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- As we close in now on the end of the year, there is more and more anticipation of exactly what 2024 will bring.

Welcome again, to the most widely watched and the longest running program on Carolina business policy, but also public affairs.

Many have already shut down and written off 2023.

So what does that mean as the first, as the new year begins, what does that mean for the economy?

What's gonna be different about inflation, what about jobs?

What about housing?

And what about the temperature around politics and sociopolitical issues?

Certainly a lot to consider and we will impact some of this with our panelists.

And later on, the president of Paper and Packaging of South Carolina manufacturer Domtar, Steve Henry joins us.

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And Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation on which our communities improve and grow.

On this edition of Carolina Business Review, Dr. Michael Walden from NC State University, Antjuan Seawright of Blueprint Strategy and special guest, Steve Henry, president Paper and Packaging, Domtar.

(dramatic music) - Welcome again to our program.

Happy holidays gentlemen, nice to see ya.

Michael, Antjuan, thank you for spending time, and especially I want to, I wanna acknowledge this on the air.

You're coming in from Raleigh, you're coming in from Columbia and DC.

I mean it's not a small commitment, so thank you, thank you both.

- It's an investment, not an expense.

- Very good, very good.

- Well stated.

Are you a closet economist?

(laughing) Michael, let's start with you.

Every month you publish North Carolina's leading economic indicators.

Is there something that's coming out of what you watch in your research, good or bad?

- Well it's been trending downward, which means a slowing economy, not necessarily recession in three to six months ahead, which is what it's supposed to predict.

Recently though Chris, it's edged up a little bit.

So what that, what that is telling me is yes, we may see a slowdown in North Carolina's economy, but it won't be as bad as maybe what was predicted by my index six to nine months ago.

So people can look at that plus or minus, but I do think there's a slowdown in terms of economic growth.

That doesn't mean recession, means we're gonna grow more slowly.

- - you know, one thing we've noticed over the years and the decades in fact in the South and the Carolinas, is that they tend to be similar but decoupled from the global or really for the US footprint in other words, because of the economic development and growth in the Carolinas.

You think that's still the case?

That won't be maybe as bad on the low side and better on the high side?

- Well, yes, I think that's still the case, but that said, that doesn't mean we escape recessions.

I've heard that so many times where I live in the triangle.

Hey, the triangle's recession proof.

No, you can look at the data.

Triangle goes through recession.

Charlotte goes through recession.

North Carolina, South Carolina go through recession, but they tend not to be as deep.

Again, I'm not predicting a recession for next year, a slowdown, so I do think we'll see a slowdown in all those markets also.

- You think there's a, there's a gravitational pull on the economy from the bare, and this is my term, Antjuan, bare knuckle bloodsport politics that's getting ready to unfold in the presidential election.

- I think elections have consequences.

And I do believe one simple concept, political concept, the road to heaven and the White House runs through South Carolina, which means sometimes there's a pit stop in North Carolina.

So the Carolinas get God's political grace.

No, but I do believe, I do believe in my heart that the consequences of the 2020 election are being felt in 2023 and will continue to be felt in 2024 and beyond.

But I do think what happens in 2024 will have both short and long-term shockwave to the economic bill of health in the Carolinas.

I think most people would agree regardless of your political affiliation, that the Carolinas have handsomely benefited from the 2020 election results.

And I think you will start, you will see that continue to play out in years to come post whatever happens in 2024.

- Just a quick follow up specifically for South Carolina, specifically that South Carolina gets the first primary this time.

How does that change the dynamic?

- Economics, quite simple.

- Is that what it is?

- People will come to the state, there'll be a lot of attention on the state, good, bad, and not so bad.

But also I think people will get to understand the diversity of South Carolina from our manufacturing assets to our technical college system, the best in the world.

No disrespect to North Carolina.

To the people and to the continued growth that you see in our state and the true diversity of South Carolinians.

I think you'll see that on full display.

And what's been true about the political presidential preference primary is that both on the democratic side and the Republican side, South Carolina has played a tremendous role in what happens at the end of the ball game.

