The Conversation: Lon Johnson PAGE 18
Coworking in the era of coronavirus Page10
CRAINSDETROIT.COM I MARCH 23, 2020
THE CORONAVIRUS IN MICHIGAN
THE GREAT ADAPTATION
THE RESPONSE
DTE’s Anderson, other CEOs put together crisis playbook
SMALL BUSINESS
ECONOMY
Impact will be painful, but extent is uncertain
BY CHAD LIVENGOOD
BY DUSTIN WALSH
Gerry Anderson has never led a major utility company through a global pandemic. Nobody in Michigan has. But some of them had been wrestling with the coronavirus and its wide-reaching effects on commerce, global supply chains and the health and welfare of workers in their overseas operations for two months before the respiratory disease was detected in Michigan’s population. And now those companies — the likes of Lear Corp., Herman Miller, Steelcase, Dow Chemical and the Detroit 3 automakers — are sharing their experiences with other Michigan Anderson companies that have been scrambling over the past two weeks to try to sustain business operations amid a biological disruption of the economy. “Some of those companies have been able to step back and essentially assemble all of that learning into detailed books of instruction,” said Anderson, executive chairman of DTE Energy Co. “And that’s what we’re sharing with other companies. If you’re being slammed by this, you don’t necessarily have the time to put that together.” Anderson has been leading the effort through his role as chairman of Business Leaders for Michigan to share, develop and coordinate responses to the COVID-19 outbreak among Michigan’s largest business for everything from the best industrial cleaning agents to messaging to employees. Over the past week, Anderson has been convening a daily conference call with top executives at Lear, General Motors Co., Steelcase, Herman Miller, Stryker, Barton Malow, Dow Chemical, Quicken Loans, Meijer and others to pull together best practices and strategies for being both reactive and proactive to the upheaval this virus is having on workforces and the economy.
Before he dashed outside to deliver a customer a curbside food order, Caffè Far Bella co-owner Jack Palazzolo asked a longtime customer Thursday a routine question that elicited an unusual answer. “Do you need silverware to go?” he asked customer Toni Mazur inside the quaint St. Clair Shores cafe on Greater Mack Avenue. “Yes, because I’m going to eat inside the car instead of in here,” Mazur replied, pointing to her car parked out front, where Palazzolo was meeting customers who didn’t want to come inside to pick up their soup, sandwich and coffee orders. Businesses and customers alike across Michigan spent last week adjusting to the disruption to their business models and processes after Gov. Gretchen Whitmer ordered a vast array of businesses to close or severely restrict patrons in an unprecedented effort to combat the spread of coronavirus.
See ANDERSON on Page 16
See BUSINESSES on Page 16
Jack Palazzolo and his wife, Karen, spent last week trying to keep their coffee shop, Caffè Far Bella, afloat by offering curbside service and putting up signs on their windows saying they were still open. | CHAD LIVENGOOD/CRAIN’S
‘We won’t let you die’ Small businesses adapt to coronavirus upheaval BY CHAD LIVENGOOD
NEWSPAPER
VOL. 36, NO. 12 l COPYRIGHT 2020 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
Detroit’s Andrews on the Corner put out signs thanking patrons for their (carryout) support | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS
U.S. auto production is grinding to a halt amid the deadly COVID-19 outbreak. General Motors, Ford and FCA US shuttered plants last week after reporting that workers tested positive for the virus. Only days prior, Wall Street stalwarts Goldman Sachs Group and JPMorgan Chase Inside declared a global reces- ` Economists sion. More than 55,000 weigh in on what unemployment claims indicators to were filed March 16-18 watch. Page 16 alone, with Goldman predicting 2.25 million claims last week across the U.S. University of Michigan economists are projecting Michigan unemployment as high as 10 percent in 2020 and as low as 5.6 percent depending on the success of social distancing and business closures. But the reality is that there is no stencil to follow. The modern, globally integrated economy has never faced a foe like COVID-19. There are too many questions left to answer to accurately predict the fallout: How long will we socially distance ourselves from neighbors, coworkers, friends? How many business sectors will be impacted and how hard? How many of your colleagues will get sick and how many will die? How will businesses traverse this new landscape and succeed on the other side? Will General Motors and Ford pivot as they did during World War II, and jumpstart the war machine? Will it save jobs or the economy? Southeast Michigan recorded its first three COVID-19 deaths by the end of last week: a man in his 80s, a man in his 50s and a woman in her 50s (the latter two with reported underlying health conditions). More deaths will likely have been recorded between the writing of this article and you reading it. But the economic sickness could linger far beyond the coronavirus. See ECONOMY on Page 16
LEADING THE BATTLE
KEEPING YOU INFORMED
Crain’s wants to tell the stories of people who are taking leadership in the fight against the coronavirus. That leadership could be from the true front-line workers in health care, who are risking their lives to save the lives of others. And we also want to tell the stories of others who are leading the charge in educating people and making creative moves in a time of economic disruption. Please send your stories to Managing Editor Michael Lee at malee@crain.com.
If you get your issue of Crain’s delivered at the office, you can also find a PDF version at www.CrainsDetroit.com/ this-week-issue. We are creating a special button there that will allow you to pass the issue along to other people, just like passing along the printed issue. Crain’s also has created a web page where nonprofits and business organizations can list their event cancellations and provide links to more information. We encourage readers to look at www.crainsdetroit.com/eventupdates.
NEED TO KNOW
SPORTS
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT MI LAWMAKERS OK $125M FOR CORONAVIRUS RESPONSE
cies and medical visits, SMART implemented free fares on all its services. It also ramped up cleaning of its buses and instituted a rear boarding policy to help protect drivers from exposure to the virus.
THE NEWS: The Michigan House and Senate last Tuesday approved $125 million in supplemental funding for the new coronavirus outbreak response on top of the $25 million in state funds it approved the previous week. On Thursday, while the number of cases and deaths tied to the outbreak rose dramatically, the state of Michigan signed off on $20 million in grants and loans to small businesses harmed by the coronavirus WHY IT MATTERS: The coronavirus has touched every aspect of life in Michigan, threatening to overwhelm the health care system and shuttering thousands of small businesses indefinitely. The $125 million relief bill includes $40 million for virus monitoring, infection control and other immediate needs, $50 million for hospital services and medical supplies and $35 million set in reserve for undetermined future costs associated with the situation. About 117,000 businesses were directly impacted by Gov. Gretchen Whitmer’s order to close or greatly limit service at bars, movie theaters, fitness centers and restaurants to prevent the spread of the virus.
SMART TO REDUCE BUS FREQUENCY, LIFT FARES THE NEWS: SMART is cutting the fre-
ART VAN HALTS LIQUIDATION SALES AT ALL STORES
quency of its bus services by 30 percent starting Monday as ridership plummets in response to the coronavirus crisis. The suburban bus system will maintain the same hours of operation and geographic coverage but reduce the number of drivers and buses on the road. Under the amended schedule, riders can expect to see Saturday service levels throughout the week. WHY IT MATTERS: Like other transit services, SMART has seen a 60 percent drop in ridership as people work from home and avoid public spaces in a drastic societal shift to stop the spread of coronavirus. But to help people who continue to use transit to get to work, grocery stores, pharma-
LANDMARK OFFICE CENTER
THE NEWS: Warren-based Art Van Furniture Inc. announced Thursday that all sales operations would cease across all stores in Michigan, Ohio, Indiana, Illinois and Missouri. The store was less than two weeks into a liquidation sale launched in tandem with its filing for Chapter 11 bankruptcy protection earlier this month. It had initially said it expected liquidation to last six to eight weeks. WHY IT MATTERS: Just 10 days ago, lines of people wrapped around Art Van’s Warren showroom, waiting for hours to capitalize on the company's clearance sales. But the biggest story in town — a homegrown retail juggernaut decimated under the watch of a private equity firm — has been overshadowed by the coronavirus outbreak. Gov. Gretchen Whitmer announced last week closure of all dine-in restaurants and bars, as well as crowds of more than 50. While the executive order didn't include all retail stores, many shopping centers, including Twelve Oaks, Great Lakes Crossing and Somerset Collection, have voluntarily shut down.
Lions agree to trade Darius Slay to Philadelphia The Lions agreed to trade Darius Slay to the Philadelphia Eagles, ending the standout cornerback’s seven-year stint in Detroit. Agent Drew Rosenhaus confirmed the trade Thursday and that Slay agreed to a three-year, $50 million extension with Philadelphia. The trade comes as the Lions overhaul a defense that ranked 31st in the league last season. Detroit last week agreed to a two-year deal with defensive tackle Danny Shelton and a trade bringing safety Duron Harmon to the Lions from New England. It could be a make-or-break year for Detroit coach Matt Patricia, who is 9-22-1 after two seasons at the helm. Ford Field
CORRECTIONS A story on Page 22 of the March 9 issue incompletely described David Fischer’s title. He is chairman emeritus of both The Suburban Collection and The Suburban Collection Holdings LLC. It also incorrectly described efforts of Fischer, U.S. ambassador to Morocco, and his wife, Jennifer Fischer, in that country. The couple is working to find ways to help teenagers and young adults — not older
adults — get the education and skills training needed to get into jobs. In our March 16 special section recognizing Notable Women in Health, we incorrectly described an honor awarded to Nancy Susick by the U.S. Navy. Susick received a National Defense Medal with a bronze star for her second award.
PREMIER LANDMARK OFFICE TOWER 755 W. BIG BEAVER, TROY, MICHIGAN
BUILDING FEATURES AND AVAILABILITY Newly renovated plaza entry and recently renovated lobby accented with polished granite, glass and cherry wood NEW AMENITIES: Fully-equipped fitness center and golf simulator On-site cafeteria, sundry, banking, ATM, travel agency, electric vehicle charging stations Ruth’s Chris Steak House, and Granite City Food & Brewery From 2,000 SF to 52,000 SF (up to 2 1/2 floors of contiguous space)
248.644.7600 | KOJAIAN.COM DENNIS KATEFF | DKATEFF@KOJAIAN.COM
2 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
INFRASTRUCTURE
High water from Lake Michigan has forced the cities of Montague and Whitehall to close one lane in each direction of the Business Route U.S. 31 bridge between the two cities last month. Water levels have gotten so high that this dock at Dog n Suds, a popular summertime drive-in restaurant, is actually a step down from moored boats. | PHOTOS BY DALE G. YOUNG FOR CRAIN’S DETROIT BUSINESS
KEEPING THE LAKES AT BAY Rising waters have shoreline towns trying to stop damage to property, economy BY JOHN BARNES | SPECIAL TO CRAIN’S DETROIT BUSINESS
WHITEHALL/MONTAGUE — The rising Great Lakes are scouring, flooding and undermining roads and bridges around the state, and nowhere is the economic uncertainty more visible than in these shoreline towns. At least $25 million will be needed to keep the causeway connecting the fraternal Muskegon County communities of Whitehall and Montague above water if Lake Michigan keeps rising, according to the Michigan Department of Transportation. The bridge is the priciest fix among 40 roads and bridges that state officials say need immediate
This article is the first part of a series on the effects of high lake levels in Michigan.
Montague City Manager Jeff Auch (left) and brothers Jason and Richard Kriesel (right), who own the Montague Foods grocery store, worry what might happen to local businesses if the bridge is closed completely due to high water.
and long-term attention. Already, the U.S. 31 business route is reduced from four to two lanes so pumps can keep water off the lower approaches. It was closed a handful of days last year. “If that were to happen on a regular basis or a permanent basis, it can really paralyze both towns,” said Amy VanLoon, executive director of the White Lake Area Chamber of Commerce. This pair of lake towns with a combined population of 5,000 yearround residents may have one of the worst emerging infrastructure prob-
lems due to Lake Michigan’s record-setting water level. But they’re far from alone. Across the Lower Peninsula, the mitten is soaked, causing untold economic damage to communities that depend on tourists and infrastructure to sustain their way of life. The draft list prepared by MDOT in February estimates nearly $6 million is being spent now and more than $111 million could be needed for roads compromised by historically high water. The list reads like a connect-thedots of scenic spots along the shores of each peninsula. Inland road slopes and shoulders are also awash. See LAKES on Page 15
FINANCE
Entrepreneurs enter new fundraising territory amid virus outbreak BY NICK MANES
Southeast Michigan’s recently growing tech startup and venture capital communities are entering uncharted territory as the state, U.S. and global economies enter a tailspin with no clear crash site and no idea how far the wreckage may scatter. Just two weeks ago, entrepreneurs around metro Detroit and in Ann Arbor were going about their daily lives, pitching their companies to would-be investors and preparing to attend pitch competitions and now-canceled events like the music, tech and culture festival South By Southwest in Austin, Texas.
