Small city, big deals: How Welland got its groove back
By Kim LaudrumEconomy General Government Manufacturing economic development Economy GE manufacturing Welland
Working fast and efficiently is winning business investment.
When it comes to industrial investment, little Welland, Ont. – pop. 52,300 and located within eight hours of 60% of the population of the US – punches way above its weight.
The Welland Canal is a major part of the St. Lawrence Seaway, providing a deep draft passage that bypasses Niagara Falls between Lakes Erie and Ontario. It provides access to safe ports and rail routes to Canada’s west or to the east, and easy access to the Atlantic Ocean as well as much of the rest of the world. Close to steel making giants in nearby Hamilton, Welland has attracted many manufacturers in the last century. But a seismic economic shift that began in the late 1990s threatened the city’s vitality.
Ontario lost 300,000 jobs between 2000 and 2010, according to a 2014 report by the Mowat Centre at the University of Toronto’s School of Public Policy and Governance. This is a story about how one small but mighty Canadian manufacturing city fought it’s way back to prosperity, grabbing the attention of Thomas Edison’s global powerhouse GE along the way.
“We were losing industry fast and furiously,” says Dan Degazio, Welland’s director of economic development. We started by losing Atlas Steels, which was a big employer, probably about a couple thousand employees.” Atlas Steels was Canada’s largest producer of stainless steel. Since the 1980s its facilities, on a couple hundred acres, were sold and renamed several times until 2003 when Slater Steels was ordered to liquidate the facilities. “Welland lost probably a couple million square-feet of industrial building with that.”
• Graftech, a manufacturer of graphite electrode products used in electric arc furnace steel, closed in 1999 – another thousand employees, another hundred acre parcel of land.
• Stelco closed its Welland Pipe operation in 2003, eliminating 175 jobs.
• Henniges Automotive, a rubber sealing and anti-vibration systems producer, closed its Welland factory in 2011. More than 300 jobs were lost.
• Dana Corp., an auto parts giant that once provided close to 2,400 good-paying jobs in Niagara, closed its Thorold plant in 2008, axing the remaining 170 jobs.
“Then one of the most recent, biggest blows was losing John Deere,” Degazio says. Deere & Co., the world’s largest manufacturer of agricultural machinery, closed its Welland factory in 2009. They had been in the city for more than 100 years. We lost over 1,000 employees (jobs) there.”
Stopping the bleeding
At the time Deere & Co. blamed the high Canadian dollar for undermining the cost advantage of operations. The loonie had risen to an all-time high of 110.3 cents US in November 2007, up from 62 cents US in early 2002. The company was the largest employer in Welland’s private sector.
The economic development team had a plan to stop the bleeding. They chased after green energy firms in 2008 because they appeared to be the trend to follow. “We landed a couple of major solar companies, but because of the financial crisis in 2008, that fell by the wayside,” Degazio says. They regrouped. “Our thought was, ‘We have a big world and we have a small city and we have to fill it back up.’ ”
About 20 years ago, Welland attracted Canadian Tire Financial, now called Canadian Tire Bank.
“We were lucky,” Degazio says. “It was a call centre that’s now rated one of the best employers in the country.” Today, Canadian Tire Bank employs 1,600 people in Welland and nearby St. Catharines.
Other companies followed. Degazio extends credit to Lina DeChellis, a Welland economic development officer, for attracting Convergys CMG Canada, a human resources services provider, to the area about 15 years ago. Convergys brought in 700 seats to their call centre. That filled a lot of jobs. Convergys employs 350 people full time.
More companies came on board: ED Products, a global manufacturer of wiring harnesses, cables and electro-mechanical assemblies, employs 125 people full time; and Welded Tube of Canada, a producer of diversified steel pipe and tube, has 247 full-time employees. Hydac Technology Corp., a fluid technology solutions provider, expanded operations in Welland as did Bosch Rexroth, a drive and control solutions provider.
Northern Gold, a food processor from Canada’s west coast, is one of the most recent arrivals to Welland. Its plant is 300,000 square feet.
The other feather in the cap for the economic development team came when GE’s Distributed Power announced in June 2016 that it chose Welland as the site for its first “Brilliant Factory” in Canada, a $265 million project. The plant combines digital technology and lean manufacturing to build large, gas-powered engines for global markets. It represents 450,000 square-feet of industrial space on a property that runs one kilometre long, and will provide 220 direct jobs while stimulating the region’s economy.
