Crain's Detroit Business, Feb. 16, 2015 issue

20150216-NEWS--0001-NAT-CCI-CD_--

2/13/2015

6:45 PM

Page 1

®

www.crainsdetroit.com Vol. 31, No. 7

FEBRUARY 16 – 22, 2015

$2 a copy; $59 a year

©Entire contents copyright 2015 by Crain Communications Inc. All rights reserved

Page 3

LOOKING BACK: Black Monday killed an IPO, but he found profits in Porta Johns Snyder’s medical education cuts startle hospital officials

Wayne digs into pension deficit County goals: Cut health care costs, avoid bankruptcy

BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Wayne County does not plan to file for Chapter 9 bankruptcy or to issue bonds to cover a growing shortfall in funding for its pension system, according to Tony Saunders,

who became the county’s chief restructuring officer in January.

According to a report for County Executive Warren Evans by Ernst & Young LLP, the pension system has gone from a funding ratio of 95 percent in 2004 to a ratio of 44 percent today, with an unfunded lia-

bility of $850 million.

Low interest rates have played a part, but the underfunding is also due to a history of generous matches, “13th checks” and genSaunders erous early retirements for limited years worked.

“Even understanding that local government pension funds are of-

College grads in the showroom: Victory Automotive’s pitch

Health Care

Converging on care: Mental health services better, but to-do list still long, Page 11

This Just In

New path to invest in Mich. small biz Pair launch equity crowdfunding platform

Last call for nominations for Crain’s 20 in their 20s

NEWSPAPER

It’s your last chance to nominate a 20-something professional who is making his or her mark in the region.

Candidates for Crain’s 20 in their 20s recognition program 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. 20.

To fill out the form, visit crainsdetroit.com/nominate.

Questions? Contact Amy Haimerl: ahaimerl@crain.com or (313) 446-0416.

BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

The first equity crowdfunding platform designed exclusively for Michigan small-business owners and investors launched on Sunday.

Called MichiganFunders.com, the website takes advantage of new crowdfunding laws signed by Gov. Rick Snyder in 2013 that allow entrepreneurs to raise between $50,000 and $2 million from local investors by offering equity shares, selling debt or creating a revenue-sharing model. Anyone,

not just investors considered accredited by the Securities and Exchange Commission, will be able to participate.

“We’re excited to give people another way to invest in their communities,” said co-founder and CEO David Tessler.

“We want people to be able to build something right here,” added Niles Heron, co-founder and chief business development officer.

“There is a diverse support group ready to accept those new ideas.”

There are several ways equity crowdfunding can work (See story, Page 21). MichiganFunders’ distinction is that it allows only Michigan companies and investors to participate. That simplifies the legal and regulatory oversight because there is no interstate commerce. But it’s also just good

ten less well-funded than states’, this is still a very low funding ratio,” said Amy Resnick, executive editor of Pensions & Investments, a sister publication to Crain’s. “It would impact the county’s ability to fund other services.”

Saunders said the county plans to start making up that shortfall through savings in health care costs it negotiates in upcoming contract talks with 11 unions. It is See Pensions, Page 24

MichiganFunders.com co-founders David Tessler (right) and Niles Heron hope to take advantage of new state crowdfunding laws that allow entrepreneurs to offer equity stakes.

See Equity, Page 21

JOHN SOBCZAK

Chassix misses 2nd bond payment; creditors concerned

BY DUSTIN WALSH AND CHAD HALCOM CRAIN’S DETROIT BUSINESS

Gores

After missing a payment of $17.4 million to bondholders this month, Chassix Inc. has asked the bondholders to organize and retain advisers — and a creditor’s filing asserts that the company is taking steps toward a possible bankruptcy.

The Southfield-based supplier of chas-

sis, brake and powertrain components did not make a scheduled payment twice since December on $525 million of bond debt it carries. Chassix, owned by Tom Gores’ Platinum Equity LLC, is working with bondholders during a 30-day grace period to formulate a restructuring plan by early March, according to a Debtwire report.

Sources familiar with the situation told Crain’s that Chassix may file bankruptcy around the time its grace period

expires March 4 on $375 million worth of senior secured notes to bondholders.

Chassix and Platinum Equity executives declined to comment.

“This is a delicate situation,” a source who declined to be named told Crain’s. “I used to hear that Tom Gores took pride in the fact that he does not put companies into bankruptcy; let’s just say I haven’t See Chassix, Page 23

20150216-NEWS--0002-NAT-CCI-CD_--

2/13/2015

3:54 PM

Page 1

Page 2

February 16, 2015

CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS Kids of Amway’s other (non-DeVos) founder doing OK, too Bringing the American way of selling skin care products and vitamins to China helped make Amway Corp. the world’s largest direct seller. It also made the children of one its co-founders billionaires.

Amway Chairman Steve Van Andel and siblings David Van Andel, Barb Van Andel-Gaby and Nan Van Andel own half of Alticor Inc., Amway’s Adabased parent. The stake — which they inherited in equal shares after their father, Jay Van Andel, died in 2004 — is valued at $4 billion, according to the Bloomberg Billionaires Index.

Richard DeVos, 88, owns the other half of Alticor.

He has a $4.5 billion fortune, according to the Bloomberg ranking.

Steve Van Andel, 59, has been Amway chairman since 1995, while two of his siblings sit on Alticor’s board. David Van Andel, 55, leads the Van Andel Institute in Grand Rapids, started by his parents. It focuses on biomedical research and science education.

Barb Van Andel-Gaby, 52, has six children, lives in Atlanta and has been “a dedicated home-schooler since 1998,” according to Alticor’s website. She has been a board member of the Heritage Foundation, a political research firm, since 1996.

Nan Van Andel is the only sibling no longer involved in the family business. She’s president of the Silverwing Foundation, also founded by her parents, which donates to religious causes.

Retailer Family Christian files for Chapter 11, owes $100M

Dow settles with whistleblower who claimed CEO spent lavishly

Grand Rapids-based Family Christian LLC, which sells Bibles, music, church supplies and other faith-related merchandise in 266 stores in 36 states, filed for bankruptcy protection with a plan to sell all its assets.

The nonprofit listed assets and debt of less than $100 million each in Chapter 11 documents filed in U.S. Bankruptcy Court in Grand Rapids, Bloomberg News reported.

Family Christian had gross sales of about $216 million in 2014.

Family Christian entered into an agreement with a newly formed unit of Family Christian Ministries to serve as lead bidder for a court-supervised auction, according to court papers.

Midland-based Dow Chemical Co. settled lawsuits by former company fraud investigator Kimberly Wood, who claimed she was wrongfully fired for uncovering improper spending by CEO Andrew Liveris and others, Bloomberg News reported.

Terms are confidential, Rachelle Schikorra, a Dow spokeswoman, wrote in an email.

Wood alleged Dow paid for Liveris family trips to the Super Bowl, World Cup and Masters golf tournament as well as an African safari, prompting the CEO to repay $719,923. She said Dow also was “funneling money” to the Hellenic Initiative, a Greek charity Liveris

co-founded. Wood, a 25-year Dow employee, also claimed she found millions of dollars in cost overruns during the renovation of the Dowowned H Hotel in Midland.

MICH-CELLANEOUS 䡲 National Cherry Festival officials want to change their annual eightday event to focus more on local agriculture and culture to revive community support, the Traverse City Record-Eagle reported. 䡲 Flint officials have hired consultants from Veolia North America to evaluate the city’s troubled municipal water system, The Flint Journal said. An initial report is expected in about two weeks. 䡲 Start Garden LLC, the Grand Rapids-based $15 million venture

capital firm started three years ago

by Rick DeVos to seed startups, has formed the Phase II fund to provide up to $1.5 million per company, three times the previous amount it would invest, MiBiz reported. Running the new fund is Mike DeVries, who led the Grand Rapids office of the Ann Arbor-based venture capital firm EDF Ventures. 䡲 Two advertising employees of Walker-based Meijer Inc., Tracy Christen Gordon and Danny Kraig Vandermyde, are accused of embezzling between $50,000 and $100,000 worth of gift cards and face as much as 15 years in prison, MLive.com reported. 䡲 A month after both sides said they remained far apart in negotiations, Bronson Methodist Hospital and Detroit-based Blue Cross Blue

Shield of Michigan agreed to a new five-year agreement that will preserve access for Blues members at the Kalamazoo-based health care organization, MiBiz reported. 䡲 Trader Joe’s is coming to the Grand Rapids suburb of Kentwood, after a lease was signed between the grocery chain and Grand Rapids-based CWD Real Estate Investment, the Grand Rapids Business Journal reported. 䡲 Lake Michigan College near Benton Harbor is launching the Great Lakes Wine Institute, which the school contends will be the Midwest’s first commercial teaching winery. Starting this fall, students can earn an associate’s degree in the art, science and business of wine making, the college said in a release.

CORRECTIONS 䡲 A Page 1 story on Michigan’s craft brewing industry in the Feb. 9 issue misspelled the last name of Mark Rieth, CEO of Atwater Brewing. 䡲 An editorial on Page 8 of the Feb. 9 issue incorrectly said James Robertson was given a Ford Focus by Suburban Ford. It was a Ford Taurus. 䡲 The People Spotlight in the Feb. 9 edition should have said that Angela Hospice is based in Livonia, not Farmington Hills. 䡲 Mary Kramer’s Publisher’s Notebook, on Page 17 of the Feb. 9 issue, should have said Ralph Slider is president of Michigan Office Solutions.

The company’s name was misstated. 䡲 A Business Diary item in the Feb. 9 issue should have said NBS Construction Solutions has expanded its services to include the sale of furniture, audiovisual and floor covering and building cleaning services. 䡲 A story on Page 7 of the Feb. 2 issue should have said the Detroit Employment Solutions Corp. is working with City Connect Detroit to administer Grow Detroit’s Young Talent program, rather than the Detroit Economic Growth Corp.