“THIS IS SURVIVAL MODE. THIS IS NOT GROWTH MODE.” —Kim Gamez, founder and CEO, Mi Padrino
Flash forward just a matter of days and startups and investors in the area are tightening their purse strings, moving all meetings to virtual, making layoffs and wondering if they’ll see any further investment any time in the near future. That’s the case for Ann Arbor-based Mi Padrino, an e-commerce platform targeted at the country’s growing Latino population. The company, which has been actively fundraising and recently closed on $800,000 of a $2 million round, has been “thriving,” according to founder and CEO Kim Gamez. A cash-dependent business, Gamez last week made the decision
that she needed to temporarily lay off two members of her 11-member full-time staff and has implemented a 20 percent pay cut for those who remain, and a larger cut for herself. It’s brand-new territory for the executive who just late last month was pitching to angel investors at an exclusive Oakland County event. Sources agree that capital is now moving to the sidelines as the spread of COVID-19 upends every element of daily life. “This is survival mode,” said Gamez of the cuts she implemented at Mi Padrino. “This is not growth mode.” For Mike Klein, CEO of Ann Ar-
bor-based genomic testing company Genomenon Inc., investors are still open to talking about participating in the 6-year-old firm’s Series A round. But he’s hesitant to believe there will be much more than conversations for now. “Over the last two weeks, I’ve had conversations with 10 new investors, so they’re still open to having conversations,” said Klein. “I don’t know how quickly they’re going to deploy their capital. We’re planning on this taking a lot longer than we expected.” See FUNDRAISING on Page 15 MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 3
PROUD TO ANNOUNCE
%1/+0) 61 &1906190 .#05+0)
Ron and Louie Boji
.CPUKPI 1HĆ‚EG Boji Tower 124 W. Allegan St. Suite 2100 Lansing, MI 48933 PHONE: (517) 377-3000
SPECIALIZING IN PRIVATE-PUBLIC PARTNERSHIPS
$1,+)4172 %1/
5QWVJGCUV /KEJKICP 1HĆ‚EG 255 S. Old Woodward Ave., Suite 310 Birmingham, MI 48009
(QT .GCUKPI 517 351-2200
/CTVKP%QOOGTEKCN EQO
REAL ESTATE INSIDER
Don’t fret just yet about the threat to commercial real estate debt Local experts believe banks and other lending institutions will work with landlords to avoid what could be a recipe for a wave of foreclosures on Kirk commercial real PINHO estate debt in light of the two-week mandated shutdowns of restaurants, bars and other businesses to combat the spread of coronavirus in Michigan. With reduced or no revenue for those tenants, that could crimp rent payments and therefore threaten building owners’ debt service obligations. But most agreed that for most lenders, short-term problems paying back loans won’t be worth the long-term hassle of property ownership. “Now, it’s only for two weeks and no one’s going to lose their property unless they recently bought it and they’re way over leveraged,� said Steven Siegel, vice president of acquisitions for Lutz Real Estate Investments and Q10 | Lutz Financial Services, a commercial real estate finance firm based in Birmingham. “No lender really wants to own a property and all the lenders are in the same position.� Ben Rosenzweig, a retail expert who is vice president of retail brokerage in the Detroit office of Colliers International Inc., echoed similar sentiments. “Moreover, it’s doubtful that the banks want to take back thousands of properties through foreclosure, since they would all have higher vacancy
Rosenzweig
Siegel
rates and (are) difficult to backfill in already.� And it’s also in the landlord’s best interest to accommodate struggling tenants. “From the owner’s financing standpoint, most mortgages require landlords to keep their occupancy and rental rates above a certain threshold. They will be hesitant to evict tenants who may have trouble paying rent during the short term, because they
“NOW, IT’S ONLY FOR TWO WEEKS AND NO ONE’S GOING TO LOSE THEIR PROPERTY UNLESS THEY RECENTLY BOUGHT IT AND THEY’RE WAY OVER LEVERAGED.� — Steven Siegel, vice president of acquisitions for Lutz Real Estate Investments and Q10 | Lutz Financial Services
could put themselves in jeopardy with their bank,� Rosenzweig said. Some are thinking of other ways to avoid the possible problem. “It’s not theoretical. Restaurants will not be able to pay their rent at the
end of the month,� said David Jaffe, an attorney with Birmingham-based law firm Jaffe Counsel PLC. “If their landlord is (large corporate landlord) Blackstone, that’s one thing. But if their landlord is a modest developer or even a decent sized developer, they can’t make their debt service payment.� Jaffe is calling for a commercial rent and debt service moratorium. “The lender has the Fed for liquidity backup. If the banks or bondholders need help, we have a vehicle there that’s much more responsive than the political process to deal with that.� There are thousands of restaurants and bars and other businesses affected by Gov. Gretchen Whitmer’s executive order, including fitness centers, movie theaters, coffee shops, casinos and others. The state has taken unprecedented steps to combat the spread of COVID-19, although there remains a cloud of uncertainty over what precisely the effects of the coronavirus will be on commercial and residential real estate. “Landlords may have to consider flexibility,� said Tjader Gerdom, owner of Novi-based brokerage firm Gerdom Realty & Investment. “It may impact cash flow, just hopefully for a small duration.� Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association, said in a statement that the bar and restaurant industry employs 600,000. He told Bridge Magazine that there are 16,000 restaurants and another 2,000 hotels in Michigan’s $40 billion dining and lodging industry. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
NONPROFITS
We are here to make your project easier. With engineering, architectural, infrastructure, and environmental services in-house and 14 RIĹ´ FHV IRU ORFDO DWWHQWLRQ )LVKEHFN LV \RXU all-in-one solutions provider.
Forgotten Harvest sees surge in food donations as distribution sites close
37 pantry sites in tri-county area close during coronavirus chaos BY SHERRI WELCH
800.456.3824 fishbeck.com
4 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
Thousands of pounds of food have been donated to food rescue Forgotten Harvest following restaurant closures and event cancellations over the past week. But it won’t be easy to get that food to those who need it. Besides the sheer volume of donations, 37 pantry sites in the tri-county area were closed as of late Thursday. Though he couldn’t speak directly to the reason for the pantry closures, ForgotIvey ten Harvest’s director of marketing and communications Christopher Ivey said most of the pantries the Oak Park-based nonprofit supplies in Wayne, Oakland and Macomb counties are typically staffed by volunteers age 60 or older. He did not say how Forgotten Harvest is responding to the loss of those distribution sites but said they come
“THE AMOUNT OF FOOD WE ARE RECEIVING FROM THE LARGE EVENT SITES IS MUCH HIGHER THAN USUAL RIGHT NOW.� — Christopher Ivey, director of marketing and communications, Forgotten Harvest
amid a surge in donations. Following a slew of event cancellations late last week, Gov. Gretchen Whitmer on Monday ordered dining rooms shut. Restaurants can still offer delivery and carry-out, but business is still slow for many. Others decided it wasn’t a viable option and shut their doors. “The amount of food we are receiving from the large event sites is much higher than usual right now,� and that’s expected to continue into next week as the larger event sites go through their refrigerators, Ivey said in an email late Thursday. But donations will soon drop down to normal or less, Ivey said.
“We anticipate once they have donated all they have currently they won’t have anything else since they are not having any new events and not ordering more food.� Donors last week included: ` Greektown Casino-Hotel, 10,000 pounds ` MGM Grand Detroit 9,600 pounds ` Little Caesars Arena, 8,500 pounds ` Country Fresh, 8,400 pounds ` MotorCity Casino Hotel, 7,300 pounds ` The Henry Ford, 4,225 pounds ` TCF Center, 1,100 pounds (total for month of March) ` Comerica Park, 1,000 pounds Ivey said Forgotten Harvest is working with the city of Detroit to coordinate food donations from about 1,500 restaurants in the city. “We do not have the bandwidth to handle every donation, so the restaurants are doing pantry direct deliveries when possible,� he said. Kurt Nagl contributed to this report. Contact: swelch@crain.com; (313) 446-1694; @SherriWelch
YOU KNOW WHAT IT TAKES TO RUN A BUSINESS.
And we’re here to help make it happen. Whether you’re a company of one or a large scale operation, running a business is no small task. It takes passion, drive and dedication. As your business evolves, we’re here to offer experienced guidance and dedicated support to help you. 53.com/CommercialBank
Fifth Third Means Business
Fifth Third Bank, National Association. Member FDIC.
COMMENTARY
Our future depends on a fair education finance system
DANIEL SAAD FOR CRAIN’S DETROIT BUSINESS
BY MIKE JANDERNOA, RIC DEVORE AND DEIDRE BOUNDS
COMMENTARY
A new job, a pandemic and a powerful team I didn’t have to fight much traffic on my first day of work last Monday. Parking in our Gratiot lot was plentiful, too. When you start a new job the same day a global pandemic begins to shut down the country, it helps to look for the positives. As the new executive editor for Crain’s Detroit Business, I expected a learning curve as I transitioned from my previous job across town at The Detroit News. What I didn’t expect was a national emergency. But I couldn’t have joined a more prepared team at a more critical time. A hard-working group was there to welcome me that first, insanely busy day — some in person, some remotely, all dedicated to keeping Crain’s vital newsgathering flowing amid the coronavirus crisis that shows no sign of abating soon. As I get to know my new colleagues from my kitchen table via Zoom — and learn more about Crain’s loyal and engaged audience — I thought I’d share a bit about me. Once “social distancing” is blessedly behind us, I hope to meet more of our readers, business leaders and community stakeholders in person. I’ve spent 30 years in daily newspapers — 15 years as a reporter and editor at The Grand Rapids Press, 15 years at The Detroit News, most recently as managing editor. My tenure at The News included directing business and auto industry coverage, as well as heading up the team that covered the city of Detroit’s historic municipal bankruptcy. In that role, I worked alongside Crain’s Senior Editor Chad Livengood, who I am pleased to reconnect with here, along with several other talented News alums. I’m a board member of the Detroit chapter of the Society of Professional Journalists, a tennis fanatic and owner of a laid-back rescue pup who makes pet therapy visits with me through Hospice of Michigan. As a proud Michigan State University graduate, I live in a house divided with my 21-year-old daughter, Grace, a
Kelley
ROOT
Executive Editor junior at the University of Michigan. You’ll find a half-and-half flag in our yard in Grosse Pointe Woods — with the green on top, of course. So why make the move to the big building on Gratiot? I was drawn to Crain’s by the quality of its news coverage, its focus on reader engagement and its reputation as the go-to resource for the business community in metro Detroit. I’m excited to be part of a respected niche publication that’s committed to innovation in serving its audience, from exclusive in-depth reporting to useful lists and data to large-scale events that educate and bring people together — at least when we’re not in self-quarantine. This past week has been challenging in ways I never imagined. That’s true for all of us, of course. My goal — our goal — is to help you navigate the uncertainty. We’ve dropped our pay wall for coronavirus coverage indefinitely, but I hope you consider supporting our work with a subscription. (You can do that at CrainsDetroit.com/membership.) With local news at risk all over the country, I believe what we provide is worth sustaining. As our managing editor Mike Lee noted last week, facts are the antidote to fear. Our staff is working around the clock to not only bring you the news, but to explain it, put it in context and winnow out what you don’t need. I’m proud to be joining Crain’s at a time when responsible reporting has never been more urgent. Stay safe. Keep reading.
Across the state, business owners are raising the concern: Where are our next highly qualified workers? The answer should be “Right in our backyard.” Unfortunately, the reality is that too many Michigan Mike Jandernoa high school graduates are not ready for the workis the former force, post-secondary CEO and training or college. chairman of A major reason for that Perrigo and is a failure of our state to chairman of 42 recognize that some stuNorth Partners. dents face serious obstacles and require more resources and support to be ready for the world of work and/or postsecondary education. A recent report by The Education Trust-Midwest, Michigan’s School Funding: Crisis and Opportunity, shows how low-income, rural and other Richard DeVore vulnerable students are is regional being left behind because president for the public education they Detroit and are receiving — in part Southeastern driven by our state’s school Michigan for funding system — fails to PNC. meet their needs. This lack of fairness in funding often keeps students with the greatest need from benefiting from the kinds of educational opportunities that every student deserves. The report highlights a national study that ranks Michigan among the five states nationally with the Deidre Bounds widest funding gaps that is president of negatively impact students Ignite Social from low-income families. Media. It’s true that money alone will not fix the state’s educational problems. It’s also true that fair funding based on student need, and insisting that resources are well used to close gaps in opportunity and achievement, are important aspects of the solution. Addressing this challenge will benefit students in low-income regions and rural areas, children with disabilities, and students who speak En-
Kelley Root is executive editor of Crain’s Detroit Business. She can be reached at (313) 446-0319 or kelley.root@crain.com.
Write us: Crain’s welcomes responses from readers. Letters should be as brief as possible and may be edited for length or clarity. Send letters to Crain’s Detroit Business, 1155 Gratiot Ave, Detroit, MI 48207, or email crainsdetroit@crain.com. Please include your complete name, city from which you are writing and a phone number for fact-checking purposes. 6 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
glish as a second language. The Education Trust-Midwest has issued a series of data-driven reports demonstrating how Michigan has fallen behind other states for educational performance and improvement. This latest report looks at states such as Massachusetts and Maryland, which are successfully moving to close the opportunity gap and boost achievement and employability. Other states, including Florida and Minnesota, are improving transparency by making complex school funding systems easier to understand. This is not a political issue, nor is it regional. It’s an issue that affects students and businesses across the state of Michigan that demands commonsense, bipartisan solutions. The Education Trust-Midwest report builds upon several others that argue funding should be based on student need. It goes further to stress that funding for schools should be done in a transparent and accountable manner. For example, every taxpayer should have access to easy-to-understand information from the state about how their tax dollars end up supporting schools. Parents should be able to quickly and easily review the budget and spending at their child’s school — and any other school in the “OUR CHILDREN state. Finally, when funds DESERVE are budgeted to bene- BETTER. OUR fit a student, we all should have confi- EMPLOYERS ARE dence that they are acDEMANDING tually supporting the educational needs of BETTER. OTHER that student. While this idea seems like STATES ARE common sense, it’s DOING BETTER.” not common practice — Amber Arellano, today in Michigan. executive director Amber Arellano, ex- of The Education ecutive director of The Trust-Midwest Education Trust-Midwest, puts it this way: “Our children deserve better. Our employers are demanding better. Other states are doing better.” We agree. Our current system is leaving too many young people behind and ill-prepared for the jobs of today and tomorrow. When faced with a business problem, we examine the data, look for best practices and lessons learned from others, and emulate them. Why can’t this same logic apply to education funding in our state? If we are to have a workforce that meets the needs of employers, it’s vital that Michigan moves toward an education finance system that is adequate and fair for all of the state’s students. Our future depends on it.
Sound off: Crain’s considers longer opinion pieces from guest writers on issues of interest to business readers. Email ideas to Managing Editor Michael Lee at malee@crain.com.
