BUSINESS AT HOME: Recession spurs rise in kitchen-table businesses. PAGE 3
HEALTH CARE
Michigan Chief Medical Executive Joneigh Khaldun, M.D., to keynote Crain’s Health Care Leadership Summit.
Jennyfer Crawford now operates her brand marketing and event planning firm, Ask Jennyfer, from home.
DETAILS, PAGE 2 CRAINSDETROIT.COM I OCTOBER 12, 2020
CRAIN’S MICHIGAN BUSINESS | AGRIBUSINESS
FEAST OR FAMINE
Federal farm payments yield uneven rewards — but for how long? External forces like trade disputes and government bailouts haven’t changed Stutzman Farms’ field plans for its rows of soybeans, corn and winter wheat. STUTZMAN FARMS
INSIDE FOCUS PAGES 8-11 Hope for a healthy hops market: Even with the challenges of COVID-19, Michigan’s hop growers remain optimistic. PAGE 8
TOP HOPS
Agribusiness’s quiet giant: Large Michigan footprint, low statewide profile? Must be Corteva Inc. PAGE 11
BY DUSTIN WALSH | Matt Stutzman planted 700 acres of winter wheat in recent weeks across his family farm as usual. The 2,000 acres of clay loam soil see a mix of soybeans, corn and winter wheat as reliably as the sun rises and sets on Stutzman Farms Inc. in and around the village of Blissfield in Lenawee County. The third-generation farmer hasn’t adjusted crop planning in two to three years, despite prodigious movements to the agricultural market thanks to ongoing U.S. trade wars and the unrelenting coronavirus. Stutzman Farms has received increased government support in the past year as a counterbalance to the harm caused by retaliatory tariffs from China and the supply chain interruptions brought on by the pandemic. These new market disruptions are another in a line of challenges farmers face. Increased periods of rain and drought have decimated past growing seasons. See FARMERS on Page 16
EDUCATION
Degrees deferred: MBA programs adapt to new way of doing business BY KURT NAGL
Once considered the gold standard of career development, the MBA degree faces a new question of relevance. Business schools in Michigan are struggling to sell the master’s programs as they face staggering budget cuts and enrollment declines brought on by the COVID-19 pandemic. Increased demand in graduate education often coincides with economic uncertainty, but in the case of a global
pandemic, experts aren’t so sure. Many companies throughout Southeast Michigan halted corporate-sponsored MBAs for employees as they rein in spending during the pandemic. At the same time, prospective students are reluctant to spend tens of thousands of dollars on tuition for mostly online classes. What’s more, even if the core tenets of business remain, the pandemic has influenced monumental change everywhere from auto plants
VOL. 36, NO. 41 l COPYRIGHT 2020 CRAIN COMMUNICATIONS INC. l ALL RIGHTS RESERVED
to office buildings. So, while business school administrators are updating delivery models and marketing methods, professors are racing to reconfigure lesson plans. The MBA is still worth the investment, said Brad Killaly, associate dean for fulltime and global MBA programs at the University of Michigan’s Ross School of Business. But he admits that the marketplace has changed considerably. See MBA on Page 17
UM Ross MBA class size, applicants dropping The MBA program at the University of Michigan’s Ross School of Business, like many such programs, has seen a falloff in the number of applicants and class sizes. Michigan Ross
Class Size Applications Acceptance Rate International Women U.S. Minority SOURCE: UM DATA
2020
2019
358 2,567 37% 18% 43% 36%
2018
421 2,990 31% 27% 45% 31%
2017
423 3,188 27% 32% 43% 35%
2016
422 3,485 25% 34% 43% 37%
413 3,353 26% 35% 40% 37%
CRAIN’S DETROIT BUSINESS GRAPHIC
NEED TO KNOW
HEALTH CARE CLOSEUP
` REPORT: DTE LOOKS AT EXITING PIPELINE BUSINESS THE NEWS: DTE Energy Co. is considering unloading its natural gas pipelines and other non-utility operations, Bloomberg News reported, citing people familiar with the matter. The Detroit-based company is working with advisers to evaluate selling or spinning off the operations, said the people, who asked to not be identified because the matter isn’t public. No final decisions have been made and DTE could elect to keep its current structure, Bloomberg reported. A representative for DTE declined to comment. “We don’t comment on market rumors,” DTE spokeswoman Paula Silver told Crain’s. WHY IT MATTERS: The divestiture would leave the company with an electric utility and gas distribution business. It would also make DTE Energy the latest power company to retreat from energy pipelines after an aggressive expansion into the sector.
` COVID-19 HOSPITALIZATIONS HIT HIGH SINCE JUNE THE NEWS: The number of Michigan residents hospitalized with COVID-19 has doubled in the past three weeks, while hospital emergency rooms have seen a 47 percent increase in ER visits during that period related to the coro-
navirus, state data show. Michigan’s upswing in new hospitalizations comes as the seven-day rolling average of new cases has climbed to its highest level since late April and hospitals are bracing for a seasonal surge of people with the flu. WHY IT MATTERS: Though not nearly as drastic as the spring, the 641 people hospitalized statewide as of last Wednesday with COVID-19 is the highest level since early June, when Michigan was emerging from a 10week lockdown for nonessential workers to flatten an infection curve that had nearly 4,000 hospitalized daily in mid-April.
` WHITMER SIGNS BILL ADDING TIME TO PROCESS BALLOTS THE NEWS: Clerks in Michigan cities or township of at least 25,000 people can start processing a surge of absentee ballots a day before November’s presidential election under legislation signed by Gov. Gretchen Whitmer last week. About 2.7 million voters have requested ballots, many more than in 2016. Secretary of State Jocelyn Benson projected that more residents will vote than at any point in state history. WHY IT MATTERS: The law buys some more time for the processing of the avalanche of ballots, which is expected to make final vote counts take longer to emerge and has election offi-
Khaldun to keynote Crain’s Health Care Leadership Summit Crain’s annual Health Care Leadership Summit, going virtual this year, will examine “Opportunity Amid Crisis,” and examine the ways the health care industry is changing in response to the COVID-19 pandemic. Michigan Chief Medical Executive Joneigh Khaldun, M.D., who has helped manage the state’s response to the coronavirus, will be the Monday keynote speaker for the summit, to be held over four days next week. Go to crainsdetroit.com/ HCLSummit to register for the sessions, which are free, and to see the full lineup of events. Programs run 3:30-5 p.m. each day and include the opportunity for breakout discussions and networking. Other panel discussions will foJoneigh cus on health research opportuniKhaldun, M.D. ties; social determinants of health; CONTRIBUTED and mergers, acquisitions and other partnerships in health care.
cials warning not to expect results the night of the election.
` VISTEON PLANS JOB CUTS AS COVID-19 TAKES TOLL THE NEWS: Van Buren Township-based Visteon Corp. plans to cut jobs over the next two years as the coronavirus pandemic recession
continues to infect the auto supplier’s bottom line. Visteon did not reveal the exact number for headcount reduction, but with an expected cost to the maker of instrument clusters and other cockpit technology $35 million to $40 million in cash payments for termination, severance and retention until the end of 2022.
WHY IT MATTERS: The company has been shrinking for years, spending much of the previous decade paring off business units.
DETROIT CITY FC VIA TWITTER
THE WEEK IN REVIEW, WITH AN EYE ON WHAT’S NEXT
` DETROIT CITY FC ENDS YEAR AS CHAMPS BUT IN THE RED THE NEWS: Winning the National Independent Soccer Association championship made for an uplifting end to an exhausting season off the field for Detroit City Football Club. The soccer team capped off a bizarre inaugural professional season with a 2-1 victory against the Oakland Roots at a fan-less Keyworth Stadium in Hamtramck. WHY IT MATTERS: The win was a shot in the arm for a team run down by the rigid protocols of the COVID-19 pandemic and missing the energy from its rambunctious fan base. Co-owner Sean LE Mann said revenue for is1exABthe year ILmore 20902perA pected to beAdown than , V T S cent from the $3 million T 1 projected at Sthe U the beginning of year. The organiG AU money on operating exzation saved penses but will end the year in the red.
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FINANCE
SMALL BUSINESS
Southfieldbased bank undergoes restructuring Mortgages got Sterling Bank in trouble BY NICK MANES
CHEW ON THIS: HOME BUSINESSES ARE BOOMING CocoGirl Edibles LLC is a side gig of Tamyra Mariner that became a full-time home business making marijuana edibles, including drinks and brownies. | COCOGIRL EDIBLES
From kitchens and spare bedrooms, recession spurs new creations BY ANNALISE FRANK
Trellis Mercer, owner of decade-old streetwear brand LoveLifeSwagger, has gone back to where he started: printing prototype T-shirts from home. He’s among a large number of Detroiters, likely in the tens of thousands, running homebased businesses. They’re weathering the pandemic and resulting hit to the economy while making themselves seen and maintaining the balance that comes with working where you sleep. The details of that balance vary. It may mean keeping kids busy while juggling clients or working late at night on a passion project after putting in a full day on the job.It could also mean, as for Mercer, going backward and forward at the same time. LoveLifeSwagger started out based at home,
Trellis Mercer, owner of the streetwear brand LoveLifeSwagger, has come full circle with a pandemic-forced home business. | CONTRIBUTED
then moved into a downtown Detroit storefront on Gratiot Avenue for six years. When the building was sold, Mercer says he was out in June 2019 — store shut down, business shut down. But in the last couple of weeks, he is building the brand back up from a spare bedroom. He started again using the old shirt printing press he’d ditched several years ago. The bulk still get made at suppliers, but he makes samples at home now. In the meantime, the company itself is moving into the future: The shop never had a big online presence, but now LoveLifeSwagger has an improved website and Mercer is focusing on digital customer service, tracking customer data and social media advertising. “We’re really just getting back to the basics right now,” Mercer said. “Switching to homebased has actually been better for us.” See HOME on Page 15
Sterling Bancorp. Inc. stands as a reminder to not put all your eggs in one basket. And if you do, make sure you’re following the letter of the law. The Southfield-based lender, which operates as Sterling Bank and Trust and has the vast majority of its presence in California, faces compliance investigations by the federal govern- O’Brien ment and litigation over allegations that it violated securities laws by improperly originating mortgage loans. A new CEO familiar with bank restructuring aims to steer the ship through the process. The bank said this week that its 2019 profits were actually half of what was initially reported in January. Sterling executives, in filings with the U.S. Securities and Exchange Commission, write that about 77 percent of the bank’s residential mortgage loans were tied to a mortgage lending program that has now been permanently suspended due to compliance issues. The bank has offered to buy back all of those mortgages, about $7.8 million, according to the filings. More than 100 loan officers and other employees of the bank have resigned or been fired in the last year, including several top executives, according to corporate disclosures. Sterling Bank is cooperating with investigations by federal regulatory agencies, related mostly to the Bank Secrecy Act/Anti-Money Laundering compliance program. The Office of the Comptroller of the Currency, a bank regulatory body, wrote last year that it “has found unsafe or unsound banking practices relating to credit administration.” See STERLING on Page 17
HEALTH CARE
COVID-19 vaccine manufacturing, trials moving forward amid flu season Rochester firm gets deal to make vials of Novavax vaccine candidate BY JAY GREENE
A Novavax vaccine is administered to a patient during early-stage trials. Rochester’s Par Sterile Products will be packaging vaccines for the bigger late-stage trial.| NOVAVAX
A small drug manufacturer in Rochester has begun the process of filling and packaging vials in the final stages of production of a COVID-19 vaccine that is expected to begin a Phase 3 coronavirus clinical trial in the U.S. later this month. Par Sterile Products LLC in Rochester has signed a nonexclusive agreement with Novavax Inc., a Gaithersburg, Md.-based drug company, to provide “fill and finish” manufacturing services at its plant for NVXCoV2373, Novavax’s COVID-19 vac-
cine candidate, said Mike Randolph, general manager of Par Sterile. Financial terms of the agreement and the number of vaccine doses the company would complete were not disclosed. Fill and finish is a manufacturing process in which a company fills vials with the vaccine and packages the products for distribution. “We are very pleased to help bring Novavax’s COVID-19 vaccine to the public,” said Blaise Coleman, president and CEO of Endo International PLC, a Dublin-based drug company that owns Par Sterile, in a statement.
