Albemarle Corp. expects to save $2 million a year by moving its headquarters from Richmond to Baton Rouge, La., company officials told financial analysts and investors in Houston earlier this week. That’s over and above the savings generated from Louisiana state incentives.
About 30 executives and support staff with an annual payroll of $7 million will leave Richmond this summer, depriving the city of a Fortune 1000 company and the bragging rights that goes along with it. The relocation of the specialty chemicals company hasn’t caused much of a stir here because the move can be seen as a natural consequence of the transition of executive leadership from the Gottwald family, which owns a dominant interest in the company, to a new generation. Additionally, there were obvious advantages to locating the headquarters near the company’s main chemical operations – much as Altria moved its headquarters from New York City to Richmond to be closer to its Philip Morris USA operating unit here.
But the latest revelations raise questions about Richmond’s competitiveness as a relatively low-cost headquarters location. At least one major city in the Southeastern U.S., it appears, is an even lower cost location.
Albemarle is embarking on Project One Albemarle, a cost-efficiency initiative that aims to save $40 million a year in general administrative and corporate costs by 2010, reports the Baton Rouge Advocate. According to COO John Steitz, the headquarters move will save $2 million a year in reduced travel expenses, dropped leases in Richmond and other administrative costs. The lower travel expenses can be attributed largely to the ability of senior executives to avoid shuttling between Richmond and Baton Rouge, a factor that does not reflect upon Richmond’s competitiveness for other companies. But the anticipated savings in real estate and administrative costs could indicate a real cost-of-business gap between Richmond and Baton Rouge.
From an economic development perspective, that gap may not prove terribly worrisome, though. The Albemarle case is a one-off: Richmond does not normally compete with Baton Rouge for corporate clients. As long as the region is cost-competitive with the New York metropolitan area, where many prospects reside, and with top-tier Southeastern regions like Raleigh and Charlotte, N.C., the cost of business may not be a problem. But it would be helpful to get more details from Albemarle executives -- just so we know for sure.