OTHER VOICES
Save the Rainy Day Fund, because we’re going to need it BY CRAIG THIEL
With a recession imminent — and now, with a tsunami of closed businesses and laid-off workers growing, a recession is a certainty — it is vitally important Craig Thiel is research director that the state put tax dollars to for the Citizens wise use. Research Last week the Council of Michigan LegisMichigan. lature passed a $312 million supplemental spending bill, sending it to Gov. Gretchen Whitmer where it now awaits her signature. Contained within the multi-departmental bill is $25 million in state appropriations to address the health and economic consequences of the coronavirus pandemic. Another $125 million in spending for coronavirus response was approved by the legislature this week. These are likely the first of many virus-related state appropriations to come as state and local health officials engage in efforts to mitigate the spread and “flatten the curve.” Also buried in the $312 million spending bill is $37 million for 85 “enhancement grants” that are what is referred to as “pork” — pet projects that only benefit specific constituencies to win political favor. Given future uncertainties related to state funding demands to tackle the new virus and the likelihood that state tax revenues will miss their mark with the current economic slowdown, budget makers should have better scrutinized every dollar allocated in the supplemental. But they failed to do so. Now, with the spending bill on Governor Whitmer’s desk, serious consideration should be given to using her lineitem veto pen to cancel the spending and direct these resources to the state’s rainy day fund in preparation for the impending recession. The timing of recessions is such that economists are not able to date their official start until the economy is already knee-deep in one. Given the global nature of the current pandemic and its widespread economic effects thus far in China and Europe, it is not a question of whether but when a recession hits the U.S. economy. Some economists have already declared that the global economy is in recession. Michigan, with its strong international business ties through the automotive industry, is already feeling the effects of the global slowdown, much sooner than other states. Detroit automakers’ European operations have halted production of new vehicles. As the economic contagion migrates to the U.S., slowdowns in domestic auto production in the state have begun. Adding in the closing of retail and commercial businesses across the state, plus the
reduction in worker productivity from sick workers and social distancing will reduce economic activity across the board in almost every sector. The sales, job and wage losses that will accompany the impending recession are expected to cause a major hit to state tax collections. How much, and for how long, is difficult to project, however. The global financial crisis that birthed the Great Recession caused state General Fund revenues to fall by $2.7 billion over two years, an annual decline of 20 percent in FY2010 and another 7 percent in FY2011. State General Fund appropriations were reduced
MICHIGAN POLICYMAKERS SHOULD BE CONSERVING ALL AVAILABLE RESOURCES IN PREPARATION FOR THE FISCAL REALITIES OF THE IMMINENT RECESSION AND THE ADDED RESOURCE DEMANDS OF THE STATE’S RESPONSE TO THE ECONOMIC AND HEALTH CONSEQUENCES OF PANDEMIC.
by $1.5 billion over the two-year period to match the amount of available revenue. During economic contractions, governments often dip into their rainy day funds to maintain support for critical programs and projects. During the Great Recession, the state’s rainy day fund was empty and provided little relief to budget writers. Since then, the state has built up reserves totaling $1.2 billion in preparation for the next downturn. This amounts to less than one half of the General Fund revenue decline caused by the Great Recession. It’s true that $37 million allocated for pet projects in the supplemental
spending bill barely amounts to a rounding error for the $1.2 billion rainy day fund. But given the revenue declines of the last recession and the limited ability of the reserves to meet current spending priorities, Michigan policymakers should be conserving all available resources in preparation for the fiscal realities of the imminent recession and the added resource demands of the state’s response to the economic and health consequences of pandemic. A good first step would be for Governor Whitmer to veto the $37 million in enhancement grant spending and redirect those resources to the rainy day fund.
Elevate your brand. Elevate your voice. In a time where we are being asked to avoid public spaces and practice social distancing, flexibility is key to business continuity. Let Crain’s Content Studio – Detroit help you generate leads, foster dialogue with potential partners and demonstrate your thought leadership through our virtual offerings, including webinars, virtual roundtables and more.
MORE ON WJR Listen to Crain’s Group Publisher Mary Kramer and Managing Editor Michael Lee talk about the week’s stories every Monday morning at 6:15 a.m. Mondays on WJR 760 AM’s Paul W. Smith Show.
FOR MORE INFORMATION CONTACT: Kristin Bull • kbull@crain.com MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 7
LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS
CO-WORKING SPACES
Beatrice and Eli Wolnerman (in foreground), owners of Bea’s Detroit.
Co-working in the time of coronavirus How businesses that thrive on in-person connection are adapting to ‘social distancing’ BY DOUG HENZE | SPECIAL TO CRAIN’S DETROIT BUSINESS
When small business owners like Beatrice Wolnerman first throw open their doors, they will face some predictable hurdles: employee issues, demanding customers and an uphill, competitive fight. A global pandemic that grinds the U.S. economy to a halt typically isn’t one of them. But it landed on Bea’s Detroit’s doorstep two weeks after its Feb. 27 grand opening. The co-working business trades on community, idea sharing and social interaction. Preventing the spread of COVID-19 requires the opposite: isolation and “social distancing.” “Unfortunately, it was a bad time to open up a co-working space, but we’re hanging in there,” Wolnerman said early last week. “If anyone needs a place to work, we’re staying open.”
8 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
“UNFORTUNATELY, IT WAS A BAD TIME TO OPEN UP A COWORKING SPACE, BUT WE’RE HANGING IN THERE. IF ANYONE NEEDS A PLACE TO WORK, WE’RE STAYING OPEN.” — Beatrice Wolnerman, owner, Bea’s Detroit
Co-working landlords, balancing the safety of their employees and customers with the need to keep their businesses afloat, have been divided on whether the best approach is to stay open or temporarily close. Whichever path they choose, they’re all asking questions about how long they can hold out. WeWork and Hunt Street Station in Detroit, along with Byte & Mortar in Troy, are among those co-working locations opting to remain open. They’re making adjustments to business-as-usual conditions that range from frequent wiping of surfaces and suspension of food service to optional work-at-home options for employees. Bea’s, which offers a shared 7,500-square-foot operating space in Eastern Market geared toward
entrepreneurs, is hoping a super scrub will do the trick. “We are having it professionally cleaned from a cleaning service twice a week,” Wolnerman said. “We are sanitizing, ourselves, three times a day. We’re wiping down door handles. We have hand sanitizer set out.” Karen Burton, co-founder and CEO of co-working operation SpaceLab, is taking the same approach to keep the business churning. Relying on the building landlord’s professional cleaning team to wipe down door handles and elevator buttons each day, her team is supplementing the sanitizing. “We wipe down and disinfect all of the conference rooms after they’re used,” Burton said. See CO-WORKING on Page 9
FOCUS | CO-WORKING SPACES
CO-WORKING
From Page 8
Unlike Bea’s — new enough that some of its 30 or so members hadn’t stopped by before the pandemic hit — SpaceLab has an established clientele. In business downtown since 2017, in a 7,000-square-foot space on Shelby, the company opened a second location, in a 6,000-square-foot space on Seven Mile Road in August 2019. “Our members who have the key fobs can come in (to private offices and dedicated desks),� said Burton, whose two locations have about 90 members. “We are still offering day passes (downtown only), but we are limiting them to keep our social distancing.� Meeting spaces still are available, but appointments now are necessary. Groups of 10 or more are prohibited and coffee, tea and water service is suspended.
Taking a pause The Downtown Education Nook in Auburn Hills and TechTown, the Strategic Community Partners Community Center, Detroit Parent Collective and Detroit Writing Room, all in Detroit, are among those co-working spaces that have hit the pause button for now. Build Institute, an entrepreneurship nonprofit in Detroit that offers co-working in its 3,000-square-foot facility on Michigan Avenue on the site of the former Tiger Stadium, shut its doors March 16, until at least the end of this month. “Our team is actively working remotely until March 30,� said Jordan Yagiela, Build Institute’s manager of community workspace. “We decided it made the most sense, to protect our clients and our team members.� Build Institute, founded in another location in 2012, has 10 team members and 10 active co-working clients. The organization also administers zero-interest small business loans to underserved populations and offers classes that bring 100 to 150 people to the location at the same time. “We have many people that come in and out of our space on a daily basis,� Yagiela said. So far, employees are drawing regular paychecks and no clients have asked for membership refunds, she said. “If that’s something they would like, we’re definitely willing to work with them,� Yagiela said. As with many other small businesses right now, it’s uncertain whether and how some co-working spaces will weather the storm. “We hope so,� Yagiela said, when asked if Build Institute could continue to operate. “There’s, of course, concern, but we are actively working to keep doing what we’re doing. We’re not exactly sure what (the future’s) going to look like. Right now, we’re exploring options to have virtual classes and online classes.� Burton and Wolnerman, while opting to keep their doors open, also are trying to hang tough. “Our numbers for our members are way down from a week ago,� Burton said last week. “Most (members) are working from home.� While a handful of members worked away in their private offices last week, meetings that would have brought in 50 or so people from across the country had to be canceled. “We’ll see how long it lasts,� Burton said. “We are privately owned. We don’t have the backing of a corporation.� Employees are being paid and Burton recently was able to sign up a new
Melissa Wojnar-Raycraft has extensive experience with state government and regulatory law, and can help you successfully navigate the increasingly complex governmental environment.
SpaceLab has a 7,000-square-foot space on Shelby and a 6,000-square-foot space on Seven Mile Road.
STATE GOVERNMENT AND REGULATORY LAW
Build Institute, an entrepreneurship nonprofit in Detroit that offers co-working in its 3,000-square-foot facility on Michigan Avenue on the site of the former Tiger Stadium, shut its doors March 16, until at least the end of this month.
member, even during the virus scare. “Income is a concern,â€? she said, adding that SpaceLab is looking at doing virtual co-working to stay connected with members and as a possible future income stream. “I’m being optimistic,â€? she said. “I’m thinking this is a way for us to expand (our reach).â€? At Bea’s, Wolnerman saw attendance by her fledgling membership nosedive, too. “We had 10 to 15 people here at a time (initially) and that started trickling off every week,â€? she said. “They’re just working from home or taking some time off to self-quarantine and stay safe.â€? Early last week, only staff and a couple of members ventured in, she said. In addition to cleaning, Wolnerman was using her time to get health department clearance for a cafĂŠ that, obviously, can’t yet open and to set up a virtual event where 20 or so businesses planned to discuss how they were surviving the COVID-19 chaos. Unless the space closes, Wolnerman doesn’t anticipate refunding memberships — which initially were discounted anyway — and employees still were getting full wages, she said. “We told (employees), if they’d be more comfortable working from home, they can do that,â€? Wolnerman said. “They have been here every day.â€? To stay afloat during the COVID-19 crisis, Wolnerman said she and her husband are relying on personal savings, with hopes the world soon will return to normal. “If we had to shut down, we would do that,â€? she said. “It would be a tough decision. We’re planning on staying open, as long as possible.â€?
Livonia, MI | www.mikecoxlaw.com (734) 591-4002 | mraycraft@mikecoxlaw.com
GET A HEALTHIER OUTLOOK ON CHILDHOOD Tune in to WJR 760 AM for Caring for Kids, a monthly radio program highlighting issues and efforts locally, regionally and nationally, that impact the health and wellness of children.
LISTEN TO WJR AM LIVE Tuesday, March 24 at 7pm
Advocating for the health & wellness of children and families
SPECIAL GUESTS
LIBBY RAPIN Founder Something Beautiful Co-Founder Oh Infinite Love
BROUGHT TO YOU BY
BOB BURY President and CEO The Fair Lane Board President Grosse Pointe Foundation for Public Education
KEITH HOWELL Director of Elementary Instruction Grosse Pointe Public Schools
HOST
MATT BELL President and CEO Midwest Recovery Center
LARRY BURNS President and CEO The Children’s Foundation
For more information and to listen to past shows visit:
yourchildrensfoundation.org/caring-for-kids MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 9
COMMERCE
Food warehousing company sees growth in coronavirus chaos Novi-based Lineage Logistics needs to hire 2,000 more workers globally in next eight weeks BY DUSTIN WALSH
Despite a two-week mandated shutdown of dine-in service at bars, restaurants, breweries and coffee shops in Michigan and several U.S. states amid the coronavirus outbreak, Novi-based Lineage Logistics LLC needs to hire 2,000 more workers globally in the next eight weeks. The world’s largest cold storage provider to the food industry is ramping up efforts to supply grocery stores as quickly as possible as concerned consumers continue to stock up on provisions, CEO Greg Lehmkuhl said. In fact, one-third of all food transported throughout the U.S. enters one of Lineage Logistics’ cold-storage facilities. “We’re seeing a huge increase in the volumes, an unprecedented rise,” Lehmkuhl said. “Our retail customers are seeing a 20 percent to 50 percent increase in end sales, so everyone is doing what they can to support the end demand.” For Lineage, that means stepping up efforts to prevent a COVID-19 outbreak in its own facilities. Lehmkuhl said the company is sanitizing operations and workers after breaks and between shifts. However, an outbreak wouldn’t stop operations, he said. “Our team is essentially first responders,” he said. “If one of them gets sick, we send them home and sanitize. That’s the protocol right
Lineage Logistics’ cold storage warehouses like this one in Woodbridge, N.J., are staying busy during the coronavirus outbreak. | LINEAGE LOGISTICS
now. With onethird of the food consumed coming through our facilities, we have no intention of stopping production even if we see a spike in our buildings. We’ll Lehmkuhl put salaried workers in hourly positions if we have to. (Food) retailers and manufacturers are in the
same position.” Lineage is looking to the restaurant, sports and entertainment industries that have been impacted by closures to fill the open positions. Gov. Gretchen Whitmer ordered last week a two-week prohibition of dine-in service at bars, restaurants, breweries and coffee shops and shuttering movie theaters, fitness centers, libraries and other public accommodation businesses to combat the spread of the coronavirus that causes the dangerous COVID-19.
The governor’s sweeping order allows restaurants, bars, taverns, breweries and distilleries to keep their kitchens open for carry-out meals as well as delivery, drive-through and curbside service. Food courts at airports are exempt. The closure order also applies to gymnasiums, indoor sports facilities, indoor exercise facilities, exercise studios, spas, recreation centers and casinos. Detroit’s three casinos also suspended operations Monday. The encouraged “social distancing” and now mandated temporary halt of dine-in restaurant service has pushed more product toward grocery stores. “The food no longer goes to Cisco or U.S. Food. It now goes to Walmart or Target or Piggly Wiggly or whomever,” Lehmkuhl said. “A significant portion of our business went to restaurants. Now they are getting killed. But it hasn’t slowed us down because of retailer demand.” Lehmkuhl said grocery retailers have seen a massive spike in online ordering coupled with delivery or pickup, especially among consumers 60 years old and older, a trend he believes will continue long after the coronavirus is controlled. “We’re seeing a massive shift to online business,” he said. “Retailers, big and small, have said online sales have already doubled compared to February. That 60-years-plus demographic is now online. That has our
customers thinking about how to restructure long-term. Once seniors go to online retailing, they’re not going back. The spike we’re seeing in online purchasing may never go down.” North American online grocery sales are projected to make up 13 percent of all grocery sales by 2022, up from just 3 percent in 2018, according to estimates from the Food Marketing Institute. That’s roughly $100 billion in sales up for grabs through 2022. Lineage is a company made on big bets. Born in 2012 through the consolidation of warehousing and logistics assets by private equity firm Bay Grove Capital LLC, Lineage Logistics is now the largest refrigerated warehousing company in the world with 275 locations in North America, Europe and Asia. The company moved its headquarters to Novi from Irvine, Calif., in 2017. After several acquisitions in 2017 and 2018, Lineage agreed in November 2019 to acquire Emergent Cold in a deal reportedly worth more than $900 million. It now operates in 11 countries, totaling 1.7 billion cubic feet of cold storage warehousing. Lineage’s Novi headquarters employs 150. Its nearest warehouse to Southeast Michigan is in Chicagoland. Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh
MANUFACTURING
Korex faces regulatory roadblocks to produce hand sanitizer BY CHAD LIVENGOOD
A Michigan-based detergent and cleaning supplies manufacturer said federal regulators won’t let the company mass produce hand sanitizer at a plant in Toronto for six months to a year amid the crushing demand for the product to combat the spread of coronavirus. Sandy Pensler, the owner of Korex Cos., said early last week that he’s been stymied by the U.S. Food and Drug Administration and the Environmental Protection Agency in restarting production of hand sanitizer. “We haven’t been able to get FDA or EPA clearance,” Pensler told Crain’s. Federal regulators said it would take “six months to a year to get all of the testing completed,” said Pensler, founder and president of Pensler Capital Corp., the Grosse Pointe Parkbased parent company of Korex Cos. Crain’s contacted Pensler on Tuesday after Gov. Gretchen Whitmer disclosed during a conference call with reporters that “there is a company in Michigan that might be able to start producing in mass hand sanitizer.” State officials did not have immediate information Tuesday afternoon about the company the governor referenced. Pensler said he has not been in contact with the governor’s office. The Korex Cos. plant in Toronto previously manufactured liquid hand sanitizer, and it has the explosion-proof tanks needed to produce an alcohol-based disinfectant that kills 99.99 percent of germs and bacte10 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
The three Korex plants have been “busy” in recent weeks as American consumers stock up on soaps in response to the coronavirus outbreak. “We have some challenges with suppliers,” Pensler said. In 2018, Pensler unsuccessfully ran for the Republican nomination for U.S. Senate. He said last week that he had not yet called Republican members of Michigan’s congressional delegation to seek assistance navigating the regulatory process.
