Working with Michelin

Michelin provides 3,500 very important jobs to rural Nova Scotia. What are the prospects for the future?

Michelin is shutting down small tire production in Pictou with the loss of 500 jobs. The announcement detailing the news was more gracious than sometimes seen from other employers. Employees have plenty of notice. Severance buyouts will make it easy for some of the older affected workers to retire, protecting jobs for younger workers. Others will be able to move to Bridgewater or Waterville.

The press release containing the news also announces financial support for local small businesses, and reiterates Michelin’s commitment to Nova Scotia.

All of this reinforces Michelin’s image as a considerate corporate citizen. But it tells us nothing about future prospects for jobs in Nova Scotia. Michelin has 19 plants in North America, primarily in South Carolina and other southern states with low taxes and employer-friendly labour legislation.

It makes tires for virtually every segment of the market, and typically has more than one plant making each product. When the company sees an opportunity for new investment those plants must compete with each other for the mandate. Factors to be considered include labour costs, workforce quality, transportation costs, and ability to proceed quickly.

A very successful product line is double-wide truck tires. These are produced in Waterville where a $73 million expansion and upgrade, of which $8.9 million in provincial money, was announced in early 2013, adding 50 jobs.

This was a nice addition although it was dwarfed in size by a $750 million expansion in South Carolina announced shortly afterward, and completed in only 17 months. It is expected to add several hundred jobs there.

Michelin has expressed potential interest in further growing the Waterville facility, which would require more land. That land currently forms part of the local airport, which is used for general aviation, aviation training, and sky diving.

Michelin has not made any commitments. Nevertheless Kings County Council has confirmed the land’s availability,announcing this week that the airport will close September 30th. Moving the airport would cost $7-$15 million, depending on the destination.

Waterville’s other product is tires for Earthmoving equipment, also a successful line, so it and double-wide truck tires seem like the most likely candidates.

The Liberal government has been admirably staunch in its resistance to corporate handouts, although it’s most recent comments suggest they have found some wiggle room.

Minister Michel Samson says the relationship between the province and Michelin is “a completely different issue” than the circumstances the premier has discussed and the party campaigned on during the election. “Michelin is… a partnership that has existed for many years and one that I believe that Nova Scotians fully support.”

Good. The government contribution to the 2013 announcement was only 12% of the total investment and in keeping with past dealings with Michelin. There are lots of opportunities to provide financial support. The Premier seems to be allergic to the word “grants “ but that can be avoided by providing low-rate repayable loans, training allowances, and of course help with the land acquisition.

Secondly, the province should resist the temptation to push for any new facility to be located in Pictou. Michelin knows which of its Nova Scotian plants has the best opportunity to compete for any particular mandate.

Thirdly, Michelin was among the employers to strongly object to the original First Contract Arbitration legislation in 2011. It is comforting that this did not prevent the Waterville enhancement, and the Liberals have since softened the language in the law. Nevertheless they should make sure that Michelin has no residual anxieties on that account.

As support for large scale manufacturing goes this is all pretty small stuff. We should be thankful our economy is not built around the making of cars and trucks. Volkswagen recently received subsidies for more than half the $1 billion cost of a new plant in Tennessee.

In Canada, Chrysler has just turned down $700 million from the federal and Ontario governments toward a $3.6 billion retooling of their Windsor and Brampton plants. This is to protect existing jobs, not add to them, and is in addition to the $850 million of bailout money that has not been repaid. Apparently the governments caused offense by asking how much of the total would be spent in Canada. Both plants will continue to operate but it is not clear how much Chrysler will invest in their long term viability. Expect more news later, perhaps after the Ontario election.

Michelin’s approach to the downsizing in Pictou should not be misinterpreted as some special soft spot for Nova Scotia. If that existed they might have tried harder to find replacements for the lost jobs.

New mandates for any of the plants in Nova Scotia will only be awarded, and existing ones renewed, if the plants here are competitive with the many alternatives Michelin has around the globe.

Government should be willing to provide financial support in line with past dealings, and to work hard on expediting the non-financial issues.

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