News Column

Obama Picks Chicago for Manufacturing Initiative

February 24, 2014

Melissa Harris and Christi Parsons, Chicago Tribune

biotech
High-tech manufacturing (file photo)

Chicago will be the site of a digital manufacturing institute backed by $70 million in federal money and $250 million in private and other government funding, giving the city, once a factory town, a better chance to re-establish its credentials as a modern maker of things.

The decision, to be announced officially Tuesday by President Barack Obama, was hotly anticipated by city and state officials who recognized the opportunity to jump-start high-tech manufacturing as a core component of Chicago's economic vision. The city, while still home to some manufacturing, is these days better known for its financial markets and convention business.

Chicago competed against several other regions of the country in a bidding process run by the Defense Department. White House officials said 41 companies, 23 universities and labs, and other organizations are involved in the consortium that won the competition.

The idea behind the institute is that manufacturing is being transformed by digital design, which replaces the draftsman's table with the capacity to work and create in a virtual environment.

The city envisions the institute focusing on projects such as producing a faster and cheaper next-generation aircraft engine, drastically reducing the amount of scrap material associated with small manufacturing runs and speeding the design process among far-flung suppliers.

"This is clearly, without a doubt, one of the most significant things to secure Chicago's long-term economic future," Mayor Rahm Emanuel said in a Saturday interview. "It is the best insurance policy you can buy, which is major research capacity."

The $70 million grant will come from the Defense Department. But far more was at stake, as city officials and business leaders quietly raised private commitments in excess of $5 million each from General Electric, Rolls-Royce, Procter & Gamble, Siemens, Lockheed Martin and Dow Chemical Co., according to World Business Chicago. The institute also will receive $16 million in state funds, according to Gov. Pat Quinn.

The new institute, according to Chicago's proposal, would be located in a leased building on the northern end of Goose Island. Oversight would be managed by UI Labs, a nascent University of Illinois-affiliated effort focused on turning academic research into moneymaking, job-creating products. UI Labs stands for Universities and Industries.

"This is not a think tank," said Michael Sacks, the mayor's top outside adviser, who was tasked, along with Deputy Mayor Steve Koch, to run the bid effort. "This is an industry-led partnership between business and academia, which will solve real manufacturing problems and deliver goods to loading docks across America faster and cheaper."

Obama will officially announce the Chicago hub Tuesday at the White House. The initiative follows Obama's new playbook for dealing with an oppositional Congress unlikely to enact any part of his economic vision.

The announcement also delivers on the president's pledge in his 2013 State of the Union address to set up three new manufacturing institutes from existing government programs. The administration launched the competition last spring.

In addition to Chicago's Digital Manufacturing and Design Innovation Institute, Obama will announce that Detroit has won an institute focused on lightweight and modern metals manufacturing. The administration set up a pilot site in Youngstown, Ohio, in 2012, focused on 3-D printing, and a few weeks ago it announced a new institute in Raleigh, N.C., targeting energy-efficient electronics.

Obama has also pledged to launch four more competitions for new institutes in the coming year in hopes of setting eight institutes in motion without any congressional action. But his broader plan is to spur Congress to support the concept; his blueprint calls for a full national network of up to 45 institutes funded in part with resources approved by lawmakers.

Manufacturing employment in the U.S. has been on a downward trend since a 1979 peak, with those losses accelerating during recessions. During the 18-month period from December 2007 to June 2009, more than 2 million manufacturing workers lost their jobs, or 15 percent of the sector's workforce, according to the Bureau of Labor Statistics.

Chicago still has manufacturing capacity, including a Ford assembly line, but many of the factories that once defined the city are long gone.

Many economists believe those jobs are never returning because new factories require a fraction of the workforce they once did. And although steep declines have been staunched, it often requires five or six wins to recover from one loss.

City officials, for instance, were able to lure Method, the eco-friendly cleaning products company, to Pullman Park in July with millions of dollars in incentives. But the state-of-the-art, 150,000-square-foot soap factory will employ 85 people. Meanwhile, after Alberto-Culver sold itself to Unilever, the Dutch conglomerate shut down the hair products company's Melrose Park plant in 2013, eliminating an estimated 600 to 800 jobs at the factory and adjacent offices.

According to the Bureau of Labor Statistics, the Chicago region lost 2,600 manufacturing jobs in 2013, a decrease of 0.6 percent.

"In Germany, they've already got 60 of these manufacturing institutes," Obama said when announcing the institute in Raleigh, according to The Washington Post. "So we've got some catching up to do."

In addition to exceeding the fundraising requirement by $180 million, Chicago's bid had a few key strengths. The first was that it included participation from university-based researchers from as far away as Texas and Colorado. Some were brought in by businesses who wanted to work with specific researchers or labs, according to an official from World Business Chicago, the city's economic development arm.

Three marquee venture capital firms also signed letters of support: Chicago-based Lightbank, whose founders helped launch Groupon; New Enterprise Associates, which just raised one of the largest venture capital funds in history; and Andreessen Horowitz. Marc Andreessen is one of the University of Illinois' most famous alumni, having helped create the first Web browser and co-found Netscape.

Caralynn Nowinski, the interim executive director of UI Labs, said fundraising efforts will continue. There are 70-plus official partners of the institute, meaning organizations that have committed money, and she expects that list to grow. Then, the institute will put out a call for project proposals, and there also will be a celebration/launch event.

Emanuel has been celebrating privately for a few days.

"Remember when I did a press conference the other day and people were going, 'Why is the mayor so giddy?'" Emanuel said. ".... This answers that question."

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mmharris@tribune.com

Twitter @chiconfidential

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(c)2014 Chicago Tribune

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Original headline: Chicago picked as site for Obama's manufacturing initiative


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