Korex Cos.’ manufacturing plant in Wixom.| DUSTIN WALSH/CRAIN’S DETROIT BUSINESS
ria, Pensler said. Two months ago, following the early outbreaks of the coronavirus in China, Pensler said his company began trying to get the necessary government apPensler provals in the U.S. and Canada to get back in the hand sanitizer business. Pensler said he hired a consultant who struck out with federal regulators in a second attempt two weeks ago. “We tried to use (the outbreak) to get back into the market, because there’s shortage of (hand sanitizer),” Pensler said. “And we couldn’t do it. We were told (two weeks ago) it was six months at a minimum and a year, more likely.”
Pensler said it has been several years since Korex’s Toronto plant manufactured hand sanitizer. He said he couldn’t recall exactly when it stopped. Korex needs FDA approval and an EPA registration number to import the product from Canada into the U.S., Pensler said. “That takes the longest,” he said. Korex Cos. manufactures hand and dish soaps, dishwasher detergent, laundry detergent and other household cleaning supplies for Clorox, Ultra Shine, OxiClean, Walmart’s Great Value and the private labels of Amazon, Wegmans Food Markets Inc. and Kroger. Pensler has previously said Korex products are manufactured at three plants in Wixom, Toronto and Chicago and shipped all over North and South America.
Distilleries explore sanitizer production Pensler isn’t the only Michigan entrepreneur trying to respond to scarce inventory of hand sanitizer in pharmacies and supermarkets — and finding difficulties in bringing a product to market. A Grand Rapids distillery wants to make the seemingly short leap into making a hand sanitizer product amid the ongoing outbreak. Jon O’Connor, co-owner of Long Road Distillers and president of the Michigan Craft Distillers Association, said his company has already had talks with federal regulators about taking some of its 190-proof base and making it into ethyl alcohol, an active ingredient in hand sanitizer that can be used to fight off the disease. “We’re confident we understand the manufacturing process to create it, we’re confident we can do everything to make a product that works,” O’Connor said.
Late last week, the state Alcohol and Tobacco Tax and Trade Bureau relaxed its regulations to allow beverage distillers to make denatured alcohol, used as an ingredient in hand sanitizer, through the end of June or later as warranted. The challenge, according to O’Connor, will be finding secondary materials needed to make the product — which could be a gel or a spray — and enough packaging. Long Road Distillers has already secured a small quantity of plastic bottles to distribute the product. “However we can make it work the most efficient way,” he told Crain’s. “I don’t think we’re hoping to do this because we’re hoping to get rich off this. It’s something we can do as a public good (and) even at a small scale, we’re willing to try.” Michael Forsyth, co-owner of Detroit City Distillery, said his distillery on Gratiot Avenue is capable of making hand sanitizer and disinfectant spray. He’s already made some to be used around his building. However, producing it for mass distribution presents a series of difficulties. “There are challenges for licensing to do it by the book, but more importantly, the supply chain is super stressed, so procuring the necessary ingredients like aloe and containers would be difficult,” he said. “Obviously, we are in a very unique time. If the government called on us, we’d do our part. That’s the Detroit way.” — Crain’s Detroit Business reporters Nick Manes and Kurt Nagl contributed to this report.
INSURANCE
Virus outbreaks generally not covered by business insurance With small businesses getting hit financially by the COVID-19 outbreak, many will look at their insurance policies to see what’s covered. For many businesses, forced to close or vastly limited in their ability to conduct business due to state mandates, the hope would be those events would trigger their business-interruption coverage. The reality, however, appears far more murky. “We offer it for sure,” said Joe Haney, president of Sterling Heightsbased Sterling Insurance Group, referring to the policy. He noted that it’s difficult to tell whether business interruption coverage would apply to property insurance, liability, workers’ compensation or something else. “I would not say it’s not covered (but more) depending on how policy is written, carrier, claim and agent assisting them,” said Haney. “I have heard about other agents telling clients no coverage in any circumstance.” Joe Infante, a corporate attorney and principal in the Grand Rapids office of law firm Miller Canfield Paddock & Stone, told Crain’s that many insurers began removing infectious disease from their business interruption coverage around a decade ago during the outbreak of H1N1, a disruptive flu epidemic. “So most places aren’t going to have it,” said Infante. Rob Fowler, the CEO of Lansing-based Small Business Association of Michigan, appears to agree with that assessment. “This situation is almost not covered by traditional business interruption insurance,” Fowler said during a briefing on the pandemic, according to a report in Grand Rapids business publication MiBiz. Some states are taking action to ensure that insurance carriers do pay up due to the outbreak — which has created a global recession — or at
GETTY IMAGES/ISTOCKPHOTO
BY NICK MANES AND JAY GREENE
least clearly explain what the policies do and do not cover. In a briefing memo to clients this week, law firm Miller Canfield noted that New York State’s insurance and financial regulatory body has “instructed all property and casualty insurers providing business interruption coverage in New York to provide a ‘clear and concise explanation of benefits’ to all commercial policyholders. In each such explanation, the insurance company is required to
answer whether a policy covers ‘business interruption,’ ‘contingent business interruption,’ and what specifically is covered under the policy.” Legislation introduced last week in the state of New Jersey would force insurers to pay for business interruption claims stemming from the COVID-19 outbreak. “While the current pandemic is new, the potential that policyholders would look to their business interruption insurance to cover
COVID-19-related losses is not,” attorneys at East Coast law firm of White & Williams LLP wrote this week of the New Jersey bill. “Over a decade ago, the insurance industry took action to curtail insurance coverage for the next pandemic, including of the coronavirus type.” It’s unclear what, if any, measures are up for debate among Michigan policymakers as they work to blunt the impact of the COVID-19 outbreak, which includes $125 million in new
supplemental spending. While attorneys like Infante say they’re hopeful that businesses in Michigan can fall back on their insurance policies, they also note that many small-business owners have more pressing issues to address. “They’ve got to figure out how to pay the employees in the short term,” said Infante. “Even business interruption insurance, that’s not going to help pay the employees in the short term.”
WORKFORCE
Coronavirus questions: Can employers take a worker’s temperature? Experts say better to pose uniform screening questions, bar those who have traveled overseas BY CHAD LIVENGOOD
The coronavirus outbreak has upended workplaces where employees work alongside each other every day, sometimes fighting coughs and colds. That has raised a series of new legal quandaries for employers to consider as they try to maintain operations, particularly for manufacturing facilities that remain open in Michigan after Gov. Gretchen Whitmer ordered Monday the closure or restricted operations of a vast array of public accommodation businesses. Whitmer also has ordered hospitals and nursing homes to begin screening employees and denying their entry if they display “symptoms of a respiratory infection, such as fever, cough, shortness of breath or sore throat.” Can other businesses go further by requiring temperature checks
GETTY IMAGES/ISTOCKPHOTO
for employees or contractors entering their premises? “I’m not a big fan of that,” said Rebecca Davies, a labor and employment attorney at Butzel Long. “If you start taking people’s temperatures, that’s a medical inquiry and could violate the (Americans with Disabilities Act).” Davies said “the best course of action” is for employers to establish uniform screening questions asking employees and employees of vendors about their general health before they enter a fast-food restaurant, manufacturing plant or office building. Employees can be sent home to
self-quarantine for 14 days if they’ve come in contact with anyone who tested positive for COVID-19, Davies said. “That’s what you want to do instead of assessing somebody’s medical condition,” Davies said. “We don’t want employers turning into doctors.” Employers also can ask and deny entry if their employees, contractors or vendors’ employees have traveled from countries with high rates of coronavirus infections, such as Italy, Spain, China or Iran, said Megan Norris, an employment law attorney Miller Canfield. “You’re allowed to ask people
questions about anything the CDC has targeted as a high risk,” Norris said. “But every time somebody sneezes doesn’t mean they have something.” In recent days, the Centers for Disease Control and Prevention has listed more than 30 countries with high rates of coronavirus transmission that should prompt Americans to self-quarantine if they’ve traveled to those countries in the last 14 days. They now include Germany, France, Ireland and the rest of the United Kingdom. Norris said the “very unusual times” may give employers legal leeway to bar employees from entering the building if their temperature exceeds 100.4 degrees Fahrenheit, the temperature benchmark for a fever. “When the health risk outweighs the business risk we’re going to go with the health because it’s going to close down your business if everybody gets sick,” Norris said.
Both Davies and Norris said businesses should establish standardized practices for denying employees, contractors and customers entry into their premises based on health reasons. Last week, the Miller Canfield law firm established an internal task force of attorneys from different disciplines to triage coronavirus-related issues for business clients, said Rick Walawender, co-leader of Miller Canfield’s corporate group. “We’ve been getting a lot of phone calls from clients,” Walawender said. “It really runs the gamut of issues.” Detroit-based Butzel Long has created an online resource center on the law firm’s website for different business sectors and is planning to host a free webinar Wednesday on “real-life employment situations presented by COVID-19.” Davies will be one of the presenters. MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 11
CRAIN'S LIST: MICHIG MICHIGAN AN BU BUSINE SINES SS INSUR INSURANCE ANCE A AGENCIE GENCIES S AND COMP OMPANIE ANIES S Ranked by 2019 business insurance revenue Company Address Phone; website
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 17 19 20
Top executive(s)
H.W. Kaufman Group Inc./Burns & Wilcox Ltd.
Alan Jay Kaufman, chairman, president and CEO; Daniel Kaufman, EVP, COO
Auto-Owners Insurance Co. Inc.
Business insurance revenue 2019/2018
Revenue 2019/ 2018
Premium volume ($000,000) 2019
Employees Jan. 2020 Michigan/ Total U.S. 2020
Worldwide employees Jan. 2020
Insurance category
$2,400.0
$2,400.0 $2,250.0
$2,400
249 1,561
1,825
Insurance Company
Jeffrey Tagsold chairman and CEO
2,148.3
2,148.3 1,871.7
7,835
2,978 5,366
5,366
Insurance Company
Acrisure LLC
Gregory Williams president, CEO
1,129.0
1,882.8 1,392.7
NA
1,087 7,460
8,222
Insurance Company
Amerisure Mutual Insurance Co.
Gregory Crabb president and CEO
840.0
840.0 839.3
NA
Insurance Company
AmeriTrust Group Inc.
Patrick Stewart CFO & treasurer Kenn Allen president and CEO
622.9
622.9 632.2
798
Insurance Company; Insurance Agency
Marsh & McLennan Companies Inc. (MMC)
Jason Wells, Michigan risk management segment leader and Detroit office head
148.0
148.0 146.0
NA
Insurance Company
Gallagher
J. Patrick Gallagher Jr., chairman, president and CEO; Lenny Brucato, area president, benefits & HR consulting; Michael Miller, area president, insurance & risk management
92.2
92.2 65.8
NA
398 16,987
33,247
Insurance Agency
Brown & Brown of Detroit
Jason Vandeberghe EVP
71.0
71.0 68.2
425
563 8,597
8,597
Insurance Agency
Marsh & McLennan Agency LLC - Michigan
Becky McLaughlan, president and CEO, Health & Benefits; Dan Hale, president and CEO, property & casualty
46.5
46.5 40.6
1,858
157 157
157
Insurance Agency
Valenti, Trobec, Chandler Inc./VTC Insurance Group
Alan Chandler president and CEO Jeffrey Chandler EVP
37.7
40.0 39.5
234
158 164
164
Insurance Agency
Hylant Group Inc.
Patrick McDaniel, Michigan partnership leader'; Michael Nixon, senior VP, SEMI employee benefits leader
29.8
32.8 31.9
486
146 739
739
Insurance Agency
AssuredPartners Inc.
Maureen Gallagher managing director Melissa Armatis and Joel Clark profit center leaders
22.9
22.9 21.1
4
356
99 6,000
6,000
Insurance Agency
Kapnick Insurance Group
Jim Kapnick CEO
17.3
34.5 33.3
5
315
176 179
181
Insurance Agency
The Huttenlocher Group
David Huttenlocher CEO
15.2
19.8 17.5
165
112
NA
Insurance Agency
Ralph C. Wilson Agency Inc.
Robert Farris COO & executive VP Stefano Vannelli CEO & president
8.1
8.6 8.5
224
51 51
51
Insurance Agency
Oswald Companies
Catherine Kosin senior VP, Michigan market leader
7.0
7.0 6.5
65
30 429
429
Insurance Agency
Johnston Lewis Associates Inc. (dba JLA Insurance Group) Jay Sawmiller 5600 New King Dr. Troy 48098 248-528-2400; www.johnstonlewis.com
CEO Mike Cardella EVP
6.3
7.1 6.6
66
49 49
49
Insurance Agency
Capital Insurance Group
Robert Moglia Jr. president; Tom Moglia, Edmund George, Donn Johnson, VPs
6.3
6.3 6.3
NA
27 27
27
Insurance Agency
Allied Insurance Managers Inc.