And so I don't think this presidential cycle will be any different.

- Antjuan just talked, just mentioned the word education, mentioned college.

Michael, you wrote an op-ed this past summer, and I'm not gonna say this right, so I'm gonna of course need you to correct me and I'd like you both on record on this in the next few minutes, and the next couple minutes is the idea that higher ed, specifically colleges and universities are maybe excessive, maybe excessive in tuition, in the money received, in the monies received from governments.

And it seems like the, not the algorithm, but the calculus around colleges is off.

In other words, it's unsustainable to continue to have these increases in tuition.

And it becomes, and this is my term, and I promise I'm gonna shut up here and let you weigh in on it, it becomes a private club that's harder and harder to get into.

- I think less so in North and South Carolina.

If you look at the rankings of states by public tuition, both states are at the lower end of that.

But that said, I think cost is a factor.

I think another factor is simply getting people to go to college.

If you look long run at the college going population, it's gonna decline.

Probably not so much in North and South Carolina, but I think they will be felt.

And then lastly, and maybe more importantly, I think our economy's going to go through a big shakeup.

AI technology in terms of jobs and what people need, what kind of training people need to get for the future of jobs.

So I think colleges and universities are going to have to retool, I call it retooling.

I think they're going to have to be much more nimble.

I think they're gonna have to pay attention to costs so that we do want people that have the ability to go to college.

When I went to college 50 years ago, I paid all my tuition by just working part-time.

That's very hard for people to do now.

So we need our great colleges and universities, but I do think they're going to be going through a transformation.

I'm gonna say that in a positive way over the next several decades.

- So does this become an industrial cycle where the smart operators and the good colleges and the good universities have already figured it out and they're out in front of it?

Are we gonna see a lot of colleges fold into small ones simply because they're not solvent?

How do you think this unfolds?

- Well, let's be honest, college is a business.

Higher education is a business.

So the bottom line does matter.

And I say that with perspective as a first gen college student and only a second generation high school graduate.

For me, college was a must for the future.

College is an option, not necessarily an opportunity.

And what we see happening, I think in the total ecosystem of this country is that higher ed is experiencing a refresh or an update.

I think the pandemic forced all of us to look at how we conduct business differently, including doing higher education.

And so what was once frowned upon or looked at in a negative way, doing online learning, has become I think the order of the day in many cases.

And in some cases I think that will be of the future.

But when you think about jobs of the future, they may not require a four year traditional college education.

So I think that's going to have impact.

And if state governments, both North Carolina, South Carolina, and across the country continue to not fund colleges at the same way, colleges and higher education institutions are gonna figure out how to be creative of keeping college low, to make it more sexy or more attractable or more appealing for people to attend and to make sure that they can make it affordable and accessible.

So I think that is going to be the ongoing conversation when we think about higher ed and then this entrance of this uptick of the importance of historical black colleges and universities.

Both in North Carolina and South Carolina they play a pivotal role, I think, to the ecosystem.

So I think that matters and then the technical college education.

But what we also see now is more students are learning at the K-12 level, college, being college ready and what that actually means.

And so I think all those things will determine what the future of an educated North Carolinian, South Carolinian looks like.

- I agree a hundred percent with everything Antjuan said.

I think the definition of education, how far you need to go to get an education and where you get that education is changing before our very eyes.

And I think that colleges are now competing, college and university are often now competing against businesses who are taking high school graduates, saying we will train you for what we need you to do.

So I think colleges, my message here is colleges and universities who have not already perceived this need to perceive this and they need to start thinking very transformationally.

- Okay, 20 seconds.

Do you think the integrity of the academics of the student will suffer or be better after all these changes or during all these changes?

- Yet to be determined.

I think it's a, I think I don't wanna give a premature benediction to that, but what I will say is that a reality for a lot of college students, particularly the Antjuan Seawrights of the world, is college debt and is it worth it?

Is it juice worth the squeeze in the end?

- Yeah, okay, thank you gentlemen.

I wish we could keep going chasing that down.

It's well worth it.

