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www.crainsdetroit.com Vol. 31, No. 3
JANUARY 19 – 25, 2015
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©Entire contents copyright 2015 by Crain Communications Inc. All rights reserved
DTE proposal could cut rates for biz, raise bills for residents
Page 3 Suppliers in driver’s seat of self-driving prototypes Council wants to paint state as industrial design hub
BY JAY GREENE
Macomb recovery slow, with some pockets prospering
CRAIN’S DETROIT BUSINESS
Two pending electric rate hearing cases filed by DTE Energy Co. could lead to lower overall rates for large industrial and business customers, but residential customers could see their rates climb. If ultimately approved by the Michigan Public Service Commission, rates could drop by as much as 4 percent for industrial customers,
Health Care
including manufacturers, hospitals, malls, steel companies and large office buildings, said Gerry Anderson, DTE’s chairman and CEO. Electric rates also could drop by 1 percent for smaller businesses, including retail stores, restaurants, office buildings, physician and lawyers’ offices, said Anderson in an interview with Crain’s last week. See DTE, Page 21 ISTOCK PHOTO
ACA spurs hospitals to address unmet health needs, Page 11
This Just In Oakland’s G2G Marketplace to offer Kronos software Workplace efficiency and management software will be available through a government-to-government marketplace set up by Oakland County to help governments share new tools. The county will offer workplace management software online to customers of G2G Marketplace, its private sector IT services hosting program, from Chelmsford, Mass.-based Kronos Inc., the company is expected to announce this week. The company produces software that allows some government agencies to monitor when employees begin and end work shifts, tracks payroll and overtime costs and can also manage scheduling. Oakland County Deputy Executive Phil Bertolini said the county is a Kronos customer and will now make Kronos software as a service available for its government customers to purchase via G2G. Kronos was one of more than 25 companies to respond to a county request to host IT software on G2G last year. — Chad Halcom
JOA: Reading between the lines Possible sale, opt-out clause may rewrite Free Press-News pact BY BILL SHEA CRAIN’S DETROIT BUSINESS
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he clock officially will begin to run this year on the fate of the joint operating agreement that props up Detroit’s two financially struggling daily newspapers. The Detroit Free Press and The Detroit News have had joint business functions — advertising, printing, delivery, etc. — under an entity now called Michigan.com (formerly the Detroit Media Partnership) while maintaining separate newsrooms. An early-termination clause within a 25-year joint operating agreement that created the current on Aug. 3, 2005, states that afHO S THE BOSS partnership ter 10 years from that date, either party Detroit’s daily papers may opt out if the partnership has sushave endured many tained three consecutive years of financial ownership changes, Page 19 losses. That means Aug. 3, 2015, begins the countdown on accruing annual losses that could trigger the end of the JOA by either newspaper’s corporate owner — McLean, Va.-based Gannett Co. Inc. (NYSE: GCI) in the case of the Free Press, and New York City hedge fund Alden Global Capital LLC for The News. But whether to go it alone in the future makes financial sense for either paper may not be a decision either current owner makes. That’s because The Detroit News is for sale, and the Free Press could be by the time the opt-out criteria are met.
W ’
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See JOA, Page 18
NEWSPAPER
KENNY CORBIN
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MICHIGAN BRIEFS Surveys: Grand Rapids economy thriving; now about health costs The Grand Rapids Area Chamber of Commerce’s annual government affairs survey found that the top concern of the 600 chamber members who responded was — for the third year in a row — rising health care costs. Other findings: 83 percent of respondents said their company hired or added positions in the past year, up from 77 percent last year. 56 percent had trouble finding qualified applicants in the past year. (Yes, there’s that “talent” word again.) 34 percent increased wages to attract qualified applicants. Another survey — this one from professor Paul Isely of Grand Valley State University’s Seidman College of Business — found employment for the Grand Rapids metro area rose 3.8 percent in 2014, well above the 3.1 percent expectation, according to a release. Isely expects growth of 2.8 percent to 3.2 percent in 2015.
And if Grand Rapids is doing well, then Kent County must be Kent County is the only large county in the U.S. — defined as having a population of more than 500,000 — to get back to unemployment rates reported before the Great Recession, according to a survey released by the National As-
Lights will stay on in U.P., with help from Chicagoan Chicago energy entrepreneur Michael Polsky is playing an improbably instrumental role in resolving a power crisis threatening to financially cripple Michigan’s Upper Peninsula. Polsky’s Invenergy has agreed in concept to build a natural-gas-fired power plant serving Cliffs Natural Resources, an Ohio-based mining company that is by far the U.P.’s largest employer. Invenergy’s role, hammered out in a multiparty deal announced Jan. 13 by Gov. Rick Snyder, will allow for the phaseout of a coal-fired power plant on the shores of Lake Superior in Marquette. Under the agreement, Wisconsin Energy will sell the sociation of Counties. That said, MLive reported, home prices and paychecks still have not recovered. The average annual pay growth rate between 2012 and 2013 was -0.3 percent, the study said.
Amway thirsty for youth, buys maker of energy drinks, snacks Ada-based Amway Corp. acquired California-based XS Energy, a maker of energy drinks and snacks, the Grand Rapids Business Journal reported. XS Energy has been distributed exclusively through Amway’s independent business owners, whereas most energy drinks are sold in convenience store and grocery store shelves.
coal plant along with its electric utility operations in the U.P. to Upper Peninsula Power Co. The plant then would stay open for five years, and Cliffs Natural Resources would continue to buy power from it for that period. Polsky’s Invenergy will build a new plant to serve Cliffs starting in 2020. It potentially could provide power to other U.P. customers as well. The deal would protect U.P. residents from paying hundreds more in electric bills annually by keeping the coal plant running. Transmission grid operators have determined it can’t shut down for now in order to keep the lights on. — Crain’s Chicago Business
Amway said it made the deal because of XS Energy’s success attracting younger people.
West Michigan office leasing up 45%; another good year expected Office space leasing rose nearly 45 percent in West Michigan last year while sales of office space were up 6 percent, MLive.com reported, citing data from the Commercial Alliance of Realtors. Average lease rates in downtown Grand Rapids are $16 to $23 a square foot. Growth in the office market is expected to continue in 2015, the report said. Much of the demand downtown is being driven by younger people who want to live as well as work in the city.
MICH-CELLANEOUS
The Michigan Supreme Court heard arguments in a case that will determine whether state workers are covered by a right-to-work law, The Associated Press reported. The
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CORRECTIONS A story on Page 3 of the Jan. 12 issue incorrectly included the Phoenix Art Museum among U.S. museums looking to hire a new director. The museum recently filled the position. San Francisco-based jeans maker Levi Strauss & Co. agreed in 2013 to pay $220 million over 20 years for the naming rights to the San Francisco 49ers football stadium that opened this season. A story on Page 19 of the Jan. 12 edition misstated the number of years. A story on Page 9 of the Jan. 12 issue gave an incorrect first name for Mike Stevens, one of the co-founders of Grand Rapids-based Founders Brewing Co.
Read AheadOfTheCurve.wnj.com, the definitive law blog for navigating the automotive supply chain.
Keeping automotive suppliers ahead of the curve
law says public and private workers can’t be forced to pay union fees as a condition of having a job. The dispute centers on whether the law steps on the turf of the Michigan Civil Service Commission. Officials at Kalamazoo-based Bronson Healthcare Group and Detroit-based Blue Cross Blue Shield of Michigan remain “far apart” on a new reimbursement agreement to replace a three-year contract that expires Feb. 15, MiBiz reported. David Esposito is the new president and CEO of Kalamazoo-based Armune BioScience Inc. Armune, a medical diagnostics company, commercializes technology licensed from the University of Michigan.
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A blueprint for a design mecca New council aims to solidify Michigan as creative hub ative Studies, who BY SHERRI WELCH CRAIN’S DETROIT BUSINESS
he buzz around the region’s and state’s industrial design heft and efforts to attract more designers to Michigan are picking up. Last week, the Michigan Economic Development Corp. announced the launch of the Michigan Design Council, a public-private advisory board that will look for ways to help cement Michigan’s position as the top spot in the country for industrial or product design talent. The council plans in the coming year to look at establishing a statewide design prize and a design district or “mecca” in Detroit, sort of a “Hollywood” for industrial designers. Separately, plans are underway to bring the 2016 Industrial Designers Society of America conference to Detroit. Sooshin Choi, provost, vice president for academic affairs and professor of design at the College for Cre-
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was among those named to the new Michigan Design Council, is serving as chairman of the 2016 conference, which is expected to draw Choi 800-900 designers, educators and industry representatives to the city, he said. “The history of Detroit is a history of American creativity and innovation, and anyone paying attention can see that Detroit is going through a dramatic rebirth,” said Charles Austen Angell, chairman of the Industrial Designers Society of America and founder of Portland, Ore., industrial design firm Modern Edge Inc., in an email. “Detroit (is) about to write another chapter in the book of American ingenuity,” he said. “We are in the midst of the ‘maker’ revolution, and I can’t think of a better city in America to hold the 2016 ... conference.”
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Google puts its self-driving car in the hands of area suppliers
Inside
BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
The fate of Google Inc.’s self-driving car rests in the hands of Livonia-based Roush Industries Inc. and other local suppliers. Roush, an engineering and specialty manufacturing company known for its custom Ford Mustang models, will assemble a test fleet of 100 Google prototypes in 2015, which Crain’s reported back in May. Google made an announcement last week that global suppliers with offices in Southeast Michigan, including Auburn Hills-based Continental Automotive Systems and Farmington Hillsbased Robert Bosch LLC, would supply parts to the vehicles. The Silicon Valley-based Internet giant did not contract with an automaker for the project, Chris Urmson, director of Google’s self-driving cars program, told reporters at last week’s Automotive News World Congress in Detroit. Urmson did say that when the pod-like two-seater electric cars are ready for production, an automaker would be involved. Urmson He didn’t specify whether the automaker would be one of the Detroit 3. Roush has leased additional space at 28220 Plymouth Road in Livonia and refurbished the
How the Motor City could become Startup City, Page 4
Company index These companies have significant mention in this week’s Crain’s Detroit Business: 5 Lakes Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 400 Monroe Associates . . . . . . . . . . . . . . . . . . . . 17 Advantage Management Group . . . . . . . . . . . . . . . 15 American House Senior Living Communities . . . . . 14 Barbara Ann Karmanos Cancer Institute . . . . . . . . 12 Beaumont Health System . . . . . . . . . . . . . . . . 12, 13 Beet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Botsford Hospital . . . . . . . . . . . . . . . . . . . . . . 12, 13 Cascade Partners . . . . . . . . . . . . . . . . . . . . . . . . . 15 Center for Automotive Research . . . . . . . . . . . . . . 19 Comau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Consumers Energy . . . . . . . . . . . . . . . . . . . . . . . . 21 Continental Automotive Systems . . . . . . . . . . . . . . . 3 Deloitte Tax . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 13 Detroit Creative Corridor Center . . . . . . . . . . . . . . 20 Detroit Free Press . . . . . . . . . . . . . . . . . . . . . . . 1, 19 Detroit News . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 19 Detroit Regional Chamber . . . . . . . . . . . . . . . . . . . 21 DTE Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Exclusive Realty . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Fontinalis Partners . . . . . . . . . . . . . . . . . . . . . . . . . 4 Ford Motor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Garan Lucow Miller . . . . . . . . . . . . . . . . . . . . . . . 20
See Google, Page 19
General Motors . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Hamilton Anderson and Associates . . . . . . . . . . . . 17 Henry Ford Health System . . . . . . . . . . . . . 12, 13, 15 Honigman Miller Schwartz and Cohn . . . . . . . . . . . 13
Business attractor
Inmatech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Inventev . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Word may be getting out, but Michigan hasn’t been doing a good job of promoting its assets, including its design community, said Kevin Kerrigan, senior vice president of the MEDC’s automotive office and senior adviser for automotive initiatives for the state.
Macomb Community College . . . . . . . . . . . . . . . . . . 3 Michigan Design Council . . . . . . . . . . . . . . . . . . . . 3 Michigan Economic Development . . . . . . . . . . . . . . 3 Michigan Sierra Club . . . . . . . . . . . . . . . . . . . . . . 21 Michigan.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Midtown Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . 17 North American International Auto Show . . . . . 4, 5, 7 Oakwood Healthcare . . . . . . . . . . . . . . . . . . . . . . 12 Redico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Robert Bosch . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Roush Industries . . . . . . . . . . . . . . . . . . . . . . . . . . 3 COURTESY OF GOOGLE INC.
See Design, Page 20 ISTOCK PHOTO
Suppliers for Google Inc.’s self-driving car include Auburn Hills-based Continental Automotive Systems and Farmington Hills-based Robert Bosch.
St. John Providence Health System . . . . . . . . . . . . 12 St. Joseph Mercy Health System . . . . . . . . . . . 12, 13 Summit Commercial . . . . . . . . . . . . . . . . . . . . . . . 17 Sundberg-Ferar . . . . . . . . . . . . . . . . . . . . . . . . . . 20 TowerSec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Walbridge Development . . . . . . . . . . . . . . . . . . . . 19
Macomb outlook: A slow recovery, pockets of growth BY KIRK PINHO CRAIN’S DETROIT BUSINESS
The economy giveth and the economy taketh away. In Macomb County’s case, that is particularly true when it comes to manufacturing jobs. But while Macomb lost significant numbers of unskilled and semiskilled manufacturing jobs with domestic automakers like General Motors Co. and others during the most recent economic downturn, the county job market has been at least partially replenished with new jobs in other areas like software and computer
ON THE WEB The online version of this story includes the PowerPoint slides that were part of Jim Jacobs’ economic forecast presentation. Go to crainsdetroit.com engineers, said Macomb Community College President James Jacobs. In 2000, the county’s manufacturing jobs totaled 106,415, by far the largest job sector, dwarf-
ing retail trade jobs (42,933), Jacobs said. By 2010, manufacturing jobs totaled less than half what they were 10 years earlier at 51,526. Although there has been a pickup of more than 17,000 manufacturing jobs, with the 2014 tally at 68,656, that’s still 35.5 percent below 2000 levels. “There is a shrinkage of certain types of jobs and growth in others,” said Jacobs, who delivered his 30th Macomb County Economic Forecast on Friday at Andiamo Italiano Ristorante in Warren. “Growth is never going to bring back See Macomb, Page 20
Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . 20 BUSINESS DIARY . . . . . . . . . . . . . . . . 16 CALENDAR . . . . . . . . . . . . . . . . . . . . 16 CLASSIFIED ADS . . . . . . . . . . . . . . . . 17 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 16 RUMBLINGS . . . . . . . . . . . . . . . . . . . 22 WEEK ON THE WEB . . . . . . . . . . . . . . 22
THIS WEEK @ WWW.CRAINSDETROIT.COM
Check under the hood at auto show Read the news and insight of Crain’s reporters and editors — and check out the gallery of photos.
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Ignition 2015 at auto show: How Motor City could be Startup City BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS
Metro Detroit, the automotive capital of the world, still isn’t a hotbed for mobility upstarts. Silicon Valley continues to reign supreme, even in automotive. Of $1.6 billion of venture capital under management in the state, only 3 percent goes toward transportation startups, according to the Michigan Venture Capital Association. Local players want this to change. Ignition 2015, an event hosted Jan. 14 at Cobo Center by Crain’s and the North American International Auto Show, singled out Detroit’s role in the startup world and how the region could be as relevant to startups as it is to the automotive industry. The event was created to focus some of the Detroit auto show discussion on the startups and tech that are a key part of the auto industry. Ignition drew roughly 150 attendees from the startup, venture capital, economic development and automotive industries. Detroit’s culture needs to change for a successful mobility startup ecosystem, Chris Thomas, founder and partner at Detroitbased venture capital firm Fontinalis Partners LLC, said during a panel discussion. “Failure isn’t rewarded here,” Thomas said. “We need to accept
failure as part of the startup culture. Experienced entrepreneurs learn from failure.” Dave Drach, vice president of business development for Techstars, said the success of this market’s mobility startups is pinned on strong partners and their distribution channels. The Boulder, Colo.-based organization, which provides seed money and mentoring for promising startup technology companies, is opening a Detroit office this year. Ford Motor Co., Magna International Inc. and Verizon Telematics are sponsoring what is being billed as Techstars Mobility, Driven by Detroit, an accelerator program to foster innovative transportationrelated startups. The three companies are committing a total of $2 million in funding plus mentors and other resources to support participating startups. Ten companies will be selected from across the country to move to Detroit and take part in a threemonth boot camp at a location yet to be determined. Each will receive $120,000 in funding, intensive training and mentoring and help with customer acquisition and executive recruiting. At the end of the three months, graduates get to pitch for funding to angel investors and venture capitalists at
what’s billed as a Demo Day. Several Michigan-based venture capital firms will provide guidance to participants. Fontinalis, Detroit Venture Partners and Ann Arbor-based Renaissance Venture Capital Fund will provide investment capital. Cooperation between OEMs and startups is becoming more common. Erica Klampfl, global future mobility manager for Ford, told attendees that the success of Ford’s OpenXC program has caused the automaker to delve deeper into aiding startups. OpenXC is a hardware and software programming interface created by Ford that is open to all developers to create new mobility-based technologies. Information developers have access to ignition status, torque, fuel level status, engine speed and much more. Klampfl pointed to Ford’s 2013 acquisition of Ferndale-based Livio Radio as a model for how large companies can benefit from a startup culture. Ford acquired the developer of in-vehicle connectivity software for less than $10 million and is integrating its software into Ford vehicles. Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh
Cybersecurity startup a winner at Ignition BY NATALIE BRODA SPECIAL TO CRAIN’S DETROIT BUSINESS
Media and auto executives have been fixated on products from some of the world’s best-known companies during the North American International Auto Show. But on Jan. 14, attention turned to up-andcoming businesses during Ignition 2015, a startup-oriented event hosted by Crain’s and NAIAS. As part of Ignition, Ann Arborbased automotive cybersecurity company TowerSec Inc. was crowned the hottest startup at the auto show by the event attendees. In addition to TowerSec, other presenters were Beet LLC, Plymouth; Inmatech, Ann Arbor; Inventev, Detroit; and Mojio, Vancouver, British Columbia. The companies were chosen to take part in the event after being vetted by local venture capital and economic development executives. Company representatives were given 6 minutes to present to the audience, then were asked follow-up questions by Chris Thomas, founder and partner in Detroitbased venture capital firm Fontinalis Partners LLC, and Dave Drach, a vice president with Boulder, Colo.based Techstars, which is opening a Detroit accelerator this year. TowerSec aims to make the future of autonomous vehicles safer. Chairman Bruce Coventry said hackers, nation-states and curious but capable 10th-graders pose threats to the future of automotive
AARON ECKELS/CDB
Bruce Coventry, chairman of top startup TowerSec.
cybersecurity. “Taking an unsecured device and plugging it into an OBD (onboard diagnostics) is like swapping bodily fluids in an Ebola ward,” Coventry said. “Today you’ll see great autonomous vehicles, but to be viable they must be secure.” Coventry detailed the potential risks of unsecured connected vehicles, saying the company’s technology will protect a driver’s safety and personal data and protect vehicle functionality. An example of potential risks, he said, was the ability for hackers to attack a vehicle’s airbag system. “As excited as we are about the Internet of things, we have to be very careful about taking devices and installing them in a vehicle,” Coventry said.