57th Annual

Detroit

Boat Show

Presidents Club

Award Recipient

February 14-22, 2015 • Cobo Center

,·Ye Gone Pore buVineVV on Py boat than in Py oIÀFe

Kendra Osowski

Find the boat of your dreams and enjoy a well deserved taste of summer in the middle of Michigan’s winter.

• It’s Back & Bigger with More Boats and More Fun • The best Prices, Selection & Time to Buy ‘RAIL JAM’ Wakeboard Demos FREE Official Boaters Safety Course, Saturday, February 21. Register Early — Space is Limited!

No better time to buy a boat! Get full value on your trade-in with Michigan’s new Sales Tax on the Difference.

RAIL JAM!

DetroitBoatShow.net ®

John Hancock Retirement Plan Services (RPS) is pleased to congratulate Kendra Osowski for being awarded membership in the 2014 Presidents Club. This annual award is presented to Regional Vice Presidents who, through their skill, industry expertise and determination, have exceeded ambitious sales objectives over the past four years.

Kendra, who joined John Hancock RPS in 2006, serves central and western Michigan. Kendra, her husband Kyle and their daughter Kellyn live in Grand Rapids, MI.

20150216-NEWS--0003-NAT-CCI-CD_--

2/13/2015

6:49 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 3

Snyder budget hits medical ed Proposed $74M cut in funds surprises hospital officials

BY JAY GREENE CRAIN’S DETROIT BUSINESS

As the largest recipient of state Medicaid graduate medical education funding, eight-hospital Detroit Medical Center also stands to lose the most money — $53.3 million — if the Legislature doesn’t reinstate

millions of dollars in state general funds that Gov. Rick Snyder eliminated from his proposed budget for fiscal 2016.

In a move last week that surprised DMC and other Michigan hospital officials, Snyder cut $74 million in general funds for resident physician training programs

to help balance the state’s proposed $54 billion 2016 budget. The cuts also included financial support to small hospitals that run obstetrical programs in rural areas.

The financial hit to the 60 teaching hospitals is actually much larger — $163 million — when federal matching funds are added, said Laura Appel, senior vice president of federal policy and advocacy with the Michigan Health and Hospital Association.

“We are concerned about the governor’s plans to eliminate sub-

sidies for graduate medical education from the general fund,” said Conrad Mallett Jr., DMC’s chief administrative officer, in a statement.

Spencer JohnJohnson son, MHA’s president, said the hospital associ-

Inside

In Hockeytown, where kids are on rink, there’s Inc., Page 4

See Medical ed, Page 23

On Feb. 18, 1985, Crain’s reported Porta John owner Earl Braxton’s plan to launch an IPO to build a business in selling urine proteins to drug companies. Here’s what happened.

LOOKING BACK

Company index These companies have significant mention in this week’s Crain’s Detroit Business: Belle Tire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Butzel Long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

30 YEARS AGO THIS WEEK

Cascade Partners . . . . . . . . . . . . . . . . . . . . . . . . . 25 Center for Healthcare Research and Transformation . 11 Chassix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Nothing succeeds like failure

Come Play Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Compuware . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 18 Detroit Medical Center . . . . . . . . . . . . . . . . . . . . . . 3 Detroit Metro Convention & Visitors Bureau . . . . . . 17 Det. Wayne County Comm. Mental Health Authority . . 13 Ellis Infinity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Ernst & Young . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Entrepreneur moved from urine enzymes to being tops in portable toilets

Funderbuilt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 HoneyBaked Ham . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Little Caesars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Michigan Department of Community Health . 12, 13, 23 Michigan Department of Natural Resources . . . . . . 9 Michigan Health and Hospital Association . . . . . . . . 3 Mich. Mental Health and Wellness Commission . 11, 15 Michigan State Medical Society . . . . . . . . . . . . . . 23 MichiganFunders.com . . . . . . . . . . . . . . . . . . . . . . 1

BY BILL SHEA

Oakland County Comm. Mental Health Authority . 12, 13

CRAIN’S DETROIT BUSINESS

Oakland Integrated Healthcare Network . . . . . . . . 12 Olympia Medical Services . . . . . . . . . . . . . . . . . . . 23

E

arl Braxton could never make pee pay.

Thirty years ago this week, the Utica entrepreneur unveiled in the pages of Crain’s his plan to go public with Enzymes of America, a company he launched to extract enzymes from human urine for medical research purposes.

He got into the urine enzyme business because he had randomly met a scientist who needed vast amounts of urine, and Braxton owned a portable toilet business that had millions of gallons of waste available from his Porta John Corp.

The idea was to sell the enzymes to research firms, which at the time were us-

OU Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Porta John Industries . . . . . . . . . . . . . . . . . . . . . . 25 St. John Providence Health System . . . . . . . . . . . . 12 Telemus Capital Partners . . . . . . . . . . . . . . . . . . . 23 University of Michigan . . . . . . . . . . . . . . . . . . . 3, 24 Victory Automotive Group . . . . . . . . . . . . . . . . . . . . 3

JACOB LEWKOW

At least Earl Braxton had his Porta John Corp. subsidiary to fall back on when visions of an Enzymes of America stock sale came crashing down after Black Monday in 1987.

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . 18 BUSINESS DIARY . . . . . . . . . . . . . . . . 20

ing urine-derived enzymes, rather than more expensive synthetics, for things such as blood clotting treatments.

After spending more than $1 million on research and design on filters for portable

toilets and attracting interest and funding from biotech firms, Enzymes of America was ready for its IPO in October 1987.

And then came Black Monday.

See Braxton, Page 25

CALENDAR . . . . . . . . . . . . . . . . . . . . 19 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 MARY KRAMER . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . 26

Victory Automotive mines retail talent with UM program

BY BRADFORD WERNLE CRAIN NEWS SERVICE

Rodger Olson is an absolute geek on retailing. And he makes no apologies for that as he lectures undergraduate students in his class on retail sales at the University of Michigan.

Whether it’s comparing the franchise models of Dunkin’ Donuts and McDonald’s or measuring the success of 7-Eleven convenience

stores’ rollout in Taiwan, Olson can speak with the authority of someone deeply immersed in his chosen subject.

His fascination rubs off on his Olson students — the mark of a good professor.

Only Olson, 38, is not actually a

THIS WEEK @ WWW.CRAINSDETROIT.COM

professor. He’s the COO of Victory Automotive Group, a Canton Townshipbased dealership group that owns 26 stores around the country and is ranked No. 40 on the Automotive News list of the top 125 dealership groups in the country, with 17,999 new retail vehicles sold in 2013.

“Retail has been something of a dirty word. We’re trying to change that,” says Olson, who spent 14 years working as an engineer for auto suppliers before he earned

his MBA and changed careers.

“There are some fantastic opportunities on the retail side. Everybody thinks of the greasy, slimy used-car salesman who’s in your face.”

As guest lecturer, Olson’s mission goes beyond just changing perceptions. Victory Automotive can use his class to mine talent coming out of the university’s See Victory, Page 22

Capped in Corktown Bottles began rolling at the Brew Detroit plant last week. Take a first look inside, crainsinsdetroit.com/brewdetroit DOUG COOMBE

WEEK ON THE WEB . . . . . . . . . . . . . . 26

20150216-NEWS--0004,0006-NAT-CCI-CD_--

Page 4

2/13/2015

6:11 PM

Page 1

February 16, 2015

CRAIN’S DETROIT BUSINESS

Big business backs little hockey stars in Detroit’s elite leagues

BY BRYAN GRULEY BLOOMBERG NEWS

HoneyBaked Ham Co., Little Caesars and Compuware Corp. are widely known for their products and services.

What’s lesser known: Together they’ve produced more than 50 players for the National Hockey League.

Only in ice hockey — and almost exclusively in Detroit — do large companies lend their brands, and hundreds of thousands of dollars, to individual teams that shape grade-schoolers into college and big-league prospects.

Some youth soccer teams wear sponsors’ logos, and companies such as Nike Inc. and McDonald’s Corp. subsidize soccer, lacrosse and basketball camps and tournaments. But those arrangements are a far cry from the Motor City’s year-round, vertically integrated hockey machine.

Along with retailer Belle Tire Inc. and auto dealer Victory Honda, Little Caesars, Compuware and HoneyBaked are known in the hockey world less for what they sell than how teams wearing their colors rank among the best in North America.

Hockey mecca Players come from across the U.S. and even Europe to compete for the Detroit teams in elite AAA leagues for girls and boys age 11 to 19. A Florida real-estate mogul married to supermodel Elle Macpherson flies his 11-year-old son to Detroit to play for a Belle Tire team ranked No. 1 in the country.

Compuware player Blade Jenkins, a 14-year-old eighth-grader, recently committed to play for the University of Michigan. The NHL “is definitely the long-term goal,” he said.

Detroit hardly has a monopoly on hockey madness. High school hockey reigns supreme in Minnesota, the nation’s top producer of NHL and NCAA talent. Prep schools and Catholic high schools claim many of the elite skaters in New York and New England. Private clubs dominate in emerging hockey hubs such as Chicago, Pittsburgh and Dallas.

Detroit has a lot going for it on the ice. Young hockey players are drawn by the proximity to Canadian competition, the chance to be scouted by the NHL feeder Ontario Hockey League, and Detroit’s reputation as “Hockeytown.”

Deep pockets The state of youth hockey in Detroit and elsewhere underscores how sophisticated the business of developing teenage athletes has become, and how parents have become ever more eager to see their kids get a chance at college or professional stardom. These boys and girls aren’t yet pros, though sometimes they seem close.

