FOR DULUTH, MINN., NOTHING seemed to work.
With the timber and mining industries reeling, unemployment soared as high as 50% in parts of the region in 1983. And efforts to recruit companies to Duluth by offering tax breaks and other aid were failing. "We had to admit that we were not exactly in the mainstream of commerce," says Jerry Udesen, a local business executive.
So Udesen and other executives did something unusual: they went out and bought companies and brought them to Duluth. Now other cities -- Grand Junction, Colo., and Great Falls, Mont. -- are pursuing the same strategy. By buying healthy businesses that fit the local economy and by maintaining local ownership, they expect to build a stronger economy. "If it succeeds as a locally run business, we'll have more stable jobs," says Bob Retz, one of the founders of Great Falls Capital Corp., which will also be buying companies.
Udesen's group, Duluth Growth Co. (DGC), sold $2.7 million of stock, mostly to local investors. DGC found companies that could capitalize on the Great Lakes fishing industry. It bought the assets of The Erwin Weller Co., a Sioux City, Iowa, maker of fishing tackle, and the assets of BC Electronics, a Seattle maker of electronic-monitoring devices used by fishermen, and moved both to Duluth, creating 51 jobs. Meanwhile, the Grand Junction group bought a Canadian electronic company, which it plans to expand into the Grand Junction market.
Transplanting a company involves some extreme risks, especially if key employees quit. None of the original employees of Erwin Weller followed the company to Duluth, so DGC spent a year training a new work force. It was a month before Weller could take new orders; the company survived by filling back orders.
Weller's presence has already helped some other local businesses. A maker of ice-fishing tents has increased its sales by advertising through Weller's marketing network. "That would have never happened," says Udesen, "if we hadn't brought Weller here in the first place."