Michigan state officials have agreed to give tax breaks to some groups of mold makers to help the industry contend with global competition and rebound from the manufacturing recession.
The program, which passed the state Legislature earlier this year, exempts the tooling industry from many state and local taxes - if the municipalities agree - in return for the shops forming close partnerships that bid on projects together, do joint marketing and share best practices.
State and industry officials say they're trying to nudge mold makers toward a new collaborative business model, one that emerged from studies of what the industry has to do to cut its costs 30-40 percent and stay competitive globally.
``The Legislature said, `Okay, if we're going to make you tax-free, we're going to require you to enter into these collaborative agreements,' '' said John Czarnecki, vice president of community services for the Michigan Economic Development Corp. ``They felt strongly that collaboration is the key to the survival of the industry.''
Several groups of toolmakers have formed coalitions, sought approval for tax breaks lasting up to 15 years from their local governments and are submitting applications to the state. MEDC officials say they will review them, looking for evidence that the shops are part of viable coalitions that meet state guidelines.
David Martin, president of Accu-Mold Inc. in Portage, Mich., got approval from Portage officials for the tax break, but he said the tax incentives are less important than the benefits of the alliances.
Accu-Mold is part of a coalition administered by the Center for Automotive Research, which spent nine months drawing up rules for how its 17 members will work together. Martin thinks the coalition can cut costs at least 20 percent for Accu-Mold, which has seen its workforce drop from 17 to 12 employees.
Beyond the domestic partnership, he said Accu-Mold also has formed an alliance with a mold maker in Hong Kong, and is trying to reposition itself to focus on complex molds.
``The less-complex molds are going offshore,'' he said. ``A lot of [customers] have dabbled going overseas, but [in the future] they are going to go over wholesale.''
While Martin said he was able to get his tax breaks easily, the industry has had mixed success convincing local officials.
Laurie Moncrieff, president of injection mold builder Schmald Tool & Die in Burton, Mich., got turned down Oct. 26 by city officials in her bid for $80,000 a year in tax abatements. She said the experience left her ``very, very frustrated.''
``We're probably going to end up leaving the community,'' she said. ``We'll probably put the building up for sale. I need to be in a community that understands.''
Like Accu-Mold, Schmald said her shop's employee count is down as well, from 45 people 18 months ago to 32 now. State officials did not have precise figures, but industry officials gave rough estimates that employment in mold-making and metal-working industries in Michigan is down about 30 percent from 2001.
Burton administrators could not be reached, but officials in other cities that have rejected requests from local mold makers said they sympathize with the firms, but worried about setting precedents.
``Some members of the [city] council felt specifically helping one industry wasn't particularly fair,'' said Tim Klunder, city manager for Zeeland, Mich., which turned down a request from Zeeland Mold Technologies. ``We have furniture and clock makers in the city, [and] they've felt extreme pressure.''
Klunder said city officials also questioned giving tax breaks without commitments for new jobs.
Officials at CAR and the Michigan Manufacturers Association, which is sponsoring another coalition, said many of the members are getting tax breaks from their local governments.
Michelle Cleveland is vice president of the Right Place Program, a private economic development agency in Grand Rapids, Mich., that has worked on tooling issues. Cleveland said state officials decided to offer tax incentives to the industry because they view metalworking as an industry that underpins many other manufacturing sectors.
Although some toolmakers feel they can compete on their own and question why the state would give tax breaks for collaborative efforts and not individual firms, Cleveland said she likes the model because it will let toolmakers participate more fully in the supply chain.
The Michigan program requires local governments to approve the local tax breaks before the state evaluates the coalitions and makes a final decision, probably later this year. To qualify for the tax incentives, the shops must have fewer than 50 workers and be in one of six targeted metalworking industries. The companies are exempted from local income and property taxes and some state income, business and education taxes.