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Flagship rises over post-GM town: Incubator has helped preserve automotive talent base, foster diverse businesses

June 16, 2008

ANDERSON - Along Interstate 69, in a new industrial building with side-windows covered in paper to foil prying eyes, Altair Nanotechnologies is perfecting a ceramic oxide battery with three times the power of a conventional lithium battery.

Up the road, Comfort Motion Technologies has written software to make a car's power seat jiggle ever so subtly, to keep one's back, butt and thighs comfortable on long drives.

And everybody is keeping an eye on Pete Bitar, whose green laser device temporarily blinds and confuses enemies on the battlefield. His Xtreme Alternative Defense Systems' latest gizmo for the military, the "Sun-Strike" device still under development, detonates improvised explosive devices in an "if-I-told-you-how-I'd-have-to-kill-you" sort of way.

"I'm just a tinkerer and a biz guy .... I have an incredibly gifted team surrounding me," said Bitar, CEO of XADS and one of the stars of the Flagship Enterprise Center.

Turning human talent into lucrative businesses is the role of the center, a four-yearold collaboration of the city of Anderson and Anderson University to help rebuild the city in the wake of General Motors' pullout here.

It may be one of the most unusual business incubators/early-stage accelerators in the Midwest. Grafted into what has become a 100,000-square-foot facility at Exit 22 is a three-story educational building used by Anderson University and Purdue University's School of Technology.

On the third floor of the office complex are student apartments that house about 20 graduate students who work at Flagship companies-providing upstart companies with business and technological savvy they may lack. XADS, for example, took on an AU theology student with a zeal for nonlethal weapons who now handles marketing.

Besides the center and attached university complex, and a 70,000-square-foot accelerator building, there is the Flagship Business Park. Owned by Madison County's Corporation for Economic Development, the park has about two dozen buildings spread over more than 200 acres. Some of the tenants are small companies that graduated from the Flagship incubator.

In Madison County, Flagship has become to engineering and business development what Haight-Ashbury was to San Francisco's hippie culture in the 1960s.

"We're seeing this as the front door of our community and to the new economy," said Rob Sparks, executive director of Madison County's Corporation for Economic Development.

"You have a world-class talent pool in this area," said Flagship's co-founder, president and CEO, Charles E. Staley.

Planted on scorched earth

For those not familiar with the history of Anderson, the significance of Flagship may be best appreciated in the context of General Motors' cataclysmic departure.

At one time, the city of 57,500 had the largest concentration of GM operations outside of Michigan. Nearly half the town-27,000 employees-worked at a dozen plants making everything from headlights to starter motors.

By some estimates the city lost $43.5 billion in industrial output, in today's dollars, and more than $10 billion in wages. But it was a slow, painful loss that played out beginning the mid-1970s, with one department downsized one week, another moved to Mexico the next.

"It felt like you were getting your fingers cut off, one at a time," recalls DeWayne Landwehr, executive director of Flagship and former director of product engineering at GM's former Guide Division in Anderson.

By 2000, GM was down to just one employee here.

A lot of the younger engineers simply moved away for new opportunities, recalled James F. Ault, chairman of Flagship's board and former general manager of the Delco Remy Division here.

But there were plenty of even more experienced engineers who had roots in the com- munity and stuck around through GM's pullout. Many had been on the cutting edge of automotive technologies, particularly in the area of electro-magnetic devices.

"But we had to move quickly," Ault recalled, noting how quickly technology changes. "I used to design [automobile] computers. I can't even keep up a conversation with these kids anymore."

In the late 1990s, economic development consultants advised local leaders to consider starting a business incubator. "We really didn't know what an incubator was," said Staley, a former Delco Remy supervisor who by then worked at Anderson University.

AU for years had ties with Purdue, which had an engineering presence at the Anderson college. School leaders decided they needed a higher profile, establishing the Flagship Center next to I-69, a busy route passed by some 60,000 vehicles a day.

A big chunk of seed money, about $3 million, came from the sale of a plant GM donated to the city.

Seven of Flagship's directors are appointed by the president of the university, four by the mayor of Anderson. The formula was set based on the center's not-forprofit status, but founders were also mindful of potential municipal political interference. "I think it helps keep us from getting that constant turmoil from changes in administrations," said Ault.

Valuable brain trust

But the Anderson area's reputation for expertise in battery technology-key parts of GM's former "EV-1" electric car were developed in the region-was what caught the attention of Reno, Nev.-based Altair Nanotechnologies, also known as Altairnano, for its new advanced battery research.

The company established an outpost in Anderson and snapped up a half dozen former GM engineers. "That's just the kind of skill set they were looking for," Staley said.

The Anderson area's reconstituted battery brain trust has also lured back a key member of the fraternity-John Waters, who in the 1990s worked for GM's electric vehicle propulsion lab on the northeast side of Indianapolis and later for Delphi Corp.'s jointventure lithium battery company, EnerDel, on Hague Road.

Back in Anderson, he's quietly been plugging away with a "dream team" of engineers developing a lightweight, plug-in electric vehicle at his upstart company Bright Automotive.

Lately, Flagship has seen a concentration of companies in the power systems arena, said Staley. Ultimately, though, Flagship is aiming to help Anderson develop a more diversified economy than it had in the past.

"To take advantage of the technology that is available, we realize that our strength in the long run is in diversity. If there was a major problem, it was our lack of diversification in businesses 30 to 40 years ago," said Ault.

The first "graduate" of the center, in 2005, was Continental Quality Engineering, which provides evaluations for automotive companies. The division of Continental Design and Engineering grew and now has a location elsewhere in Anderson.

Of the roughly 50 companies that have operated at Flagship, less than 10 percent are no longer in business or failed, said Staley. Some have moved on, and about 30 companies now have a presence at Flagship, from automotive to software to refurbished-medical-equipment firms.

"We're going to have failures. We're in the business of promoting risk and people have to accept that," said Ault.

But that acceptance of risk doesn't diminish confidence. The center's managers are looking to build a second business-accelerator facility. The first, a 70,000-square-foot, $2.6 million building that opened a year ago next to I-69, has been taken over entirely by Altairnano. Staley said there are three or four companies that have matured to accelerated status. He'd like to have the new building up and running by 2010.

Other firms, such as XADS, already do most of their real work in other facilities in Anderson: Bitar's office at Flagship is only 250 square feet, but he has another 12,500 square feet scattered around town.

Flagship helped him needle through government bureaucracy to obtain military business. Late last year, XADS received a $2.5 million contract from the Naval Surface Warfare Center in Crane to further develop the firm's improvised-explosivedevice detonator. His firm has 10 employees, with at times 50 or so additional contract workers. His non-lethal ray-gun recently was featured on Discovery Channel's "Future Weapons."

Another of his ventures, AirBouyant, plans to build a 15,000-square-foot headquarters at Anderson Municipal Airport. The firm's product is a long way from the Chevy Cavalier lighting that GM used to make: Bitar is developing a personal-transportation device known as the "VertiPod," a sort of upside-down helicopter that can cruise 18 inches off the ground. Think flying Segway.
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