The deal is one of several possible roads to a vaccine for the pandemic disease that are passing through Michigan manufacuturers and medical research operations. The Novavax vaccine is the only vaccine that Par Sterile is currently finishing, although it has in the past produced influenza vaccines, said Randolph, who also is a senior vice president with Endo International. Par Sterile manufactures a whole list of branded and generic aseptic injectable products. See VACCINE on Page 16 OCTOBER 12, 2020 | CRAIN’S DETROIT BUSINESS | 3
am co iss sh pr
REAL ESTATE INSIDER
This vacant Southfield office building heads to the auction block next month after capital improvements needed following a former ownership group’s tenure. | COSTAR GROUP INC.
After improvements, part of office park in Southfield heads to auction
PROGRESS IS ON THE HORIZON. That’s Business Elevated.
Let’s get there together.
Russ Kacin FVP, Commercial Banking 248.743.4034 RKacin@ibcp.com IndependentBank.com 4 | CRAIN’S DETROIT BUSINESS | OCTOBER 12, 2020
About a year after the former Blue Cross Blue Shield of Michigan buildings in Southfield came under new ownership following a contentious court battle, part of what is now known as the West Eleven Office Park is heading to auction. Kirk The auction for 27350 W. PINHO 11 Mile Rd. runs from 1 p.m. Nov. 16 to 1 p.m. Nov. 18 with a starting bid of $1.35 million for the 159,200-square-foot vacant building. At one point, the building was "shuttered by debtors" and "unfit for occupancy," court filings in Oakland County by Southfield-based brokerage house Farbman Group said last year. The building is one of four that I wrote about in November stemming from a series of mind-boggling lawsuits between Canadian investors targeting each other in Oakland County and federal court, with allegations ranging from fraud to implications of one party in a double murder in Toronto. You can read the story at crainsdetroit.com, but the long and short of it is that the ownership group let the four-building complex deteriorate, leaving behind tens of millions in unpaid bills and mortgages because they were broke, and then Farmington Hillsbased Friedman Real Estate bought the properties out of receivership. A mortgage company based in California foreclosed on the loan, and Friedman Real Estate paid $22.9 million for the note via sheriff's deed in May 2019, according to Oakland County land records. Jared Friedman, director of opportunities for Friedman Real Estate, told me that the plan was always to sell the Tower 300 building because it sits on its own parcel and makes for a good redevelopment opportunity. "We put a lot of time, money and effort into fixing up those buildings, fixing elevators, HVAC systems, upgrading parking lots," Friedman said. The two tenants in the complex are Federal Mogul Corp. (now Tenneco), which leases seven of the 10 floors, or
71.3 percent, of the 160,300-square-foot Tower 300 building at 27300 W. 11 Mile Rd., while Stefanini Inc. leases three of the seven floors, or 43.7 percent, of the 110,800-square-foot Tower 100 building at 27100 W. 11 Mile Rd., according to marketing materials for the property. The Tower 200 building is at 27000 W. 11 Mile Rd. and its 304,500 square feet are currently vacant. Steve Silverman, senior vice president of investment and advisory services for Friedman Real Estate, and Jordan Friedman, director of special projects for Friedman Real Estate and Jared Friedman's brother, are responsible for the auction.
Another Platform project being re-evaluated Another Detroit-based The Platform LLC project is on hold with no timeframe for resuming it. Peter Cummings, executive chairman and CEO of the 5-year-old development company, said in a statement that the company is "reevaluating" the second phase of its Baltimore Station project's co-living programming in the Milwaukee Junction neighborhood due to the COVID-19 pandemic, changing economy and rising construction costs. He said it should be unveiled "in the near future," but no timeframe was released. Other Platform projects have been delayed, scaled back or shelved, including the Fitzgerald neighborhood project with Detroit-based Century Partners; the company's plans in the Islandview neighborhood across from Belle Isle; and a luxury condo project in the TechTown neighborhood, respectively. Former CEO Dietrich Knoer left the company a year ago. "In the meantime, we remain deeply committed to Detroit and optimistic about its future, and we are looking forward to unveiling two
completed projects and breaking ground on another major development in the coming weeks," the statement concluded. Those projects being completed are The Peoples State Bank of Redford building in Detroit, now generally referred to as The Obama after a Chazz Miller mural of the former President and First Lady that appeared on it, as well as the Chroma project, a redevelopment of a former cold storage facility. The project slated to break ground soon is the Woodward West development, the long-in-the-works apartment project by Queen Lillian II LLC and The Platform. Detroit-based Queen Lillian II consists of Chris Jackson, a minority owner and former staffer to former Detroit City Council president Gil Hill and former part owner of Greektown Casino-Hotel; and James Jenkins, who is majority owner of the company and is president and CEO of Detroit-based Jenkins Construction Inc.
Carvana opens in Novi Another long-in-the-works project is coming to fruition, this time in Novi. The Carvana Co. location in the Adell Center development at I-96 and Novi Road opened last week. The car vending machine concept is seven stories and sits on a chunk of land that Kevin Adell, owner of the WFDF 910 AM radio station, WADL-TV 38 and The Word Network cable television station, has been working on developing for years. Other users at the 22-acre former Novi Expo Center site have faced serious financial challenges during the COVID-19 pandemic, including restaurants, fitness centers and hotels. Adell said the Texas Roadhouse at the site is open and the Planet Fitness building is complete and plans to open in December. There are also two hotels planned: a Home2 Suites by Hilton and a Fairfield Inn & Suites by Marriott. Contact: kpinho@crain.com; (313) 446-0412; @kirkpinhoCDB
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COMMENTARY
Freedom, firearms and fear
In plot to kidnap governor, policy allowing guns inside state Capitol gets renewed scrutiny Chad
LIVENGOOD
DAYNA POLEHANKI
L
ANSING — Dayna Polehanki spent 19 years in the classroom teaching high school English before winning a seat in 2018 representing western Wayne County in the Michigan Senate. Now she keeps a bulletproof vest under her desk on the Senate floor. Polehanki’s fear for her safety on the job stems from an incident on April 30, when men carrying rifles and wearing bulletproof vests took a perch in the Senate gallery overlooking senators. It was an intimidating day on the job, Polehanki said, as the Legislature was debating a contentious extension of Gov. Gretchen Whitmer’s state of emergency declaration for the coronavirus pandemic that, at the time, was claiming a weekly average of 122 lives in Michigan each day. Polehanki, a Livonia Democrat, took a photo of four of the men that went viral on social media. “Directly above me, men with rifles yelling at us,” she wrote that day on Twitter. “Some of my colleagues who own bullet proof vests are wearing them. I have never appreciated our Sergeants-at-Arms more than today.” Some of the men in the Senate gallery that day actually wanted to do harm to politicians, cops and Gov. Gretchen Whitmer, according to Attorney General Dana Nessel’s office.
A shocking criminal plot revealed Thursday by Nessel and federal prosecutors detailed months of planning and training by 13 men who aimed to kidnap Whitmer, bomb her family’s vacation home and kill police officers. “Today we found out these threats were real,” Polehanki said Thursday during a Senate floor speech, pleading with the Republican majority to ban firearms in the Capitol. “There was a plan in place to not only scare us, but to kidnap us and to kill us.” According to the FBI, the kidnapping plot included a meeting outside of the Capitol during another Second Amendment rally on
June 18 while legislators were inside doing the people’s business. During that meeting, according to federal prosecutors, the leader of a militia group called the Wolverine Watchmen and the leader of another group of men, a Grand Rapids businessman named Adam Fox, hatched a plan to “combine forces” to go after the governor. Four days earlier, Fox was recorded in a telephone call discussing his need for “‘200 men’ to storm the Capitol building in Lansing, Michigan, and take hostages, including the governor,” according to federal authorities. This is not an unimaginable scenario.
The state Capitol building is the least secure government building in Michigan. There are no metal detectors, no security guards wanding visitors or workers like they do at Detroit’s city hall and every federal and state courthouse in the state. Even Lansing City Hall across the street from the Capitol checks for firearms. State Sen. Dayna In Michigan’s Capi- Polehanki, D-Livonia, took tol, there’s no rule this photo on April 30 of against protesting the armed men in the Senate government while dis- gallery during a heated playing a gun. And no debate that day over an one checks to make extension of Democratic sure it’s not loaded. Gov. Gretchen Whitmer’s There’s been a state of emergency years-long debate declaration, which the over why a citizen can Republican-controlled carry a gun into the Legislature did not Capitol, but they approve. The man on the can’t carry a sign sup- right in this photo was porting gun owner- identified by the Attorney ship rights — or any General Office as William kind of sign, for that Null, 38, of Shelbyville, matter. who was charged Thursday The issue of ban- with a 20-year felony for ning guns in the Capi- allegedly providing tol has been bubbling material support for for months since the terrorist acts in a plot to April 29 incident, kidnap Whitmer. which caused Polehanki to purchase the bulletproof vest in case someone wants to pick off senators someday from the gallery. “Every day I walk in and I scan the balcony,” she said in an interview. See LIVENGOOD on Page 15
COMMENTARY
Unemployment benefits fight highlights long-term economic pain
A
s state legislators contemplate the future of unemployment benefits, the health of Michigan’s economy hangs in the balance. Michigan’s quick recovery, largely thanks to the automotive sector working double time after two months of lost production, has stalled out. Jobs posts remain well below January levels and long-term unemployment is on the rise. More than 230,000 unemployed Michiganders entered the federal Pandemic Emergency Unemployment Compensation program between Aug. 29 and Sept. 19, according to U.S. Department of Labor data. That system pays benefits for those unemployed longer than 26 weeks. In other words, hundreds of thousands of Michiganders have been laid off since March with no sign of returning to a job. The Michigan Department of Labor and Economic Opportunity has failed to tell Crain’s just how many people would be impacted if an agreement to extend benefits isn’t reached. Gov. Gretchen Whitmer’s office claims as many as 800,000 in the state could see a loss of benefits. That’s an exaggeration, to say the least. Roughly 768,000 Michiganders were on some form of unemployment as of Sept. 19.