Jayson Bass CEO Bill Sheldon president
5.3
5.3 4.9
36
27 27
27
Insurance Agency
KIG Insurance
Jeffrey Belen president
5.0
8.1 8.9
66
54 54
54
Insurance Agency
30833 Northwestern Highway Farmington Hills 48334 248-932-9000; www.hwkaufman.com
6101 Anacapri Blvd. Lansing 48917 517-323-1200; www.auto-owners.com 5664 Prairie Creek Drive, SE Caledonia 49316 800-748-0351; www.acrisure.com 26777 Halsted Road Farmington Hills 48331 248-615-9000; www.amerisure.com 2
26255 American Drive Southfield 48034-6112 248-358-1100; www.ameritrustgroup.com One Towne Square, Suite 1100 Southfield 48076 248-945-5600; www.mmc.com
30150 Telegraph Road, Suite 408 Bingham Farms 48025 248-203-0626; www.ajg.com
35735 Mound Road Sterling Heights 48310 586-977-6300; www.bbdetroit.com 3331 W. Big Beaver Road, Suite 200 Troy 48084 248-822-8000, 734-525-2463; www.mma-mi.com 1175 W. Long Lake Road Troy 48098 248-828-3377; www.vtcins.com
2401 W. Big Beaver Road, Suite 400 Troy 48084 248-643-8750; www.hylant.com 3099 Biddle Ave. Wyandotte 48192 734-283-1400; www.dalymerritt.com 1201 Briarwood Circle Ann Arbor 48108 888-263-4656; www.kapnick.com 1007 W. Huron Waterford Township 48328 248-681-2100; www.hgway.com 26026 Telegraph Road, Suite 100 Southfield 48086 800-638-1174; www.rcwa.net
39572 Woodward Ave., Suite 201 Bloomfield Hills 48304 248-433-1466; oswaldcompanies.com
1263 W. Square Lake Road Bloomfield Hills 48302 248-333-2500; www.capitalinsuranceagent.com
1055 S. Blvd. E., Suite 110 Rochester Hills 48307 248-853-0930; www.alliedinsmgr.com 26877 Northwestern Highway, Suite 400 Southfield 48033 248-352-5140; www.getkig.com
$2,250.0
NA
792.9
NA
632.2
NA
NA
68.2
40.6
37.4
NA
21.1
16.2
13.5
8.1
NA
5.8
NA
4.9
5.0
1
1
NA
607
3
319 798
NA
Want the full Excel version of this list — and every list? Become a Data Member: CrainsDetroit.com/data
This list is an approximate compilation of the largest such agencies and companies in Michigan. It is not a complete listing but the most comprehensive available. Unless otherwise noted, information was provided by the companies. Companies with headquarters elsewhere are listed with the address and top executive of their main Michigan office. NA = not available. 1 Crain's estimate. 2 Meadowbrook Insurance Group announced in October 2018 that it had changed its name to AmeriTrust Group Inc. 3 Includes Marsh, Mercer and Oliver Wyman figures. 4 AssuredPartners' 2017 revenue figure represents revenue from its Daly Merritt Insurance subsidiary. The 2018 figures also include J.P. Clark Agency, which AssuredPartners acquired in 2018, and AssuredPartners' risk management unit. 5 Kapnick Insurance Group acquired A.E. Mourad Agency of Madison Heights in October 2018. 2018 figures include A.E. Mourad. 12 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
CRAIN’S
THOUGHT LEADERS TAP INTO THE POWER OF
VIRTUAL INFLUENCE. Crain’s Thought Leaders gives you an opportunity to showcase your expertise and address the Southeast Michigan business community about current events, trends and hot issues, from the comfort of your home office. Each Crain’s Thought Leader will have an opportunity to write a 400-word piece about their chosen topic; this piece will be published alongside a display ad in the printed issue. Thought Leader columns will also live in the content hub on CrainsDetroit.com for one year, appear in native ads online and in our e-newsletters.
See a topic you’re interested in influencing?
APRIL 13 // Cybersecurity // DEADLINE EXTENDED! APRIL 20 // Commercial Real Estate APRIL 27 // Healthcare MAY 4 // Wealth Management MAY 11 // Technology MAY 25 // The Future of Work // SELLING FAST! JUNE 1 // Healthcare JUNE 8 // Mobility JUNE 15 // Human Resources JUNE 29 // Diversity & Inclusion JULY 13 // Labor Law // Selling fast! JULY 27 // Cybersecurity AUGUST 3 // Talent Attraction and Retention AUGUST 24 // Wealth Management SEPTEMBER 28 // IP Law OCTOBER 2 // Manufacturing OCTOBER 19 // Corporate Social Responsibility NOVEMBER 2 // Healthcare NOVEMBER 23 // Private Equity DECEMBER 14 // Economic Outlook // SELLING FAST! Close date 3 weeks prior to publication date; materials must be received 2 weeks prior to publication.
Contact Kristin Bull at kbull@crain.com for more information on this custom advertising opportunity
DEVELOPMENT
‘Final answer’: Hudson’s site tower will be second-tallest in Michigan BY KIRK PINHO
After more than three years of design, height and programming changes, Dan Gilbert’s real estate company says it is now set to build what would be the second-tallest building in Michigan on the site of the former J.L. Hudson’s department store downtown. At a new proposed height of 680 feet, the Hudson’s tower would only be eclipsed in height in Michigan by the 727-foot Detroit Marriott at the Renaissance Center. The new height represents a 25 percent reduction, however, from what was being considered in the fall 2018. Bedrock LLC CEO Matt Cullen in an interview with Crain’s last week said that programming considerations ended up dictating the new height, which has been in flux since initial plans were revealed for it in February 2017, when it had a tower that was 734 feet, besting the RenCen hotel by a mere 7 feet. It then rose to 800 feet, and then a possible 912 feet, before Bedrock executives last summer began to soften their claims that the building would be the state’s tallest. In January, Cullen told Crain’s and the Detroit Free Press during the Detroit Policy Conference that the tower would not be the state’s tallest, but didn’t know what the precise height would be. “We’re confident (680 feet) is the final answer,” plus or minus a few feet, Cullen said last week. The current uses include 225,000 square feet of residential space (150 units) and 286,000 square feet of hotel space (200 to 250 rooms) in the tower, along with a 232-foot building referred to generally as “the block” to the north that includes 402,000 square feet of office space, 127,000 square feet of event space and 18,000 square feet of retail
DEALS&DETAILS CONTRACTS SAE International, Troy, an association of mobility professionals, has a contract with Bianchi Public Relations Inc., Troy, a public relations firm, to provide public and media relations support in Detroit and Silicon Valley in 2020. Websites: sae.org, bianchipr. com DeMaria, Detroit, a construction firm, was awarded the contract for the Hutchins Hall Auditorium renovation located on University of Michigan’s central Ann Arbor campus. The project includes renovating the 4,500-square-foot space with new carpentry, paint, stained glass window repairs, installation of new auditorium seating and audio/video systems. Website: demariabuild.com
EXPANSIONS A view of the former site of the J.L. Hudson’s department store property in November 2019. | KIRK PINHO/CRAIN’S DETROIT BUSINESS
space. The tower and the block are to be separated by an activated alley. “When you look at the program, you say ‘what’s a high end hotel?’ That’s 200-250 keys, right? What’s the market for residential of this type? You do that and then that defines the program, and then the program obviously defines what you’re building,” Cullen said. “And so, I think we’ve had the opportunity to really refine the program and understand what the market wants, what Dan wants to reflect as far as the characteristics of the building, as far as the quality of the building ... and here’s how many square feet we need in order to accommodate that. And then that gets translated into height and width and everything else.” Cullen said there is a March 31 Board of Zoning Appeals meeting during which the company expects consideration of variances to allow a building of 680 feet (instead of the 360 feet currently allowed) in height and
132 feet in width (instead of the 60 currently allowed), and a development with six loading docks, half of the 12 required under city code. The Hudson’s development is now anticipated to be complete in 2023. Foundations are expected to be completed by the end of the month and above-grade building is expected to be visible by the summer. Large cranes are expected to begin being delivered and assembled April 3. The project has undergone a slew of changes. At the time of a December 2017 groundbreaking ceremony, the project was expected to be complete in 2022 and have 330-450 residential units; 103,000 square feet of retail, food and beverage space, plus a street-level market; 168,000 square feet of event and conference space; and 263,000 square feet of office space. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
Beef Daddy’s, a restaurant, has opened at 15771 Hall Road, Macomb. Beef Daddy’s started in 2007 at a gas station in Warren. Website: beef-daddys.business.site The Michigan Institute for Advanced Surgery, Lake Orion, an ambulatory surgery center, added 2,000 square feet to its existing 15,000-square-foot facility. The additional space houses a new procedure room for less invasive surgical procedures and added sterile storage. Website: michiganadvancedsurgery.com
MERGERS & ACQUISITIONS H.W. Kaufman Group, Farmington Hills, a network of insurance companies, acquired Barbican Protect Limited, London, England, a managing general agent that specializes in commercial property, casualty, financial lines and marine in the United Kingdom. Barbican Insurance Group, will rebrand as Burns & Wilcox. Websites: burnsandwilcox.com, hwkaufman. com, barbicanprotect.com Masco Corp., Livonia, manufacturer of home improvement and building products, sold Masco Cabinetry to
ACProducts Inc., The Colony, Texas, manufacturer of cabinets, for $850 million in cash at closing and preferred stock issued by a holding company of the buyer with a liquidation preference of $150 million. Websites: masco.com, acpicorp.com Jonas Software, Markham, Ontario, Canada, a software company, a acquired Club Caddie Inc., Grosse Pointe, a provider of golf management software. Websites: clubcaddie.com, jonassoftware.com Taubman Centers Inc., Bloomfield Hills, a real estate investment trust that invests in shopping centers, has sold 50 percent of Taubman Asia’s interest in CityOn.Xi’an, Xi’an, China, a shopping center, to real estate funds managed by Blackstone Group Inc., New York, N.Y., an asset management company, for $91 million. Net proceeds to Taubman are expected to be approximately $51 million following the allocation of debt, taxes and transaction costs. Following the sale, Taubman will own a 25 percent interest in the shopping center. Website: taubman.com, blackstone.com Derek Blair, a Northville resident, has purchased The Northville Gallery Art & Framing, 123 E. Main St., Northville, an art gallery and framing business. Website: northvillegallery. com Graphic Sciences Inc., Madison Heights, a document management products and services company, was acquired by Intellinetics Inc., Columbus, Ohio, a cloud-based content services software provider, from NuVescor Group, Hudsonville, an investment group, Each company will continue to operate under its own name, maintain current offices and experience minimal changes in personnel. Websites: intellinetics. com, gsiinc.com, nuvescor.com Mans Lumber and Millwork, Trenton, a lumber and building materials company, acquired Legendary Millwork Inc., Troy, manufacturer of custom millwork, trim and doors. Websites: manslumber.com, legendarymillworkinc.com
Advertising Section
PEOPLE ON THE MOVE
To place your listing, visit www.crainsdetroit.com/people-on-the-move or, for more information, please call Debora Stein at (917) 226-5470 or email dstein@crain.com. LEGAL
PROFESSIONAL SERVICES
PROFESSIONAL SERVICES
Foley & Lardner LLP
Baker Tilly
BeneSys
Lynn Gandhi has joined Foley & Lardner’s Detroit office as partner in its Business Law Department and Tax, Benefits & Estate Planning Practice Group. She comes with more than 30 years of experience counseling on complex taxation issues, including 18 years serving as in-house tax counsel for major corporations. She is widely recognized as a leading state and local tax attorney, and has led legislative and administrative changes in tax laws that benefit business entities and their owners.
Baker Tilly, a leading tax, advisory and assurance firm, welcomes Andrew Bernhard as Director to our leadership team at our Southfield office. Andrew brings to the firm more than 18 years of experience managing global consulting and sales teams including profit and loss, as well as providing middle market clients with strategic and tactical solutions. He also brings demonstrated experience building partnerships, translating ambiguity into tangible solutions and facilitating client growth.
BeneSys is pleased to announce the promotion of Mary Weir to Senior Vice President, East. Her expanded responsibilities include the critical task of managing client relationships, ensuring client satisfaction with our services and providing new and innovative ways to help our clients with their challenges. Mary brings 22 years in the TPA industry focusing on Taft Hartley clients and her focus on process and quality has helped lead standardization efforts in numerous departments at BeneSys.
NEW HIRE? PROMOTION? BOARD APPOINTMENT?
ANNOUNCE YOUR
BIG NEWS IN CRAIN’S!
