Ann Arbor Area BUSINESS MONTHLY magazine brings the reader the latest business news and information important to the businesspeople in Washtenaw County. Each month articles cover real estate, legal, Internet, employee concerns and the climate of business in the greater Ann Arbor area. There is news about company employees and feature articles on local businesses. We cover business news from Ann Arbor, Chelsea, Dexter, Manchester, Milan, Saline, Whitmore Lake, and Ypsilanti.
Toyota Technical Center Now
Open With 400 New Jobs
By Duane Ramsey
The grand opening of the Toyota Technical Center's York Campus celebrated not just bringing 400 new jobs but much more to York Township, Washtenaw County and the State of Michigan.
The grand opening was celebrated October 9 with Governor Jennifer Granholm, Congressman John Dingell, hundreds of local and state officials, community leaders, Toyota team members, suppliers, and guests. Granholm thanked Toyota for choosing Michigan for locating its new technical center.
She recognized it as "one of 330 R&D facilities in the state making $10 billion of investment in future innovation and the next generation of products."
"It's also part of $7 billion investment in 52,000 new jobs in the automotive industry as part of the No Worker Left Behind workforce development program for retaining workers for jobs of the future," Granholm said.
The technical center located on 700 acres expands Toyota's engineering and safety testing facilities while employing 1,007 team members. The addition of 400 new jobs will boost its employment in the Ann Arbor area to 1,100 by 2010.
"Toyota's investment of $187 million to advance research and development demonstrates our commitment to the North American automotive industry," said Shigeki Terashi, president of Toyota Technical Center. "TTC has been conducting R&D activity in Michigan for over 30 years and recognizes southeast Michigan as the center for automotive R&D in North America."
The company first established the TTC in 1977 near the EPA's offices in Ann Arbor. Part of the Ann Arbor campus will remain in use along with the York campus of TTC. "Toyota has grown step-by-step with its global R&D facilities in Michigan," said Yasuhiko Ichihashi, senior managing director of the Toyota Motor Corp.
As former president of the TTC in Ann Arbor, Ichihashi was very involved in the planning of the new facility. He said it gave him "great pleasure to return to Michigan and see the results of those efforts." "It will lead into the next stage of growth for Toyota in North America," Ichihashi said about TTC.
"It represents a huge vote of confidence and is a psychological economic boost for the area," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "Toyota would not have located here without the outstanding human resources to back it up."
The facility provides engineering design and vehicle performance development to Toyota's 13 plants in North America. TTC is involved in prototype building, vehicle evaluation, materials engineering, power train tuning and design, regulatory affairs and advanced technical research.
TTC has developed the Avalon, Sienna, Solara, Tundra models and Toyota's latest Venza model. The company will begin production of the Venza in January 2009 at its plant in Georgetown, Ky. The engineering and design facility consists of 350,000 square feet of office and laboratory space while the safety test facility provides 180,000 square feet of testing space. The two buildings are connected by an enclosed walkway.
Toyota used sustainable and green building practices in the design and construction of the facility and development of the site, according to Bruce Brownlee, senior executive administrator for the Toyota Technical Center.
The design and construction of the project was certified by the Leadership in Energy and Environmental Design, known as LEED, developed by the U.S. Department of Energy. The company cleaned and redeveloped the Brownfield site that it purchased from the State of Michigan for $11 million in 2006. It minimized disruption to the natural habitat during construction that began in January 2007 and was completed in August.
The project retained 150 existing trees and planted more than 3,500 new trees including the first one at the ground-breaking last year. They planted more than 8,000 native perennials, grasses and wildflowers to reduce maintenance of the site.
Bio-swale and stone road shoulders were constructed to reduce storm water run-off and promote natural water filtration. Pump stations were incorporated into retention ponds to support irrigation of the property.
The company implemented "zero landfill" initiatives to reduce environmental impact of daily business activities on the site.
Forty percent of the materials used were obtained from local sources within 500 miles of the site, including seeds and plants.
Crushed and recycled old building and new materials of brick, concrete, cardboard, plastic steel and wood were used in the construction of the facility. The carpet installed in the offices is made with 50 percent post-industrial recycled materials. The buildings feature an under-floor air system that is 8 percent more energy efficient, said Brownlee. Low-E glass and light-colored roofing material was used to reflect light and reduce solar heat gain.