Dustin
WALSH
The likelihood of all of them are past the traditional 20 weeks of state unemployment benefits is just not possible given new initial claims each week. In the meantime, the state’s economy has been buoyed by consumer spending, much of which is in direct relation to federal stimulus and state unemployment payouts. Consumer spending in the state is up roughly 12 percent since January, despite nearly 800,000 or about 8 percent of all men, women and children in the state, drawing some form of unemployment nearly seven months into the pandemic, according to data from the Opportunity Insights real-time tracker operated by economists at Harvard University. The math is simple: Any disruption to the unemployment benefits or an extension that eviscerates the six-week extension of benefits enacted by executive order from Whitmer will damage
the state’s economy in what economists now expect to be a long-toothed recession. The Michigan House of Representatives is expected to vote as soon as Tuesday on extending unemployment benefits from 20 to 26 weeks through the end of the year — a temporary fix for what will be a much longer problem. The issue is of critical importance to low-income Michiganders, who have been more acutely harmed by the pandemic recession than any other group. The unemployment rate for Michigan’s low-income workers — those earning $27,000 or less annually — was down nearly 18 percent at the end of August. High-income workers, those making more than $60,000 annually as defined by the Harvard economists, have largely been unaffected with employment 1.3 percent higher in August than in January. Retail and hospitality jobs were pummeled by the pandemic and forced closures by the governor’s office, bottoming out in April at more than 50 percent fewer jobs than in January. A large number of those jobs have recovered as restrictions loosened, to the point where retail and hospitality jobs are down fewer than 10 percent from the start of the
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 | OCTOBER 12, 2020
year. Education and health services positions, however, continue to bleed out, now down nearly 11 percent from January. LOW-INCOME But with all the employment pain EARNERS, THOSE abounding, consumer MOST ACUTELY spending has not followed suit. In fact, con- AFFECTED BY sumer spending in LAYOFFS, HAVE Michigan is actually up a shocking 16.9 percent OUTPACED THE since January. SPENDING OF Low-income earners, those most acute- HIGH-INCOME ly affected by layoffs, EARNERS, BY have outpaced the spending of high-in- PERCENTAGE, come earners, by perTHROUGH MOST centage, through most of the pandemic. In OF THE fact, high-income spending didn’t PANDEMIC. eclipse low-income spending until the end of August, according to the Opportunity Insights tracker. See WALSH on Page 15
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
We can’t lose sight of importance of economic development BY ECONOMIC DEVELOPMENT LEADERS FOR MICHIGAN
administer $100 million in relief grants to help small businesses keep their doors open and their employAt the heart of economic develop- ees on payroll. We are pleased to exment is the well-being of people and pand our role to support the shortterm recovery strategy that will aid communities. We, the co-authors, are the CEOs businesses and families through unof 12 regional economic develop- certain times. The priority of EDLM remains to ment organizations and founding members of Economic Development drive long-term economic growth Leaders for Michigan. Together we and keep Michigan competitive. We have over 350 years of economic de- are pleased the Legislature and govvelopment experience. Our organi- ernor agreed upon funding for ecozations represent 84 percent of Mich- nomic development priorities in the igan’s population and 89 percent of recently passed 2021 state budget. state gross domestic product. We Our need for economic action has lead efforts which drive Michigan’s not ended. While we must pull together in difeconomic engine, generate revenue, and create quality jobs through busi- ficult circumstances, our state’s longness retention, expansion, and at- term economic health is on the line. Other states have created attractraction. We connect businesses with the tive incentive packages that outpace resources they need to grow by Michigan, and they actively attempt to lure our comstrengthening panies to relosupply chains, OTHER STATES HAVE cate production supporting infraand jobs. Supply structure im- CREATED ATTRACTIVE p r o v e m e n t s , INCENTIVE PACKAGES THAT chain manufacturing facilities launching entreare returning to preneurs, linking OUTPACE MICHIGAN, AND North America in talent and emTHEY ACTIVELY ATTEMPT the wake of ployers, and coCOVID-19. In an ordinating state TO LURE OUR COMPANIES aggressive and and local incentives that encour- TO RELOCATE PRODUCTION rapidly shifting environment, age business AND JOBS. Michigan must growth. In partnership with local and state stake- be positioned to maintain existing holders, the results we achieve help businesses and attract new compacommunities prosper. Our work puts nies to bring quality job growth, development, and sustained investMichigan on the map. The impact of COVID-19 across ment to our state. Keeping Michigan on the map will the regions and communities our organizations serve is unquestionable. require decision makers in Lansing Above all, we are saddened by the to continue to invest in economic deloss of life in our state and nation due velopment. Future budgets must to the pandemic. Additionally, maximize funding for business recountless businesses and employees tention, expansion, and attraction have suffered devastating economic strategies, as well as support for starthardship, further impacting Michi- ups which contribute to GDP. Maingan families. And, we still expect our taining GoingPro will allow employstate budget may fall short by up to ees whose service jobs have disappeared to acquire new skills $4 billion over the next two years. To assist our communities, EDLM and remain self-sufficient. We must restore Good Jobs for members partnered with the Michigan Economic Development Corp. to Michigan, which incentivized compa-
nies to create lasting, good-paying jobs at no up-front cost to the state. MEDC must streamline grant and incentive decisions for businesses who want to stay in or relocate to Michigan. Existing Tax Increment Finance tools which create local opportunity should have overwhelming support from the legislature and administration. These investments and priorities, or lack thereof, demonstrate whether Michigan values economic opportunity and smart business growth. If we are dedicated to the well-being of Michigan’s residents, economic development initiatives that connect businesses, develop talent, and help build our economy are indispensable
Kevin Johnson, President & CEO, Detroit Economic Growth Corporation Ron Kitchens, Senior Partner & CEO, Southwest Michigan First Birgit Klohs, President & CEO, The Right Place, Inc. Maureen Donohue Krauss, President & CEO, Detroit Regional Partnership Paul Krutko, President & CEO, Ann Arbor SPARK James McBryde, President & CEO, Middle Michigan Development Corporation Jennifer Owens, President, Lakeshore Advantage Bob Trezise, President & CEO, LEAP
at this crucial moment. Inaction will stunt our economic growth potential while other states get ahead. EDLM’s CEOs and our organizations are committed to providing businesses the tools they need to accelerate Michigan’s economy, in turn supporting our communities, and ensuring residents live healthy, high-quality lives. We hope the state will join us. Rob Cleveland, President & CEO, Cornerstone Alliance Amy Clickner, CEO, Lake Superior Partnership JoAnn Crary, President, Saginaw Future Inc. Marty Fittante, CEO, Invest UP
CONGRATULATIONS
2020 Michigan Women’s Hall of Fame Inductee
DR. GLENDA PRICE We are deeply grateful for your continued impact on Marygrove for more than twenty years! Your friends and partners at the
GOVERNMENT
Moody's backs Detroit bond rating amid COVID impact BY ANNALISE FRANK
Moody's Investor Service maintained its pre-pandemic outlook on Detroit's debt despite the toll the virus has taken on the economy and the city's finances. The credit rating agency is keeping its Ba3 rating on Detroit's unlimited tax general obligation bonds, it announced early last week. Its outlook on that rating also remains positive. The news came days after Moody's downgraded both New York state and New York City's ratings amid sales and income tax slides, as reported by the Wall Street Journal. The credit rating is generally an indicator of a city's financial footing. Moody's also chose a Ba3 credit rating for a new series of $80 million in bonds set to pay for Detroit recreation and parks, police equipment and animal control. The agency is maintaining a rating
that it set in May 2018. At that time, Moody's had raised the city's grade up from B1. The Ba3 level is still three steps below investment grade. "The coronavirus-driven recession has caused significant declines in economically sensitive revenues,. ... However, because the city took proactive steps very early in the downturn to adjust expenditures including reducing capital spending and eliminating positions, reserves will likely remain healthy," Moody's said in its Monday rating report. Detroit Mayor Mike Duggan in mid-April announced a slew of employee pay cuts to eliminate a potential deficit last fiscal year and this fiscal year, and that the city would hold off on $72 million in demolitions and $33 million in capital projects. Contact: afrank@crain.com; (313) 446-0416; @annalise_frank
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CRAIN’S MICHIGAN BUSINESS | AGRIBUSINESS
GROWING HOPTIMISM Hops growers in Michigan survive shakeout — and thrive BY TOM HENDERSON
Hoptimism: A belief that things are better with a craft beer Many of the investors who thought there was easy money to be made from hops when Michigan farmers began planting that crop 13 years ago have sold their interests and moved on. A lot of the hobby farmers who were fans of craft beer and thought it would be cool to be part of that fast-growing industry have found other hobbies. The euphoria, optimism and unrealistic expectations are gone. Left are hop growers who say they are here for the long haul, who have figured out how to fight disease and infestations, who are making money and selling all they can grow. Not even COVID-19, they say, has dampened their conviction that they now have a sustainable agricultural business. The blow from the virus was significant. Michigan’s hops growers generally have small operations, many of them only 5 or 10 acres, and a significant share of their sales are to brewpubs, which were shut down for months once the pandemic hit with full force in March. 8 | CRAIN’S DETROIT BUSINESS | OCTOBER 12, 2020
But some of the growers were able to hold their own by increasing sales to Michigan craft brewers with bottling and canning lines that were able to distribute their beer to retail outlets. In stores, sales were up because of more people spending more time at home and finding themselves in need of a beer, or two. But first, let’s examine the hop: Hops are small, cone-shaped flowers growing on female plants that grow in vines on thin, strong ropes made from coconut husks hanging from vertical wooden trellises that rise 18 feet into the air. They add aromatics and flavor complexity to beer. Mass-produced beers like Budweiser use about a third of a pound of hops per barrel. Craft beers typically use four or five times that much, with the extra hoppy beers now in vogue using even more. According to the national Brewers Association, there were 400 craft breweries and brewpubs in Michigan in 2019, ranking it sixth in the nation. J. Robert Sirrine, the senior educator at the Michigan State University extension service in Suttons Bay on the Lee-
lanau Peninsula, helped revive the state’s hop industry in 2007. He says Michigan had been a producer of hops from about 1860-1880, with perhaps as much as 400 acres under production, but a combination of things caused farmers to change crops. He said Michigan hop yields back then were hurt by disease and insect infestation about the same time major hop production began in Oregon and Washington state. Hops farms in those regions were in areas with low humidity and rainfall, much better for hop growing than Michigan, with generally high humidity and relatively high summer rainfall, and the building of the transcontinental railroad allowed for the quick shipping of hops to the major breweries in the Midwest and East Coast. According to the Hop Growers of America, Washington is by far the nation’s largest producer of hops, with 40,880 acres under cultivation in 2019, more than 69 percent of the total in the U.S. Idaho was second with 8,358 acres, Oregon third at 7,306, Wisconsin fourth at 1,297 and Michigan fifth at 720. According to the na-
Hop
QUIET GIANT Large Michigan footprint, low statewide profile? Must be Corteva Inc. PAGE 11
MiLocalHops’ fields in Williamsburg in the northwest Lower Peninsula. The operation is Michigan’s largest hops grower. | CONTRIBUTED
Hops are processed at the Top Hops operation in Goodrich. | TOP HOPS
tional association, Michigan hit a high of 810 acres under production in 2017, but it fell to 750 the next year. Sirrine thinks the acreage for Michigan is inflated and doesn’t reflect small and hobby farmers who have exited the business, that the actual total under production is closer to 600 acres. He estimates total hop farms at 40, not counting hobby farmers who might have half an acre under production. Mark Trowbridge, who with his son Sean owns the Top Hops LLC farm in Goodrich, is chairman of the Hop Growers of Michigan. He said membership has fallen from a high of 40 growers several years ago to 27 today. “A lot of people thought they’d get into growing hops and people would just buy it,” he said. “It was wishful thinking. They didn’t put a lot of thought into how they were actually going to make money, or knew who they were actually going to be selling to.” Sirrine said that as craft brewing was taking off in 2007, he got calls from farmers in northern Michigan asking about the possibility of growing hops. “There was a global hop shortage. Prices were skyrocketing, and I kept
getting calls from farmers. I didn’t know if we could, so we brought in experts,” he said. What they told him was that the 45th parallel in both the northern and southern hemispheres is where hops thrive, and the 45th parallel cuts right through northern Michigan. The first to plant was a farmer on Old Mission Peninsula north of Traverse City. “Michigan hop farming took off from there, though it has been turbulent, like agriculture can be. Look at dairy farming. You can have all kinds of problems on a dairy farm,” said Sirrine.
Powdery mildew, corn borers and a pandemic One truism of farming is: If it ain’t one thing, it’s another. As craft brewers expanded their product lines and grew in volume, they began to look for different hop varieties that Michigan growers can’t provide. The big hop growers out west can spend millions on experimenting with new hop breeds. When they get one they like — and that can take years and millions of dollars, time and money Michigan farmers can’t afford — they get a
patent on what is known as a proprietary hop and begin to market it. Michigan growers can’t afford to license new lines from the patent owner, either, so they continue to grow standard hops in the public domain. A hop variety known as Cascade has been a mainstay of Michigan growers and brewers for years, but there has been less demand for it by larger brewers who are able to afford the more expensive proprietary hops, which can also be more resistant to disease and have a longer shelf life. Because of higher rainfalls here and higher humidity, Michigan hops have been prone to a disease called downy mildew almost from the start, something that isn’t a problem in drier hop climates out west. In 2017, powdery mildew hit Michigan hop growers hard. In 2019, it was the European corn borer insect. An unusually cold spring that year meant when it came time for the borer to feed, the corn crop wasn’t ready. “The European corn borer went out looking for a different host and found hops,” said Serrine. See HOPS on Page 10
OCTOBER 12, 2020 | CRAIN’S DETROIT BUSINESS | 9
FOCUS | CRAIN’S MICHIGAN BUSINESS | AGRIBUSINESS
HOPS
From Page 9
Then, this year, it was a human disease, which reduced sales by many growers by 30-50 percent. Sales picked up sharply in July and August as brewpubs began opening up and expanded outdoor seating. Overall, says Serrine, “the Michigan hop industry has stabilized. Those still at it are good at marketing and sales.”