Coaches routinely jump from team to team. So do players and,

ALL STAR ACTION PHOTOGRAPHY

The Little Caesars AAA Peewee Major team won the Silver Stick AAA Finals held in Port Huron in January.

occasionally, wealthy “sugar daddy” parents who write checks for anything from chartered buses to coaching budgets.

“It’s unrestricted free agency every year,” said Darren Eliot, director of minor hockey for Little Caesars and a former NHL goaltender.

In addition to paying for ice time, cross-country tournament travel and $200 hockey sticks, moms and dads shell out hundreds

of dollars for development camps, skating coaches, goalie coaches, off-ice physical trainers and nutritionists. Corporate sponsors chip in to defray parental bills that can exceed $15,000 a season for a single player.

John Kay, Belle Tire’s longtime director of hockey, said the regional tire store chain has an annual budget of up to $500,000 for its 25 See Hockey, Page 6

DBpageAD_DBpageAD.qxd 2/10/2015 3:21 PM Page 1

SWITCH YOUR BUSINESS TO VERIZON

GET $150 ACCOUNT CREDIT for each smartphone line.

Credit available for each port-in-eligible number brought to Verizon & activated on new 4G LTE smartphones.

Requires new 2-yr. activation on $34.99+ plans. Offer expires 2/28/15.

Be unstoppable.

Enjoy up to 48 hours of battery life,1 and get up to 8 hours of battery life in just 15 minutes† with Turbo Charger.

14999 (32 GB)

$

New 2-yr. activation on $24.99+ plan required. Offer expires 3/31/15.

Get the coverage, speed and reliability your business needs with America’s Most Reliable Network.

Experience why more small businesses choose Verizon than any other wireless carrier.*

AMERICA’S LARGEST AND MOST RELIABLE 4G LTE NETWORK CALL: 1.800.VZW.4BIZ 1

|

CLICK: vzw.com/business-bill-credit

|

VISIT: vzw.com/storelocator

Based on an average user profile that includes both usage and standby. Actual battery performance will vary and depends on signal strength, network configuration, features selected and voice, data and other application usage patterns.

Charging speeds vary based on battery emptiness; usage based on average user profile and may vary based on network signal, configuration and usage patterns. * Results based on third-party study.

Activation/upgrade fee/line: $40. IMPORTANT CONSUMER INFORMATION: Corporate Subscribers Only. Subject to Major Acct Agmt, Calling Plan & credit approval. Up to $350 early termination fee/line. Offers & coverage, varying by svc, not available everywhere; see vzw.com. While supplies last. Restocking fee may apply.

DROID is a trademark of Lucasfilm Ltd. and its related companies. Used under license. © 2015 Verizon Wireless.

I3575 †

20150216-NEWS--0004,0006-NAT-CCI-CD_--

2/13/2015

6:09 PM

Page 2

Page 6

February 16, 2015

CRAIN’S DETROIT BUSINESS

Hockey: The big business of supporting little stars on ice ■ From Page 4

AAA and AA teams, covering jerseys, pants, gloves, some ice time, and salaries that average $5,000 for AAA coaches.

Belle Tire executive Don Barnes Jr. started sponsoring teams 16 years ago “because he just had a passion for hockey,” Rob Smith, the team’s assistant hockey director, says from his cinder-blockwalled office at Belle Tire’s home rink in Fraser. Down the hall, a sporting goods store sells red-andwhite T-shirts, polos and hoodies emblazoned with Belle Tire’s script logo.

Smith, 54, a retired cop, brandishes a fat ring signifying Belle Tire’s

2007 AAA national championship for 15- and 16-year-olds. “Nineteen of those 20 kids are still playing” in college, minor leagues or the NHL, he said, including Boston Bruins defenseman Torey Krug.

Lou Schmidt Jr., president of HoneyBaked Ham’s Michigan unit, started a single team in 1994 for his young son. He began adding teams in other age groups and, by 2000, HoneyBaked was spending $125,000 a year and vying for state and national titles.

Eleven years ago, Schmidt, 55, decided to step back and turned the hockey program over to Suburban Sports Group, a Farmington Hills

company that manages rinks and hockey schools. HoneyBaked no longer contributes money but lets teams use its name on their goldand-black jerseys stitched with pink, hockey-stick-wielding pigs.

The name “has some brand equity” in the hockey world, Schmidt said. Has it helped him sell hams?

“Probably not,” he said. “For every 20 kids you put on the team, there’s 40 you cut, and they’re pissed.”

Compuware ties Company-sponsored hockey in Detroit dates back 50 years to

when teams for Little Caesars, Slasor Heating and Paddock Pools dominated. Many vanished while Little Caesars founder Mike Ilitch bought the NHL’s Detroit Red Wings and poured more dollars into youth hockey. Caesars alumni include Mike Modano, the retired NHL star who holds the career record for combined goals and assists by a U.S.-born player.

Little Caesars’ biggest on-ice rival emerged in the late 1970s when Compuware co-founder and hockey fan Peter Karmanos Jr. started sponsoring teams, one of which skated at Joe Louis Arena, home to Ilitch’s Red Wings.

After Karmanos bought the NHL’s Hartford Whalers, now the Carolina Hurricanes, in 1994, Ilitch evicted Karmanos’ youth team from the Joe. Karmanos responded by building a $25 million arena in Plymouth Township.

Karmanos, now retired from Compuware, has made plans to sell Compuware Arena to the USA Hockey Foundation and this month sold the OHL’s Plymouth Whalers to IMS Hockey Corp. They’ll move to Flint next season.

Through a spokeswoman at his new company, MadDog Technology LLC, Karmanos said he will continue to contribute money to youth hockey.

Rich sponsors The sour tang of sweat and leather hangs in the air as John Trouba sits in a Compuware dressing room telling of his son’s journey to the Winnipeg Jets in the NHL. Jacob Trouba, now 20, had played for Little Caesars before switching to Compuware.

“It was just the best opportunity to play with some better kids,” said the elder Trouba, partner in a marketing firm that’s developing a mobile app around his son.

Even with Compuware’s sponsorship, Trouba said he spent about $7,500 a season, more when Jacob traveled to Sweden and Russia. Trouba said the best teams often have a “money guy,” a rich parent who’ll toss cash on top of the sponsor’s contribution.

Florida real estate magnate and hockey fanatic Jeffrey Soffer was so eager to have his 11-year-old play in Detroit that last year he reached out to Mike Hamilton, then a highly regarded coach for HoneyBaked. Soffer is chairman and CEO of Turnberry Associates LLC, a multibillion-dollar real estate firm that owns the Fontainebleau Miami Beach resort.

He is also the husband of model and businesswoman Macpherson.

His son Logan played wing last season for the Snow Kings in Aspen, Colo. Jeffrey Soffer approached Hamilton about bringing Logan and a few teammates to play for the coach in Detroit. Hamilton said he couldn’t work out an arrangement with HoneyBaked, so he migrated to Belle Tire.

Florida fundraiser Hamilton, in an interview, said he wasn’t sure how much if any money Soffer has put into the team, though it wasn’t the six-figure sums rumored in Detroit hockey circles.

Soffer raised more than $50,000 for the team in a golf outing last summer at a Turnberry property in Aventura, Fla., Hamilton said. Last month, Soffer hosted the Belle Tire squad and rivals from Chicago, New Jersey and Connecticut for a private tournament in Florida.

But Hamilton will be movingn on. Earlier this month, he and Soffer agreed the coach would finish this season and then step down.

“We just differed on how things should be going forward,” Hamilton said. “No hard feelings. Everyone has one way they want to do things.”

DBpageAD_DBpageAD.qxd 2/6/2015 3:15 PM Page 1

20150216-NEWS--0008,0009-NAT-CCI-CD_--

2/13/2015

6:21 PM

Page 1

Page 8

February 16, 2015

CRAIN’S DETROIT BUSINESS

MARY KRAMER

OPINION

Evans’ goal: Skip Ch. 9, fix problem I

t’s becoming clear — if it was ever in doubt — that the legacy of Bob Ficano is going to require the full-time focus of new Wayne County Executive Warren Evans.

The high-profile issue throughout the election campaign was the stalled jail project on Jefferson Avenue downtown.

And, indeed, that remains an issue. In an interview last week with Crain’s, Evans said the project is costing the county up to $1.3 million a month in interest payments, so a decision about what to do with the project needs to be made soon.

Less clear is what’s in the county’s best interests, he said, because it has “$130 million in the ground” on the project, so it’s important to determine if it makes more sense to finish the project or accept an offer of about $20 million for the site.

Looming even larger, of course, is a structural deficit that could exhaust the county’s cash by mid-2016. The deficit is driven largely by pension underfunding and retiree health care costs.

Pensions everywhere have been hit hard by prolonged low interest rates that wreaked havoc with actuarial assumptions on rates of return.

But, as Tom Henderson reports on Page 1, Wayne County compounded its problems by overgenerous contribution matches, “13th checks” and buyouts that awarded large pensions to younger employees.

Evans and Tony Saunders, his chief restructuring officer, say they are determined to avoid bankruptcy or an emergency manager, but also don’t believe quick tax hikes are the answer. Opportunities for savings include an evaluation of retiree health care and upcoming contract negotiations.

We wish Evans and his team Godspeed and help from the business community in restoring fiscal stability to the county.

Metro Detroit doesn’t need another tour in the public eye for negative reasons.

Growing state of crowdfunding On the lighter side, we are pleased to see opportunities for entrepreneurial funding continue to grow.

As Amy Haimerl reports on Page 1, the first equity crowdfunding platform custom-made for Michigan is launching this week.

MichiganFunders.com takes advantage of new state crowdfunding laws, but is different from some other similar platforms because of its focus on Michigan and the ability for small investors to participate.

This type of investing comes with some risks, but it’s a new resource both for small companies trying to grow and for small investors wanting to make equity investments.

Talent starts with a first paycheck Do you remember your first paycheck?

