The Industrial Belt Fights Back

We all know the story: The U.S. industrial belt, sometimes referred to unkindly as the Rust Belt, is a tale of decline stemming from (you pick) a changing economy, international competition, costs that outpaced productivity gains, aging infrastructure, or a failure to adapt. This industrial belt usually refers to the area around the Great Lakes, including Pennsylvania, Ohio, Michigan, and Indiana, and also the more central states of Illinois and Wisconsin. In some discussions, this economic decline is laced with broader social issues such as urban decay, youth unemployment, and drug abuse. The memoirs “Hillbilly Elegy” by J.D. Vance, now a Senator from my home state of Ohio, paints a poignant picture of the challenges and dysfunctionality of family life during a period of economic uncertainty.

Statistics seem to support this unhappy story, relating that national employment in manufacturing peaked at 19.6 million in 1979 and dropped to 12.8 million by 2019. Unemployment in Ohio went from 4.1% in 2000 to 10.3% in 2010. Some were able to adjust, but in general those kinds of numbers mean a lot of misery for individuals caught up in this transition.

But there is, happily, an update to this story. I caught up with journalist and author (and fellow Buckeye) Rebecca Fannin for lunch, and we discussed her latest book, “Silicon Heartland,” which tells us the rest of the tale. One of the quiet success stories of recent years in the industrial belt has been the emergence of local venture capital firms, spurring innovation in the traditional economy. From tech-enabled manufacturing to standalone startups in logistics or health, the industrial belt has gone through a renewal in startups and relaunches that has reshaped the local economies.

For example, Drive Capital, based in Columbus and launched by two former Sequoia Capital partners, has funded some 60 startups in the region. In Indianapolis, Scott Dorsey took his profits from selling his firm to Salesforce, and invested in Lessonly, for sales training at small and medium businesses. Pittsburgh, drawing on the strength of Carnegie Mellon, has become a national leader in robotics and automation.

I wanted to see this trend for myself, so I drove down to New Philadelphia to spend some time with Battle Motors, a specialty truck manufacturer. Founded in 1946 as the Crane Carrier Company to modify and re-manufacture surplus military vehicles for the construction and petroleum industries, by 2021 it was producing 336 trucks annually. That is when venture capital stepped in, with a $120 million investment.

Production leapt from 336 trucks in 2021 to 700 in 2022, and Battle received a follow-on investment of $150 million. Production is targeted for 2,500 vehicles for this year.

Employment at Battle Motors followed the same pattern, up from 95 employees at the start of 2022 to 450 at present.

And this growth allowed for vertical integration and new models. In 2021, Battle produced no electric vehicles. In 2022, EVs were about 5% of production, and this year they will make up about 10%.

This scale has allowed Battle to get into new lines of business and undertake some vertical integration. New models, from digger derricks to bucket trucks, now account for 15-20% of the order book.

“The original company was very specialized, with low volume and high complexity products,” explained Chief Technology Officer Kelleigh Ash. “We are becoming a one-stop shop for all customers’ needs, from food and beverage delivery, to utility, to any customized production.”

The lessons from this economic renewal:

• Do not focus exclusively on the game-changing global innovators. For every Google or Facebook, there are dozens, maybe hundreds, of smaller innovators that are experimenting, improving, competing, and changing the way we live, work, and produce. Individually, these smaller groups might not make the headlines, but cumulatively they have a sizable impact.
• Play to your strength. If the strength of Silicon Valley is Stanford, Berkeley, and the amazing cluster of VCs, innovators, and engineers—the strength of the industrial belt is a trained factory workforce with a strong worth ethic. So ideas that require a manufacturing or a logistics dimension might be better situated in the industrial belt rather than Menlo Park.

“Silicon Heartland” is an important story of industrial renewal led by VCs. And Ohio unemployment? It deteriorated from 4.1% to 10.3%, but has rebounded to 3.8% in March 2023. When I mentioned to Rebecca the plans by Intel to open a $20 billion chip plant outside of Columbus, Rebecca responded that the area is booming but is going to need lots more trained engineers. Training is already beginning. The Battle is just starting.