Coming up on this program, typically at the end of the year and the beginning of the next year, we like to do two special related programs.

The end of the year, it's the economic, or economic year in review, it's with four of our resident economists and if you've watched this program at all, you know who they are.

Dr. John Connaughton from UNC Charlotte, Dr. Joey Von Nessen from USC, Dr. Frank Hefner from the College of Charleston, and a new entrant that might not know what he's getting into, Dr. Jerry Fox from High Point University will also be on that panel.

We also do an economic forecast for the next year.

It's a two-parter and it always promises to be very interesting and lively is probably an understatement.

In its 100, it is 175 years old.

It is a large manufacturer headquartered in Fort Mill, South Carolina.

And unless you're in the manufacturing industry, it may be the biggest business you've never heard of.

Domtar is a dominant maker of paper pulp and engineered absorbent material products, that pun intended, has fiber running through all of their core products.

They say that on their website, kinda like that.

Joining us now is the president of paper and packaging, Steve Henry.

Steve, welcome to the program.

- Thank you, excited to be here.

- Yeah, this is great Steve.

So Steve, Domtar's a major manufacturer obviously, and way beyond the Carolinas, globally.

So do you have a closer focus and you have a closer concern about the US economy or the global economy?

What dominates your vision here?

- Yeah, and it really depends on which products we're talking about that we produce.

I would say we're largely more focused on the North American economy, but we have certain markets where we're certainly, we're a global, we're a global player, so we have to pay attention to both.

And as we all acknowledge, we're in a global economy these days.

So there's certainly interactions between both, even when you're more focused here in North America.

- Yeah, so Thomas Friedman wrote the famous book in 2005, the World is Flat.

So things move pretty quickly.

Let's talk about how do you model then, how do you model a global manufacturer?

If there is a slowdown the next 18 months or 20 months, how do you get out in front of it?

- You know, really what we're seeing is it's like everyone, it's been an incredible journey these last few years.

Last year like a lot of companies, what's obvious to us now is that there was inventory buildup.

So you not only in pulp and paper do you see that, but retail, many other industries.

So some of the apparent demand that we thought we had last year has turned out not to, you know, was inventory build and not true demand.

And then this year we've seen obviously the corollary to that which is unfortunate, but demand, you know, has appear to be lower than what you would expect because that inventory draw down.

And in our particular case, our industry, if you look across most the products we produce, you know, believe we're through 90% of that inventory draw down through the third quarter this year.

And so what we're really expecting, and I guess if you look more broadly from an economic perspective, we hear this from a lot of our suppliers as well, is 2024 will be the year of normalization.

And similar to what was discussed on the prior segment, you know, is there a slowing of the economy, yes, but demand overall seems to be in relatively robust.

- Michael.

- Two terms that we heard during the pandemic, supply chain problems and labor shortages.

I think both of those have dramatically improved, yet I talked to a lot of business people and are still worried about those long run.

How are those two factors affecting you?

- Certainly from a supply chain perspective, I think those are largely behind us.

Now what what I'm excited to see is ourselves and many of our partners, whether they're suppliers, customers, there's certainly a lot more of ongoing work around supply chain resiliency.

I think we've all learned from this new global economy that we operate in.

So that's I think exciting, will pay dividends in the future.

From a labor perspective, Domtar was affected differently.

We've enjoyed, we have a very loyal and dedicated workforce, and so extremely low turnover levels.

Generally when people come to work for us, they stay and work their career with us.

We've been preparing for the silver tsunami for a number of years and during the pandemic that certainly has, you know, has finally come to fruition, which we're, you know, it's mixed emotions.

I'm so happy for our employees that have worked their careers and have been so loyal and dedicated manufacturing sustainable products for our customers.

But it also presents new opportunities to bring new talent into the company and to grow.

But our turnover is around 6%.

What I would say from a labor perspective, particularly from a manufacturing company, is we do a lot of work in our local communities really reaching out to community colleges, both here in the Carolinas and across North America.

And we actually try to start going back to high schools, middle schools, elementary schools.

