Earlier today Caterpillar announced that it was moving its corporate headquarters from Peoria to Chicago. The move affects about 300 top-level executives. The company will retain a large presence in Peoria.
This is in line with what I’ve written about before: the rise of the executive headquarters, where a company moves its executive suite (anywhere from 50-500 people) to a major city like Chicago while leaving the back office elsewhere.
Chicago has benefitted from this more than any other city I know. In addition to many corporate HQ relocations from the suburbs, it lured ADM from downstate Decatur, ConAgra from Omaha, and even MillerCoors from Milwaukee.
These are all food/agriculture or industrial concerns. That’s right in line with Chicago’s industrial heritage.
I would assume there’s a real possibility every major agricultural or industrial company in the US interior that’s not already headquartered in a major city like Minneapolis may make a similar move to Chicago. I’m sure World Business Chicago already has its target list compiled and is making calls.
This exposes two major divides in the American economy.
The first is between cities positioned advantageously vs. disadvantageously. Chicago is the former (along with Boston, San Francisco, Dallas, etc). Peoria, along with most sub-million metro areas with an industrial heritage, is the latter. It’s simply difficult to keep higher end jobs in these cities. This robs of them of not just some high wage positions, but also significant talent firepower that could be invested in civic betterment.
The second is between those who are prospering with high skills, and those who are not. Chicago has a serious murder problem that’s been making global headlines for two years. It also has a huge financial problem on its hands, especially in the school district.
This doesn’t seem to be affecting business recruitment. CAT and others have not been scared off. This shows that, so far at least, Chicago and its successful segments can succeed even while the impoverished black and Latino areas of the city fail, and as many other industrial cities fall into decline.
In other words, this is another example of the decoupling of success in America. Those who are succeeding in America no longer need the overall prosperity of the country in order to personally do well. They can become enriched as a small, albeit sizable, minority.
Trump’s election was an intrusion into that success caused by those resentful from being left behind. The election of leftist mayors in the style of Bill de Blasio is another such reaction. It’s very clear from what I see and hear in global cities that those who are succeeding wish those who are not would hurry up and die or just go away. They pretty much say it explicitly when it come to the white working class, and you can believe they are thinking it when it comes poor blacks.
There are cumulatively a lot of angry people out there, who are not blind to what items like CAT’s relocation imply. This inequality is only a recipe for further political upheaval and unrest.
Chris Barnett says
More fuel: Cummins in Columbus, Indiana.
The long term investment of the Irwin/Miller families and the groundbreaking Cummins Foundation have helped to foster a “quality of life” program that started before the term was coined. This shows the importance of a long-term leadership commitment to civic improvement.
The C-suite hasn’t left, though the past two CEOs have been Indianapolis residents (and the company just built a division HQ in downtown Indy).
Rod Stevens says
Trump/ Bannon’s destruction of the social network isn’t going to make these places better. First start with the immigration barrier that keeps skilled refugees away from places like Toledo that so badly need them. Then add on Betsy de Vos free-market approach that has failed Michigan. We need some positive templates for building up society, not tearing it down.
Memo to Rod: Trump has been in office 2 weeks. Another memo to Rod: Open your eyes and see the disaster of the Obama social network the past 8 years in Chicago, Detroit etc. Don’t be such a blatant cheerleader of the failed status quo.
How is the collection of swamp monsters Trump has selected been revolutionary in any way? Are you claiming Goldman Sachs spreadsheet manipulators, Ben Carson, and an Amway heiress are a fresh start? Really?
How is Obama uniquely responsible for 40 years of American political and economic assumptions? Or the “logic” of capitalism?
Oh, ok to use your logic that Obama is not responsible for anything, then neither was George Bush despite the left’s still crying about “it’s all Bush’s fault” never ending battle cry.
Read carefully. “How is Obama uniquely responsible for 40 years of American political and economic assumptions.”
George W Bush was certainly responsible for many disastrous things as well. But, so was Bill Clinton. If anything, Trump seems interested in returning to the deregulatory environment of the Clinton era (which contributed to the 2008 crash). And Obama was certainly not some revolutionary monster that you are implying in your partisan shot.