Coventry was awarded a Shinola watch. The focus for all the pitches was technology and how each company is impacting mobility. Beet pitched its EKG-like technology, Envision, which measures the health of a factory. CEO David Wang said factories can become ill just like humans. Its technology can be implemented at any factory in two days to help diagnose problems. Wang’s angle is to harness the data collected in a manufacturing system to improve the product. Mojio pitched its connected-car technology, which lets drivers send a car’s data from its onboard diagnostics port to Mojio’s cloud service, allowing developers to create native apps for cars. Jay Giraud, CEO of Mojio, explained that patent-pending developer tools are pushing the company forward. Mojio works with 150 app developers. Inventev pitched its Energy SWAT Truck, a merger between a vehicle and generator. David Stenson, founder and CEO of Inventev, compared generators of the past to digital cameras — they’re becoming more uncommon. In addition to generating power, the Energy SWAT technology allows a vehicle to be powered without idling and move electrically at higher speeds. Inmatech pitched its supercapacitor, developed out of Michigan State University, which would extend the life of a car battery by 10 years, according to Les Alexander, the company’s COO.
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Barra ‘tougher, not meaner’ after challenging year as GM CEO BY MIKE COLIAS CRAIN NEWS SERVICE
General Motors Co. CEO Mary Barra said she was surprised by the wave of media attention that followed her appointment as the first female CEO of a major global automaker, saying that it reflects a backward view of the automotive industry. In an on-stage conversation last week in Detroit at the Automotive News World Congress with Keith Crain, editor-in-chief of Crain’s Detroit Business and Automotive News, Barra reflected on everything from where she finds peace and quiet — at the grocery store — to her approach to firing employees and her whirlwind first year as CEO, which included a deluge of safety recalls. “The biggest surprise was what the rest of the world and other industries thought of the (automotive) industry, that it was so stunning,” Barra said. “I think they don’t know us very well. I think they had us back 20, 30 years.” Barra, 53, gave several professional and personal insights during the 45-minute chat: 䡲 She said the Buick Avenir concept that GM showed on the eve of the North American International Auto Show in Detroit is a buildable NAIAS model. BarBuick Avenir concept ra said GM’s design division, led by design chief Ed Welburn, works closely with engineering to design realistic concepts that could go into production should GM decide to greenlight them. Welburn “works so well with the engineering organization that when we do a concept vehicle, they know what it takes,” she said. Asked whether GM will produce it, she said, “I don’t know.” 䡲 Barra defended Chevrolet’s $600 million sponsorship of British soccer club Manchester United. Critics have questioned whether the deal makes sense after GM’s decision in late 2013 to pull the Chevy brand out of Europe. She said that soccer fans in China and the U.S., especially young ones, follow the team. “It’s a huge opportunity to strengthen the brand especially in the U.S. and especially in China,” she said. 䡲 GM’s decision to move Cadillac’s senior leadership team to New York was “a recognition of where we want to take Cadillac, to be a true luxury brand.” “We want to seize the opportunity of where global brands and luxury brands are and to bring that energy to” Cadillac, she said. 䡲 Barra has personally fired “many” employees, and takes responsibility for doing so, just as she would commend workers for their success. GM dismissed 15 workers in the wake of an investigation into last year’s recall of a faulty ignition switch that is linked to at least 45 deaths. “I served in HR for a short period of time when we came out of bankruptcy. I had to have many
There’s times “ where I’m by myself. When I’m out grocery shopping, it’s me and the cart.
”
Mary Barra, General Motors CEO
GLENN TRIEST
General Motors Co. CEO Mary Barra had an on-stage conversation last week in Detroit at the Automotive News World Congress with Keith Crain, editor-in-chief of Crain’s Detroit Business and Automotive News.
difficult conversations,” she said. But she said she does it in a way that allows the person to “maintain their dignity.” Over her tenure as CEO, she said, she has become “tougher, not meaner.” 䡲 She dismissed the notion that she may have had inklings about the extent of the ignition-switch is-
sue before she was notified in January 2014. The question, she said, “was asked and answered.” 䡲 Barra said she and her family have adjusted to her sudden celebrity status. She said her school-aged son and daughter “made it very clear that ‘Mom’ is the job they’re evaluating me on.” She acknowledged that
strangers will approach her on a Saturday morning at Target when she’s shopping by herself. But she likes the unsolicited encounters more than she dislikes them. “You’d really prefer people to not recognize you,” she said. “But they come to you and say, ‘Hey, I’m really excited about that vehicle.’ The support, even from strangers
who recognize me, has been overwhelming.” The times where she goes incognito are just fine with her, too. “There’s times where I’m by myself,” she said. “When I’m out grocery shopping, it’s me and the cart.” Earlier, Barra provided GM’s financial outlook for 2015 to Wall Street analysts at a conference, predicting higher operating profit and margins despite the expectation of slowing global industry sales growth — just 3 percent — and flat or declining prices in North America. But even while making those forecasts, Barra acknowledged that the best-laid plans can quickly get sidetracked. “A year ago,” she said, “we would have never been able to predict what we faced.” From Automotive News
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Comau exec: New auto materials force assembly line flexibility Comau SpA, a subsidiary of Fiat Chrysler Automobiles NV, is the largest supplier of automotive assembly line systems in the world. The transition to lighter materials — a continued move toward greater fuel economy — is not only changing what vehicles are made of but how they are made. Take Ford Motor Co.’s new 2015 F-150 pickup. Martin Kinsella, Comau Inc. The automaker’s flagship truck is 700 pounds lighter with a body made of alu- at nine
Q&A
minum instead of the traditional steel. Lighter materials with different tensile strengths require more complex manufacturing processes and machinery. Behind that new process for Ford and automakers is Southfieldbased Comau Inc. It’s the U.S. unit of Comau and accounts for roughly $400 million of the parent’s $1.46 billion of revenue. It occupies 1.4 million square feet in the region buildings in Southfield,
Royal Oak, Novi and Port Huron. Crain’s reporter Dustin Walsh chatted with Martin Kinsella, Comau’s director of advanced materials and process technologies, about managing new materials on the line and the future of automotive assembly. How have manufacturing assembly lines, and robots, changed in recent years? The timeframe from concept to launch has changed dramatically. Automakers go from concept to full-volume production much quicker today than even a few years ago. Also, the cost of a robot
in real terms has come down dramatically. The robot used to be the most expensive part of the (assembly) solution. Now it’s been superseded by the end-process part on the robot; a welding gun, etc. How is flexible manufacturing altering what Comau does? Historically, an assembly system might have been only able to run one (vehicle) model. Now it is able to do a small four-door variant up to a large SUV, running down the same line. Changing the line over to handle a different model would have required a change of the facility layout and equipment.
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Sally Like, Owner Marcile’s Fashions & Bridal
Now, working together with the customer in the early phases, we know we may need to run three models down the line today and five models later. So, we pre-prep for future model changes, which allows for less significant downtime for a model changeover. What is Comau’s greatest challenge in modern manufacturing? The global challenge is around CAFE (fuel economy) standards. Every automaker is driving toward the goal of products with greater focus on design and mass reduction. We’re working with (automakers) on ways to handle multiple materials in a single line. This used to happen on low-volume lines, but not anymore. Part of the challenge is the product joining process. The vast majority used to be resistant spot welding steel components that had been around for decades. Now in the last 10 years, there’s been an intro of different materials. Some can’t be spot welded and have to be joined with different techniques. Now you’ve got a body shop with multiple fixtures (on the robots). There’s also the challenge of volumes. Most automakers are increasing capacity. That’s a big challenge for us to provide a solution that can run efficiently and have limited downtime to meet these volumes. What is the future of assembly lines? Lines used to have a fragmented, zone-by-zone approach. Our philosophy moving forward is to make it an organized machine: high-volume, adaptable, flexible and capable of utilizing new materials. Customers will more and more want the ability to flex their body shop to a greater degree. We’ll also see a greater use of the mobile technology common outside the environment present in the factory space.
NOMINATE YOUR WORKPLACE FOR HEALTHY COMPETITION Is your workplace the healthiest in Michigan? Find out by nominating your company for Healthiest Employers of Southeast Michigan, an awards program that will be included in a June 2015 Crain’s report. The Healthiest Employers award, sponsored by Health Alliance Plan, takes a look at the best practices that employers across the state use to create a healthy workplace. Judging will be handled by Indianapolis-based Healthiest Employers LLC. The group has conducted similar competitions in most of the major cities in the United States. The contest is free to enter. Winners will have their wellness efforts recognized as part of a print supplement to run this year. They also will be featured in a video series as well as honored at an event in April, with time and location still to come. To enter, go to crainsdetroit.com/nominate. The deadline for entering is Jan. 26.
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Commerce official shows support for city in auto show visit Assistant U.S. SecreSnyder yesterday to talk tary of Commerce for about, from a broader Economic Development standpoint, the things he’s Jay Williams spent two doing to create a better taldays in Detroit in supent and workforce enviport of the region’s ecoronment. nomic resurgence, tourPlus, I had meetings ing the North American with the foundations International Auto Show about how our efforts can floor and meeting with overlap with what they business executives. are doing as well as Dan Williams, the former Gilbert about what he’s mayor of Youngstown, doing. I also had a great Ohio — which has many meeting with the folks at Jay Williams, parallels to Detroit in TechTown … to hear secretary of the way of a recovery about their priorities of commerce for story — and executive helping to facilitate innoeconomic director of the U.S. Office vation and entrepreneurdevelopment of Recovery for Automotive ship. Communities and Workers, spoke with Crain’s reporter Dustin What were your impressions of the Walsh about Williams’ views on auto show? Detroit and the federal governIt’s gotten bigger. Hearing from ment’s role in its recovery. those that were here six years ago, Cobo Center didn’t have the level Tell us about your visit. of excitement the show is accusI came for the auto show as well tomed to. People that were there as to gauge the (auto industry) re- talk about how depressing that covery and figure out how we time was. could continue to be of assistance. They didn’t know whether (GenIt’s been amazing to see over the eral Motors) or Chrysler would surpast four to six years just how the vive. Now, fast-forward six years, auto show has been a barometer of it is a fitting indicator of the overthe recovery and the industry. all growth, success and recovery of This particular visit, I had a the industry. There are still going chance to sit with the mayor (Mike to be economic cycles. The econoDuggan) to discuss what priorities my is not going to grow at 5 perhe has that we could be of assis- cent annually for seven or eight tance. I also met with Gov. Rick years consecutively. But the
Q&A
growth that is happening now is sustainable. The products that these automakers are manufacturing have a global appeal. They are more innovative, they are more fuel-efficient, they are more technologically advanced. They are producing cars people want to buy. It’s clear that this is a real recovery, but we can’t lose sight that there are still too many long-term employed and those that still need to be exposed to economic opportunity. What is the Commerce Department’s role in Detroit? Our role is to be responsive to the needs and priorities, as articulated by the local leadership. That commitment remains strong. We’ve spent some time trying to figure out how to get the resources that were already invested here in Detroit moving through the system, working with Kevyn Orr when he was in place (as emergency manager), now working with Mayor Duggan. That was a huge priority, remains a huge priority — in addition to figuring out what programs exist that would be of assistance to Detroit. It’s not our role to dictate what is in the best interest or what the priorities are, but instead to be responsive when the mayor or the governor says that these are things that would be helpful.
How does a city reinvent itself when it is resource-challenged? There are always resource constraints. There are resource constraints in Washington. I think what we’ve found, and what’s been documented, is there were a significant amount of resources that had been allocated over the years to the city of Detroit that were stuck. They had been allocated, but weren’t moving through the system, weren’t being spent by the city. Then there was always the threat of those resources expiring or being recalled. One of the commitments of the administration was to get someone here on the ground to say: “OK, those tens of millions of dollars that had been allocated to X, Y or Z … let’s get that moving so there isn’t the threat of losing those resources.” We’ll always be operating under resource constraints, but before Detroit talks about any new resources, let’s assess the resources that are there and get those into the proper channels and then figure out what other resources exist that may be appropriate. What are the challenges Detroit faces? Opportunities? Certainly the size and scale of challenges here are somewhat unique. Lots of cities have challenges. … But also to the scale of
those challenges, there are major opportunities. Yesterday, we met with a couple dozen of the foundations here. The wealth that they bring, not just in terms of asset value but the wealth of knowledge, goodwill and credibility — and momentum that they bring — is incredible. A lot of cities in economic distress would love to have this many foundation leaders who gather in a room and figure out strategies of how they can bring resources to the situation. What’s encouraging about what you’ve seen in Detroit? Jobs aren’t created by the federal, state or local governments. Jobs are created by the private sector. But the role we do have is helping to shape that environment, helping to create the conditions. We want to make sure Detroit is a great place to invest, a place to get that return. A great example is the meeting we had with Dan Gilbert. Here’s an entrepreneur who is making great investments in Detroit. When you get folks that maybe don’t love Detroit like Dan Gilbert loves Detroit, they can say, “Hey, I’m just about making great investments in great places”… they can now say, “Oh, Detroit happens to be on that list.” That’s the market-driven recovery.
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OPINION
Strong newspapers improve community W
hen the Newspaper Preservation Act was passed in 1970, the goal was simple: preserve multiple news voices in communities by allowing newspapers to form joint operating agreements that merged business operations but maintained competitive newsrooms. A good idea that worked until it didn’t. More than two dozen markets took advantage of the legislation to create JOAs. All but a half-dozen have dissolved, with Detroit being the largest remaining market, undone by a combination of preand post-Internet problems. But as Bill Shea reports on Page 1, the JOA is no longer the biggest question mark for The Detroit News and Detroit Free Press. The News is up for sale along with the other newspapers operated under the Digital First Media umbrella. The Free Press, along with other Gannett newspapers, is being spun off from Gannett’s digital and broadcast properties into a separate company. In short, this could be a year of accelerated change for the two dailies, who already have had years of intermittent layoffs and buyouts and shrinking revenue. It’s a business problem to be sure, but it’s also a community one. Despite financial stresses, the Free Press, for example, devoted significant resources — both staff and money — to rooting out corruption in the Kwame Kilpatrick administration. It has ongoing litigation with the University of Michigan to try to force the decision making of regents to be more transparent. It’s a reminder that long-standing news organizations play a role in the community not often taken up by newer, smaller ones.
State’s future still needs investment A state deficit? Lansing lawmakers and state officials were huddling last week to revise budget estimates for the fiscal year that is only 4 months old. The House Fiscal Agency originally projected a shortfall of $454 million; its Senate counterpart pegged it at $162 million. A consensus preliminary estimate Friday puts it at about $400 million. One culprit — more companies are exercising previously issued tax credits against higher profits from an improving economy. Talk about a Catch-22. Cuts likely will be coming, both for this year and for next, when revenue is expected to be down more than $500 million. Let’s hope this isn’t bad news for Gov. Rick Snyder’s quest to get voters to endorse in May a new 1 percent sales tax increase for roads. Economies, like businesses, can’t grow without investment, and improved roads are critical to Michigan’s future.
