Return to Virginia Business - April 2004

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- The biggest deals of 2003

by Paula C. Squires
Virginia Business
April 2004

With the economy rebounding, companies were more willing to invest in corporate expansions last year. In fact, Virginia recorded one of its best years ever with just over $4 billion in announced deals. In keeping with the times, though, the expansions don't necessarily mean jobs.

The dollar total for deals announced in 2003 showed a healthy gain over the $2.4 billion reported in 2002. “It's the second highest capital investment year we've ever reported. The last time we got that high was in 2000,” says Rob McClintock, research director for the Virginia Economic Development Partnership. Yet, the number of new jobs expected to come from those deals — 28,500 — was down from the 30,600 new jobs reported in 2002.

The problem, says McClintock, isn't outsourcing, an issue that's becoming increasingly sensitive as out-of-work Americans bemoan the moving of highly skilled jobs off shore. Rather in Virginia he sees companies improving productivity by spending on new equipment and technology. “While there's a lot of emotion now on the outsourcing of jobs, really that pales in comparison to the replacement of jobs because of technology, which has contributed to higher productivity and brought this economic expansion forward.” For instance, Anheuser-Busch Inc. plans to spend $200 million to upgrade and install new equipment to boost capacity at its beer brewery plant in James City County, “but they don't need any more people to do that,” says McClintock.

Fortunately, some of the state's biggest deals will create jobs, including the deal ranked as No. 1 for 2003. The $500 million Howard Hughes Medical Institute in Loudoun County broke ground on a biomedical research facility that's expected to hire 300 people. “The research that revolves around the biosciences is a big driver for the economy in Northern Virginia,” notes McClintock.

That area will benefit also from several defense-related expansions including the Arlington location for the headquarters of the U. S. Transportation Security Administration, one of the branches of the new Department of Homeland Security, which is expected to create 2,000 new jobs. In Prince William County, General Dynamics Land System plans to spend $64.5 million for the assembly of new fighting vehicles for the U. S. Marines Corp. The project will initially employ 140 workers and perhaps as many as 340 over the life of the program.

Besides defense, headquarter expansions helped give Virginia one of its strongest years. In fact, three of the companies that ranked in the top ten deals for corporate investment were spending on headquarter operations. They included Philip Morris USA's corporate relocation from New York City to Richmond, an expansion at AMERIGROUP Corp.'s national health care headquarters in Virginia Beach and the third expansion in 20 years for Stihl Inc., a German-based manufacturer of power equipment, which has its U.S. headquarters in Virginia Beach.

Stihl plans to spend $60 million on a 228,000-square-foot-addition, so it can boost manufacturing capacity for its many power tools, which include chain saws, leaf blowers and edgers. In what is a refreshing reverse NAFTA scenario — an international company continuing to grow here through the use of U. S. labor — the latest project will add 200 news jobs to Stihl's current work force of 1,100, with workers needed in manufacturing, engineering, quality assurance and marketing.

There's no reason for his company to move, says Paul Bruggeman, director of manufacturing for Stihl in Virginia Beach. “For the last 25 years, we have been very successful here. … The city and support and the colleges have been good. We have future engineers coming out of these schools. So this is our home.'' Still, he realizes that in this day and time, Stihl's approach is “kind of unique. We do continue to grow and hire people and do not source out of the company even though our parent company is in Germany.”

Another Virginia headquarters expansion and one of the biggest job producers announced last year came from the financial services sector. Wachovia Securities plans to spend $8.3 million, creating 1,000 new jobs to grow its headquarters operations in Richmond and Henrico County, following its merger with Prudential Securities.

Rounding out last year's nearly 376 projects, are several new power plants, the continued growth of several of the state's chemical companies, a new Wal-Mart distribution center in Rockingham County that will hire 1,000 workers and the entry of some new employers in the Southwest and Southside regions, which badly need jobs to replace those lost in textiles and coal. Minnesota-based Marvin Windows and Doors chose Roanoke County as the site for a new manufacturing facility for one of its product lines. The company plans to invest $32 million over the next five years, creating 350 jobs by 2008.

Return to Virginia Business - April 2004