The State of Indiana
The Hoosiers’ Export Focus Is Paying Dividends
Back in 2006, seeking to diversify its 95 percent-domestic customer base, Hoosier Gasket Corp. hired Oleg Gostomelsky and tasked him with cultivating a clientele in Eastern Europe. A personable engineer who speaks fluent Russian as well as English and had studied international policy at West Point, Hoosier Gasket’s new vice president could presumably sit down with prospects across the former Soviet bloc without need of either interpreters or back-up engineers.
He could indeed, and set out to do just that.
Key resources emerged close to home. After meeting Mark Cooper, director of the U.S. Commerce Department’s Indiana office, Gostomelsky registered with Commerce’s Gold Key program. Perennially popular among manufacturers, Gold Key helps identify distributors and potential customers in their overseas territories, then arranges introductory meetings on behalf of export managers. U.S. embassies are often pressed into action to support the new connections.
In 2008, Gostomelsky flew to Kiev for a series of meetings Gold Key had set up at factories across Ukraine. His seventh sit-down, in the headquarters of the giant Kharkov Tractor Plant known by its Cyrillic acronym XTZ, produced a major win: The company committed the bulk of its gasket purchasing budget to Gostomelsky’s employer. Since then, back home in Indiana, the globe-trotting vice president has turned to Gold Key for additional matchmaking missions, while following home-grown customers deeper into international waters.
When Chrysler sold a manufacturing license to the Gorky Automotive Plant, the Russian automotive giant known as GAZ, Hoosier Gasket piggybacked the deal, forming its own connection with GAZ, then with other original equipment manufacturers in Russia and Ukraine. Gostomelsky, whose grandparents spoke Russian at home, also helped form a joint venture involving his company’s Indianapolis neighbor Cummins and the Kama Automobile Plant, the large-truck producer. The market for U.S.-made vehicle parts in Russia has surged in the wake of normalized trade relations in 2012.
In seven-plus years at Hoosier Gasket, Gostomelsky has helped expand the company’s international base considerably; exports now account for about 15 percent of its $25 million in annual revenues, with a growing overseas customer base in China, Brazil, India, Australia, Russia and Ukraine. In 2012, Hoosier Gasket received Commerce’s Export Achievement Award; the same year, Gostomelsky joined the board of the Indiana District Export Council (DEC), a volunteer group supported by Commerce. Through DEC, Gostomelsky speaks regularly to business groups about the advantages of exporting. He’s especially keen on promoting Export University, DEC’s full-day export fundamentals program targeting new-to-export businesses, held in conjunction with local chambers of commerce.
“Education is vital if we are going to export more,” Gostomelsky says. “Speaking other languages besides English is vital too. We really have to be global.”
DEC’s Indiana chairman, David Williams Russell, is firmly in Gostomelsky’s corner. “People like Oleg are key to exporting in Indiana,” says Russell, an international trade lawyer at Harrison Moberly. “Our approach is to encourage people who know how to export to mentor others. They volunteer to help people around the state. I’m delighted at the growing demand for DEC seminars across Indiana.”
David and Beth Johnson, owners of an Indianapolis vending company called Fish Face Photo Booths, attended Export University last year, where they met trade consultant and DEC volunteer Andrew Reinke. The Johnsons’ company provides retro-style photo booths for use at parties and events, and has been selling overseas since 2010. After the program, the owners continued working with Reinke and his consulting firm, Foreign Targets Inc., through funding provided by Indiana Small Business Development Center.
The Johnsons already exported to Egypt, Spain, Australia, Poland and Canada; they now eyeballed Mexico. Reinke undertook a market research project and determined the Johnsons could lower tariffs and reduce costs for customers. He also located a customs broker for Mexico.
“Andrew’s been an amazing help,” affirms David Johnson. “He’s made exporting so much less scary for us.”
Across the state, export promotion efforts are paying dividends. Indiana exports totaled $34.4 billion in 2012, the last full year for which data is available. The total set a record high for the state, growing at a faster rate than both the U.S. and other Midwestern states, according to Tanya Hall at the Indiana Business Research Center at Indiana University’s Kelley School of Business.
Hall attributes the state’s export growth to rising sales of industrial machinery and vehicles and parts, paced by global giants like Cummins, as well as small and midsized family-owned businesses like Hoosier Gasket. The state’s top two export categories are vehicles and parts and pharmaceuticals. Industrial machinery ranks third, followed by optical and medical instrumentation. Life Sciences exports are led by Eli Lilly, the Indiana pharmaceutical conglomerate, and newcomers like Roche Diagnostics, which opened a new plant in Indianapolis in 2012. Aircraft and aerospace parts, agricultural products, recreational and specialty vehicles, and musical instruments are also major export categories.
While Indiana’s top three long-time export markets are Canada, Mexico and Germany, recent growth has occurred in China, Brazil and Spain. Germany is the top market for the state’s pharmaceutical and medical equipment industries, and Spain now absorbs a growing percentage of Indiana goods. Canada, which accounted for more than half of Indiana’s export sales as recently as 1999, presently absorbs just over a third, reflecting the growing appetite of other trade partners.
“Relatively speaking, exports are more important to Indiana” than is the case in most other states, Hall says. While Indiana’s gross domestic product ranks 16th nationally, it ranks 11th in terms of export dependency, or the percentage of GDP represented by sales overseas.
Indiana’s motto—the Crossroads of America—is borne out by its logistics and transportation cluster, one of the largest in America. No fewer than 14 U.S. interstate highways intersect in greater Indianapolis. More than 4,200 railroad-track miles are operated by such Class I railroads as CSX Transportation and Norfolk Southern. Shippers have their choice of international airports in Indianapolis, Fort Wayne and Gary, as well as proximity in the northern part of the state to Chicago’s O’Hare International and in the south to Louisville International. Shippers capitalize on the state’s advantageous position on both the Ohio River to the south and Lake Michigan in the northwest, moving more than 70 million tons of cargo by water each year. Cargo goes through Lake Michigan into the Great Lakes/St. Lawrence Seaway and via the Ohio River into the Inland Waterway System.
Global is local in Indiana, as business owners, executives and entrepreneurs have abundant export mentors close at hand. “Hoosiers tend to be very giving and very helpful people,” remarks Reinke, the DEC consultant and former president of the Indianapolis World Trade Club. “It’s a Midwestern way of living. We are generally willing to take the time to answer questions. We don’t feel we’re above helping others. I think that’s one reason export programs have caught on so prolifically.”
State of Emergence