Swedish investors are among the most visible in the US, for the most part courtesy of Ikea and H&M stores dotted around urban centres across the country. Since 2003, the two companies have created 7800 jobs in more than 110 new projects across 29 states, according to data from greenfield investment monitor fDi Markets.
Yet, in Naperville, an affluent suburb of Chicago, Swedish investors recently became associated with something other than flatpack furniture and affordable fashion. In August, SKF, a Swedish manufacturing giant specialising in bearings, lubrication systems, mechatronics and seals, chose Naperville as a site for its global technical centre, investing an estimated $18.5m and hiring 80 engineers, with plans to expand the headcount to 200 in the future and bring investment up to $30m over the next 15 years.
SKF's Naperville operation is not the company's first venture in the mid-western US, as the company already operates a similar R&D centre in Plymouth, Michigan, as well as 19 other facilities across the region. Overall, the company operates out of 58 locations in the US. “We chose Naperville due to its proximity to our customers, universities that we work closely with and easy access to an international airport [Chicago O'Hare],” says SKF's US president and CEO, Poul Jeppesen.
That the state of Illinois granted SKF an incentive package of more than $2m also helped to tip the balance in favour of Naperville. “Incentives are of course not the only thing that SKF looked at during its site-selection process, but the company did pay close attention to state assistance offered for a new investment,” says Tracey Hyatt Bosman, managing director at Biggins Lacy Shapiro & Company, a site-selection consultancy hired by SKF to assist with the process.
In an announcement published shortly after SKF made its decision public, then-governor of Illinois Pat Quinn lauded SKF's investment as a part of the state's comeback. What might be surprising is the fact that although SKF is a manufacturing company, its Naperville investment has little to do with bearings or lubricants.
“SKF is increasingly moving from components manufacturing to being focused more on the knowledge-based economy. It is not just about products, but increasingly about solutions,” says Walt Delevich, vice-president in charge of communication for SKF's US operations. Apart from R&D centres such as the one being constructed in Naperville, the company is investing in so-called 'solution factories', aiming at providing customised services for local customers. So far SKF has opened 29 solution factories worldwide. The company typically hires between 30 and 60 engineers at its solutions centres, while R&D centres tend to have three to four times as many.
“The great thing about having such a global network of centres is that we have a growing database of solutions ready for use,” says Mr Delevich. “If our customer in Texas comes with an issue, before we start working on it we can check whether maybe a centre in Australia solved it in the past.”
A worldwide network of centres notwithstanding, in the US SKF aims to keep its services local. It has three solution factories in the US, the most recent opening in Birmingham, Alabama, in October. And there are more to come in the near future, according to Mr Jeppesen. “We want our solution factories to be a maximum three- to four-hour drive from our customers. For that reason, in the next couple of years we are planning to build between 10 and 12 new centres,” he says.
These expansion plans go in line with the company's push for higher North American sales. Currently more than one-third of its sales come from clients in western Europe, while Asia and North America each account for about 24%. The company's global strategy is to raise sales from the two latter continents to 30% by 2020.
“The US is still the largest industrial market in the world, and it will stay so for years to come,” says Mr Jeppesen. Without specifying where SKF's new US centres will be located, he says that as with the Naperville decision, one of the main factors behind site selection is access to talent, and that is not easy to find.
“Youth these days would rather work at Facebook, Google or Microsoft,” says Mr Jeppesen. “Working for a company associated with manufacturing is not seen as a hip thing to do, no matter how advanced our operations have become. That is why we introduced an apprenticeship programme and why we organise open days at our factories. When people take a ball bearing in their hand, they usually say 'wow, that is pretty cool’.”
The wow factor
Those who, like business journalists, do not immediately fall in love with ball bearings usually warm to them upon learning that SKF supplies products to Ferrari cars used in Formula 1 races. But the number of people, especially those in the millennial generation, who still need to be wowed is huge.
Mr Jeppesen, who apart from heading SKF's US operations also sits also on the board of the National Association of Manufacturers (NAM), a Washington, DC-based lobby group, says that selling manufacturing to millennials is one of the biggest tasks companies face when operating in the US. “At NAM we work a lot on changing the image of manufacturing in this country,” he says. “I believe that the growth of this sector might soon outperform the growth of the US economy. We want to expand, but for that we need a wider and more readily available skills base.”