U.S. Manufacturing Remains Strong as Gray Celebrates 55 Years
In its first decade in business, James Norris—a natural-born salesman— grew the company quickly, putting Gray on the map as a formidable competitor in commercial and industrial construction. But things came to a screeching halt when he lost a short battle with lung cancer in 1972, leaving the future of the company uncertain. Without hesitation, Lois Gray named her 23-year-old son, Howard Gray, president of the company and remained steadfast that she and her six children would continue to pursue the family’s American dream by picking up where James Norris left off.
The road was not without some bumps and bruises. But, through it all, Lois Gray and her children stayed the course, giving everything they had to ensure the family business was kept alive.
In 2010, the company published a book chronicling its first fifty years (1960-2010) called Building on a Legacy: Documenting 50 Years of Gray Construction. Though just five years have passed, Gray has experienced a significant amount of growth and change in this relatively short period of time, for one very good reason: the resurgence of the U.S. manufacturing industry.
According to Phil Seale, executive vice president of the manufacturing and food and beverage markets for Gray, not only has the volume of manufacturing business changed, the type of projects Gray is building for manufacturers has transformed as well.
“We’re certainly executing a lot more complex projects—larger projects—so there are a lot of controls needed for those type of projects,” Seale said. “These are more sophisticated customers who build these very large projects. So, we’re having to put into place enhanced controls and procedures.”
Seale says the company has seen a rise in business across a variety manufacturing sectors including food and beverage, automotive, aerospace and metals, among others. He says the company is meeting the needs of its growing customer base by adding resources.
“Construction is still a very competitive business and, even though there’s a lot of work out there, you have to be doing things more efficiently,” he said. “From 2010-2015, we’ve added over 50 percent to our staff, and we’ll add another 30 people this year. The key is finding good people and immersing those new people into the Gray culture.”
In 2012, the company lost its beloved matriarch and long-time chairperson, Lois Howard Gray. Her legacy was one of stoic persistence in the face of adversity, yet always handling the difficult times with grace and charm. In an obituary at the time of her passing, close friend and renowned Kentucky political commentator, Al Smith, said of Mrs. Gray: “Her lovely smile, her soft speech of welcome to clients from all over the world who attended her Derby parties, then returned to sign a contract, and her steely determination to help her children make good on every promise became the public face of the brand her four sons and their two sisters called ‘the Gray Way’ of doing business.” Mrs. Gray’s legacy lives on in Gray’s corporate culture, and is sure to be carried through for generations to come.
The Manufacturing Resurgence
The year 2012 bore new opportunity for Gray. The economic recovery and an energy renaissance in the U.S. due to a booming natural gas industry was fueling significant investment by manufacturers— both foreign and domestic—in the Southern part of the U.S., and Gray was eager to win its share of this business. A new office was located in North Carolina to position Gray closer to this important market and grow its business there.
Tripp Eskridge, managing director for Jones Lang LaSalle (JLL)—a professional services and investment management firm that has worked with Gray to provide site search and selection services—says the South/Southeast regions of the U.S.—from Houston, Texas to the Carolinas—are top choices for a variety of reasons, driven by a “site-selection matrix.”
"We’re talking about the labor cost, energy cost, availability of incentives, land cost, development cost—in all of those areas, the South typically does quite well,” Eskridge said.
He says the most significant among those factors is the quality and viability of the workforce. While this is not a “new” issue for manufacturers, Eskridge says the sensitivities of manufacturers to the type of workforce they are looking for are changing.
“What I find is that companies are a lot more analytical about the labor base, how they’re affected by the local competition, and what’s changing in the marketplace,” he said. “They’re very focused on the quality of the workforce. It’s not that they weren’t before, it’s just with more precision now.”
Hal Sirkin, senior partner and managing director at the The Boston Consulting Group agrees and says advances in manufacturing are changing what manufacturers look for in its workforce.
“Manufacturing, which has been perceived as mostly a business of brawn, has become a business of brain,” he said. “In essence, your father’s manufacturing facility, which involved people doing a lot of heavy lifting and other hands-on work, is changing to people who are working on computer, programming machines and making sure that the machines are running properly, but not adding much of the labor themselves.”