MARY KRAMER A lesson from the EM for DPS Throughout his tenure as emergency manager for Detroit Public Schools, one of Jack Martin’s biggest headaches was competing for students with charter schools. The irony? As CFO of the U.S. Department of Education in 2002, he helped to sell President George W. Bush’s landmark legislation: No Child Left Behind — which supported school choice and charters. Now, as his 18 months as Detroit’s state-appointed school EM expired last week, Martin says: “I still support school choice, but it has to be managed school choice. “The answer is not another governance model” but a kind of “certificate of need” process that would oversee Martin adding capacity for K-12. “You need a closing plan, too. An orderly closing plan. So you don’t have what we have in Detroit now. … We need an enforceable process for schools that are not cutting it.” Martin is a Republican and a former Marine. He, like Gov. Rick Snyder, is a CPA. He helped fix the finances at the U.S. Department of Education and has served as an emergency manager in Highland Park and Detroit schools. So his perspective is certainly
worth considering as Snyder prepares to receive recommendations from a new, broadbased Coalition for the Future of Detroit School Children. The coalition is likely to recommend a process for opening — and closing — Detroit schools. The CPA in Snyder might also appreciate other things Martin has learned. Operations have had positive cash flow, but when the $53 million in annual debt payments for past bond issues are added, “that’s when it all falls apart.” He ultimately decided that previous cuts — like closing schools — further exacerbated enrollment drops. After a school closed, the district lost at least 40 percent of the students attending that building to charters or leaving the district. And strikes? The last major teachers’ strike, in 2006, probably cost the district at least 20,000 students, Martin said. Detroit simply has overcapacity in its schools, Martin says. Last fall, seven charter schools opened, even though most school buildings — traditional public or charter — have plenty of empty seats. He learned that parents make decisions about which schools to send their kids to for many reasons — academic reputation is only No. 3 on the list after safety — including safe paths to get to school — and “customer service” — how parents are treated by front-line school staff. That’s one reason Martin brought Target
Corp. in to train front-line employees about respect for parents (and students) as customers. So what is Martin proudest of over his tenure? Top of the list: Stabilizing enrollment and getting off the federal “at risk” list, which should make applying for government or foundation grants easier. “There are some districts, once you get on, you never get off,” Martin said. Other district achievements: 䡲 College admissions for DPS grads are up — they earned $138 million in grants and scholarships in 2014, he said. 䡲 Sixteen of the 30 top-rated schools on the Excellent Schools Detroit scorecard in fall 2014 were traditional Detroit Public Schools. 䡲 Seeing on-campus crime drop by 30 percent. 䡲 Working with skilled trades unions and other partners to create a pipeline of talent for construction-related jobs in major city projects, including the new international bridge and hockey arena district. But there’s still a deficit. Better schools — traditional public and charter — are critical to rebuilding Detroit’s population. That’s why Martin’s advice can be helpful to the governor — or anyone else serious about creating the structure to improve schools in Detroit. Mary Kramer is publisher of Crain's Detroit Business. Catch her take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760 and in her blog at www.crainsdetroit.com/kramer. E-mail her at mkramer@crain.com.
TALK ON THE WEB From www.crainsdetroit.com Re: Detroit’s car insurance costs a roadblock to bankruptcy comeback Crime and fraud are a big part of the high rates in Detroit. But the entire state suffers from high rates, and not because of no-fault. It is because of medical claims coverage. Not only is Michigan the only state that requires all insurers have unlimited health care pay-
outs for life, health care providers get to charge their full list price, not the negotiated prices that are paid for Medicare and regular health insurance. Announcer
developers should take 100 percent of the risk. Waltduro
Re: $28M Strathmore Hotel rehab
Gilbert’s track record speaks for itself. Give him a chunk of floor space and let’s see what transpires. Freedom Trinity
If this project is economically viable, then the banks, owners and
Re Bill Shea: Dan Gilbert: Missed opportunities with auto show
KEITH CRAIN: Now it’s time to enjoy all of our efforts Make no mistake. The North American International Auto Show at Cobo is the best in North America and one of the best in the world — ranking right up there with Geneva and Paris and Frankfurt. We are very lucky to have such a premier show in our own backyard. If you haven’t seen what a few hundred million dollars has done to Cobo, you will be in for a very pleasant surprise. I hope everybody gets a chance in the next week to enjoy this spec-
tacular motor show. It’s worth the time and the money. I have always wished that there were lots of dealerships that sold all the competitive brands under one roof. It would be a lot easier to compare models and check them all out for purchase. For whatever reason, the manufacturers have no interest in making it easy for us to compare models at
the same time. Luckily for us, we have that chance with our own motor show. Everybody is here, and there are plenty of opportunities to check out the cars, look under the hoods and even see whether the truck is really as roomy as they say. If you’re not sure how much space is in the back seat, you’ll find it easy to compare
vehicles and features almost right next to each other. When you think about it, we’re pretty lucky. Sure, there are some great shows in Chicago, New York and LA. But to have the best in the entire continent is a very special opportunity. If you ever go to smaller-market auto shows, you’d realize very quickly just how much better Detroit’s is than the rest. Last week, we were courting all the executives and media from around the globe. Thousands of
folks turned out to make the Friday night black-tie event the largest single-night fundraiser around. That event, I am told, has now reached over $100 million raised for children’s charities. No one even comes close. Just about everybody in Detroit has had something to do with the success of this international motor show that has put Detroit front and center on a worldwide stage. Now it’s our time to enjoy the auto show. We deserve it.
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City students explore jobs, poverty and success How much do you have be able to succeed. to earn to be a 1-percenter in Detroit? What about the top 5 percent of households? Job-skills training is A median household something they were very income of $200,000 lands passionate about. They you in the top 1 percent complained, as all stuin this city, and $100,000 dents everywhere have gets you into the top 5 said, about having to take percent, according to algebra classes when they data from the 2013 Amerdon’t see how it’s relevant ican Community Survey. to their futures or the Amy Haimerl In most of the country’s skills they need to get a top 25 largest cities, $200,000 barely job and build a career and a life. I taps into the top 5 percent, and know I said the same things when I $100,000 is effectively the middle was in high school. And just like the class in cities like San Francisco adults told me then, I reminded and New York City. That’s right, what is middle class in other major cities* is the equivalent of the elite here in Detroit. (*Yes, cities: This data is for the city, not metro areas.) Of course, for many here in Detroit, the idea of earning $200,000 a year seems about as likely as a zombie apocalypse or the Detroit Lions actually winning the Super Bowl. The city’s median household income is just $26,325, and 31.5 percent of households bring in less than $15,000. The only other large cities that come close to those numbers are Philadelphia and Memphis. (See chart, next page.) And that’s assuming a paycheck in the first place: In November, Detroit posted a 13 percent unemployment rate — much higher than the national average of 5.6 percent.
Detroit 2.0
them that much of what they are learning is about building critical thinking skills and a common base of knowledge. They are skeptical, just as I was. Instead, they want the business community to get involved with them. They have ideas about what they want for their futures, but they need access to people who can tell them what it really takes. They want to be connected to the people in their community who can show them a path. They understand on a very personal level the disheartening statistic that 75 percent of Detroiters make less than the nation’s medi-
Access to business
an household income of $51,900. They know that the story of Detroit’s future is jobs creation. Good-paying jobs. No matter how clean the city’s books are, Detroit will not thrive — as people or a place — unless we create new jobs and properly train the existing workforce. But, of course, there is no magic job fairy. So we talked about how you create jobs and what prevents it. I told them the story of New Center Stamping and how it wanted to expand but couldn’t get a loan because of a lack of collateral. But I also told them about an innovative program that was developed in
Michigan and grew into a national program that helps companies get the loans they need. The good news, I told them, is that there is a lot happening in this city and state that we can be proud of. Efforts like these: FoodLab Detroit is doing lifechanging work by helping to move people from the informal to the formal economy. They can take one woman (or man) baking in her kitchen and help her turn it into a business that can support her and employ others in the community. It’s grown to 115 members in the
Potential to succeed I was pondering that disparity last week after meeting with a class of economics students at University Prep Academy High School in the New Center area. Their instructor, Mitchella Gilbert, asked me to talk to her students about the economy and what is happening here in Detroit. We discussed GDP and other economic indicators, which they’ve learned are pointing to positive territory. But we also discussed what the economy feels like to them and their families because economics, at its core, is about the health of the population and whether they can — or cannot — feed their families. (And yes, I have a degree in economics from a free-market school.) The students are writing letters to President Obama, explaining what they see as the biggest impediment to the U.S. economy — using textbook economic theory — and giving their recommendations for improvement. They are exploring ideas surrounding regulation and access to capital and economic disparity, diminishing marginal returns. But what they are really interested in are innovative ideas to create new jobs and train the existing workforce as ways to end poverty and unemployment. They are interested in these efforts because they want to see themselves having the chance to be one of those earning $100,000 or $200,000 a year, to be a part of the success of this city. They want to be lawyers and social workers, doctors and writers. And more than half of them expressed some interest in being an entrepreneur. In a town where they don’t see jobs, they want the skills to be able to create their own. They want to
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past year. The teams at Garden Fresh and Forgotten Harvest are also working to grow food entrepreneurs and help them scale up. The Build Institute, TechTown Detroit, SCORE and others are working to foster talent and smart business growth. Their efforts to help startups and existing businesses access resources and training will be critical. The new $148 million American Lightweight and Modern Metals Manufacturing Institute opened in Corktown. That taps into our manufacturing prowess and will, fingers crossed, bring more jobs. Automation Alley recently announced an accelerator program targeting fledgling advanced-manufacturing firms, promising to
January 19, 2015
CRAIN’S DETROIT BUSINESS
URBAN EARNINGS: WHERE DETROIT RANKS 25 largest cities by population 1. New York City 2. Los Angeles 3. Chicago 4. Houston 5. Philadelphia 6. Phoenix 7. San Antonio 8. San Diego 9. Dallas 10. San Jose 11. Austin 12. Indianapolis 13. Jacksonville
Percent of households earning: $200K+ $150K-$199K 7.2% 6.4 5.3 5.8 2.5 3.6 2.9 7.3 5.7 12.0 5.8 2.4 2.9
connect them with their first customer. Those firms will create both high-skill and mid-skill jobs.
5.5% 4.9 4.6 4.2 2.8 4.0 3.2 7.4 3.7 10.6 5.2 2.7 3.3
Median Household income $52,259 $49,497 $47,270 $45,010 $37,192 $47,139 $45,722 $64,058 $42,846 $81,829 $53,946 $41,962 $47,557
The Michigan Department of Transportation and area unions are working together to put Detroiters
25 largest cities by population 14. San Francisco 15. Columbus 16. Charlotte 17. Fort Worth 18. DETROIT 19. El Paso 20. Memphis 21. Seattle 22. Denver 23. Washington, D.C. 24. Boston 25. Nashville
Percent of households earning $200K+ $150K-$199K 14.1% 1.9 6.0 3.6 0.7 2.4 2.5 8.9 5.8 11.9 7.0 3.6
in apprenticeship programs so that they can be ready for all of the construction jobs that are coming from
Median Household income
9.3% 2.9 4.7 3.8 1.1 2.8 2.4 7.3 5.2 7.9 6 3.4
$75,604 $44,072 $52,375 $51,315 $26,325 $41,406 $36,912 $65,277 $50,313 $65,830 $53,601 $46,686
the Red Wings arena, highway expansion and new bridge to Canada. The Detroit Garment Group Guild created an industrial sewing certificate program to bring the art back to Southeast Michigan. It’s an in-demand skill. And with consumer interest in goods made domestically, it’s a timely need.
Don’t ignore legacy All of these efforts mean that the Powers That Be are looking at how we grow jobs all along the spectrum, from high-tech to support staff, creating a tightly woven tapestry of opportunity. Plus, I told the students, they are thinking about how we focus on what we do best: build things. Michael Finney, outgoing president and CEO of the Michigan Economic Development Corp., recently told the Detroit Economic Club that he sees manufacturing as the key to the future. “Ignoring our legacy of making things has had a negative impact not just on the state but on the city of Detroit,” he said. “We should own up and say that we are best in class in making things. We are best in class in the world at making things, and not just cars.” One of the young men in the class I visited wants to be a tech entrepreneur and is very interested in what’s happening in the Madison Building. That reminded me how important it is to celebrate the nascent high-tech industry. These firms bring innovation and innovative thinking to Detroit. And this young man sees himself in that world, sees it as something for him to aspire to. So I applaud the efforts of business like Detroit Labs, which recently created an apprenticeship program to train people for the digital economy. Our local Girl Develop It chapter and the instructors at Grand Circus are also working to make the opportunities of this world accessible to more people. And now we have the TechStars incubator coming to our city to foster transportation-related startups. It’s good news, also, that The Detroit Economic Growth Corp.’s new president and CEO, Rodrick Miller, says the organization will be putting a renewed focus on business attraction Students know that here is no magic job fairy. They understand that this work will be hard. But it’s their future we are talking about. Their faces that could either be part of the 5 percent or even the 1 percent — or the more than 30 percent making less than $15,000 a year. All of them want the chance to be on the right side of that equation. This originally appeared as Amy Haimerl’s blog at crainsdetroit.com.
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AMERICAN HOUSE ADDITION West Michigan acquisition is latest deal made by chain of senior living communities, Page 14
People After Beaumont Health System determined that large numbers of uninsured people from the Brightmoor neighborhood of Detroit were coming into its emergency departments, it began offering residents in the area free preventive care and wellness services.
Udow-Phillips
Thompson
䡲 Marianne Udow-Phillips, director of the Center for Healthcare Research and Transformation at the University of Michigan, has been elected to join the board of directors of the Arbor Research Collaborative for Health. 䡲 Hayley Thompson, a member of the population studies and disparities research program at the Barbara Ann Karmanos Cancer Institute and an associate professor in the department of oncology at the Wayne State University School of Medicine, was recently awarded a $1.8 million grant to study eHealth activity among African-American and white cancer survivors. The grant is from the Agency for Healthcare Research and Quality in the U.S. Department of Health & Human Services. 䡲 Lesley Flynt, M.D., a resident in nuclear medicine at Beaumont Hospital, Royal Oak, won the American Society of Neuroimaging’s 2015 Oldendorf Award for the best abstract from research in brain mapping.
COURTESY OF BEAUMONTH HEALTH SYSTEM
Community care ACA spurs hospitals to identify, address unmet health needs
Susick
Taylor
䡲 Nancy Susick, president of Beaumont Hospital, Troy, has been named one of 130 Women Hospital and Health System Leaders to Know by Becker’s Hospital Review. 䡲 Iris Taylor, CEO of DMC Detroit Receiving Hospital, has announced her retirement after 40 years with the DMC, effective March 27. A search for a successor has begun. 䡲 The following administrators were appointed product line leaders as part of Henry Ford Health System’s delivery system re-design: Cheryl Martin, system vice president for Martin radiology services, from vice president for radiology services at Henry Ford Hospital; Edward Szandzik, system vice president for pharmacy, from director of pharmacy services at Henry Ford Hospital; and John Waugh, system vice president for pathology and laboratory medicine, from vice president of system laboratories.
BY JAY GREENE CRAIN’S DETROIT BUSINESS
H
ospitals in Southeast Michigan are working to identify unmet or significant health needs in their immediate markets under new rules mandated by the Patient Protection and Affordable Care Act of 2010. One of the many little-known provisions of health care reform requires nonprofit hospitals — beginning in tax year 2012 — to conduct extensive community health needs assessment reviews in collaboration with community organizations every three years. Section 501(r) of the Internal Revenue Service code also requires hospitals to develop an implementation strategy to address those needs and report the projects and expenditures on Schedule H on the annual Form 990 to the IRS. Infant mortality reduction, obesity, cancer, diabetes, heart disease, asthma and signing up the uninsured are several community benefit projects being undertaken by nonprofit hospitals in
Southeast Michigan. While local experts and hospital executives interviewed by Crain’s said they do not believe the health assessment reviews have significantly increased the amount of charitable or preventive health care provided, the exercises helped to direct programs to the highest need areas. “The process did create some ‘aha’ moments for some (hospitals) that encouraged them to look at doing some things differently and more effectively,” said Lori Boyce, director of business tax services with Deloitte Tax LLP in Detroit. “Some hospitals have done a very good Boyce job and will accomplish much more for their efforts and dollars (expended) than others.” As part of the community health needs assessment, hospitals formed teams to identify major health issues. They collected demographic health
data and leading chronic diseases on patients they serve. They also Does the amount of conducted comcharitable and munity surveys community benefit that hospitals provide justify and listened to continuing tax suggestions in exemptions? Page 13 focus groups and in telephone or face-to-face interviews. Community health action plans then were developed and approved by the hospitals’ boards of trustees. The process was intended by policymakers to encourage hospitals to reach out into their community, work with like-minded organizations, and develop or expand programs to improve the health of populations — rich or poor — within their reach.
SECOND OPINION ON TAX BREAKS:
PAGE 12: Examples of projects that hospitals have developed based on their community health benefit assessment reports.