"All automakers are going through some challenging times but we're hopeful for the future and want to celebrate this new center and Toyota's commitment to Michigan. We plan to be here for a long, long time," Brownlee said.
Joe Zurawski, York Township supervisor, praised Toyota, local and state officials for working together to make the project happen on the site of the former mental health institution.
"This site was identified for R&D 20 years ago in the York Township Master Plan," said Zurawski, who was elected when plans for the facility began. "Toyota has been very respectful of the York Township community throughout the development of the center." In keeping with Toyota's commitment to the community, the company made contributions of $25,000 each to Milan Area Schools, Saline Area Schools, and York Township to establish the Sandra Richardson Park Maintenance Fund. It also donated 7.84 acres of land adjacent to the park for future use.
Toyota also contributed $25,000 to the Michigan Economic Development Foundation to support business retention and attraction efforts while increasing national and international awareness of Michigan's positive business climate.
(Possible sidebar with photo of speakers quoted - TTC Speakers - caption below)
Governor Jennifer Granholm, Toyota's Yasuhiko Ichihashi, Congressman John Dingell, State Rep. Kathy Angerer, and Joe Zurawski, York Township Supervisor, pictured from left to right.
"It's a celebration of investments and jobs in Michigan and an important piece in the strategy of the state to diversify its economy while supporting the automotive industry. I am excited that this facility is an example of our efforts to diversify our economy."
- Governor Jennifer Granholm
"We express our gratitude and congratulations to Toyota on this great facility for the state and our country. We're happy to be partners with you to build success in southeast Michigan."
- Congressman John Dingell (15th District)
"It's a great day for York Township and the State of Michigan. What it means to this community speaks volumes about jobs for local residents. Toyota had a dream for this piece of property and today it has come true."
- State Rep. Kathy Angerer (55th District)
"This occasion was a long time coming but it was well worth the wait. It's more than we could ever have hoped for. This great day has taken a lot of effort to become a reality. We and Toyota persevered to make it happen."
- Joe Zurawski, York Township Supervisor
"This facility if the jewel in the crown of all Toyota investments in North America. There is nothing more important than R&D facilities so it's huge for the local area and the State of Michigan."
- Jim Epolito, president, Michigan Economic Development Corp
"We are proud of our new facility at York Campus in Michigan. We are teaching and mentoring students in a new wave of engineers who recently joined us from college."
- Shigeki Terashi, president, Toyota Technical Center
Assessing the Pickens Plan:
T. Boone Pickens Promotes Energy Plan in Ann Arbor
by Mark Ziemba
America's current energy situation alarms Texas energy investor and oil and natural gas explorer T. Boone Pickens. "We're using 25 percent of all the oil every day in the world, with 4 percent of the population and 3 percent of the reserves," says Pickens. "We're spending $700 billion dollars a year to import foreign oil," he adds, emphasizing that 70 percent of our oil is now imported. In October Pickens spoke in Ann Arbor at the University of Michigan, detailing how wind and natural gas can help America reduce the risk of foreign oil dependence through the Pickens Plan.
Pickens is no stranger to energy issues. He founded private energy investment firm BP Capital, public natural gas company Clean Energy Fuels and the Mesa Power Pampa wind power company. He also started Mesa Petroleum in 1956, prospecting for oil for four decades.
So it's surprising that Pickens would blame America's energy issues on oil. "We've never been asked to do anything on energy in America because of cheap oil," says Pickens. Now that oil isn't so cheap these days, there may be more of a motive to find energy solutions.
Evaluating the Foreign Oil Dependence Threat
Of particular concern is how much oil the United States imports. Pickens says that we currently import 70 percent of our oil, and that number has grown from 24 percent in 1970.
That's a fairly accurate figure. The U.S. Energy Information Administration (EIA) provides figures in their "Annual Energy Outlook 2008" for 2006 that yield 66 percent net imports of crude oil as a percentage of products supplied, a preferred yardstick for a physical measure of dependence. For 2007, the EIA simply lists net imports of all petroleum as 58 percent in its document "How Dependent Are We on Foreign Oil?"