How old were you? Detroit Mayor Mike Duggan hopes Detroit employers give 5,000 teens and young adults the chance to make that memory this summer.

He unveiled the plan — dubbed Grow Detroit’s Young Talent — at an employer briefing at the Detroit Regional Chamber. It targets Detroiters ages 14-24 and runs from July 6 to Aug. 28.

Employers would pay $1,000 — half the payroll cost — for a teen to work 20 hours a week for six weeks. (Learn more at gdyt.org.)

Crain’s Detroit Business has signed on as a partner — not just to employ teens this summer but to get the word out to employers.

An ad about the program is on Page 16.

It seems like a pretty simple proposition. For a thousand bucks, an employer has a chance to change a life.

“There’s nothing better than a young person experiencing their

first job,” says Lena Barkley, a workforce initiatives manager at CVS Caremark.

She estimated that CVS hired about onethird of the 68 teens who worked last summer from Detroit high schools: Denby, Cody, University Prep, Ben Carson, Cass, Renaissance and Martin Luther King Jr. CVS has year-round training programs, too. One program targets 18- to 24-year-olds to “give them a chance to learn everything a new hire would do.” Another program, for teens in school, immerses them in career pathway preparation.

“We have kids who soon realize: ‘I didn’t know a pharmacist could make $120,000 a year,’ ” Barkley said.

CVS also works year round with a training facility at Wayne County Community College’s east-side campus.

Working with the Detroit Employment Solutions Corp., Skillman Foundation and CityConnect,

Duggan tweaked the program. Example: Grow Detroit’s Young Talent will manage recruitment and payroll online. Teens are matched to employers based on geography, ability and interest. Each employer will have a youth specialist assigned to help manage any issues.

And teens have free access to city buses to help them get to work.

So what can the teens do? Answer phones, perform data entry, work on “environmental cleanup” (aka mowing grass, cleaning up parking lots), making document copies. At General Linen & Uniform Service, for example, teens cleaned, sorted and distributed uniforms for restaurants, hospitals and security companies.

Lots of people want to see Duggan succeed. This program seems a modest investment from employers — large and small — to help him out.

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: Business executives urge more state spending on higher education I have owned my own businesses since the mid-1970s but am ready to take some abuse from my fellow CEOs for stating what should be obvious to all. We in the business community are not paying our fair share of taxes, which is why state government does not have enough money to adequately fund public colleges and universities.

Why would young families want to live in Michigan if we continue to underfund public education? For the weather?

Nat Pernick

Re: Stroh’s death knell rang in Bell’s Brewery and era of craft beer I covered the last days of Stroh

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity. for Crain’s in the late 1990s. The main issue for Stroh’s decline, really, was it kept buying rivals and adding failing brands (like Old Milwaukee) and building this large house of many brands rather than building one strong brand (the Coors strategy). Another issue John Stroh told me about: When the economy took off in the 1990s, consumers moved from subpremium beers (like Goebel made by Stroh) to premium brands, and from premium brands to more expensive imports (and later craft beers). So, I truly believe if the Stroh family had opened a brewpub or two in Detroit in 2008, it

would have done well.

Joseph Serwach Stroh could easily use its original recipe and open its own microbrewery. Tell me that wouldn’t work in the new Red Wings town.

Many of us still remember the allure of “America’s only firebrewed beer.”

Dukeoftralee

Re: Wayne County corruption probe ends; Ficano says name cleared Ficano’s name may have been cleared, but he has zero credibility.

The only accomplishment in his years as a county exec was to keep his hands clean of criminal and incompetency charges related to county officials who reported to him.

George R

KEITH CRAIN: Next time, let’s skip the movie stars I am very pleased and proud to know that two leaders of our government, Gov. Rick Snyder and Mayor Mike Duggan, with apologies to both, would not win a beauty contest or be in the running for the anchor seat of NBC’s “Nightly News.”

They are both great managers and are doing a great job representing their citizens. They are forceful, dynamic and personable, but by no means are they the best orators as politicians that we have seen in the last decade or so.

I am not sure either one of them could be considered great campaigners. They simply are the best

at what they do. They manage government agencies, and they do those tasks very well.

As the 2016 presidential campaign kicks off, I cannot help but, once again, be concerned with how the appeal of candidates seems to be more important than their substance.

We seem to be far more interested in how they appear in 30second sound bites on television rather than their intellect.

Voters are far more interested

in style than substance, and that means that almost inevitably we won’t pick the best candidate.

The skills to run a campaign, whether it’s for president, governor or mayor, are quite different than the ability to run a government office.

In my opinion, Mike Duggan, who ran a completely unlikely campaign for mayor, has demonstrated over the last year his ability in running the office.

Gov. Snyder, after being re-elect-

ed for a second term despite a very lackluster campaign, is concentrating on running the state of Michigan rather than running for office, two quite different skill sets.

In the next couple of years, we are going to be bombarded with slick, very professional commercials on radio and television and in print. The way to find out about a candidate is to read very boring papers on positions that they represent on significant issues. And I will guarantee you that no one will read those papers.

How often do we hear the question as to whether a candidate is

electable rather than how good and competent they are? Voters seem to be far more interested in cute, glib answers rather than thoughtful reflections on issues.

It’s our own fault. That’s what the voters want, and that is the way candidates act. If we’re lucky, there is a lot of substance below those glib one- liners, but we never know until they are elected and we see how they perform.

We are lucky to have a governor and mayor who have substance over style.

Pleasant fellows, yes, but good management is far more important.

20150216-NEWS--0008,0009-NAT-CCI-CD_--

2/13/2015

11:30 AM

Page 2

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 9

Food to kayaks: State names Belle Isle vendors a major overhaul of the City and Faneuil Hall Market- not yet been determined, but the acre park to the state for 30 years Come this summer, place in Boston.

DNR can issue them for up to sev- beginning in February 2014. Since complex. visitors to Belle Isle will “They are the best in the world at en years before having to go back then, the state has invested nearly find kayaking, carriage “We’re definitely look$12 million in the park, including rides, food trucks and ing to take the lead on a what they do,” Jacobs said. “In or- to bid.

“We haven’t made final deci- removing hazardous trees and renmore. fundraising campaign to der for us to do this the right way, Last fall, the Michigan completely renovate the we thought it was important to have sions on length, but will most like- ovating and reopening bathrooms.

Visitors to the park must disDepartment of Natural Reathletic complex and them on board. This project is too ly offer the contracts for an initial sources asked area busiturn it into a state-of-the- important to risk on me learning on three-year term, and then as long play a parks pass, which costs $11 nesses to bid on 12 conas the terms of the contract are be- per year and is purchased when art hub for health and the job for the first time. tracts for recreational wellness,” Jacobs said.

“It sounds great that I get to ing met, extend the additional four residents renew their vehicle regand concession opportuBecause that is such a build my own playground, but this years,” said Brenda Mikula, con- istration. Passes are also available nities on the island. In significant overhaul, Ja- is more important than Come Play cession/lease manager for the for purchase at the park. There is Amy Haimerl total, 28 firms entered cobs asked Biederman Detroit. We want to be strategic DNR’s parks and recreation divi- no cost for visitors who walk, bike or bus onto the island. bids, with 10 Detroit-based compa- Redevelopment Ventures to part- and ensure that this continues to sion.

This column originally appeared nies submitting proposals. (Just as ner with him since it has been in- be an asset for the city of Detroit Belle Isle is a Michigan state a side note: Where were y’all? How volved with such high-profile pro- and the people of the city.” park. Former Detroit Emergency as an Amy Haimerl blog at crainsThe length of the contracts has Manager Kevyn Orr leased the 982- detroit.com. could there only be 28 bidders for jects as Bryant Park in New York 12 plum contracts?)

Last week, the DNR released the winners: 䡲 Athletic complex, including scheduling athletic fields (two bids): Come Play Detroit in partnership with Healthy Detroit and New York City-based Biederman Redevelopment Ventures 䡲 Golf driving range (four bids): Francine Pegues, president of Detroit-based Dan Teak LLC, who was most recently responsible for developing “lists of prequalified businesses and general contractors working on the $300 million Wayne County Consolidated Jail Project,” according to her LinkedIn page 䡲 Mobile food services (three bids, two winners): Nancy Kuykendall (no further information); Gino Maisano, owner of What’s Up Dawg, which was formerly open in Dearborn 䡲 Mobile ice cream services (five bids, two winners): Hamtramck-based NYC Yogurt, owned by Saad Almasmari; Detroit-based EdWhen you work with the Huntington Private Client Group, we meet with you face-to-face. ible Liz, owned by Liz Godwin Kids row food concession (five 䡲 Using our Listen, Plan, Advise® approach, we work with you to create a clear plan that fits bids): Bert Dearing, owner of Bert’s Warehouse in Eastern Market your needs, giving you meaningful advice about the options available for meeting your 䡲 Watercraft/bike/snow sport objectives. As your goals change over time, we help you review your plan to make any equipment rental (three bids): Wyandotte-based Riverside Kayak necessary revisions. And we keep you involved every step of the way.