Crain’s People on the Move showcases industry achievers and their companies to the business community. For more information, contact Debora Stein at dstein@crain.com • or submit directly to CrainsDetroit.com/people-on-the-move Ask about our 6x and 13x bulk commitments. Advertising Section
PEOPLE ON THE MOVE 14 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
LAKES
From Page 3
Each site has a price tag, short and long term. In Leelanau and Benzie counties, banks along the famed M-22 byway are collapsing from shoreline erosion, including 600 feet of shoulder at the 45th Parallel, sweet spot of the Northern Hemisphere. M-25 along Michigan’s Thumb could need $34 million long term for culvert and bluff erosion in Huron, Sanilac and St. Clair counties, according to MDOT. In the Upper Peninsula, the Tah- A truck crosses the bridge over the White River in Muskegon County to make deliveries quamenon River threatens M-123 up- to Montague last month. High water from Lake Michigan has forced the cities of stream from its famous falls. U.S. 2 is Montague and Whitehall to close two lanes of the four-lane Business Route U.S. 31 now just a foot or so above water along bridge between the two cities so municipal workers can pump water from the road Big Bay De Noc. An estimated $9 mil- surface. | DALE G. YOUNG FOR CRAIN’S DETROIT BUSINESS lion would be needed to raise or reThe Army Corps’ six-month fore- ditional 12 inches or more this spring, place two bridges. cast in February predicts higher lake as models predict, “levels could break And that’s just the mainland. On Mackinac Island’s east side, a levels this spring and summer after a 120-year historic records.” section of M-185 has collapsed, re- winter with less evaporation and Still, some of the estimated $111 quiring $1 million now and perhaps more water runoff than usual, said million for long-term fixes may not be Lauren Fry, hydrologist in the Army necessary should water levels recede, $6 million in future repairs to stabilize February 17,a 2020 the lakeside road that’s mainly used Corps’ Detroit district office. said Brad Wieferich, MDOT’s head of “Water levels will just naturally go by bicycling tourists and horse-drawn December project planning and design. 2, 2019 carriages on the island with almost no up this time of the year, but that’s hapNo one can say when that might be; March 23, 2020 pening16, on top of already high levels,” the Great Lakes only recently emerged cars. Lakes Huron and Michigan’s water Fry said. from a yearslong drought. levels were recorded at 581.56 feet in “The water situation in Michigan is January, the highest level for the ‘Enhanced road problems’ real,” Whitmer said Feb. 25 at an event month of January dating back to 1918, in Detroit. “We’re going to be seeing when the U.S. Army Corps of EngiMDOT’s list of infrastructure com- incredible issues because of it. ... neers started tracking lake levels. promised by rising lake levels was We’ve got enhanced road problems That’s more than 5.5 feet higher than prepared for Gov. Gretchen Whitmer’s because of that, and it’s going to take the all-time low recorded in January High Water Coordinating Summit on enhanced resources to fix that.” 2013 during a sustained drought that Feb. 10. For now, MDOT’s road mainteforced harbors and canals leading to State, federal, tribal and communi- nance money for pothole patching, the Great Lakes to be dredged. ty groups were told if levels rise an ad- crack filling and road grading is being
FUNDRAISING
Venture Capital, said he believes every venture From Page 3 capital fund is taking a step back Michael Healander, CEO of Deat this point and troit-based drone software provider pivoting to their Airspace Link, closed on a $4 million first priority: their capital raise in January and expressed existing portfolio relief that he completed that round of companies. then. He encouraged other entrepre- Rizik Rizik said the neurs to get deals done as quickly as possible. “I’d be pretty damn scared current priority of any fund is to beright now,” Healander said of entre- gin closely working with the manpreneurs who are trying to raise fund- agement of portfolio companies to look at revenue and expenditures ing. during a time of market slowdown Capital moves to sidelines and “remodeling what the future looks like” while assessing future For Patti Glaza, executive vice pres- capital needs. “Because all the people who would ident and managing director of philanthropic venture capital firm Invest be investing are doing this with their Detroit Ventures, the current trajecto- portfolios, they’re likely not going be ry brings back memories of Sept. 11, looking at new investments,” Rizik said. 2001 and the long “Most ... comuncertainty that “WE’RE NOT ON PAUSE, panies are going followed the terBUT WE ARE SLOWING to face a slowrorist attacks. down because “It’s inevitable DOWN.” they can’t meet that the length of — Patti Glaza, executive vice with potential this will cause president and managing director, customers,” he good companies Invest Detroit Ventures said. “Just the to fail, and that’s a shame,” Glaza said. “It’s just going to whole ability to sell product is going be reduced.” be a really hard year.” To that end, global deal flow in the Glaza said Invest Detroit has 62 active investments and generally tries private equity and venture capital has to do between two and three new in- fallen off a cliff in recent weeks as vestments per month. The fund is COVID-19 makes its way around the now looking at most at one invest- world, according to a report last week ment per month and Glaza said that from data firm GlobalData. “The number of PE and VC deals would be “aggressive” given the new announced during March 1, 2020, to uncertain state of the economy. “We’re not on pause, but we are March 17, 2020, fell by 32.4 (percent) compared to the deals announced slowing down,” said Glaza. Glaza said Invest Detroit’s message during the same period in 2019, while to its companies is to plan on having corresponding deal value also deat least 12 months of cash on hand to clined by 26.5 (percent),” the report weather the storm, and 18 months states. Weaver. would be better. Chris Rizik, CEO and fund manag- Contact: nmanes@crain.com; er of Ann Arbor-based Renaissance (313) 446-1626; @nickrmanes
tour in Pentwater was lifted in late November after Longbridge Road was raised more than two feet to account for the possibility that Lake Michigan won’t recede anytime soon. Lake Michigan is pushing upward through Whitehall and Montague’s storm drains, leaving them vulnerable to being disabled during a big spring rainstorm, officials say. “Especially when we get wind from the west, it was forcing water up the tube and onto the road,” Montague City Manager Jeff Auch said. “Right before Thanksgiving we had it closed down almost for a full day.” For now, the four-lane bridge connecting Montague and Whitehall is reduced to two lanes. Stormwater drains are plugged. Pumps do the work for which the drains were designed. The west side is blocked for service vehicles and industrial sandbags. “The fear is if they just raise the roadway that’s going to cause additional pressure on the bridge itself and that is becoming the weak point,” Auch said. The state is planning hydraulic studies to measure the impact, he added. Townspeople fear future bridge interruptions. “When it closed for any period of time, we were down somewhere in the nature of 20 percent, which is a big number, especially in the off-season,” said Richard Kriesel, co-owner of Montague Foods. “If it closes for long, it is going to make it very hard for us to stay in business.” Crain’s Senior Editor Chad Livengood contributed to this report.
diverted for riprap, armor rock and whatever else quarries can mine to replace washed-out shoulders and brace the pavement itself against total collapse. “Most of it is just the sandbagging and armoring and just trying to hold what’s there,” Wieferich said. “If it continues, then we’re going to have to dip into capital projects funds,” Wieferich added, perhaps shaking up the state’s five-year road and bridge plan.
Bracing for ‘havoc’ Whitehall and Montague are former lumber and tannery settlements on opposite sides of where the White River enters White Lake, five miles from Lake Michigan. There is one bridge between them. Today, the communities are intertwined as if by that single strand. Fourth of July parades march from one downtown to the other. School-of-choice students pass on the bridge, about 100 each way, the area chamber’s chief says. CRAIN’S DETROIT BUSINESS Their economies depend on tourists, from the iconic n Suds drive-in just CRAIN ’S Dog DETROIT BUSINESS off the bridge — one of 17 left in the na’S DETROITOutfi BUSINESS tion —CRAIN to WaterDog tters next door for paddlers and peddlers. “Most of our customers come through Whitehall,” said Rob Crabtree, an employee at Johnson’s Great Outdoors. “When the wind blows from the west, that can create havoc.” Pentwater, a popular Lake Michigan shore town 30 minutes to the north of Montague, was hit worse, Crabtree noted. A seven-month de-
Advertising Section
CLASSIFIEDS To place your listing, contact Suzanne Janik at 313-446-0455 or email sjanik@crain.com www.crainsdetroit.com/classifieds
M
P
REAL EAL MARKET PLACE ARKET JOB FLACE RONT ESTATE STATE REQUEST FOR AVAILABLE PROPOSALS POSITIONS Receivership sale of assets POSITIONS AVAILABLE
A RES LABORATORY SPACE COMMERCIAL PROPERTIES
of Visiting Physicians Busi-
ENGINEERING Residential Physicians Nokia of America Corporation has aness position in Ann Arbor, MI. Association, & RPAMI. ManSolutions PLLC LLC, Saline, As Senior Engineer, Norgren Automation Delight For your Clients BestProject of Michigan 2,280CORKTOWN Acres Salewith the Software Engineer [ALU-MI20-EC2] – includes account agement, part of a team, deliver engg projects in time, adhere toInc. specs & budgets & co-
Handmade Nut, Baked Goods &
Write scalable & testable codes & participate in review;7scripting languages receivables, vehicles, outstandDOUBLE RANCH cross functional teams throughout project cycle. Req Master’s deg or SpaceEAGLE For Lease Chocolate Giftordinate Trays.Python, PERL, BASH, SQL; design & implement REST APIMedicare in webapp; & AWS ingorinsurance, and foreign equiv in Engg (Elect, Mech, Civil) rel + 3 yrs rel work exp; ORMeda North Central Michigan FREE Holiday logo &Mail message services. resume to Nokia of America icaid Corporation, Attn: HR, 600 Mountain claims, office equipment, ofup to 100,000 sq ft cards w/your Bach’s deg or foreign equiv in 07974. a stated fieldspecify + 5 yrsJob rel work exp. Up to EOE 10% Ave, 6D-401E, Murray Hill, NJ Must Code # in reply. TheDoubleEagleRanch.com fice furniture, medical supplies, Guaranteed Christmas Delivery! 313-712-1656 travel req. To apply, mail resume to: HR Manager, Norgren Automation and intellectual property. SolCall Kyle: 248-444-6262 NibblesGifts.com 248-737-8088 utions, LLC, 1325 Woodland Dr., Saline, MI 48176 (reference: MI0001).
Ask for Jerome
Contact Sonya Goll at (248) 354-7906 ext. 2234 or sgoll@ sbplclaw.com for additional information, form purchase agreement, financials of business, and deadlines for offers.
M ARKET P LACE MARKET PLACE
Visit our store at 32550 Northwestern Hwy, Farmington Hills
LABORATORY AREH SI SSPACE RA E
Executive 110102540-01Director, Audience Development & Analytics SI ESS
S
As a forward-thinking and transformational Audience Development WEDDING SERVICES Only Executive, you will lead the strategy, Business development,Owners and execution of audience plans via effective marketing practices with the goal of achieving Get your free hardcopy of revenue growth across six of Crain Communications’ core brands: The Lazy Manager’s Toolbox Automotive News, PROPERTIES Crain’s Business Publications, Modern Healthcare, Ad COMMERCIAL ClaimByyour free copy now at Age, Pensions & Investments, Polymer Group. leveraging your focused ROI mindset and your experience as a modern, multi-channel marketer TheLazyManager.com CORKTOWN you’ll decide how best to engage audience members during their Space For Lease customer journeys, and how best to allocate resources. Position could be up to 100,000 sq ft based in Detroit, Chicago, or New York City. 313-712-1656 Visit crain.com/careers/ for more information Ask for Jerome and available positions.
VISIT OUR WEBSITE: www.
crainsdetroit.com/ @CRAINSDETROIT eds Business Development Salesclassifi Associate FOLLOW US ON TWITTER
The Global Polymer Group is looking for a Business Development/Sales Associate who will be expected to work with inactive accounts and new prospects to pre-sell the brand with the objective to set up a meeting with the Regional Manager. They will work with the sales team to help establish relations to ensure a smooth transition of the account. The
LEADERSHIP
REAL ESTATE MISCELLANEOUS
Entrepreneurs & Leaders Skip the Mistakes and Take More Breaks
with shortcuts that simplify your work & achieve remarkable results. Call Jim 906-643-6643 RESIDENTIAL PROPERTY WEDDING SERVICES
2,280 ACRES FOR SALE
ElopeUpNorth.com DOUBLE EAGLE RANCH North Central Michigan TheDoubleEagleRanch.com Call Kyle: 248-444-6262
CRAIN’S READERS HAVE AN
MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 15
THE CORONAVIRUS IN MICHIGAN
ANDERSON
BUSINESSES
From Page 1
From Page 1
Bob Riney, president of healthcare operations and chief operating officer at Henry Ford Health System, also has been on the calls, giving business executives the latest guidance coming from hospitals, Anderson said. Anderson said he and other Michigan executives have learned lessons on the fly from their counterparts whose overseas operations in China and Italy have been hampered by outbreaks since January. “We actually benefited from the thinking of companies that had been seeing this a month ago in their overseas operations,” he said. “... The ones that have been dealing with it or a while are up the curve further.” BLM has launched a new website, BLMCovid19.com, and published best practices, links to state and federal resources as well as the COVID-19 company policies and procedures for one unnamed “international manufacturer” that other companies can use for guidance. Anderson’s team at DTE had to
It was a week of great adaptation to brainstorm and try creative ways to stay afloat for what will be at least a two-week shutdown — and possibly longer if the virus continues to spread. Distilleries across Michigan started trying to figure out how to turn grain alcohol into hand sanitizer and cleaners to meet consumer demand — an almost warlike response of a single industry to respond to the nation’s needs to combat a common enemy. “If the government called on us, we’d do our part,” said Michael Forsyth, co-owner of Detroit City Distillery in Eastern Market. “That’s the Detroit way.” Across the state, entrepreneurs took steps last week to prepare for what could be weeks, if not months, of economic turmoil. Bakeries and restaurants sold off excess inventory as groceries. Supermarkets cut hours to let staff catch up restocking shelves; others created designated hours for senior citizens to shop without competing for scarce eggs and packaged foods with younger customers. DuMouchelles Art Galleries, citing health concerns, went to entirely online, phone and absentee bidding for art, jewelry, antique silver, rugs and firearms to keep customers out of its downtown Detroit showroom. Emagine movie theaters turned on its popcorn kettles and attempted to generate cash by selling buttery popcorn to go. And diners and coney islands that have always relied on loyal patrons to fill lunch counters and booths suddenly were offering delivery. “We’re taking it day by day,” said Lou Giannopoulos, owner of Athenian Shish Kebob at Nine Mile and Harper in St. Clair Shores. Giannopoulos spent much of last week trying to figure out how to logistically
“WE ACTUALLY BENEFITED FROM THE THINKING OF COMPANIES THAT HAD BEEN SEEING THIS A MONTH AGO IN THEIR OVERSEAS OPERATIONS. “ — Gerry Anderson, executive chairman, DTE Energy Co.
launch into action last week when three employees tested positive for coronavirus. The Detroit utility company’s executive chairman said the Michigan companies with overseas operations were most helpful in advising BLM members on how to best communicate with employees and customers about the infections within their own organization. “When the number of confirmed cases spikes, it is going to be really vital that we have clear, calm, accurate messaging,” Anderson said in an interview Thursday. On Friday, the state health department announced a big spike in confirmed coronavirus cases in Michigan: from 334 to 549. The spikes in test results Thursday and Friday were largely a result of hospital labs in Michigan coming online to test specimens. Anderson said the calls with fellow business leaders have reinforced the need for “calm discipline” and a focus on restoring what was one of the best economies in generations just a month ago. “Because if we don’t, there’s just a lot of secondary harm — apart from the health crisis — that is going to come to the most vulnerable,” Anderson said. “There’s a lot at stake in our business community just bearing down on this together and producing a great response.” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood 16 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
ECONOMY
From Page 1
“None of us has ever experienced a shock like this and the demand shock will be profound,” said Michael Belzer, an economist and professor at Wayne State University, who is currently holed up in his Ann Arbor-area home. “No buying means no selling, and no selling means no production, and no production means no working; no working means no money and no spending, which means no taxes; and no state taxes means no services.” President Donald Trump proposed last week an economic package that could approach $1 trillion, an economic rescue package that far eclipses the 2008 Great Recession. Trump said he wants checks sent to the public within two weeks and is urging Congress to pass the massive stimulus package in just days. The government is trying to react fast because the COVID-19 recession could easily turn into a depression. Josh Bevins, director of research for the Washington, D.C., think tank Economic Policy Institute, is estimating at least 3 million U.S. job losses by summer. The U.S. Travel Association projects 4.6 million jobs lost in 2020 in the travel and hospitality industry alone, which would push the national unemployment rate up to 6.3 percent. U.S. Treasury Secretary Steven
start home delivery to help keep employees working after he had to cut everyone’s hours when Whitmer temporarily barred dine-in service.
‘We won’t let you die’ After Whitmer’s order went into effect at 3 p.m. March 16, Palazzolo and his wife, Karen, spent that Monday evening and the next morning re-arranging their front-counter operation so they could more easily take orders by phone, serve walk-in customers and run out orders to customers in their cars. All the while, they also had to police the line to comply with Whitmer’s order that no more than five patrons be inside the cafe at once waiting for carryout orders. “We’re still adjusting as we go,” Palazzolo said. “There’s nothing consistent about it.” Because so many patrons are staying home with kids out of school or potentially self-quarantining, Palazzolo said, the normal lunch rush hour “can range from 10 a.m. to 3 p.m.” The hardest adjustment has been how quiet the cafe is, Palazzolo said. “It’s like playing to a Broadway show with no audience,” he said. “I don’t want it to be the new norm.” Like a lot of small restaurants, the Palazzolos sold gift certificates to loyal customers to generate needed cash. “We won’t let you die,” Mazur told Karen Palazzolo on her way out the door to eat in her car.
