US Steal? America for Sale
U.S. Steel is one of the most iconic companies in the history of the United States. They even got mentioned in the Godfather! U.S. Steel was the company that built Disney’s Contemporary Resort as a modular building in 1971. U.S. Steel’s South Works facility in Chicago once employed over 20,000 people. The company was a symbol of this country’s manufacturing prowess.
However, beginning in the 1970s, South Works began a long period of downsizing, finally closing for good in 1992. Twenty-five years later, the lot still sits vacant. Despite several efforts to develop the property, nothing yet has materialized. Until now.
The Chicago Tribune reported a plan involving two European companies to build as many as 20,000 modular homes on a 440-acre unused tract of land known as South Works. The Tribune quoted Mayor Rahm Emanuel as saying “this agreement is a major milestone towards converting an unused stretch of land that represents Chicago’s industrial past into a vibrant community that will contribute to the Chicago’s economic, cultural and recreational future.”
On one hand, you have to admire the grit and tenacity of Mayor Emanuel to make something happen with this land. Embracing modular construction is another bold move for Rahm, one that will need to be squared with construction unions. But is selling off part of the Windy City to foreign interests really a good idea? Even if it is the “baddest part of town”, to quote Jim Croce.
The two companies cited in the story are Emerald Living, a unit of Dublin-based WElink Group, and Spanish partner Barcelona Housing Systems. Now, the last time these two names surfaced in the same news story, we learned that a U.K. housing authority had cut a massive US$3.3 billion deal with them. Under the deal, five factories would be opened in the U.K., employing U.K. residents and building 25,000 prefab homes for the U.K. over five years. Sweet deal for everyone, right? Well, not the U.K. modular manufactures who were left out of the deal.
Oh, and one more thing – there was a third partner in the U.K. deal: Chinese mega corporation, China National Building Material Company. It is actually the Chinese company opening the plants and building the homes in the U.K. “based on designs pioneered by Spanish specialist Barcelona Housing System.” Why are those words important? Because it’s the same language that appears in the news stories about the Chicago deal - “The site will have a substantial residential component of up to 20,000 housing units built with innovative, environmentally-friendly technology pioneered by Emerald Living’s partner, Barcelona Housing Systems (BHS).”
The Barcelona deal was apparently selected over a “vague” Chicago-based proposal and another proposal from a Chinese company. But who exactly will be building these homes?
Who cares, you say – no one else was building anything on the southside. Let a Spanish (or even Chinese) company have at it! It will ultimately be better for the city and better utilize an unused piece of land. All true.
The sitting mayor of Chicago is going to tell people it’s a good deal to have a Spanish (and perhaps Chinese) manufacturer build 20,000 homes on a piece of land once occupied by the mighty U.S. Steel? Why? Because part of the deal included the company opening a factory in Chicago and agreeing that factory would be unionized. That’s how Rahm squares the deal with labor bosses.
The modular home industry builds between 25,000-35,000 homes nationwide on an annual basis. A project for 20,000 homes would keep ten modular factories, each employing an average of 125 workers, busy for the next ten years! Oh, and by the way, Elkhart, Indiana is less than two hours from Chicago. That area is also home to nearly a dozen residential and commercial modular manufacturers who would probably like a bit of that action (remember when then-President Obama visited the area multiple times during the recession)? So many questions:
-Is it good for overall industry growth that 20,000 new Chicago homes will be modular instead of site--built?
-Does the development and potential revitalization of the southside of Chicago justify selling off part of the iconic city to foreign interests?
-Do we care if worker paychecks are from Spanish or Chinese companies?
-Is this “modular developer” the new industry model?
Maybe I’m just naïve, or even jealous. Why aren’t more developers working with U.S. manufacturers on innovative solutions to our urban housing issues?
This article is not intended as a wake-up call for the modular construction industry. It’s a far bigger story than that. This is a wake-up call for the North American construction and manufacturing industries at large. And it’s a wake-up call for our political leaders.
There is way too much information here for me to properly vet and vent in one article. I plan on writing a series of articles about this issue, what it means for the industry, and most importantly, what we should do about it.
Started on August 4, 2017 by Tom Hardiman