A Mississippi native who has an LED lighting factory in China wants an unusual incentive in exchange for setting up an additional assembly plant in his home state employing 200 workers to start.
Lighting OEM Inc. owner and founder James Scott said he is asking for an incentive that ensures the factory won’t become another “white elephant” for the state. To that end, the Abbeville native said he wants an edge in bidding for the state’s LED (Light Emitting Diode) lighting business.
“Instead of them giving me a bunch of money, they give me a 25 percent advantage” in selling to the state and its universities, he said.
Scott said he prefers a bid preference of 25 percent but will settle for less. “If they tell us 15 percent, then we’ll probably take 15 percent.”
He said he has pitched the Mississippi Development Authority. “Their reaction was that maybe this was a good idea because we don’t want to use another $25 million on a ‘dead horse,’” added Scott, referring to economic development investment failures the state has endured.
A key virtue of LED lighting is the potential for energy savings to let the buyer recoup the cost of the lighting within two years, according to Scott. “Everything we can show them is a 100 percent return with a 2-year profit margin.”
The size business Lighting OEM would gain from the state is hard to say. The state Department of Finance & Administration, which is the state’s property manager, said even a ballpark estimate would be difficult to give. Maintenance invoices, for instance, aren’t broken out into specific items, “making it almost impossible to guess what we spend on just one thing,” said Sherri Hilton, DFA spokeswoman.
The MDA does not comment on negotiations with economic development prospects. In fact, the agency does not confirm negotiations are occurring.
Scott said he has made similar pitches to economic development officials in Texas, Tennessee and Georgia. His preference is Mississippi, however.
He wants to make a decision within the next six weeks.
“My mother is buried in Mississippi; that’s the number one reason for my decision,” said Scott, who ventured into the lighting business 30 years ago after buying a classified ad in the Memphis Commercial Appeal in which he offered to work as a salesman for commission-only.
The best offers came from a water distributor and a lighting distributor. He took the lighting company offer, he said, because he didn’t want to tell his girlfriend he was selling water.
Lighting OEM has talked with officials in Senatobia and Oxford, according to Michael Levin, CEO of Lighting OEM.
The interest in Senatobia centers on two abandoned buildings – the former Twin Creeks solar panel plant and former BMW auto parts distribution center.
While Scott says Oxford is his first choice, options for a plant there are limited to an abandoned Toro lawnmower factory.
Levin’s main interest is in the Twin Creeks building, a 85,000 square-foot building equipped with state-of-the-art equipment Scott now calls “dead-horse” equipment he can’t use.
Senatobia and the MDA are marketing the building under the new name of Metro Technology Center.
The former home of bankrupt solar-panel maker Twin Creeks has plentiful electrical power capacity and water-recycling capacity, both key requirements for assembling LED lighting,
Senatobia owns the building, though the MDA has an unpaid loan of $17 million invested in it.
Scott said he has pitched Senatobia a deal similar to the one he made the state, though this offer is directed at the city and Northeast Mississippi Community College. Give Lighting OEM a price preference on your LED lighting and the company will move into the building right away, Scott said.
Senatobia Mayor Alan Callicott said Tuesday he has talked with neither Scott nor his representatives. He noted, however, he would not have had contact with the company unless it came as a referral from the Mississippi Development Authority. “We rely on the MDA to vet any projects that come to us,” the mayor said.
Tim Climer, Tate County Economic Development Foundation executive director, said the building has several prospective occupants at the moment but declined to say whether Lighting OEM was among them.
“Several are looking at it and we’re entertaining other offers as well,” Climer said Tuesday.
LED’s Worldwide Reach
Predictions that LED lighting will soon be lighting much of the developed world drive Scott’s desire to expand his young company. Though light emitting diode lighting has only about 8 percent of the world market, it is projected to gain 35 percent of the market in 2020 and 75 percent by 2030, said Levin, the Lighting OEM CEO.
“It’s poised to jump. We are in the right place at the right time.”
Levin expects the company will see sales of around $2 million in 2014 for its LED lighting and LED signage products, its first full year of selling. “We’re predicting about $8 to $10 million in 2015 and $27 million in 2016,” he said. “These are conservative estimates.”
Lighting OEM has secured sales contracts in Brazil, Poland, Russia, Ukraine and Romania, the company says.
The company is providing custom design of its products as well as retrofitting existing fixtures, it said in a press statement.
In Mississippi, it furnished the stadium lighting and mounting arms for the 73-acre Oxford Lafayette Sportsplex.
In addition to stadium and other outdoor complexes, Lighting OEM’s commercial product line includes hotels, gas stations, manufacturing facilities, warehouses, malls, resorts, nightclubs, auto dealerships and parking garages.
Wanting to Come Home
Scott, an electrical engineer, said he sold his 15-year-old Erie, Pa., lighting company toward the end of the last decade over frustrations with labor costs. He ventured into the political polling business before deciding to take another crack at the lighting business.
Having lived and done business in China for a dozen years spread over the decades, he set up shop in the manufacturing hub of Shenzhen, a city in the coastal province of Guangdong. Scott said he has no immediate plans to leave China, where he has about 200 workers. But setting up a successful U.S. operation could change his mind, he said.
“We have to keep the China side open here” until Lighting OEM can hand off 100 percent of the work to a U.S. operation, Scott added.
China’s big draw of labor savings is not so big anymore, he noted. “It’s close,” Scott said of Chinese factory wages inching toward U.S. levels.
He has few legal protections for the processes he has developed. “I have 100 items in China that have been copied from me. It’s one of the reasons I want to leave.”
He has more processes to develop, he said, but does not want to expose them to piracy by developing them in China.
While saving on transportation is another big reason for wanting to come home, the United States offers significant cost savings for obtaining the aluminum component that is the critical element to the heat sinks in LED lighting technology, said CEO Levin, who is based in the company’s U.S. headquarters in Philadelphia, Pa.
“The aluminum is currently being recycled in the United States and then shipped to China, where it is being melted and used to manufacture the heat sink in LED lighting fixtures which are then sent back to the United States as a finished product,” Levin said. “It makes economic sense to make the heat sinks in the United States.”
Mississippi has a strong sentimental pull, Scott said. He emphasized the affection he has for his home state adds to his caution over securing financial incentives from the state to set up shop in it. “My number one problem is how can I bring the company into Mississippi and not be another white elephant?” he said.
“I have been kind of what you might call a rebel. I don’t do everything perfect, but I try to do everything I can 100 percent correct.”