On Rockwell Collins, local leaders express optimism
City leaders are holding off on conversations with Rockwell's acquirer
CEDAR RAPIDS — Two months after the acquisition of its largest employer was announced, Cedar Rapids-area leaders expressed optimism about what the future may hold for the metro area and the corporate successor of Rockwell Collins.
In interviews and in an editorial board meeting with The Gazette, local leaders said they see the potential for more jobs in Cedar Rapids from United Technologies Corp.’s planned purchase of Rockwell.
They also described how they’re currently approaching the acquisition, which includes holding off on conversations with UTC, continuing existing workforce initiatives and advocating for the state’s research tax credit.
Farmington, Conn.-based UTC announced in early September it plans to acquire Rockwell, which employs about 8,000 people in Cedar Rapids and some 30,000 worldwide. Rockwell would combine with UTC’s aerospace division to form Collins Aerospace Systems.
Rockwell CEO Kelly Ortberg would be the chief executive of Collins Aerospace.
At only two-months old, the announcement has left some questions up in the air. They include where Collins Aerospace will have its home base and how big of an effect, positive or negative, the acquisition will have on Rockwell’s Iowa employment base.
‘HIGH DEGREE OF CONFIDENCE’
Cedar Rapids Mayor Ron Corbett, City Manager Jeff Pomeranz and City Economic Development Manager Jasmine Almoayed met with Ortberg in October. They left the meeting, they said, with a positive view and a “high degree of confidence” in the company’s future in the city.
“We derived our confidence from Kelly Ortberg speaking to us very frankly,” Pomeranz said. “He was very confident and told us we should feel very good about the long-term plan and the long-term reality of Rockwell or Collins Aerospace in our community.”
Corbett, Pomeranz and Almoayed said they have not talked to UTC. While they have discussed visiting UTC’s headquarters, based on their conversation with Ortberg, “it’s not the right time,” Pomeranz said.
“That is something that we have put on the radar screen to do at some point in the future. Based on our last meeting with Kelly, it wasn’t something we felt we should do from a timing standpoint now,” Corbett said.
Ortberg’s comments have weight, Pomeranz and Corbett said, because he will lead Collins Aerospace. During the editorial board, Corbett also said “we’re taking our cues from him” and that not every business decision can be influenced politically.
“If we hear something contrary to what we’ve been told, we will certainly, maybe take a different tactic going forward. But right now, we’re following their lead and it’s one we feel we can trust,” he said.
Doug Neumann, executive director of the Cedar Rapids Metro Economic Alliance, said existing efforts to bolster workforce and quality of life can make Cedar Rapids an attractive venue for UTC. Initiatives that would help attract other companies apply to potential growth under Collins Aerospace.
“A lot of that playbook, a lot of what we can do to make our hand as strong as it can be is the same as it was before news of the acquisition,” Neumann said. “We haven’t stopped any of those efforts.”
Neumann said he also has not spoken with UTC.
“There will be an appropriate time for building the new relationships for inviting United Technologies to audiences with our business community,” Neumann said.
RESEARCH TAX CREDIT
Neumann, Corbett and others also brought up a state research-and-development incentive program as a key selling point for the area.
“Really, the most important thing that I think Rockwell, from a state level and a local level, is concerned about is the research-and-development tax credit. This tax credit has been extremely important to them to create engineering jobs and to the R & D in the Cedar Rapids facility,” Corbett said.
Iowa has a Research Activities Credit it provides to companies for R & D work they do in the state. The tax credit is refundable — meaning if a company claims more in tax credits than their state tax liability, Iowa will write them a check.
But that research tax credit, along with other tax credits, has a target on its back as lawmakers contend with lower-than-expected revenues and cuts to the state budget. Ending the refundability of that credit and others came up during the last legislative session, including from the Republican chairman of the House Appropriations Committee, State Rep. Pat Grassley of New Hartford.