From cycle gym to equipment rental Whitmer’s order hit gyms, fitness clubs, movie theaters and other recreational and entertainment businesses especially hard because they aren’t allowed to have any customers inside their premises. That greatly limited their ability to generate any sales. Amy Latawiec, owner and founder of Rebel Cycle Studio, learned online Mnuchin warned last week the unemployment rate could hit 20 percent if preventive measures against the virus’s impact were not taken. Locally, all eyes are on the automotive industry. The sector was the source of tremendous bloodletting during the 2008 financial crisis and still remains a vital source of economic vitality for the state and region. The impact has already been massive globally. Auto sales in China plummeted 80 percent in February after the outbreak emerged. Falling demand and health concerns from UAW factory workers led Ford, GM, FCA and suppliers to shutter factories last week, joining Europe. In the U.S., auto factories are shuttered until March 30, but there is an expectation they could go longer . The decision to close down is a smart strategy, said Sam Abuelsamid, principal research analyst for Chicago-based Navigant Research in a Twitter post last week. Shuttering now gives the companies flexibility to manage production and inventories during declining demand. “No one will want to be sitting on excess inventory if this situation drags on,” he said. Credit Suisse projects auto production to fall by 388,369 units from the shutdowns, or about 2.4 percent of last year’s total production, with GM not making more than 103,000 vehicles it planned to and Ford not making just over 95,000.
Sister Pie owner Lisa Ludwinski turned her cafe and bake shop into a version of a grocery store after the order came down for restaurants to close | LARRY PEPLIN FOR CRAIN’S
that other spin studios across the country were renting out exercise bikes for customers to use at home instead of leaving them sit idle in closed studios. On Thursday, Latawiec put out a message to longtime customers that they could rent one of her 15 spin bikes for $75 for a month. “They were spoken for within 30 minutes,” Latawiec said. She and her husband delivered some of the bikes to customers at their homes; some wanted socially distant exchanges to avoid spreading germs, she said. Latawiec said she explored whether she could hold virtual spin classes but ran into a legal roundblock: The music she plays for riders can’t be used on a livestream video on Instagram or Facebook.
“We don’t have the rights to do that virtually,” she said. “It’s a different fee.” Latawiec said some loyal customers prepaid for future spin classes, providing a much-needed infusion of cash.
The loss of a single week of auto sales in the U.S. could have staggering ripple effects on the broader economy, according to data from the Center for Automotive Research in Ann Arbor. For every seven-day period that consumers stop buying new vehicles, the U.S. economy would lose roughly 94,400 jobs and $7.3 billion in overall earnings, Kristin Dziczek, the center’s vice president of industry, labor and economics, told Automotive News. Government tax receipts would drop about $2 billion, she said. A significant drop in demand is likely as much of the country hunkers down and practices social distancing to slow the spread of the virus, Dziczek said, because of the discretionary nature of new-vehicle purchases. Even after the crisis passes, the auto industry may be slower to recover because vehicles cost more than other purchases consumers are likely to delay. “If on the other side people don’t want to buy cars, we have a real problem,” she told Automotive News.
percent in 2021. Those figures, however, are well below Michigan’s unemployment rate during the Great Recession, which peaked at 14.6 percent in June 2009 and lower than the peak 16.4 percent unemployment in January 1983 following that recession. The reason is we now have fewer employees in Michigan’s most vulnerable industries, like automotive. Michigan’s automotive industry employs far fewer than before the last two recessions. Automakers and parts suppliers employed roughly 171,000 in Michigan in January, compared to more than 320,000 in June 2000. At the bottom of the Great Recession, in June 2009, automakers and parts suppliers employed fewer than 95,000. Michigan has only recovered roughly 76,000 auto jobs since then. “Even before the virus, Michigan’s economy was already very soft ...” Charles Ballard, an economist and professor at Michigan State University, told Crain’s. “The Michigan economy has been growing more slowly than the overall U.S. economy for the last few years, and especially slowly in the last year.” Between December 2018 and December 2019, the entire Michigan economy only added 19,500 jobs, well below the growth rate of 43,000 jobs per year in 2017 and 2018. COVID-19 layoffs ramped up immediately after Whitmer signed an order limiting gatherings to 50 of fewer peo-
Unemployment spike? Michigan’s unemployment rate could spike to 10 percent under a worstcase forecast published by the University of Michigan Research Seminar in Quantitative Economics last week. The forecast projects in a best-case scenario Michigan’s unemployment rate rises to 5.8 percent in 2020 before falling to 4.5
Restaurateurs suddenly become grocers The fast-spreading coronavirus and uncertainty of how long mitigation measures will have to last had some restaurateurs unloading inventory and bracing for a complete shutdown like those seen in Italy, California and New York. At Sister Pie bakery in Detroit’s West Village, owner Lisa Ludwinski converted her inventory of flour, eggs, milk, butter, fresh vegetables and fruit and even toilet paper into a small grocery store.
C ders Kerc igna chal leas A clos but sup on t “W hold mak com er C site. the groc
Fro
V dale
` EC
The Une milli On F wor But mist
BETSE watc too li likely when
BRAN abou pers defin and over reces the r
KRIST FOR A like t week start diffe start That
JOHN MANA COVI for m
IN’S
that fee.” mers vidh.
irus igahad venhutifor-
oit’s nski our, bles to a
wevemcesnt in 16.4 uary
emable
emtwo sup0 in d to t the une liers igan auto
an’s ...” protold has the few last
Deigan well s per
merder peo-
THE CORONAVIRUS IN MICHIGAN
Customers were able to place orders by email and stand outside the Kercheval Avenue bake shop in designated squares drawn in sidewalk chalk to create social distancing of at least 6 feet between patrons. At Drifter Coffee, the Ferndale cafe closed down “until further notice,” but mounted a grocery service “while supplies last,” according to a notice on the coffee shop’s website. “We don’t know what the future will hold, and we don’t know if we will make it through, but the health of our community is more important,” Drifter Coffee said in a notice on its website. “However, we will still be serving the community while we can with a grocery service. Swipe for details!”
From booze to sanitizer Valentine Distilling Co. in Ferndale joined forces Friday with Bir-
mingham craft brewer Griffin Claw Brewing Co. in redirecting grain alcohol for vodka and bourbon to producing hand sanitizer. Griffin Claw, the brewer of popular beers such as Norm’s Raggedy-Ass IPA and El Rojo red ale, was working to bottle as much as 7,000 2-ounce bottles of hand sanitizer by the end of the week. The brewery was using old beer and distilling it down to make a 160-proof to 180-proof grain neutral alcohol. It’s then diluted with distilled water, becoming 70 percent alcohol hand sanitizer, said Chris Lasher, marketing director for the brewer. “We just saw the impact of COVID-19 and everyone running out of sanitizer,” Lasher said. “We operate a distillery, so we got creative and were able to make our own.” The initiative caught the attention of Whitmer, who praised distillers for their innovation in media interviews. By Friday, Valentine Distilling was working jointly with Griffin Claw to sustain production of hand sanitizer, a company representative said. Other distillers such as Detroit City Distillery and Long Road Distillers in Grand Rapids were trying to master the science behind making germ-killing hand sanitizer. “We’re confident we understand the manufacturing process to create it, we’re confident we can do everything to make a product that works,” said Jon O’Connor, co-owner of Long Road Distillers and president of the Michigan Craft Distillers Association. The bigger challenge, according to O’Connor, would be finding secondary materials needed to make the product — which could be a gel or a spray — and enough packaging. “I don’t think we’re hoping to do this because we’re hoping to get rich off this,” O’Connor told Crain’s. “It’s something we can do as a public good (and) even at a small scale, we’re willing to try.”
dering if you should even be open and then you come in and it’s busy.” Cousineau was concerned about his employees or customers contracting COVID-19. The hardware story near the Detroit border, which has been in the same family’s hands for six decades, started taking credit card orders by phone and dispatched employees to curbside deliveries. On the outside doors, Cousineau put up signs instructing customers that if they don’t feel well to not come inside and call in their order instead. “If you cough or sneeze in the store, we’re going to ask you to go outside,” Cousineau said.
Creative marketing?
Amy and Steve Latawiec of Rebel Cycle Studio delivered spin bikes to customers to use in their homes. | LARRY PEPLIN FOR CRAIN’S DETROIT BUSINESS Heather Winkelseth (right) hands a customer a takeout order Thursday at Athenian Shish Kebob in St. Clair Shores. The coney island plans to start offering delivery for the first time. Owner Lou Giannopoulos said. “We’re taking it day by day.” | CHAD LIVENGOOD/ CRAIN’S DETROIT BUSINESS
Business booms in small corners Some retail businesses saw an uptick in sales last week as consumers continued to snatch up cleaning supplies. At Pointe Hardware in Grosse Pointe Park, customers were calling
` ECONOMISTS WEIGH IN ON WHAT TO WATCH The economic toll wrought by the COVID-19 outbreak is mounting. Unemployment claims are on the rise — Goldman Sachs projected that U.S. jobless claims last week would rise to 2.25 million — up from 281,000 the week prior. On Friday, University of Michigan economists predicted Michigan’s unemployment rate could rise to 10 percent under a worst-case scenario, a figure last seen in October 2011 as the state was still dealing with the fallout of the Great Recession. But these projections are nothing more than educated darts in the dark. So Crain’s asked local experts, such as economists, researchers and logistics executives who see firsthand the economy dry up. Here is what they said:
BETSEY STEVENSON, ECONOMIST, UNIVERSITY OF MICHIGAN: “What I’m watching closely is the government’s response. The risk is that we do too little, not that we do too much. And unfortunately it’s more likely that we do too little. If we want the economy to spring back when the pandemic subsides we need bold fiscal policy efforts now.” BRANDON STALLARD, CEO, TPS LOGISTICS: “We went into a recession about six months ago. It’ll hit the papers in time. I have a unique perspective because I can see what’s moving. Things have definitely stopped moving. Shipping is probably down 20 percent and down 40 percent is a possibility. This whole thing is overblown. I don’t mean to be brazen, but we went into a recession and folks have denied it. Now we’ve got an excuse for the recession.” KRISTIN DZICZEK, VICE PRESIDENT OF INDUSTRY, LABOR AND ECONOMICS, CENTER FOR AUTOMOTIVE RESEARCH: “As a forecaster, we don’t get serial events like this very often. This has played out in China. They had six weeks of disruption. A sharp contraction of demand and are now starting to see a return and surge in sales. The spread may be different, the government response may be different, but we have started to see a rebound and return to manufacturing in China. That’s at least a template I can look for here.” JOHN TAYLOR, CHAIR OF THE DEPARTMENT OF MARKETING AND SUPPLY CHAIN MANAGEMENT, WAYNE STATE UNIVERSITY: “This thing (shutdowns from COVID-19) lasting a couple of weeks is one thing, but if this drags out for months, a lot of (manufacturing) suppliers are going to struggle.
‘Lean’ is a good thing but it also counts on certainty. When you don’t have certainty, (just-in-time inventory management) becomes a problem. Luckily, we have great mega-suppliers that are very strong financially. Bosch as an example. But the smaller tier-ones and others, they are going to need cash flow. Nevertheless, I don’t think this will be the end of global supply chains.” JULIE FREAM, CEO, ORIGINAL EQUIPMENT SUPPLIERS ASSOCIATION: “There’s more concern about liquidity than anything else right now, besides the health of employees, and what we need as an industry. We’re hearing a lot of suppliers asking about getting that liquidity. The other big thing looming is the June 1 entry into force for (United States-Mexico-Canada Agreement). Going forward, this needs to be changed. There’s no way the industry can deal with this crisis and implement rules changes. It just needs to be fixed so that we have the ability to actually execute USMCA and do it well.” CHARLES KLEIN, STATION MANAGER FOR DETROIT, FREIGHT SHIPPER OEC GROUP: “We are hearing from our customers that manufacturing is trending up in China. So, goods are ready to be shipped. The challenge will be the movement of goods once they hit the U.S. The virus and response to the virus will dictate this. The travel ban in Europe will affect the current air freight market as well. Grounded passenger airlines that also move cargo will tighten capacity. The manufacturing sector recovering in China is a positive sign. However, there will be major challenges ahead as the global supply chain reacts to the virus’s effects.”
or coming in and buying up paint, lawn fertilizer and crab grass killer in large quantities, co-owner Randy Cousineau said. “There’s a percentage of people who just aren’t concerned,” Cousineau said. “It’s strange, you’re looking at the news in the morning and wonple and shutdown dine-in restaurant and bar services. Hundreds of retailers have also closed temporarily. The state’s Unemployment Insurance Agency said 5,400 claims were filed on March 16, up from 1,300 to 1,600 on a typical Monday — a 238 percent to 315 percent increase. The U.S. Department of Labor released its latest unemployment claims report on March 19, showing 281,000 new claims two weeks ago, an increase of 70,000 from the previous week. However, those figures are expected to rise exponentially in the coming weeks. “The problem is that the data won’t be in to tell us for sure how big this recession is until long after the pandemic has ended,” said Betsey Stevenson, economist and professor at University of Michigan. “If we want the economy to spring back when the pandemic subsides we need bold fiscal policy efforts now. Without them, the drop in income can create a cascade of defaults, foreclosures, bankruptcies, and depleted bank accounts. All of which will mean that people can’t go back to spending the way they were prior to the pandemic even when it ends. If that happens we are in for a much longer recession, with a slower recovery.” Economists have long tried to gauge the impact of a mega-virus, but with little success. The Congressional Budget Office, a federal agency that provides analysis to Congress, modeled the deadly 1918 influenza pandemic,
Other business people used a little humor in an otherwise tense situation. Dennis Bernard, founder and president of Southfield-based Bernard Financial Group, a commercial real estate finance firm, typically sends financing materials to lenders with a photo and brief description of the property as the first thing the recipient sees. That has been replaced with a photo of a Corona beer bottle. “The level of stress is elevated for everyone, whether it’s school kids, or the elderly or everyone in between,” he said. “Nobody wrote a script for how to do this. We’re all in unchartered waters, but the business goes on and we’re still doing loans. Everybody needs a little chuckle.” On the last page of the attachment, of which about 15 or 20 had been sent as of late last week, is a directive to the reader to wash his or her hands. Crain’s Staff Reporters Kirk Pinho, Dustin Walsh, Annalise Frank Nick Manes and Kurt Nagl contributed. Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood or H1N1 influenza, against the economy in 2005. The CBO report said any global pandemic “could produce a short-run impact on the worldwide economy similar in depth and duration to that of an average postwar recession in the United States.” Specifically, though, a severe a pandemic, much like COVID-19, could reduce U.S. gross domestic product by about 4.25 percent, followed by a sharp rebound. However, it’s possible the Detroit 3 and suppliers could jumpstart the war machine, much like the Arsenal of Democracy during World War II, to combat the virus and provide at least some economic stimulus. GM and Ford are exploring the possibility of putting their manufacturing muscle toward medical equipment to help treat the spread of COVID-19. CEO Mary Barra spoke with officials from the Trump administration on March 18 about the company’s plans to halt North American production until March 30. “That was a time when we did take America’s manufacturing might and bring it to bear on an issue affecting the whole country,” Kristin Dziczek, CAR’s vice president of industry, labor and economics, told Automotive News. “And that’s what we have to do now.” Contact: dwalsh@crain.com; (313) 446-6042; @dustinpwalsh MARCH 23, 2020 | CRAIN’S DETROIT BUSINESS | 17
d enem volor solecum autem. Nam restisitiant od mo et eatis magnatem quaeste cuptas nonseditem em eos magnatur, In ditistentur
THE CONVERSATION
Lon Johnson on why Detroit could take lead in water tech investment WATERWORKS FUND: Lon Johnson, CEO of WaterWorks Fund, knows Milwaukee is ahead of Detroit in developing technology for clean drinking water. But he thinks Detroit could overtake other Great Lakes towns by becoming the capital for water technology investment that can fuel innovation. Johnson, a former chairman of the Michigan Democratic Party who lives in Detroit, recently co-founded a Detroit-based online investment platform aimed at crowdsourcing equity capital for water technology projects at WaterWorksFund.com. | BY CHAD LIVENGOOD ` Crain’s Detroit Business: Tell us about WaterWorks and how this equity crowd-funding model works. Johnson: WaterWorks seeks to advance potential water solutions by introducing people to investment opportunities and projects seeking capital at our website, WaterWorksFund.com.