The U.S. government has not only made note of these changing needs but, in recent years, has begun to roll out a series of “manufacturing hubs,” geared toward helping manufacturers improve the quality of the labor pool in specific geographic regions.
Sirkin likens this effort to the creation of a variety of “Silicon Valleys.”
“It’s basically putting a lot of brainpower together in one place—that tends to work really well,” said Sirkin.
While it’s too soon to tell, Sirkin is optimistic some of these hubs will meet their objective.
“Not all of them will become the caliber of Silicon Valley—there’s always a failure rate, but I think at least some of them will do that,” he said. “Silicon Valley was organic. The manufacturing hubs are more like planting a seed and helping it grow. It’s a different approach, but it will have similar results.”
Sirkin himself has helped springboard the development of a manufacturing-hub-of-sorts in Prince George County, Va., noting a renewed interest by colleges and universities to understand today’s advanced manufacturers and the type of instruction students need to thrive in these careers.
“In Prince George County, we found that professors were teaching with outdated materials— not because they wanted to, but because they didn’t know what the schools wanted,” said Sirkin. “When these professors and employers got together, they started to change what they were doing in terms of workforce development, and they are now able to teach to the machines being used by manufacturers in that area.”
International Investment in the U.S.
For a large part of its 55 years, Gray has been meeting the needs of international manufacturers who have located or expanded in the U.S. Well before other construction companies were even entertaining the idea, Gray won its first project from an international manufacturer— electronics leader, Toshiba—in 1979. A series of projects for Toyota in the ‘80s would solidify Gray’s position in the international market—a position the company still enjoys today.
Over the past five years, investment by international manufacturers in the U.S. has grown significantly. Countries with historically strong economies—like Japan and Germany—are moving products closer to market as energy prices decrease and the availability of natural gas in the U.S. surges.
“The Houston, Texas area is booming with new projects, all oil and gas-related,” said Gray’s Phil Seale. “There are a lot of chemical derivatives from gas, and if you’re a Japanese company and all of your derivatives are from petroleum, now’s a good time to diversify and change some of your processes, and that’s what they’re doing.
Sirkin says not only is natural gas helping “run our homes and factories” at a lower cost, he says the U.S. is becoming one of the largest oil producers in the world, something no one would have predicted just a few short years ago.
“The U.S. is now putting out 9 million barrels of oil a day, and it’s still rising,” said Sirkin. “We don’t know how long that will last. On reserve, some say we have anywhere between 50 and 100 years of natural gas. Of course, oil is worth more than natural gas in the equation because it’s easier to ship. But that’s why we’re seeing $60-a-barrel now, rather than $110.”
Lower energy prices, Sirkin says, is offsetting some of the costs of doing business in the U.S., making it much more attractive for international manufacturers to locate here. Beyond Japan and Germany, Korea is investing more in the U.S., although slowly and cautiously. But perhaps the most surprising investment is coming from a part of the world no one would have expected just a few years ago: China.
“There are companies that want the stamp on their products to be made or assembled in America, from Chinese components,” said Seale. “There are four or five big Chinese projects out there right now, and that’s expected to grow. They’re bringing their product closer to market, and like the fact that their product can be assembled in America and meet that quality expectation. I think there is a strategic move by China to try and diversify and invest in more countries.”
The bottom line, Sirkin says, is with an ever-improving economy and a booming energy industry, the U.S. will continue to be an attractive place to make products.
“For the time being, there’s a very strong tailwind from the U.S., both in job creation—the shift back to ‘made in the USA,’—and the much lower natural gas cost in the U.S., which provides a big boom to the U.S. economy,” he said. “We just had a revision in the GDP—it’s now 5 percent—and that’s another quarter in a row of high jobs numbers relative to what we had been seeing. We’re no longer losing jobs, and unemployment is at 5.8 at this point in time.”
As Gray celebrates 55 years, the company intends to continue to meet the growing and changing needs of manufacturers locating or expanding in the U.S., both foreign and domestic.
“There is no question that without a vibrant manufacturing industry in the U.S., our business would look vastly different,” said Seale. “We look forward to creating even more great projects for our customers in the years to come.”