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Behind the deal: A scramble to lure Siemens

Friday, October 05, 2001

By Dan Fitzpatrick, Post-Gazette Staff Writer

On Sept. 5, Armstrong County Commissioner Jim Scahill heard an alarming rumor.

As one of his last tasks as governor, Tom Ridge took the stage at yesterday's groundbreaking ceremony for the Siemens Westinghouse Power Corp.'s fuel-cell factory in Munhall. (Gabor Degre, Post-Gazette)

A $122 million manufacturing plant that he desperately wanted for his county (and thought he had) might be going to Allegheny County instead. Scahill, while riding in his car, placed a call to Rick Stafford, chief executive of the Allegheny Conference on Community Development, and asked Stafford whether Siemens

Westinghouse Power Corp. was looking at sites in Allegheny County.

"He was right," Stafford said.

As it turns out, Scahill was oblivious to a three-week campaign to find Siemens Westinghouse a suitable site near Pittsburgh. Spurred by the company's desire to be closer to its Churchill research center, the campaign involved Mayor Tom Murphy, Allegheny County Chief Executive Jim Roddey, Buchanan Ingersoll President Bill Newlin and former Westinghouse Electric executive Tom Murrin, along with a slew of development officials from the city, the county, the state and the Pittsburgh Regional Alliance.

The fact that Scahill, a big proponent of regional cooperation, knew nothing about the Siemens campaign sent him into a rage that has yet to subside.

"Call the coroner," Scahill said. "Regionalism is probably dead."

Scahill's reaction has added a subplot of controversy to what could be the year's biggest economic development project in southwestern Pennsylvania. Siemens Westinghouse, a subsidiary of the German conglomerate that purchased part of Westinghouse Electric in 1998, announced last week that it would build an innovative fuel-cell factory in Munhall, along the Monongahela River. The decision ended a three-state, 11-month economic development derby, with the Pittsburgh area beating out aggressive competitors in Orlando, Fla., and Fort Worth, Texas.

Yesterday, Gov. Tom Ridge traveled to Munhall on his last day in office to participate in the groundbreaking.

The story of how Munhall landed the new plant, which could employ as many as 500 and eventually span 430,000 square feet, is full of successes and near-failures. The plant, designed to build rail car-sized fuel cells that squeeze electricity from natural gas, will pay salaries of $60,000 and bring manufacturing back to the beleaguered Mon Valley.

But landing it was complicated. Not only was Scahill left out of the final discussions, thereby inflaming his suspicions of Allegheny County and raising new concerns about the concept of regional cooperation, but the Mon Valley deal had to be cobbled together hastily, at the last minute. Unable to find a site in Allegheny County after 10 months of searches and not willing to go to an industrial park in Armstrong County, Siemens approached Murphy and Roddey in late August and gave them 10 days to find a suitable location.

If the deadline could not be met, the plant would go elsewhere.

Map: Site of proposed Siemens factory


While it is "unfortunate" that Scahill was upset, Murrin said, the larger problem "is the apparent inability of our region to provide the fundamentals of professional, competitive plant site selection . . . There really is no great mystery in doing it. We just haven't made it a sufficiently high priority."

The Allegheny Conference and the Pittsburgh Regional Alliance, the agencies that first got the tip about Siemens' plans in November 2000, are conducting a case study that will examine the deal in detail, pointing out what went right and what went wrong.

"We need to learn from this," Stafford said.

Even as Siemens moves ahead with construction, however, there still is a lot of confusion about why Scahill was left out of the loop.

The company's explanation is simple. Armstrong County's Northpointe Industrial Development Park, which for months was the only site in Western Pennsylvania that met the company's space requirements, was under consideration until the very end, even as the company scouted Allegheny County.

"Armstrong County never came off the table," said Linda DeJulio, plant manager of the new factory and a director of operations for Siemens Westinghouse's stationary fuel cells division.

But several key participants in the deal said the company ruled out Armstrong County in late August.

Stafford said the PRA learned about the company's switch Aug. 28. Murrin said he found out Aug. 23, in a conversation with Thomas Voigt, president of Siemens Westinghouse's stationary fuel cells division. Newlin, asked by Siemens to assist with the search, heard about it Aug. 29, also in a conversation with Voigt. He "informed me that they had made a decision," Newlin said. "They appreciated the proposal (from Armstrong) but they were not going to locate there. He told me they would still consider, if there were time, an Allegheny County location, but otherwise, it would be lost to one of the other states."

