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www.crainsdetroit.com Vol. 30, No. 26
JUNE 30 – JULY 6, 2014
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©Entire contents copyright 2014 by Crain Communications Inc. All rights reserved
Page 3 Why 3 hospitals became 1: To compete on cost, quality
China firm plans auto R&D center Title issues, other bidders obstacles to Plymouth Twp. site BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
Beth Niblock starts from scratch on Detroit IT system See-water: Algae inspires firm’s gene therapy to help the blind
This Just In Doeren Mayhew forms investment banking unit
NEWSPAPER
Troy-based Doeren Mayhew & Co. PC, an accounting and advisory firm, has formed a separate investment banking practice, Doeren Mayhew Capital Advisors LLC. “We’ve been in the investment banking business, we just did it through Doeren Mayhew. But we’ve got enough licensed people, (so) we decided to spin it off into its own entity,” said Managing Director Mark Crawford. Crawford said the new business unit has three employees in its Troy headquarters and three in the firm’s Houston office. Crawford said the practice will only do deals involving private companies. While the firm will have no limit on the size of deals, he said he expects most to be in the $10 million to $200 million range. He said Doeren Mayhew has closed five deals in the past two months and 10 since the fiscal year began in October. According to Inside Public Accounting, Doeren Mayhew ranked as the top accounting firm in the U.S. in M&A activity in 2013, deriving 5.8 percent of its revenue from investment banking. — Tom Henderson
In two years, a Chinese-backed developer plans to open an automotive research and development center on more than 320 acres in Plymouth Township. But first, there are some title issues to clear up. Namely, resolving a longtime legal battle over land
ownership between the township and city of Detroit. Ann Arbor-based Third Wave Group LLC, the U.S. holding company for China-based Beijing Dixing Taihe Investment Group, responded to a request for information from Plymouth Township last month. The township is seeking developers to redevelop the property, which is zoned for industrial, man-
ufacturing or scientific research. Third Wave is one of four developers that re- Chinese have sponded to the invested township RFI. $1 billion in Others included Michigan operations Southfield-based since 2000, Redico LLC, Page 21 Wixom-based Total Sports Complex and Birmingham-based Biltmore Development LLC. Michael Liu, managing director of Third Wave and chairman of Beijing Dixing, said that group’s
ROLE
REVERSAL
$120 million plan is meant to bridge the gap between China’s booming economy and Southeast Michigan’s auto industry through the international Liu business concept of “build, operate, transfer.” Third Wave would build the center, which is planned as a four-story office building and several R&D See R&D, Page 21
Politics, power bottle up efforts to alter liquor laws
Taking innovation for a spin
BY CHRIS GAUTZ CAPITOL CORRESPONDENT
GLENN TRIEST
ho says Detroit is all about cars? How about curing cancer, making fuel cells or even new options for a mani-pedi splurge day? Julie Bartholomew (above) is a doctor who found a calling developing a machine that builds custom color cosmetics. Detroit-area companies are a wealth of patent innovation, particularly in biotech, energy and Bartholomew’s breed of product assembly know-how. IP merchant bank Ocean Tomo developed the Eureka Index for Crain’s, a special report on 25 companies making high-value discoveries, from test tubes to lipstick tubes. Stories on these innovators begin on Page 11.
W
In 1933, Michigan moved quickly and became the first state to ratify the 21st Amendment repealing the prohibition of alcohol. But these days, a mix of politics, power and lobbying means change doesn’t come as fast when it comes to the state’s liquor laws. There was optimism among state officials — and some brewers and pub owners — when a state commission produced a 2012 report detailing a myriad of ways to modernize Michigan’s liquor control system. The changes were billed as a way to spur business and job growth while maintaining public safety. Two years and one day later, just 18 of those 72 recommendations have been implemented, and a handful of those that were approved have been watered down from the original proposals after lobbyists and the lawmakers supported by them became involved. Among the 54 proposals that have been successfully blocked include allowing breweries to ship directly to customers as wineries do, permitting liquor licenses to be See Liquor, Page 22
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MICHIGAN BRIEFS Fruit growers’ outlook: Not like 2013, but winter didn’t do us in Michigan fruit growers and processors don’t expect a repeat of last year’s large crop of apples, cherries and blueberries, MLive.com reported. But despite a harsh winter, they still predict an average yield. About 160 fruit growers and processors gathered last week for the Michigan Frozen Food Packers Association’s 59th Annual Fruit Crop Guesstimate, an event designed to prepare for the coming harvest. The greatest optimism came from apple farmers, who predicted 27.7 million bushels this year, compared with 26.3 million last year. Blueberry farmers predicted a smaller crop than last year mainly because of damage from subzero temperatures. Farmers expect 82 million pounds this year, compared to 114 million last year. The tart cherry crop will be down from last year despite optimistic reports from the state’s prime cherry region in the northwest Lower Peninsula.
Pistons owner sells Cadillac boat maker to French company Rec Boat Holdings LLC in Cadillac was acquired by BĂŠnĂŠteau Group, a French sailboat and motorboat manufacturer, MiBiz reported. Rec Boat manufactures Four Winns, Glastron, Wellcraft and Scarab
Lake Michigan charter fishing industry: Watershed year? This summer could be a telling season for the salmon fishery in Lake Michigan and the lakeshore economy that relies on the industry for tourism. While scientists predict catch rates will remain similar to last year, the industry faces uncertainty related to an imbalance in the predator-prey relationship in the lake that has led fisheries managers to halve their plants of the prized chinook salmon. Anglers also could have a harder time accessing fish in the coming years as the aging population of charter boat captains looks to retire or sell amid rising costs and a dearth of new fishermen taking up the business. Last year, catch rates hit a five-year low in Lake Michigan. The sustainability of offshore fishing is a particular concern for the lakeshore communities that have come to rely on fishing as part of their tourism industry, said Kathryn Maclean, president boats and invested about $9 million into the Cadillac plant, doubling employment in about four years to about 500. Terms were not disclosed. Platinum Equity LLC purchased Rec Boat out of bankruptcy in 2010. Platinum Equity founder and Michigan native Tom Gores also owns the Detroit Pistons of the National Basketball Association and Palace Sports & Entertainment.
Natural-gas firm pleads not guilty to charge it lied to landowners Oklahoma City-based Chesapeake
of the Ludington & Scottville Area Chamber of Commerce. The charter fishing industry generated about $15.3 million in total economic output and $6.5 million in personal income in the state’s coastal communities along Lake Michigan in 2013, according to a charter fishing economic impact calculator developed by Michigan Sea Grant. It also created more than 316,370 employment hours in businesses ranging from charter fishing operations to restaurants and hotels, the report stated. “It wasn’t until I started with the chamber that I understood how big of an industry it was,� Maclean said. “It has a huge impact on our economy, especially on our restaurants and gas stations and marinas, and it also brings in summer residents who run the charters.� — MiBiz
Energy Corp., already facing antitrust claims in Michigan over bids on gas exploration rights, pleaded not guilty last week in a state court in Cheboygan to charges that it lied to landowners about leases it took out on their property. Attorney General Bill Schuette accused the second-biggest U.S. natural gas producer of telling landowners that their existing mortgages were no barrier to leasing their properties, then cited those same mortgages as justification for canceling almost all the leases after competition for them ceased.
Study: Low Great Lakes levels to eat up $18B from economy by ’50 A study by the Mowat Centre, a Toronto-based think tank, says that if water levels remain low on the Great Lakes and the St. Lawrence River, the damage it could do to the region’s economy could reach $18 billion by 2050, The Associated Press reported. According to the study, conducted for the Council of the Great Lakes Region, much of the Great Lakes and St. Lawrence basin beginning in 1997-98 has suffered the longest extended period of
lower water levels since coordinated measurement began in 1918. The entities that would face the brunt of the economic hit: recreational boating and fishing, commercial shipping and harbors, and rural groundwater users.
MICH-CELLANEOUS 䥲 Kentwood-based automotive supplier Autocam Corp. officially opened its 50,000-square-foot plant in Marshall, east of Battle Creek. The $10 million plant is expected to create 85 jobs. 䥲 The U.S. Department of Transportation approved $8.8 million to improve five Michigan airports: Muskegon County Airport, Kalamazoo/Battle Creek International Airport, Sawyer International Airport in the Upper Peninsula, Bishop International Airport in Flint and Capital Region International Airport near Lansing. 䥲 Paw Paw’s St. Julian Winery was awarded gold medals during the 2014 San Francisco International Wine Competition, held June 20-22, for its 2013 Braganini Reserve Riesling, Mountain Road Estate Bottled and 2013 Reserve Riesling. Find business news from around the state at crainsdetroit .com/crainsmichiganbusiness. Sign up for the Crain’s Michigan Morning e-newsletter at crainsdetroit.com/emailsignup.
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Beaumont: Compete on cost, quality BY JAY GREENE CRAIN’S DETROIT BUSINESS
A chief goal of the newly announced Beaumont Health is to create a network of eight hospitals and 153 outpatient centers in Southeast Michigan to offer health insurers, employers and consumers a lowercost and higher-quality alternative to competing health systems. Last week, the boards of Royal Oak-based Beaumont Health System, Dearborn-based Oakwood Healthcare and Farmington Hills-based Botsford Health Care approved a plan to
New health system looks to pay-for-performance models create the region’s largest health system with combined revenue of $3.8 billion. Experts told Crain’s that Beaumont Health officials are trying to position their organizations to attract more patients to their health systems through traditional managed care contracting and newer pay-for-performance models being tested that reward higher quality.
Inside
MANAGING MERGER How Beaumont, Oakwood and Botsford will operate as single system, Page 20
About half of a hospital system’s revenue comes from negotiating prices for medical services with private health insurers, which in metro Detroit include Blue Cross Blue Shield of Michigan, Health Alliance Plan, Priority Health and HealthPlus of Michigan. Under health care reform and the movement to high-deductible health plans, potential patients of
health systems also will be more likely over the next five years to select providers based on price and quality considerations using online databases. Efforts by Medicare and private payers like Blue Cross to offer health systems pay-for-perfor-
New Tacom commander’s marching orders, Page 6
See Beaumont, Page 20
Company index
Gene therapy for blindness gets attention of investors
Ctrl ... Alt ... the D
RetroSense plans human trials in ’15 BY TOM HENDERSON CRAIN’S DETROIT BUSINESS
New CIO Beth Niblock starts from scratch to overhaul Detroit’s ‘fundamentally broken’ IT system Beth Niblock’s first impression of Detroit’s IT: “Almost everything needs to be overhauled.”
crosswalk despite the ticket she received. But that’s an entirely different IT irst things first: Beth Niblock has DRMS system was more like a fish to fry. First, she just has to get no control over the parking me- nightmare, Page 18 City Hall functioning. ters. What IT in Detroit “It really was kind of more fundaAnd yes, the city’s new chief infor- can’t do, Page 19 mentally broken than I thought it mation officer has received her share was,” Niblock said of the city’s information of parking tickets since moving to Detroit technology infrastructure. “Almost everyfrom Louisville, Ky., in February. More than thing needs to be overhauled.” half the city’s meters are broken, which made Niblock sneaked her first peek under Depaying for parking in the middle of the polar troit’s hood last year as part of an IT task force vortex a challenge. organized by the White House. She joined the “I’m standing on the street blowing on my credit card, trying to make it work, and going, CIOs from Boston, New Orleans, Chicago and ‘OK, I just have to take the parking ticket,’ ” Raleigh, N.C., for two days of investigation and she said, laughing. evaluation. She whips out her cellphone to show off a photo of her car very obviously not blocking a See Niblock, Page 18 BY AMY HAIMERL
CRAIN’S DETROIT BUSINESS
F
SYSTEM ERRORS
Ann Arbor-based RetroSense Therapeutics LLC plans to start human trials of a gene-based therapy next year, and if those trials go as animal trials have gone, those blinded by degenerative eye diseases will regain some of their vision. What seemed more like an interesting science experiment four years ago than a real company — can a light-sensing gene that helps pond scum find sunlight also help the blind see? — is attracting interest and venture capital as it gears up for human trials. The therapy is based on the photosensitivity of a gene called channelrhodopsin-2. This gene allows blue-green algae to detect where the sun is shining on a pond so they can move in its direction and convert light to energy through photosynthesis. When the gene, which is inside a cultured medium called a vector, is injected into the eye, previously non-photosensitive retinal cells are converted into photosensitive See RetroSense, Page 22
These companies have significant mention in this week’s Crain’s Detroit Business: A123 Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Adaptive Materials . . . . . . . . . . . . . . . . . . . . . . . . 12 Associated Builders and Contractors of Michigan . 17 Beaumont Health System. . . . . . . . . . . . . . . . . . . . . 3 Biltmore Development . . . . . . . . . . . . . . . . . . . . . . 1 Blue Cross Blue Shield of Michigan . . . . . . . . . . . . . 4 Bosch Automotive Service Solutions . . . . . . . . . . . 14 Botsford Health Care . . . . . . . . . . . . . . . . . . . . . . . 3 Clark Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Cobasys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Concours d’Elegance . . . . . . . . . . . . . . . . . . . . . . . 5 Crain Communications . . . . . . . . . . . . . . . . . . . . . . 4 Cybernet Systems . . . . . . . . . . . . . . . . . . . . . . 11, 12 CytoPherx . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12 Dandelion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Detroit Regional Chamber . . . . . . . . . . . . . . . . . . . 17 Doeren Mayhew . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Durr Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 General Retirement System . . . . . . . . . . . . . . . . . . 7 Gentherm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Grindstone Capital . . . . . . . . . . . . . . . . . . . . . . . . 12 Henry Ford Health System . . . . . . . . . . . . . . . . 12, 20 Hygieia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Immunolight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Imra America . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 IMX Cosmetics . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 JAC Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Jaffe Raitt Heuer & Weiss . . . . . . . . . . . . . . . . . . . 11 Knight Foundation . . . . . . . . . . . . . . . . . . . . . . . . 18 LifeSecure Insurance . . . . . . . . . . . . . . . . . . . . . . . 4 L.VAD Technology . . . . . . . . . . . . . . . . . . . . . . . . . 14 Magna Electronics . . . . . . . . . . . . . . . . . . . . . . . . 12 McLaren Health Care . . . . . . . . . . . . . . . . . . . . . . 20 Michigan Beer and Wine Wholesalers Association . 22 Michigan Brewers Guild . . . . . . . . . . . . . . . . . . . . 22 Michigan Campaign Finance Network . . . . . . . . . . 22 Michigan Grocers Association . . . . . . . . . . . . . . . . 22 Michigan Liquor Control Commission . . . . . . . . . . 22 Miller Canfield Paddock and Stone . . . . . . . . . . . . . 5 Municipal Employees’ Retirement Systems of Mich. . . 7 Oakland University . . . . . . . . . . . . . . . . . . . . . . . . 14 Oakwood Healthcare . . . . . . . . . . . . . . . . . . . . . . . 3 Ovonyx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Plante Moran . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Police and Fire Retirement System . . . . . . . . . . . . . 7 Redico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 RetroSense Therapeutics . . . . . . . . . . . . . . . . . . . . 3 Rubicon Genomics . . . . . . . . . . . . . . . . . . . . . . . . 14 Sakti3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Saturn Electronics & Engineering . . . . . . . . . . . . . 13 Sentio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12 Service Solutions U.S. . . . . . . . . . . . . . . . . . . . . . 14 Stirling Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 TechTown Detroit . . . . . . . . . . . . . . . . . . . . . . . . . 11 Third Wave Group . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Together Health . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Total Sports Complex . . . . . . . . . . . . . . . . . . . . . . . 1 U.S. Army Tacom . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Wells Fargo Advisors . . . . . . . . . . . . . . . . . . . . . . . . 7 Yatooma’s Foundation for the Kids . . . . . . . . . . . . . 5
Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . 19 BUSINESS DIARY . . . . . . . . . . . . . . . . 16 CAPITOL BRIEFINGS. . . . . . . . . . . . . . 17 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 ISTOCK PHOTO
Can a light-sensing gene that helps pond scum find sunlight also help the blind see?
KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 LETTERS . . . . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 9 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8
THIS WEEK @ WWW.CRAINSDETROIT.COM
it’s oeuvre-where Read about CAMP Detroit’s mission to highlight local artists on the streets of Detroit, crainsdetroit.com/CAMPDetroit
PEOPLE . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . 23 WEEK ON THE WEB . . . . . . . . . . . . . . 23
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Blues to co-brand, sell specialty insurance packages with LifeSecure BY JAY GREENE CRAIN’S DETROIT BUSINESS
THE MILLER LAW FIRM
Blue Cross Blue Shield of Michigan will begin to co-brand and sell together three specialty insurance product lines this week with subsidiary LifeSecure Insurance Co., a for-profit Brighton-based company Blue Cross founded in 2006. Starting in April 2015, LifeSecure plans to roll out several other specialty products, including individual disability and individual critical illness protection, and individual and group life and package together with Blue Cross health insurance products, said Tiffany Albert, CEO of LifeSecure. As a recently converted nonprofit mutual insurance company, Blue Cross is allowed to co-brand insurance products with LifeSecure in Michigan. From 1980 through March 2013, under Public Act 350, Blue Cross was considered the insurer of last resort and limit-
ed to selling only health, dental and vision policies. The three current LifeSecure individual product lines that will be co-branded with Blue Cross health policies are long-term care insurance, personal accident and hospital recovery policies, Albert said. “Most people have no idea what these products are,” said Albert, appointed CEO of LifeSecure in April after four years as Blue Cross director of external sales distribution. Long-term care insurance covers nursing home care but also services that support people living at home. Personal accident covers medical costs not entirely covered by health policies, and hospital recovery is designed to pay living costs after a patient is discharged. Expanded benefits for personal accident and hospital recovery will be offered starting July 1, Albert said. Group coverage for personal accident and hospital recov-
ery will be offered later this year. Kevin Stutler, Blue Cross vice president of ancillary products, said LifeSecure and Blue Cross are considering offering price discounts for customers who purchase multiple products. He said Blue Cross needs state regulatory approval for those discounts. LifeSecure plans to offer group policies for personal accident and hospital recovery later this year. While long-term care is only offered as an individual policy, Stutler said, employers can offer it as a benefit. Several other health insurers in Michigan offer some specialty products in the individual, group and workplace markets, including Cigna Healthcare, Humana and Aetna. Other companies offering a variety of specialty lines include Aflac, ING Group, Colonial Life, Guardian, Prudential and Unum. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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Crain Communications Inc. has named KC Crain executive vice president/director of corporate operations, the company’s board of directors announced last week. Crain, 34, will retain his position and responsibilities as group publisher of the DetroitCrain based company’s Automotive News Group, which includes Automotive News and Autoweek. He also remains group publisher of Crain’s Chicago Business, Plastics News, Rubber & Plastics News and Tire Business. As director of corporate operations, Crain will oversee the corporate technology, knowledge management, audience development and digital team for Crain Communications, which, in a statement, the board of directors called “a vital leadership role as Crain continues to adopt and implement new technology and strategies for our changing business model.” Crain was named publisher of Autoweek in 2007 and a vice president of Crain Communications in 2008. Crain also held the roles of associate publisher and advertising director at Autoweek. Prior to Autoweek, Crain served as a reporter for Automotive News. Crain serves on the boards of Cornerstone Schools, Karmanos Cancer Institute, College for Creative Studies and the Young Presidents’ Organization. He is a graduate of Denison University, where he earned a bachelor’s degree in communications.
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Clark Hill hits fastest-growing, revenue milestones on national lists BY CHAD HALCOM CRAIN’S DETROIT BUSINESS
Detroit’s Clark Hill plc is both the fastest-growing law firm in the nation by number of attorneys and the newest member of the top 200 firms ranked by revenue, according to American Lawyer Media. With the addition of 74 attorneys last year, Clark Hill grew 35.2 percent last year, tops among the 350 largest firms in the country earlier this month in a report by the ALMowned National Law Journal. The firms collectively grew by 3.9 percent. Sister publication American Lawyer also adds Clark Hill for the first time to its AmLaw 200 list of largest national firms by revenue, at No. 177 with $127.5 million for 2013. That puts it slightly ahead of Miller Canfield Paddock and Stone PLC, which slid from No. 174 to No. 182 as revenue dropped from $129 million to $122 million. Miller Canfield was among the bottom 15 listed firms by growth rate, shrinking
by 27 attorneys to 270. Most of Clark Hill’s growth came via merger in March 2013 with Pittsburgh-based Thorp Reed & Armstrong LLP, which had about 80 attorneys. The merged firm reported 284 attorneys for 2013. CEO John Hern said the firm also has made recent additions in its IP Hern and litigation practices, and hired attorneys in Chicago and Southeast Michigan. More expansion is possible, he said. “It’s always a work in progress,” he said. “The Thorp Reed merger allowed us to build up a level of expertise in banking and commercial finance practices that we couldn’t offer before, and if we build again we want to do it by taking that same kind of approach. “This (new national ranking) is a milestone for the firm, and the
fact we’ve made it I think reflects that we’re intent on having a deep bench of expertise that our clients want to see.” Miller Canfield became smaller in 2013 through a decision to pare lawyers at its Windsor office who had built practice specialties outside of its core businesses, said CEO Michael McGee. Attorneys in Windsor had drifted into areas like residential property matters and condominium development, McGee said in an email to Crain’s, before the firm decided to refocus its Canadian operations last year. The Windsor cuts account for about two-thirds of the 27 fewer attorneys, he said, with the rest coming through attrition and retirement. “The revenue decline is almost wholly the Canadian change. In the case of this change, smaller is demonstrably better,” McGee said. Other local law firms from the AmLaw 200: Honigman Miller Schwartz and Cohn LLP is the largest of Detroit’s
firms by revenue at an estimated $188 million in 2013, ranking No. 146 compared to No. 145 with an estimated $186 million in 2012. It reported 231 attorneys in 2013, up by four from the year before. Dickinson Wright PLLC climbed from No. 175 last year to No. 164 as revenue grew from $127.5 million to $159.5 million in 2013. It also added 64 attorneys, primarily by adding the 60 attorneys of the for-
TAMPA BAY RAYS VS DETROIT TIGERS
Concours d’Elegance adds Yatooma’s as beneficiary, could become its focus BY SHERRI WELCH CRAIN’S DETROIT BUSINESS
Since its founding 36 years ago, the Concours d’Elegance of America at St. John’s has largely been known as one of the top collector and vintage car shows and auctions in the country. Lesser known is the fact that the event’s organizer is a nonprofit by virtue of educating the public on the history of the automobile while raising money for other groups in the process. The Concours d’Elegance board chairman is Larry Moss, managing director, Moss Financial Group in Birmingham. Keith Crain, chairman of Crain Communications Inc., is a director on the Concours board. Since moving the annual event to the Inn at St. John’s in Plymouth from Oakland University’s Meadow Brook Hall in 2011, the Concours has split roughly $20,000 largely among three nonprofits: College for Creative Studies, Leader Dogs for the Blind and Hospice of Michigan. This year’s event on July 27 will also benefit Yatooma’s Foundation for the Kids, an addition that will mark a new fundraising direction. “Our focus is ultimately going to be on one charity, not three or four charities,” said Moss. “I fully expect ... Yatooma’s will be the primary beneficiary beginning with the 2015 event.” Moss admitted he has a soft spot for kids, and Yatooma’s mission of helping children who’ve lost a parent is a cause many may feel compelled to support. Focusing on a single charity will create more impact, he said. The Concours reported revenue of $779,147 from grants, sponsorships, donations and programmatic/ticket revenue and an operating excess of $139,517 in 2012, the year of its most recent tax filing.
“With Norman Yatooma’s charity you (also) get a give and take,” Moss said. Though the event’s organizers have never asked the other nonprofit beneficiaries for assistance, Yatooma “comes to the table and says, ‘We’re going to help,’ ” he said. Though still a fledgling nonprofit, Yatooma’s Foundation for the Kids and its founder, the Bloomfield Hills attorney and founder of Norman Yatooma & Associates PC, have forged relationships with companies and people including Art Van Furniture Inc., Kroger Co. and the Ilitch family. Each make inkind donations that help the foundation stretch its budget to provide a child and family with a variety of services, Yatooma said.
mer Mariscal, Weeks, McIntyre & Friedlander PA in Phoenix in January 2013. Dykema Gossett PLLC, the largest of the Detroit firms at 340 attorneys in 2013, slid six spots to No. 152, with revenue about flat at $180 million and three additional lawyers. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom
The foundation also gets pro bono advertisements from local advertisers to help promote its mission, Yatooma said. The foundation is operating on a budget of just more than $400,000, a level that enabled it last year to provide 500-600 children with food, clothing, shelter, grief counseling and mentoring, and their surviving parents with training and assistance in finding work. This year, Concours d’Elegance will also include a dozen of the children who Yatooma’s Foundation supports on a panel to pick their favorite cars. “It’s a really nice experience for these kids to be treated differently for a good reason rather than a bad reason,” Yatooma said.
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CRAIN’S DETROIT BUSINESS
JOHN SOBCZAK
Maj. Gen. Gwen Bingham oversees an operation that employs more than 7,000 people in Warren.
New Tacom commander’s focus: Lean processes, better community contact BY CHAD HALCOM CRAIN’S DETROIT BUSINESS
Lean process management and improved community engagement are expected to be focus areas for Maj. Gen. Gwen Bingham, who has assumed command of the U.S. Army Tacom Life Cycle Management Command in Warren. Bingham, a native of Alabama and commander of White Sands Missile Range in New Mexico since 2012, became the first woman to lead Tacom when she formally assumed command last week from Maj. Gen. Michael Terry. She was also the first woman and AfricanAmerican commander at White Sands. She said she expects to implement lean process management tools at Tacom much as she has done at White Sands, as the Army has reduced troop numbers amid the ongoing wind-down of deployments in Iraq and Afghanistan. The Army is in the process of reducing its active-duty positions from 560,000 to 490,000 troops by 2015, with a future defense plan in the 2015 budget calling for the service to trim to 420,000 troops by 2019. But, Bingham adds, she remains fundamentally a “people person” in her management style. “I believe in taking care of people, and in all the jobs we do worldwide we want to make the best possible use of people in all our deployments and troop (strength) and total programs,” she said. Bingham, who will mark 33 years of military service in August, moved to Macomb Township with her husband about two weeks ago. She said her historic role in Tacom is a point of pride but not necessarily a motivation in taking command posts.
“But I get Vietnam veterans walking up to me who tell me how they never expected to see an African-American with two stars (a major-general rank insignia),” she said. “And … I like to give back, because I didn’t do it all by myself and I see everyone I’ve worked with before from an E-1 (enlisted solider) to a general playing a role in me becoming who I am.” Tacom, a division of the U.S. Army Materiel Command, has overseen more than $10 billion in contract awards each of the past two years and maintains a workforce of more than 19,000 people at 109 locations, including more than 7,000 people in Warren — most of them civilian Army employees.
Bingham also pointed to the recently convened Army Southeast Michigan Advisory Council, a group of 13 local advisers to the base command that meets again in August, and ongoing Army programs to support training and education for science, technology, engineering and math careers, as areas where the base will focus on engaging the larger Southeast Michigan community in the future. Terry, who had commanded Tacom since June 2012, will retire at a ceremony in Fort Hood in Texas after 35 years in military service. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom
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New advisers line up for post-bankruptcy pension plans BY CHAD HALCOM CRAIN’S DETROIT BUSINESS
Who will manage the post-“grand bargain” pensions for Detroit’s 30,000 active and retired employees if a judge confirms the city’s current plan to exit federal bankruptcy? The state and the philanthropic foundations that will pony up more than $560 million combined to shore up the city’s pension plans will have an oversight role for years to come, along with the city itself and various financial services experts, under a new governance model created by the plan itself and a newly minted state law. But retirement plan providers and investment consultants also said the post-bankruptcy structure could bring pension plan advisers and other experts to the table who had not considered doing business with the pension plans for some time, boosting the prospects for return on their investments. “We had stayed away from (advising) Detroit’s pension plans for a number of years, and I think for the right reasons. Politically, it was too bogged down to get very excited about under past leadership,” said Chris Forte, managing partner for Wells Fargo Advisors LLC in Birmingham. “But with this ‘grand bargain,’ we recognize that there’s a completely different landscape, and either in leadership or (as a
We had stayed away from (advising) “ Detroit’s pension plans. ... But with this ‘grand bargain,’ we recognize that there’s a completely different landscape.
”
Chris Forte, Wells Fargo Advisors
plan consultant) we’d love to have our names thrown into the hat.” Also taking a new interest in Detroit’s pension plans is the Municipal Employees’ Retirement System of Michigan, which manages more than $9 billion in plan assets for employees of 800 different municipalities statewide. Chris DeRose, CEO of MERS, said the nonprofit benefit plans consultant and investment manager has had some discussions with Detroit officials about plan oversight during the bankruptcy and hopes to offer its services to the future investment committee created in one of several bills signed by Gov. Rick Snyder on June 20. “We’ve had a number of legislators tell us during the development of this (“grand bargain”) legislation that MERS would be a natural for this, and we do think we’d be a natural asset for the new investment committee,” DeRose said.
If U.S. Bankruptcy Judge Steven Rhodes approves the city’s plan of adjustment to exit bankruptcy after the confirmation hearing that is scheduled to start Aug. 14, the General Retirement System and the Police and Fire Retirement System will gain new committees that have investment management powers over the pensions, in addition to their current 10-member governing boards. Each of the investment committees will comprise a mix of appointees — the GRS can appoint one active employee and one retiree, while the police and fire board can tap a current and former employee apiece from both departments. Another five independent committee members serve by agreement of the state, city and the plan board in consultation with the contributing foundations. The pension boards reviewed possible nominations to that committee last week but have taken no action yet. The
police and fire board are to review the matter Thursday; it’s not clear when the GRS will review it. The new committees will make recommendations to the plan boards appointing or replacing investment managers or other advisers, and can appoint a chief investment officer or CFO for each plan. Both pension boards need committee approval for investment decisions. The committees serve for 20 years after confirmation, but either can be dissolved after five years if its plan becomes 90 percent funded. Gone are the days, investment consultants said, when pension investment deals were done with little or no due diligence, while board members allegedly entertained proposals from friends or invested in companies that had no assets or had alleged connections to a corruption investigation of former Mayor Kwame Kilpatrick. And the new committees, while they may add another level of bureaucracy, are a livable arrangement if everyone involved is focused on the investment interests of the plan’s beneficiaries, Forte said. Phil Fogli, managing partner of Pennsylvania-based FRS Capital Management, which has created financial plans for various police and nonuniform municipal pensions, said his company is primarily focused on municipal plans in that
state but does occasionally solicit business elsewhere. He expects competition will be fierce for Detroit’s plan consultant business unless there is a tough regulatory structure that deters some types of fund managers. “Plans will have to be flexible enough to change with the markets. Because it’s important not only to be able to capitalize on the current performance of equities, but also to reduce the impact of the downsides of the market,” he said. Forte said he expects bureaucracy and regulation won’t be much of a barrier to companies seeking to provide advisory services for Detroit employees. Wells Fargo is investment consultant to the $135 million pension plan for city of Monroe employees, for example. DeRose added that MERS, which maintains a staff of 130 employees on an annual budget of about $25 million, could manage Detroit’s plans without having to add people or scale up its operations. Detroit’s two pension plans have more than $6 billion in combined assets. The MERS system averaged a 15 percent rate of return on plan asset investments in fiscal 2013, DeRose said. The GRS in the same year averaged 12.23 percent. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom
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CRAIN’S DETROIT BUSINESS
OPINION
Wholesalers wield too much power I
t will come as a surprise to few that the Michigan Beer and Wine Wholesalers remains a powerful lobbying force in Lansing. As Capitol Correspondent Chris Gautz reports on Page 1, the wholesalers have managed to block 54 of 72 recommended updates to the state’s liquor control system and water down a few others. Among the squashed reforms are a provision that would allow breweries to ship directly to consumers like wineries can, and another allowing bars and restaurants to buy liquor from local stores if they run out between wholesaler deliveries. What those measures had in common is that they allow alcohol-related businesses to deal with parties other than wholesalers. Wholesalers have enjoyed near-monopoly conditions since the end of Prohibition, when virtually every state set up a three-tiered system of producers that sell to distributors that sell to retailers that sell to customers. The system was created, among other factors, to create a way to regulate and tax the industry after years of illegal operation during America’s constitutionally mandated dry years. There were good reasons for that at the time, but wholesalers grew into such a powerful force in most states that a noticeable amount of alcohol regulation is about protecting turf rather than consumers. There has to be a better way.
