WHEN Alex Cassie parted company with a big engineering firm in northwest England four years ago, he was looking forward to a leisurely retirement.
Former colleagues had other ideas. They persuaded him to start a new business with them in Burnley, making parts for car companies, including Aston Martin, and for electrical-generator manufacturers.
One problem was finding finance. A bank loan was the obvious solution, but the local Burnley Enterprise Trust alerted Cassie to an unlikely source of funds. Why not ask Michelin, the French tyre company, for a loan?
It was good advice. BCW Engineering, as the new company was called, was one of the first British firms to take advantage of Michelin Development, a small-business loan scheme that has been running in France since 1990 and which was brought to Britain in 2003.
Michelin lent Cassie’s firm £20,000 and has since made two more loans to help it grow. From employing four people four years ago, it now has 68 on its books and turns over £5m a year. Cassie is pursuing contracts in Denmark and Italy, and will this month travel to India to see if he can set up a low-cost manufacturing operation there.
The Michelin loan programme is a rare example of a corporate social-responsibility scheme that is more than hot air. The idea is simple: Michelin has pledged £3m that it will lend to small companies near its British plants — or, in BCW’s case, former plants.
Michelin had a factory in Burnley but shut it in 2002. Its other UK plants are at Stoke-on-Trent, Ballymena and Dundee.
Michelin used to count itself among Britain’s largest industrial employers. In Stoke-on-Trent, where it set up in this country in 1927, it once employed 20,000. Now there are only 1,500 staff.
The loans scheme is not designed to ease corporate guilt by setting up former tyre workers in business. The aim is to put something back into the community, and help the social fabric by creating jobs and aiding local entrepreneurs, Michelin executives say.
As well as money, Michelin provides free advice on accounting, marketing, engineering or health and safety, and senior executives are expected to devote some of their time to helping loan applicants. This year Michelin Development has asked the company’s Stoke-on-Trent executives to give a combined 100 days to support the scheme.
The company is also willing to take a calculated risk with the money it lends. “If we are not prepared to take a risk, then frankly we are not bringing much to the party,” said Mike Cole, its local business-development manager.
Cassie said Michelin had helped to ease one of the biggest difficulties he faced when starting out on his own — the lack of the support structure he had enjoyed when working for a larger organisation. “What was alien to me was having to be responsible for cash flow myself, rather than it being someone’s else’s responsibility,” he said.
Michelin does not administer the loans directly, but has an arrangement with Royal Bank of Scotland. RBS makes the loan, and Michelin guarantees it, and subsidises the interest rate so that the small business pays only Bank rate — at present 5.25%. No personal guarantees are needed.
So far it has made 80 loans in Britain, worth in total just over £2m — and only 10 of them have had to be written off. More than 70 companies have taken the loans and they employ 800 people between them.
The last figure is important because the guiding principle of the programme is job creation. “Our goal is to create quality jobs that will last,” said Cole. As a rule of thumb, Michelin likes to see at least one job created per £4,000 lent.
The programme has only a few basic rules. It will not lend to retailers, favouring instead manufacturing in its broadest sense. It has made loans to technology companies, spin-outs from universities, pottery makers, packaging firms and even toy firms.
At each of its four sites a steering committee of local agencies and Michelin representatives vets applications and approves loans — although Michelin retains the final say.
Cole said he or one of the other Michelin Development staff visit the applicants before they make a formal submission to the committee, and weed out those who are not going to make the grade. The rest are given help with business plans and the detail of their proposals.
“There is a fairly low refusal rate for those who make it to the committee,” he said. “We like to say yes, and are normally looking for reasons to say yes.”
This approach has made Michelin popular with borrowers. Trevor Johnson, managing director of Caverswall China, a Stoke-on-Trent maker of fine bone china, secured a loan from Michelin last month that helped him to buy out the company. “I knew that Michelin operated a development fund, but I didn’t really know what it was for,” said Johnson. “[Michelin] has been absolutely superb — extremely helpful and knowl-edgeable.”
Caverswall now employs 19 people, and about three-quarters of its output is bespoke designs for high-rolling clients — including Sir Elton John.
Unsurprisingly, given the area’s historic association with pottery, china-making firms are well represented in the Stoke-on-Trent scheme. Another to have benefited is Studio Hinks Fine China, Britain’s only remaining manufacturer of painted china flowers.
Almost all its output is exported to Japan.
John Hinks, the owner, is a veteran of business start-ups, and began this venture two years ago when he was 66. “I had retired three times already, but to be honest I didn’t fancy going to Tesco every day,” he said.
Nor did he want to go back to haggling with banks to secure financial support for his start-up business. Instead, he went to Michelin. “They are interested in creating jobs and, of course, ceramics does just that — the kind of work we do is labour-intensive.”
Studio Hinks now employs 14 people, the oldest of whom is 74. “I’m just the office toy-boy really,” said Hinks, now 68.
Although the Michelin scheme is a rare example of this kind of corporate philanthropy, it is not unique. Two large schemes were set up in Britain to ease the blow of job losses in the coal and steel industries. UK Steel Enterprise, which remains a subsidiary of the Corus steel company, claims to have created 66,000 jobs, while British Coal Enterprise fostered about the same number in the six years before it was privatised in 1996.