Connection 䡲 Electric carriage ride service (two bids): Farmington Hills-based Andre’s Carriage Tours, owned by Dave Ducharme 䡲 Porta-potty and handwash station rental (one bid): Ypsilantibased Parkway Services Inc. 䡲 Mobile toy sales (two bids): Joselyn Jackson, who owns St. Senior Vice President and Regional Manager Clair Shores-based Glitter-N-Glow Private Client Group Novelties 䡲 Beach chair/umbrella rental Huntington National Bank (one bid): Detroit-based Caliente Detroit, owned by Alicia Chapman and a brand of her firm Chappy 220 Park Street Group Investments LLC The highest-profile contract is Birmingham, MI 48009 for the athletic complex, which 248.637.8206 phone was awarded to 248.824.4441 cell Come Play Detroit. The Deeric.dietz@huntington.com troit-based company has been organizing sports leagues on the island for the past five years and last HUNTINGTON PRIVATE CLIENT GROUP year was awardJacobs The Huntington Private Client Group is a team of professionals that includes Private Bankers and Personal Trust Administrators and Portfolio Managers from The Huntington ed the contract National Bank and licensed investment representatives of The Huntington Investment Company, who work together to deliver a full range of wealth and financial services. to manage the permits and schedMember FDIC. ®, and Huntington® and Listen, Plan, Advise ® are federally registered service marks of Huntington Bancshares Incorporated. Huntington ® Welcome.™ uling for the playing fields. That is a service mark of Huntington Bancshares Incorporated. ©2014 Huntington Bancshares Incorporated. will continue this year while CPD founder Justin Jacobs will look at

Small Biz

WE BELIEVE PERSONAL ATTENTION IS BEST GIVEN IN PERSON.

Eric W. Dietz

DBpageAD_DBpageAD.qxd 2/10/2015 1:42 PM Page 1

20150216-NEWS--0011-NAT-CCI-CD_--

2/13/2015

11:43 AM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

“If I have diabetes, I can go to a primary care physician or a federally qualified health center. But if I also struggle with depression, I might not be as good about going to that clinic. We want to empower that primary care doctor to take care of that person” with a referral.

People 䡲 Paul Kellerman, M.D., was named section head of nephrology at Beaumont Hospital, Royal Oak. He will also serve as medical director of inpatient apheresis, medical director of the Beaumont Dialysis Center, Berkley, and co-director of the nephrology course at the Oakland University William Beaumont School of Medicine.

Harris

䡲 Karen Harris, vice president of patient care services and chief nursing officer for Henry Ford West Bloomfield Hospital, was elected president of the Association of Women’s Health, Obstetric and Neonatal Nurses.

Chopp

䡲 Michael Chopp, distinguished professor of physics at Oakland University, was given the 2015 Thomas Willis Lecture Award by the American Heart Association for his contributions to biomedical research.

䡲 Mary Haarman, director of mission relations at Aquinas College, and Doug Nouse, a manufacturer’s representative at Birmingham-based Nocran LLC, were elected to the Hospice of Michigan Foundation board.

Welch

䡲 Robert Welch, M.D., joined the Detroit Medical Center as vice chairman of obstetrics and gynecology clinical operations and Wayne State University as the chief and division director of maternal fetal medicine. 䡲 Margaret Keeler was given the 2015 AANP Nurse Practitioner State Award for Excellence from the American Association of Nurse Practitioners.

Keeler

䡲 Michele Oliveto has been named COO of AudioNet America Inc., Clinton Township.

AudioNet is a national hearing aid network. She formerly was client services officer at DST Health Solutions LLC, Southfield.

䡲 Joseph Fournier has been named chief human resources officer for the University of Michigan Health System, Ann Arbor.

He previously was vice president and chief human resources officer for UMass Memorial Medical Center in Worcester, Mass.

Oliveto

Page 11

Lynda Zeller, Michigan Department of Community Health

Converging on care ISTOCK PHOTO

Push improves state mental health services, but a long road lies ahead

BY JAY GREENE CRAIN’S DETROIT BUSINESS

T

he changes underway in Michigan’s mental health delivery system are being pushed along at the top by two unlikely allies: Republican Lt. Gov. Brian Calley and Democratic Sen. Rebekah Warren.

Although they have taken different paths, Calley and Warren have been interested in improving the delivery of services to treat mental health, substance abuse and developmental disabilities LOSING THE GAPS in the state’s chilHealthy Michigan dren and adults for Medicaid helps more than a decade. expand behavioral Calley, who has health services, Page 13 a child with autism Report cites progress and successfully adon mental health vocated in 2011 for recommendations, Page 15 an autism benefit insurance mandate, and Warren, who has advocated since 2008 to expand the federal Mental Health Parity Act in Michigan, discovered they could find common ground on behavioral health issues.

C

Lt. Gov. Brian Calley and State Sen. Rebekah Warren, members of Gov. Rick Snyder’s mental health commission, are happy with improvements that have been made to date, but also say that real progress will take several years of continued efforts.

They served on Gov. Rick Snyder’s

Michigan Mental Health and Wellness Commission during 2013. Last month, that group released its first-year report, which highlighted legislative actions and improvements in how the state delivers publicly funded behavioral health care.

Calley and Warren believe much progress has been made the first year after the commission issued its recommendations. But they say real progress will take several years of continued efforts.

Access problems Access to providers remains a major problem, despite the federal government’s adding behavioral health cover-

age as an essential benefit to health insurance plans under the Affordable Care Act and the state’s enhancing Healthy Michigan Medicaid with mental health coverage, experts said.

A 2013 survey by the University of Michigan’s Center for Healthcare Research and Transformation found that one in five Michigan residents had been diagnosed with depression at some point in their lives, a number comparable with national averages.

But the same survey also found that 57 percent of primary care physicians in Michigan said the availability of mental health services in their community was inadequate for adults, and 68 percent reported it was inadequate for children.

“The commission’s recommendations didn’t focus on access to care areas,” said Marianne Udow-Phillips, the center’s director.

“It is a complex problem because it involves workforce issues. We don’t have enough psychiatrists” and other mental health professionals.

Care coordination One of the commission’s main concerns is that care barriers exist between the mainstream medical system — led by hospitals and physicians — and providers serving in the behavioral health system.

See Care, Page 12

20150216-NEWS--0012,0013-NAT-CCI-CD_--

2/13/2015

10:36 AM

Page 12

Page 1

February 16, 2015

CRAIN’S DETROIT BUSINESS

Health Care

State expands records exchange to improve care 2015 MHA PATIENT SAFETY & QUALITY SYMPOSIUM Leading in the Age of Transformation March 10 and 11 | Detroit Marriott at the Renaissance Center | Detroit Examine the factors driving healthcare transformation, from the shift from volume to value toward population health, the demand for greater transparency and cost-effective care, and systems that are the pinnacle of quality and safety improvement Attendees will not only gain in-depth knowledge about these pressing trends –– but they will do so at a conference that surrounds them with today’s healthcare leaders and provides extraordinary benefits: • • • • • • • • •

Internationally recognized speakers who are healthcare experts Case study sessions outlining techniques you can adopt immediately Discounted team registration Virtual attendance Education credits Networking opportunities Exhibitors whose products can make your job easier An immersive preconference A venue surrounded by big-city fun, cultural wonder and renowned restaurants

Visit www.mhakeystonecenter.org to learn more, or call (517) 323-3443 and ask for Janice Jones.

Showcase Your Company’s

Healthy Culture

Is your workplace the healthiest in Michigan?

This award takes a look at the best practices used by employers across the state toward the goal of creating a healthy workplace.

,WŐV IUHH WR HQWHU Winners will have their wellness efforts recognized as part of a print supplement to run in Crain’s Detroit Business in June. They will also be featured in a video series as well as honored at an event on Wednesday, April 22, 2015 at Henry Ford West Bloomfield Hospital in Bloomfield Hills.

NOMINATION DEADLINE: MONDAY, FEB. 16 To make a nomination, visit crainsdetroit.com/nominate

In the past year, the Michigan Department of Community Health has taken action to improve the coordination of physical and behavioral health care by expanding the exchange of electronic health records to providers in two ways. 䡲 The first is to develop an electronic data product called Care Connect 360. The online, claimsbased electronic health record is being made available to the state’s 46 community mental health agencies. The database has information about paid claims that summarizes patients’ medical and behavioral services.

“Case managers can see that (a patient has) been hospitalized three times for diabetes and see the claims for mental health services,” said Lynda Zeller, deputy director of behavioral health and developmental disabilities admin-

istration at Community Health. 䡲 The second way is through real-time clinical information that also is becoming available through the Michigan Health Information Network, Zeller said.

“We have three of the 10 (prepaid inpatient health plans) online now with the others in process,” she said.

Nicole Lawson, manager of clinical practice and health care innovation for the Oakland County Community Mental Health Authority, said Care Connect 360 is proving its value.

“We are seeing hospitalizations trending down because people have access to care now (with a 24hour crisis center operated by Common Ground) and are able to receive treatment,” Lawson said. “Before, you had to be in crisis to access care. Now it is more preventive in nature.”

— Jay Greene

Care:Mental health moves ■ From Page 11

Over the past two years, coverage for behavioral health care has improved somewhat, said Lynda Zeller, deputy director of behavioral health and developmental disabilities administration at the Department of Community Health.

For example, the Affordable Care Act increased private coverage for behavioral health, and Healthy Michigan Medicaid added benefits.

“It allows people access to specialty behavioral services, community mental health networks and services that wrap around a person,” Zeller said.

Crisis services and prescription coverage also are more readily available, she said.

Zeller said the state thinks people should be able to access behavioral health services in multiple settings, including primary care.

“If I have diabetes, I can go to a primary care physician or a federally qualified health center. But if I also struggle with depression, I might not be as good about going to that clinic,” Zeller said. “We want to empower that primary care doctor to take care of that person” with a referral.

Steve Candela, director of outpatient behavioral health at St. John Providence Health System, said efforts started two years ago to colocate medical and mental health professionals in St. John’s 10 outpatient locations in Southeast MichiCandela gan.

“Our biggest barrier is shortages of psychiatrists and access to outpatient care,” especially with the expansion of mental health coverage under Obamacare and Medicaid expansion in Southeast Michigan, he said.

Candela said having a mental

health professional in the same physician clinic increases the chances that a patient needing those services actually will get help.

“We are placing more than 200 psychotherapists, psychologists and social workers into our practices to increase access to mental health services,” Candela said. “If you embed a therapist, a physician can let them know there is help right down the hall.”

