🔒Report: CT ranks in bottom half of aerospace manufacturing attractiveness

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Connecticut ranks 33rd in a new report measuring states' attractiveness for aerospace manufacturing — a mixed-bag position weighed down by the Nutmeg State's high wages, energy costs, and taxes, but bolstered by a strong supplier and skilled-labor base.

Connecticut ranked dead last out of 50 states in operating costs and placed 32nd in overall tax burden in the “2015 Aerospace Manufacturing Attractiveness Rankings” produced by accounting and consulting firm PricewaterhouseCoopers (PwC). The state fared better with its industry size and education rank coming in 19th and 14th, respectively.

The report reflects much of what many Connecticut manufacturers already know: The state has quality talent and innovation, but high costs are detrimental to the industry's growth prospects, says Scott Thompson, partner and U.S. aerospace and defense assurance leader at PwC. The state has more ability to influence costs like taxes, but wages tend to be more regional and harder to control, he says.

“If I were selling Connecticut … or if I were selling to other companies about Connecticut's value, it would be around the employment base and the skills that the aerospace workers in Connecticut have,” Thompson says.

Indeed, talent was a top concern for aerospace executives PwC interviewed as part of a national research paper it released in 2013 called “Aviation's Second Golden Age: Can the U.S. Aircraft Industry Maintain Leadership?” That report contained PwC's initial aerospace manufacturing attractiveness index, which ranked Connecticut No. 14. The ranking methodologies, however, changed in the latest report to separate and better reflect the state's tax burdens and operating costs, meaning the two rankings are not an apples-to-apples comparison.

“By far and away, they were much more concerned about the availability of talent than the cost of the talent,” Thompson said of executives interviewed in the 2013 report. “They're finding it challenging to get engineers as well as skilled manufacturers.”

Bruce Fiedorowicz, director of sales for GKN Aerospace Engine Systems in Newington and past president of Aerospace Components Manufacturers, a nonprofit network of Connecticut and southwestern Massachusetts aerospace companies, believes the industry is stronger here than the state's ranking reflects.

“I don't think that's a litmus test for the health of the aerospace industry in the region,” said Fiedorowicz, whose company makes fan casings for jet engines made by Pratt & Whitney, GE Aviation, and Rolls-Royce.

“As I like to say it, we are in Silicon Valley of aerospace here,” he said. “If you draw a radius around where we're sitting now [in Newington] and go 50 miles you have hundreds and hundreds of facilities…that have the capability of changing metal and adding value through special processes — that's the huge competitive advantage for this region.”

Connecticut has the talent, infrastructure, and supply chain to complete parts to original equipment manufacturer (OEM) specifications most efficiently, he said.

The ranking “by no means suggests the 'best places' for aerospace manufacturing,” but does provide an interesting view on the many options to locate sites and/or research and development facilities, especially for suppliers that don't need to be based near OEMs, the PwC report said.

Jeremy Maryles, manager of research and analysis at PwC, said industry and overall wage rates in Connecticut, plus energy costs, is where the state started to drop, fueling its last-place ranking in operating costs, which also includes business climate. Numbers influencing that ranking, but not included in the report, had the state ranked 47th in electricity prices, and 46th and 48th in industry hourly wage and all occupations' hourly wage, respectively.

“Basically, Connecticut, on all three metrics — on electricity and the wage numbers — is ranked pretty poorly,” Maryles said.

Connecticut scored well on its industry size. It ranked No. 4 in the number of companies whose primary business is aerospace and headquartered in Connecticut, including suppliers that specialize in aerospace. Connecticut also ranked well (14th) for industry employment.

“Even though Connecticut is a higher cost place in terms of wages, when you think about the state's industry employment being No. 14 and being No. 4 in terms of number of aerospace companies, to me what that says is that Connecticut should be placing a lot of emphasis on its attractive labor pool,” Thompson says. “Even if the cost is high — there may not be a lot that you can do to manage that — it tells me, put the emphasis on the skills.”

Joe Brennan, president and CEO of the Connecticut Business & Industry Association, said Connecticut's overall ranking would be much better if not for the operating costs.

“It's just the reality of being in Connecticut,” he said. “Looking at wages, looking at taxes, you're going to come up with a pretty poor ranking for operating costs, and I think that skews the overall ranking. That's why we're working to try to reduce some of those costs.”

CBIA's legislative priorities include trying to reduce energy costs permanently, in part through projects like Access Northeast to improve natural gas pipeline capacity and through diversification of fuel sources, and trying to change the debate on taxes, Brennan said.

Currently, the state legislature is debating hundreds of millions of dollars in proposed tax increases to help close billion-dollar budget deficits over the next two fiscal years.

“The best way to pay for government … is to grow your tax base and you grow that best through economic activity, not through tax increases,” Brennan said. “So that's the message, it's not just we don't want higher taxes, it's figuring out a better way to pay for government and to grow the economy.”

Connecticut has a lot of aerospace advantages, from Pratt & Whitney's headquarters to hundreds of companies in its supply chain, Brennan said.

He called the PwC report a mixed bag.

“It shows the good in some areas, not so good in others … but if you look at the overall impact that aerospace manufacturing has on Connecticut, I think it's a good place to operate,” Brennan said.

GKN's Fiedorowicz agrees.

Companies associated with aerospace components manufacturing are growing, adding jobs, equipment and facilities, he said.

“If you take the pulse of the aerospace industry in this region, we're going at Mach 3 and beating fast,” Fiedorowicz said. “The backlog and the opportunities from the OEMs are going to ensure that this area is going to have growth for the next 20-plus years and that's if they don't introduce anymore new platforms — and you know that's always going to happen.”

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