“My priority is to create jobs,” says Mr Kernan. “I will not stop looking for ways to create jobs, grow our economy and make life better for all Hoosiers.”

Speaking before both houses of the Indiana General Assembly in January, Mr Kernan announced his next step: the Indiana@Work programme. “A key element of this programme is to help workers to advance their skills to find well-paid jobs,” he says.

The five-year plan will use existing funds to create a life-long learning and career development system to train workers, provide better assessment of their skills and better matching with available jobs. “My goal is to give every Hoosier the opportunity to get a job or training for a better job,” he says.

Indiana@Work is an administrative action so the governor can implement the programme immediately.

Tough job to take on

Mr Kernan has a strong reason for his concern. When he assumed his post last September after the death of then Governor Frank O’Bannon, Indiana was suffering the hardships created by a deep nationwide recession. The state depends heavily on manufacturing and had already lost 9% of its manufacturing jobs since 1997.

However, as Mr Kernan points out, these figures were not so bad when compared with the national unemployment average of 12%. At 4.2%, the situation is even better in Indianapolis, the state’s capital, business and manufacturing centre.

“Indiana has always been in an enviable position because of its abundance of raw materials, quality workforce and strategic location,” he says. “Its strengths lie in its major industrial manufacturing sectors that add value to transportation equipment, chemicals, primary metals, fabricated metal products, industrial machinery, and plastics and rubber products.”

Indiana also sits in the US’s heartland and is blessed with expansive waterways and highways that connect the state to the Mississippi River, the Great Lakes, Chicago, the automotive centres of Detroit and beyond.

These were good enough reasons for Case New Holland to invest $28.7m in a new warehouse and distribution campus in Lebanon, Indiana. One facility will serve as a national parts distribution centre; the other will be Case New Holland’s primary location for export parts for all international business. Indiana competed with Ohio for the project.

Scores of distribution warehouses filled with imported goods have been set up in the state, especially in Hendricks County, west of Indianapolis. Besides Case New Holland, there is Electrolux, the Bombay Company, the Guitar Center and HomeGoods/TJX, among others.

In eight years, nearly 18 million square feet of bulk distribution has been constructed in Hendricks County alone. Prior to 1996, no bulk space existed in the county.

Indianapolis has 137.2 million square feet of distribution space, and growing. Growth is being spurred on by the city phasing out its inventory tax.

Attracting business

To make Indiana more business friendly, the state is restructuring numerous taxes that affect businesses. It is introducing a 50% non-refundable tax credit for relocating a major corporate headquarters in the state; it is making its 10% Research and Development (R&D) Tax Credit, which was due to expire in 2013, permanent; it is revising the job retention provisions added to its Economic Development for a Growing Economy (EDGE) tax credit during the 2002 session, so that smaller companies can qualify; and it is offering a 25% or $250 refundable tax credit for job/workforce skills training expenditures.

Mr Kernan admits that Indiana has lost business to other states that offered more attractive tax packages. But the changes in tax structure are now resulting in corporate decisions to remain in the state, he says.

Yet, Mr Kernan still has concerns about the future. Behind them lies international competition. “We are seeing more competition with China that is disturbing because China is targeting our core industries like machinery and metal working,” he says.

The issue is one on which he intends to keep a watchful eye and lies behind his reasons for why Indiana must strengthen its position in the world, and stress a highly skilled and hard-working labour force.

Fiscal concerns

As well as addressing workforce issues, education and taxation, Mr Kernan is focused on the state’s fiscal stability. He says that the state is in relatively good shape, but Standard & Poor’s recently reduced its credit rating from AA+ to AA due to deficit management and spending.

While other states have been forced to make critical cuts in essential services and programmes to tighten their belts, Mr Kernan says he does not intend to ask the legislature to re-open the current budget. He does, however, call for a line item veto to protect taxpayers from unnecessary and unaffordable spending.

Recognising economic development as an important element to the state’s future, Mr Kernan intends for Indiana to remain focused on four key areas: advanced manufacturing, life sciences, information technology and high-tech distribution. All these industries are well represented in the state.

“Indiana needs to take advantage of the strengths it already possesses,” he says. “We will continue to focus on our attributes and search for opportunities to bring investment back to the state.”

As proof of Indiana’s place in the world, in 2000 it exported more products than ever in its history: about $15.4bn worth. That year, exports accounted for 8.1% of gross state product.

“In 2001, that figure dropped to $14.3bn mainly because of the terrorist attacks on September 11,” he says.

But in 2001-2002, there was an increase of $558m for a total $14.9bn in exports. The state’s projection is that for 2003 it realised 5%-10% growth – although, without hard data, this is speculation.

Using percentages from the 2002 year-end report, the five largest export industries are vehicles (not railway) (27%), machinery (22%), electrical machinery (9%), organic chemicals (6%) and medical instruments (6%). While Indiana encompasses scores of small to medium-sized companies, large manufacturers in the state include Rolls Royce, Lilly, Roche and Cummins.

Mr Kernan is expecting international trade to represent an increasingly larger percentage of Indiana’s domestic product in future. The traditional top Indiana manufacturing sectors involved in international trade include iron and steel mills and ferro-alloy, motor vehicles, motor vehicle bodies and trailers, motor vehicle parts, alumina and aluminium production and processing, and foundries. Indiana remains strong in the automotive sector thanks to Japanese companies like Toyota and Subaru-Isuzu.

“Japan is number one for FDI,” says Mr Kernan. “Currently, we have about 200 Japanese-owned companies in Indiana, employing approximately 40,000 people. Many are in the automotive sector.”

Much FDI is funnelled through the Indiana’s Department of Commerce and its various international trade offices around the world. The state has 14 offices: in Australia, Brazil, Canada, Chile, China, Israel, the Netherlands, Japan, Korea, Mexico and Taiwan, with a liaison office in Singapore.

Community purpose

A family man, Mr Kernan holds a strong conviction about the purpose of his work. “My belief in public service comes from my mom and dad,” he says. “They taught me that it is very important to participate in one’s community.”

Mr Kernan says that although did not seek the post of governor (he was lieutenant governor before Mr O’Bannon’s untimely death), people across the state pulled together to make his transition smooth. He is continuing many of Mr O’Bannon’s policies but stresses that his personality is very different from that of his predecessor. “We believed in the same things: to do the best we can for the people we serve,” he says. “He was a great mentor.”

For now, Mr Kernan’s biggest challenges are the economy and working to find more and better jobs for Hoosiers.