Debbie Brinson, CEO of the Pontiac-based Oakland Integrated Healthcare Network, a health center with four locations, said most people with private commercial health insurance coverage now have expanded behavioral health services.

“Care depends on the level of acuity you have with mental health issues,” Brinson said.

“With mild to moderate problems, it is often difficult to get into the (public) system.”

But Brinson said Oakland Integrated’s clinics help break those barriers by offering integrated care through a health team composed of combinations of physicians, nurses, psychologists and social workers.

The team evaluates patients and devises treatment strategies.

“The way to make a radical difference in mental health services is to co-locate with primary care,” Brinson said. “Another radical piece is to bring mental health services to schools.”

Need for intermediate care Of $14.3 million allocated last July by the Michigan Legislature in the state’s 2014-15 budget to kick-start several recommendations by Snyder’s commission, $1 million was earmarked to expand intermediate mental health care beds and services.

The commission said intermediate care beds should be made availSee Next Page

20150216-NEWS--0012,0013-NAT-CCI-CD_--

2/13/2015

10:36 AM

Page 2

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 13

Health Care From Previous Page

able regionally for stays of 48 hours to 30 days. Services also should include substance and alcohol use disorder as well as mental health.

Another recommendation: The state should develop performance criteria for adult foster care homes.

Calley said his No. 1 priority this year is to address the need for intermediate care. Community Health is undergoing a thorough review of options, he said.

“It has to be designed with reintegration into society in mind, not to just lock people away (in inpatient hospitals) and segregating them from society,” he said.

Calley said Snyder’s new “river of opportunity” concept calls for the state to design programs around the needs of people.

“We don’t want to simply feed the existing system with more dollars unless the outcomes are better,” he said. “We can do a lot better with the resources we have if we design the program around people.”

Zeller said Community Health decided to first focus its review of intermediate beds on children who most often have needed hospitalizations.

“Psychiatric hospitals haven’t been able to meet their (children’s) needs. We need something more in the community,” she said.

In Michigan, 60 private psychiatric hospitals with more than 2,200 beds serve inpatient needs.

Only 200 beds are for children.

So far, Community Health has issued a request for proposal to select a contractor that can offer a child behavioral action team to help strengthen existing clinical teams supporting and evaluating children.

Another option under study, Zeller said, is to encourage further development of six- to 12-bed child residential treatment facilities. “We are trying to identify if we have gaps and where they are,” she said.

Warren said the policy that began in the late 1980s of closing most of the state’s 16 inpatient psychiatric hospitals and opting for community-based care might have gone too far. Only four state-run psychiatric hospitals are open in Michigan, including one for children.

“We overcorrected,” Warren said. “We still have folks in crisis, and they need intermediate-term beds that we don’t have enough of.”

Candela said the $1 million made available by the state for intermediate care and crisis management is urgently needed.

“There is a gap of where people can go,” he said. “Some people need inpatient care, and that is limited. Some people need a brief experience, not at a hospital or as an outpatient. We are pushing for providers to create this service.”

St. John Providence in Southeast Michigan has four inpatient psychiatric units than range between 76 percent to 96 percent capacity and two partial hospitalization programs that run about 50 percent capacity.

“The state (and providers) are moving in the same direction” to improve care coordination of physical and behavioral health care, Candela said. “When it comes to behavioral health, everybody is performing in silos.”

Jay Greene: (313) 446-0325, jgreene@crain.com.

Twitter: @jaybgreene

Healthy Michigan Medicaid expansion helps thin care gaps

BY JAY GREENE CRAIN’S DETROIT BUSINESS

The disruption of the delivery of public mental health services in Southeast Michigan that began in 2013 because of state budget cuts has been largely alleviated by an expansion of Healthy Michigan Medicaid and adjustments made by regional mental health authorities, officials told Crain’s.

While gaps in care still exist, Lynda Zeller, deputy director of behavioral health and developmental disabilities administration at the Michigan Department of Community Health, said more people are receiving behavioral health services than before.

“We are still looking at gaps” in coverage for people who do not have Medicaid, Zeller said. “And as the system evolves, there will always be gaps.”

But Healthy Michigan now covers mental health services for about 500,000 new Medicaid enrollees, injecting about $274 million in federal funds into the state Medicaid program and eliminating a large number of uninsured residents who had no mental health coverage.

Because Michigan expanded Medicaid under the Affordable Care Act, state government was able to reduce general funding for mental health by about $209 million, according to Community

Health.

Since Healthy Michigan Medicaid went into effect in April 2014, 41,855 enrollees, or 10.1 percent of 416,292 total enrollees, have received 453,704 behavioral health services, or 10.8 services per enrollee, through January, according to Community Health.

Tom Watkins, Tom Watkins, CEO of Detroit Wayne County Community the Detroit Wayne County Mental Health Authority Community Mental Health Authority, said the state funding the authority has increased Mediccuts deeply affected service deliv- aid revenue nearly $30 million so ery beginning in 2013. But the in- far this fiscal year, Watkins said.

But Watkins said he expects the fusion of Healthy Michigan Medicaid funding over the past year state to make new cuts this year and efforts by the authority to im- as it takes steps this spring to adprove efficiencies helped mini- dress a projected $325 million revenue shortfall. mize the impact.

“2015 was theoretically going to “We recovered from the cuts faster than I thought we would,” be a pretty good year,” he said.

Watkins said. “We moved rather “This just adds a new wrinkle.”

The Oakland County Community aggressively to maximize benefits and capitalize on the Healthy Mental Health Authority also abMichigan Medicaid plan. We are sorbed at least $20 million in cuts last year, officials said. in pretty good shape now.”

Despite having to cut its $680 “We are still advocating for admillion budget by about $60 mil- ditional state funding,” said lion general funds dollars in 2013, Nicole Lawson, Oakland’s man-

moved rather “ Weaggressively to

maximize benefits and capitalize on the Healthy Michigan Medicaid plan. We are in pretty good shape now.

”

ager of clinical practice and health care innovation. “We are looking for efficiencies and other ways to help people.”

But, overall, Lawson said, the state has taken positive steps so far to improve mental health delivery.

“We have seen vast improvements in the past year in health care integration” at the authority, Lawson said. “We have a single consent form that takes the burden off a person having to get multiple releases of information from different parties, and we are able to exchange data to improve health care coordination for people.”

In Oakland County, nearly 36,000 people are enrolled in Healthy Michigan Medicaid, Lawson said, and the authority has seen a big increase in patients using mental health benefits.

Elizabeth Hertel, director of health policy and innovation with Community Health, said that for many patients, Healthy Michigan Medicaid has helped bridge the gap between physical to behavioral to substance abuse.

“We use primary care screening to identify problems,” she said. “People don’t know how many medical problems are created not having mental health problems treated earlier.”

Jay Greene: (313) 446-0325, jgreene@crain.com.

Twitter: @jaybgreene

DBpageAD_DBpageAD.qxd 2/12/2015 8:41 AM Page 1

C ELEBRATE A N E W YE AR IN FEBRUARY

✤⟩ḻŦ THE DETROIT CHINESE BUSINESS ASSOCIATION INVITES YOU TO JOIN US IN WELCOMING A DELEGATION OF GOVERNMENTAL AND BUSINESS LEADERS FROM CHINA TO MICHIGAN FOR OUR CHINESE NEW YEAR GALA. IN THE 12-YEAR CYCLE OF THE CHINESE ZODIAC, 2015 IS THE YEAR OF THE SHEEP, MARKING A PROMISING YEAR FILLED WITH PEACE AND GREAT BUSINESS RELATIONSHIPS. WE INVITE YOU TO DEMONSTRATE MICHIGAN’S WARMTH AND GOODWILL, AND BUILD “GUANXI” FOR A GOOD YEAR TO COME.

THE 2015 DCBA CHINESE NEW YEAR GALA WILL FEATURE:

KEYNOTE PRESENTATION

BY GOVERNOR SNYDER*

BALLET DETROIT FOUNDATION

PEKING OPERA

GET YOUR T ICKE TS TODAY! RE GISTRATION ENDS FEBRUARY 23.

FRIDAY, FEBRUARY 27, 2015

RESERVATIONS

MOTOR CITY CASINO, SOUNDBOARD ROOM

EARLY BIRD SPECIAL: TABLES FOR TEN $2,000 (LIMITED TIME ONLY)

2901 GRAND RIVER AVE., DETROIT MI 48201

GENERAL GALA TICKETS: $250/PERSON; $450/COUPLE

5:00 PM - VIP REGISTRATION & RECEPTION 5:30 PM - GENERAL REGISTRATION & RECEPTION 6:30 PM - DINNER PROGRAM

DCBA CORP MEMBERS: $225/PERSON; $400/COUPLE PLEASE CONTACT CATHY CUI (CATHY@DCBA.COM) FOR RESERVATIONS OR MILAN STEVANOVICH (MILAN@DCBA.COM) FOR SPONSORSHIP INQUIRES.

The Rudolph/Libbe Companies

WWW.SURESOLUTIONSMBE.COM

20150216-NEWS--0015-NAT-CCI-CD_--

2/13/2015

10:38 AM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 15

Health Care

Report cites progress on state mental health recommendations

BY JAY GREENE CRAIN’S DETROIT BUSINESS

A progress report on the more than 60 recommendations made by Gov. Rick Snyder’s Michigan Mental Health and Wellness Commission cites progress on more than 20 of them.

The recommendations aim to eliminate service gaps and propose new models to improve mental health services in Michigan.

“The first year, we went around the state to hold public hearings. It didn’t matter where we were, we heard loud and clear: There is too much disconnect with mental and physical (medical) care, there are not enough services, and there are transportation problems for appointments and jobs,” said state Sen. Rebekah Warren, D-Ann Arbor, a commission member.