Niblock’s IT work key to future Information technology is considered a sexy field, but that’s on the innovation side. When it comes to fixing long-broken systems, it’s much more about taking inventory, establishing priorities and otherwise going back to the basics. That’s the challenge Beth Niblock, Detroit’s CIO, faces. As Amy Haimerl reports on Page 3, Niblock’s early priorities are around things as basic as providing reliable Internet service and replacing the city’s near-obsolete computers. As important as that is, it’s probably the easiest part of what she faces. Many city processes are still so tied to manual processes that they’re unaffordable and hard to execute. One example: It costs the city $62 to cut a payroll check because it takes 149 full-time employees — including 51 uniformed officers — to run the system. The prospect of everything that has to be fixed is daunting, but more or less starting from scratch may provide more opportunities to create optimum systems.
LETTERS Another view on executive pay Editor: Maureen Thomas’ letter published in the June 9 issue (“Top execs’ high pay not deserved”) is so strident that it calls for balance. And before I begin, my firm and I are examples of those “so-called executive compensation experts” dismissively referred to in the letter. Our clients consist of publicly traded enterprises, closely held businesses and nonprofits. Our experience is not confined to the large companies to whose practices the letter appears to object, but also to many organizations of varying sizes and business models throughout the U.S. As a general proposition, despite what she says, the “compensation figures for midlevel executives and nonexecutives” are available in published surveys. They may be opaque as to particular companies, but they will be available in relevant context. Where her (irony alert!) “generous 3 percent” 2013 pay increase comes from, we can only speculate. A change in a company’s share price is of interest to a greater audience than those who sell their shares. Moreover, stock prices represent more than the “market’s perception of value at a particular moment in time.” They, more importantly to the investment community, take into consideration the discounted future earnings of a business. Prices also reveal potential trends in the economy at large, the subject company’s future business and employees’ investments in their firms’ 401(k)s. And while it is true that share prices can be influenced by a variety of extraneous factors, to state without evidence that a stock’s price “bears little correlation to CEO and senior executive performance” is both nonsensical and irresponsible. Curiously, the letter states, “What shareholders really value are dividends.” In the absence of any proof of this hypothesis, I suggest that many shareholders are equally pleased by the payment of dividends or the growth of share prices, all things being equal. I also fail to see any cascading inevitability between dividend cuts, employee layoffs and executive severance agreements. The letter declares that firms like mine provide opinions
Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com “bought and paid for by corporate boards made up entirely of C suite club members.” Please! I have been at this long enough and have dealt with enough boards to testify that employee board members have been increasingly replaced by independent board members who have been recruited specifically for their community involvement, financial savvy, experience, talent and probity. And as to the claim that board compensation has “risen dramatically,” the reply is that this phenomenon is the consequence of companies having to increase the rewards to board members for the increasing time having to be spent on board business, particularly given an environment of greater legal compliance, accompanied by an increased threat of litigation. The problem with the letter is that it offers nothing beyond shrieks and conclusions. Sometimes it’s cathartic to rage about inequities, real or imagined; there’s a lot of injustice in the world, and it’s good to get it off our chests. But to be convincing and advance the cause, we need to be a bit more rational, a bit more coherent. Paul Creasy Partner Organizational Consulting Group LLC Avon, Ohio
Trademark gets IP lawyer’s motor going Editor: Bravo to Keith Crain for sharing his outrage over what appears to be a blatant misuse of the growing and powerful Detroit brand by the Detroit Electric car company (“Phony Detroit project should lose trademark,” June 23 column).
While the Detroit Electric brand has been federally registered, this registration may be short-lived. If indeed the company is moving manufacturing operations out of Detroit/Wayne County and into the Netherlands, eliminating any tie to Detroit, the trademark can be canceled for being geographically deceptive under U.S. trademark law. In fact, we are considering putting on our pro bono hat for the city of Detroit and taking action with the U.S. Patent and Trademark Office to right this wrong. Similar to the recent cancellation of the Washington Redskins family of trademarks, the USPTO does not allow registration of trademarks that are offensive, scandalous, disparaging, or deceptive, among other nonqualifying categories. In the case of Detroit Electric for automobiles, the trademark registration may be canceled if the primary significance of the mark is a generally known geographic location; the consuming public is likely to believe the place identified in the mark indicates origin of goods; and the misrepresentation is a material factor in the consumer’s decision. Marks that are deceptive are never registrable, and this fact pattern screams of deception to me. Detroit is gaining renewed national and international attention from the media and the global business community for its revitalization efforts, especially during bankruptcy. Companies like Quicken Loans, Shinola and GalaxE.Solutions, which have legitimately made their corporate homes in Detroit in recent years, created significant and meaningful jobs, and tout their Detroit connection proudly, are to be applauded and affirmed for their efforts. Conversely, companies such as Detroit Electric that want to ride Detroit’s popularity train without a corresponding investment need to be called out for their disingenuous displays of showmanship regarding commitments to Detroit and the region. I agree with Mr. Crain that it is time to take action and protect our Detroit brand. There will be no “Grand Theft Auto” in my IP yard. Kelly Burris Intellectual Property Attorney Brinks Gilson & Lione Detroit
KEITH CRAIN: It could become a very dangerous slope Just before the very successful Ford Fireworks last week, there was the Detroit River Days festival. There were a lot of folks who attended the weekend event, and it was great weather. But a few other bits of news got brushed away with the scattered fireworks ashes early Tuesday morning. During River Days, there were broadcast reports of an all-out teen brawl in the streets. Human blockades even caused one rap artist not to take the River Days stage, according to WWJ. The Detroit Police Department
told us there was a report of “shots fired” during River Days but no injuries. Investigators said the suspected gun shots heard were actually the explosions of fireworks. But the all-out brawl was a disturbing story, and it was under-reported until later last week. As a result of the weekend’s events, there were heightened concerns about possible gang-related activity being planned for the night of the fireworks.
Yet, I never read or heard much about this story, particular in our local newspapers, when it broke. Now, I don’t know whether the media knew more or not. If all the reporters were busy and details simply weren’t known, then we can chalk that up to sloppy reporting. But if more about the incident or incidents was known and everyone decided it was in the best interests of the community not to re-
port it right away, then that’s a big mistake and a very dangerous precedent. If it was determined by newspaper editors that reporting about the brawl would have a detrimental impact on the Ford Fireworks that was scheduled for a couple of days later, then the media have let their community down and they deserve to be strongly criticized for their actions. In the end, there was a gigantic show of police, both local and state, during the fireworks, and there were no reports, published or otherwise, of any incidences.
The security was all orchestrated perfectly. But it is the responsibility of the media to report, not decide. Next time, the local media should treat these incidents as they would for any news cycle, even if it puts a damper on fireworks night. Media outlets, whether broadcast or print, have an important responsibility to report the news in a timely fashion without second-guessing themselves over impact. Let’s hope I’m wrong about the non-reporting, or late reporting, of bad news in our city. We all deserve the unfiltered truth.
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MARY KRAMER: Buffett gets it, poor Matt Lauer does not Just when you think the pace of change is quickening, life throws us a speed bump. NBC “Today” show co-host Matt Lauer supplied the bump last week when he asked General Motors Co. CEO Mary Barra if she thought she could be a good parent and a good CEO. After the Twitterverse ate Lauer alive, he defended himself on Facebook, saying he would ask the same of a male CEO. (We must have missed that interview.) Lauer’s Q&A could have made great content for “the state of women” conversation I had on a recent panel pulled together by The Michigan Chronicle. A conclusion? Women can cheer about progress in power and leadership roles in metro Detroit. Consider Barra herself. Or entrepreneurs like Strategic Staffing
Solutions’ Cindy Pasky, who may have sparked Mike Duggan’s successful write-in campaign for Detroit mayor. Or Detroit Manufacturing Systems’ Andra Rush, who hired hundreds of Detroiters on the city’s west side. Or FirstMerit Bank’s Sandy Pierce, who in her spare time chairs the Henry Ford Health System board and leads the financial review team appointed to oversee Detroit finances. They stand on the shoulders of earlier — and fewer —
icons like Florine Mark and Irma Elder. But don’t pop the champagne corks — yet. On Crain’s own list of top-compensated CEOs and top execs, Barra is the only woman. Fewer than 12 percent of board seats on publicly traded company boards are held by women, according to Inforum’s 2013 index. Only nine of 100 top public companies made Inforum’s honor roll for having at least three female directors (a group that in-
TALK ON WEB
cluded GM, DTE Energy, Kelly Services and two of Michigan’s “Big 3” office furniture makers). Imagine if the nine grew to 30 companies and if Barra found she had some female company as CEOs of other leading Michigan companies. Maybe the 30% Club will help. Warren Buffett is among the 20 chief executives and chairmen who formed the club, modeled on a British group, in May. Peter Grauer, who chairs Bloomberg LP, is the U.S. chairman of the group that wants to increase leadership ranks of women at U.S. companies to 30 percent.
In a statement, Grauer noted: “Businesses do better when they avoid ‘group think,’ and better gender balance is a key factor in business success. … We have a lot more work to do in the U.S. to improve female representation, and senior business leaders have to drive that change.” Maybe TV anchors need to help, too. Mary Kramer is publisher of Crain's Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com/kramer. E-mail her at mkramer@crain.com.
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From www.crainsdetroit.com Re: Amy Haimerl blog: Diversity left out of startup revolution in Detroit Entrepreneurs by nature take the path less traveled and do not wait passively for resources to move their concept forward. They seek out and show up. Please stop the victimizing mentality. The brilliant, diverse people who arrived at our shores sought out and pursued their dreams; they did not sit back and wait to be saved. No Spin; Facts Please Young men dominate the tech biz. Diversity, not so much. It is what it is, but it doesn’t change that Amy pointed out the obvious and it ticked people off. Grandslam
Re: Beaumont, Botsford, Oakwood merger a done deal following approval Another unfortunate consequence of ACA. More to come and more layoffs, too. William J
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Consolidation in health care and lots of other changes started way before the ACA was passed. Health care is a growing industry. Sure, I suppose some people will lose their jobs, but people lose jobs all the time. The net job growth in health care is through the roof. 264477
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Re: After 125 years, Carhartt rolls up its sleeves for the future Until they move ALL manufacturing back to the U.S., I will be buying jeans elsewhere. I have been a Carhartt customer for more than 30 years, but if the clothes do not say “Made in the USA,” I will not buy them. Rick
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Mindy Barry
Crain’s wins 8 awards in national biz group contest
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Lansing
Crain’s Detroit Business earned eight editorial excellence awards last week from the Alliance of Area Business Publishers, including a bronze for best newspaper. “This publication shows a level of high-quality, sophisticated reporting that focuses on what is important to its community,” the judges wrote. “Stories are wellwritten, authoritative and sharply edited. … The publication shows the complexity of the economic situation for the city and region, as well as how it affects the broader economy of the nation.” The annual competition recognizes excellence in journalism, photography and design achieved by regional business publications. Other winners: Chad Halcom, Bill Shea, Dustin Walsh, Kirk Pinho and Chris Gautz, gold, for their breaking news coverage on the Web and in print of the city of Detroit’s Chapter 9 bankruptcy filing. Bob Allen and Gary Piatek, gold, for best headlines. Amy Haimerl, silver, for Detroit 2.0, in the best stand-alone publication category. “This publication highlights a new sense of optimism despite bankruptcy in Detroit,” the judges wrote. “The editors picked a narrative focus that showcased economic development and scrappy success stories.” Tom Henderson, bronze, for best body of work by a reporter, for his wide-ranging financial and technology coverage. Jay Greene, bronze, for best commentary for his blog post on his experiences in signing up for health care coverage on healthcare.gov. Bill Shea, bronze, for his online scoop of Cadillac’s hiring of Campbell Ewald as its agency of record. “The story’s depth was excellent,” the judges wrote. “There were multiple layers of reporting and knowledge giving the story credibility and giving testimony to the writer’s ability to take a news tip and turn it into something more.” Nathan Skid, gold, for “Table Talk,” which covered food and local restaurants, in the best blog category. Skid is now with Advertising Age, a sister publication to Crain’s. More than 600 entries from 43 publications in five divisions were judged by faculty members from the University of Missouri School of Journalism. The alliance is a nonprofit national organization representing 64 independent magazine and newspaper members in the United States, Canada and Australia. For more about the awards, visit www.bizpubs.org.
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Patents and trademarks
THE EUREKA INDEX
MOST INNOVATIVE COMPANIES RANKED BY PATENT QUALITY 1. CytoPherx Inc.
The lifeblood of innovation B
178.16
2. Cybernet Systems Corp.
149.83
3. Sentio LLC
144.90
4. Magna Electronics Inc.
140.15
5. Cosmetic Technologies LLC
138.80
6. Ovonyx Inc.
137.79
7. Henry Ford Health System
136.97
8. Sakti3 Inc.
135.08
9. Imra America Inc.
133.96
10. A123 Systems LLC
133.31
11. Immunolight LLC
131.18
12. Adaptive Materials Inc.
BY DUSTIN WALSH
CRAIN’S DETROIT BUSINESS
iotechnology, energy and manufacturing innovation rose to the top in an evaluation of the latest intellectual property born in the Motor City. In this Eureka Index report, Crain’s worked with the Chicago-based IP valuation services firm Ocean Tomo to rank locally produced patents based on quality.
129.27
13. Grindstone Capital LLC
125.18
14. Cobasys
125.13
15. Saturn Electronics
123.05
16. JAC Products Inc.
122.40
17. Gentherm Inc.
122.32
Leading this year’s list, which is based on a review of patents issued last year, is Ann Arbor-based CytoPherx Inc., with five patents and a viability score of 178.16. A score over 150 places the patents among the best 5 percent in the U.S., according to Ocean Tomo. CytoPherx manufactures a medical device that removes white blood cells from the kidneys of patients with acute kidney failure. Early trials have shown that CtyoPherx’s technology can reduce mortality rates to 31 percent from 50 percent. CytoPherx leads the pack, but it’s
18. Rubicon Genomics Inc. 117.70 19. Stirling Power Inc.
116.57
20. Durr Systems Inc.
116.30
21. Service Solutions U.S. 116.14 22. Hygieia Inc.
Patent rankings show biotechnology, energy, manufacturing leading the IP pack just one example of the mix of interesting medical treatment, automotive and energy companies developing technologies, products and processes in Southeast Michigan. Ann Arbor-based companies dominate the top of the list, claiming three of the top five — including Cybernet Systems Corp., which manufactures ammunition sorters, and Innovative Surgical Solutions LLC, which does business as Sentio LLC. Larry Jordan, managing partner at Jaffe Raitt Heuer & Weiss PC in Ann Arbor, said Michigan continues to innovate into new industries. “Innovation in Michigan is being driven by a lot of early stage technologies and ideas Jordan right now,” Jordan said. “Ann Arbor is a cauldron of interesting stuff because it’s so close to the auto industry and getting plenty of spinoff activ-
115.73
23. Oakland University
114.70
IN THIS REPORT
24. Bosch Automotive
114.38
Rankings on patent quality, see chart at left More about top 25 innovative companies,
25. L.VAD Technology Inc. 114.37 Biotechnology Avg. score: 134.1 Manufacturing Avg. score: 128.7 Automotive Avg. score: 123 Energy Avg. score: 127.8 Other: Avg. score: 133.9
Pages 12-14
Profiles of five industry standouts:
EUREKA INDEX: INNOVATIONS THAT MATTER Crain’s and Ocean Tomo, an IP valuation firm, analyzed patents issued by companies in Southeast Michigan in 2013 to identify the most innovative. For the purposes of the quality ranking above, Ocean Tomo assigned patents a value relative to a median score of 100, based on analysis of about 50 factors. Examples: the number of citations made in subsequent patents and the likelihood that a company will seek to defend the patent. Topranked companies in this year’s report all surpassed a quality score of 114. U.S. corporate patent grants totaled 3,872 last year and total patent awards topped 302,948, according to data from the U.S. Patent and Trademark Office. ISTOCK PHOTO
Cybernet Systems Corp.: Sorting a mountain of ammo can be a volatile situation, Page 12 Sentio LLC (Innovative Surgical Solutions LLC): Technology from the auto industry helped create a “stud finder for nerves,” Page 12 IMX Cosmetics LLC: A doctor gives life to a hunch that started by putting nail polish inside a paint mixer, Page 13 Immunolight LLC: A chemical used in ancient Egypt turns tiny particles and X-ray light into a modern cancer fighter, Page 13 JAC Products Inc.: A Pontiac auto supplier is trying to adorn roof racks with lighting … and cameras, Page 13
Crain’s List: Highest-volume patent producers in Michigan, Page 14
ity from the University of Michigan.” But the list also includes a solid showing by innovators based in Detroit and Oakland County. Leslie Smith, president and CEO of Detroit-based TechTown Detroit, said the auto industry shakeup in 2009 reignited the spirit of entrepreneurship in the region, a spirit that continues to build momentum. Manufacturers and suppliers Smith fared positively in the Eureka Index, but the patents tend to concentrate on electronics, energy systems and more efficient production methods. “We didn’t grow up in a culture where entrepreneurship was a way a life,” Smith said. “We have a century’s worth of resources right at our fingertips; it’s time we figure out how we can use our history to build today’s culture of innovation.”