We will invite teachers on teacher work days to come into our facilities because, you know, there's a lot of stereotypes about manufacturing out there and I've been present on some of these events and it is amazing when the teachers come in and see these facilities and the amount of engagement, empowerment, the mental work that goes into this.

I think a lot of them kind of envision the old, I Love Lucy chocolate assembly line, you know, as manufacturing and they come in and they see, you know, high tech facilities.

Our first question is normally where are all the people?

Because these are very automated, very high tech facilities, capital intensive that we operate.

And it's a really challenging, yet rewarding career.

And so we have to do a lot of work.

Our society tends to steer people towards a traditional four year degree, and we need accountants and engineers and you know, lawyers, and HR professionals.

We need, you know, it takes a village to run our business, but we also need a lot of the people working in the manufacturing environment and certainly doing our part.

And I think we need to do more as a country as we're I think entering a manufacturing renaissance in this country with the lessons learned from the pandemic and some of the, you know, the re-shoring of manufacturing here to our country.

- Well, you answered one of my questions.

I was gonna ask you, how do you make the boring sexy.

Most people see manufacturing as this boring thing.

And so how do you make it attractive for a new generation of workers entering into the workforce?

But I wanna pivot differently.

How does, what's your biggest fear of 175-year-old company where we see the tectonic plate shifting in terms of demand for what traditionally was a product that everybody wanted, but that may change now with all the technological advances.

Then the second part is how does, we opened the show talking about the political elections.

How does the politics and the legislation impact your success short and long term or your potential failure?

- Yeah, great, great questions there.

And you know, in terms of the, the sell to potential future employees, the great thing about this generation is they really care about the planet.

You know, they're so activated and mobilized around the planet and what we're able to share with them is we were sustainable and cool before, you know, anyone was ever talking about it.

And I would encourage you, if you ever get the opportunity to spend the afternoon with a forester out in the woods, and they have to think in decades, you know, in terms of sustainably harvesting trees, making sure we plant three trees for every tree that we harvest or we won't have a future.

Taking care of that environment.

And then, you know, in ways that we've got one facility that's using AI technology coupled with drones, trying to look at the health of trees and forests.

So, I mean, it's a combination of sustainability technology, but what we find is our employees are very passionate about, you know, we're so focused on trying to find replacements for single use plastics in particular.

And our products are renewable, they're sustainable.

No part of that tree goes to waste.

We use every bit of that tree.

And then the beauty is we have extremely high recycling rates.

And so when you put your paper products back into your recycling bin, you can feel confident that that's coming back to Domtar and other industry facilities.

And we're using that to make high quality products that touch our lives in many different ways.

Now, pivoting to the the second question in terms of, you know, the regulatory environment that we find ourselves in.

I think first it's important to point out, so if you look at Domtar, you know, over the last 10 years we've reduced our greenhouse gas emissions by 32%.

- That's impressive.

- And we are so proud of that.

But we're not satisfied, right?

You got one planet and we gotta take care of it.

And so we're challenging ourselves and set, you know, ambitious goals to continue reducing our impact on the planet.

I mentioned we're very proud of our track record around sustainable forestry.

The entire forest products industry has made similar improvements.

There are, we're tracking over a dozen regulations that primarily look at air quality chemical regulations, other aspects of our business that could negatively impact our entire industry in several different ways.

One, it would increase costs significantly, potentially putting us in a situation where foreign made products that are not made with the same environmental standards, you know, or lower costs coming into our country, which obviously would've a negative impact for the, you know, for the planet.

And then if you think about the other impacts it would have here in the US in terms of, potentially would result in, in plant closures, you know, losing jobs.

A lot of our plants are in rural communities across North Carolina, South Carolina, and throughout North America.

You know, these are extremely well paying jobs, stable jobs with great pay and benefits.

And you know, at the end of the day what we, what we're asking for is to be involved in the conversation and to collaborate.

We absolutely agree, we've got to continue to reduce emissions and impact on the planet and we wanna do that in a thoughtful way together.

- Steve, lemme go back to something that's cultural to Domtar and I didn't know it until right now.