She said people with behavioral health problems also face discrimination, problems accessing services and financial distress, as do families with a child with autism spectrum disorder.

A fellow commission member, Lt. Gov. Brian Calley, said he will

push for all the recommendations to be carried out in the next two years, including intermediate-care beds, flexibility in funding special education and job opportunities.

Calley said working across the aisle with Democrats contributed to better recommendations and a successful implementation rate.

Warren said the panel’s recommendations, which required unanimous approval from the six-member bipartisan group, sought goals that were achievable quickly.

“We don’t think we can break down the barriers in one year, but we wanted to show progress,” she said. “We have done that.”

Key recommendations from December 2013 report Improve coordination of behavioral health and physical health and encourage integration of mental health and medical professionals to provide seamless care. Chronic or serious physical health problems can contribute to mental illnesses.

as well as mental health services.

Develop performance criteria rules for adult foster care homes.

READ THE REPORT The full Mental Health and Wellness Commission 2014 annual report is available online at michigan.gov/mentalhealth

Promote telehealth services for psychiatrists and other health professionals to ensure patients have better access to care regardless of their location.

Consider a bundled-payment model to reimburse providers for Medicaid and community mental health services. A bundled payment approach typically ties multiple services together in a single reimbursement rate to encourage coordinated care.

Begin implementation of a Medicaid health home plan to integrate physical and behavioral health for designated populations.

Authorize intermediate-care beds for juveniles and adults with a mental illness for periods of 48 hours to 30 days and incorporate substance and alcohol use disorder

Progress toward goals from January 2015 report In 2014, the Legislature approved a 15-bill package that removed the words “mental retardation” and other similar phrases from state statutes and replaced descriptions with specific diagnoses.

The Michigan Department of Community Health issued a uniform behavioral health consent form to help patients share information with various providers involved in their care. The single consent form will save patients and providers time in filling out duplicate forms.

The Michigan Health Information Network now provides both physical and behavioral electronic health records to providers to support coordination of care. Most of the funding came through Community Health from two federal grants.

Schools now can use funds earmarked for at-risk students for a va-

riety of purposes, including medical, mental health and counseling.

The state Interagency Council on Homelessness was created to provide statewide planning and development resources for homeless Michiganders.

Mental health care is now an allowable expense under the Michigan Veterans Trust Fund, and pilot programs are underway in Battle Creek and Ann Arbor to ensure vets have full access to services.

The Mental Health Diversion Council was expanded to find better ways to help deal with mental health issues and juvenile justice.

The 2014-15 state budget included $14.3 million to begin 25 recommendations that include coordinating care between schools and providers, increasing housing opportunities, training for law enforcement, sharing health information exchange data and expanding child health centers in underserved areas.

Last week, the governor issued an executive order to cut $2.9 million from the commission’s budget to implement its recommendations.

SOMETIMES EVEN HEALTHCARE HEROES NEED A CHAMPION

®

Healthcare professionals and executives rely on our attorneys to obtain the right results in the boardroom and courtroom, so they can stay focused on their patients and business.

Licensure Actions Q Transactions Q Medical Liability Q CON Managed Care Contracting & Disputes Q Medicare & Medicaid Q Compliance Q

Integration

Q

Q

D. Jennifer Andreou

Mark S. Kopson

Medical Liability Practice Group Leader 586.466.7607 | jandreou@plunkettcooney.com M i ch i g a n

•

Ohio

•

Healthcare Industry Group Leader 248.901.4061 | mkopson@plunkettcooney.com Indiana

•

w w w. p l u n k e t t c o o n ey. c o m

DBpageAD_DBpageAD.qxd 2/12/2015 4:07 PM Page 1

$1,000 CAN

CHANGE YOUR NEIGHBORHOOD

DETROIT EMPLOYERS: Grow Detroit’s Young Talent is a 6-week summer youth employment program that has been re-tooled to ensure PRE-SCREENING and ON-THE-JOB support for teens and employers.

Mayor Mike Duggan invites you to help Detroiters, ages 14-24, get ready for the workforce through a summer immersion.

EMPLOY • SPONSOR • DONATE • CHANGE Make an impact - visit GDYT.org today!

Grow Detroit’s Young Talent is a City of Detroit-endorsed program operated by the nonprofit organization City Connect Detroit.

For questions, contact youthjobs@cityconnectdetroit.org.

20150216-NEWS--0017-NAT-CCI-CD_--

2/13/2015

11:54 AM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 17

Metro Detroit visitors bureau launches new marketing campaign

BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

The Detroit Metro Convention & Visitors Bureau is rolling out a new marketing campaign urging metro Detroit to put its best face forward as a surge of new events and visitors comes to the region.

Among them is the so-called Super Bowl of conferences, the American Society of Association Executives event in August, which is expected to bring 6,000 meeting planners who could bring future events to the city.

In all, the back-to-back conventions and meetings are expected to attract 200,000 new visitors this

Utah company buys Southfield apartment complex A Utah multifamily ownership and management company has purchased its first two properties in Michigan, including one in Southfield.

Provo-based Peak Capital Partners, which has a portfolio of 14,000 units in 17 states under ownership and management, purchased the 256-unit Pebble Creek Apartments complex, southeast of 12 Mile and Inkster roads, and Traditions Townhomes complex in Holland, which has 120 units.

Financial terms of the sale were not disclosed.

Staff at Pebble Creek said the complex was previously owned by Concord Management Ltd. Pebble Creek one-bedroom units start at $713 per month and have 812 square feet, according to the complex’s website. Two-bedrooms start at $859 and have 1,100 square feet and three-bedrooms start at $992 and 1,300 square feet.

Chris Manning, managing director of Peak Capital, said both complexes have occupancy rates about 95 percent.

Although both are well-maintained, “light exterior renovations are planned,” Manning said.

Those include things like new landscaping, painting touchups and parking lot repairs. Units will also be repaired and updated as they are released.

“We really liked the prospects in the economy in Michigan,” Manning said. “We think that it’s poised for growth and we really like these properties. … These are clean, safe, well-run properties and we intend to keep them that way.”

Traditions Townhomes was sold

by Plymouth, Minn.-based Dominium, according to CoStar Group Inc., a Washington, D.C.-based real estate information service.

Both properties were built in 1996, according to CoStar.

— Kirk Pinho

year, about twice the number the Super Bowl drew in 2006, the convention bureau said.

The Detroitbased bureau estimates that the groups hosting a O’Callaghan meeting in Detroit this year will spend about $214 million here.

The Detroit area hasn’t seen this much convention business in 20 years or more, said Michael O’Callaghan, the bureau’s execu-

tive vice president and COO. “There’s a sense these Midwestern destinations are historically very friendly ... that gives us an edge over some of the destinations on the coast like New York, Boston or Los Angeles,” he said, and the campaign’s goal is to reinforce that.

If as a region we wow the meeting planners and visitors, “they’re going to go back and say great things about the city and potentially ... generate additional income and jobs in our community.”

Dubbed “2015. One Team, One Dream,” the bureau’s new campaign will include a 30-second public service announcement video

aired on local television stations.

The video features local hospitality, restaurant and cultural attraction employees and volunteers who’ve been recognized by peers or the convention bureau for outstanding customer service, speaking about the importance of it.

Also part of the campaign: Local print advertisements, briefings to the hospitality industry before each major event, hospitality training for transportation and hotel employees and calls for event volunteers.

The convention bureau has invested about $120,000 to create the campaign and program, O’-

Callaghan said.

Among the other conventions coming to Detroit this year are the Shell Eco-marathon Americas, bringing 32,500 in April; the Midwest Media Expo, 20,000 in April; the USA Volleyball Open National Championships and Corporate Meetings, 10,000 in May; the National Baptist Christian Education Congress, 25,000 in June; the Evangelical Lutheran Church of America Youth Gathering, 36,000 in July; and Youmacon, coming in October with 14,000 attendees.

Sherri Welch: (313) 446-1694, swelch@crain.com.

Twitter: @sherriwelch

20150216-NEWS--0018-NAT-CCI-CD_--

2/13/2015

11:55 AM

Page 1

Page 18

February 16, 2015

CRAIN’S DETROIT BUSINESS

Compuware, BMC team up to compete against IBM, CA Tech

BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Detroit-based Compuware Corp. and Houston-based BMC Software Inc., longtime competitors in offering services and products to users of mainframe computers, will announce Tuesday that they have an agreement that will allow them to sell to each other’s customers.

The two plan to use the agreement to cut into the market share of their two largest competitors, New York-based IBM Corp. and New York-based CA Technologies Inc. The companies are focused on a new line of mainframe computers IBM debuted in January called the z13 that specifically targets the fastgrowing mobile segment of the com-

puter market and the huge volume of data that segment generates.

Compuware and BMC will begin marketing a beta version of an interface for the z13 mainframe at a large IT convention in Seattle March 1-6, with a finished version scheduled to be available for customers in June, according to Chris O’Malley, Compuware’s president and CEO.

The interface will use two of BMC’s software products and one of Compuware’s products. The two companies say the three in tandem will make running the z13 as well as previous z System mainframes easier, faster and cheaper.

Even if customers own the z computers instead of leasing them, they are charged on a metered basis for the time spent using the li-

censed software that runs them.

O’Malley, who joined Compuware last summer after a lengthy career at CA, was named to head the company in December after it was bought by Chicago-based Thoma Bravo LLC. Compuware now does mainframe services and products exclusively, with cloud-based computer services split off as a separate company, Dynatrace LLC of Waltham, Mass.

O’Malley said he approached BMC in December to plan a strategy for taking advantage of the much ballyhooed upcoming release of the new IBM line of mainframes.

“I made the case for us to come together and get our customers to buy each other’s tool sets,” O’Malley told Crain’s in advance of the formal announcement. “It made sense for us to address solutions that neither of us could do alone.