Does oil dependence equal oil vulnerability, however? The EIA doesn't exactly see it that way. In the 1998 EIA document "Measures of Oil Import Dependence," James M. Kendell wrote that many oil suppliers lessens vulnerability. "If the world oil supply came from many small producers and one of them suddenly stopped exporting oil, it would have little effect on U.S. and world supplies and prices, even at a high rate of U.S. dependence." If the market is diverse enough, then there are potentially other sources for imported oil.
In fact, the EIA's 2007 figures on U.S. crude oil imports by country suggest a somewhat diverse list of suppliers. Surprisingly, Canada leads the list of top U.S. crude oil suppliers at an 18 percent total share of U.S. imports, followed by Mexico at 11 percent, Saudi Arabia at 11 percent, Venezuela at 10 percent and Nigeria at 8 percent.
Pickens covers this with a broader sweep in his figures, lumping the Middle East and Africa together at a 40 percent share of total U.S. oil imports, Canada and Mexico at 37 percent, South America at 15 percent and Europe and Asia at 8 percent. The Middle East and Africa are currently flashpoints for conflict, however, which could easily disrupt supply in today's tight, volatile oil market.
Oil vulnerability can be gauged even better with economic measures, suggests the EIA. "Economic measures of oil security are at least as important, if not more so, than physical measures," wrote Kendell.
One suggested economic measure of vulnerability is known as "oil intensity," or oil consumption per dollar of gross domestic product. According to the EIA's "Monthly Energy Review September 2008," for 2005, consumption of petroleum and natural gas per real dollar of GDP was 5.73 thousand BTUs per chained 2000 dollars. On average, this figure has been declining 12 percent every five years since 1975. Kendell notes, however, that a lower intensity figure can be the result of increased mile-per-gallon vehicle performance or an economic slowdown causing drivers to travel less.
Another economic measure of energy vulnerability is energy expenditure per share of GDP. Using figures from the EIA's "Annual Energy Review 2007" and the U.S. Bureau of Economic Analysis annual GDP current dollar figures, for 2005 the petroleum expenditure per share of GDP is 4.8 percent, a figure that has been growing since the mid-1990s and is similar to calculations for the mid-1980s. This number is not reassuring, but at least it's not as high as the 1980 figure of 8.5 percent.
Since a case could be made for America's energy vulnerability, it would be wise to devise a new energy strategy. The Pickens Plan suggests two ambitious ideas: a huge network of wind farms to replace the role of natural gas in electricity generation and using that natural gas as a transportation fuel.
Harnessing the Abundant Wind Power in the Great Plains
Pickens calls America "the Saudi Arabia of wind." He wants to begin establishing a massive network of wind turbines in the middle of the country to generate about 22 percent of the nation's energy in 10 years, an idea facing some obstacles.
Pickens calls this area the "Wind Belt," stretching from North Dakota down to the northern tip of Texas, across the Great Plains region.
According to renewable energy forecasting and assessment company 3Tier Group, this area features high average annual wind speeds at 80 meters above ground, a typical wind turbine hub height.
On the DOE's National Renewable Energy Laboratory "Wind Resource Potential" map, the Great Plains exhibits some large areas of wind resource potential rated as "good." These areas fall particularly in the Dakotas, western Minnesota, northern Nebraska, northwestern Iowa, southwestern Kansas, western Oklahoma and northern Texas. North Dakota even offers some spots rated as "excellent."
Of interest locally is the fact that Lake Superior, Lake Michigan and Lake Huron each also contains areas rated by the NREL as "excellent," though these are mostly over the lakes.
"The U.S. has an exceptional wind resource," says Center for Sustainable Systems Assistant Research Scientist Duncan Callaway, Ph.D., of the University of Michigan's School of Natural Resources and Environment. Regarding the DOE's May 2008 study "20 Percent Wind Energy by 2030," Callaway added that "many feel like it would not be unreasonable to be even more ambitious."
Such a plan would work with modern wind turbine technology, which is sophisticated and efficient enough for the job.