Don’t try to slot me into the same kind of ideological pigeonhole you seem to enjoy inhabiting.
I would note that the chaos and idiocy of the first two weeks are not a good sign. I would also note that the Republican leadership did not even wait that long before meeting to agree to obstruct Obama at any cost.
As someone who’s quite familiar with Peoria, I know this quite the gut punch to them. During my time there I often heard (behind the scenes) how difficult it was for them to recruit and retain senior execs because of the Peoria location, and they invested quite a bit in downtown Peoria to counter that. But Peoria’s size meant that it would never have the scale of vibrancy that a city like Chicago has.
Back offices with mid-level and some senior execs will stay in Peoria, as will much of the manufacturing and R&D. But what Peoria will miss most is the civic leadership of top execs, who won’t participate in local philanthropy, and won’t be the target of activities and amenities that would allow Peoria to play above its weight.
Times are not getting better for midsize and small metros.
Chris Barnett says
Exactly, pete. Aaron has commented here on the hollowing out of civic leadership as the result of economic restructuring many times over the years.
Mergers, hedge-fund roll-ups and corporate HQ relocations in every industry have made smaller cities into “branch plant” towns devoid of senior management and their personal civic leadership and philanthropy. It’s happened continuously over my lifetime in manufacturing, utilities, banking, law…all the fields that were the main providers of civic titans in the past.
I just think of my home town, Fort Wayne, Indiana. Local banks and department stores all replaced by branch banks of big money center companies (Wells Fargo!) and a faceless slice of generica known as Glenbrook Mall.
Curious about our host’s opinion of Fort Wayne. I was surprised at the islands of almost “hipness”….we had a fantastic brew pub experience (food as good as any Napa Valley gourmet burger!) in a really well done rehab of an old factory. Some nice townhouses under construction downtown. An older, uglier 1960s bank building with mid century modern condos above and another huge brew pub absolutely packed to the gills on a Friday night, and an outstanding third world coffee bar somehow surviving amidst the ghosts of Calhoun Street.
And then one drives out of the core neighborhoods into the suburban zone and I remember how utterly awful Midwestern suburbia can be. No market discipline in land use, so everything splurted out over the landscape ornamented with immense signs and empty big box stores. Gawd, it is UGLY OUT THERE. And I hate Midwestern tract housing design. It’s nice how affordable it is, but my god, is it bland and plain and boring.
Aaron M. Renn says
Ft. Wayne has some cool people in it doing interesting things. It has some of the “hip” entities you note, but fewer of them. Seems to be hanging in there economically. I can’t really give deep details on it though.
Chris Barnett says
And Fort Wayne lost Lincoln Financial’s C-suite to Philly despite being a bigger city/metro than Peoria.
But there is still a pretty big back-office presence, something our host has also suggested as a “specialty” for smaller Midwestern cities.
I remember that Lincoln case. The thing that really bugs me, though, is the complete loss of local banks to “Too Big To Fail” money center banks. But again, that may be the result of national policy and trends that are for many people and many places harmful.
I did notice in the neat café downtown the same kind of web-enabled youngsters one can see in the Bay Area. They even had a shared workspace kind of place downtown.
As much as I LOVE California (landscape, climate, culture), the reality that one can buy a cool old house in a classic pre-war neighborhood (not the suburbs, gawd, suburban Fort Wayne sucks!) for less than $100K…it may be tempting as a retirement option (not a homeowner in Cali right now, and I can see no way absent a LOTTO prize of reentering that market!)
Chris Barnett says
brian, in metro Fort Wayne, Wells, Chase, PNC and Fifth Third have just under 60% of the bank deposits between them. But down the list there are plenty of small institutions so there’s no lack of competition. The other banks on the list are “local” in the sense of being much smaller and headquartered in Indiana or Ohio and not focused on investment banking.
