Another West Michigan company joins a Recovery Zone

November 3, 2008
| By Pete Daly |
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Falcon Tool & Die in Spring Lake Township has "been around a long time," said its president and co-owner, Dave Peppin. But the industry has been on the ropes in Michigan as auto industry work has gone overseas, and "lots of our fellow shops in the past five years have gone away."

Falcon Tool & Die just got some help from the state of Michigan, which will increase the odds it won't be going away. The company, which employs 20 and was founded in 1964, was just given approval to join the First Choice Machining Solutions Tool & Die Recovery Zone, one of a number of tool-and-die collaboratives organized by the Michigan Economic Development Corp.

As a member of the collaborative, Falcon will operate free of most state and local taxes for 12 years, making it more competitive in today’s global market. The designation was approved in October by the Michigan Strategic Fund Board. 

“We’re happy to welcome Falcon Tool & Die as the newest member of Michigan’s tool-and-die alliances,” James C. Epolito, MEDC president and CEO and chair of the Michigan Strategic Fund board said. “Tax-free designation strengthens these companies through the benefits of collaboration and lower taxes.”

Although Falcon Tool & Die has employed more workers in the past — as many as 32, according to Peppin — it currently is enjoying brisk business, despite the problems in the auto industry in Michigan.

"We are about 70 percent automotive and about 30 percent contract office furniture," said Perrin.

Of the company’s automotive work, "the majority is for the foreign domestics," said Perrin.

He explained that Falcon does not directly supply the foreign-owned auto plants in the U.S., but rather does work for the Tier 1 and Tier 2 suppliers that serve those plants.

Even as Michigan's own Big Three automakers are facing serious difficulties, the "foreign domestics" are apparently in better shape — at least from the perspective of the owners of Falcon Tool & Die.

"Our level of quoting activity is probably at an all time high for our company," said Jerry Johnston, vice president of Falcon and the other owner of the company, along with Peppin.

Johnston said the firm’s order backlog is "probably near or slightly exceeding our record backlog, and that’s just due to some new work we've recently gotten."

When asked to predict what business will be like for Falcon one year from now, Perrin and Johnston could not make a prediction, but Peppin said they are "optimistic."

"Looking forward in the next six months, it appears as though things are going to be considerably better than the last two years," said Johnston.

Peppin said they are optimistic in the near term, at any rate, because "the Detroit automakers seem to be moving quickly toward new product introduction that is more responsive to the current environment. So, as the Detroit automakers convert their product line from large vehicles to smaller, fuel-efficient, electric and hybrid-type vehicles, that is going to require them to purchase tooling to tool up all these new vehicles."

"Although we may not have the greatest economic climate right now in the state of Michigan, the car makers in Detroit are looking beyond the near term and committing capital to new vehicle introductions, and when that occurs, that’s when die and model shops have the opportunity to build product," added Peppin.

He said that over the last several years, there have not been a lot of completely new vehicle introductions by the Detroit auto companies.

"They've been more sheet metal changes — cosmetic kinds of things," said Peppin, which "obviously reduced the demand for tooling in this state."

Now that Detroit is "bringing out totally new vehicles, that's going to increase demand" for the tool-and-die industry, he said. So much so that the managers at Falcon Tool & Die anticipate adding maybe three or four more people to its employee roster, said Peppin.

To receive consideration for Recovery Zone designation, tool-and-die companies must have a collaborative agreement that demonstrates synergistic opportunities among the companies. Amendments to the Michigan Renaissance Zone Act in 2004 allow existing zones to request the inclusion of additional companies.

Other tool-and-die companies that were already members of the First Choice Machining Solutions include three from Muskegon: the Eagle Group, Industrial Tooling Technologies Inc., and Muskegon Tool Industries Inc.

Automated Industrial Motion of Fruitport and Westtech Corp. of North Muskegon are also members.

Tool-and-die Recovery Zones were started in 2004 by the state of Michigan to assist the tool-and-die industry by making companies exempt from local taxes — with the local government's permission — if the company is willing to collaborate with other tool-and-die companies. The intent is to help those companies retain existing jobs, and strengthen them to compete effectively in the global market.

Peppin said there are other advantages to joining one of the MEDC tool-and-die collaboratives, besides the tax advantages.

"The bigger picture … is the opportunity to work with other firms in developing new marketing strategies, new sales strategies, best-in-practice efforts, working together toward lean manufacturing, sharing technology and sharing capacities," said Peppin.

"The real gain here is to be associated with the successful companies where we can all pool our knowledge and talents to try and create business strategies that are going to aid all of us in an environment of globalization," he added.

More than 200 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 that are in collaboratives support each other by sharing information; they may also share purchases of materials and sometimes even contracts. Some contracts for tool-and-die work are too large for one small shop to take on, but are ideal for a collaboration. In those cases, the participating shops each fill parts of the order that are in its particular field of expertise.

According to the MEDC, the most recently available information from the U.S. Bureau of Labor Statistics shows that Michigan has some 1,780 tool-and-die establishments with 35,831 employees representing 19 percent of the U.S. total in the industry.

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