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Focus: Patents and Trademarks 1. CytoPherx Inc. Ann Arbor Top executive: H. David Humes, M.D., co-founder and managing director Patents filed in 2013: 5 CytoPherx manufactures a medical device that removes white blood cells from the kidneys of patients with acute kidney failure. Early trials have shown CtyoPherx’s technology can reduce mortality rates in patients from 50 percent to 31 percent. The company’s patents from last year were related to methods for sequestering leukocytes (white blood cells) and platelet cells from the blood.
4. Magna Electronics Inc. Auburn Hills Top executive: Jake Hirsch, president Patents in 2013: 24 Patents granted to Magna Electronics in 2013 enable the development and production of components and sensor systems that are meant to make cars safer, or more comfortable, for drivers. Magna Electronics supplies electronic systems to automakers, such as cameras for parking assist systems, lane departure warning systems and actuators.
2 . C Y B E R N E T S Y S T E M S C O R P.
Tech solutions boost human performance BY DOUG HENZE SPECIAL TO CRAIN’S DETROIT BUSINESS
Seven years ago in Kuwait, the U.S. military had an expensive problem: A mountain of ammunition needed sorting, and there was no quick way to do it. Contractors picked through the stockpile by hand, separating the usable elements from the junk and categorizing each round by size. This process took workers three minutes to sort one round. Enter Heidi Jacobus, CEO and founder of Cybernet Systems Corp. in Ann Arbor. Answering a general’s call to design a computerized sorting system, Jacobus and her team came up with the Automated Tactical Ammunition Classification System. “We actually built it and delivered it to Kuwait in 90 days,” Jacobus said. “In the defense world, it sometimes takes three months to get a signature on a nondisclosure agreement.” Using multiple cameras to develop 3-D images of the rounds,
the high-tech problem-solving Jacobus has taken on since founding her company in 1989. Cybernet, a $6 million to $8 million in annual revenue operation CARTER SHERLINE with slightly Heidi Jacobus shows off the ATACS ammunition sorter. less than 50 employees in Cybernet made each round distin- Ann Arbor and Orlando, Fla., guishable to its automated sortfiled three patents in 2013. ing equipment. The rounds were Jacobus started the company sorted by a shaking table and sent while pursuing her doctorate in down a conveyor belt — technolocomputer science, when she realgy adapted from the auto industry ized her dissertation aligned with — for classification. a U.S. Department of Defense effort to During the military’s first three simplify cockpit displays for pilots. months of use of the machine — “That theme of using technolowhich can sort as many as 40,000 gy to improve human perforrounds in an eight-hour day — it mance has been an underlying saved $27 million, Jacobus said. theme of the company,” she said. Cybernet sold the ATACS for just Cybernet’s first product was a more than $1 million, she said. joystick for NASA that allowed astronaut trainees to get a grip on The ATACS is an example of
what a robotic arm would be “feeling” outside of a space station. It reduces the time an astronaut spends outside the space station while still performing tasks, such as tightening screws. Since then, the company has delivered dozens of products, Jacobus said. One is an adaptation of the ammo-sorting machine. It separates spent brass casings collected at firing ranges from live ammo to allow for recycling. “Brass is expensive, and the price is going up,” Jacobus said. “We modified our machine so it makes sure there are no live rounds (going to a recycler for melting).” Using the same type of technology being tested for self-driving cars, Cybernet also retrofitted forklifts that can drive themselves into a hut, select a pallet marked with a bar code, and back themselves out. “A lot of what Cybernetics does is respond to customers who have problem statements,” Jacobus said. “This is something we’ve gotten very good at: solving problems.”
6. Ovonyx Inc. Sterling Heights Top executive: Tyler Lowrey, CEO Patents in 2013: 18 Ovonyx, founded as a division of Energy Conversion Devices Inc. by the late Stanford Ovshinsky, created phase-change computer memory — sometimes called Ovonic Unified Memory. Micron Technology Inc. paid $1.3 billion in 2012 to buy Ovonyx, which was a joint venture between ECD and Intel Corp. Phase-change memory is a type of RAM that is written on with electric pulses. In 2013, Ovonyx patented technology related to the technology, such as programmable resistance memory.
7. Henry Ford Health System Detroit Top executive: Nancy Schlichting, CEO Patents in 2013: 3 Henry Ford Health System’s 2013 patents are focused on the technology behind implantable materials for repairing the heart by resizing and reshaping, a method for administering nitric oxide for neurologic therapy, and patient safety methods during dialysis.
8. Sakti3 Inc. Ann Arbor Top executive: Ann Marie Sastry, CEO Patents in 2013: 4 Sakti3 Inc., a University of Michigan spinoff, develops solid-state batteries to extend the range of electric vehicles and allow other electronic devices to run longer between charges. Beyond cars, those devices can include smartphones and laptops. Its patents in 2013 were focused on methods for manufacturing batteries, a solid-state propulsion system and automotive hybrid technology.
3. SENTIO LLC
‘Stud finder for nerves’ shows surgeons the way BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
Sentio LLC in Southfield has used technology found in a smartphone to create a nerve-mapping tool that allows surgeons to avoid contact with nerves during minimally invasive procedures. “It’s like a stud finder for nerves,” said Chris Wybo, a cofounder and president of Sentio. “You don’t want to cause pain and disruption to normal, healthy tissue when performing surgery. By using this device, there is less scarring, less blood loss, less infection and a quicker recovery.” Wybo, who has a background in mechanical and biomedical engineering, helped design the sensor with the company’s CEO, Stephen Bartol, an orthopedic spine surgeon at Henry Ford Hospital in Detroit. Sentio’s system allows surgeons to detect nerves and avoid them during spinal surgeries. Unlike other electromyography, or EMG, systems, which detect nerves through electrical signals, Sentio’s mechanomyograpghy, or MMG, system detects the triggering of
9. Imra America Inc. Ann Arbor Top executive: Takashi Omitsu, president Patents in 2013: 23 Imra America, the laser research and development arm of Japanese automotive supplier Aisin Seiki Co. Ltd., is leading the development of femtosecond fiber lasers. The lasers allow manufacturers to machine products at
Sentio CEO Stephen Bartol (left) and President Chris Wybo aim to prevent pain for surgery patients with their nervemapping tool. LARRY PEPLIN
nerves through muscle movements using accelerometers — like those used in your smartphone. The accelerometers are placed on the skin — unlike EMGs, which require needles — creating a safer environment for the patient and operating room staff, Wybo said. The technology for the Sentio MMG first came to light in the 1990s but was too bulky and expensive for practical use in the medical world. The technology was refined in 2007 after being tried out at Wayne State University.
high volume. Its patents in 2013 focused on production of low-cost lasers, compact lasers and high-powered lasers.
10. A123 Systems LLC Livonia Top executive: Jason Forcier, CEO Patents in 2013: 18 The Chinese-owned battery
After a small incision is made during surgery, the smart sensor is placed in the skin and establishes a safe path for surgeons so they can avoid “the minefield of nerves” that surrounds the spine. The Sentio MMG provides literal stop-and-go signals on a computer while the surgery is being performed. “Hospitals are more and more interested in making procedures less invasive,” Wybo said. “Our system eliminates the evasiveness of detecting nerves. The sensors
maker continues to develop and patent technologies related to its development of lithium iron phosphate-based batteries for use in the automotive and electric grid industries. A123 was acquired out of bankruptcy in 2013 by Chinese conglomerate Wanxiang Group Corp. A123’s patents awarded last year involve new battery designs and systems.
we’ve developed are much safer.” Since 2007, Sentio has raised $8.5 million to commercialize the product for hospitals in the U.S., Canada, Mexico, Australia, Europe and soon the Middle East. Locally, Henry Ford Health System is the largest user of the system. Currently, 35 percent of Sentio’s revenue comes from international health systems, Wybo said. The patents granted to Sentio under Innovative Surgical Solutions LLC in 2013 were for more advanced MMG sensors, the software system and methodology for the probe, and sensor technology. Sentio plans to expand the MMG technology for use in ear, nose and throat surgeries and pain management surgeries, Wybo said. It also has patents pending for MMG software that will communicate with surgical robots. The company continues laboratory and animal testing at Wayne State. Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh
12. Adaptive Materials Inc. Pittsfield Township Top executive: Aaron Crumm, president Patents in 2013: 3 Adaptive Materials, dba Ultra Electronics AMI, manufactures portable fuel cells for both military and commercial applications. The cells produce electricity from readily available energy, such as propane.
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Focus: Patents and Trademarks 5. IMX COSMETICS LLC
16. JAC PRODUCTS INC.
Cosmetics – just what doctor ordered BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
Julie Bartholomew is a doctor. Her specialty isn’t oncology or cardiology or even osteopathy. With an inclination for invention, the Wayne State University School of Medicine graduate traded the infirmary for the beauty counter more than a decade ago to make cosmetics with a personal touch. What began as a hunch, by placing nail polish into a household paint mixer, is turning into a valuable startup. Bartholomew founded IMX Cosmetics LLC, patents filed under Cosmetic Technologies LLC, after working with engineers to create her own on-site, automated cosmetics customization process for department stores. The IMX (pronounced “I mix”) machine allows users to create their own “mix” of lip gloss — including color, finish and flavor — with more than 40,000 possibilities. “Although my direction began in medicine, I always knew that I was an inventor,” Bartholomew said. “I love cosmetics, but it is in the designing of an experience, combined with unique technology, that intrigues me most.” IMX’s proof-of-concept machines were tested in 2002 through 2005 at Nordstrom in Las Vegas; Fred Segal in Santa Monica, Calif.; and Barneys New York. The cosmetics were featured in fashion magazines Glamour, Harper’s Bazaar, InStyle and others.
GLENN TRIEST
Julie Bartholomew with her cosmetics machine.
The company is fully funded by Bartholomew and her family. In 2004, Bartholomew stepped back from the startup to raise her children before reigniting the concept last year. IMX’s new iterations of the machine feature an open design so shoppers can see the process of mixing their own cosmetics concoction. The redesign also reduced the mix time to less than four minutes. Bartholomew said the IMX concept is targeted at the millennial generation — with 45 million females and $200 billion of spending power, who demand customization, immediate gratification, creativity and entertainment. Millennials “feel the need to be connected in all channels, to go deeper and to feel like part of the process,” Bartholomew said. “The IMX technology
and brand successfully provide innovation, newness, personalization, a one-toone connection and immediate gratification — all key drivers with this generation.” Meredith Stedman, director of education for Be Pro Cosmetics at New Hudsonbased cosmetics manufacturer TNG Worldwide Inc., said the $55 billion U.S. cosmetics industry is continually evolving. Customers are always looking for new trends, like new color options, which are steadily available because cosmetics are relatively low-cost to produce. Last year, IMX was granted two patents to bring smartphone integration and personalization to the machines. The company holds 61 patents in 18 countries. Customers will be able to order their mix of lip gloss from their smartphones while shopping and pick it up at the IMX machine at a later time. IMX also created a radio frequency identification key chain, called an “MX stick,” which will identify a user to the machine as well as save personal preferences of cosmetics. Bartholomew, the only employee of IMX, is negotiating with a global department store to place IMX machines in as many as 20 stores in 2015. She expects the machines to be in nearly 300 stores by 2016. Novi-based Michigan Custom Machines Inc. made IMX’s prototype and will make additional machines, she said.
11. IMMUNOLIGHT LLC
Ancient Egypt, modern X-ray battle cancer BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
The controversial co-founder of luxury handbag maker Dooney & Bourke, Frederic Bourke, formed Detroit-based Immunolight LLC in 2007 with a mission of applying ancient remedies to modern cancer-fighting. Immunolight emphasizes treatment at the nano level by injecting tumors with nanoparticles designed to battle the disease. These particles are capable of absorbing light and converting wavelengths into a cancer-killing technology. The method, ultimately, is designed to greatly increase the effectiveness of injected drugs. The particles use a photosensitizing chemical called psoralen, which is found in plants and was used by ancient Egyptians to cure depigmentation of the skin. Psoralen forms a chemical reaction when exposed to ultraviolet light. UV light, like that found in X-rays, can penetrate material, including animal and human tissue. Immunolight uses X-rays to activate the chemicals, and the resulting treatment has
The firm was acquired in 2011 by UK-based Ultra Electronics Holdings plc for $23 million. Adaptive’s 2013 patents include technology that monitors water in a fuel cell, technology that manages fuel cell power, plus advancements in solid-oxide fuel cells.
13. Grindstone Capital LLC Bloomfield Hills
reduced tumor sizes in laboratory mice. The nanoparticles allow drugs to be administered in precise locations without damaging other tissue. “If you got cancer 40 years ago, the options were surgery, radiation and chemotheraWalder py; not much has changed today,” said Harold Walder, president of Immunolight. “We can activate the drugs inside the tumor without poisoning the whole body.” The company, which is based in Detroit but uses laboratories at Duke University in North Carolina, has tested its treatment on several types of cancer — including skin, breast, prostate and colon cancer — with relative success, Walder said. Immunolight is currently scaling up to perform clinical studies on canines that have been diagnosed with cancer. Walder said he expects the company to conduct human clinical trials by early
Top executive: Dan Carroll, founder Patents in 2013: 6 Grindstone Capital is an investment firm with holdings in automotive machined components supplier Royal Oak Industries Inc., which has several subsidiaries across the state. Grindstone acquired several patents last year, mostly centered on radio-controlled clock receivers.
2015, thanks to fast-track options for oncological technologies from the U.S. Food and Drug Administration. Bourke, who is the sole funder and has invested more than $10 million into the company, was convicted and sent to prison last year for his role in a deal to seize control of the state oil company of Azerbaijan. Bourke reportedly invested $8 million in the deal, which broke U.S. law under the Foreign Corrupt Practices Act. He served less than a year in prison. Bourke has funded biomedical startups for years and previously sold a technology similar to Immunolight’s to Johnson & Johnson that specifically battles lymphoma. Walder, who left Johnson & Johnson to run Immunolight, said the technology expands beyond cancer and could be used to fight Crohn’s disease, lupus and other diseases. But its capabilities, aren’t limited to medicine; nanoparticles could be used to cure adhesives in automotive and other industries, one focus of four patents last year to expand the company’s offerings.