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Health Care
How 7 hospitals took action on community benefit reports Henry Ford Health System, Detroit Infant mortality rates have long been a serious problem in metro Detroit with rates three times higher for black babies than for white, said Jaye Clement, Henry Ford’s director of community health programs. Besides Henry Ford, infant Clement mortality is an issue identified by Detroit Medical Center, St. John Providence Health System, Oakwood Healthcare and the Michigan Department of Community Health, Clement said. In 2011, the four systems and other local health groups launched the Detroit Regional Infant Mortality Reduction Task Force to coordinate efforts. But Clement said Henry Ford’s needs assessment found that young women still felt disconnected to the more than 100 programs available to them. “We got $2.2 million in grant funding from the Robert Wood Johnson Foundation and began the Women Inspire Neighborhood Networks program to help connect women with the 100 programs,” she said. The program’s six community health workers make home visits
to mentor women and encourage them to seek prenatal care and other healthy behaviors. The women also receive information on educational, housing and employment opportunities. So far, of the 400 pregnant women who enrolled, 324 participated in the study with 143 confirmed births. Some women were still pregnant at the time the study was completed and other women dropped out of the program. “It is not an easy task to keep in contact with women because some live transient lifestyles,” Clement said. “The personal relationship developed with the community health worker helps” keep the women in the program.
Oakwood Healthcare Inc., Dearborn While Oakwood identified heart disease, obesity and the uninsured as priority health needs, Oakwood found lack of diabetes education to be another significant problem. The four-hospital system partnered with a number of local organizations and the National Kidney Foundation to increase education on diabetes prevention, said Betty Priskorn, Oakwood’s corporate director of community outreach. Through Oakwood Healthy Communities coalition, Oakwood’s four hospitals, municipalities, schools, nonprofits, businesses and other
SOUTHEAST MICHIGAN HOSPITAL COMMUNITY BENEFIT RANKINGS Hospital
Net community benefit in dollars
University of Michigan $298 million Henry Ford Health $262 million Oakwood Healthcare $123.5 million St. Joseph Mercy $134 million Botsford Hospital $22.1 million NATIONAL AVERAGE* Beaumont Health $145.6 million Crittenton Hospital $13.5 million Karmanos Cancer Institute $13.5 million St. John Providence $96.6 million McLaren Health** $49.9 million SOUTHEAST MICHIGAN AVERAGE
Percentage of expenses 13.6% 12.2% 9.7% 8.0% 7.7% 7.5% 6.7% 5.7% 5.7% 5.6% 4.5% 7.9%
*Survey of 1,800 tax-exempt hospitals, New England Journal of Medicine, April 18, 2013 **Only includes McLaren’s three hospitals in Southeast Michigan: McLaren Macomb, McLaren Oakland and Barbara Ann Karmanos Cancer Institute. Note: Community benefit dollars include net expense of financial assistance, uncollected Medicaid costs, health professions costs, community health expenses, research and cash and in-kind expenses. Source: IRS Form 990s, Schedule H, 2012.
providers are addressing the four priority areas, focusing mostly on serving vulnerable populations. “Our programs and staff are in the community, engaging residents and allowing easier access to services,” Priskorn said. For example, health navigators assist with sign-ups for the Healthy MichiPriskorn gan Medicaid program, and classes on healthy cooking and eating are offered through a partnership with Gleaners for Cooking Matters classes. “The one thing that was a surprise that every community focus group mentioned was that there was not enough awareness or coordination of services by the various organizations serving the communities,” Priskorn said.
St. Joseph Mercy Health System, Ann Arbor Anticipating the need to coordinate projects, the Washtenaw Health Initiative was formed in early 2011 by St. Joseph, University of Michigan Health System and the Washtenaw Health Department. “Before you serve people, you have to know them and what they need,” said Michael Miller, St. Joseph’s chief mission officer. “We also have to know others who are serving alongside them. Nobody can fix those health needs alone.” Miller After it completed its first community health needs assessment in 2012, St. Joseph decided to expand a weight management program for obese children and teens into Livingston County from Ann Arbor. So far, 70 percent of participants of Shapedown have reduced body mass index over the two-hour, 10-week program.
Other community investments included providing education for Medicaid and private insurance enrollment, improving access to prescription drugs in Livingston County and offering health education to the public. Next year, St. Joseph plans to publish a new three-year joint health needs assessment with the University of Michigan and public health agencies. “We will agree on an implementation plan to reduce duplication and jointly address needs,” Miller said.
Barbara Ann Karmanos Cancer Institute, Detroit Karmanos began its community health needs assessment process in 2010 by conducting focus groups to develop the survey, which was issued in 2012, said Laura Zubeck, R.N., director of patient and community education and volunteer serZubeck vices. “The information and documentation process requires identification of needs, reporting on how needs are addressed, along with describing how needs are not being addressed and why,” Zubeck said. While the survey did not uncover surprise needs, Karmanos found that prostate cancer education needed more attention as national data showed 233,000 new cases of prostate cancer each year, Zubeck said. Karmanos now is working with Wolverine Harley Davidson and Chrysler Corp. on various projects to offer prostate cancer symposiums, Ask the Doctor events for employees and a prostate advocacy training program to help train prostate cancer survivors, Zubeck said. Over the past year, Zubeck said education for prostate cancer screening has increased 47 percent.
Botsford Hospital, Farmington Hills Botsford’s community relations and finance departments work
very closely to develop and submit community benefit reports and 990 tax returns to the IRS, said Margo Gorchow, vice president of community relations and development. One of the biggest unmet needs identified by Botsford’s Community Advisory Council was access to services in the evening and weekends or timely appointments during the week, Gorchow said. Many people said the message they have been receiving is to visit emergency departments when their physician offices are closed, Gorchow said. “This reinforces the need to establish medical home models in primary care,” said Gorchow, noting that Botsford is working to implement the medical home model with some of its employed physicians to better serve patients. Botsford also collaborated with the Neighborhood House in Farmington Hills to help their clients find affordable health insurance either through Medicaid or the public health insurance exchange. “Perhaps for the first time, these individuals experienced receiving education and empathy about their challenges to obtaining health care insurance,” Gorchow said. “I observed people making plans to talk with one of the resources available that night or provided by the presenters.”
St. John Providence Health System, Warren Every three months, St. John’s community benefits steering committee meets to discuss community needs. St. John’s community market includes the counties of Wayne, Macomb, Oakland, Livingston and St. Clair with special consideration to the poor. Using focus groups, surveys and interviews, St. John officials develop the needs assessment. Priorities are developed, including increased emphasis on diabetes and obesity programs, with the St. John board and hospital advisory committees. No surprises were found because for several years St. John had been using a similar process developed by the Catholic Health Association. But despite comprehensive programs to reduce infant mortality and success in many areas over the past several years, St. John’s assessment determined that additional steps should be added, especially in Detroit, to reduce premature deaths and low-weight births. For example, St. John hospitals now refer more mothers to the outpatient breastfeeding clinic and mother nurture program.
Beaumont Health System, Royal Oak Administrators and physicians at Beaumont’s three hospitals several years ago began seeing large numbers of uninsured people with asthma and other conditions coming into their emergency departments from the Brightmoor neighborhood in northwest Detroit. During its community health asSee Next Page
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Health Care
Hospital tax breaks raise question: Does community benefit? BY JAY GREENE CRAIN’S DETROIT BUSINESS
Nonprofit hospitals in some parts of the country have faced backlash over the past three decades as to whether the amount of charitable and community benefits they provide justifies continuation of exemptions on a variety of taxes, including sales, property, income and revenue bonds. Several nonprofit hospitals in metro Chicago, Pittsburgh and other localities have lost property tax exemptions because they failed to provide enough community benefits. Lori Boyce, director of business tax services with Deloitte Tax LLP in Detroit, said the IRS has been requiring hospitals to report additional financial information since 2009 on Form 990’s Schedule H. She said Congress could use the IRS data on community benefits to evaluate whether hospitals should continue to be exempt from taxes that for-profit hospitals pay. “(Sen. Chuck) Grassley has always wanted tax-exempt hospitals to do more than for-profit hospitals” in providing community benefits, Boyce said. However, Boyce said health care reform — that projects to reduce the uninsured by 30 million through Medicaid expansion and the individual health insurance mandate — could reduce the amount of hospitals’ uncompensated care and remove the original reason for their tax exemptions. On the other hand, Boyce said, “hospitals also are getting less payment from Medicare and private payers and are spending more because of electronic health records.” Boyce added that because all hospitals face these business costs, including for-profit hospitals such as the Detroit Medical Center, regulators are looking to nonprofit hospitals to provide other community benefits. Still, Boyce said, some nonprofits “are struggling to survive. You take away tax exemptions and you will see a number of hospitals close. They couldn’t afford to stay open.” Margo Gorchow, vice president of community relations and development at Botsford Hospital, said national standards for community benefit could provide clarity for all nonprofit hospitals. “The challenge to nonprofits will be the implementation of nonreimbursable programs (and) activities in a time of declining mar-
From Previous Page
sessment review, Beaumont identified Brightmoor as a target area for health improvement, despite 90 percent of patients coming from Oakland County. In 2013, the Brightmoor Health Outreach Collaborative began to provide monthly health education and screening events. So far, more than 600 people have been served. Comprehensive free health, dental, legal, mental health, financial and other services are offered to the 4-square-mile neighborhood where 12,836 residents live with incomes less than $25,000 annually.
gins that have been used to support mission-based, governmentrequired community health outreach,” Gorchow said. A national benefit standard could backfire, Boyce said. “If the IRS or some states set a minimum standard of, say, 5 percent, than some hospitals might cut back to the minimum,” she said. “Some are doing more than 10 percent.” Even if the IRS doesn’t act, Boyce said the new Schedule H can be used by state and local governments to determine whether the organization has provided sufficient community benefit to support property or sales tax exemption.
Community benefits In a study of 1,800 nonprofit hospitals, the April 2013 issue of the New England Journal of Medicine found that, on average, nonprofits spent 7.5 percent of their operating expenses on community benefits during fiscal year 2009. Hospitals ranged from 20 percent to 1 percent. In Southeast Michigan, hospital systems ranged in community benefit provision from 4.5 percent for McLaren Healthcare Corp’s three metro Detroit hospitals to 13.6 percent for Ann Arbor-based University of Michigan Health System, followed closely by 12.2 percent for Henry Ford Health System in Detroit. (See chart, Page 12.) More than 85 percent of these expenditures were devoted to charity care and other patient care services and 10 percent to health profession education, research and contributions to community groups, the report said. Of the remaining communitybenefit expenditures, 5.3 percent were devoted to health improvements that include health screenings and public health education. Doug Clark, Henry Ford’s vice president of audit, compliance and tax services, said the five-hospital system increased its community benefits quite a bit in 2009 and 2010, mostly due to improved accounting. “The last two years (the Clark amount) has been relatively flat,” Clark said. “We spent the first cycle at doing an inventory of what the needs in
Anne Nearhood, coordinator of the Beaumont Health Community Coalition and the Brightmoor project, said the communityneeds assessment also helped Nearhood identify common health problems in Royal Oak, Grosse Pointe and Troy, where the system operates hospitals. “We learned the five focus factors — diabetes, drug-related admissions, obesity, asthma and sui-
the community are. But Clark said Henry Ford next year will develop a plan to align the needs found in the assessment with community improvement activities. “We will set plans on where to invest money into the community based on the highest needs,” said Clark, adding that an emphasis on community improvement activities will be paramount. “That is the standard (the IRS) should focus on the most — community heath improvement,” he said. “It is the hardest to get your arms around and there is no regulatory mandate to do it, but it is the area where we can make the biggest difference.” Michael Miller, chief mission officer for St. Joseph Mercy Health System, said St. Joseph, like most Catholic hospitals, complying with community benefit reporting requirements was easy because the federal rules were similar to ones developed by the Catholic Health Association years ago. “There are more expectations for all nonprofit hospitals across the industry,” he said. “A lot of (smaller hospitals) don’t have the internal capacity to do it, and they have to hire consultants to do market reviews, assessments and the report.” Miller said implementing the plan also requires financial resources. “You are on the hook to do something or explain why you are not,” he said. St. Joseph Mercy’s hospitals have taken a close look at the population served, the social demographics, poverty and lack of education with an eye toward prevention. “We either improve the health of the community and take the burden off the government or if we do not we are missing the opportunity to help people when they need it,” Miller said.
Some confusion cleared On Dec. 31, the IRS issued its final rule governing administration of the community health needs assessment, clearing up several areas of confusion for how hospitals should define their markets. For example, hospitals may not exclude “medically underserved, low-income, or minority populations who live in the geographic areas from which the hospital facility draws its patients,” according to the final IRS 501(r) regula-
cide — affected all areas,” she said. Beaumont is addressing these needs through prevention and wellness programs coordinated by the Beaumont-led coalition, she said. Although Beaumont spends about the same on community activities, the system is directing resources differently, Nearhood said. “Because of this formal community health assessment,” Nearhood said, “we looked at the whole health system and expanded our community engagement to determine what our focus areas should be.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
tion. “A hospital (also) must take into account all patients without regard to” payer source or whether they are eligible for hospital financial assistance policy. “Hospitals should define community by where patients come from. That is the starting point in my mind,” said Ann Hollenbeck, a health care attorney with Detroit-based Honigman Miller Schwartz and Cohn LLP. “The next question is: Who are we not serving in this Hollenbeck logical geographic area, and why aren’t we serving this population?” A recent report found hospitals have very different definitions of what constitutes their community, said the National Network of Public Health Institutes. Only 23 percent of hospitals look at geographic health disparities when defining the community they serve, the report said.
Beaumont Health System’s Anne Nearhood said that wasn’t the case when Beaumont reached outside its immediate market of Oakland County and into a poor Detroit neighborhood, where it was noticing many patients coming into its emergency department. Besides providing data that could help policymakers set national community benefit standards to justify nonprofits’ exemptions, one intention of the Affordable Care Act’s provision for community health needs assessments was to help direct care to impoverished populations. Nearhood and several other hospital executives agreed that hospitals need to do more to improve public health, preventive health and social services. Some experts believe if hospitals were to shift 20 percent of their community benefit expenditures to improve public health and preventive care, population health could improve dramatically. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene
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Health Care
American House buys W. Mich. independent living community BY KIRK PINHO CRAIN’S DETROIT BUSINESS
American House Senior Living Communities is continuing to expand with the purchase of a west Michigan independent living community and beginning construction on a new senior living community north of Naples, Fla. Bloomfield Hills-based American House — founded in 1979 and partowned by Southfield-based developer Redico LLC — purchased Lloyd’s Bayou in Spring Lake, Mich., which has 111 one- and two-bedroom independent living apartments. The deal closed last month, said Dale Watchowski, president and CEO of American House and president, COO and CEO of Redico. The purchase price was not disclosed. Lloyd’s Bayou was previously owned by The Jones Financial Cos.
CON Roundup The following are selected filings for a certificate of need submitted to the state Dec. 1-Jan. 14: Letters of intent 䡲 University of Michigan Health System, Ann Arbor: Renovate space on the second floor for future clinical use; $11.6 million. 䡲 Westwood Nursing Center, Detroit: Acquire 125-bed licensed nursing home by Rockwell Plus Management operating under a 15year lease; $5.8 million. Applications received Wellbridge of Romeo LLC, Romeo: Change bed capacity by moving 33 nursing home beds from Romeo Continuing Care; $2.4 million. 䡲 Holly Convalescent Center, Holly: Renovate existing space and move nursing home beds into new addition; $5.7 million.
