April 25, 2012 - Rather than relocate the manufacturing of its new product to Mexico in order to save on labor costs, Cooper-Standard Automotive would prefer to keep its operations in the Village of Leonard.
The Cooper-Standard Automotive, located at 180 E. Elmwood St. in Leonard, is seeking a seven-year, 50 percent reduction in personal property taxes on the $3.378 million in new machinery and equipment itís proposing to purchase, so the company can create jobs here as opposed to Mexico. Photo by C.J. Carnacchio. (click for larger version)
"It's important to me and my management team personally because we're from Michigan and we want to see jobs stay here," said Eric Millay, plant controller for Cooper-Standard's 180 E. Elmwood St. facility.
But in order to stay in Leonard, the Novi-based global automotive supplier must obtain a tax break from the village government, plus some funding from the State of Michigan.
First up is the proposed tax abatement.
As part of the process, the village council has two public hearings scheduled for 7 p.m. Monday, May 14 at Rowland Hall (23 E. Elmwood St.).
The first hearing deals with Cooper-Standard's request to create an Industrial Development District for its property.
If approved, this would allow the company to seek a seven-year, 50 percent abatement (or reduction) of the personal property taxes on the new equipment it plans to purchase and install at the Leonard plant. This request for tax relief is the subject of the second public hearing.
According to the application submitted to the village, Cooper-Standard is planning to invest $3.378 million in new machinery and equipment, plus another $169,000 for plant renovations.
This investment would enable the company to manufacture a new type of high-tech valve designed to moves fluids through the Chevy Volt (a hybrid electric vehicle) in order to regulate the battery's temperature.
"The intent of it is to cool and warm the battery to make it more efficient and last longer," Millay explained. "Whenever the computer says the battery needs to cool down, the valve will rotate and put coolant there. If it needs to heat up, it will transmit glycol in a different route."
Cooper-Standard is currently manufacturing approximately 5,000 to 10,000 of these valves each month for the Volt, according to Millay.
However, the company expects to make a whole lot more of these valves for another customer, the name of which Millay wasn't at liberty to disclose at this time.
"We found another major customer that will probably (order) up to about a half-million valves per year," he said. "I think next year we should be (producing at) about that rate."
For this customer, the valve would be used to cool and heat a vehicle's oil pan and transmission in order to maximize fuel efficiency.
Millay indicated this mystery customer is a company "which everybody in the world has heard of."
"Right now, it's kind of under the radar," he noted. "Our customer didn't want it out there yet."
Thanks to this new product, the 20,000-square-foot Leonard plant has already added five new jobs and expects to add another 55 positions over the next few years.
Of these jobs, 50 would be skilled and unskilled positions paying $24,960 to $25,688 annually between 2012 and 2014; three would be clerical/service positions paying $28,080 annually; and two management/professional positions paying $65,000 per year.
The Leonard facility currently employs about 70 Cooper-Standard workers, plus another
25-30 contract employees.
The tax abatement Cooper-Standard has requested would only apply to the personal property taxes it would pay on the $3.378 million in new machinery and equipment it's proposing to purchase.
If approved, the abatement would effectively cut the personal property taxes on this investment by 50 percent.
The decision of whether or not to grant the reduction is entirely up to Leonard's council, even though it would also apply to other property taxes levied by Addison Township, Oakland County and Oxford Community Schools.
Per state law, Cooper-Standard is already exempt from the 6-mill State Education Tax and 17.9946-mill Oxford Schools operating tax, so the only school district tax that could be affected by this proposed abatement is the 7-mill levy to pay off bond debt, according to Addison Twp. Treasurer Dan Alberty.
There would be no tax break for Cooper-Standard's existing real or personal property.
According to Leonard Treasurer Judy Verse, in 2011, Cooper-Standard paid $2,372 in real property taxes and $8,222 in personal property taxes to the village alone.
Last year, the village collected a total of $75,397 in tax revenues from all of its properties. Cooper-Standard accounted for 14.05 percent of the total tax collection. Leonard currently levies 6 mills for its operating tax.
As for the summer and winter tax bills Cooper-Standard receives from Addison Township (which include county and school taxes), last year, the company paid $34,026 in personal property taxes and $17,151 in real property taxes, according to Alberty.
The township itself levies a total of 8.1338 mills between its police, fire, library and municipal operating taxes.
If Leonard grants the abatement and Cooper-Standard adds the 55 new jobs, the company could then secure $235,730 from the Michigan Economic Development Corporation (MEDC).
"It should be noted that nothing is finalized or formally agreed upon at this time," Millay wrote in an April 20 e-mail.
This potential state funding would help Cooper-Standard offset a portion of the difference in labor costs between Michigan and Mexico "to make it more competitive to keep that business here," according to Millay.
"We have personal reasons, if you will, to keep it here because we want the employees here Ė we want to be a center of high-tech manufacturing excellency," he explained. "We wanted to be in Michigan instead of in Mexico, but we just couldn't justify it financially without some assistance."
But in order to get that $235,730, Leonard must grant the personal property tax abatement.
"The state of Michigan doesn't want to give us funds if the local government doesn't think it's a good idea," Millay explained. "If Leonard gives us this tax abatement, then we can move forward (obtaining) the funds from the MEDC."
Leonard Village President Mike McDonald indicated that he and council are in favor of the granting the tax break.
"I think we're (the council) rock solid on the fact that we need to do this to keep the business in Leonard and to keep the jobs here in Michigan at the very least," he said. "I think it's a palatable deal for us. The personal property (tax) isn't all being forgiven and it's only for seven years."
"It certainly should help keep Cooper-Standard active and viable in our community for hopefully, at least that long and longer. That's our goal."
McDonald noted the plant has a significant impact on the local economy.
"There was a period of time quite a few years ago when that facility was shut down for all intents and purposes, and it had a huge impact, not really on the government, but on the community Ė the businesses, the gas station, the stores, etc.," he said. "We'd obviously much rather see the plant continue to operate."
Even though he doesn't officially get a vote in the matter, Alberty indicated that he, too, favors the granting the abatement.
"I personally see it as a win for Addison Township, especially the village," he said. "It will bring some more people in, more jobs."
Alberty explained that while it's true the abatement would represent a 50 percent tax cut for Cooper-Standard, "it's still an increase in revenue" for the village, township and other governmental entities because it involves taxing personal property that currently doesn't exist at the Leonard plant.
"I'm sure that it will pay for any additional services that may be required from the township or the village," he noted.
Manufacturing the new product in Leonard as opposed to Mexico has definite advantages for Cooper-Standard as well.
"It's a high-tech product (that) requires engineering support," Millay explained. "Our engineering team is all located in Auburn Hills and Novi, so we just thought it would be better for our customers and for our internal staff to have our engineers close to the product.
"There's constant changes and tweaks and updates and evolutions of these designs. It requires a lot of face time with engineers. It's not as effective to do it over the phone. It's not practical to be flying back and forth to Mexico every week."
CJ Carnacchio is editor for The Oxford Leader. He lives in the Village of Oxford with his wife Connie and daughter Larissa. When he's not busy working on the newspaper, he enjoys cigars/pipes, Martinis/Scotch, hunting and fishing.