14. Cobasys LLC (Bosch Battery Systems LLC), Orion Township Top executive: Reinhardt Peper, CEO Patents in 2013: 3 Cobasys, now named Bosch Battery Systems, was founded as a joint venture between Chevron Corp. and Energy Conversion Devices before being sold to another JV between Samsung SDI Co. Ltd. and
A future with lights, cameras on roof racks BY DOUG HENZE SPECIAL TO CRAIN’S DETROIT BUSINESS
Automotive roof rack manufacturer JAC Products Inc. largely has focused in recent years on reducing rack weight — by using lighter materials — to drive down fuel costs. But the Pontiac-based supplier is now setting its sights on electronics aimed at increasing vehicle owner safety. The next generation of racks — used for everything from carrying luggage to stowing kayaks — will feature mounted cameras and lighting. “As JAC Products looks to the future of innovation, we are integrating new electronic technologies into our luggage rack systems to further enhance the ultimate owners’ experience,” said Noel Ranka, global vice president of sales and marketing. While Ranka closely guards the list of possible applications, helping drivers see in “blind” spots will be one way to use the technology. Ranka said the company Ranka shoots for at least 10 new patent applications each year. The company was granted four patents in 2013. “We make sure we have a process that drives innovation inside the company,” Ranka said. When the company was formed in 1967, roof racks were heavy steel frameworks. Fuel economy standards and rising fuel prices spurred manufacturers such as JAC to use different materials. JAC has reduced rack weight by as much as 3 pounds, replacing steel with lighter-weight aluminum, Ranka said. Plastic supports also are part of the mix. Because the racks are a point of brand differentiation for automakers, they’re customized for customers. JAC, which counts Toyota Motor Corp. as its largest customer, also sells to Ford Motor Co., Honda Motor Co. Ltd., Kia Motors Corp., Fiat Chrysler Automobiles NV and others. “We recognize the roof rack as a lifestyle and a styling feature,” said Donald Cline, JAC’s executive director of sales for North America. A JAC innovation called the Swing-in-Place offers a convertible option. When crossbars aren’t in use, they can be stowed within the side rails to reduce wind noise. Vehicles using that technology include the Toyota Tacoma and the Chrysler Town and Country. In addition to roof racks, JAC provides a number of other products, such as cargo management systems and step rails. Pickup owners can install bed dividers into the vehicle box to keep loaded cargo where they want it. JAC also makes waterCline tight, lockable storage bins. JAC, which has about $330 million in sales, employs 1,350 workers at four locations in North America and two in Europe. JAC also has a sales contract with Bepo in Brazil and has formed a soon-to-be-announced contract with a company in China.
Robert Bosch GmbH called SB LiMotive Co. Ltd. in 2009. Bosch and Samsung disbanded the joint venture and Bosch retained the U.S. and German operations of Cobasys. Bosch Battery Systems manufactures nickel-metal hydride batteries for automotive use. In 2013, it received patents on data collection and monitoring technology for its batteries.
15. Saturn Electronics & Engineering Inc. Rochester Hills Top executive: Mike McNamara, CEO Patents in 2013: 4 Saturn Electronics & Engineering was acquired in 2012 by Singapore-based Flextronics International See Next Page
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Focus: Patents and Trademarks From Previous Page
21. Service Solutions U.S. LLC
Ltd. The solenoid and wiring harness supplier continues to manufacture for the automotive industry, but it now is operated as part of Flextronics’ U.S. division headquartered in San Jose, Calif. Patents granted under Saturn’s name in 2013 included a fluidcontrol valves and a pressure control assembly.
(Bosch Automotive Service Solutions LLC), Canton Township Top executive: Tanvir Arfi, global president Patents in 2013: 23 Robert Bosch GmbH acquired the Warren-based service solutions business of SPX Corp. in 2012. Renamed Bosch Automotive Service Solutions, the unit supplies automotive repair shop technology, diagnostic software and training services. The patents granted in 2013 to the Service Solutions U.S. name included a method for identifying part numbers, a compression test adapter and a method of blending refrigerants.
17. Gentherm Inc. Northville Top executive: Dan Coker, president and CEO Patents in 2013: 9 Gentherm, formerly Amerigon Inc., makes climate control technology for automotive interiors. That includes seats and steering wheels, and the home goods market through heated and cooled bedding and furniture. In 2013, Gentherm was awarded patents for convective heater technology, a fluid distribution system and other climate-control devices.
18. Rubicon Genomics Inc. Ann Arbor Top executive: James Koziarz, president and CEO Patents in 2013: 3 Rubicon develops and manufactures biological tools for genetic testing used in drug development and diagnosis. The firm’s patents last year include streamlining of its DNA diagnostic technology through more user-friendly methods for researchers and lab technicians.
19. Stirling Power Inc. Ann Arbor Top executive: David Miklosi, president and CEO Patents in 2013: 3 Stirling Power manufactures Stirling engines, a heat engine that operates on a closed cycle where working fluid is cyclically compressed and expanded at different temperatures. Stirling Power’s externally-heated engine uses pressurized hydrogen heated by a variety of methods, including gases from wastewater treatment plants, woodchips, solar energy, synthetic gas and other waste products or reused products. Patents granted in 2013 include a pressure equalization system, control valve and rod seal for its Stirling engine designs.
20. Durr Systems Inc. Auburn Hills Top executive: Bruno Welsch, president Patents in 2013: 3 Durr Systems Inc., a subsidiary of Stuttgart, Germany-based DĂźrr AG, manufactures and supplies automotive and industrial paint and sealing robotics. The issued patents focus on the design and development of robotic paint and sealer application robots and systems. These are mainly used by the automotive and aerospace industries. The patents are applied to paint and sealer robots, rotary atomizers used for paint application, robotic system designs and material dosing techniques.
22. Hygieia Inc. Ann Arbor Top executive: Eran Bashan, cofounder, director and CEO Patents in 2013: 3 Hygieia develops a medical device called the Diabetes Insulin Guidance System. The device uses software to analyze blood sugar levels and body chemistry and recommends to patients how much insulin they should take. Last year, Hygieia secured patents for hardware and software to optimize the device’s performance.
23. Oakland University Rochester Hills Top executive: Betty Youngblood, interim president Patents in 2013: 3 Oakland University was granted patents in 2013 focused on various research areas, including technology that evaluates sheet metal strength before manufacturing, microfabrication — or fabrication of miniature electrical devices — and a thin-layer sensor to detect environmental gases.
CRAIN'S LIST: LARGEST MICHIGAN PATENT-HOLDING COMPANIES Ranked by number of patents 2011-13 Rank
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 10. 12. 13. 14. 15. 16.
24. Bosch Automotive Service Solutions LLC
17.
Canton Township Top executive: Tanvir Arfi, global president Patents filed in 2013: 9 Robert Bosch GmbH acquired the Warren-based service solutions business of SPX Corp. in 2012. The unit, renamed Bosch Automotive Service Solutions, supplies repairshop technology, diagnostic software and training services. The patents granted in 2013 to Bosch Automotive Service Solutions include a method for an angled wire stripper, a data meter and vacuum pump.
18.
25. L.VAD Technology Inc. Detroit Top executive: Jean Kantrowitz, acting president Patents in 2013: 3 L.VAD manufactures the left ventricular assist device for people with advanced heart failure. The device uses a mechanical pump to assist a weakened heart in pumping blood through the body. Last year, L.VAD was granted patents for advancements of its medical device, including an aortic pump, a process to facilitate cell growth and methods for aortic pulsation.
19. 20. 21. 21. 23. 24. 25.
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CRAIN’S DETROIT BUSINESS
PEOPLE HEALTH CARE
Woodbury
IN THE SPOTLIGHT
Held
Vondie Woodbury to vice president, community benefit, CHE Trinity Health, Livonia, from director of community benefit.
Meryl Held, D.O., to medical director, Medical Weight Loss Clinic, Southfield, from internal medicine physician, Rochester Medical Group, Rochester Hills.
HOSPITALITY Gabe Hernandez to franchise owner, The Big Salad LLC, Grosse Pointe Woods, from store manager.
LAW
Detroit Medical Center, Detroit, has named Andrei Soran its COO. He succeeds Rodney Huebbers, who has been named CEO of University Health System, Shreveport, La. Soran will remain president of DMC Huron Soran Valley-Sinai Hospital and DMC Surgery Hospital while a search is initiated to replace him. He had been vice president of growth for Vanguard Health Systems’ New England region and CEO for MetroWest Medical Center, Framingham, Mass., a teaching affiliate of Harvard and Tufts universities. Soran, 54, earned a bachelor’s degree in physical therapy from Tel Aviv University, Israel, and a master’s in management at Boston University and Ben-Gurion University of the Negev, Israel.
Julie Benton to vice president of human resources, Continental Structural Plastics Inc., Auburn Hills, from chief people consultant, The HR Department, Atlanta, Ga.
NONPROFITS
Suder
rights and advocacy, and customer services, Oakland County Community Mental Health Authority, Auburn Hills, from manager, community education and consumer empowerment. Also, Edna White to director of human resources and communications, from manager of human resources.
SERVICES Bonnie Miles to membership manager, Birming-
Frank Henke to
Hernandez
executive partner, Warner Norcross & Judd LLP, Clinton Township. He continues as a partner.
Reesa Handelsman to partner, Wachler & Associates PC, Royal Oak, from senior associate. Marc Seyburn to member, Barris,
Handelsman
Sott, Denn & Driker PLLC, Detroit,
from president, Delta Faucet Co., Indianapolis. Rob Schmit to president, Jervis B. Webb Co., Farmington Hills, from executive vice president, Daifuku Webb Holding Co., Farmington Hills. Also, Ken Hamel to senior vice Daipresident,
Schmit
president, Jervis B. Webb Co. Jay Rohrback to materials, warehouse manager,
from founder/ managing member, Seyburn Knox Law Group PLLC, Birmingham.
Lingenfelter Performance Engineering,
MANUFACTURING Richard O’Reagan
Seyburn
IS YOUR TEMPORARY LABOR PROVIDER CHARGING YOU A FAIR RATE?
to group president, global plumbing, Masco Taylor, Corp.,
www.parrymurphy.com/templabor.html
Does Your Ad
STAND OUT?
Find out! Reserve your space now in the Signet AdStudy® issue of Crain’s Detroit Business.
For more information visit crainsdetroit.com/adstudy
AD CLOSE: July 31 ISSUE DATE: August 11
Hamel
Brighton, from vice president, Powertrain Control Solutions LLC, Belleville.
ham Bloomfield Chamber of Commerce, Birming-
Miles
ham, from program manager of events, Volkswagen Group of America, Auburn Hills.
PEOPLE GUIDELINES Announcements are limited to management positions. Email them to cdbdepartments@crain.com or mail notices to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 482072997. Releases must contain the person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.
BUSINESS DIARY ACQUISITIONS & MERGERS Agree Realty Corp., Farmington Hills, announced that it closed on two acquisitions with a total purchase price of approximately $12.5 million: an Academy Sports + Outdoors in McKinney, Texas, and a Michaels store in Wausau, Wis. Website: agreerealty.com.
CONTRACTS
Get a free assessment at:
fuku Webb Holding Co., from
White
Vicki Suder to director of recipient
Altair Engineering Inc., Troy, a provider of computer-aided engineering and computing software and services, announced that Centro para a Excelencia e Inovacao na Industria Automovel, Maia, Portugal, is deploying Altair’s HyperWorks as its standard computer-aided engineering platform for most of its projects. CEIIA is a private nonprofit association for research and integrated product development in several domains, including intelligent mobility, aeronautics and energy. Website: altair.com. LLamasoft Inc., Ann Arbor, a provider of supply-chain design software services, entered into an agreement with the supply-chain risk management practice of Deloitte & Touche LLP, a subsidiary of Deloitte LLP, New York City, that combines Deloitte’s thirdparty risk management solutions with
LLamasoft’s supply chain analytics, design and modeling software platform.Website: llamasoft.com.
New Jersey Health Care Quality Institute, Pennington, N.J., selected ArborMetrix Inc., Ann Arbor, to use its EpisodeMetrix analytics platform to compare health data from New Jersey, Philadelphia and New York City. The initial procedures under consideration for measurement include joint replacement, spine surgery, bariatric surgery, coronary artery bypass surgery, and coronary angioplasty and stents. The institute plans to include additional conditions and procedures in the future. Websites: njhcqi.org, arbormetrix.com.
Jervis B. Webb Co., Farmington Hills, announced a maintenance and operations contract extension with Toronto Pearson International Airport for the conveyor manufacturer and services firm’s subsidiary Jervis B. Webb Co. of Canada Ltd. Website: daifukuwebb.com
EXPANSIONS Doeren Mayhew & Co. PC, Troy, an accounting and advisory firm, spun off its investment banking practice into a new investment bank, Doeren May-
hew Capital Advisors, to accommodate its mergers and acquisitions client base. Websites: doeren.com, doeren capital.com.
NEW SERVICES BrassCraft Manufacturing Co., Novi, a Masco Corp. company and manufacturer of plumbing products, is releasing Spanish-language versions of its most popular “how-to” and product videos, covering common plumbing installations and highlighting features of BrassCraft products. The 14 videos are accessible at es.brasscraft.com/video or youtube.com/brasscraft.
DIARY GUIDELINES Email news releases for Business Diary to cdbdepartments@ crain.com or mail to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 482072997. Use any Business Diary item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.
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Biz split on changes to high school standards $185M in bonds The business commuthat could be better nity is divided over spent providing trainchanges made to the ing. stateâ&#x20AC;&#x2122;s high school curChris Fisher, presiriculum, which Gov. dent of the builders and Rick Snyder signed into contractors associalaw last week. tion, said a strong The Michigan Merit Michigan needs both Curriculum had been students who plan to go to college and those hailed by education adwho would rather work vocates as one of the in the skilled trades. toughest in the country â&#x20AC;&#x153;A global economy since being put into place Chris Gautz requires a diverse skill during the Granholm administration. It required students set and a diverse workforce,â&#x20AC;? to have passed Algebra II and Fisher said. But Brad Williams, vice presihave two credits of a foreign landent of government relations for guage in order to graduate. But altering the standards had the Detroit Regional Chamber, said been a priority in the Legislature the chamber was concerned about for several years for some Repub- the idea of watering down the licans, with the backing of skilled stateâ&#x20AC;&#x2122;s standards at a time when trades groups, such as the Michi- students are entering a globally gan Manufacturers Association and competitive work environment. â&#x20AC;&#x153;We believe in high standards,â&#x20AC;? the Associated Builders and Contractors of Michigan, who felt the Williams said. The chamber opposed House standards were too rigid. The fear was that the tough Bills 4465 and 4466 when they standards were leading to stu- were introduced because they dents flunking out of high school eliminated the foreign language because they couldnâ&#x20AC;&#x2122;t pass the for- requirement and changed the Aleign language or Algebra II re- gebra II requirement. In the end, quirements. Another concern was the chamber moved to being neuthat some students were spending tral on the bills, and did not urge time taking classes unrelated to Snyder to either sign or veto the their expected career paths, time legislation.