䡲
Decisions
䡲 Henry Ford Continuing Care Cen-
ter-Belmont, Harper Woods: Acquire 151-bed nursing home from HFHS, Advantage Management Group; $3.9 million. Approved. 䡲 Henry Ford Continuing Care Center-Roseville: Acquire 169-bed nursing home from HFHS, Advantage Management Group; $3.9 million. Approved. (See story, Page 15.) 䡲 St. Joseph Mercy Oakland, Pontiac: Add a hybrid operating room and cardiac catheter lab, replace an operating room and add fifth cardiac catheter lab; $3.8 million. Conditionally approved. 䡲 Orthopaedic Surgical Institute, Rochester Hills: Acquire surgical outpatient facility with two operating rooms; $5.4 million. Approved. 䡲 Oakwood Hospital-Dearborn, Dearborn: Renovate clinical space, including emergency, radiation oncology and imaging support, and upgrade the emergency department; $27 million. Approved. — Natalie Broda
LLLP of St. Louis, Mo., according to CoStar Group Inc., a Washington, D.C.-based real estate information service, The rebranded American House Lloyd’s Bayou will undergo renovations that include adding an Anytime Café, expanding the community dining room, renovating the wellness center and adding a multipurpose room that can be used for things such as movies or religious services. A grand reopening is expected in spring 2016. In Estero, Fla., American House is developing American House Coconut Point, which will have 54 independent living, 76 assisted living and 64 memory care units. Construction began last month, and the community — which will also have an Anytime Café as well as a spa with salon, nail and massage
services, media room, library and fitness center — is expected to open in spring 2016. The acquisition and development will give American House 47 communities under ownership and management, Watchowski said. Forty-four are in Michigan. American House properties include independent living facilities; congregate care facilities, where residents are provided support services like food, housekeeping, laundry and transportation; memory care facilities; and hospice care facilities. In October, American House purchased Jenison-based Oak Crest Communities of Michigan, an owner of senior living communities, for an undisclosed price. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB
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Health Care Experience the Premium Lifestyle at the Palace
Advantage Management acquires two nursing homes from Henry Ford BY JAY GREENE CRAIN’S DETROIT BUSINESS
Advantage Management Group, a Southfield-based nursing home chain, has acquired two nursing homes with 320 beds from Henry Ford Health System in Southeast Michigan and an assisted living center in Port Huron owned by independent investors. The two Henry Ford long-term care facilities, which Advantage purchased for $12.8 million, are in Roseville and Harper Woods, said Reggie Hartsfield, Advantage’s COURTESY OF ADVANTAGE MANAGEMENT GROUP president and co-owner. The purWayne Health & Rehabilitation Center is among the facilities Advantage chase price also includes land costs. operates. “Our goal is to have a complete “Every hospital I know is thinkPolanski said the key to successcontinuum of care so we can touch on every aspect” of the post-acute ing about whether they want to in- ful integration between inpatient care industry, Hartsfield said. “We vest (millions of dollars) into post- acute care and post-acute care is want to continue to grow and add a acute care, an area which is not information sharing. typically their core strength,” “I worry when patients are discouple facilities each year.” charged because the level of acuity Advantage now owns seven Lewis said. Polanski said some health sys- we are seeing is much higher,” nursing homes and the Harrington Inn, the assisted living facility, in tems are looking at joint ventures, Polanski said. “We have programs Port Huron. Advantage paid $1.8 affiliations and sale of post-acute in place to track patients and we care operations. are getting back more information million for the 72-unit facility. While Henry than in the past. There has been Hartsfield said AdFord sold improved coordination.” vantage generated $53 its nursing Kelsey Hastings, R.N., Advanmillion in revenue homes, the sys- tage’s CEO and co-owner, said Adlast year and tem will con- vantage is investing substantial projects more tinue to oper- amounts of money in a systhan $78 milate its home temwide electronic health record lion this year health agency system, PointClickCare, for all its fawith the addiand other cilities. tional three post-acute care “We have gone from partial pafacilities. services, in- per systems to complete medical “We plan to cluding occu- records,” Hastings said. “We are expand in pational working on integrating (our elecphysical therhealth, infu- tronic records) with health inforapy and home sion, hospice mation exchanges. It will take health this and dialysis some time.” year,” he said. services, But Hastings said Advantage’s Advantage also opPolanski said. care transition nurses work very erates Northwest “There are a closely with hospital care transition Manor and Samaritan lot of things we nurses to ensure patients receive Manor in Detroit, Reggie Hartsfield, want to do, but seamless care when they move Southgate Manor, Advantage Management Group capital is tight through the health care system. Wayne Health & Rehaand the ap“We try to reduce duplication of bilitation Center and petite of the organization is over- medication, lab, radiology and Battle Creek Manor. John Polanski, CEO of Henry whelming,” he said. “It would take treatments,” she said. “When a paFord’s Community Care Services, hundreds of millions of dollars to tient is referred to us or admitted to our facility, said Henry Ford sold the homes be- build out a (long-term we flag that cause they did not fit in with the care) strategy” to match the breadth of organization, system’s future integration plan. whether it is Henry Ford inherited the nurs- the Ford system in Henry Ford,” ing homes years ago when it ac- Southeast Detroit Medical quired Cottage Hospital from the Michigan. In 2013, Center or St. former Bon Secours Health SysJohn Provitem. Henry Ford has since con- Henry Ford to dence Health verted Cottage into an ambulatory decided merge its System. care center. Hastings “It is difficult to develop a long- home health said nursing term care strategy if you only own product comwith homes are two facilities,” he said. “We don’t pany scored by hosneed to own everything to meet the McLaren pitals on how needs of patients. We can continue Health Care well they do to clinical care by finding partners Corp., Genesys Health on patient and alliances to support compre- and Binson’s Home Health Centers to form handoffs, hensive care.” Kelsey Hastings, quality and Because of health care reform, re- Hart Medical EquipAdvantage Management Group readmission duced reimbursement and in- ment Co. The move rates. creased public quality reporting, was necessitated last “We want to help hospitals remost multi-hospital systems are year when Medicare went to a making tough decisions on whether competitive bidding process to re- duce the (financial) penalties from unplanned readmissions,” said to invest in or divest nursing homes duce costs. Lewis said the development of Hastings, adding that increased or and other post-acute care services, including rehabilitation and home electronic health records and continued referrals are the payoff. Jay Greene: (313) 446-0325, health care, said Gary Lewis, man- health information exchanges reTwitter: aging director of Southfield-based duces the need for hospitals to own jgreene@crain.com. post-acute care facilities. @jaybgreene Cascade Partners.
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BUSINESS DIARY ACQUISITIONS & MERGERS McKenzie Bay International Ltd., Brighton, an energy technology holding company, announced its planned acquisition of Clean Green Energy LLC, dba CGE Energy, Brighton, an energy service provider. Websites: mckenzie bay.com, cgeenergy.com.
CONTRACTS Advanced Photonix Inc., Ann Arbor, a supplier of opto-electronic sensors, devices and instruments used by test and measurement, process control, medical, telecommunication and homeland security markets, announced that its subsidiary, Picometrix LLC, will supply high-speed optical receivers to a leading OEM telecom systems customer. Website: advancedphotonix.com. Hirschmann Solutions, Auburn Hills, a supplier of antenna and transceiver systems for machine-to-machine and automotive communications, is providing roof antennas to Road King Technologies Inc., Montreal, a manufacturer and distributor of fleet management/GPS tracking systems for the ready-mix concrete industry. Websites: hirschmann-solutions.com, rkt-gps.com. WSM International, St. Clair Shores, a provider of Web and data server migration services, announced its agreement with LeaseWeb USA Inc., to provide cloud, server and applicationenabled migrations for LeaseWeb customers. Additional services available to LeaseWeb customers through WSM include load testing, performance tuning, security services, server monitoring and management. Websites: wsmintl.com, leaseweb.com.
EXPANSIONS BullsEye Telecom Inc., Southfield, a national integrated telecommunications provider, has opened new sales centers in Houston and Atlanta. Website: bullseyetelecom.com. Citizen Yoga, Royal Oak, has opened a studio at 1224 Library St., Detroit. Telephone: (313) 502-5450. Website: citizenyogastudio.com. Gentherm Inc., Northville, a developer of thermal management technologies, opened an office in The Woodlands, Texas. Website: gentherm.com. Massage Envy Franchising LLC, Scottsdale, Ariz., has opened a franchise at 18768 West Road, Woodhaven. Website: massageenvy.com. Sixt SE, Pullach, Germany, and its U.S. operating unit, Sixt Rent a Car USA LLC, Fort Lauderdale, Fla., opened a rental car branch to serve customers traveling to Detroit Metropolitan Airport, Romulus. Website: sixt.com.
JOINT VENTURES CIC Contracting LLC, a company formed by TSP Services Inc., dba TSP Environmental, Redford Township; and IWC Services LLC, Detroit. The new company provides a full spectrum of environmental services. CIC Contracting is at 1500 Trombly St., Suite D, Detroit.
MOVES Special D Events, a provider of meeting and event planning services for businesses and nonprofit organizations nationwide, has moved from 1229 S. Washington Ave., Royal Oak, to 535 Woodward Heights, Ferndale. Website: specialdevents.com.
NAME CHANGES Mufflers and More, Walled Lake, a full-service auto repair shop, has changed its name to Kenny’s Lakes Area Auto Experts. Telephone: (248) 668-1200. Website: lakesareaauto.com.
NEW PRODUCTS Ally Financial Inc., Detroit, introduced interactive, Web-based training courses to the Performance Development Center, a platform that provides training for dealers. The new courses are designed to educate RV dealerships and their employees about fi-
PEOPLE
nancing topics and tools so they can process applications more quickly. Website: allydealertraining.com. Altair Engineering Inc., Troy, a provider of computer-aided engineering and computing software and services, launched HyperXtrude 2015, a new version of the simulation tool for extrusion processes, allowing engineers on the shop floor to validate die designs directly from computer-aided design models. Website: altair.com.
BASF Automotive Refinish North America, Southfield, launched its SmartColor online tool, which will provide collision repair centers and distributors speedy access to its online color retrieval system. Website: basfrefinish.com. BorgWarner Inc., Auburn Hills, is supplying its fifth-generation electrohydraulic actuated all-wheel-drive coupling for Lamborghini’s new Huracan LP610-4 sports car, successor to the Lamborghini Gallardo. BorgWarner also is supplying high-performance friction technology for Audi’s new dual-clutch transmission. Website: borgwarner.com. Language Arts & Science LLC, Royal Oak, a provider of multilingual translation and localization services for businesses internationally, has launched Pairaphrase, its first translation application. This new app allows users to translate internal documents and communications as well as websites in virtually every language and file format from a desktop or tablet. The company is working to launch Pairaphrase for iPhones and Androids. Websites: pairaphrase.com. languageartsandscience.com. Taubman Centers Inc., Bloomfield Hills, has launched the Mall at UTC iOS mobile shopping app, offering indoor navigation developed by Spreo LLC, New York City. The app is being piloted at The Mall at University Town Center, Sarasota, Fla., and is scheduled to roll out to Taubman properties across the U.S. during 2015. Meredith Xcelerated Marketing, New York City, created the free app. Website: taubman.com.
IN THE SPOTLIGHT
Townsend
ENTERTAINMENT Hayley Townsend to general manager, Sea Life Michigan aquarium, Auburn Hills, operated by
Merlin Entertainment plc, London, from general manager, Sea Life Arizona, Handel Tempe, Ariz. Also, Debbie Gibb to marketing manager from marketing manager, Flagstar Bank, Troy; and Lucy Handel to displays curator from displays curator, Sea Life Manchester, Manchester, England.
FINANCE Brian Vieaux to
Vieaux
INSURANCE tant vice president of loss control, Amerisure
Mutual Insurance FarmingCo.,
NEW SERVICES
The Michigan Business and Professional Association, Warren, with Basic HR Solutions, Portage, is offering its members the Basic Business Payroll Package, which provides business owners payroll processing and tax filing, poster compliance and human resource tools for background checks and drug testing. Websites: michbusiness.org, basiconline.com. Valuation Link LLC, Northville, a national appraisal management company, has launched a desktop appraisal report for home equity, default and portfolio/servicing loans. Telephone: (877) 390-5225. Website: valuationlink.com.
STARTUPS Peninsulas LLC, Royal Oak, an online, Michigan-themed apparel and lifestyle brand founded by Robert Jameson and Sherri Lawton-Jameson, offers apparel, housewares and stationery goods as well as items from other Michigan brands. Products are available at pop-up events and stores around Michigan. Website: shoppeninsulas.com.
national sales director for wholesale lending, Flagstar Bank, Troy, from senior vice president and head of home lending.
Jim Flynn to assis-
Continuity Programs Inc., Walled Lake, a customer relationship marketing firm, has launched a new website with a greater focus on marketing strategies for specific industries, such as real estate, mortgage and financial services, contractors, small business and enterprise. Website: continuityprograms.com. Medical Weight Loss Clinic, Southfield, a physician-administered weight loss program, announced the launch of its new customized corporate wellness program, available to all Southeast Michigan employers. The company also has been added as an official worksite wellness provider on the Michigan Health Worksite Environment Platform, a no-cost online resource available to state employers interested in improving the health of their workforce. Website: mwlc.com.
Gibb
Flynn
ton Hills, from loss control manager.
SME has named Jeffrey Krause as executive director and CEO. He will be mapping the strategic direction and leading day-today operations of the Dearbornbased manufacturing nonprofit. Prior to joining Krause SME, Krause was vice president of operations at Intraco, and he also held manufacturing, sales and strategy roles at Delphi and General Motors, including as the GM Foundation’s vice chairman. He replaces Wayne Frost, who was SME’s interim CEO and will take the role of board president for 2015. Krause, 56, has a bachelor’s degree in industrial administration from Kettering University and a master’s in business administration from Harvard Business School.
LAW Molly Crandall, to shareholder, Brooks Kushman PC, Southfield, from senior associate. Also to shareholder from associate: Erin Bowles, Christopher Smith, Brian Doughty, John Rondini and Martin Sultana. Also, Elizabeth Janda to chairwoman of the firm’s trademark practice. She remains shareholder. Eric Novetsky to partner, Jaffe Raitt Heuer & Weiss PC, Southfield, from associate. Kimberly Slaven to member, Dickinson Wright PLLC, Troy, from associate. Also, Doron Yitzchaki to member, Dickinson Wright PLLC, Ann Arbor, from associate.
MARKETING Jonathan Disegi to executive vice presi-
dent, global director of strategy and research, Commonwealth/McCann, Detroit, from global planning director, JWT, New York. Also, Iris Coldibelli to global strategy director, from strategic planning director for South America, Sao Paulo, Brazil; and Charlie Quirk to global strategy director, from associate director of strategy and planning, Possible Seattle, Seattle.
MEDIA Mike Wheeler to operations manager for Detroit radio stations WJR AM 760, WDVD FM 96.3, WDRQ FM 93.1 and WDRQ-HD2 , Cumulus Media Inc., Detroit, from program director, WJR.
NONPROFITS
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Jody DeMeyere to visitor services manager, Detroit River International Wildlife Refuge, managed by the U.S. Fish and Wildlife Service, Grosse Ile, from visitor services manager, Long Island National Wildlife Refuge, Shirley, N.Y. Heather Rindels to chief development officer, Starfish Family Services, Inkster, from interim chief development officer.
REAL ESTATE Elizabeth Kmetz to director of commercial
property
management,
Broder & Sachse Real Estate Services Inc., Birmingham, from general property manager, Hines Interests LP, Minneapolis. Also, Sarah Girand to vice president and director of multifamily division, from director of multi-family division.
CALENDAR WEDNESDAY
ters, president and CEO, Huntington Ingalls Industries. Westin Book Cadil-
JAN. 21
lac Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org. Inside the CEO Mind. 8-10 a.m. Jan. 29. Detroit Regional Chamber. Cynthia Pasky, CEO of Strategic Staffing Solutions, speaks at breakfast event. $25 chamber members, $50 nonmembers. Contact: Maggie Oldenburg, (313) 596-0482; email: moldenburg@ detroitchamber.com; website: detroit chamber.com/events. SphinxCon. 3-9 p.m. Jan. 30, 9 a.m.-6 p.m. Jan. 31 and 9 a.m.-noon Feb. 1. More than 40 arts leaders, including
Breakfast of Champions. 7:30-9 a.m. Leadership Oakland. Kent Snyder, financial adviser, Kent Financial Group, discusses “The Economics of Happiness.” MSU Management Education Center, Troy. $25 members, $36 nonmembers. Call Leadership Oakland for walk-in ticket availability. Contact: (248) 952-6880; email: info@leader shipoakland.com; website: leader shipoakland.com.
UPCOMING EVENTS The Exit Interview. 11:30 a.m.-1:30 p.m. Jan. 27. Detroit Economic Club. Kevyn Orr, former emergency manager, city of Detroit, is the speaker. Cobo Center. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org.
Executive to Executive Series No. 2: Achieving Outcomes Through Continuous Improvement. 8-10 a.m. Jan. 28. Plante Moran PLLC. The speaker is Samuel Flanders, M.D., executive vice president of quality, safety and clinical effectiveness, Beaumont Health. Lawrence Technological University science building atrium, Southfield. $30, or free for LTU students, faculty and alumni. Contact: Donna Kress, (248) 204-3054; email: dkress@ltu.edu; website: ltu.edu/management/execu tivetoexecutive.asp. Detroit Economic Club Presents. 11:30 a.m.-1:30 p.m. Jan. 28. With Mike Pet-
National Endowment for the Arts Chairman Jane Chu, plus hundreds of art professionals and educators are slated to attend. Westin Book Cadillac Detroit. $35 for students, $50 for a day pass or $100 for a full pass through Jan. 23; after that, the price for a three-day pass is $150. Contact: (313) 877-9100; email: abigayl@sphinx music.org; website: sphinxcon.org.
Automotive Industry Outlook: Opportunities & Risks. 5-8 p.m. Jan. 29. Marketing & Sales Executives of Detroit. Mike Wall, director of automotive analysis for IHS Automotive, speaks on IHS’s outlook for 2015 and beyond at this dinner and networking event. Management Education Center, Troy. $45 members, $65 nonmembers. Contact: (248) 643-6590; website: msedetroit.org.