About that first hop farmer That first hop farmer? He is now out of the business. One of the next to plant was Brian Tennis. He and his wife, Amy, had bought a small organic cherry orchard just west of the village of Omena in the Leelanau Peninsula in 2005 as a place to camp on weekends. She was a health care executive in Grand Rapids and he worked in IT at Herman Miller. After going to one of Sirrine’s presentations, they converted the cherry farm to a 30-acre hop farm in 2008, and in 2010 named it the Michigan Hop Alliance. Processing hops is very expensive. In addition to harvesters to cut down
Storage bins at Top Hops’ operation in Goodrich. | TOP HOPS
the vines from the trellises, you need equipment that separates the hops from the vines, that dries the hops out from 70 percent moisture to 7 or 8 percent and that then processes
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them into hard, tiny pellets that are shipped to brewers in 11-pound bags. “We didn’t know what we were getting into,” he said. “Luckily, we didn’t know what we were getting into. We lost a lot of money the first few years. We paid a lot of idiot tax.” He said the alliance originally began in 2013 as a co-op of five farms. “We put in acreage and shared equipment. Eventually, I was the last man standing. We bought out our partners,” he said. “But it’s not every day you get to start an industry. “A lot of farmers who were growing hops are now pulling out the hops and putting in hemp.” Tennis processes hops for six small farmers from around the state who can’t afford all the equipment. He also sources hops from abroad for brewers looking for hops that can’t be found in Michigan, including importing from Slovenia, New Zealand, France, Germany, Poland, South Africa, England and Australia. In 2016, Tennis stabilized his economics and his market by taking on an equity partner, Wixom-based StreetCar Partners LLC, which gave him access to funding if needed. One of StreetCar’s portfolio companies is Arbor Brewing of Ann Arbor, and that locked in a major customer. Tennis said his harvest this year of 13 different varieties was by far his best ever, about 1,500 pounds per acre and about 45,000 pounds in all, but sales were down because of the hit he took from COVID, which knocked him down by about 50 percent for several months. He said he has tried unsuccessfully to buy his neigbhor’s apple orchard to convert it to hops, but one way or another will be expanding soon, 20 or 30 acres at a time. “We did fine this year. We were in neutral, but I didn’t have to lay anyone off. Next year we’ll be slamming, again.” He said he employs six to eight. Sirrine helped whet the Trowbridges’ appetite for the hop business when he organized a bus tour of some of the first northern Michigan hop farms, or yards as they are known in the hop business. Mark was a retired engineer and his son had a degree in biology and environmental science. “We weren’t farmers but we both enjoyed being outside. We’d bought some land for recreation and my son saw the craft-beer boom and thought
Hops are small, cone-shaped flowers that lend their flavor to beer during the brewing process. | TOP HOPS
it might be how we could make some money off a farm,” said Mark. They liked what they saw but moved slowly, spending nearly two years doing their homework before launching a business nine years ago. They planted 5 1/2 acres and have expanded since to 17 acres today, growing seven different types of hops and selling to about 50 small customers. “We don’t sell to Founders or Bell’s or Short’s,” he said, referring to three of the biggest craft brewers in the state. This year’s harvest yielded 19,000 pounds, a little below expectations because of disappointing yields in two varieties. He said it took five years to get to the point where the business paid for itself. The Trowbridges wanted to be a fully integrated hop farm, which meant a considerable capital expense for equipment, which will be paid off in a year or two and put them well into the black.
The biggest hop yard east of the Rockies According to the U.S. Department of Agriculture, total hops production in the U.S. was up 5 percent in 2019 to 112 million pounds, a record, and substantially up from the 2016 harvest of 87 million pounds. Totals for the current season, with harvesting finished or well underway at most farms, are not in yet. Michigan’s Department of Agriculture doesn’t track the hop harvest by volume, but Sirrine estimates the total harvest this year at between 600,000 and 1.1 million pounds. Depending on the variety of hops grown, the price per pound can range
from $6 to $14 a pound, with most varieties bringing close to the bottom of that range. The lion’s share of Michigan’s acreage is at a single farm, MI Local Hops in Williamsburg, which recently finished harvesting its 220 acres. It is the largest hop yard east of the Rockies. It sits on the site of the former High Point Golf Club, which went out of business in 2008, unable to compete with the Bear Golf Course at the Grand Traverse Resort, just a few miles west on M-72 in Acme. The hop farm was announced with much fanfare in 2015, locals happy to see the closed golf course turned into something productive. There were news reports of a 400-acre farm, and the business was a partnership owned by a number of prominent Traverse City investors, most of whom are no longer involved. Mark Johnson, one of the original owners and a local commerical real estate developer, is now 95 percent owner. Right off the bat, he said, they learned a big lesson about farming: “When there are shortages, prices go up. When prices go up, farmers plant more and prices go down. We made a big investment anticipating high profits for a while to pay off the investment, and that didn’t happen. But I’m here for the long haul.” “We are at a vital time for Michigan hops. We’re on the rise, but it hasn’t been easy,” said Mike Moran, Mi Local Hops’ general manager and vice president. “We had some setbacks, things that didn’t go well.” MI Local Hops grows 14 varieties of hops. It harvested 150,000 pounds this year, down from the average of 200,000 to 250,000 pounds because of cutbacks due to the pandemic. Moran said that counting processing it does for other farms outside the area, he will pelletize more than 300,000 pounds this year. Don Hayden, the owner of the golf course, owns the H&H Farm nearby, and it has 21 acres under production as an affiliate of the Mi Local Hops operation. Kalamazoo-based Bell’s is the farm’s largest customer, buying centennial hops that are the key to the taste of its Two-Hearted Ale. They also sell centennial hops to Grand Rapids-based Founders for its All Day IPA. Most other sales are to smaller craft brewers. He said he used to process hops for several other hop farms but they have gone out of the hop business. “A lot of farmers grew varieties that too many other farmers were growing. Or they didn’t quite have the quality. Some hobby farmers thought they could do it farming two days a week,” Moran said. “The Michigan hop industry is still proving itself. We have to prove ourselves year after year.” The farm has a 30,000-square-foot processing plant and another 15,000-square-foot facility for the cold storage of hops and equipment to pelletize them. Moran says he sells to brewers around the U.S. and to brewers in South Korea, India, Brazil, Canada, Taiwan, China and Japan. He said he was in negotiations for a big sale to India that blew up when COVID hit. “From April through June, our sales were down 50 percent because of the pandemic,” he said, though he was able to keep his seven employees working without need for layoffs. The farm hosts events, though that was curtailed this year. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2
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FOCUS | CRAIN’S MICHIGAN BUSINESS | AGRIBUSINESS
Corteva, a growing presence if not yet a household name Former Dow DuPont agribusiness units expanding in Michigan, supplying farms globally BY TOM HENDERSON
If there were an award for the largest worldwide company with a major presence in Michigan that somehow has managed to stay below the radar, it would have to go to Corteva Inc. (NYSE: CTVA), whose reach is mammoth and whose name often elicits a “who?” It has a market capitalization of $22 billion, employs about 21,000 worldwide, has manufacturing operations on every continent except Antarctica and had revenue of $9.15 billion in the first six months this year. The company employs nearly 800 at its Michigan hub, which includes manufacturing operations in Midland and Harbor Beach in the Thumb, and it also employs about 300 contractors locally. Midland is the clue. Corteva is a former part of the Dow DuPont empire. On June 1, 2019, it was spun off as an independent company through an initial public offering, a delayed result of a deal in 2017 that had shocked the chemical world when it was first announced. In 2015, Midland-based Dow Chemical Co. and Wilmington, Del.-based E.I. du Pont de Nemours & Co., better known simply as DuPont, announced their intention to merge. DuPont’s agricultural division and Dow’s agricultural division both were very large and were spun off as Corteva. Another large agricultural company is part of Corteva’s heritage. In 1999, DuPont bought Pioneer Hi-
Corteva’s campus in Harbor Beach. | TOM HENDERSON/CRAIN’S DETROIT BUSINESS
Bred International, a global seed company that is the basis of Corteva’s seed-production and sales. The Michigan hub makes herbicides and pesticides as part of the company’s crop-protection platform, which includes five other crop-protection sites in the U.S. and 15 crop-protection facilities around the world. The Michigan hub is the biggest. Corteva’s seed-production platform grows and sells huge volumes of a wide range of seeds, with 39 production sites in the U.S., 80 other sites worldwide and thousands of fields in production. A major expansion of each part of
the Michigan hub is currently underway. Last October, the company announced it would spend $145 million to increase the company’s manufacturing of pesticide products, particularly its Spinosyns line, which is made by a proprietary natural fermentation process and sold in more than 100 countries around the world under the brand names of Spinosad and Spinetoram. The products ward off or reduce crop damage caused by insects. Spinosad and Spinetoram have each been awarded a Green Chemistry Challenge award by the U.S. Environmental Protection Agency, a program that honors companies that incorporate the
principles of green chemistry into their products. Corteva claims to be the world leader in naturally derived insecticides. The company said it expects that by increasing its Callender Spinosyns capacity by 30 percent at those plants as a result of the capital program, it will increase revenue by more than $100 million a year once everything is online. Marcel Venckeleer, the director of the Michigan hub, says construction at his facilities began late last year and likely will continue into 2022. The first of the construction projects is scheduled to be done by the end of this year. “We’re pouring concrete foundations and putting in steel beams at both our operations,” he said. A new fermentation facility is among the things being built in Midland. Currently, fermentation is only done at Harbor Beach. Venckeleer said the expansion will result in a modest increase in employees, with most of the gain in production as a result of more efficient equipment. Lisa Callender runs the Harbor Beach operation with the title of site leader and will also be in charge of fermentation operations in Midland when those come on line. Decades ago, her 16-acre, three-manufacturing-plant op-
eration was the site of a lumber mill. In 1961, a company called Hercules built a fermentation plant there to make monosodium glutamate, a flavor enhancer common in Chinese food and often used in canned soups and vegetables and processed meats. In 1975, the fermentation plant was sold to G.D. Searle Co. and sold again to Monsanto in 1985 to make the artificial sweetener NutraSweet. In 1995, a joint venture of Dow’s bought the plant and began fermenting Spinosyns. Both campuses of the Michigan hub remained open as essential businesses after the coronavirus hit, though many human resources and other nonmanufacturing jobs were done remotely. “People need to eat. Farming doesn’t stop,” said Callender. “The joke is, there’s no better place to social distance than in a combine.” The top and bottom lines weren’t impacted by the virus. According to filings with the SEC, revenue for the six months ending June 30 was up 2 percent from $8.95 billion for the first six months of 2019, most of which was as a business division and not as a public company. Net income was $1.05 billion, compared with a loss of $418 million in the first half of 2019. Corteva’s stock closed Thursday, Oct. 8, up $1.80 to $32.33, and its 52week range has been $20.38-32.64. Tom Henderson: (231) 499-2817 Twitter: @TomHenderson2
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Q&A
John Rakolta Jr. on his job as an ambassador, the UAE-Israel deal, and the future of his family’s company BY ADAM FINKEL
If you looked closely at the dignitaries from the White House and Israel who visited the United Arab Emirates as a long-sought accord between the country and Israel last month, there was a Detroiter front-and-center: John Rakolta Jr. The Senate confirmed Rakolta as ambassador to the United Arab Emirates on Sept. 17, 2019. He arrived as the top diplomat to the country on Oct 29. The United Arab Emirates is home to around 10 million citizens and has a GDP around $400 billion. Michigan companies with a presence or partners in the UAE include Domino’s Pizza, Altair Engineering, Dow Chemical, Kellogg’s, General Motors and Ford Motor Co. Rakolta is the first politically appointed ambassador to the UAE. He was previously the chairman and CEO of Walbridge, the family-owned construction company with a headquarters in Campus Martius in downtown Detroit and business activities worldwide. He has also long been active in educational and community issues in Detroit Last month, President Donald Trump hosted Israeli Prime Minister Benjamin Netanyahu, United Arab Emirates Foreign Minister Abdullah bin Zayed and Bahraini Foreign Min-
as a country. You know, they’re wide. They’re deep. They’re well thought-out. And they’re designed to bring prosperity, protection and peace to our country. And the final responsibility of Ambassador is the relationship with the host country, from the citizens and public standpoint, to many expats there. You know, the UAE is unique in its design. In this population, about 9-10 million people, 90 percent of them are foreign nationals all coming there to work. And there’s only about a million Emiratis. So there’s this uniqueness of this ... this melting pot, if you will.