Capitol B r i e fi ng s
Fisher
Williams
Thatâ&#x20AC;&#x2122;s because a compromise was reached that allows students to fulfill the two-credit foreign language requirement at any point in their K-12 experience. And for the next six years, high school students could fulfill one of the two foreign language credits by taking a career technical class, such as welding, where foreign language instruction would not be part of the curriculum. One area where changes were woven into the curriculum is Algebra II. Rather than be forced to take that class to graduate, students are now allowed by law to take a career technical class to satisfy the math requirement so long as the concepts of Algebra II are used in the classroom. Fisher said this will give students a way to see how these math skills can be incorporated into a real-world setting, as they learn
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About 55,000 streetlights will be purchased and installed throughout Detroit after the Michigan Finance Authority sold $185 million in bonds last week on behalf of the Public Lighting Authority. The 30-year bonds have a fixed interest rate of 4.53 percent and include a refund of the $60 million in interim financing sold last year. According to the laws setting up the authority, the bonds will be paid back by revenue from a city utility user tax, but the annual aggregate debt limit on any bonds is $12.5 million. According to the lighting authority, the issuance received an investment-grade rating of A- from Standard and Poorâ&#x20AC;&#x2122;s and BBB+ from Fitch. Citibank was the senior manager on the transaction, with BMO and Loop Capital serving as co-managers. Miller, Canfield, Paddock & Stone PLC was bond counsel for the Public Lighting Authority, while Dickinson Wright PLLC was bond counsel for the Finance Authority. Robert W. Baird & Co. was the municipal adviser. Thirty-five institutions and several dozen individual retail accounts placed orders for the bonds, according to a statement. â&#x20AC;&#x201D; Chris Gautz
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The City of Auburn Hills, a leading Oakland County community that is home to several companies of all sizes, including many North American and World headquarters, and a citizen population of more than 21,000, is seeking an Economic Development Coordinator to join its Community Development team. Focusing on the Cityâ&#x20AC;&#x2122;s longstanding reputation of aggressively fostering business recruitment, expansion and retention, the successful candidate will continue on the momentum of our current Coordinator who is retiring. The position is highly visible, a key player promoting our strong economic expansion goals, and a trusted advisor to the Community Development Department, City Managerâ&#x20AC;&#x2122;s office, and to the local legislative body. Details of the position can be found in the employment section of the cityâ&#x20AC;&#x2122;s website at www.auburnhills.org. The salary range, depending upon overall education and experience, is $51,703 - $67,341 and includes a competitive benefits package. Send your cover letter, resume and salary history to: Mr. Thomas A. Tanghe, Acting City Manager, 1827 North Squirrel Road, Auburn Hills, MI 48326. Position will remain open until filled. EOE
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CRAIN’S DETROIT BUSINESS
Niblock: 1st-year IT goals: ‘Fundamental blocking and tackling’ ■ From Page 3
They found seven key areas Detroit needs to focus on, prioritizing practical needs first, nifty tech tools second. They are: 䡲 Establish a CIO. 䡲 Evaluate citywide IT infrastructure. 䡲 Promote civic innovation. 䡲 Make freely available open government data more accessible and usable. 䡲 Develop a 311 system, which is similar to 911 but for nonemergency calls about city services. 䡲 Improve enterprise geographic information systems. 䡲 Enable online permitting. As the CIO of Louisville, Niblock had no idea she would be the check mark for item No. 1. But Detroit Mayor Mike Duggan started courting Niblock shortly after he won his office, trying to convince the 53-year-old to leave the city she’d called home since she was 10. At first, Niblock was having none of it. But the mayor, she said, can be persistent. He drove down to Louisville to make his case. And by the end of dinner, Niblock was sold. She agreed to come and fix an infrastructure so fundamentally broken that police precincts can’t share information, smartphones can’t synch with city systems, 70 percent of financial reports are entered by hand, $1 million checks are found hiding in desk drawers, and the tax system was called “catastrophic” by the IRS in an audit. Welcome to Detroit.
Rebooting the city For the first eight to 12 months of her tenure, Niblock anticipates she will focus on the decidedly unsexy part of fixing the city’s IT infrastructure: new computers, reliable Internet, backup and storage, improving data security. After that, she will turn to the HR and financial management systems, which have to integrate, and getting that data into the cloud. “The goal of the first year is focusing in on fundamental blocking and tackling,” she said. “We don’t have the PCs and software to do our jobs or a robust and reliable network to do our job. We need those pieces in place first.” Right now, she is focused on replacing all of the city’s computers, 80 percent of which are at least four years old and almost all of which run Windows XP or older. That makes the city’s “fleet,” as Niblock calls it, obsolete by industry standards. Microsoft doesn’t even support XP any longer. “It’s been amazing to watch people work around that,” Niblock said. “They don’t complain; they just kind of make it happen.” This work may seem slow and incremental to residents, but a measured approach is what helped Niblock overcome challenges when she became the CIO of Louisville in 2003. The city and neighboring Jefferson County had just merged, and Niblock was tasked with integrating the financial, HR and other systems. “Not everybody had the technology, and not everybody was comfortable with it, so there was a lot that we needed to do,” she said. In Detroit, the situation is even more basic. Niblock is starting from
‘Dreams’ system was nightmare for city Yes, Detroit’s new CIO, Beth Niblock, has heard about the “Detroit Resource Management System,” the $47.9 million boondoggle known as DRMS and pronounced “Dreams.” In 1997, the city planned to integrate 43 departments and 22 computer systems into one. But by 2003, the price tag had escalated to more than $120 million — and the system still didn’t work. Carl Bentley, who oversaw the program implementation as the city’s deputy director of information technology, declined to speak about the city’s IT, but he told Baseline magazine in 2002 that DRMS failed for being too sweeping in its approach. “If I could redo the project plan, I would go back and figure out how to do it in chunks, in smaller pieces versus the mass distribution we eventually did,” said Bentley, now the executive vice president of Detroit-based Strategic Staffing Solutions. The city eventually got the financial pieces of the system to work, but it never managed to get the HR or payroll systems online. Worse, the MacGyvered version of the system is what the city has been limping along on for the past decade. In 2002, then-city CFO Sean Werdlow told Crain’s that the system was using five Oracle software modules to link purchasing, accounts receivable and payable, general ledger, and projects and grants accounting. But in Emergency Manager Kevyn Orr’s plan of adjustment before the bankruptcy court, he specifically calls out Detroit’s inability to manage grants as a significant IT flaw. There were also unintended consequences of some improvements. For example, according to Baseline, scratch rather than try to integrate systems. Because there has been such wholesale disinvestment and cutbacks in the nearly two decades since the city’s last major IT overhaul (See related story, this page), very little infrastructure remains. Even Emergency Manager Kevyn Orr called out the problems in his plan for exiting bankruptcy, saying in court documents that the city’s IT was “obsolete” and “in urgent need of upgrade or replacement.” For example, it costs the city $62 to cut a payroll check because the system is so manual it takes 149 full-time employees — including 51 uniformed officers — to run it. At a cost of $19.2 million per year. “I am most grateful that I didn’t have to make a lot of the hard cuts during all of that,” Niblock said. “They had to make really hard choices. The fact that the team here has kept some systems up and running is fairly miraculous.”
The New Orleans experience When Allen Square started as the CIO of New Orleans in 2010, he found a very similar situation to what Niblock faces. As a member of the White House task force, he recognized immediately some the problems he’d already tackled. “I see Detroit in a very similar spot as New Orleans,” he said. “I walked into a mess. The city of New Orleans had a bad reputation of failed tech projects, billions of dollars thrown away. What I inherited had corruption all around it, though I don’t think Detroit IT has this looming glut of corruption.” Nobody has gone to jail over IT in Detroit, despite cost overruns and other challenges, whereas the two New Orleans CIOs preceding Square both pleaded guilty to federal bribery and corruption charges. To rebuild from that, Square
the city was able to start paying vendors more frequently than twice a week, but that meant some vendors were receiving checks for tiny amounts. “The city is writing too many checks for trivial amounts to some vendors; Ameritech alone gets 100 per month,” wrote Edward Cone. Fingers have been pointed at everyone from city employees to the vendor in charge of implementation, IBM Global Services, for Detroit’s most famous IT snafu. Yet, for Niblock, the issue is obsolete. Technology, the city — and even standards — have changed since then. For example, in her first week of work she had to tell the mayor that there had been a significant data breach. Fire and EMS had legacy databases that weren’t encrypted but stored people’s personal information. At the time they were created, though, encryption wasn’t a standard. “Those databases had been there a long time, so the standards have changed. I don’t think people think about that,” Niblock said. So instead of looking back, Niblock is focused on the future. She’s committed to lean engineering and ensuring that there aren’t unintended consequences to the infrastructure the city is building now. “If this is Eden, you have these cross-functional teams with subject matter experts and you have technology people, and they work in a room together,” she explained. In (Louisville), we actually had a room you could go into and work with screens and whiteboards so that you are in constant communication.” So, the new Detroit dreams are a lot different than the old Detroit DRMS. — Amy Haimerl
first reached out to other city CIOs for advice. The constant refrain was: Fix your foundation before you build. “Everything I did for about the first 18 months, except perhaps a new website, was internal focused,” he said. “Things were breaking, and I had to get them fixed.” That meant doing the hard thinking. He spent months work-
BUGS IN THE SYSTEM 䡲 The city can’t use IT networks to
share information between police precincts. 䡲 The city is unable to manage jails and electronic ticketing through an IT system. 䡲 Police, fire and EMS vehicles lack adequate equipment. 䡲 The city cannot efficiently make payroll: It uses multiple systems, with each check cut costing $62. 䡲 The city cannot collect delinquent property taxes online; Wayne County has to do it because city does not have the systems. 䡲 City employees cannot open Word documents easily; not every department has the same software or version. 䡲 The city lacks adequate backup systems. 䡲 IT isn’t used to running accounting: 70 percent of accounting journal entries are booked manually. 䡲 The city lacks an effective system for permits and licensing: Its building permits system is more than 10 years old, and the fire department’s system for inspections is more than 20 years old. 䡲 Malfunctioning parking meters are rampant; half of all meters are broken. 䡲 The city can’t sync smartphones with city calendars. 䡲 Payroll, HR, and financial data and systems cannot be integrated.
ing with staff to understand the processes and uses for each system. What does something actually need to do? Who is it benefiting? How does it integrate? “Technologists need to pay attention to what it takes to do the process improvement work,” he said. “We often underestimate it or shortchange it because of tight budgets.” Doing that means vendors can sell you systems that don’t meet your needs. Or, as often happens on IT projects, the implementation doesn’t match the scope of work. (See: Healthcare.gov when it rolled out.) “If you do the work before you select the tool, you can start to evaluate the tools from a more enlightened perspective,” said Square, who is now chief technology and innovation officer at PosiGen Solar Solutions, based in Metairie, La. “You can have more detailed conversations with your vendors about whether the way you are solving an issue could be changed or optimized. Spend the time doing that, you are in a great spot.” First and foremost, though, his advice to Niblock is this: “Resist the tendency to do the sexy projects. Stabilize and build a strong foundation. You’re going to get pressure to do other things, but make it clear that you have to stabilize your environment first.”
Getting ready for an upgrade Niblock is working with the mayor and Mary Martin, Detroit’s new director of lean process management, to put together teams of city employees and business community volunteers to build streamlined, efficient systems. “I think people are hopeful, but I think they have been through a lot of roller coasters,” Niblock said.
“Because the people who are here have been here for a while, they are (in a mindset of) ‘trust but verify’ because they’ve heard a lot of these promises before.” Square warns Niblock to always have a department head’s buy-in before moving forward with projects. If she can’t get that person on board for an upgrade, move on to another priority. “Don’t pull a department with you,” he said. “Make sure they are co-leading the project with you. If not, it’s a recipe for bad implementation — and those cost millions of dollars in city government. You have to have at minimum a department head that realizes there is a need to replace what we have today and are willing to dedicate their resources and time to getting it done.” That will be critical advice when it comes time to start developing online permitting systems, a more robust website and a consumermanagement system, such as 311. (The city is doing a triage revamp of detroitmi.gov, but a full overhaul is expected in the future.) Those things all layer on top of a strong IT infrastructure but require multiple departments willing to rethink how they do business. Often, the opposite happens: IT systems are made to fit around broken work flows rather than imaging what could be happening. “A lot of the systems that cities put in are best in class, but then we customize the heck out of them,” Niblock said. “There needs to be resolve to stick to best practices. It helps you all down the line.”
Opening up the data What keeps Niblock pushing forward is the goal of working on two of her passion projects: civic-tech innovation and open data. “One of the things that is so exciting about Detroit is all the civic tech people,” she said. The John S. and James L. Knight Foundation and Rock Ventures LLC committed $500,000 for civic-tech innovation projects, which is allowing her to hire a deputy director to oversee those efforts and build an innovation fund that will make small grants to local civic tech firms. Civic tech generally refers to people using open government data to solve civic problems. Three of Detroit’s most prominent of these types of technology companies are Dandelion, Data Driven Detroit and Loveland Technologies LLC. The latter have become well known because of their work on the Mother City Mapping project, which catalogued and analyzed the city’s nearly 400,000 parcels over nine weeks during the winter. That provided the data guiding the city’s plan to fight blight. Crain’s asked all three what primary improvement they’d like to see in Detroit’s IT. They all said they want the city’s data to be more open, transparent and publicly available — preferably for free. “Rich data is like nutrient-rich soil,” said Peter Vanderkaay, director of partnerships and business development at Dandelion. “Opening up the data allows the city to tap into the community of social and civic problem solvers, creating a diSee Next Page
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versity of solutions that any city government would be hard pressed to develop on its own.” Cities across the country, for example, have made property records open and accessible, allowing Loveland Technologies to expand its local Why Don’t We Own This? website (wdwot.com) to more than two dozen locales, from Denver to Washington, D.C. Meanwhile, the Miami-based Knight Foundation has invested $25 million into civic tech innovators since 2010, and reports that 121 companies were founded in 2012. “What’s partly intriguing about Detroit is that it’s one thing to build an app that sits on top of a fully functioning IT system that has all the data lined up and works perfect every time, but it’s another thing to figure out how tech can help us move forward and maybe even move past those folks (with fully functioning IT departments),” said Katy Locker, the Knight program director for Detroit. “What can we do to skip steps to get us to a more open-data environment? That is very intriguing nationally to the civic tech community.” It’s also an imperative for Niblock. In fact, when the mayor was wooing her, she said, they spoke in depth about the importance of open data and changing the city’s default of locking down information. A very basic improvement, she said, will be making Detroit City Council meeting minutes online and easily accessible. She is also discussing how to make the video of the council sessions archived and searchable.
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READER POLL: WHAT ARE DETROIT’S IT PRIORITIES? What do Crain’s readers think should be the top priorities for improving the city of Detroit’s IT infrastructure? Nearly 800 responded to our online poll. Here’s what they said. You also can find it online at crainsdetroit.com/ITpoll Make all city forms available online — park permits and principal residence exemptions, for example — and allow residents to file them from the website: 20.1% Make it easier to pay for parking tickets, property taxes and other bills online: 14.9% List clearly and explain all city business licenses; allow residents to apply online: 11.9% Fix parking meters; put them on a mobile payment system: 11.8% Make public information free and easy to access: 8.6% Stop charging fees to pay property taxes online: 7.2% Put City Council agendas and minutes online and make them searchable: 5.6% Move Detroit toward a smart-parking grid: 5.6% Other: Includes improve bus schedules, improve city website, implement a 311 or similar system and archive all City Council video and make it available and searchable online: 14.4%
“What we have to do to regain the public trust is be open with our data,” she said. “We have something I’m very excited that we are working toward that will be out mid-fall.” But even the civic tech community realizes that Niblock and the city must first take baby steps. As the COO of Loveland, Mary Lorene Carter said she wants the people she works with in city government to be able to communicate and collaborate together easily. “Right now, many city departments may have a system that works for them, but they can’t easily access information that has been collected and curated by another department,” she said. “In order to operate a city efficiently, one needs to be able to have access to the all of
the relevant information.”
IT budget Of course, all of these dreams come with a price tag. To cover the bills, the city is counting on the money that Orr set aside in his restructuring plan that is before the bankruptcy court. The emergency manager proposed spending $1.4 billion for service improvements, with nearly 11 percent of that amount — or $152 million — going toward IT. The bulk — $94.8 million — is going to the finance and HR departments. A total of $21 million is going to fire and police departments because their systems are in as bad of shape, if not worse, than the general services part of the city. “As of the petition date, the DPD had no IT systems in place at all for such functions as jail management, electronic ticketing and activity logs,” according to the plan of adjustment. Of course, Orr’s plan still has to be confirmed in bankruptcy court and there are no guarantees. Still, Niblock is plowing ahead. She anticipates announcing her new deputy soon and is making plans to let the computer contract out for bid. She still thinks about her dream world, her Eden, she laughs, of when Detroit is a smart, connected city. One where you don’t have to blow on your credit card in the cold of February, trying to force a broken parking meter to accept it. Instead, you could find an open parking spot anywhere in the city and pay for it right from your phone. Imagine, she said, sipping off her coffee at the Roasting Plant, just imagine. Amy Haimerl: (313) 446-0416, ahaimerl@crain.com. Twitter: @haimerlad
BANKRUPTCIES The following businesses filed for protection in U.S. Bankruptcy Court in Detroit June 20-27. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. Arch Construction Inc., P.O. Box 871965, Canton Township, voluntary Chapter 7. Assets: $57,634.54; liabilities: $209,809. WEC Group LLC, 1850 Northfield Drive, Rochester Hills, voluntary Chapter 11. Assets: $1,170,392; liabilities: $2,376,279.45. — Natalie Broda
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Beaumont: A system for new reality ■ From Page 3
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mance or value-added contracts along with patients making provider decisions are driving consolidation, experts said. “Changing managed care contracts are driving these mergers,” said Jeffrey Hoffman, senior partner with Kurt Salmon’s health care practice in San Francisco. “Beaumont can’t do it on its own. It has to form a geographic network (with Oakwood and Botsford) to drive down costs to make an insurer want that network.” Hoffman said health insurers, including Blue Cross, are offering systems a variety of managed care contracts that essentially offer shared savings if costs are reduced. “Insurers are saying there are real dollars that have to come out of the system, and that can be done because there is wasted care that we cannot pay for anymore,” Hoffman said.