Grosse Pointe Chamber of Commerce 10th Annual Membership Dinner and Pointer of Distinction Awards. 5:30-8:30
p.m. Jan. 29. Individuals and businesses are honored for excellence. Country Club of Detroit, Grosse Pointe Farms. $65. Contact: (313) 881-4722; website: grossepointechamber.com. Preview of M1 Concourse. 6-8:30 p.m. Jan. 29. Asian Pacific American Chamber of Commerce. This networking event includes a behind-the-scenes preview of the $40 million private car garage, 1.5-mile race track and autothemed retail destination. Suburban Exotic Motor Cars of Michigan Showroom, Troy. $20 for members and strategic partners, or $35 to join and attend. Contact: Erin Mclin, (248) 4305855; email: erin@apacc.net; website: apacc.net. The State of Manufacturing 2015. 11:30 a.m.-1:30 p.m. Feb. 5. Detroit Economic Club. Speaker is Jay Timmons, president and CEO, National Association of Manufacturers. Detroit Marriott at the Renaissance Center, Detroit. $45 DEC members, $55 guests of members, $75 others. Contact: (313) 963-8547; email: info@econclub.org; website: econclub.org. The 2014-15 Detroit Red Wings. 11:30 a.m.-1:30 p.m. Feb. 9. Detroit Economic Club. Detroit Red Wings head coach Mike Babcock, and Ken Holland, executive vice president and general manager, are scheduled to speak. MotorCity Casino Hotel, Detroit. Open to board, life and gold members only. $45 DEC members, $55 guests of members. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org.
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Strathmore redevelopment: Vintage look, modern amenities use residential buildings,” said Atkinson, who grew up in Detroit. “For years, I did affordable housThe abandoned Strathmore Ho- ing because that’s all that was betel towers over Alexandrine ing built, but now it’s market-rate Street, gusts of icy winter wind apartments and condos. Detroit is curling through eight floors of just on fire right now.” open, empty windows. Pedestrians He faces a big project because walk past the ground floor, which the entire interior is scrapped, but is covered by the iconic street art that also offers room for creativity created by the Hygienic Dress because the interior is “scrapped League featuring men wearing to the max.” suits and gas masks. HAA and MBS are attempting to The view has been part of the preserve all the historic detail and landscape of Midtown for the past plasterwork that they can, but will 11 years. also be attentive to serving modIt will all change in the next 30 ern lifestyles. days, when construction on a $28 “It’s going to be contemporary million rehabilitation of the build- with a lot of historic character,” ing is expected to begin. Atkinson said. Midtown Detroit Inc. and St. LouisDon’t expect that to mean exbased McCormack Baron Salazar are posed brick and a loft-like interior. developing the former hotel, built Because the project is being fiin 1924. It will feature 129 apartnanced, in part, with historic tax ments and 2,000 square feet of comcredits, HAA has to keep its demercial retail space. The units will signs in line with historic use. be one and two bedrooms, and 40 “We are being percent will be recareful not to served for lowerchange the charincome families acter of the while the remainspaces,” he said. ing 60 percent will “We can’t strip lease at market the plaster off and rate. expose the brick “The redevelopbecause it’s not ment of a building the historic naas significant as ture.” the Strathmore is Doug Atkinson, Atkinson a great boost for Hamilton Anderson Associates turned to the ManDetroit, no matter how you look at it,” said Mayor ning Brothers Historic Photographic Mike Duggan in a news release. Collection to conduct research on “With its significant number of af- the building, which is how they fordable housing units, the Strath- discovered the “Strathmore” more helps to make even a hot name. The Manning brothers’ commerproperty like Midtown accessible cial photography business was to an average Detroit resident.” MBS tapped Detroit-based archi- started in 1906 and run as a family tecture firm Hamilton Anderson and business until 1989. Today the colAssociates to handle the design lection, which is housed in Detroit, work. And that team is being led is open by appointment and feaby Doug Atkinson, a senior associ- tures more than 250,000 images. “Virtually every office building, ate who has been with HAA for 18 theater, private club, store and mayears. “I’ve always worked on mixed- jor industry in the city of Detroit is
BY AMY HAIMERL
CRAIN’S DETROIT BUSINESS
We are being “careful not to
change the character of the spaces.
”
MIDTOWN DETROIT INC
The Strathmore Hotel, 70 W. Alexandrine St., as it was, as it is and as it will be.
captured,” says the collection’s website. The new Strathmore units will have hardwood floors and stone countertops typical of modern rentals. But one piece that Atkinson is excited about is restoring the building’s atrium. “The defining character of this building is that it’s a doughnutshape building,” he said. “There is a courtyard in the center of the building with this big glass skylight. That will be a garden room and community space. It will be a cool vintage 1920s garden lobby.” Retail on the ground floor is expected to include a fitness center, a dog groomer and other boutiques. Atkinson cited the Auburn development on Cass Avenue as an example of the retail mix. Cass Corridog, Source Booksellers and Patrick Thompson Design, among others, call that spot home. The Strathmore won’t feature on-site parking, but MBS has cut deals with or acquired neighboring parking lots for residents’ use. Being less than a block from the new M-1 Rail project also helped convince funders that having on-site parking wasn’t a deterrent to the deal. “That’s the momentum that pushed the project over the edge,”
Atkinson said. “Funders see that you’re close to public transportation, so you don’t need a car and a half for each unit.” Financing the $28 million deal are the U.S. Department of Housing and Urban Development, Michigan State Housing Development Authority, Michigan Economic Development Corp., city of Detroit, U.S. Bank, In-
vest Detroit, Detroit Development Fund, Enterprise Community Partners, Ford Foundation, The Kresge Foundation, Hudson-Webber Foundation and Midtown Detroit. Construction is expected to be completed in 18 months. Amy Haimerl: (313) 446-0416, ahaimerl@crain.com. Twitter: @haimerlad
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The 164,000-square-foot Marquette Building at West Congress Street and Washington Boulevard sold to a group of undisclosed outof-state investors. The purchasing entity, 243 Congress LLC, paid $5.775 million for the building in a deal that closed last month, said Bunia Parker, principal of Detroit-based Summit Commercial LLC, which represented the buyer. Renovations are planned and the building will remain as office space, but exactly what the renovations will include, how much they will cost and when they will be complete has not yet been determined, Parker said. The building, across the street from Cobo Center, is less than 5 percent occupied. “Because of the large absorption of space in the CBD (central business district) recently, this building is uniquely positioned because it can house large tenants in a con-
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tiguous space up to (164,000) square feet — something that cannot be easily found,” Parker said in an email to Crain’s. It was a cash sale, said Chuck
Mady, CEO of Detroit-based Exclusive Realty, which represented 400 Monroe Associates, the building seller that is controlled by the estate of the late Greektown CasinoHotel developer Ted Gatzaros. The average rent in the building, which was built in 1899, is $15 per square foot per year, according to CoStar Group Inc., a Washington, D.C.-based real estate information service. Chicago-based Triton Real Estate Partners LLC had the building under contract in the summer but decided not to buy it, according to A.J. Weiner, executive vice president in the Detroit office of Jones Lang LaSalle, which was representing Triton. The company had planned a conversion into modern loft-style office space for creative and tech companies, similar to Dan Gilbert’s 46,000-square-foot Madison Building at 1555 Broadway St. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB
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CRAIN’S DETROIT BUSINESS
JOA: Clock ticking on future of pact preserving 2-newspaper town ■ From Page 1
Three years is “an eternity now in the newspaper business,” said industry analyst Ken Doctor. In September, Alden decided to “evaluate strategic options” in what has become an effort to sell its 75 daily and 160 weekly publications that operate under a company called Digital First Media. Digital First executives are assembling bids, according to an industry report by Doctor published Thursday by the Nieman Journalism Lab at Harvard University. It’s unknown when any sale decision might be made, but Doctor said two or three bids are for all of the Digital First newspapers. “They want a single buy if they can get it,” he said. Doctor cautioned that a buyer could then opt to resell some of the papers individually or in geographic clusters. Meanwhile, Gannett announced last year it would spin off its newspapers into a separate, debt-free public company (still called Gannett) from its much more profitable digital and broadcast holdings, which jointly will take a to-be-determined name.
The newspaper spinoff is expected to happen this year. “What we likely will see is that the combined worth of these companies go up,” Doctor said. “I would bet that the value of the new digital-broadcast company matches the value of the entire company value presplit.” Gannett could hang onto the new newspaper company or sell it, Doctor said. “It has some value. It can be managed. It’s not an attractive asset. There could be buyers. KENNY CORBIN I could see it go either Like daily newspapers throughout the country, Detroit’s dailies have suffered circulation and way,” he said. A message seeking print advertising losses accelerated by the rise of news and advertising on websites and, in comment was left for recent years especially, mobile devices including smartphones. Jeremy Gaines, Ganthe company “are in a position” to cludes language that outlines ownnett’s vice president of corporate answer questions. ership changes: Gannett, as genercommunications, al partner with a 95 percent ownerDavid Bralow, general counsel ship stake in the partnership, must and senior vice president for Digisign off on any sale of a limited tal First Media, said neither he nor If a sale does occur, the JOA in- partner’s stake in the JOA. The JOA language limits Gannett’s ability to block a sale to whether the buyer has “experience in and a good reputation within the publishing industry.” Gannett doesn’t need permission from The News’ owner for a sale of the Free Press. The JOA expires in December 2025, but it automatically will renew for five years if neither party opts out. The agreement supplanted a 100year JOA formed by Gannett and now-defunct Knight Ridder Inc., the former Freep owner, that took effect in 1989.
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There doesn’t appear to be much of a business case for the owner of The Detroit News to opt out of the JOA, especially because the partnership reimburses all News newsroom salaries and expenses monthly under terms of the deal. Separate newspapers would require costly re-creation of advertising, printing, and delivery infrastructure. The cost and complexity of exiting a JOA makes it unlikely that a new owner of The News would opt out, Doctor said. “It’s so entangled with that JOA that I think whoever buys it just keeps it,” he said. “The new owners would look at not having separate entities but combined entities. They would adopt rather than overthrow that JOA structure.” And the trend across the newspaper industry has been to share functions where possible to save money, he said. “The newspaper industry is seeking as much in consolidated efficiencies as it can get in its legacy printing functions. They’re looking at every way that they can to save money,” he said. An incentive for the owner of The News to remain part of a JOA can be found in a series of annual payments by the partnership that began at $5 million in 2006. The payments decreased in size every few years, and the 2009 JOA revi-
sion further reduced the overall amount paid, by about $6 million, to a total of $45 million by 2025. The partnership declined to answer questions about the payments. A new owner would receive such payments and any profits — if there are any. Without such payments, The News could be closed by new owners. “Whoever is the owner then would shut it down if it’s a continuing loss and get out of it,” Doctor said. “By buying it, you’re not just taking a lagging property; you’re accepting an annual loss.” As majority partner, Gannett could view opting out of the JOA as a way to save money because it wouldn’t have to pay The News’ expenses or share any theoretical profits. However, partnership executives over the years have said advertisers prefer the option of two newspapers — The News traditionally caters on its opinion pages to conservatives, while the Free Press leans left — and that they generate more ad revenue than a single newspaper would. The partnership does not comment on its finances, or speculate on future actions or operations, said Alan Lenhoff, director of project management and corporate communications for Michigan.com. A source familiar with the finances of the partnership said it continued to lose money through 2014, continuing a trend that executives have publicly acknowledged previously. David Hunke, Free Press publisher and partnership CEO until moving to Gannett’s USA Today in 2009, said publicly that year that the joint newspaper operation was losing money. Then-partnership spokesman Rich HarshbargHunke er in August 2010 said it was “working toward profitability” but was still losing money. The JOA defines losses thus: “For purposes of this agreement, newspaper operating losses for a year shall mean the publication of the Detroit Free Press and The Detroit News has resulted in an aggregate operating loss for such year determined in accordance with generally accepted accounting principles, provided that all revenues generated and expenses incurred during such year which related to commercial printing (including, but not limited to, commercial printing of other newspapers), shall be excluded from the calculation of newspaper operating losses.” Detroit’s newspapers have sustained the industry-wide circulation and print advertising losses that have swept print media since the rise of online and mobile delivery of news and display and classified advertising. In the most recent estimate available, total print advertising revenue for newspapers nationwide in 2013 fell to $17 billion, See Next Page
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January 19, 2015
Detroit’s dailies have endured many changes in ownership over years Detroit’s two daily newspapers have changed ownership hands several times in recent decades. McLean, Va.-based Gannett Co. Inc. bought The Detroit News and other newspapers and several television stations for $717 million in 1986 from the Detroit-based Evening News Association. In 2005, Gannett bought the Detroit Free Press for $262 million from San Jose, Calif.-based Knight Ridder Inc. and sold The Detroit News for $25 million in stock to Denver-based MediaNews Group Inc., now a unit of New York Citybased Digital First Media owned by hedge fund Alden Global Capital. Gannett also owns Observer & Eccentric Newspapers; the daily newspapers in Lansing, Battle Creek and Port Huron, which became part of the new print company; and Grand Rapids-based ABC affiliate WZZM-TV Channel 13, which will be part of the unnamed new company. The Free Press was moved to Gannett’s publishing division, a transition that began in April 2012. Previously, the Freep was in a separate division along with USA Today. The move had immediate job ramifications: Previously, when cost-cutting directives came down from corporate to trim staff and expenses within the newspaper division, the Free Press and USA Today were exempt. That’s not to say the paper didn’t have orders to cut costs. Nationally, Gannett owns 46 TV stations, USA Today and 81 other newspapers and websites such as CareerBuilder. It reported $314 million in operating income in 2013 on $3.5 billion in revenue for
ated Media Inc., also based in Denver, emerged from bankruptcy. Digital First Media was formed in September 2010. It manages the MediaNews Group and former Journal Register Co. newspapers, which were merged under the Digital First Media name. Alden, which specializes in distressed properties and has owned stakes in several newspaper chains, bought the Yardley, Pa.-based Journal Register outright for an BLOOMBERG undisclosed amount in July A reporter reads a release announcing 2011, took it private, and in Gannett Co.’s purchase of the Detroit Free September 2012 put the Press from Knight Ridder and MediaNews chain into Chapter 11 bankGroup’s taking ownership of The Detroit News ruptcy for the second time from Gannett in 2005. since 2009. The News wasn’t its print segment. part of the bankruptcy. Overall, Gannett’s 2013 revenue The Journal Register chain inwas $5.1 billion with $739 million cluded the Oakland Press in Pontiin operating income. ac, Macomb Daily in Mt. Clemens Its 2013 annual report, the most and Royal Oak’s Daily Tribune recent available, shows digital rev- (both now based in Clinton Townenue and profit were $748 million ship), and Mt. Pleasant Morning and $128 million, respectively, Sun, along with dozens of nondaily while broadcast revenue was $835 publications in its Voice and Hermillion with $362 million in operat- itage chains. ing profit, also both up from 2012. In 2013, the MediaNews and JourThe Detroit News has a more nal Register publications were complex ownership structure, but merged under the Digital First it ultimately is Alden Global Capi- name, which linked newspapers in tal, founded in 2007 by so-called 10 states into a single operating unit. vulture investor Randall Smith. He The Alden name may sound fadoes not give interviews, and the miliar locally because of a threatnewspapers’ finances are private. ened proxy fight in 2011 between it Alden in March 2010 acquired a and Van Buren Township-based Vislarge, non-controlling stake in teon Corp. The former parts affiliate Denver-based MediaNews Group of Ford Motor Co. eventually ceded Inc., then owner of The Detroit two seats on its board to the fund. News, as MediaNews parent Affili— Bill Shea
From Previous Page
opened in 1917. Additionally, the partnership last year took Michigan.com as an assumed name to market Gannett’s Michigan properties for advertising purposes. Under a federal law from the 1970s aimed at preserving newspapers, newspaper owners have to inform the U.S. Justice Department when significantly changing or terminating a JOA.
down from a 2005 peak of $47.4 billion, according to data from the Pew Research Center’s Project for Excellence in Journalism. By contrast, newspaper digital revenue was just $3.4 billion in 2013, up slightly from $3.3 billion the year prior. In recent years, the Freep has reduced head count through rounds of buyouts, early-retirement incentives and layoffs, and it has required staff to take unpaid furloughs and pay freezes. Both papers and the partnership reduced head count by 260 through buyouts between October 2007 and July 2008. An additional 125 jobs were collectively eliminated in June 2010. There have been dribbles of job cuts since then, along with corporate-mandated newsroom organizational changes by the Free Press and a focus on mobile and online by both newspapers. In another major move to reduce expenses, the newspapers relocated last year to a smaller office in the former Federal Reserve building at 160 W. Fort St. owned by Detroit real estate entrepreneur Dan Gilbert. He also owns the newspapers’ former home at 615 W. Lafayette Blvd., which The News
JOA: A failed experiment The history of newspaper joint operating agreements has been one of failure, said Rick Edmonds, a media business analyst with nonprofit Poynter Institute in St. Edmonds Petersburg, Fla. “Really, in most any place it actually damages both newspapers,” he said. “There has been strong financial pressure to dissolve them.” There are believed to be six JOAs still active, and more than 20 that have seen them terminated, often with one paper going out of business or becoming an onlineonly news outlet.