Rockwell has argued the tax credit is a key reason why it does research in Iowa. The company spends more than $1 billion in R & D a year, about 60 percent of which is done in Iowa, spokesman Josh Baynes said in an email.
“The R & D tax credit in Iowa is instrumental in supporting our workforce in Iowa as opposed to other locations,” Baynes said.
Rockwell is one of the top recipients of the credit, claiming $90.2 million of the tax credits from 2010 through 2016. That’s about 23.7 percent of the more than $381 million claimed in total for those years and second only to Deere and Co. and a Deere subsidiary.
“This would be a blow to Cedar Rapids and to Iowa’s effort to expand Collins Aerospace going forward if that research-and-development tax credit were to be pared back or, worse, eliminated,” Corbett said.
Neumann, of the Economic Alliance, also called the tax credit vital to the area’s business recruitment efforts.
“Particularly as we become a part of these more multinational companies, it gets real, real easy to say, ‘research and development jobs, nope, those are going to Charlotte,’” Neumann said.
UTC Aerospace Systems is based in Charlotte, N.C.
It’s not clear how much of Rockwell’s claims were paid as refunds. The state Department of Revenue does not disclose those amounts for specific recipients.
In 2016, though, 82 percent of the research tax credits paid to corporations were given as refunds.
NO REQUEST FOR INCENTIVES
So far, there is no request from Rockwell or UTC for bids or incentives for the executive offices of Collins Aerospace or for other jobs, Pomeranz and Almoayed said.
Ortberg “very pointedly said incentives aren’t at play at this point. They’re not requesting any. They’re not considering any. That’s not what’s going to be the driving force in that business unit headquarters” decision, Almoayed said.
If a proposal comes up, Pomeranz said Ortberg “assured us that we would be notified and that we would be informed.”
Local officials pointed out the acquisition still is in early stages. A shareholder vote still is required as are federal and international regulatory approvals. The acquisition is not expected to close until the latter half of 2018.
OUTSIDE OF CEDAR RAPIDS
While on a visit to Marion in early October, Gov. Kim Reynolds said the state is “going to compete aggressively to keep” Rockwell here, but declined to talk specifics.
“We’re just going to say that we’re not going to let them slip away. We’re going to do everything that we can to make sure that we keep them here,” Reynolds told The Gazette on Oct. 10.
Reynolds said she spoke with Ortberg right after the acquisition announcement was made in September. She would not say whether she had spoken specifically with UTC.
“The economic development (authority) and myself, we’re doing everything that we can to make sure that they know we want them here and that we can meet their needs,” she said.
Members of Iowa’s Congressional delegation, including U.S. Sens. Chuck Grassley and Joni Ernst, met with Rockwell and UTC leadership in September. Those meetings, staff members said, were requested by the companies.
Marion Mayor Nick AbouAssaly said he’s heard anecdotally that one in six Marion households has a Rockwell employee.
As the acquisition process continues, he said it’s important the metro area keeps lines of communication open with Rockwell. He has not had direct conversations with Rockwell or UTC, but said there should be “one channel of communication.”
“The city of Cedar Rapids is taking the lead on those communications, but keeping us all advised and updated,” AbouAssaly said.
Officials in other communities with Rockwell employees said they also have not had conversations with the company or UTC about the acquisition.
Decorah City Manager Chad Bird said his office has a good relationship with Rockwell, but has not talked about the acquisition. The company has about 250 employees in the city and is a “cornerstone” of the local business park, Bird said.
“I don’t know that we’re worried (about job losses). We just don’t know enough to know what it’s going to mean,” Bird said.
In Coralville, where Rockwell employs 700, City Administrator Kelly Hayworth said the city hopes the company can expand in the future.
He said he trusts the efforts of the city of Cedar Rapids, the Economic Alliance and the Iowa City Area Development Group.
“That’s why we’re members of those organizations and I rely on them to be doing the necessary things. I would expect that everything has been done that needs to be done,” Hayworth said.
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