ister Abdullatif bin Rashid Al-Zayani for a signing ceremony for the accord at the White House. The same day, Rakolta sat for an interview. The Q-and-A, edited for brevity and clarity, is below. `What are your thoughts after being at The White House for much of the day? It’s been a really incredible day, to say the least. I’m honored to be here, quite frankly. We did have an idea that things were moving in the right direction many months ago. It’s just amazing how quickly they came together. And I think there were a number of factors that caused that. But for all intents and purposes, it’s the leadership. You know, the prime minister, the crown prince, the president, these guys took a big step forward and took a lot of courage. Not everybody in the world is in favor of this. And as a result, they put their presidencies/prime ministerships on the line for this — for the good of mankind and the Middle East. ` What was the process to be confirmed as the ambassador to the UAE? I was actually announced by the White House in March of 2018. My confirmation process took 18 months — much longer than originally envisioned. I spent about a month getting prepared, but you know, there’s a different kind of preparedness after you’re confirmed.
Rakolta
` What can you tell us about your current role? You can break down the day-to-day aspects of an ambassador into three components. The first is the operational aspect of the embassy itself. There’re around 1,000 people that work in the embassy and in the consulate. Half of those are Americans and the other half are from local countries. They would be people from all different countries. It’s a very complicated operation. They all have families. They’re away from home. And so my job has been to protect them and protect America. T:10" A second pillar would be our policies
` How did you end up in the UAE? The State Department has a process and a number of logical factors. We did have a business there for about 10 years. So I was familiar with the customs and the laws and the people. Walbridge worked there from about 2002 to 2010 (or) 11-ish. We built many projects and joint ventures with another company. I think that coming from the greater Detroit area and the large concentration of Middle Eastern citizens also probably was a factor. I think being the honorary general counsel probably was a factor to some degree. I think my business experience was another factor. You know, and the fact that I’m a Republican. That’s another factor. So we put all those things together. And one of the things that is not widely reported,
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` Getting to today’s announcement, when did you realize you would be involved with history? You know, it was slow. After being here for about three months, I was looking for a way to strategically advance our relationship in a meaningful way and the White House and the National Security Council afforded the UAE this opportunity to have a strategic dialogue. Something that this country had not participated in before. And so myself and the Embassy Staff, the State Department in the National Security Council, and many agencies worked on an outline of issues and how we might proceed. COVID really put a monkey wrench into the situation. And it took us until about the middle of June, a better part of five months to move forward on the process. ` Are there insights that you’ve already seen about the business and financial impact of the agreement between the UAE and Israel? I think, first of all, this is a pivot of history. We’re all children of Abraham. And I think that lays out the foundational set See RAKOLTA on Page 14
T:7"
One size doesn’t fit we. we
but it’s public is that I’m the first politically appointed ambassador (from the U.S.) in the history of (the UAE). Up until my ambassadorship, there’d been basically 47 years of career diplomats.
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Korotkin Insurance Group, Inc. Korotkin Insurance Group, Inc. (“KIG”) is proud to welcome retired Detroit Red Wing, Drew Miller, as an Agent offering insurance solutions for business owners and individuals alike. Michigan owned and operated, KIG has been servicing the community for over 100 years. KIG President, Jeffrey Belen, stated, “We are thrilled to welcome Drew to our team. He is a man of great character, drive and ambition. We respect his vision and look forward to growing our business together.”
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NEW HIRE? PROMOTION? BOARD APPOINTMENT? Create your own business headlines with Companies on the Move For more information, contact Debora Stein at 917.226.5470 / dstein@crain.com Crain’s People on the Move showcases industry achievers and their companies to the Detroit business community. Contact: Debora Stein at dstein@crain.com 14 | CRAIN’S DETROIT BUSINESS | OCTOBER 12, 2020
CrainsDetroit.com/ CompanyMoves
RAKOLTA
From Page 12
of values that you could build upon. So that’s one giant insight. These values are applicable to more than just Muslims and Christians and Jews. They are applicable to the entire world. And it’s really nice and heartwarming to see our three nations adopt these principles, these values, if you will. Another insight is the strength of both countries. They’re both very strong economically, you know, they’re model economies, compared to their neighbors, for different reasons, of course. The Middle East as a whole is a very large market in excess of 500 million people. And you can just imagine the potential of growth here and opportunity, if we’re going to be focusing on peace as opposed to terror and violence. So that was a big insight. And then thirdly, they’re both very strong militarily. Together, you put all this together, they make very logical allies. It’s great that we didn’t have to wait another 25 years for this to happen. What do you think the UAE can most learn from your experience in Detroit and Michigan? And what do you think Michigan can most learn from the perspective you’ve gained in the UAE? I think the UAE can learn that it’s a small world. And today we’re not very far apart. In many respects, we’re very much alike, you know, communities, families, and wanting to do business and be friends with everybody around the world. We have to be a little bit more patient and a little bit more understanding of what we can do for them. They’re not in need of capital. They’re a very wealthy country. They don’t need our money for investment. But they would like from us is our ideas, our minds, our innovations, our technology, to help them further advance their country We have the Expo 2020 coming up. It’s been delayed for years, and It’ll start in October of 2021. The State Department and the White House and President have offered me the chance to be the commissioner general, which I accepted back in February. We are working to have a world-class pavilion and to have a program about the values and democracies and freedoms of our country, and then to be second to none around the world. This will be an opportunity for places like Detroit and the state of Michigan to come and to participate, to network and to find the areas where we have common interests, common investment ideas, opportunities for trade, job creation, cultural exchange, all of these things. Interestingly, Detroit has a sister relationship with the city of Dubai. It was a signed agreement back in the ‘90s. And I think we ought to dust that off. How would you define the nature of business activity between the UAE and your home state? Oh, first of all, there is a robust relationship. They buy a lot of cars in the Middle East. General Motors, Ford and Fiat Chrysler have good footprints here and sell a lot of cars. You don’t see a lot of pickup trucks yet but that might be coming. Michigan is known for biotech, and I think that that’s a huge opportunity to raise — to partner with many, many nascent companies where they have new ideas and services and products that would benefit the UAE. Food security and agriculture are two big ones that Michigan might be able to participate and benefit from the most. There are plenty of opportunities for us. We need to come, we need to engage and we need to find our place. And that’s the hardest part. The hardest part isn’t
Detroit construction mogul John Rakolta Jr. became the ambassador to the United Arab Emirates with his confirmation in September 2019. | WALBRIDGE
finding opportunities. There’s plenty of them. It’s identifying them, and then marrying up the right partners together that are looking to expand, looking to invest with each other, looking to find the next cure, the next piece of software, the next application or the next manufacturing system. What are the other major topics you’re working on as the lead diplomat? These are the four challenges that I would say, really occupy most of my time. The first is Expo 2020. Prior to 1994, the State Department handled and funded our pavilions. And during that period of time, we concentrated on the goodness of America, the strength of our Constitution, the Declaration of Independence, and all the freedoms that we have as citizens.
“THEY BUY A LOT OF CARS IN THE MIDDLE EAST. GENERAL MOTORS, FORD AND FIAT CHRYSLER HAVE GOOD FOOTPRINTS HERE AND SELL A LOT OF CARS. YOU DON’T SEE A LOT OF PICKUP TRUCKS YET BUT THAT MIGHT BE COMING.” And those freedoms are what really have created our dynamic as the world’s biggest economy in a way that no other country has been able to replicate Whether it’s in innovation, patents or output. We’ve really created something quite unique. When I got here, we weren’t going to be participating in Expo because in ‘94, the U.S. government stopped funding participation and it was passed on to the private sector. The private sector had to go out each year to raise money from the large companies like Coke and IBM. We hit a wall for Expo 2020. And corporate America was no longer interested in investing in that kind of marketing because it had really run its course. This is what we’re dealing with. So, remarkably, Emirates has offered a gift to the United States valued at almost $60 million. We could go back to the way that we work and have a pavilion that was based on our values and all those things that make us a great country. It was challenging to get our country in a position where we would accept the gift, and then start to build a pavilion. I’ve been working on this for a little less than a year now. And that’s been my first challenge. Second is to protect American citizens here. And then third is to protect the homeland. And quite frankly, COVID presented a huge problem. That’s the second big problem that I faced, and we’ve done a good job. We haven’t had a single COVID case, knock on wood, of the diplomats in the embassy to this point in
time. The UAE is doing even a better job. Their death count is very low. The third thing is the strategic dialogue: counterterrorism law enforcement, economic trade, investment, culture, freedoms of the individual religion. Expo is a subset of the strategic dialogue. But Expo will be over within 18 months to two years. The strategic dialogue hopefully will go on for a very, very long period of time. The final one is the Abrahamic Peace Accords. ... Keeping it confidential was a challenge because if it got out, we may not be here today. How often have you been able to get back and what do you most miss about Detroit? I came back last Christmas for three days and then I came back in the month of July. I was in Detroit just one day and spent most of the time in Washington getting ready for today. I’m a social animal and love the citizens of Detroit. I looking forward to coming back and working in the community. I miss Coney Islands. ... I miss my family. Do you have a projection of the next few years of your diplomatic career? I’m a political appointee. I’m not making any predictions on the election right now. It’s probably a toss-up. If the president wins, I’ll be here for a while. And by chance if he does not, then most likely I’ll be home sometime in the early part of 2021. Any final thoughts on Walbridge and how life will be when you return? I’m not up to speed on the current state of the business. Walbridge is one of the world’s great industrial contractors. And I’m told that that has not subsided at all. And there’s just plenty of opportunity to build new plants and improve old ones. The company has done a lot of work over the years around large data centers to service the growing needs of AWS and Microsoft cloud usage. I have a sense from what my kids tell me that things are going very well right now. In terms of succession, I think we set the plan in motion. Junior [son John Rakolta III] is number two guy and operates with one of my partners, Mike Haller, who is president. They form a really great team. Our continuity of family ownership, our transition is squarely on his shoulders. The other business, DFM, which is a facility maintenance business, is led by Lauren, my second-oldest daughter, who’s been there since 2014. She has become the majority shareholder of that business. The rest of the family owns the balance. She’s the president and CEO. She’s doing a fabulous job of expanding her business. So that succession plan’s in place also. We’re very fortunate that my kids will be the third generation of family ownership.