Such an example is Seattle, where the Post-Intelligencer became a purely digital newspaper in 2009, two years after a legal settlement ended a 26-year JOA with the Seattle Times (which remains a print daily). “Neither of those papers was profitable because they had to split the business,” Edmonds said. Other major markets that saw JOAs end include Denver, Miami, Cincinnati, Pittsburgh, San Francisco, St. Louis and Columbus. The intent of JOAs was to maintain two different editorial voices in a city, he said, but the business model hasn’t worked because savings realized from consolidations doesn’t offset competition, Edmonds said. “In practice, even with these advantages, they continue to compete with each other for advertising and readers,” he said. “It just didn’t work. One just keeps withering away. It made most of them untenable over time.” That’s the same scenario in Detroit, Edmonds said. “It kind of looked like this was going to be a license to print money, but it hasn’t been. It’s been a disappointment,” he said. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19
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Google: Area suppliers ■ From Page 3
space for the project, Maureen amongst auto interests to make Crowley, director of corporate progress on automated vehicles.” communications, told Crain’s. Mercedes-Benz AG unveiled its “We’ve built out a whole area self-driving luxury prototype earspecifically for this program,” lier this month at the Consumer Crowley said. “It’s been a great Electronics Show in Las Vegas. opportunity for us to expand upon Dieter Zetsche, CEO of Merour assembly capabilities.” cedes parent Daimler AG, told reCrowley said Roush has made porters that self-driving cars are new hires in supply chain support the future of automotive. and assembly, but declined to re“Cars will turn into mobile veal specific numbers. Google is homes in the very best sense of maintaining a tight lid on the pro- the word,” Zetsche said, accordject with non-disclosure agree- ing to Automotive News. “They ments. will be exclusive cocoons on In July, the Michigan Strategic wheels that enable people to do exFund awarded Roush a $1 million actly what they want or need to performance-based grant to ex- do. This is the redefinition of aupand space at multiple sites in tomotive luxury.” Livonia and at its Allen Park facilAudi AG also allowed reporters ity. The project was expected to to ride in an autonomous A7 create 210 new jobs, but did not sedan from Silicon Valley to Las specifically mention the Google Vegas for CES earlier this month. project. Google plans to deploy the test Roush is also “piggybacking” fleet of Roush-built prototypes two additional assembly pro- this year, yet no timeline has been grams, leveraging what it’s learn- disclosed. On closed courses, ing from the Google project, Urmson told Automotive News, Crowley said. She declined to dis- the cars will be able to operate cuss the additional projects, cit- without a steering wheel, brakes ing non-disclosure agreements. or accelerator — and drive themContinental and Bosch have selves without a human passenbeen developing autonomous car ger. technologies and prototypes as Due to California regulations, part of their own collision avoid- controls will be added and a test ance and other safety systems. driver will be behind the wheel Bosch will supply the electric when the car travels on public powertrain system for the Google roads. car, including the electric motor Locally, autonomous- and conand power electronics, Linda nected-car testing is in full swing. Beckmeyer, manager of public University of Michigan is boosting and press relations, confirmed in its Safety Pilot program for conan email to nected cars, which tracks interacCrain’s. It will tions between vehicles, to 9,000 vealso supply the hicles and finishing construction long-range of a $6.5 million test track for auradar sensor tonomous vehicles, a next-wave used to guide technology for connected cars. autonomous Detroit-based Walbridge Developsystems for the ment LLC, a subsidiary of Walbridge vehicle. Group Inc., entered into an agreeBeckmeyer ment for redevelopment of General declined to disMotors Co.’s former Willow Run Salman cuss whether Powertrain Plant in September the supplier has made hires for 2013. the project. The plan is to redevelop a maSamir Salman, CEO of Conti- jority of the 332-acre site into a nental Automotive Systems, told connected vehicle research cenAutomotive News that his compa- ter. Walbridge will own and operny will help design the Google ate the shared research and develfleet’s brakes, tires, opment center, body controllers which will be used and interior elecby automakers, suptronics. pliers and research “We’ve been institutions. working with them Its completion for a while,” Saldate remains unman said. “Now known. we’ll concentrate on Wallace hopes the (helping Google) to growing test bed and build the protoinnovation will lead types. That’s our foto more local unveilcus.” ings of these techRoseville-based nologies at the North RCO Engineering Richard Wallace, Center for American International Inc. is also providAuto Show. Automotive Research ing services for the “While Google Google car. was an early motivator here, the Richard Wallace, director of auto companies clearly have transportation systems analysis adopted CES as an important at the Ann Arbor-based Center for venue, and most of the big news I Automotive Research, said the see from CES on automated vehiGoogle project will further estab- cles was about traditional aulish Southeast Michigan as the in- tomakers,” he said. “I would exnovation hub for what’s possible pect this trend to continue, but I in automotive. also hope we will start to see some “On some level, I think Google of these automated driving reuses local suppliers here because veals at the NAIAS.” here is where you find the needed Dustin Walsh: (313) 446-6042, capabilities and expertise,” Wal- dwalsh@crain.com. Twitter: lace said. “Clearly, the race is on @dustinpwalsh
Here is “ where you find the needed capabilities and expertise.
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Design: New council wants to solidify Michigan as creative hub ■ From Page 3
The design community is a business attractor, he said. “Great businesses always have great design, whether that’s their product ... packaging or their marketing.” The MEDC tapped Sundberg-Ferar Inc., one of the oldest industrial design firms in the country, to lead the newly launched council. President Curt Bailey, Vice President Jeff DeBoer and Research Manager Michelle Zurowick all hold seats. Matt Clayson, director of Detroit Creative Corridor Center, has served as an adviser in helping pull the council together. Detroit is one of the few places in the world you can design, engineer, mass produce and mass market a product, he said. “But at the same time as we’ve lived and breathed it so much over the past century, we’ve taken it for granted. It is so integrated into our manufacturing and product development DNA.” Susan Drescher, product management and human machine interface expert for Continental Automotive Systems Inc. said the need is to secure Michigan as the hub for industrial design. “Overall, it’s an industry need
DESIGN COUNCIL MEMBERS 䡲 Shooshin Choi, provost, vice president for academic affairs and professor of design, College for Creative Studies 䡲 Ralph Gilles, senior vice president, product design, FCA US LLC (formerly Chrysler) 䡲 Nate Young, vice president, global innovation, Newell Rubbermaid Inc. 䡲 Pat Schiavone, global vice president of design, Whirlpool Corp. 䡲 Gunalan Nadarajan, dean, Stamps School of Art and Design, University of Michigan 䡲 Susan Drescher, product management and human machine interface expert, Continental Automotive Systems Inc. 䡲 Jeevak Badve, national board member, Industrial Designers Society of America for all automotive, but also for anyone manufacturing a product,” Drescher said. “Just like New York is known for fashion designers, we want to be known for the vast industrial designers we have here and we want to attract more.” Drescher also said industrial design firms like Walled Lake-based
Sundberg-Ferar Inc. would benefit from additional talent. Among the council’s first orders of business will be the establishment of a statewide award to an individual or company for improving the human condition through great product design. The council plans to hold its first design competition, Design Michigan Week, in 2016, as one means of raising awareness of the critical mass of industrial designers in the state. Michigan is already home to the largest number of industrial or product designers in the country, according to U.S. Department of Labor statistics. The state employed 4,020 industrial designers as of May 2013. That represents one designer per 1,000 jobs in the state in 2012, 4.67 times the U.S. average. California ranked second with 3,660 industrial designers. That number equates to 0.25 designers per 1,000 jobs there, 1.16 times the national average. Still, in Michigan most are captive within companies, DeBoer said. Companies in industries like automotive, tooling, furniture, appliance, electronics and consumer
goods industries come to CCS all the time to recruit designers and interns, Choi said. Also on the new design council’s agenda for the coming year is a plan to look at establishing a “design mecca” or zone of 1-10 square miles in Detroit as a place multidisciplinary design creative can work and collaborate, DeBoer said. In identifying a spot for the zone — which could be dubbed “District 313” in Detroit and spawn a “District 616” in Western Michigan — “we’re going to work with the state … they have a line of sight to developers and corporate sponsors who might want to participate,” DeBoer said.
Not first time The new council’s proposal for a new design zone in Detroit is the latest effort to more strongly brand the region’s and state’s design talent, but it’s not the first. The Detroit Creative Corridor Center has been working for years to knit together various creative clusters in a seven-mile area of Detroit. And last summer, Detroit Mayor Mike Duggan announced a designated “innovation district” for the
area stretching up Woodward Avenue from the riverfront to New Center. The intent, Duggan said at the time, was to create an anchor to support neighborhood business incubators across the city. It’s still early, but it’s possible the state-sponsored design zone in Detroit could align with earlier efforts, Kerrigan said. On Michigan’s west side, Design West Michigan has been doing work similar to DC3. And the creative teams of six Michigan companies are working from shared space at Grid70 in downtown Grand Rapids. So named for its 70 Ionia street address, the space houses the design talent of: Wolverine World Wide Inc., Meijer Inc., Amway Corp., Steelcase Inc., Pennant Health Alliance and Process Automation Concepts. The disparate efforts to cluster creative talent together strengthen the state’s overall reputation for design talent, Clayson said. “You need to see a lot of this activity from different arenas to solidify this kind of global understanding that design is big in Michigan.” Sherri Welch: (313) 446-1694, swelch@crain.com. Twitter: @sherriwelch
Macomb: Manufacturing jobs exist, but the skills have changed ■ From Page 3
There are jobs in manufacturing in the automotive, defense and medical industries in Macomb, he said. “For people thinking those jobs aren’t out there, that’s just Hackel not true. Manufacturing here in Macomb County is alive and well.”
Pockets of growth Only three job sectors have more jobs in them than they did in 2000: information (1,698 to 5,963 last year); education services (1,349 to 2,332); and health care and social assistance (25,509 to 27,129),
according to Jacobs, who has taught economics, political science and social science at MCC. Statewide, automotive industry employment has steadily improved since 2009, when there was a low of 116,300 jobs, according to Jacobs. It has improved to 164,200 jobs this year. In 1999, there were 316,300 automotive jobs in Michigan. Macomb’s unemployment rate has also been improving, falling from 12.4 percent in November 2010 to 6.8 percent last November. To continue improving employment rates, local leaders need to respond to demographic trends, Jacobs said. Many of the newest residents are lower-income and new immigrants, so new programs are being launched to support entrepreneurs and diversity/inclusion. In addition, Detroit’s emergence
Law firm Garan Lucow plans move to Crain HQ Law firm Garan Lucow Miller PC will move its Detroit office into the Crain Communications Inc. headquarters building by June, after finalizing a lease deal on Friday. The law firm, which houses about half of its nearly 90 attorneys in the city, will move out of space it leases at 1000 Woodbridge St. in Detroit’s Rivertown district after more than 30 years. It will fill about 33,000 square feet in the Crain building at 1155 Gratiot Ave., said firm executive committee Chairman John Gillooly. “With the footprint we’ll have in the Crain’s building, we’ll have access to some high-tech new office space,” he said. “It’s an upgrade to
our physical plant, and it will enable us to install a high-tech instructive classroom and space to have Webinars and connect digitally with clients across the country. This will really take that part of our business model to another level.” The move is expected to bring the Crain building to nearly full occupancy for the first time since Blue Cross Blue Shield of Michigan consolidated employees in the Renaissance Center about three years ago. Founded in 1948, Garan Lucow is perhaps best known for its practices in automotive negligence defense, civil litigation defense and municipal law. It has additional offices in Troy, Ann Arbor, Grand
Blanc, Lansing, Port Huron, Traverse City, Grand Rapids, Marquette and Merrillville, Ind., that are unaffected by the move. — Chad Halcom
BANKRUPTCIES The following business filed for protection in U.S. Bankruptcy Court in Detroit Jan. 9-15. Under Chapter 7, a company files for total liquidation. Belleville Milling Co. Inc., 101 Davis St., Belleville, voluntary Chapter 7. Assets and liabilities not available. — Dustin Walsh
from Chapter 9 bankruptcy changes the relationship between the city and suburbs in a positive way and creates opportunity for Macomb, Jacobs said.
Economic development Construction jobs, tied to new economic development and new home construction, have followed a similar trend line. In the boom times of 2000, there were 17,937 construction jobs in Macomb County, a figure that dropped to 8,695 in 2010 and climbed to 11,129 last year. In 2010, there were 787 residential building permits for apartment buildings, single-family homes and condominiums issued in Macomb; last year, there were 1,680. Jacobs said he believes that while the residential housing mar-
ket will continue its recovery this year, it will be inhibited by lack of income growth. Median annual household income has dropped from $71,797 in 1999 to $52,978 in 2013, a 26.2 percent fall. Jacobs said some of that decline is related to lower-income people and families moving into Macomb County. Wild cards in the state and national economies are other reasons Macomb is on a slow-mode recovery. Some of those factors include road funding, low energy costs and low inflation. “We are moving up — and slowly, unfortunately,” Jacobs said. “We have a U-shaped recovery, although we wish it was V-shaped.” Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB
CRAIN’S SEEKS NOMINEES FOR 20 IN THEIR 20S Do you know a 20-something who is someone to watch? Crain’s 20 in their 20s recognition program seeks young professionals who are making their marks in the region. Candidates are not limited to any particular field or activity but include up-and-comers who are making waves as young professionals within a company, have shown success or originality as entrepreneurs, or have made local impacts in some other demonstrable way. Besides the corporate world, candidates are considered from creative industries, nonprofits and social entrepreneurship arenas. Winners will be profiled in the June 1 edition and honored at a future awards event. Nominees must be 29 or younger before June 1. Nominations are due Feb. 13. To fill out the form, visit www.crainsdetroit.com/nominate. Questions? Contact Amy Haimerl at ahaimerl@crain.com or (313) 4460416.
in their
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the types of jobs that existed before.” Jacobs said plenty of automotive jobs still exist in Macomb at places like the GM Technical Center on Van Dyke Avenue and elsewhere — for people with the right skills. “If you know German, Japanese or Chinese and have technical abilities, you’re going to find a job,” he said. Mark Hackel, Macomb County executive, said the common narrative that manufacturing jobs have gone away doesn’t tell the truth on the ground in the county. It’s just that they may require more education or specialized skills. “There’s a disconnect,” he said. “The whole idea is to get people to realize that there are facilities and job opportunities — just not like our grandparents’ ones.”
20s
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DTE: Rate request tied to higher capital spending ■ From Page 1
But residential customers could pay 3.2 percent more — an average of $3 per month or 16.3 cents per kilowatt-hour instead of the current 15.8 cents — according to DTE rate filings and interviews with company executives. The Public Service Commission has scheduled a prehearing Jan. 29 to set the timetable for DTE’s rate review. The commission has until July 1 to make a decision, or DTE can self-impose its rate changes. Sandy Baruah, the Detroit Regional Chamber’s CEO, said he supports DTE’s efforts the past several years to reduce electric rates on business customers and commercial users. “One of the most important elements businesses use when determining where to locate or expand is energy costs,” Baruah said in a statement to Crain’s. “Making Michigan energy prices more closely match competitor states helps retain and attract more jobs in our state.” Over the past few months, DTE worked closely with the business community in Detroit and the Michigan Economic Development Corp. to make further rate adjustments, Baruah said. Under an Aug. 5 order by the commission, DTE was instructed to make a September filing that examines various customer class rate designs “to better ensure rates are equal to cost of service and support affordable and competitive electric rates for all customer classes.” The result was a revenue-neutral proposal that deeply cut industrial rates while boosting residential rates. Business rates were not affected, although some users could see rates go up slightly and others experience small cuts, DTE said. Doug Jester, a principal with 5 Lakes Energy LLC, a Lansing-based energy consulting firm, said industrial users have been complaining for years that their rates are too high. “DTE has adjusted their rates the last few years. This is an additional step,” said Jester, who was a witness before the commission in DTE’s first rate case in September. Robert Strong, general counsel of the Association of Businesses Advocating Tariff Equity, an industrial power user group, said ABATE supports reducing industrial rates. “It gets closer to the cost of services,” said Strong, who also is an attorney at Birmingham-based Clark Hill PLC. “The 4 percent rate reduction is reasonable, and if we are successful in getting the return in equity reduced, the decrease will be more.” For example, Strong said, ABATE will oppose granting DTE a 10.75 percent return on equity. “This request is way too high and above the 2014 national average of 9.8 percent,” he said. “The base rate goes up so much they don’t need the 10.75 percent.” DTE’s second rate change proposal, which it submitted in December, is based on recouping $370 million in costs related to new electric capacity, environmental and anti-pollution compliance, safety and reliability upgrades, and to keep up an adequate rate of financial return, Anderson said. DTE has invested about $1 billion annually over the past four years. Its last rate increase was in
Consumers seeks rate increase for electricity, was granted gas price hike Last December, Jackson-based Consumers Energy Co. also filed for electric rate increases for residential and business customers in west and mid-Michigan. Consumers Energy provides only gas services to Southeast Michigan. Consumers Energy is asking for a net increase in revenue of $163 million — amounting to 6.9 percent increase for low-energy business users and a 5.5 percent rate cut for high-energy business customers — to help pay for expanded generating capacity, environmental regulations, distribution improvements and other costs. Residential customers would experience an 11.5 percent increase. Overall, however, total 2011, when DTE requested $444 million and the commission allowed $188 million. Anderson said DTE decided to ask for a rate increase this year because recent capital expenditures have reached a tipping point and need to be recouped. “We try and stretch it as long as possible when it comes to rate increases, and we could do it differently, but the Public Service Commission likes it when we don’t come in for rate increases more frequently,” Anderson said. “We use Anderson cost reductions and cost controls as much as possible to reduce rate increases.” While DTE’s filing specifically asks for a 15.5 percent base rate increase on residential customers, 5.8 percent for business customers, and 8.2 percent increase overall, Anderson said the actual net increase to customers is much lower (see chart, this page) because the company has lowered or eliminated other fees charged to customers that include fuel charges, renew-
electric bills would still be 10 percent below the national average, a Consumers Energy spokesman said. Consumers Energy last received a 2.3 percent average rate increase in 2013 to pay for $89 million in improvements. The Public Service Commission has until July 6 to make its decision on Consumer’s rate request, or the company can go forward with it. Earlier this month, the commission approved an increase in Consumer Energy’s natural gas prices. For example, residential customers using 100 cubic feet of gas per month will pay an extra $1.97 on their bill. — Jay Greene able energy charges and a “securitization of bond” charge. “We issued a bond 15 years ago ($350 million a year) that is paid for and over, so we can reduce rates by that amount,” Anderson said.