Typical turbines resemble large airplane propellers with three blades, and are mounted on a horizontal axis at the top of an 80 to 100 meter tall mast. "A taller turbine means that you can get more energy," says Callaway. He explains that this is because wind at higher altitudes is less affected by friction with the earth's surface. The turbine's "propeller" has a diameter of between 70 and 80 meters.
Design isn't so much an issue. "The real efficiency question," says Callaway, "is how much energy does it produce for the amount of money you invest in it?" Design improvements have increased mechanical efficiency, but he says that the biggest improvement in wind turbine technology has been in the cost to build and install them.
Adding wind power to the national energy plan will require more than just building lots of turbines. Typical power generation plants are relatively close to power customers, but wind farms in the Great Plains will be far from a majority of customers. New power transmission lines will be needed to carry the energy from the wind power -- and not just any power lines, but more efficient ones.
"For every mile that you transport an electron, you lose a certain amount," says Callaway. "We're going to be transporting the electrons even further now, so that efficiency is going to tend to go down, unless we use a certain kind of transmission technology called high-voltage direct current."
Callaway says that "it's likely that HVDC transmission lines will be needed for the Pickens Plan just to limit those energy losses." He adds that these lines are "more expensive than conventional alternating current transmission lines." Such transmission lines will carry more electricity to make the bigger investment more economical, he says, but electrical power savings will make up for the added cost of the infrastructure.
Building the transmission lines will require significant investment. Pickens estimates that the DOE's suggested $70 billion new national grid for transmitting power from wind is "not as complete as I'd like to see it."
Pickens believes that private business could fund a new grid, especially if the government offers tax credits. "They need to have a production tax credit that lasts for 10 years so you can get the manufacturing operations into the Wind Belt," he says.
Getting the right of way to build transmission lines may require the use of eminent domain laws to obtain land for a project deemed for the public good. Pickens has already attempted to obtain rights of way in Texas for wind power transmission lines.
A company started by Pickens in 1999, Mesa Water has been trying to market water from land owners in the northeastern corner of the Texas panhandle with access to the High Plains Aquifer, also known as the Ogallala Aquifer. In order to get the water to potential buyers in other cities, it will have to be piped there.
Texas state politicians passed two bills in 2007 that may help Pickens obtain both water and wind rights of way there. Senate Bill 3 authorized a water conservation district or water supply corporation to be able to allow others to operate transmission lines on rights of way and House Bill 2984 struck down the need for water supply district supervisors in most counties to be registered voters in their district. Water supply districts can exercise the power of eminent domain, if needed.
The Roberts County Fresh Water Supply District No. 1 was created in late 2007. According to Texas State Senators Robert Duncan and Kel Seliger, its only five members were all employees or associates of Pickens. In the spring of 2008 the new water supply district and Mesa Power alerted homeowners along the proposed right-of-way route about the plan and began holding meetings with residents, some of whom were concerned about what might happen to their property.
The new water district's future is already uncertain, however. In August the U.S. Department of Justice objected to the state's changes in the eligibility of the water supply district supervisors. As a result, water districts were informed in September that the new guidelines had no force, and that valid water district supervisor candidates needed to be registered voters in the same district. While plans to obtain access for the wind power transmission lines through the water district's powers may have been halted, interest in providing for wind power remains high in Texas.
Wind power's intermittency creates another integration issue with the power supply grid.
"Wind is not something you're going to have 100 percent of the time," admits Pickens, who points out that wind is only a part of a bigger solution.
The issue that wind power presents for the energy grid is keeping a constant flow of electricity so that the supply meets the demand, says Callaway. While there are already fluctuations due to changing demand, these are fairly predictable. With wind power supply, says Callaway, "the timing of those fluctuations will not necessarily be as predictable as they are with electricity demand."
When wind power fluctuates, another energy generation source needs to be able to compensate for the drop -- one that's able to respond quickly to the changes. "Natural gas plant electricity generators are still going to be required in this high wind-generation future," says Callaway. "Compared to coal or nuclear, gas plants are much more flexible."
Pickens believes that wind power is a natural fit for America's energy generation scheme. According to the EIA, our largest sources of electricity generation are coal at a 49 percent share, natural gas at 21 percent and nuclear at 19 percent. In the Pickens Plan, wind power will replace natural gas, freeing it up for another use.