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Over the next decade, said Tony Colarossi, who heads the health care practice at Southfield-based Plante Moran PLLC, more health insurance will be purchased on public or private health insurance exchanges where consumers will Colarossi be able to shop based on price and quality factors. “You look at the mergers and consolidation in Michigan. (Hospital systems) don’t just want to be bigger. They are thinking ahead strategically,” Colarossi said. “They know people will look at (hospital and physician) networks as a value proposition because they will be paying a higher percentage of those costs out of pocket.” But consolidation to position for managed care contracting or self selection by patients doesn’t have to include sharing of assets, as in the Beaumont Health deal. Last month, Together Health Network was formed by Livonia-based Trinity Health and Warren-based Ascension Health Michigan to conduct managed care contracting. Physician-led Together Health is designed as a clinically integrated network that combines the strengths of 27 hospitals, related health care facilities of nursing homes, home health agencies and hospices with more than 40 physician organizations and 5,000 physicians. Colarossi said Together Health and Beaumont Health — and competing health systems — want to appeal to individual consumers to select a health benefit package that has their systems in their network. Consumers want to know what they’re buying into, Colarossi said. “I want seamless care and (to) make sure everyone is being held accountable in that health system,” he said. “We have about five years before there is full price transparency.” For example, Colarossi said, consumers will consider cost more carefully when it comes to, say, getting a knee replaced — $10,000 at hospital A or $15,000 at hospital B — because they will be paying
How new system will operate If finalized as expected this fall, Beaumont Health will become the largest health system in Southeast Michigan, controlling about 30 percent of the inpatient market with eight hospitals and 3,337 beds, 153 outpatient sites, 5,000 physicians and 33,093 employees. CEOs Gene Michalski of Beaumont Health System, Brian Connolly of Oakwood Healthcare and Paul LaCasse, D.O., of Botsford Health Care will serve on the newly formed CEO Council, which will oversee the transition and implementation of the new system until the final closing documents are signed. Michalski will chair the council. Connolly will also serve as transition executive, and LaCasse will be clinical transition executive on the Council. John Lewis, Oakwood’s chairman, will be the new system’s initial chairman. for the majority of it out of pocket. Nancy Schlichting, CEO of Detroit-based Henry Ford Health System, which engaged Beaumont in preliminary merger talks last year, said Henry Ford also is looking at a variety of ways to reduce costs and expand its five-hospital system, 1,200-physican medical group and managed care network. “Like every market in the country, consolidation is happening and will continue,” Schlichting said. “There is no silver bullet out there. We all have to find ways to reduce the costs of health care and to improve access” for patients.
Cost-reduction opportunities In announcing the new Beaumont Health, executives promised at least $134 million in annual cost savings after three years with no facility closures or across-the-board layoffs. Savings primarily would come from efficiencies gained from operating a single electronic health record system and consolidating billing, collections, purchasing and other backoffice business functions. But experts said up to $400 million could be cut annually if hard decisions are made over the next two years. For example, Beaumont could cut duplicative top vice presidents from the executive team and reduce managers through consolidation of departments that include finance, billing, purchasing, marketing and such clinical services as heart, oncology and orthopedics, said experts. “$134 million is very low. It won’t take three years to affect those savings,” said Joshua Nemzoff, president of New Hope, Pa.-based Nemzoff and Associates, a consulting firm that advises nonprofit hospitals on mergers and acquisitions. “Minimum savings is 10 percent of expenses, somewhere in the $400 million range,” Nemzoff said. “They should be able to get those savings in 12 to 18 months if they are serious about integration” and returning value to the community. Phil Incarnati, CEO of McLaren Health Care, a Flint-based 11-hospital system, said the three systems had
The three CEOs also said that affiliations will continue with Beaumont and Oakland University Beaumont School of Medicine, Botsford with the Michigan State University College of Osteopathic Medicine and Oakwood with Wayne State University School of Medicine. The new system will include Beaumont hospitals in Royal Oak, Troy and Grosse Pointe; Oakwood hospitals in Dearborn, Taylor, Wayne and Trenton (known as Southshore); and Botsford Hospital in Farmington Hills. System executives said the names of the hospitals eventually will be changed to tie them to the Beaumont Health name. A new corporate headquarters will be established at a neutral site convenient to the three current headquarters in Royal Oak, Dearborn and Farmington Hills. — Jay Greene to grow larger to compete in the new era of declining reimbursement and lower inpatient admissions. “My first reaction is to congratulate them. They are good people,” Incarnati said. “My sense is they all needed to grow in terms of scale and size. It could happen by being acquired or join together. None of them individually have the size and staying power, the so-called experts say, to adapt to the changes in the market.” Incarnati said he expects Beaumont Health can achieve higher cost savings than it has so far advertised by eliminating greater numbers of employees. “We have done a number of transactions to reduce costs and improve value,” he said. “You have three independent parties and have three positions across the board. You eliminate two across the board. Unless you do that, it is hard to get to those savings.”
Cutting down Gene Michalski, CEO of Beaumont Health System and the new Beaumont Health, said workforce downsizing would be accomplished through natural attrition, retirements and voluntary resignations. But Michalski and fellow CEOs Brian Connolly of Oakwood and Paul LaCasse, D.O., of Botsford also promised Beaumont Health will cut clinical costs by adopting best clinical practices, improving care coordination through sharing of electronic health records, and increasing quality and patient safety that will reduce costly readmissions. The health system CEOs declined further comment on consolidation plans until after regulatory approval this fall from the Federal Trade Commission and Michigan Attorney General Bill Schuette’s office. “It is going to take them a few years to do what is necessary to get the value that they expected,” said Incarnati, adding that Beaumont Health will be successful “if they are committed to truly integrating.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com DIRECTOR, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com WEST MICHIGAN EDITOR Matt Gryczan, (616) 9168158 or mgryczan@crain.com RESEARCH AND DATA EDITOR Sonya Hill, (313) 446-0402 or shill@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766
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China: R&D center ‘great opportunity for region’ ■ From Page 1
buildings, and operate subsidiaries of Chinese automotive manufacturers looking to expand in the U.S. Third Wave would then transfer ownership of the real estate back to the Chinese company when it is ready to open its own space here. “China needs an easier business assistance model in the U.S., and the concept of BOT (build, operate, transfer) has been well-taken in China,” said Liu, a Chinese native and MBA graduate from Wayne State University. Liu said if negotiations proceed as planned, the deal should be completed by October and construction would begin next spring, with plans to open the center in early 2016. Third Wave plans to finance the deal through its Beijing Dixing Taihe parent with loans from the Bank of China Ltd., Minsheng Banking Corp. and Taikang Life Insurance Co. Ltd. Liu said some local financing may be necessary for construction. The Third Wave proposal is a good one if the group can come up with the money and Plymouth Township settles its court dispute over ownership, said Richard Reaume, township supervisor. “It would be a great capital investment with high-paying jobs,” Reaume said. “This is a great opportunity for the region, but we’re willing to work with whoever comes through with the right proposal.”
Deal delays Reaume said the other interested developers have varying ideas for how to best use the land. Dale Watchowski, president, CEO and COO of Redico, said the company would like to build office and R&D buildings at the site. “We like the site very much,” Watchowski said. “We had a meeting with (the township) two weeks ago, and we are kind of waiting for a response on how we did in the request-for-proposal process.” Total Sports’ proposal is to build a sports center with indoor and outdoor facilities such as softball and basketball. Biltmore is undecided on a specific plan, Reaume said, but it would likely be a mixed-use development with houses and possible office space. A call to David Stollman, president of Biltmore, was not returned in time for deadline. However, for the time being, talks for the Plymouth site are on hold. An impasse over the land dispute, and Detroit’s bankruptcy case, is stalling negotiations. The property, at Five Mile and Ridge roads, is part of what was once the Detroit House of Corrections. The city of Detroit purchased 1,000 acres of land in Plymouth and Northville townships in 1919 for a prison farm that housed convicted bootleggers during Prohibition. Much of that property was sold throughout the 20th century, according to the Plymouth District Library. Plymouth Township acquired the land for more than $600,000 in a Wayne County tax foreclosure in 2011, said Reaume. However, the city of Detroit sued the county and township last year claiming it retains ownership over 190 acres of the property. Reaume said the city wants $60 million for the property, which the township claims it already owns.
Chinese have invested $1B in state since 2000 U.S. automakers and suppliers entered the Chinese market in the 1980s and 1990s, but it took until the new millennium for the Chinese industry to enter the U.S. market in a big way. Chinese businesses have invested $1.1 billion in Michigan since 2000, according to a January report by the Rhodium Group, much of it in automotive and aerospace. Chinese supplier conglomerate Wanxiang Group acquired the automotive and grid assets of former bankrupt Livonia-based lithium-ion battery maker A123 Systems LLC in January 2013. Changan Automobile Group, a Chinese auto supplier, opened a $7 million R&D facility in Plymouth in 2011. The Michigan Economic Development Corp. approved a $1.7 million tax credit, hinged on the creation of 161 jobs, for the U.S. subsidiary, Changan U.S. Research and Development Center Inc. Shanghai-based SAIC Motor Corp. opened a 30,000square-foot North American headquarters in Birmingham in June 2012. And Chinese firm Pacific CentuDetroit’s argument is that state law dictates Wayne County cannot foreclose on property owned by the city, said Charles Raimi, deputy corporate counsel for Detroit. The case was stayed last year in Wayne County Circuit Court due to Detroit’s bankruptcy, but the stay was lifted this month. Judge Robert Colombo ruled last week that development could not occur until the dispute is resolved. “We’re asking from some cooperation from Detroit, but they are suing everyone,” Reaume said.
Shopping the region Liu said Third Wave sought several locations in Wayne and Oakland counties over the last two years prior to settling on the Plymouth Township site. Third Wave was in discussions last year to acquire the failed Bloomfield Park development in Pontiac but couldn’t reach a deal with Wells Fargo Bank NA, the lender and current owner. Third Wave also continues to review sites in Toledo and down I-75, but it still hopes for a metro Detroit site because Chinese companies associate the automotive industry with the region, Liu said. “We (Chinese) have a thing for Henry Ford,” he said. “This is where the automobile was created.” However, Liu said, area economic development officials need to step up their game to attract more international investment. “(Local) U.S. governments don’t know how to attract Chinese businesses. … They need to hold their hand to get them through the process,” Liu said. “In (metro Detroit), getting meetings took months and months, instead of days.” Third Wave began talks with Plymouth Township in December with plans to begin architecture and engineering by July. State lawmakers tried in 2013 to expedite economic development on the Plymouth property, but the issue didn’t gain traction in the latest legislative session. State Rep. Kurt Heise, R-Plymouth Township, introduced a bill in December of last year to transfer the Plymouth Township property to the Michigan Land Bank to move redevelopment forward. The bill remains in the House commit-
ry Motors acquired Saginaw-based steering systems supplier Nexteer Automotive in 2010. Despite a slowdown in auto sales growth in China in recent months, the industry is expected to sell more than 20 million cars there. Chinese automakers continue to look to expand globally as well, including in metro Detroit. Qiang Hong, senior research scientist at the Center for Automotive Research in Ann Arbor, said direct investment from China is becoming an important piece of U.S. gains. Southeast Michigan could benefit from an increased relationship with the country. “It used to be a one-way street, primarily U.S. capital flowed into to China, but more flows into the U.S. now,” Hong said. “Michigan is in a unique position to influence the future Chinese automotive industry and market trends by providing policy guidance to the Chinese government, enhancing cooperative research and building stronger private sector relations.” — Dustin Walsh
tee on appropriations. Michigan lost billions of dollars in investment by providing a poor reception for the Japanese automotive industry in the 1980s, Liu said. He said he hopes the region doesn’t repeat the mistake. “Chinese auto companies want to be here; this region has the talent and engineering,” Liu said. “They could create lots of jobs and development; we have to get this right.” Jerry Xu, president of the Troybased Detroit Chinese Business Association, said a win for Third Wave,
and other Chinese investors here, could trigger a pipeline for more investment. “Often, the Chinese only hear the misconception from media about Detroit, and it’s become a hindrance to more investment,” Xu said. “But I think the ice is melting, and as we continue to work on more deals, the resistance is dropping and the auto industry’s reputation is gaining more interest.” Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh
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RetroSense: Potential vision treatment inspired by pond scum ■ From Page 3
cells, allowing limited vision. RetroSense and its research partners have tested mice, rats and nonhuman primates, with all species showing a return of some vision following treatment, said founder and CEO Sean Ainsworth. As a result, the company has just completed raising a venture capital round of $2.4 million, led by a San Diego firm, Nerveda LLC, and is close to agreeing on terms of a follow-on round of $5 million or more, Ainsworth said. Those rounds will fund Phase 1 U.S. Food and Drug Administration trials next year and the first half of Phase 2 trials. Fundraising has been sparked because of large recent deals involving other biotech firms and by RetroSense’s success in animal trials for its lead product, a biologic with the working name of RST-001. Ainsworth founded RetroSense in 2010 after licensing the work of Wayne State University researcher ZhuoHua Pan. He laid out the company’s plans to a standing-roomonly crowd at the recent Michigan Growth Capital Symposium Ainsworth in Ypsilanti, which drew venture capitalists and angel investors from around the country to hear pitches for capital from 32 Midwest firms. Ainsworth said that if what has
worked in animals works in patients taking part in the upcoming trials, at least some black-andwhite vision will be restored to those blinded by such diseases as retinitis pigmentosa and dry agerelated macular degeneration. There are no approved drugs on the market for either retinitis pigmentosa or dry AMD. Ainsworth said the goal is for people to have functional vision, meaning they would be able to identify someone sitting across the table from them and to see well enough to maneuver around at home and out and about as pedestrians. In most human trials, Phase 1 is strictly to assess safety and involves healthy volunteers. RetroSense’s Phase 1 trial of several dozen patients, though, will only involve the blind, so not only will the company get data on safety, it will get instant feedback on whether patients have had any sight restored. “We expect to see proof of concept in Phase 1,” said Ainsworth. “If people go from being blind to saying, ‘I can see!’, that’s pretty powerful. Proof of concept is a trigger point where big pharma perks up its ears and looks at a deal far more closely. Pretty clearly that’s a big inflection point for us.” Ainsworth told would-be investors in Ypsilanti that RetroSense could get sold before the company gets to the large, and expensive, Phase 3 trials — the last stage before getting federal approval to go to market. Last October, as a result of suc-
cess in animal studies, RetroSense was named by Elsevier Business Intelligence as having one of the 10 therapies in the U.S. with the most licensing potential. David Brophy, founder of the growth symposium and director of the Center for Venture Capital and Private Equity Finance at University of Michigan’s Ross School of Business, praised Ainsworth for taking RetroSense so far so fast. “Good for him. RetroSense can serve as a model for what you need to do to get to the point where you’re investible. Companies that complain about not being able to get funding, they need to pay more attention to blocking and tackling,” he said. “To make a football analogy, most startups start at the 1-yard line and the payoff is 99 yards away. Most entrepreneurs aren’t thinking long-term enough, doing what they need to do to get that far. Sean did.” The plan included not being satisfied with his initial license. In addition to its license with WSU, RetroSense in March 2013 licensed a patent for augmenting vision from Massachusetts General Hospital. The plan also included bringing on advisers with a national reputation to help RetroSense better grab industry attention. After the company was launched in 2010, George Williams, M.D., a retinal surgeon and chairman of the department of ophthalmology at William Beaumont School of Medicine at Oakland University, joined RetroSense’s advisory team, as did Ted McGuire, who had 35 years of expe-
rience in large pharma, including Parke-Davis and Pfizer Inc., and was involved in bringing several successful drugs to market, including Lipitor. Then, in October 2012, RetroSense hired Steven Bramer as chief development officer. Bramer, a 26-year veteran of the ophthalmology industry, had been chief drug development officer at the Maryland-based Foundation Fighting Blindness. One of the venture capitalists who attended the symposium was Cam Gallagher, managing director of Nerveda, a $26 million venture capital fund that invests in biotechnology. Gallagher said he met Ainsworth following his pitch for funding to the Tech Coast Angels in San Diego about four months ago. “I’ve got a strong interest in gene therapy, but we didn’t have any gene-therapy companies in our portfolio yet. It’s just a really good time to get into that market,” said Gallagher. He said that between his fund, some of his personal money and money from his friends and family, about $1.8 million was raised out of the $2.4 million A round. The other investors included the Midland-based Blue Water Angels and the Tech Coast Angels. Gallagher said one key inducement for those investing in the A round, and for the two East Coast venture capitalists who are considering joining the B round, is the recent history of companies targeting vision problems signing large deals.