Capital expenditures Part of DTE’s rate increase is to help pay for the Carson City-based Renaissance Power Plant, a 732megawatt gas-fired plant, which DTE purchased last summer for $240 million, to help meet peak demand during severe weather. DTE also plans to purchase a 300megawatt gas plant this year to also prepare to meet high capacity demands. DTE has several existing plants in mind but hasn’t yet identified a specific one, Anderson said. Because of projected regional electricity shortages starting in 2016, DTE must increase its own electric generation capacity, Anderson said. “For years, the Midwest has had an extra supply of peaking capacity,” Anderson said. “We generally buy 1,000 megawatts capacity from outside the marketplace, in Ohio or Indiana. That is drying up fast due to environmental policies.
DTE PROPOSED RATE INCREASES FOR 2015, BY CUSTOMER CLASSES The following is the expected net effect of proposed rate increases from DTE Energy Corp. A decision on the September proposal is expected by May. A decision on the December proposal is expected by year’s end, but DTE could elect to implement all or part of it in July. The December proposal, if implemented, would supersede the September proposal. Both rate proposals contain base rate increases higher than the expected change in bills because of the phasing-out of other charges.
Customer class Average residential Business/commercial Industrial
Sept. 2014 proposed rate change 4% increase ~0% 5% decrease
Dec. 2014 proposed rate change 3.2% increase 1% decrease 4% decrease
Customer descriptions Average residential customer: Based on using 650 kilowatts of electricity. Business/commercial: Retail stores, restaurants, office buildings, physician and lawyers’ offices. Industrial: Large manufacturing companies, hospitals, retail malls, steel companies and large office buildings. Source: DTE Energy Co, DTE rate filings with Michigan Public Service Commission, Crain’s interviews
People are closing power plants.” He said the Midcontinent Independent System Operator, which administrates wholesale electricity markets in multiple states, is predicting a shortage of capacity in 2016. “This is the first shortage we are seeing in a long time, mostly in Michigan,” he said. “This is the reason we are out there acquiring plants.” Anderson said DTE also has spent millions of dollars to improve distribution line systems to reduce power outages. But Strong and Jester agreed that the commission — to encourage efficiency and customer savings — should impose a rate structure based on the time customers use electricity. “We (industrial users) are already time-of-use customers. We are charged different rates based on when we use electricity,” Strong said. “Business and residential customers should be the same.” Jester said rates should be higher during the daytime, when demand is higher, and customers should be rewarded with lower rates during evening and early morning hours, when demand is low. “By having rates that are constant across time, we fool people and don’t show them when power is cheap or expensive,” Jester said. “This doesn’t give them the opportunity to reduce their bill. I advocate for rates that vary when demand is high and low.” Jester said reduced electricity use in peak time periods could eliminate the need for utilities to purchase additional power plants to meet peak capacity.
Arguing renewables Officials of the Michigan Sierra Club said they will oppose DTE’s proposed rate increase, primarily because it further promotes coal and gas-powered plants and does not include further expansion of such renewable energy options as wind and solar. Laurie Williams, a Sierra Club staff attorney, said DTE should invest more money in renewable energy because it is safer for the environment and public health. Williams said DTE wants to spend millions of dollars on coal plants that are nearing retirement and emit levels of sulfur dioxide that could soon exceed pollution limits. “We think it’s far more cost effective to retire these plants and start planning for a future that makes sense for residents,” Williams said. “We think the rate hike money would be better spent on renewables.” Anderson said DTE already has told investors and the public that it intends to retire 40 percent of coal-fired capacity by the mid2020s and 60 percent by the 2030s. “We see a big rotation away from coal in the next 10 to 15 years,” Anderson said. “Some have pushed us to be more specific (and tell them) what year. … Once the EPA comes out with final regulations (on sulfur dioxide emissions), the timeline will change and we can be more specific.” Jay Greene: (313) jgreene@crain.com. @jaybgreene
446-0325, Twitter:
www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. Crain GROUP PUBLISHER Mary Kramer, (313) 446-0399 or mkramer@crain.com ASSOCIATE PUBLISHER Marla Wise, (313) 4466032 or mwise@crain.com EXECUTIVE EDITOR Cindy Goodaker, (313) 4460460 or cgoodaker@crain.com MANAGING EDITOR Jennette Smith, (313) 4461622 or jhsmith@crain.com DIRECTOR, DIGITAL STRATEGY Nancy Hanus, (313) 446-1621 or nhanus@crain.com MANAGING EDITOR/CUSTOM AND SPECIAL PROJECTS Daniel Duggan, (313) 446-0414 or dduggan@crain.com SENIOR EDITOR/DESIGN Bob Allen, (313) 4460344 or ballen@crain.com SENIOR EDITOR Gary Piatek, (313) 446-0357 or gpiatek@crain.com WEB EDITOR Kristin Bull, (313) 446-1608 or kbull@crain.com RESEARCH AND DATA EDITOR Sonya Hill, (313) 446-0402 or shill@crain.com WEB PRODUCER Norman Witte III, (313) 4466059, nwitte@crain.com EDITORIAL SUPPORT (313) 446-0419; YahNica Crawford, (313) 446-0329 NEWSROOM (313) 446-0329, FAX (313) 4461687 TIP LINE (313) 446-6766
REPORTERS Jay Greene, senior reporter: Covers health care, insurance, energy utilities and the environment. (313) 446-0325 or jgreene@crain.com Amy Haimerl, entrepreneurship editor: Covers entrepreneurship and city of Detroit. (313) 4460416 or ahaimerl@crain.com Chad Halcom: Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson: Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho: Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor: Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Dustin Walsh: Covers the business of law, auto suppliers, manufacturing and steel. (313) 4466042 or dwalsh@crain.com Sherri Welch, senior reporter: Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com
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WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF JAN. 10-16
Entrepreneurs event: Pitches, Grommet CEO n upcoming celebration of entrepreneurship in the region features a prominent speaker, Jules Pieri, co-founder and CEO of The Grommet — and a much-watched regional pitch competition. The keynote from Pieri during the Jan. 29 Annual Collaboration for Entrepreneurship (ACE ’15) is part of a daylong program that also includes breakout discussions and networking. Pieri, who comPieri pleted her undergraduate degree at the University of Michigan, is now an entrepreneur in residence at Harvard Business School and was named one of Fortune’s Most Powerful Women Entrepreneurs in 2013. The Grommet is a product launch platform that puts an extra emphasis on helping under-represented entrepreneurs launch handcrafted or problemsolving products. In the regional pitch competition, meanwhile, known as the ACE Challenge, 10 finalists will compete for cash awards. The contest is now in its 15th year. Finalists are: Valerie Obenchain, Advanced Interactive Response Systems LLC of Newaygo, which builds oxygen safety systems for hospitals and residential Kevin Kesseler, AsystBio of East Lansing, a marketing company Andrew Zimmerman, Civionics LLC of Ann Arbor, which provides integrated systems of wireless sensors, cloud-based storage and advanced analytics David Porter, Clavis Sinica LLC of Ann Arbor, a Chinese language learning tool Marshall Khwaja, Exo Dynamics LLC of Ann Arbor, a medical device company that built an active lumbar support brace for use by surgeons in the operating room Nevin Brittain, Health Numeric LLC of East Lansing, a remote patient monitoring service John Lopes, Microcide Inc. of Sterling Heights, a maker of nontoxic antimicrobial products Alex VanDerKolk, Mountain Labs of Ann Arbor,
A
which has developed data collection software for health care research Barak Leibovitz, Seat Side Service LLC of Ann Arbor, an app that lets you order concessions and merchandise from your phone to be delivered to your seat at an event Lauren Shampo, Transcuro LLC, Fenton, a tool designed to streamline hospital discharges by locating providers that fit the patient’s follow-up health care needs. Finalists will give 3minute pitches to potential investors during the event at Burton Manor in Livonia. The prize is $5,000. Tickets are $25 online and $40 at the door. Get more information at ACE-event.org. Last year’s winner was Inventev, a company based in the TechTown incubator in Midtown Detroit. Inventev’s technology allows commercial trucks to generate electricity for equipment at job sites. Sponsors of the challenge include MiQuest, the Michigan Economic Development Corp., Ann Arbor Spark and Automation Alley.
Snyder stamps out e-cig bills to avoid ‘confusion’ If it looks like a cigarette but doesn’t smell like one, is it a cigarette? So far, yes. Gov. Rick Snyder has vetoed bills that would prohibit e-cigarettes from being regulated as tobacco products under Michigan law. Snyder said Michigan shouldn’t step on the toes of the federal government, which has proposed regulating e-cigarettes. He said it would “sow confusion” and send a “mixed health message” to the public. The devices heat a nicotine solution to produce an odorless vapor.
Hallmark Channel’s Kitten Bowl goes to the Lions The Hallmark Channel’s second Kitten Bowl — the network’s feline answer to Animal Planet’s decade-old Puppy Bowl — includes three cats named for Detroit Lions players. Among the 90 cats competing will be Nom Nom Nom Suh, named for defensive tackle Ndamukong Suh;
Cat Stafford, after quarterback Matthew Stafford; and Clawvin Johnson, the kitty version of Stafford wide receiver Calvin Johnson. Other cat names are riffs on current or former NFL players such as Aaron Pawdgers and Joe Montuna. The 90 cats, who will be available for adoption after the game, compete on an obstacle course of yarn balls, lasers, and string toys. Kitten Bowl II airs at noon Feb. 1. The Puppy Bowl XI kicks off at 3 p.m. Oh, and the actual Super Bowl XLIX is at 6:30 p.m. that day.
Daifuku drops ‘Webb’ from holding company name Farmington Hills-based Daifuku Webb Holding Co., notable maker of conveyor and baggage handling systems, is dropping the “Webb” part of its name. Daifuku Webb, a collection of several U.S. subsidiaries including historic Jervis B. Webb Co. and parent Daifuku Co. Ltd., is now Daifuku North America Holding Co. The holding company, which also owns Daifuku America Corp., Elite Line Services, Wynright Corp. and Logan Teleflex Inc., streamlined its name and branding logos for 2015, the company said last week. It has previously reported about 500 Michigan employees, and about 100 engineers in metro Detroit. Jervis B. Webb was founded in 1919 by its namesake founder; granddaughter Susan Webb headed the company until 2008.
SkySpecs presents at Las Vegas electronics event SkySpecs LLC, an Ann Arbor-based maker of drone aircraft to inspect bridges, wind turbines, buildings and other infrastructure, presented as a finalist in a startup competition at the Consumer Electronics Show earlier this month in Las Vegas. SkySpecs was one of 14 finalists at the TechCrunch Battlefield Hardware 2015 event. The drone-maker presented its Guardian system, which is a collision avoidance module combining sensors, computation and software that can be equipped on any drone. Kitchener, Ontario-based Voltera won the competition. SkySpecs has raised $1 million, including a $500,000 prize from the Accelerate Michigan Innovation event in November.
Snyder set to trim budget with $289M shortfall ov. Rick Snyder said he is planning to make midyear cuts because Michigan’s budget is $289 million short of initial predictions, The Associated Press reported. Snyder’s administration and legislative economists settled on the projected shortfall in a meeting Friday at the Capitol. Also on Friday, Snyder created, by executive order, a new state panel: the Michigan Interagency Council on Homelessness, formed at the recommendation of the Mental Health and Wellness Commission.
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ON THE MOVE Bloomfield Hills-based crisis and mental health services agency Common Ground named Heather Rae, its vice president of programs and services, as CEO. Rae, 49, will succeed longtime President and Rae CEO Tony Rothschild when he retires in September. The Grand Rapidsbased Michigan Small Business Development Center is seeking a new state director after the recent retirement of former director Carol Lopucki. Nancy Boese, the SBDC’s business growth team manager, is the acting director.
COMPANY NEWS The Plymouth Whalers announced that the minorleague hockey club owned for 25 years by Peter Karmanos Jr., retired chairman and co-founder of Detroitbased Compuware Corp., has been sold to Cape Coral, Fla.-based IMS USA Inc., and will relocate to Flint’s Perani Arena next season. A purchase price wasn’t disclosed; the deal is subject to approval by the Ontario Hockey League. Architecture and engineering giant HOK said it has completed its acquisition of Kansas City-based 360 Architecture, the primary architect of the $535 million Detroit Red Wings arena set to open in 2017. The deal will not affect the arena project. HOK designed Comerica Park, home of the Detroit Tigers. Los Angeles-based private equity firm The Gores
Group acquired Auburn Hills-based auto supplier U.S. Farathane Corp. for more than $100 million. The Gores Group is led by Alec Gores, brother of Detroit Pistons owner Tom Gores. The RACER Trust announced it has sold 25 acres of vacant Detroit land to real estate companies General Development Co. and Friedman Integrated Real Estate Solutions, both of Southfield. The land will be developed into a large logistics center employing more than 200. Less than a year after EQ-The Environmental Co. was acquired by a national environmental company, the new owner changed the Livonia-based firm’s name to U.S. Ecology Inc. to reflect a single brand. Boise, Idaho-based U.S. Ecology provides environmental and industrial waste management services. Detroit-based Blue Cross Blue Shield of Michigan and its subsidiary LifeSecure Insurance Co. signed a contract to co-market specialty group insurance products with Dearborn National Life Insurance Co. Burns & Wilcox Canada, a subsidiary of Farmington Hills-based Kaufman Financial Group, acquired Avec Insurance Managers Inc., a Toronto-based managing general agent, for an unspecified amount. Avec specializes in marine, inland marine and other specialty commercial lines. Detroit Bikes LLC will be the first retail tenant on the ground floor of The Albert apartment building in Capitol Park when it opens its first retail outlet there in the spring, the company announced. Livonia-based hospital system Trinity Health signed a definitive joint venture agreement with Californiabased Heritage Provider Network to advance its strategy of coordinating care for specific groups of patients, Modern Healthcare reported. Auburn Hills-based auto supplier Android Industries LLC is expanding its operations in Detroit thanks to additional platform contracts from General Motors Co. Android is expected to invest $16.5 million to expand its current location on the campus of nonprofit Focus: Hope and create 131 new jobs. The Detroit Marriott Renaissance Center announced it has completed a $30 million renovation project, according to AP. Officials of the 70-floor downtown hotel said the one-year project overhauled its 1,298 guest rooms and 100,000 square feet of meeting space; the hotel was open throughout. Sterling Heights-based General Dynamics Land Systems has a new $26.2 million
contract with the Naval Sea Systems Command in Washington, D.C., to supply remote-operated MK46 gun weapon systems for destroyers and near-shore ships. Total revenue for the three Detroit casinos dropped 1 percent to $1.33 billion in 2014, despite increases during December and the fourth quarter, according to the Michigan Gaming Control Board.
OTHER NEWS The U.S. Supreme Court said Friday it will decide whether same-sex couples nationwide have a right to marry under the Constitution. The justices said they will review an appellate ruling that upheld bans on same-sex unions in Michigan and three other states. The case will be argued in April; a decision is expected by late June. Earlier, a U.S. District Court judge ruled that Michigan must recognize more than 300 same-sex marriages performed in the state during a brief window last year. Michigan residents who buy from Amazon, Overstock and some other online retailers will be forced to pay the state’s 6 percent sales tax starting in October, AP reported. Gov. Rick Snyder signed “Main Street fairness” laws to ensure roughly $60 million a year in taxes on Internet and other out-of-state purchases are collected. The University of Michigan plans to use a new $20 million gift from an alumnus, former General Mills Inc. CEO Stephen Sanger, and his wife, Karen, to start a leadership center within the Ross School of Business. Detroit Tigers starting pitcher David Price got a record oneyear, $19.75 million deal to avoid salary arbitration, CBSSports. com reported. The contract reportPrice edly is the most lucrative in baseball history for an arbitrationbased salary. The Michigan Department of Human Services is issuing layoff notices to 100 workers, effective Feb. 15, due to a $7.5 million budget cut, according to AP. An agency spokesman said 61 affected employees work in two offices in Detroit and the Grand Rapids area that are closing. The Republican National Committee’s executive committee voted to censure Dave Agema, a former Republican state representative from Grandville, and seek his resignation after he linked to a racist article from Facebook, AP reported.
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