Incentives Deal of the Month
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In an interview with Site Selection in fall 2005, Ontario's Economic Development and Trade Minister Joe Cordiano said one thing is key to the auto industry and to those who serve it.
"Companies that fail to innovate will die," he said.
That principle has proved stout when applied to economic development ministries too, which is why Ontario and Canada as a whole have lately come to the incentives negotiations table with new cash for automotive companies, as long as it's pegged to R&D and innovation. Not long after his talk with us, Cordiano was able to welcome the latest fruit of that work, a US$657-million (CA$768-million) investment by DaimlerChrysler's Chrysler Group in its Brampton and Windsor plants, as well as its R&D Center in Windsor. Approximately 18 percent of the funding for the project will be kicked in by the Canadian and Ontario governments.
Now there's a new sweepstakes afoot, and the clock on the first round of awards just started ticking
One Month to GoIn an announcement on Friday, Dec. 16, Ontario officials unveiled a US$428-million (CA$500-million) Advanced Manufacturing Investment Strategy (AMIS) repayable loan program, which will offer loans worth up to US$8.5 million or 10 percent of a qualifying project's cost, whichever is lower.
"In order for Ontario to be successful in the global innovation race we must be the first to discover new ideas, the first to turn them into new products and services and the first to market those products and services to the world," said Premier Dalton McGuinty, who also holds the title "Minister of Research and Innovation."
Caveats: The term of the loan shall not exceed 10 years. And the loan shall be interest-free for up to five years only if certain performance targets are met. "Eligible costs include machinery, equipment, labour, materials and other costs which are directly attributable to the approved project," says the Ministry's Web site. Unfortunately, purchase of land is not one of them. Eligible proposals will include project investments valued at CA$50 million (US$42.7 million) or more, or the creation or retention of a minimum of 150 high value jobs.
Qualified statements aside, the new program is just the latest gambit from a province intent on playing the innovation card for all it's worth. And while repayable loan programs are nothing new, the dollar amounts are nothing to sniff at. If that CA$500-million figure sounds familiar, it's the exact same amount that was dedicated to the Ontario Automotive Investment Strategy in April 2004. The results?
"In just one year our auto strategy has attracted $5.3 billion [US$4.6 billion] in new auto investment and secured thousands of high value jobs for years to come," said Cordiano at the November announcement by the Chrysler Group.
This time around, proposals will be assessed according to 11 criteria. It comes as no surprise that Criterion No. 1 in this land so long averse to incentives offers of any kind is "The financial capacity of the proponent corporation to perform the project and repay the loan."
Once that's all settled, other criteria include use of advanced materials, private-sector financial leverage occasioned by the loan, job creation and job skill level, waste reduction, energy conservation and, finally, the establishment of a worldwide "centre of excellence" within the candidate company.
The call for proposals officially opened on Dec. 19, and officially closes at the end of business on Tuesday, Jan. 31, 2006. The program allows for up to three calls for proposals annually over five years.
On the Same PageThe new program was announced at Toronto-based Ryerson University's Institute for Aerospace Design and Innovation, just one cog in a national educational infrastructure that supports Canada's claim to No. 1 in the world for individuals achieving college or university degrees.
The Institute, where students frequently work on industry-assigned projects, is housed within the George Vari Engineering and Computing Centre, named for the prominent Hungarian emigre who made his fortune in land development. Opened in September 2004, the 225,000-sq.-ft. (20,903-sq.-m.) facility was a major part of a CA$210-million (US$179-million) expansion plan, which in November just got another CA$5-million boost from Mr. Vari and his wife Helen. At that announcement too the "I" word surfaced.
"George and Helen Vari have made a landmark gift for a landmark building," said Ryerson President Sheldon Levy, "one that will have a profound influence on the educational experience of our students for many years to come, and one that provides us with infrastructure to develop our growing reputation for research and innovation."
Of the school's 20,000 undergrad and graduate students, more than 4,500 of them are enrolled in engineering, architecture and science colleges. Stand-alone Masters and PhD programs in Aerospace Engineering are scheduled to make their debut in 2006 along with Masters programs in Biomedical Physics and Molecular Science, followed in 2007 by Masters programs in Architecture and computer science.
Layers of PlayersThe current Blackberry jam in the U.S. notwithstanding, Canada's claim to technological prowess is well-founded, ranging from the high-tech pioneer companies of Ottawa to the animation and video-game cluster in Montreal. The inventor of Java and the founder of eBay both hail from the land of the maple leaf, as do the founders of Blackberry maker Research-In-Motion, headquartered in the Kitchener-Cambridge-Waterloo "Technology Triangle" that has most recently welcomed Toyota's next assembly plant.
Adding further fuel to the innovation fire is the nearly 90-year-old institution called the National Research Council, which oversees the operation of 20 focused industry institutes and five technology centers focused on such industries as biotech, engineering and construction, aerospace and manufacturing. In addition to NRC's own 4,000 employees, it welcomed more than 1,400 guest workers during 2003-2004 from Canadian and foreign universities, companies and other organizations.
The NRC's most recent project, the NRC Centre for the Commercialization of Biomedical Technology, opened in October 2005 in Winnipeg, a CA$12-million (US$10.3-million) centerpiece in the city's "BioMed City" campaign to establish itself as an international center for public health research, innovation, commercialization, and skills development. Among the center's offerings are diagnostic and imaging hardware and software development resources, informatics resources and a prototyping facility for medical devices.
Back in neighboring Ontario, Minister Cordiano points to Toronto's Medical & Related Sciences (MaRS) Discovery District, a public-private partnership to accelerate life sciences development. A US$254-million project involving 1.3 million sq. ft. (120,770 sq. m.) of lab and office space, MaRS is the "glue that binds together" Ontario's innovation corridor, says Cordiano, adding that he's also fostering 11 regional innovation networks around the province, as Ontario pours some CA$1.8 billion (US$1.5 billion) into research programs and projects over the next four years.
"Critical mass is essential," he tells Site Selection. "You can have incubators, but creating scale is important for companies considering investing, and to attract the attention of international investors."
Cordiano's background with the ministry includes oversight of gaming, and he recognizes the difference between jobs numbers and quality jobs. Recognition of the difference involves the invocation of another "I" word: Industry.
"Gaming is part of the landscape," he said, "but it can never really replace the spin-off that comes from industrial activity and R&D. It has created thousands of jobs, but they're part of an entertainment package. You need the potential that comes from an industrial base."
That base just might be getting wider. Adding to the promise of Chrysler's Windsor complex are reported talks between DCX and Volkswagen that would have DCX producing a van product for its fellow German competitor in North America. While that production could conceivably go to a St. Louis plant, the company's major van production occurs in Windsor.
It could be the next instance of an "advanced manufacturing" agenda actually advancing manufacturing backed by a cache of incentives beyond cash itself.
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