After shutting down a tire plant in Kitchener two months ago, Michelin SA is importing a plan from Europe in an effort to create new jobs in the city.
Michelin Development, which offers low-cost loans and industry expertise to small businesses, is opening its first North American office in Kitchener, Ont. For the city, it may serve as a way to ease economic dependence on a struggling North American manufacturing sector.
The announcement comes after the European tire giant said it will close its BFGoodrich plant in the city in July, eliminating 1,100 jobs.
By offering Waterloo region residents money and expertise to help them create or expand businesses, the centre aims to create hundreds of new jobs in the next six years. John Tully, a Michelin executive formerly based in Greenville, S.C., and brought in to run the Kitchener office, said the six-year timeline was chosen because of the project's long-term nature.
John Tully Director of Michelin Development in Kitchener, Ontario on Tuesday, March 28, 2006. (Jim Ross/The Globe and Mail)
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"[Michelin Development] is designed to create jobs and regenerate the economy," Mr. Tully said. "It's open to all Waterloo region residents."
For Kitchener, the project represents a chance to diversify its economy away from manufacturing and into less battered industries such as technology. The region already has a solid technology infrastructure in place, thanks to the proximity of the University of Waterloo and BlackBerry-maker Research In Motion Ltd.
In Europe, Michelin Development has pumped millions of dollars into local communities in Britain, France and Poland, among other countries. The centre offers loans at interest rates lower than what local banks charge. Michelin Development loans have helped create businesses ranging from software companies to biodiesel fuel makers to skate parks. Although Michelin won't reveal how much it's going to spend in Kitchener, the average loan size during the British centre's first year of operation was about $50,000.
Mr. Tully said, on average, the European offices create about 75 jobs a year. However until Michelin completes its research on Kitchener's economy and needs, he added, the office will not be able to give accurate benchmarks. Research should be complete by late summer or fall of this year.
But just how successful Michelin Development proves to be in Kitchener is yet to be seen. Many of the people set to be laid off when the tire plant closes have spent decades in manufacturing, and are unlikely to start businesses in new, unfamiliar industries.
In an interview, Kitchener Mayor Carl Zehr said the city has been in contact with Michelin since the company announced the BFGoodrich plant shutdown in early February. However, the city's goal during those discussions had nothing to do with Michelin Development, but rather with getting the tire giant to reconsider the plant closing.
"We wanted to know the reasons for the closure, and whether Michelin would reconsider opening the plant," Mr. Zehr said. "It appears that is not the case.
Given Michelin's history and reputation in Kitchener, Mr. Zehr said, the company should be looking to establish a "lasting legacy" in the city.
"I don't know if Michelin Development is going to do that,' he added.
The Kitchener office will focus on providing low-cost loans and industry expertise to businesses in the region.
The focus is on companies with fewer than 250 employees.
Michelin North America (Canada) Inc., headquartered in Laval, Que., is one of many companies in the manufacturing sector suffering from a variety of negative economic conditions. The strengthening Canadian dollar and soaring energy prices have increased the cost of doing business in Canada. Competition from foreign countries, where the cost of labour is substantially cheaper than in Canada, have also hurt Michelin's bottom line.
The February announcement of the Kitchener plant's closing came on the heals of similar downsizing notices by Bridgestone-Firestone Canada Inc., Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd.