In May, New York-based Regeneron Pharmaceuticals Inc. announced it would pay up to $640 million to California-based Avalanche Biotechnologies Inc. to develop gene-therapy products to treat ophthalmologic diseases. Also in May, New York Citybased Ophthotech Corp. announced it would receive short-term payments of up to $330 million and milestone payments of up to $700 million more from Switzerlandbased Novartis International AG to license an experimental eye drug, Fovista, to treat patients outside the U.S. who suffer from wet agerelated macular degeneration. Gallagher said getting efficacy results in Phase 1 speeds up the time to market and a possible acquisition or licensing deal by a big pharmaceutical company. “You only have to invest a relatively small amount to get to a big market potential,” he said. In addition to the recently concluded Series A round of capital, RetroSense has had financial support from a variety of sources, including a grant of $163,000 from the Qualifying Therapeutic Discovery Project, a joint program of the National Institutes of Health and the Internal Revenue Service; a $250,000 grant from the Foundation Fighting Blindness; consulting and support services of $50,000 from Ann Arbor Spark; and $350,000 from the Michigan Economic Development Corp. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2
Liquor: Efforts to change laws run up against sobering reality ■ From Page 1
transferred between adjacent counties and allowing bars and restaurants to buy more liquor per month from stores if they run out. Among the watered-down was a proposal to allow brewers that make less than 30,000 barrels to ship directly to retailers. That was changed to 1,000 barrels and the beer must be delivered by an employee of the brewery in a vehicle owned by the brewery. Apparently no rule change was too small not to be debated and changed. Instead of rescinding a rule that bans the use of branded glassware in bars and restaurants, the Legislature passed a law that names 13 specific purchased branded items that can be used. Critics say these and many of the other proposals didn’t see the light of day or were changed because they would hurt the profits of wholesalers that operate in specific jurisdictions — entities with which bar and restaurant owners are required to do business by state law. “I don’t think much gets done on alcohol without the wholesalers’ fingerprints on it,” said Michael LaFaive, director of fiscal policy for the Mackinac Center for Public Policy. Mike Lashbrook, president of the Michigan Beer and Wine Wholesalers Association, one of the most powerful lobbying groups in Lansing, is not shy about the role his organization played in preventing many of
the provisions from taking hold. “We see that as a success,” he said. “We believe the issues and recommendations that had merit and were going to have a positive economic impact in a responsible manner passed. “There certainly were a number of recommendations that were irresponsible … and we vigorously opposed those.” In the past two years, wholesalers have spent more than $285,000 on lobbying. In the 2012 election cycle, the wholesalers PAC raised $745,000 and more than $500,000 through April of this cycle, according to the Michigan Campaign Finance Network.
Stale rules The Office of Regulatory Reinvention, whose mission is to simplify regulations and remove obsolete ones, originally set up the committee that looked at alcohol regulations. It also formed committees in seven other areas, including the environment, workplace safety, and insurance and finance, and eventually proposed 328 changes to laws and regulations. Since 2012, 146 have been implemented. The proposals from the liquor committee have the lowest percentage of success of the reports released more than a year ago. The latest report, one on rulemaking, was released three months ago. So
far, one of the 18 recommendations has been implemented. The rate of successful implementation of these changes ranges from the 25 percent the liquor report produced, to 74 percent in the insurance and finance sector, where 34 of 46 recommendations have been implemented. So what is so different about alcohol? Those serving on the committee and others in the industry point to multiple factors, including that alcohol is a controlled substance, but there’s also a healthy dose of politics and money. Rich Robinson, of the Michigan Campaign Finance Network, said interest groups play offense when they want something changed and they play defense when they don’t. In this case, the wholesalers didn’t want many of the changes. Because the wholesalers give generously to lawmakers in both parties and often host fundraisers at their office near the Capitol, Robinson said, he was not surprised so little has been done. “They give any lawmaker money who is sucking air, so long as they aren’t complete teetotalers,” he said.
Cleaning the lines Some of the other rule changes that were implemented were less controversial, such as no longer requiring security guards to escort
individuals visiting the Michigan Liquor Control Commission in Lansing. Other changes reduced duplicative paperwork and encouraged the use of electronic communication to help speed up the process of approving liquor licenses. One of the biggest changes was for conditional liquor licenses. Under the previous law, when someone purchased a bar, the transfer of the liquor license typically took months longer than all the other paperwork. So in order for the new owner to be able to sell alcohol before the license transfer, a “participating management agreement” had to be set up — and the previous owner had to technically stay on as owner. The transfer process could take anywhere from a few months to more than a year. Under the law Gov. Rick Snyder signed in December, businesses are issued a conditional license within 20 business days, contingent on a background check. “That’s a game changer in liquor licensing,” said Andy Deloney, chair of the Michigan Liquor Control Commission. Linda Gobler, president and CEO of the Michigan Grocers Association, who also served on the liquor rules committee, said conditional licensing was important to her industry as well as the restaurant industry. That is why she said she doesn’t see it as a negative that
so few changes have been implemented. “Those are always very difficult issues,” she said. “Liquor is a complex system. There are a lot of vested players in it. It requires a lot of education.”
The next case Scott Graham, executive director of the Michigan Brewers Guild, said he was glad to see the state review alcohol regulation. “Quite a few people have gotten into brewing without experience,” he said. Those brewers have had to learn on the job, and they have learned that the most influential voice in Lansing is the beer and wine wholesalers, he said. “We are much younger at that game, but we have a significant voice that should be heard,” he said. “The beer and wine wholesalers should be a voice for wholesalers. The voice for beer should be the ones that make the beer.” Deloney said the state will continue to act on the remaining recommendations made by the committee through either the action of his commission or legislation. “They all still have potential,” Deloney said. “We’re very proud of the work we have done, but we are not at all done.” Chris Gautz: (517) 403-4403, cgautz@crain.com. Twitter: @chrisgautz
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CRAIN’S DETROIT BUSINESS
June 30, 2014
RUMBLINGS Detroit Club ‘in limbo’ for renovation he Detroit Club isn’t dead. It’s just homeless for now. Emre Uralli, the Florida investor who bought the club’s building at 712 Cass Ave. in December for $1 million, is renovating the 37,000-square-foot building. That effectively has booted the club out of the 1892 Romanesque Revival building — at least for the time being, said James Van Dyke, a Detroit Club member and vice president of development for the Detroit-based developer Roxbury Group. The club, which was founded in 1882 and at its peak in the 1960s had about 1,000 members, was planning to start a membership drive to increase its current ranks from about 30 to around 100, Van Dyke said. “The renovation put our membership drive plans on hold and not understanding completely if we can have space in the building, or if we would have to find another building,” he said. Uralli purchased it from Nick and Lorna Abraham, coowners of Woodward Parking Co. Inc. Soon, too, the building — which is on the National Register of Historic Places — could have yet another new owner. It’s scheduled to be sold on auction.com July 2830 with a starting bid of $950,000.
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Southfield Town Center may get big tenants Two large tenants are considering office space in
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Shinola/Detroit LLC received a new round of publicity last week when the national media picked up on his love of the watches to contrast wife Hillary Clinton’s muchquoted remarks about being broke and in debt when the couple left the White House in 2001. The former president was presented with a Shinola Runwell watch on April 26 while touring the compathe Southfield Town Center, ny’s Detroit headquarters which was purchased in and factory. At the time, May for $177.5 million by Clinton said he already New York-based 601W Cos. owned two of the watches, Real estate sources say which start at $550. Blue Cross Blue Last week, in Shield of Michigan the midst of his is considering wife’s book tour, consolidating Bill Clinton elabtwo Southfield orated on his love offices into for the luxury 250,000 square watch. feet in the 2.2 In an interview million-squarewith Rip Rapson, foot office compresident and plex; and that CEO of The Kresge Detroit-based Foundation, ClinAlly Financial Inc. ton said he AMY HAIMERL is considering bought 14 during Bill Clinton greets moving into two shopping Shinola workers. 300,000 to 350,000 runs, including square feet there from the the April visit. He said he Renaissance Center. bought most to give as gifts. Ally’s lease in the RenCen expires in November 2016, according to CoStar Group Inc. Gina Proia, vice presiNo, former Michigan dent and chief communicaGov. Jennifer Granholm is not tions officer of Ally Finanplanning to run to become cial, said in an email to Crain’s on Friday that there the next governor of California, U.S. senator or even is no plan to change its real Oakland city dogcatcher. estate footprint in the near A story in the San Franterm. cisco Chronicle last week Michael Silberberg, prinquoted a Democratic stratecipal of 601W, said the comgist who suggested that pany is working on several Granholm, who now lives large potential leases but in California and has been would not say with whom. teaching at UC-Berkeley, has BCBSM’s Southfield the star power to be competspace is in the Omni Officenitive in a statewide race. tre at 26899 Northwestern But it is not to be. Highway and Oakland Com“As I’ve said since the mons at 20750 Civic Center end of my term, I won’t run Drive. for office again, but I’ll certainly want to continue helping others, including Hillary Clinton, should she choose to run,” Granholm Bill Clinton’s April visit to said in a statement.
Granholm says she’s done running for office
Clinton’s Shinola splurging is back in the spotlight
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Diversity left out of startup shift
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There has been rampant discussion about who can actually access technology and information. Is it truly everybody?
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Amy Haimerl’s “Small Business” blog can be found at www.crainsdetroit.com/section/blogAmyHaimerl
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Linkner fumes at New Yorker
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A Harvard University professor, who also somehow manages to also be a staff writer for the New Yorker magazine, was NOT kind to Josh Linkner recently.
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Tom Henderson’s blog on “Big Bucks, High Tech” is at www.crainsdetroit.com/henderson
Gilbert buys Free Press, News building an Gilbert has purchased the Detroit Media Partnership building that houses the Detroit Free Press and The Detroit News. The property also houses the newspapers’ business operations. The asking price for the 415,000-square-foot building at 615 W. Lafayette Blvd. was $8 million. A spokesman for Gilbert’s Rock Ventures LLC would not say how much was paid for the building, which will be redeveloped. In October, the newspapers will move into the Gilbert-owned former Federal Reserve building at 160 W. Fort St.
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ON THE MOVE 䡲 Richard Hampson was named president of Charter One Bank in Michigan by Providence, R.I.-based Citizens Financial Group Inc. Hampson, who was responsible for key Michigan corporate banking clients at PNC Bank, replaced Ken Marblestone, who left Charter One last fall. 䡲 Michael Tenbusch, 45, is to leave as chief impact officer for Detroit-based United Way for Southeastern Michigan at the end of June. He will explore other interests including writing and creating change in the community, CEO Mike Brennan said in a note to United Way’s board.
COMPANY NEWS 䡲 Parts supplier Delphi Automotive plc is now part of two federal investigations — one tied to the ongoing General Motors Co. recall crisis and the other a potential challenge to its European tax domicile. Delphi has set up its tax base in the United Kingdom, but its operational headquarters and executive team remain in Troy. 䡲 Ralco Industries Inc. was awarded an amended state tax credit by the Michigan Strategic Fund to assist with the construction and $13.5 million investment of the supplier’s new world headquarters in Auburn Hills. 䡲 The nonprofit Invest Detroit was approved for two awards, totaling almost $2 million, at the meeting of the Michigan Strategic Fund. The largest of nine awards given went to Invest Detroit, for $1.35 million to administer the Accelerate Michigan Innovation competition. 䡲 Detroit nonprofit Ma-
trix Human Services is getting $125 million over the next five years from the U.S. Department of Health and Human Services for Head Start programs in the city, AP reported. 䡲 Plymouth-based Loc Performance Products Inc. landed a defense contract award worth up to $161.6 million from the U.S. Army Tacom Life Cycle Management Command in Warren, and First Ann Arbor Corp. Inc., a subsidiary of Ann Arborbased Arotech Corp., gained a new change order award on a previous Army pact worth up to $36 million. 䡲 Chrysler Group LLC plans to spend $63 million to expand capacity at its 65-yearold Warren Stamping Plant by as many as 3.6 million parts per year, Automotive News reported. 䡲 Blue Cross Blue Shield of Michigan plans to ask the U.S. Supreme Court to look at a case in which the Detroit company owes more than $6 million to auto supplier Hi-Lex Controls Inc. for what Hi-Lex says were hidden fees, AP reported. 䡲 Detroit-based social media startup Stik.com won the $100,000 top prize during AOL founder Steve Case’s Rise of the Rest tour stop in Detroit. 䡲 The Michigan Strategic Fund approved a tax capture to assist Lormax Stern Development Co. with the redevelopment of part of Macomb Mall in Roseville for a project totaling $1.6 million. 䡲 Detroit-based DTE Energy Co. spent $300,000 to buy Tollgrade Communications Inc.’s LightHouse MV sensors and software system, which can detect potential power outages. 䡲 Troy-based The Suburban Collection bought Don Massey Cadillac in Plymouth and Capitol Cadillac of Lansing from Charlotte, N.C.based Sonic Automotive Inc. for an undisclosed amount. 䡲 Auto supplier Mayco International LLC spent $11.4 million to purchase the Sterling Heights building where it is the sole tenant. 䡲 Zaman International, a nonprofit dedicated to women and children, paid $525,000 for a 40,500-squarefoot building in Inkster, where it will consolidate six local locations, including its headquarters in Dearborn. 䡲 Upwardly Global, a nonprofit with offices in the San Francisco area, New York and Chicago, opened an office in Detroit to train skilled legal immigrants and refugees to find work.
OTHER NEWS 䡲 Woodward Avenue will
shut down from Adams Street, at Grand Circus Park, to Campus Martius
Park for about 120 days beginning July 28 as construction of the M-1 Rail streetcar line begins in Detroit. 䡲 U.S. Bankruptcy Judge Steven Rhodes agreed to a bus tour of Detroit, which the city has said is important for him to understand the need for capital improvements; and members of the American Federation of State, County and Municipal Employees Council 25, the largest union of city employees, ratified agreements tied to the bankruptcy deal. 䡲 Midtown Detroit Inc. and its Green Alley Project will pilot Public Spaces Community Places, a statewide crowdfunding and matching grant initiative designed to help boost public space projects. 䡲 The VA Ann Arbor Healthcare System was among 10 examples cited by the U.S. Office of Special Counsel in a letter to President Barack Obama that said failure to fully address whistleblowers’ concerns was putting patients at risk. 䡲 The newly announced Motor City Project is intended to make a northwest Detroit neighborhood attractive to potential and current residents seeking to start businesses. 䡲 Johnny Prepolec, the former auto supplier executiveknown as Chef Johnny Prep on his on-demand TV show “Soup and Co.,” bought Mr. B’s Bar/Pub Inc. in Royal Oak. Terms were not disclosed. 䡲 The Yankee Air Museum signed an agreement to buy a 144,000-square-foot portion of the Willow Run Bomber Plant, AP reported. Organizers want to make the space the museum’s new home. 䡲 Paramount Pictures’ “Beverly Hills Cop IV” was approved for a $13.5 million film incentive from the state, and will shoot in metro Detroit with Eddie Murphy returning as star. 䡲 Gov. Rick Snyder signed a $15.8 billion education budget with substantially more money for public universities, a preschool program for disadvantaged 4year-olds and a $50 boost in K-12 districts’ funding, AP reported.
OBITUARIES 䡲 Michael George, cofounder of Melody Farms Dairy Co. and the Chaldean Iraqi American Association of Michigan and founding chairman of Farmington Hills-based George Enterprises LLC, died June 24. He was 81. 䡲 Marilyn Fisher Lundy, a member of Detroit’s famed Fisher family and longtime president and CEO of Matrix Human Services, died June 24. She was 89.
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