The company, he said, was "very explicit in saying to me that if something was considered around here, it would have to be the Allegheny County site."

When Newlin heard that, he called Murphy.

Murrin contacted Roddey.

At an Aug. 31 meeting, Siemens officials gave Newlin and his team the 10-day deadline. A week later, on Sept. 7, Murphy took Siemens on a tour of several sites in the city, including Lawrenceville, the North Side and the Pittsburgh Technology Center in Hazelwood.

Later that same day, Siemens officials met with Roddey, and Roddey's development team took the executives on an afternoon tour of The Waterfront, a string of large stores, restaurants and office buildings in the Mon Valley that used to be the USX Homestead Works. The Siemens officials liked the site so much that after having drinks at a Downtown bar that night, they drove by The Waterfront again, to get a second look.

By Sept. 17, Siemens executives had chosen the Waterfront site; on Sept. 20, the company's board gave it the final approval.

The official announcement came Sept. 26.

But Scahill wants to know why he wasn't give an opportunity to make one last sales pitch for the Northpointe Industrial Development Park.

Others are asking the same question.

The first time Roddey sat down with Siemens Westinghouse, on Sept. 7, his "first question" to Voigt was about Armstrong County. He wanted to know if the company's decision not to locate in Armstrong County had been discussed with Scahill. Voigt, according to Roddey, said it had. Roddey asked if Scahill understood the decision and was upset about it. Voigt, according to Roddey, said Scahill understood the decision and was not upset.

But Scahill did not have the same understanding, apparently.

On Sept. 5, the day Scahill first heard rumors that the company was considering Allegheny County, he had a conversation with Voigt and DeJulio in his car. According to Scahill, "Voigt said we were still the No. 1 site." While Voigt admitted Siemens was looking at Allegheny County sites, he made it sound as if he was following orders from the company, Scahill said.

But the company remembers that phone call differently.

DeJulio, in an interview this week, said Voigt did not tell Scahill that Armstrong County was the No. 1 option. "What Thomas said to Jim is Armstrong County is the reason we are staying in Pennsylvania, and looking at sites in Allegheny County," she said.

It was PRA President Ronnie Bryant, Scahill said, who later broke the news to him that Armstrong County was no longer being considered.

"I think he is justifiably upset," Roddey said. "I think the company clearly told (Armstrong County officials) they were their first choice, and I don't think they ever understood that had changed."

Bryant, in an interview this week, sided with the company, saying that Siemens Westinghouse never eliminated Armstrong County from consideration and that the region was "never in jeopardy of losing this project." He also defended the PRA, saying that "there maybe were several phone calls that needed to be made that were not made but you cannot say a total breakdown in this situation was the result of ineptness by the PRA."

"The understanding has to be that, if a mistake is made, it is not a malicious mistake."

Stafford, Bryant's boss, said, "It is a fair point to make that someone should have called (Scahill) sooner." But, "I don't think the PRA deserves all the blame for that. There were a number of other players in this, too."

The larger issue, though, is how Scahill's hurt feelings will affect regional cooperation.

For some officials in outlying counties, Scahill's version of the Siemens story is evoking the same kind of tense feelings that surfaced in 1997, during a campaign for a sales tax that would have paid for stadiums and development in Pittsburgh. At the time, commissioners from outlying counties complained about a perceived Allegheny County bias and how the plan's backers never approached them for support.

"The spirit of the thing is we are all a region, but you wonder when push comes to shove, are we really a region or are we all out for ourselves?" said Bracken Burns, a Washington County commissioner.

"We aren't equal partners if we don't treat each other equally."

Tom Balya, a commissioner in Westmoreland County, said the Siemens deal is "simply a sign that there is still a lot of work that needs to be done and there is infinite room for improvement." Referring to the PRA, Balya said, "I think they failed to communicate what was going on and keep people apprised. If we are going to build relationships, there has to be effective communication."

But Bryant, who started his job in June pledging to mend the PRA's relations with outlying counties, said, "I don't think we have truly defined what regionalism will look like in Western Pennsylvania." If some county officials want the system of information-sharing to be better, "I would ask them what the system is. I don't think we have clearly defined the system. We have got to get our expectations all on the same page."

"What we have got to do is keep the spirit of cooperation alive."

While Scahill argues that "regionalism got damaged" as a result of the Siemens deal, Stafford has a more optimistic outlook. "If we learn anything from this, there was enough teamwork to win this thing," Stafford said. "If we improve our teamwork, we will win a lot more.

"The approach of working together really took a hit," Stafford said. "But I don't think it died."

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