Tupelo Money

By Timothy Roche/Tupelo

Tupelo, Miss., is five hours by road from the closest seaport. It's two hours from an international airport. And it's nearly an hour's drive from an interstate highway. If you were trying to get to any of those places, you wouldn't start here. Tupelo is isolated in the hilly, northeastern corner of the poorest and least educated state in the union. If you've ever heard of Tupelo, it's probably as the birthplace of Elvis Presley. It seems an unlikely magnet for foreign investment and export employment. But that's exactly what it has become.

The city's nighttime population of 36,817 more than doubles on workdays as manufacturing jobs draw employees from six counties. The Tupelo area has attracted 44 new factories, and 150 existing plants have expanded in the past two years, creating 10,000 new jobs. Companies from 16 countries now manufacture in the region. Exports range from precision valves to computer chips to 75% of the world's steel golf-club shafts. Tupelo has even attracted one U.S. factory back from Mexico. And other Tupelo companies compete successfully against imports, making everything from crepe paper to couches. (The Hometown of the King of Rock 'n' Roll is also the Upholstered Furniture Capital of the World.)

Why Tupelo? The city has only one significant geographic advantage: proximity to the Tennessee Valley Authority's system of hydroelectric dams, which offers electric rates 20% cheaper than the national average. But other towns in several states can offer the same deal. Public officials in the Tupelo area lure industry with low taxes, free road and rail connections--even subsidized rent and low-interest loans. But much of America engages in that kind of smokestack chasing. Tupelo has a low cost of living and cheap, nonunion labor. So does South Carolina. So does South America.

What Tupelo offers that's special is cheap labor that is also skilled, trainable and loyal. The city has invested in its schools, which not only produced an eye-popping 11 National Merit Scholars in the most recent graduating class but also provide top-notch vocational training to those not bound for college. Rather than throw money at the biggest factories that are shopping themselves to the highest bidder, Tupelo's industrial-development effort seeks smaller employers across a diverse range of industries. And most new residents find Tupelo a pleasant place to live--one reason that turnover, a major expense for any business, runs only about 3% a year in the manufacturing sector, compared with double digits experienced by fast-food restaurants in the area.

Tupelo was started on the road to success by George McLean, an eccentric teacher turned millionaire who bought the town's newspaper in the early 1930s, then used it to push what he called social interaction. Only by investing in schools and in infrastructure like roads, he believed, could the town evolve into a community and attract prosperous industries. He and other Tupelo leaders were recruiting foreign companies as far back as the 1970s. Upon his death in 1983, McLean donated most of his wealth, including his profitable newspaper, to create an economic-development foundation that remains the driving force in the town's growth.

Not every city has a George McLean. Then again, not every city labors under Tupelo's disadvantages. If this former dusty crossroads can go global, locals say, anyplace can. Here's what the city's business and political leaders have learned:

--Cheap labor is available lots of places; what the best employers want is workers who are reasonably priced, skilled and trainable. Holley Performance Products, whose carburetors power NASCAR racing vehicles, discovered Tupelo when the firm sent an executive to buy the machinery and other contents of a factory that had closed. He wound up persuading his bosses to buy the whole plant--equipment, employees and all. In what locals describe as "reverse NAFTA," Holley closed a plant in Senoita, Mexico, and consolidated its operations in Aberdeen, near Tupelo, in 2000. The town offered subsidized rent, tax breaks, worker training at a nearby college and low-interest loans. Best of all, though, Holley found that Tupelo's skilled workers could use more sophisticated tools and processes than the Mexican workers in Senoita to manufacture more efficiently. Says Michael Peters, a Holley vice president: "We found we could get skilled labor, not cheap labor. We operate on lean manufacturing. We were able to reduce our employee head count."

A similar calculus persuaded Sistag Maschinenfabrik, based in Switzerland, to begin manufacturing specialty valves in Tupelo two years ago. That plant now produces a quarter of Sistag's revenue, shipping valves across the U.S. and to Brazil, Canada and Mexico. Hunter Douglas, which makes venetian blinds, and Cooper Tires built big plants in Tupelo--in large part, they say, because their products and processes are relatively complex and require workers who can learn and adapt.

--Investments in education pay off in jobs. While Tupelo and Mississippi lure companies with breaks on various taxes, state law still requires them to pay their full share of taxes for public schools. Starting 30 years ago, Tupelo's efforts to attract small manufacturers helped expand the tax base and enhance the financing of local schools. Today, Tupelo High's modern campus includes a fine-arts museum and a 1,000-seat performing-arts center. About four-fifths of the graduates go on to college, and for the others, vocational training is available as early as the seventh grade. Says superintendent Michael Vinson: "We have to have outstanding public education to educate not only the individual but the potential employee as well."

--Don't just tell prospective employers you want them. Show them. When the Canadian paper company Nexfor Inc. looked to open a fiberboard mill in the southern U.S., economic developers in Tupelo promptly planted 300,000 paper-producing loblolly pine trees--which grow three times as quickly here as in Canada. In 1995, with $4 million in state and local land- and road-improvement grants, Nexfor built a $90 million facility that employs 120. Says Charles Gordon, a company vice president and member of the search party: "Tupelo has one of the best industrial-development machines in rural America."

--Small can be beautiful when recruiting new employers. One of the oldest industries in the Tupelo area is furniture, which today accounts for nearly 40% of the region's manufacturing jobs. Local leaders have worked to sustain that industry by, for example, building a trade-show facility the size of four football fields. But they have also labored to attract firms across a broad range of industries. Says Thomas Griffith, mayor of Amory, just south of Tupelo: "We don't want to be too dependent on any one industry. If one plant shuts down, it doesn't hamstring the total economy."

--Sell your quality of life--and work to improve it. For all its progress, Tupelo is still in the middle of nowhere. It will never attract residents who demand opera, haute cuisine or courtside NBA tickets. But a three-bedroom house costs $100,000 or less. Nearby forests and waterways provide superb fishing, boating, camping and hunting. Tupelo has grown its own symphony and theater group. Its regional hospital employs more than 5,000 people and provides high-quality health care.

Gene Pierce grew up in Tupelo but left to work as an air-bag engineer for Ford. He came home to manage True Temper, whose 473 employees produce steel shafts for golf clubs sold from Tokyo to Turin. Comparing Tupelo with the metropolitan areas, Pierce says, "The pay is just as good here, and there's less hassle."

--With reporting by Alice Jackson Baughn

TIME.com ON AOL For more about Tupelo and other efforts to attract international business, go to time.com/global

With reporting by Alice Jackson Baughn