When I looked it up, I found the banking scene in Indiana overall not as concentrated or “money center”-ish as I thought. Chase (ex-Bank One), PNC, and 5/3 are the market leaders, but have only a total 30% share of deposits statewide, and Chase alone has half of that (15%). 4-6 on the list are Old National (Evansville), First Merchants (Muncie), and 1st Source (Michiana) with 13% of the market. Wells is in 7th place with about 3.5% of the market, and BofA has no presence. Source: FDIC
Jim Grey says
I am alarmed by this statement: “It’s very clear from what I see and hear in global cities that those who are succeeding wish those who are not would hurry up and die or just go away.” Can you expand on it? What exactly are you hearing that leaves you with this conclusion?
Purple City says
Back when Boeing moved its corporate HQ, it was widely reported in the Seattle press that Dallas/Fort Worth had been the clear winner in terms of economic incentives, but that the executives’ wives were disinclined towards becoming Texans. It would be interesting to do a survey of what sort of macrocultural changes have resulted in Peoria being an even more unbearable place for the median C-level spouse than it was, say, 20 years ago.
Mark Hansen says
Today, it’s basically expected that both spouses will work. And often, you have young professionals marrying other young professionals. Both want to succeed. And that can be a big problem for cities like Peoria.
Because say Caterpiller offers a married person an amazing job in Peoria and the offer is accepted. What does their spouse do if their particular high level skills don’t align with the local job market? They’d probably have to take a pay cut at a job they’re overqualified for. Because in most small to mid-range markets, you have just a few big employers driving the need for high skill labor.
I know in Iowa City some people even came up with a name for the resulting phenomenon: “captive spouse syndrome.” Or it went something like that.
It’s just way easier for professional couples to find equal job satisfaction in 2-3+ million metros.
Chris Barnett says
One possibility is generational/demographic, and not necessarily specific to Peoria/Cat or any particular small Midwestern city. Painting with a very broad brush, 50-something C- level people in big Midwestern companies in 1996 would have been leading-edge Boomers (or older) who most likely would not have come from upper-middle-class suburban backgrounds and were more likely to have been white Midwesterners.
50-year-olds in the C-suite of a company like Cat (or Cummins, or Rockwell Collins, or Lincoln Financial, or Mead Johnson, or Hill-Rom, all companies that do or did have HQ in smaller Midwestern cities) today would be “trailing Boomers” and leading-edge Xers whose life arc is generally very different…less likely to be of strictly white Midwestern origins and more likely to have graduate degrees from top B-schools. In other words, somewhat more cosmopolitan and less parochial.
As far as I know, it hasn’t actually been demonstrated that Cat is going to relocate in the City of Chicago; they went out of their way to say “Chicago area.” For all we know they could be setting up shop in Dyer, Indiana. (Someone said Naperville in the Crain’s comment section but didn’t substantiate it.) But people who think it’s great that jobs and people move from Chicago to Indiana or Tennessee, or California to Arizona and Texas, are tearing their hair out over the monstrous unfairness of moves in the other direction, and attribute it to corruption and/or executive cupidity.
We didn’t hear nearly so much wailing and gnashing of teeth when jobs were moving the other way (“wish those who were not would hurry up and die or just go away”) and inner cities were desiccating, and you certainly didn’t hear it from Republicans. This has always stuck in my craw about the earnestness of conservatives who suddenly have a problem with these trends and recruitment tactics. Indiana throws a party every time an Illinois plant moves across the state line, but they threw a fit over Carrier.
Anyway, Chicago was built on a portage between America’s two great inland navigation systems and at the tip of a major barrier to overland travel, and every leap in travel technology was put to work ensuring that all roads/tracks/canals/flight paths would continue to lead ruthlessly towards the Loop, to the hilariously impotent chagrin of St. Louis. If centralization has to happen somewhere, pooling in Chicago is as natural as geography.
Maybe that is the bigger issue. Should we be encouraging/supporting centralization to the extent encouraged by modern American policy? I am not so sure. And, I am not sure we can do a lot to slow it given the inevitable logical of capitalism?
The real issue is US does not have enough talent of its own because its school system, does not produce what it should. That is why STEM subjects dominated by foreigners! Frankly I think that is a disgrace!
There is a reason why Michigan governor took lead with placemaking. He used to be consultant who worked in Chicago!
I personally do not like suburbs, nor do I like cities that have suburban sections. Millenials are like me!