HOME
From Page 3
Approximately 50 percent of all businesses are home-based, and it’s been that way for the last decade, according to a 2019 U.S. Small Business Administration Office of Advocacy data sheet on small businesses. Yet, they’re invisible in a way because they generally don’t have a sign to drive by or an address one can visit. “There is a home market out there that is in some ways hidden,” said Pierre Batton, vice president of small business services for the Detroit Economic Growth Corp. “We don’t see it because they’re not on our commercial corridors.” Home-based companies make up an even greater proportion — 60 percent — of businesses without paid employees, or nonemployer firms, according to the SBA. Batton said he could not estimate the number of home-based businesses in Detroit. But he did cite 2012 U.S. Census Bureau data that puts the total number of Detroit businesses at nearly 62,000, with nearly 51,000 being “minority-owned” and a large majority of those businesses owned by Black Detroiters, who make up 80 percent of the city’s population. That would likely put the number of Detroit home-based businesses in the tens of thousands. Of nonemployer businesses — which are more likely to be homebased — 32 percent are owned by people of color, compared with 18 percent of employers, according to the SBA. As of 2019, businesses with paid employees accounted for 4.2 percent of Black-owned businesses and nonemployer companies made up 95.8 percent. More directly, Batton can see that home-based entrepreneurs are seeking help during the pandemic. Of the 4,600 businesses and nonprofits that applied for $7 million in DEGC-managed Small Business Restart Program grants, more than half were homebased. And though city of Detroit matching grant-making initiative Motor City Match focuses on funding brick-and-mortar storefronts, it has also led to the creation of nearly 300 home-based enterprises. One obvious reason to work at home? It cuts down on spending. “What are your revenue streams, what should you realistically respect for your business type in terms of revenue for that first year, second year?” Batton said. “Going directly into a commercial space as a startup can make the difference between surviving (and debt).” Nationally, nearly three-fourths of
LIVENGOOD
From Page 6
The Michigan State Capitol Commission, the steward of the 142-yearold building, has been studying its authority to ban guns after Nessel — the state’s top attorney — told the commission it has the legal power to do so. “I don’t think that’s the case,” said John Truscott, vice chair of the commission and CEO of the Detroit-based Truscott Rossman public relations firm. The commission has “very, very limited” authority and can’t impose penalties or enforce a ban on carrying guns into the Capitol, Truscott said. “All we can do is say it’s a trespassing offense — that’s it,” he said. “What prosecutor is going to do anything about that?”
October 5, 2020
October 5, 2020
Jennyfer Crawford, owner of Detroit brand marketing and event planning firm Ask Jennyfer, ran her business from home for four or five years before renting an office and storage space. She’s now back home during the pandemic. CONTRIBUTED
October 5, 2020 nonemployers earn $100,000 or less a year, according to the Federal Reserve Bank of New York’s 2019 Small October 5, 2020 Business Credit Survey. And 32 percent of nonemployers at the time had no collateral to use to obtain financing products — double the figure for employer firms. Ten percent more nonemployers operated at a profit than at a loss in 2017, with Blackowned companies more likely to operate at a loss than profit, the survey found. Black-owned businesses, a backbone for Detroit and other cities, have historically struggled to access the same financing as white businesses due to discrimination. “Those that can start a business in their home, it provides that supple-
Crawford ran her business from home for four or five years before renting an office and storage space. She’s now back home during the pandemic. “I feel that sometimes when you have a home-based business, people don’t take you as serious,” she said. “That’s just in my experience.” Home-based businesses aren’t necessarily “hidden,” though. They gain traction on the internet and in online marketplaces like Etsy, through word of mouth, at events or fairs and more. Marketing is key, and it’s changing during the pandemic. “A lot of them have been doing a lot of online live sales or online videos,” Crawford said. “Some people
“THERE IS A HOME MARKET OUT THERE THAT IS IN SOME WAYS HIDDEN. WE DON’T SEE IT BECAUSE THEY’RE NOT ON OUR COMMERCIAL CORRIDORS.” — Pierre Batton, vice president of small business services for the Detroit Economic Growth Corp.
mentary income for their households,” Batton said. “So a lot of it is folks starting it out of necessity.” That’s especially the case during a recession. New business applications are rising in the United States at the quickest pace since 2007, the Wall Street Journal reported late last month. Many home-based entrepreneurs want to eventually grow into a brickand-mortar store, especially those who sell physical products and want to interface with customers, said Jennyfer Crawford, owner of Detroit brand marketing and event planning firm Ask Jennyfer. A prominent example Batton cited is Melissa Butler, the founder of Detroit-based The Lip Bar cosmetics, who started making lipstick at home and now sells in hundreds of Target stores across the country as well as her own space in downtown Detroit.
are using TikTok. It’s crazy. But they’re utilizing these social media platforms, going live, the Facebook shop or just promoting their own shop online, and that’s how they’re kind of getting through (the lack of foot traffic).” Mercer saw just 10 percent to 20 percent of sales online when he had a shop at 277 Gratiot Ave. Now he’s aiming for nearly all online, other than wholesale accounts. LoveLifeSwagger started selling again last week, including Detroit-inspired gear including a Lions hoodie for $46, T-shirts ranging from $38-$50 and a $250 pirate jacket. “I do have hopes to grow more and faster because … there’s a lot of trends online, trends you can follow and hop on,” he said. “(At the physical store), we focused more on trends on what kinds of events were going on downtown.”
Truscott said the Legislature needs to set policy about what is and isn’t allowed to be brought into the Capitol. “The Legislature controls their space in the building,” he said. “All we can tell them is they can’t paint over the historic paint and they can’t move walls.” The revelations of the plot to abduct the governor by force “should force a discussion” on the issue, Truscott said. “I think it should be jarring to anybody that a plan like this was hatched and almost carried out,” he said. The decision about this workplace policy rests with Senate Majority Leader Mike Shirkey and House Speaker Lee Chatfield and the political will of their respective GOP caucuses. Shirkey, R-Clarklake, said Thursday that GOP leaders are “having further conversations” with the Capitol commission members about the gun rule.
Shirkey threw cold water on the concept that if guns are banned in the Capitol, no gunman will ever storm inside and start shooting. “But we cannot ever pass enough laws to create an environment where there would be no risk and cause people to arrest the kinds of things that people can contemplate,” Shirkey told reporters. “It would not be a country we would enjoy.” “If we get rid of all risk, there’s only one absolutely guaranteed outcome — no freedom,” he added. Polehanki said the Senate majority leader is “punting back to the Capitol commission.” “Enough with this endless volley of responsiblity,” she said. “I don’t feel safe in this workplace. Would you?” Contact: clivengood@crain.com; (313) 446-1654; @ChadLivengood
WALSH
Mercer aims for LoveLifeSwagger to make $100,000 annually within two years. And, he said, he enjoys usFrom Page 6 ing the shirt printing press again. “It’s really just getting back to my Since January, consumer spendoriginal passion,” he said. “Working ing among low-income individuals at home has been a little bit better, in is up 22.8 percent, compared to terms C ofRAIN focusing, because I really high-income spending up ’S DETROIT BUSINESS CRAIN’S Dearners’ ETROIT BUSINESS have my home set up as a studio ... 23.7 percent. There’s no distractions, customers Current Harvard projections show walking in or football games going on long-term unemployment peaking in downtown.” early 2021. But depending on the Tamyra Mariner, who lives on the quality of the recovery, they say as east side and owns CocoGirl Edibles many as 3.9 million people at best and LLC, also isn’t looking to leave home 5.1 million in a worst-case scenario any time soon. will face long-term unemployment. Mariner decided to make her side A staggering number of Americans, RAIN’S Done ETROIT BUSINESS gig herCprimary after she was let roughly 700,000, stopped looking for go from a job at Detroit-based Meridwork at all last month, which partly explains a rosier than imagined 7.9 ianHealth. She makes Kool-Aid percent unemployment rate. Those drinks,Cbaked goods and other foods RAIN’S DETROIT BUSINESS that have dropped out aren’t counted with THC from her kitchen, and is in the unemployment number. looking to expand to her basement to And optimism among business accommodate growth. leaders is waning. Of state and local Mariner said her business broke chamber of commerce executives in even in April, and that word of mouth the U.S. surveyed last month by Siehas spread her brand from regular customers to more people and small na College Research Institute, only events during the pandemic. 55 percent believe economic condi“Something about COVID, I don’t tions will improve by the end of 2021 know what it was, but the support, — more than a year from today. everything that’s been going on in Even more startling, 32 percent of the world ... It was not like this last those surveyed believe economic year,” she said. conditions will have worsened and Another home-based entrepreonly 23 percent believe the U.S. will likely be out of the recession by then. neur, Danielle Lyons, wants to move Michigan’s manufacturing and into a building or coworking space as health care sectors carry the ecoher business Style Haus Events grows clientèle and inventory. nomic water for the state. I previWith the pandemic, work right ously mentioned the impact now involves a lot of virtual meetCOVID-19 and the pandemic has had on health care jobs. The manuings, email and Pinterest. But Lyons also puts together floral arrangefacturing sector recovered quickly, ments and balloon displays at home, thanks to automotive, but if next mindful not to let her new puppy Leo year doesn’t prove to be a banner year economically, it’s unlikely auin where she’s working. POSITIONS POSITIONS “... at the beginning of quarantine I AVAILABLE tomakers and suppliers will main- AVAILABLE got a puppy, so trying to manage that tain a portion of their workforce. time …Systems He doesn’tEngineer know when (Stoneridge, to say, The data is undeniable. Michigan’s Systems Inc., Novi, Engineer Michigan) (Stoneridge, Inc., N :Design Devices :Design products new upControl to near full production, Devices inproducts u ‘OK, this isnew my Control work time,’” she electronics said. economy, for the future, iselectronics going cluding researchenjoy & review,to cluding developing specification program research timelines& &review, developing “But otherspecification than that, I actually be reliant on unemployment benreports, reviewing designs, designs, drafting docu- of mechanical des it,reports, becausereviewing ... I get todesigns, work at adrafting faster mechanical efits or suffer thepreparing consequences mentation preprod. prototypes, mentation packages, & transferring building buildpreprod. to prototypes, pace and ... packages, really honebuilding in on what diminished consumer spending and production. Req’s: Master’s in electricalproduction. eng., comp.Req’s: eng., auto Master’s eng.,inorelectrical eng., com I’m trying to do.” an even longer recession. Apply by resume only to Christina SimpApply by resume
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VACCINE
From Page 3
Novavax plans to enroll people in its Phase 3 trial later this month for its COVID-19 vaccine at clinical trial sites not announced yet, said John Trizzino, chief business officer and CFO with Novavax. Some 30,000 people will be enrolled, he said. NVX–CoV2373 was created using Novavax’s new recombinant nanoparticle technology to generate an antigen derived from the coronavirus spike protein. It contains a Novavax-patented material to enhance the immune response and stimulate high levels of neutralizing antibodies. Novavax has secured $2 billion in funding for its global coronavirus vaccine program. In July, the U.S. government awarded it $1.6 billion to support the vaccine’s clinical trials and manufacturing as part of its $6 billion Operation Warp Speed program, which also includes Pfizer Inc., Sanofi SA and Johnson & Johnson, all of which are testing coronavirus vaccine candidates in clinical trials. If the trials succeed, Novavax expects to deliver 100 million doses for use in the United States by the first quarter of 2021. Novavax also has a deal with the Serum Institute of India, a major vaccine manufacturer, that they said would enable them to produce as many as 2 billion doses a year.