Lon Johnson, CEO, WaterWorks Fund
` So, if I’m an investor and I’ve got $1,000 I just want to put into something, how do I go about doing that? You would go to WaterWorksFund. com and take a look at the various investment offerings that are available to you. You have the ability to take a look at the (website), see what (the companies) are about, review the terms and if you like and so wish, make a transaction. ` So tell us a little about the type of companies that you’ve already partnered with here. Broadly, what we seek is any company that’s looking to raise capital that is helping the world use water more efficiently. We have some clear ethics. We make sure this company isn’t buying or selling water or seeking to privatize water in any way, shape or form. We have a process where companies seeking capital would apply, we review the company and if we feel they’re a good fit, we would then onboard them, if you will, with the processes that are required through the (federal) regulations and get them on our site. Then that company would work to drive (web) traffic to their offering all across America. ` The world is getting thirstier. We know there are western states that would like to hook up a hose to Lake Michigan. And I’m sure there are some people who would like to drain a little water out of Lake Michigan right now, since it’s a little swollen. But where do you see the opportunity for Michigan, from an economic standpoint? We see and believe that water problems are coming at a pace and
scale that we’re just, too often, not ready for. And because of climate change, population growth, aging infrastructure, we believe it’s going to get worse. But we’re optimistic. There is enough fresh water for the world. And there are smart engineers and smart companies out there doing things to help the situation. But too often we think those companies have a hard time raising capital. So what we seek to do is build a community of water investors and present to them these companies or these projects that are helping the world use water more efficiently. In Michigan and here in Detroit, we are surrounded, obviously, by fresh water. But when you look back into Michigan’s history, we helped lead international trade — it was fur
trade. And then from fur trade, it was mining copper and iron ore out of the Upper Peninsula. The next was lumber, wood. Those were all natural resources. It was Michigan taking advantages of its blessed natural resources. And now we at WaterWorks see that we have a natural resource challenge coming down the pike in a way that we’re not ready for, we believe. But there are answers are there. So we seek to introduce investors to potential solution providers that are seeking capital. ` How did you come up with this idea? Well, having grown up here in Michigan I was always around water — fishing or swimming. We tend to
take water for granted. And then I went to school out west and saw the importance of water. ` People cherish it a little more out there. Yeah, Arizona was an awakening for a Michigan boy. It was there that I really started to see how blessed we were and how other regions in the country and world were challenged. And I also spent quite a bit of time working for (former Vice President) Al Gore for a number of years and saw how environmentalism can be combined with capitalism and (put) solutions forward. And that is in large part what drove me to help to start to overcome some of the biggest hurdles our potential water solutions companies have, and that is investment capital. Often times, these technologies need a smaller amount — say a half-million dollars or $1 million. And when they call or speak to a venture capital firm or private equity fund, their investment criteria are much larger. How do we right-size this? How do we fix this market imperfection, if you will, and get them the quarter million to million dollars they may need in investment capital? I looked up a lot of different ways and I found that equity crowdfunding could be an answer. ` For Michigan, do we need to be doing more from a public policy standpoint to develop water technology? Are there missed opportunities that we ought to be taking advantage of right now? There’s an enormous amount of technology out there that can address our water problem. ... In terms of where Michigan can play in this space, look, there are communities and countries that are way ahead of us. Milwaukee is a prime example. California, Australia, Israel — necessity being the mother of invention. I do believe one place where Michigan, as a state, can start to play a leading role is helping to finance both water technologies and water projects. That’s a space that I believe, instead of being in competition, you’re value add.
crainsdetroit.com
Editor-in-Chief Keith E. Crain Publisher KC Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Lisa Rudy, (313) 446-6032 or lrudy@crain.com Executive Editor Kelley Root, (313) 446-0319 or kroot@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@crain.com Group Director: Business Process Kim Waatti, (313) 446-6764 or kwaatti@crain.com Digital Portfolio Manager Tim Simpson, (313) 446-6788 or tsimpson@crain.com Creative Director David Kordalski, (216) 771-5169 or dkordalski@crain.com Assistant Managing Editor Dawn Riffenburg, (313) 446-5800 or driffenburg@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Senior Editor Chad Livengood, (313) 446-1654 or clivengood@crain.com Special Projects Editor Amy Elliott Bragg, (313) 446-1646 or abragg@crain.com Design and Copy Editor Beth Jachman, (313) 446-0356 or bjachman@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687 TIP LINE (313) 446-6766 REPORTERS
Annalise Frank, city of Detroit. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter, health care and energy. (313) 446-0325 or jgreene@crain.com Nick Manes, finance and technology. (313) 446-1626 or nmanes@crain.com Kurt Nagl, higher education, business of sports. (313) 446-0337 or knagl@crain.com Kirk Pinho, real estate. (313) 446-0412 or kpinho@crain.com Dustin Walsh, senior reporter, economy and workforce, manufacturing, cannabis. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter, nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com MEMBERSHIPS
CLASSIC $169/yr. (Can/Mex: $210, International: $340), ENHANCED $399/yr. (Can/Mex: $499, International: $799), PREMIER $1,299/yr. (Can/Mex/International: $1,299). To become a member visit www.crainsdetroit.com/ membership or call (877) 824-9374 Group and Corporate Membership Sales Deb Harper, (313) 446-1623 or dharper@crain.com ADVERTISING/MARKETING
Sales Inquiries (313) 446-6032; FAX (313) 393-0997 Director, Program Content Kristin Bull, (313) 446-1608 or kbull@crain.com Senior Account Executive John Petty Senior Account Manager/Political Specialist Maria Marcantonio Advertising Sales Lindsey Apostol, Mark Polcyn, Sharon Mulroy People on the Move Manager Debora Stein, (917) 226-5470, dstein@crain.com Events Director Kacey Anderson Integrated Marketing Manager Kelsey Strachan, Kelsey.strachan@crain.com or (313) 446-1629 Insights Analyst Reginald Brown, reginald.brown@crain.com or (313) 446-1670 Senior Art Director Sylvia Kolaski Director of Media Services Joseph (Sam) Tanooki, (313) 446-0400 or sabdallah@crain.com Classified Sales and Sales Support Suzanne Janik CUSTOMER SERVICE
Single copy purchases, publication information, or membership inquiries: (877) 824-9374 or customerservice@crainsdetroit.com Reprints: Laura Picariello (732) 723-0569 or lpicariello@crain.com
READ ALL THE CONVERSATIONS AT CRAINSDETROIT.COM/THECONVERSATION
RUMBLINGS
Kramer named among Lifetime Achievement winners from SPJ THE DETROIT CHAPTER OF THE SOCIETY FOR PROFESSIONAL JOURNALISTS has selected Crain’s Group Publisher Mary Kramer to receive one of its Lifetime Achievement Awards this year. Other honorees include Pulitzer Prize winner David Ashenfelter, who worked for both the Detroit Free Press and The Detroit News in his long career, and Vickie Thomas, city beat reporter for WWJ 950 AM. The organization plans to honor the three as well as salute its annual
journalism award winners at a banquet that has been postponed from April because of the coronavirus outbreak. K r a m e r Kramer worked for six daily newspapers before joining Crain’s Detroit Business in 1989 as editor. She has since helped the publication expand its audience
18 | CRAIN’S DETROIT BUSINESS | MARCH 23, 2020
and influence by broadening beat coverage, creating signature events and through such initiatives as The Detroit Homecoming, which has documented Homecoming-related economic impacts of more than $600 million since it began in 2014. In spring 2017, she was named to the Michigan Journalism Hall of Fame. Later that year, she was named group publisher for Crain’s four city/regional business publications in Detroit, Chicago, Cleveland and New York.
Her volunteer roles include: chair, Grand Valley State University board of trustees and vice chair of the Skillman Foundation. A member of the invitation-only International Women’s Forum, she is co-chairing that group’s international conference in Detroit in October 2020. More than 500 women from up to 30 countries are expected to attend. A Detroit resident, she is the first woman to be elected president of the historic Detroit Athletic Club.
Crain’s Detroit Business is published by Crain Communications Inc. Chairman Keith E. Crain Vice Chairman Mary Kay Crain President KC Crain Senior Executive Vice President Chris Crain Secretary Lexie Crain Armstrong Chief Financial Officer Robert Recchia G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) Editorial & Business Offices 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except the third week in December, by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732. Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Contents copyright 2020 by Crain Communications Inc. All rights reserved. Reproduction or use of editorial content in any manner without permission is prohibited.
LARGE-SCALE
RESOURCES
LOCAL
GUIDANCE
When you have the solutions you need, you’re ready for today. CORPORATE & COMMERCIAL BANKING | Every day, you’re responsible for cutting through complexity and making smart decisions for your organization. Today’s the day to ask yourself if you have someone on your side who understands your needs and can provide more than just standard financing or investment management. At PNC, we combine the resources of the seventh-largest bank in the country1 with a local team that works side by side with you to find personalized solutions that will help you and your company make the most of today. For more information, visit pnc.com/cib or contact Ric DeVore, Regional President, at richard.devore@pnc.com.
FINANCING | TREASURY MANAGEMENT | CAPITAL MARKETS | M&A/IPO ADVISORY INTERNATIONAL SERVICES | INVESTMENT MANAGEMENT
1 Federal Reserve Statistical Release, Large Commercial Banks, as of December 31, 2019 PNC and PNC Bank are registered marks of The PNC Financial Services Group, Inc. (“PNC”). Bank deposit, lending and treasury management products and services, and investment and wealth management services are offered by PNC Bank, National Association, a wholly owned subsidiary of PNC and Member FDIC. Products and services may also be offered by or conducted through other subsidiaries of PNC. Investments: Not FDIC Insured. May Lose Value. No Bank Guarantee. ©2020 The PNC Financial Services Group, Inc. All rights reserved. CIB ENT PDF 0120-0200-1518401
A cable outage ouldn't be the end of your work day. AT&T Internet for Business has 99.9% reliability, unlike second-rate cable internet. It operates on AT&T’s integrated network and features Internet Backup. So even if you lose power, you won’t lose internet.
S:13.5"
Act now
to enjoy a $100 AT&T Visa® Reward Card* with fast, 1GB service. Go to att.com/BizInternet2, call 855-366-6255 or visit a local store to take advantage of this offer today.
Read the Terms of Service at: www.att.com/internet-terms. Acceptance of Terms of Service is required. Geographic and service restrictions apply to AT&T Internet services. Go to https://www.att.com/smallbusiness/explore/internet.html to check qualification. Internet speed claim(s) represent maximum downstream and/or upstream speed capabilities. Actual speeds may vary and are not guaranteed. Many factors can affect actual speeds, including site traffic, content provider server capacity, internal network management factors, device capabilities and use of other services. Prices and offers subject to change without notice. Term commitments, Early Termination Fees, credit restrictions and other terms, conditions, and limitations may apply. Advertised services not available in all areas. Offer, terms, and restrictions subject to change and may be modified or terminated at any time without notice. AT&T Internet Promotion - $100 AT&T Visa® Reward Card* offer available through 4/30/2020. Offer available to new AT&T Internet for Business and AT&T Business Fiber subscribers or customers migrating from FastAccess® Business DSL or AT&T High Speed Internet Business Edition to AT&T Internet for Business or AT&T Business Fiber. Offer not eligible for renewals or speed upgrades. Offer is not available to local, state, or federal government entities, e-rate eligible entities or Rural Health Care (RHC) entities. Customer must have active service in good standing for a minimum of 60 consecutive calendar days and must remain active at time of redemption to qualify for $100 AT&T Visa® Reward Card* (“Reward Card”). A maximum of one Reward Card may be issued per account (i.e. phone number to which AT&T Internet line(s) is/are billed). Qualified subscribers must complete the online redemption process at the AT&T Business Reward Center at https://rewardcenter.att.com/Smallbusiness/default.aspx by the date provided in the redemption letter to obtain Reward Card. *Reward Card: Will be sent letter with redemption requirements. Redemption required w/in 60 days from reward notification mail date. Reward Card delivered within 3-4 weeks after redemption to customers who maintain qualifying service(s) from installation date and through reward fulfillment. Card expires at month-end 6 months after issuance. For Cardholder Agreement, go to rewardcenter.att.com. The AT&T Visa Reward Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and can be used everywhere Visa debit cards are accepted in the United States, US Virgin Islands, and Puerto Rico. Not available for withdrawal of cash. The Bancorp Bank; Member FDIC. Visa U.S.A. Inc. is not affiliated with AT&T or this offer. AT&T is not responsible for lost, late, mutilated, misdirected or postage-due mail. Void where prohibited, taxed or restricted. May not be combined with other offers, discounts or promotions. Offer, terms, and restrictions subject to change, and may be modified or terminated at any time without notice. Credit restrictions and other conditions and limitations apply.