Midland: Leaders say Dow Chemical is committed to city’s future

Dow Chemical is building a new six-story corporate office building at its headquarters in Midland. It is expected to open next year. (Bridge photo by Lindsay VanHulle)

The steel skeleton of what will become Dow Chemical Co.'s newest headquarters is beginning to take shape.

By the end of next year, when it's scheduled to be up and running, the 150,000-square-foot building will be home to 600 employees at the chemical manufacturer's corporate office. Its open footprint was designed to encourage more employee collaboration and productivity.

Dow expects its decision to build new rather than renovate — it demolished an older building on its Midland campus — will lower the company's energy use by 63 percent and cut 20 percent from its construction costs.

The company did not disclose the cost of the project. Regardless of the price tag, however, the timing of the capital investment is viewed by some in Midland as a sign that Dow remains committed to the city in which it was founded nearly 120 years ago.

By the second half of this year, Dow plans to have finalized a $130 billion merger with Wilmington, Del.-based DuPont — one of the largest deals in Michigan's history. The new company, to be called DowDuPont, will have dual headquarters in Midland and Wilmington and then plans to split into three separate, publicly traded businesses.

One of those — a material science company that will include the Dow name — will remain headquartered in Midland, a city of about 42,000 people, while agriculture and specialty products businesses will be based in Delaware.

Much is still unknown about the merger's impact on Midland. Dow is so influential here that not only is it the city's largest employer and taxpayer, it has spawned several corporate and family foundations that pour millions of dollars into charitable projects in the region and around the state.

"The fact of the matter is, Dow is the backbone of Midland. There's just no doubt about it," said Tim Nash, a senior vice president at Northwood University in Midland and director of the school's McNair Center for the Advancement of Free Enterprise and Entrepreneurship.

"I truly believe that what's going to happen in the next two to three years is you're going to see a Dow Chemical that is as large, if not larger, than the one that exists right now."

As a company town, Midland is a particularly successful one. The city has a higher median household income and more residents with bachelor's degrees than the state as a whole. (More than 42 percent of its residents had a four-year degree, compared with 26 percent in Michigan, according to census estimates, and its median income of $50,333 in 2014 was slightly higher than the state median.)

That can be attributed partly to Dow. The company ended 2015 with $7.3 billion in net income on revenue of $48.8 billion.

In 2013, Dow paid $733 million in payroll to its Michigan workforce, according to company information. Its Michigan operations employed more than 440 scientists and engineers working on research and development.

The state's chemical industry pays an average salary of $80,500, according to Dow, a figure it says is 28 percent higher than average manufacturing wages. The company employs more than 5,900 people in Michigan and more than 24,000 in the U.S.

Even so, the fact remains that Midland's economic fortune is tied to that of Dow, a position that carries inherent risk. It is by far the city's largest employer, with more than 5,000 people on the local payroll, according to Midland Tomorrow, the county's economic development agency. When combined with Dow Corning Corp. — Dow said it plans this year to assume 100 percent ownership of the joint venture between Dow and Corning, N.Y.-based glassmaker Corning Inc.— the company's local employment jumps to more than 6,500.

The region's next-largest employer, MidMichigan Health, ranked a distant second with 2,140 employees. Midland-based Chemical Bank is third with 591.

The team at Midland Tomorrow focuses on retention visits to existing businesses to understand what things — financing, infrastructure, skilled labor — companies need to be successful.

Bill Allen, who took over as president and CEO of both Midland Tomorrow and the Midland Area Chamber of Commerce in January, said chemical and technical industries are a "sweet spot" when recruiting firms, given the influence of Dow.

"That's a model employer. That's one of Michigan's knowledge-economy firms," said Donald Grimes, an economist and senior research associate at the University of Michigan's Institute for Research on Labor, Employment and the Economy.

Yet mergers and acquisitions can raise pressure to consolidate. Even if corporate leaders who steer companies through a merger are sincere in their commitment to the community, Grimes said, at some point new leadership could come in with fewer connections to the home city.

"If I'm the city of Midland and the Midland Public Schools, I'd be making a big effort to make sure they do everything they can to stay," Grimes said. "They've got you over the barrel and, well, that's the way it is."

In a December press release announcing the DuPont deal, Dow Chairman and CEO Andrew Liveris called the merger "a game-changer for our industry" and suggested it would strengthen the company's position amid global industry shifts.

The company declined to comment beyond its regulatory filings.

City and economic development leaders say they believe Dow is committed to Midland for the long term, and they don't think the company would pursue the merger if it weren't going to lead to growth.

"On the one hand, certainly there will be disruption," said Jon Lynch, Midland's city manager. "Life as we know it with the company in its current configuration obviously will change, and we expect that will affect both people and investment. The flip side of that is that the company is traveling down this road because it feels it will make for a stronger and more sustainable business into the future, and to the extent that that might unfold that way, it's a good outcome."

Dow contributes close to $4 million annually in property tax revenue, comprising about 17 percent of the city's total taxable value, he said.

The outcome of the DuPont merger is outside the city's control, Lynch said, adding that municipal leaders instead focus on creating the kind of place in which people choose to live and work — and to which Dow can recruit employees who could live anywhere in the world. He pointed to the city's public library, cultural and recreational facilities and a fire department with specialized chemical training as examples.

Many of the city's celebrated assets have been supported with funding from several local foundations, which several people said is unique to a city of Midland's size.

Dow Chemical has its own foundation, which funds most of the company's charitable gifts. The company said more than 1,500 of its employees in 2014 contributed more than 17,000 volunteer hours in the Great Lakes Bay Region, which includes Midland and neighboring counties.

In addition, the community has several established family foundations with connections to Dow, including one started by Dow founder Herbert H. Dow's wife, Grace A. Dow, in 1936.

The Herbert H. and Grace A. Dow Foundation has awarded close to $532 million since its inception.

The Dow name appears on everything from the public library to a minor league baseball stadium.

"That is kind of an offshoot of the existence of the Dow Chemical Co. that these foundations will, for into perpetuity, donate to large and small causes to make Midland, mid-Michigan and the state of Michigan better," said Nash, the Northwood University administrator, whose wife works for Dow in customer service.

"It really is a giving town, and I think a lot of that started with the examples of Grace A. and Herbert Henry Dow."