Vaccine trial update If widespread human testing begins later this month, Novavax would become the fifth drug company to begin Phase 3 trials in the U.S. Three of the trials have begun in Michigan and a fourth is expected shortly. Clinical trials of a Moderna and a Pfizer COVID-19 vaccine also are continuing at Henry Ford Health System and Michigan Center for Medical Research, respectively. A third trial of the AstraZeneca vaccine has been paused by the FDA at the University of Michigan and other U.S. sites due to two negative patient reactions in England. One of the patients developed transverse myelitis, where the immune system attacks the spinal cord, but AstraZeneca hasn’t released details on the second patient’s reactions. Johnson & Johnson also expects to soon begin large human trials at Henry Ford and the University of Michigan. Officials at the hospital systems told Crain’s they were unsure when the trial would begin. But at least five participants in the Moderna (three subjects) and
Pfizer (two subjects) vaccine trials have reported aches, fevers, headaches, exhaustion and chills after receiving the second doses, according to CNBC. The side effects usually went away within a day, but some were surprised by how severe they were, the report said. “If this proves to work, people are going to have to toughen up,” one of the Moderna participants, a North Carolina woman in her 50s who declined to be identified, told CNBC. “The first dose is no big deal. And then the second dose will definitely put you down for the day for sure. … You will need to take a day off after the second dose.” Moderna and Pfizer have acknowledged that their vaccines could induce side effects similar to symptoms associated with mild COVID-19 such as muscle pain, chills and headache. In an interview this week, Moderna CEO Stéphane Bancel said the company would not have enough safety data to seek emergency use authorization for its coronavirus vaccine until at least late November. Moreover, Bancel said the vaccine won’t be ready to be widely distributed until next spring, dealing a blow to President Donald Trump’s assertion that a coronavirus vaccine could be ready within weeks. Bancel revealed the possible timelines for approval and availability of the company’s mRNA-based COVID-19 vaccine candidate at the US Pharma and Biotech Conference hosted by the Financial Times last week. Pfizer CEO Albert Bourla said it is possible the company may be prepared to submit safety data to the FDA for approval of its vaccine later this month, but that the New Yorkbased company would not be pressured to move faster than science dictates for final approval of the drug. A Pfizer spokesman said this week that the company is getting its 1,300-acre Kalamazoo facility ready to manufacture a COVID-19 vaccine. The spokesman said it’s unclear how long it would take for it to be approved for manufacturing. Pfizer’s Kalamazoo plant is manufacturing trial vaccines for its 44,000-person human test and is prepping other facilities for manufacturing, the spokesman said. A recent CNN poll found that only about half of Americans said they would try to get a COVID-19 vaccine once one is available, a number that has dropped somewhat since May. Contact: jgreene@crain.com; (313) 446-0325; @jaybgreene
FARMERS
From Page 1
President Donald Trump has courted farmers throughout his presidency, authorizing nearly $50 billion in direct payments to farmers since 2018. Critics have pointed to damage the agricultural sector has suffered from the trade war with China under his watch, which much of the aid was designed to offset. Roughly 36 percent of all net farm income across the U.S. in 2020 will come from the U.S. government. Michigan farmers received nearly $453 million in ad hoc payments from the U.S. Department of Agriculture this year alone. With the election less than a month away and an unplacated virus, experts and farmers are concerned about the future. What if the government spigot gets turned off? “Since 2018, the world has blown up for farmers,” said Aleks Schaefer, agricultural economist and assistant professor at Michigan State University. “But there is really no end in sight for a lot of these tariffs. We don’t know the future of these ad hoc payments. It’s simply impossible for farmers to plan.” Farm troubles began long before COVID-19 and trade wars. U.S. farm income rose to 40-year highs in 2013 before plummeting to a 12-year low in 2016, largely on increased global production of dairy and livestock. For instance, the European Union ended its long-run milk quota in 2015, allowing farmers to produce without restrictions, leading to a flooding of the global market with milk product and devastating U.S. prices. But when Trump took office in 2017, a quest to tackle trade issues with China arose and it was American farmers who took it on the chin. U.S. trade policy against China resulted in retaliatory tariffs on nearly $30 billion worth of U.S. agricultural exports in 2018 and 2019. Overall, U.S. agriculture exports fell by 58 percent in those years. Farmers largely support the president, despite the harm caused by tariffs. An August poll from the Farm Journal showed 82 percent of the more than 1,500 farmer respondents said they planned to vote for Trump. John Newton, an economist with the industry lobbying group American Farm Bureau, said support among farmers is largely because of the successful negotiations of trade deals. Congress ratified the U.S.-Mexico-Canada Agreement in late 2019, a trade agreement with Japan in January and a preliminary agreement with China, called the U.S.-China Phase 1 trade deal in January as well. “We were fairly optimistic coming into 2020 with all the trade deals the administration and Congress com-
“I UNDERSTAND THE REASON FOR (TRADE DISPUTES), BUT I DON’T LIKE IT.’ — Farmer Matt Stutzman
pleted,” Newton said. “We had renegotiated ag trade with half of our trade partners with those agreements.” Farmers were willing to endure pain now for windfalls later. It’s a little more complicated for Stutzman, who calls himself a moderate on the political spectrum. “I understand the reason for (trade disputes), but I don’t like it,” Stutzman said. “I like better prices, but to back up my country, I want the U.S. to succeed, I am happy to fight the fight but let’s make it work so I don’t have to do this again. With Trump, I want to trust him. I really just hope he’s right and we’ll get back to normal soon so I never have to trust him again and we can move forward.” But with the direct payments bypassing Congress — most subsidies to farmers via the U.S. Farm Bill — and facilitated through the USDA, the payments have been ripe for complaints. Sen. Debbie Stabenow requested the U.S. Government Accountability Office review the USDA’s Market Facilitation Program and the report concluded the payments were uneven to farmers based on geography. Michigan farmers who participated in the program received an average payment of $15,367 or about 7 percent less than the national average payment of $16,507. Stabenow, who is the ranking member of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, said the report is evidence the administration favored farmers in southern states. Coincidentally, farmers in Georgia received $42,545 per farm owner. Georgia is the home state of USDA chief Sonny Perdue. “He certainly put together a program that favored the crops in his state,” Stabenow told Reuters last month. “Per farm, per acre, the South hit the jackpot, with Georgia leading the nation.”
Matt Stutzman, third generation farmer, of Stutzman Farms Inc. in Blissfield. STUTZMAN FARMS INC. PHOTOGRAPHS
Cotton farmers, common in Georgia, received payments equaling 40 percent of their projected value, compared to 25 percent or less for other crops like the soybeans and corn in Michigan, according to the GAO report. The USDA has argued that cotton was harmed more acutely from the trade disputes. Under the Coronavirus Food Assistance Program, designed to shore up farms impacted by COVID-19 supply chain interruptions, the largest farms won out over smaller farms, according to the Environmental Working Group, which monitors farm subsidies. Late last month, the group said said the largest 1 percent of farms in the program received 22 percent of the payments, or nearly $1.1 billion of the $5 billion paid in June. “This is 100 percent the administration choosing winners and losers,” Schaefer said. Late last week, the state of Michigan awarded 124 farms with fewer than 10 employees a total of $567,000 in grants,
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“(Compared to) the days of 20 years ago, where everybody wanted an MBA, everyone is asking the question, ‘What is the best return on my educational investment?’” Killaly said.
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or an average of $4,572.58 per farm, to mitigate the COVID-19 impact. Newton believes upcoming stimulus packages — through Trump instructed Republicans to abandon negotiations last week until after the elections — would address inequalities to specialty crops and smaller farmers. Stutzman isn’t concerned about the inequities in the programs as long as farmers reap the rewards. “I think the reason you see one state receiving higher prices is because more of that commodity that was affected,” Stutzman said. “That speaks to the lack of diversity in some states. We’re really diversified, so we probably see less of those payments because we don’t have as many of those row crops that received assistance. I guess I’m not that concerned if another state gets more aid. Those payments are going to farmers not rich people.” Janna Fritz, executive director of the Michigan Soybean Promotion Committee and a co-operator of JDF Farms in Pigeon in the Thumb, said the payments, while needed, have now added more stress to an uncer-
STERLING
From Page 3
In a regulatory filing last week, Sterling says it is working to address the myriad issues that are affecting the institution. “The current focus of the Company is to work hard to resolve its outstanding compliance and regulatory issues, government investigations and third party litigation,” the executives wrote. Additionally, the bank plans to “develop a strong culture of compliance, re-establish strong credit metrics for new lending initiatives, hire new key business development and operations personnel, and establish a new path forward to ser-
tain future for farmers. “The added government payments are contributing to the future uncertainty of overall farm income,” Fritz said. “They don’t need added uncertainty. They live with uncertainty with the weather and those other natural occurrences that come with farming. Farmers understand the process of development of farm bills and can utilize government payments authorized by farm bills for their future finances. But when government payments are made in an ad hoc function, it is more difficult for them to plan for future operations.” There is a fear among farmers that the current administration could sour on continued support for farmers in 2021 or a President Joe Biden could choose a different path. Schaefer said it’s now a political minefield to deal with the government payments in the future. “That’s the one unsolvable problem of ag; once you give these guys a payment, it becomes really politically costly to take that away,” Schaefer said. “All I see is a whole lot of pain for everyone next year. Political pain and a lot of pain for farmers. The solution is free trade. They can remove the steel and aluminum tariffs for one. But the we’re going to take away all this money (farmers have) been relying on for the last two and a half years?” For Stutzman and Fritz, you’ve got to worry about the seeds before you worry about what you’ll reap. “We would like to see markets open up and free trade continue,” Fritz said. “But the reality is we’re all going to farm. We’re going to make every effort to negate the risks incorporated with agriculture and continue to try to provide for the world no matter what happens.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh vice our customers’ needs and build investor confidence.” To help with all of the issues, Sterling Bank in June brought on Tom O’Brien to serve as CEO. O’Brien, 69, replaced Tom Lopp, the former chairman, president and CEO who resigned in May for health reasons. He had been promoted to CEO the previous October. O’Brien, an industry veteran with a history of bank turnarounds, told Crain’s he will address the issues one at a time and expects to see significant progress over the next six months to one year. “We’re kind of in the early stages of addressing all of those issues,” O’Brien said. O’Brien said the bank remains well capitalized and is “reasonably
Enrollment and application volume declined sharply this fall for Michigan Ross’ full-time, two-year MBA program — the school’s marquee offering, which costs around $66,000 per year for Michigan residents and $71,000 for nonresidents. Most MBA classes are being conducted online during the pandemic, but some are being offered in a hybrid format. The school’s class of full-time MBA students is the smallest it has been in five years, falling to 358 from 421 the year prior, according to university data. Conversely, its part-time online MBA program, launched last year, is seeing quick growth. It jumped from 72 students then to 134 this fall. Killaly said the decline in the number of full-time MBA students is attributable partially to international students being allowed by the school to defer enrollment to next year due to government travel restrictions. Students outside the U.S. make up 18 percent of the fall class, compared to 27 percent the previous year. Like many other business schools, Michigan Ross extended its MBA application deadline in March by two months because of the pandemic. Still, application volume hit a fiveyear low, dropping to 2,567 from 2,990 the year prior. That bumped the school’s acceptance rate to 37 percent — the highest it has been in five years — and led to financial losses. The business school’s overall annual budget was cut for the first time in 10 years, according to a university document. Its 2020-21 budget of $105.6 million was reduced by $18.6 million, or 15 percent, from last year as the university grapples with a projected $1 billion in losses due to the impact of the COVID-19 crisis. Killaly said the COVID-19 uncertainties had students everywhere questioning whether school was a good option. “Is now the time that I want to make that investment in my education?” he said of potential applicants’ concerns. “While the applications may be down, the quality and the profile of our students has never been stronger.” Despite international travel complexities, Dimitri Alejo, 31, decided that the pandemic was the perfect time to explore new opportunities. profitable.” Harve Light, a managing director in the Birmingham office of turnaround firm Conway MacKenzie, said he projects a long, difficult process forward for the bank. The institution, he said, is likely to find itself — at least in the short term — crippled by a lack of access to capital stemming from an inability to originate mortgage loans that can then be sold to the secondary market. Beyond its Southfield headquarters in the One Town Square office building with about 135 employees, Sterling Bank has 26 offices spread around California, two in New York and one in the state of Washington. It had deposits of nearly $3 billion as of June 30 of this year and year-to-date has lost about $14.6 million, according to the Federal
Alejo, who is from Colombia, started his MBA program at Michigan Ross a few weeks ago after numerous delays getting to Ann Arbor because of travel restrictions. He said that because of the pandemic many of his friends who intended to study in the U.S. scrapped their plans. “If you are in the moment right now where everything is shut down, it’s a perfect moment to prepare and grow yourself,” Alejo said. Alejo said he left a good job as brand manager for Uber because he wanted to go “beyond making profits” and help companies influence positive change for society. His MBA concentration is social impact with technology. “When everything is open again, I will be ready for those new opportunities that the market will have,” he said. The Seidman College of Business at Grand Valley State University is expecting a flat budget over last year, though the university has not finalized its overall budget, Karen Ruedinger, the business college’s assistant dean, said in an email. The number of MBA students this fall is 132, down from 167 last year, according to data provided by the university. At Michigan State University’s Broad College of Business, the number of full-time MBA students this fall slipped to 140 from 149 last year, due largely to lost international enrollment, according to university data. The larger impact was felt in the executive MBA program designed for students working full time, many of whom typically receive financial support from large corporations partnered with the school, including Eaton Corp., Whirlpool Corp. and the Detroit 3 automakers. Just 98 students enrolled in that program this year, compared to 134 last year. “Companies who typically have sponsored their students have opted not to for this particular year, and that’s a bit unprecedented with some of our employers, so there has been more of a hesitation and what we refer to as deferrals,” said Cheri DeClercq, assistant dean of graduate and MBA programs at Broad College of Business. Ford Motor Co. cut off its tuition assistance program amid the pandemic but restored it in early August,according to spokesperson Said Deep. Fiat Chrysler Automobiles, which sponsors employees for MSU’s MBA program, allowed current students to continue but postponed the 2020 fall class until next year, said Michael Palese, spokesperson for the company. Even some universities suspended tuition support programs for employees. UM paused its program indefinitely April 30. MSU also saw an “extreme” decline Deposit Insurance Corp. O’Brien said that figure will be amended in the coming weeks, although it’s unclear to what extent. In its Oct. 6 regulatory filing, Sterling Bank reported net income for 2019 of $29.2 million, a 54 percent decline from the year before and about half of the $57 million the bank reported in its unaudited financial statements from January. Additionally,the bank said it’s on the hook for a $25 million liability tied to litigation and federal government investigations. In February, Sterling was named as a defendant in a shareholder class action lawsuit by the Oklahoma Police Pension and Retirement System, which alleges the bank violated federal securi-
in MBA applications in the spring and summer as the pandemic continued, though application numbers were trending up going into March, DeClercq said, adding that 40 percent of international students who had intended to start in the fall deferred to next year. As the admissions office worked to stem the enrollment decline, DeClercq said the college adjusted its curriculum around COVID-19. Undergraduate classes at MSU are fully remote this fall, but around 30 percent of MBA classes are being conducted on site.