Creating a New Role for Natural Gas
Pickens wants natural gas to play a new role as transportation fuel in order to reduce our dependence on foreign oil while we develop other energy options for transportation.
"What we have is natural gas, a cleaner fuel in abundance here," says Pickens.
There are numerous large natural gas fields in America. The Barnett Shale gas field in Texas is considered to be the largest at 50 trillion cubic feet of gas, but Pickens says that "the Hayes Field over in north Louisiana is five times bigger than the Barnett." He notes that the Marcellus Field in the Appalachians is twice as big as Barnett, and points out others in Arkansas and Oklahoma.
He adds that Canada has a big gas field in British Columbia at the Horn River, and that due to the close proximity of our nations, "we're their natural customer."
Natural gas is also easier to extract than oil, says Pickens. "Natural gas moves so much better in the reservoir than oil does, so you can get into areas where the shale has some oil where you can't get the oil out, but you can get the gas," he says.
There may be some strategic benefits from replacing some of our transportation fuel with natural gas. Pickens believes that this use would reduce the $700 billion America spends on foreign oil by 38 percent, or $266 billion. This ratio is close to the 40 percent proportion of imported oil Pickens says the U.S. gets from the Middle East and Africa. It would also keep the money we spend on natural gas in our own economy. "Anything we can capture back into the United States will help us help our economy," he says.
There is a significant initial vehicle cost to switching to natural gas. Including tax breaks, a new natural gas vehicle such as the Honda Civic GX currently runs about $7,000 more than a traditional gas vehicle in Michigan. Existing cars could be converted to run on natural gas for about $10,000 to $20,000, which may be cut by 50 to 80 percent by federal tax rebates. Doing this would mainly benefit fleet vehicles or newer vehicles that can still be driven enough miles to make up for the cost. Gas vehicles can be refueled slowly at home with special refueling stations, which run about $5,000 to $10,000.
The incentive for considering this is that Pickens says that the cost of natural gas is about $1.50 per gallon right now.
The biggest issue may be the lack of refueling station infrastructure. "We don't have the infrastructure for you to go from here to New York," says Pickens. Some vehicles, called "bi-fuel" vehicles, can store both regular gas and natural gas (or another alternative fuel), and run on either, which would extend their range.
Perhaps the first step is for fleet vehicles to lead the way. Pickens is already talking with FedEx, Swift Trucking and Wal-Mart. If they switched to natural gas, then filling stations would be created to fulfill the need, and the natural gas fueling infrastructure would grow. An overall savings on transportation costs could result, as well.
"A million trucks on natural gas would reduce diesel use by 40 percent," says Pickens. "Thirty percent of all the transportation fuel used every day in America is used to move goods."
Pickens is realistic about natural gas as a resource. "I think we have plenty of gas to do what I'm talking about, but not forever," he says. "It's going to be a bridge for 20 or 30 years to get us to the next generation of transportation." He thinks that batteries or hydrogen are the most promising options.
Callaway suggests that electrical vehicles are a better idea than natural gas ones. "The net efficiency in a natural gas vehicle would be something on the order of maybe 25 percent," he says. He notes that modern gas plant electricity generators operate at about 60 percent efficiency. "It might make more sense to shift our transportation infrastructure to one that's based on electricity instead of one that's based on liquid fuel." Callaway admits that the cost of batteries is presently a barrier to this idea. "On a 20-year time frame it would make much more sense to go the route of vehicle electrification," he says.
The Bottom Line
Of course, Pickens could conceivably profit from the changes he suggests in the Pickens Plan, as the founder of a wind power company, a natural gas supplier and an energy investment company. When asked if profit is his motive for pushing the Pickens Plan, he says, "That's crazy. I'm rich enough already. I don't need any more profit."
The Pickens Plan offers some intriguing ideas to help America face its threatening energy issues. While there are limitations to accomplishing all of the plan's goals in the time frame desired by Pickens, Pickens is offering leadership and elevating the discussion about energy to a higher priority. "I want to elevate it to the number-one issue," says Pickens.