New Recovery Zone Collaborative Approved

December 27, 2007
| By Pete Daly |
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WALKER — The Global Tooling Alliance approved by the Michigan Strategic Fund last week, which includes a small tool and die shop in Walker, is the 24th collaborative formed to take advantage of Tool and Die Recovery Zone tax-free status and other benefits.

Focus Mold & Machining, which has only four employees, is one of approximately a dozen tool and die companies from across the state that have formed the Global Tooling Alliance.

Dave Dault, owner of the company located on Walker Avenue, said he started Focus Mold & Machining in 1998. It is an automotive industry supplier, providing plastic injection molds and performing high-speed machining.

"Of course, the last several years have been up and down quite a bit," he said. The company recently lost what he called its "No. 1 customer," a Tier One auto industry supplier that he declined to name.

"What happens is, you have a good customer of eight or nine years and a great relationship with them and everything is going great, but — they discontinue what they are doing.

"Without even knowing (it's coming), all of a sudden they are gone," he added.

Dault said despite the loss, Focus employees are still at work.

"You go out and knock on doors, but it takes a while," he said.

Tool and Die Recovery Zones were started in 2004 by the state of Michigan to assist the tool and die industry by making a company exempt from local taxes — with the local government's permission — if the company is willing to collaborate with other tool and die companies. John Czarnecki, the Michigan Economic Development Corp. vice president responsible for administering the program, said the intent is to help tool and die companies retain existing jobs, and strengthen them to compete effectively in the global market.

The law only allows 25 collaboratives. Next year the MEDC will accept applications from tool and die groups interested in forming the 25th collaborative — if there is one. Two could have been approved this year, but only one collaborative, which named itself the Global Tooling Alliance, applied. According to Czarnecki, a little more than 200 tax-free tool and die companies are now in the Recovery Zones in Michigan.

Aside from the abatement of local taxes for up to 15 years (the length of time is up to the local government), the companies in collaboratives support each other by sharing information and sometimes work.

Dault said sometimes contracts for tool and die work can be "big packages" that two or more companies can share, each filling parts of the order that are in its particular area of expertise.

Dault said the city of Walker granted his company a local tax exemption for 15 years. Walker is "very good about working with businesses," he said.

Apollo Tool and Engineering in the Walker Industrial Park is another tool and die shop with Recovery Zone tax-free status. It is a member of the Tool Makers Alliance, a collaborative of seven companies led by Michael Hartley, the president and owner of Apollo.

Apollo has been in Walker for seven years and has 25 employees.

The Tool Makers Alliance is about a year old, Hartley said, and members share information that enables them to improve their processes. They can also collaborate on purchasing to save money.

"The tax abatement, in my opinion, is to purchase technology and employee training," he said.

Right now two members of the Tool Makers Alliance are bidding together on a project that involves a range of die sizes, according to Hartley. One of the companies specializes in smaller dies while the other specializes in larger sizes. By joining together in the bid, the two can "quote on the complete package," whereas, acting alone, they would not be able to bid on the project at all.

If a member company takes on a project and later finds out it does not have the capacity to fill the order on time, it can "farm out some of the work within the collaborative and meet the shipping dates," said Hartley. A lot of orders today, he added, "are on the premise of short lead times."

"These collaboratives, as a whole, are a fabulous thing for all the companies involved," said Hartley.

He said the other members of the Tool Makers Alliance are mainly from the Greater Grand Rapids area, and all are auto suppliers.

"As a general consensus, everyone in our collaborative is busy," said Hartley. "They're in great shape."

Most of the companies they supply, he said, have manufacturing facilities in "lower cost countries," and "we are extremely fortunate to be able to design and build tooling and send it abroad."

But being able to invest in technology and training is "extremely important. We have to be able to compete in the world economy," he added.

Hartley said he is not worried about a downturn in North American auto production next year.

He said that while the industry "may see some hardships in 2008 … I think it is going to hold its own. I think the worst is passed. We're in a holding pattern."

According to a November memo from Czarnecki's department at the MEDC to the Michigan Strategic Fund Board, the MEDC surveyed 121 companies that were the first to join a Tool and Die Recovery Zone collaborative. The survey covered 2006, and results showed that 49 of the companies increased jobs by 317, 38 cut 177 jobs, and 34 remained the same. Eighty-one companies spent $12.3 million on new equipment. Forty-two said their business increased, 47 said it decreased, and 32 stayed the same.

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