Rethinking recruiting It isn’t just universities being impacted by shifting attitudes toward advanced degrees and higher education in general. Troy-based Walsh College, which specializes in undergraduate and graduate business degrees, has seen enrollment slide at both levels over the past five years. Its total student headcount for fiscal year 2020 was 2,596, down 150 students from the year before and more than 1,000 from five years ago, according to data from the school. Mike Levens, who was promoted to president of the college this summer, told Crain’s in August that he planned to meet challenges by doubling down on remote education. At Wayne State University, Kiantee Jones, assistant dean of graduate programs at the Mike Ilitch School of Business, is thinking about recruitment in a new way. While the raw number of MBA applications this fall is up slightly from last year, the number of people moving past the first phase of the process dropped off significantly, Jones said. There are 223 new MBA students at the school this year, compared to 270 last year. The business school’s budget for fiscal year 2020-21 hasn’t been finalized, but Jones expects a 5 percent cut. Wayne State’s niche of part-time, mainly online classes would seem better protected from the pandemic than its competitors’ models, but “virtually” attracting new students has been a headache, Jones said. The work- and learn-from-home age caused a disconnect between the school and companies such as Lear Corp., DTE Energy Co. and the automakers, which provide its main pipeline of students. “We used to get flooded with applications,” Jones said. “We didn’t really have to put forth a great effort. We were invited to corporations. We were setting up tables. We had a really good connection with the employees at these corporations. It was just easier.” Contact: knagl@crain.com; (313) 446-0337; @kurt_nagl ties laws related to residential lending practices. The bank last month moved to dismiss the lawsuit, but that motion has not yet been granted. O’Brien said he believes the loans themselves to be performing well and sees few credit issues for the bank. Rather, the issues are related to the bank’s compliance in writing the loans. Addressing that, he said, will largely be a matter of adapting the culture. “I would say where we went off line was ... focusing on the loan origination,” O’Brien told Crain’s. “And, you know, certain people who have since lost their job focusing on volume and not on these compliance matters.” Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes
OCTOBER 12, 2020 | CRAIN’S DETROIT BUSINESS | 17
THE CONVERSATION
Nonprofit leader Brian Siegel makes ‘heartbreaking’ decisions to stay afloat ENTREPRENEUR: There wasn’t much fun to be had in the entertainment industry in 2020. Just ask Brian Siegel, CEO of the Jewish Community Center of Metro Detroit by day and ax-throwing entrepreneur in his spare time. Siegel has spent most of the year trying to avoid financial devastation from the pandemic, both for the West Bloomfield Township-based nonprofit and for his businesses, which include Detroit Axe and Joe Dumars Fieldhouse. That’s forced him to make heartbreaking decisions, such as permanently closing the original fieldhouse and shuttering the nonprofit’s health club. | BY KURT NAGL ` How did you become a businessman? I’m an attorney by training. I went to University of Michigan Law School and became a real estate attorney in Chicago and moved home to open Joe Dumars Fieldhouse with (former Detroit Pistons star) Joe Dumars and (businessman) Scott Kaufman. It’s proudly served the community, both in Shelby Township and in Detroit, for 25 years. I was a longtime entrepreneur. In the days when it was legal, we sold shirts at University of Michigan football games and had an idea to create a kind of mecca for sports for the underserved in the community. We had a vision, and we learned from that vision ... My full-time job is CEO of the Jewish Community Center of Metro Detroit. We’re in a critical moment, an important moment, and that’s my focus. I am a visionary leader for my other businesses, but I am not the day-to-day operating partner of those businesses.
` How did you become CEO of the Jewish Community Center of Metro Detroit? I was heavily involved as a volunteer in the Detroit Jewish community, among other philanthropic endeavors. I became the lay president of the board of the Jewish community center on two occasions, the second time leading them out of a financial crisis, at which point I became a turnaround specialist for the center, which I have proudly served as CEO for over four years.
` How did you get involved with Joe Dumars? In 1993, it was actually through an accountant who represented (former Pistons star) Isiah Thomas and Joe Dumars. They thought that he would be a good fit for us and introduced us. And that was in ’93, and we’ve been partners ever since.
` What’s been the most challenging aspect of that role? I got involved at the JCC because of a crisis born of the fact that the JCC needed to make a paradigm shift in the way it performed its mission. The world has changed as to how you build Jewish community, and most institutions don’t really gravitate to change. We have to make some heartbreaking decisions but necessary decisions to point this big ship to a more productive future. So, the incredible challenge was to both respect its history, and inspire change. We recently closed our health club, which is incredibly heartbreaking. But JCC historically built community by creating safe space. We’re no longer in the business of creating safe space, or in the business of bringing people together. We need to be ahead of that. We can’t be reactive to that type of change. We are very empathetic to the pain it’s caused.
` That’s a long time to keep a partnership going ... One of the things I’m most proud of in my career is the long-standing, effective personal business relationships I’ve developed, whether it was with employees who were with us the entire time ... and my partners, Geoff Kretchmer or Scott Kaufman or Joe Dumars. These have all proven to be lasting relationships that to me are as important a part of your legacy as anything else.
` Speaking of challenges, what’s the outlook on ax throwing? Obviously, quite a lot to be determined. We’re quite bullish…We’re in the business of creating energy. Ax throwing sounds very dangerous. It’s completely not dangerous, but it is very exciting, very controlled and very safe. We believe the world will return to a place where people want to be with other people. But it may take some time…I believe that, you know, having a social experience and having a
beer and having some fun and playing games is something that we’ve been doing for thousands of years. It is part of our human nature to be social, and the world will find its way back to that. So I remain extraordinarily optimistic about the future of our businesses. ` After closing the original Joe Dumars Fieldhouse in Shelby Township, what’s the future for the one in Detroit amid development at the old state fairgrounds? Creating jobs in Detroit is a great thing, and retrofitting the entire fairgrounds to create jobs is really important. Joe and I opened the fieldhouse in Detroit to provide recreation for people who are underserved. It’s an activity that’s very hard to make business sense out of because you only have a certain number of people playing in a space that’s 50 by 90 (feet), and you can only charge so much for it. We’re really proud of what’s been accomplished there quietly. If it was up to us, we would continue to operate there and provide this self-sufficient vehicle for community recreation. I think that’s valuable. We’re in a historic building, and I also believe it’s important to hold on to some of those structures. At the same time, I would never want to get in the way of Detroiters getting jobs and future developments. I know the developers. These are all good people.
` Are you bitter about being shut down for so long because of COVID-19? The governor had an impossible job. I think her heart is in the right place. ... I also am empathetic to the industries affected because it can feel arbitrary. The truth is, it just was an impossible task to create guidelines for all industries and err on the side of caution and safety. I really see it both ways. I think that’s the key to leadershipbeing able to understand the problem from both sides ... I try to see things from other people’s sides, even while I advocate for my own, because I think that’s how good decisions are made. Brian Siegel entrepreneur, nonprofit leader
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RUMBLINGS
2 Black-owned Detroit startups awarded $50,000 grants from Google Two Detroit startups are among the nationwide recipients of $50,000 cash grants for minority-owned businesses from internet search giant Google LLC. The grants — part of the $5 million Google for Startups Black Founders Fund — were awarded to Alerje LLC, a medical technology and digital health company, and Raxplay LLC, a virtual reality music venue. “We are committed to helping Black founders who have been deeply impacted by COVID-19 and who are disproportionately locked out of access to the funding they need to succeed,” Jewel Burks Solo-
Evelyn
Lymon
mon, head of Google for Startups US, said in a release announcing the grants. The lack of access to capital for minority-owned businesses has long been documented and a broader awareness of that fact has been
18 | CRAIN’S DETROIT BUSINESS | OCTOBER 12, 2020
occurring in recent months as the coronavirus pandemic and social unrest from police violence have put the wide gap on full display. A report earlier this year by the Michigan Venture Capital Association noted that 85 percent of Michigan’s 144 venture-backed startups were run by white men. The Google funding serves as an acknowledgement of that gap, said Isaac Lymon, founder of Raxplay, which is working on bringing a virtual concert experience with major artists to market by early next year. “With funding from Google, I think it’s a really big foundation piece for us,” Lymon told Crain’s. “This is a se-
rious market that we’re in that’s solving a real problem with a real audience. So for Google to acknowledge that I believe is a pretty strong indicator that ... Black founders can generate generous returns for investors.” Likewise, Javier Evelyn with Alerje said that the funding from Google around the country helps bring about greater economic empowerment and “at least leveling the playing field ... that Black-owned businesses tend to have.” Evelyn said his Detroit-based company remains in fundraising mode and has been making progress on new intellectual property within the food allergy sector.
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 last 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.
Getting more masks to where they’re needed most Across the country, Bank of America continues to work with local organizations to provide critical resources to the vulnerable and underserved populations hardest hit by the coronavirus. To support the safety and health of those most at risk in our community, we are partnering with local leaders and organizations to distribute PPE masks here in Detroit. This is in addition to the four million masks we donated earlier this year in cities across the country — and part of our ongoing commitment to provide millions of masks to help slow the spread of the coronavirus. Together, let’s work to help Detroit recover.
Matt Elliott Detroit Market President
100,000 masks distributed to our neighbors here in Detroit. We’re partnering with: United Way for Southeastern Michigan
To learn more, please visit bankofamerica.com/community
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