Jay Jandrain is the CEO of Butterball and he was on this program not long ago, right before Thanksgiving.

And he had a surprising statistic, 94% employee turnover.

I don't even know how you manage through that.

You just said you had 6%.

That's amazing on the other side, and this is not meant to be a leading question, but there are companies that would die for that.

How, I mean the cost is lower, the loyalty is higher, you know all the metrics around that.

What is it about the company culture that keeps people engaged that keeps them, that they wanna stay?

How do you do that?

- The, we have three values in our company.

It's agile, caring, and innovative.

And I think the caring value in particular, you know, like any organization, we're not perfect, but we really do truly care about our employees, the customers that we serve.

We recognize the communities we operate in, give us our license to operate.

I think the benefit, you know, the kind of the green benefit that we talked about here, I mean these were green jobs.

They were working in green jobs before we ever started defining 'em that way.

And so there's a pride in terms of they know what they're doing as contributing positively to society and it's the most collaborative environment that I've ever, you know, worked in.

And within our company when people feel like you're really about doing right by the customer and doing right by our community, my experience is our employees go above and beyond to help you, you know, help you be successful with whatever you're trying to accomplish.

So it's just a, it's a family-like culture even though we're a large company with 6,000 employees.

And I think to your point, what you have to do is you can never take that for granted.

It takes a lot of work each and every day.

It's culture is fragile and, but you also, with 175 year history, you also have to, the innovative value comes in, you've gotta continue to, I mean, we're an amazing story of reinvention.

If you go back and look at what we were producing 175 years ago, it's very different than what we're producing today.

And we're continuing to reinvent ourselves, like I mentioned, focusing on, you know, packaging grades and what we can do to replace single use plastics in particular.

- We have about two minutes.

- Over, since your company's been around for most of our nation's history, we've gone through phases of protectionism, free trade, protections of free trade, looks like we're moving more toward protectionism.

Is there, is there a position you want to take on that?

Where's the proper balance between free trade and protectionism?

- I think ultimately what you have to strive for is a level playing field.

That's all, that's all I think anybody really wants to have.

And you know, in the case of our industry, you know, other countries have governments give them certain advantages and I guess we just have to make sure that we have a level playing field.

I personally don't think subsidies are the right way to level the playing field here in the US.

It's just making sure that the products coming in, you know, have have a level playing field with the US products.

And then I think the other element is, you know, we talked about the regulations is thinking about unintended consequences and just making sure we can figure out how to reduce emissions and our impact on the planet together.

But we gotta do it in a cost-effective and thoughtful manner that can actually grow manufacturing, produce more sustainable and recyclable products for the world in the process.

- Do you have a quick question?

Literally less than a minute.

- Your fear, short and long term for both the industry and the worker at your company?

- So yeah.

- It's like the lightning run.

- Yeah that's right, that's right.

- 30 seconds.

- No, you know what I'm, and it's not, it's both I guess a fear and an opportunity.

Obviously we have to manage the, you know, there's electronic substitution.

We're the largest printing and writing producer in North America and I'm, I'm so proud and it is amazing business and it's not going to zero.

And when you get your college diploma, you want it on a piece of paper, you don't want it in a PDF file right?

You know, I know I wanted the piece of paper, but you know, it's I think continuing that 175 year history of reinvention, continuing to reinvent ourselves, not get complacent, and learning to embrace the next generation.

And what I talked about culturally, right, is we've gotta continue to grow and evolve that culture so that all generations, all people feel welcome and feel as passionate about the company culture as we do.

- To use an old game show term, you beat the clock, so thank you for joining us and come back.

'Cause obviously there's not a lot we didn't unpack, but thanks Steve and welcome.

- Thank you very much, pleasure to be here, thank you.

- Antjuan, nice to see you.

- Nice to see you again.

Nice time.

- Happy holidays.

Thank you.

Merry Christmas, good to see you both.

- Happy holidays to you and your family.

- Thank you for joining us.

Until next week, I'm Chris Williams.

Hope your weekend is nice.

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