It was a hard-earned reward. How did Welland beat out some 26 other municipalities for GE’s business?
GE said it chose Welland because of its proximity to the US border and access to skilled workers. Welland’s “aggressive” effort to attract its business was also a key factor. (In June 2018, GE sold its distributed power division to Advent International.)
“Our labour force here is second to none. Because of the strong manufacturing base we have a very strong labour force with transferable skills,” Degazio says. “Also, we have Niagara College, one of the best-rated in the country for training for technical skills. It works very closely with a number of companies in industry.”
As for Welland’s aggressive pursuit of GE: Degazio says the light bulb moment came when attending conferences in the US and seeing the incentive programs there.
“US municipalities were sending letters to attract our companies and we had nothing to combat it or sway the companies to stay. We had no incentive programs at the time.”
It would be nothing for companies in Welland to pick up and move 30 minutes away across the border to Niagara Falls or Buffalo, NY, if the American incentives were good.
Welland developed a Gateway incentive program with help from the Ontario government. Having completed 11 or 12 Gateway incentive programs in the last five years, Welland is leading the Niagara region.
Some of the incentives include: a development charge waiver, so zero development charges; and a tax incentive – anywhere from a 40% to 100% grant or grant-back of the regional and city portion of taxes.
For instance, GE was receiving approximately $30 million over 10 years under the Gateway incentive program. “Northern Gold will be receiving a 75% grant. They’ll be getting roughly $5 million over the next 10 years,” Degazio says. “There are also a number of smaller ones that receive maybe $30,000 or $40,000 a year. In a small company, that’s a pretty big help to them.”
Export Development Canada played an essential role in securing the GE plant, which moved from Wisconsin. EDC pledged $2 billion in federal export financing, giving Welland a tremendous advantage over locations in the US, where Congress had waffled on restoring funding to the US Export-Import Bank, a US trade credit agency, during GE’s decision process.
“EDC played a big part in the GE project. That’s a very, very valuable part of our investment. EDC can do things we can’t,” Degazio says.
But it’s not just cash and tax incentives that companies seek, Degazio says. Welland’s greatest strength, it turned out, was its ability to do work fast and get plants into the ground. “That’s what we heard wherever we went. Our biggest incentive program was, ‘We’ll get your plant in the ground faster than anybody else.’ And they did. GE was in the ground within six to eight weeks.”
Northern Gold needed to be up and running within the year. Welland’s economic development team helped make that happen.
“That’s a company from Coquitlam, BC. They could have been anyplace because they are a food processor,” Degazio says. Within one year of setting up shop in Welland, it started an expansion and doubled the size of the facility.
Getting into the ground quicker means companies realize a return on investment much faster. To expedite the process, Welland worked hard to eliminate red tape. The economic development office streamlined processes, access to the mayor and decision-making can happen at “a moment’s notice,” and clients contact Degazio directly by cell phone. They need only deal with one point person.
The process is also streamlined at the provincial level, with one point person to stickhandle any permits, regulations, incentives or taxes. Carrie Manchuk dealt with issues on that side. She made it possible for Welland staff and clients to meet with representatives from a number of ministries in a room, all at the same time, to resolve issues and develop a timeframe to move forward.
Property expenses are also a factor in the city’s favour. “Let’s face it, industrial property anywhere in the GTA – Brampton, Mississauga – you’re looking at $2 million to $3 million an acre. They are paying $75,000 to $200,000 an acre here,” Degazio says. “If you’re going to buy a property and you need 10 acres, and you’re paying $20 million for the property, but you can’t get a building permit for two to three years, that’s a hell of a lot of carrying charge.”
Brampton Brick is the latest business attracted to Welland. “That plant will be 600,000 square-feet.” Although Degazio says he’s not sure yet how many employees will be hired, the impact on the city’s coffers is expected to be positive.
What’s in store for the future? Degazio is optimistic. “Automotive parts manufacturing just got a big boost out of the new NAFTA deal (USMCA). Our local college can work with those companies to train people for what they need.”
Seems Welland is getting its groove back.
Kim Laudrum is a Toronto- based business writer and regular contributor to PLANT. E-mail email@example.com.
This article appeared in the March 2019 print issue of PLANT Magazine.