“We’ve already reached Chris O’Malley, out to cusCompuware tomers and analysts jointly to tell them about this,” he said.

“This won’t be the last thing we do together.”

O’Malley declined to project any revenue increases this could lead to for Compuware, but said: “This will do a lot for us in terms of revenue numbers and bookings.

We’re two vendors who are one strata below IBM and CA, and this will help us.”

Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

“theI made case

for us to come together and get our customers to buy each other’s tool sets. ... This won’t be the last thing we do together.

Employment Litigation Experience

In Your Corner.

®

”

Ŷ Represents employers in litigation involving all types of employment and labor claims. Ŷ Advises healthcare organizations in matters involving peer review activities, professional credentialing and discipline. Ŷ Counsels employers regarding employment policies, reductions in force and employment agreements.

BANKRUPTCIES First Tier Ranking in Labor Law – Management Health Care Law

■

Metro Detroit

■

Grand Rapids

■

Kalamazoo ■ Grand Haven

■

Lansing

Contact Terry Miglio at tjmiglio@varnumlaw.com

The following business filed for protection in U.S. Bankruptcy Court in Detroit Feb. 6-13. Under Chapter 11, a company files for reorganization.

Chapter 7 involves total liquidation: Advanced Laboratories Inc., 13201 Prospect St., Dearborn, Chapter 7. Assets: $43; liabilities: $201,310.

— Natalie Broda

20150216-NEWS--0019-NAT-CCI-CD_--

2/13/2015

10:39 AM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 19

CALENDAR 2014 NEWSMAKER OF THE YEAR Who made news in 2014? Find out at the Crain’s Detroit Business Newsmaker of the Year luncheon.

It takes place Feb. 25 from 11:30 a.m.-1:30 p.m.

Hear the dramatic details from key players involved in Detroit’s historic bankruptcy as Crain’s honors the city’s former emergency manager, Kevyn Orr, and Judge Steven Rhodes of the U.S. Bankruptcy Court. Gerald Rosen, chief judge of the U.S. District Court for the Eastern District of Michigan, who also acted as chief bankruptcy mediator, will moderate. Also, 2014’s BestManaged Nonprofit winner will be honored.

The event will be at MotorCity Casino Hotel, 2901 Grand River Ave., Detroit. Individual tickets are $70, a reserved table of 10 is $750, and student tickets are $60. Preregistration closes Feb. 20 at 5 p.m. If available, walk-in registration will be $90 per person.

For more information or to register, contact Kacey Anderson at (313) 446-0300 or cdbevents@crain.com, or visit crainsdetroit.com/section /CrainsEventsUpcoming. Join the conversation: #crainsnewsmaker.

and address legal, accounting and risk considerations, business plans and financing options. Spark East, Ypsilanti. $25. Registration ends 24 hours before the event. Contact: Alissa Steiner, (734) 372-4071; email: alissa@annar berusa.org; website: annarborusa.org.

UPCOMING EVENTS Leading Nonprofit Organizations: Training for Executive Directors and Boards. 9 a.m.-4 p.m. Feb. 25. Michigan Nonprofit Association. Regina

Funkhouser, executive director of the Nonprofit Network, facilitates a program designed to help nonprofit board members and executive directors better understand legal and fiduciary responsibilities and more effectively raise funds. Nonprofit Center at the Armory, Lansing. $60 MNA members, $80 nonmembers, $30 for additional members from the same organization.

Contact: (517) 796-4750; website: nonprofnetwork.org.

Commercial Real Estate Financing A-Z. 4-6 p.m. Feb. 25. CREW Detroit. Speak-

ers include Claudia Cassa, vice president and alternate group manager, Comerica Bank; Jenny Meier, executive vice president and chief revenue officer, Bank of Birmingham; and Clarissa Chartier, chief credit officer and executive managing director, Talmer Bank.

Crowne Plaza Hotel, Detroit. $40 members, $75 nonmembers. Register by Feb. 23. Contact: Norma Lee Beuter, (248) 646-9629; email: beuter@comcast.net; website: crewdetroit.org.

19th Chinese New Year Gala. 5-11 p.m.

Feb. 27. Detroit Chinese Business As-

sociation. Keynote speaker Gov. Rick Snyder among government and industry leaders. Reception, dinner, entertainment. MotorCity Casino Hotel, Detroit. $250. Register: (248) 918-0391 or www.dcba.com. Email: milan@dcba. com or cathy@dcba.com.

Java @ the Junction. 8:30-10 a.m. March 3. TechTown. Scott Trossen, founder of the Michigan HR Group, discusses how to find the right employees. TechTown, Detroit. Free. Contact: (313) 879-5250; email: info@techtowndetroit.org; website: techtowndetroit.org.

Come visit TURCK at the

2015 Manufacturing in America Symposium Ford Field March 11th and 12th, 2015 Details & Registration: www.techtipoff.com

WEDNESDAY FEB. 18 Breakfast of Champions. 7:30-9 a.m.

Leadership Oakland.

Jennifer Korman, community relations, Mercedes-Benz Financial Services, moderates a panel of young professionals who will talk about what it means to be a leader. MSU Management Education Center, Troy. $25 members, $36 nonmembers. Will take walk-ins, but encourage calls by Tuesday.

Contact: (248) 952-6880; email: info@leadershipoakland.com; website: leadershipoakland.com.

Branding vs. Marketing. 8-10 a.m. Better Business Bureau. This breakfast and networking session features a presentation by Linda Kleist, owner, Identity Graphic Design, on building a better brand and marketing clearly and effectively. Better Business Bureau, Southfield. Free; walk-ins are allowed. Contact: Demitria Robinson, (248) 799-0305; email: drobinson@easternmichigan bbb.org; website: bbb.org.

February Economic Development Forum. 8-9:30 a.m. Troy Chamber of Commerce. Bing Goei, director of the Michigan Office for New Americans, will speak about attracting highly skilled job-creating immigrants to Michigan. Rehmann, Troy. Free for chamber members, $15 nonmembers; an additional $5 will be charged to those who register day of the event.

Contact: Jaimi Brook, (248) 641-8151; email: theteam@troychamber.com; website: troychamber.com/events.

Workplace Strategy Panel. 8-10 a.m. Society for Marketing Professional Services Michigan. Panel features workplace strategy leaders, owners, real estate advisers and workplace trend developers. Panelists include James Meredith, corporate-commercial studio leader-workplace strategy, Harley Ellis Devereaux; Heidi Wagner, senior facilities leader, Robert Bosch LLC; Diane Stegmeier, president, Stegmeier Consulting Group; and David Arwady, managing director, CBRE. David Kiwior, president, Airea Inc., will moderate. Schoolcraft College VisTaTech Center, Livonia. $45 SMPS members, $90 nonmembers, $30 students (with current ID); will take walk-ins. Contact: smps-mi.org.

FRIDAY FEB. 20 Starting Your Own Business. 8:30 a.m.4 p.m. Ann Arbor Spark. Spark and community partners help aspiring entrepreneurs forge a marketing plan

All industrial automation technology parts are not created equal; TURCK customers can rest assured that no matter the application challenges, TURCK works.

A CPA that understands Medical Practice Management?

Whoa, baby!

For ShindelRock, advising medical practices on financial and accounting matters means providing timely information so physician-owner practices can plan accordingly, taking advantage of cost-saving measures that can affect a practice’s profitably and back- office operations. Our medical practice clients, like Women’s Health Consultants, PLC of Novi, rely on the big results ShindelRock delivers, so they can focus on the delivery of (much) smaller things.

For medical practice management services, call 248.855.8833 www.ShindelRock.com | 248.855.8833 28100 Cabot Drive Ste. 102 | Novi, MI 48377

20150216-NEWS--0020-NAT-CCI-CD_--

2/13/2015

10:41 AM

Page 20

Page 1

February 16, 2015

CRAIN’S DETROIT BUSINESS

PEOPLE CONSTRUCTION Seth Herkowitz to partner, Hunter Pasteur Homes LLC, Farmington Hills, from manager.

EDUCATION Daniel Henne to director of auxiliary marketing, Office of Student Life, University of Michigan, Ann Arbor, from creative director, Interrupt LLC, Sylvania, Ohio.

Henne

FINANCE

Sean Roberts and Matthew Hare to principal, Huron Capital Partners LLC, Detroit, from vice president. Also, Brad Barker and Brian Schwartz to vice president, from associate.

LAW

IN THE SPOTLIGHT Bloomfield Hills-based TriMas Corp. has named David Rice to the new position of CFO of the spinoff Cequent organization. He will take the reins once the spinoff from TriMas is complete — expected in mid-2015. He will also assume responsibility for the human resources of Cequent businesses.

Rice is serving as division finance officer of TriMas’ Cequent Performance Products Inc. in Plymouth.

Rice joined TriMas in 2005 and has been group controller and director of corporate audit. He also held divisional controller positions at GKN Sinter Metals and Mueller Industries Inc., and managed international operations finance at The Woodbridge Group.

Rice, 51, holds a bachelor’s degree in business Rice administration with a concentration in accounting from Wayne State University and an executive MBA from the University of Michigan. He is a certified public accountant.

Birmingham, from director of client services, UltraLevel Inc., Southfield.

nities, Grand Rapids.

Phil Santer to vice president of business development, Ann Arbor Spark, Ann Arbor, from senior business development manager, Ann Arbor Spark, Brighton.

Julia DeHart to Rivertown Assisted Living administrator, United

NONPROFITS

Methodist Retirement Communities Inc., Detroit, from property manager,

from chief human resources officer, University of Cincinnati, Cincinnati.

MARKETING Lance Miller to chief technology officer, McCann Worldgroup Detroit,

KMG Prestige Inc., Toledo.

Neel Hajra to president and CEO, Ann Arbor Area Community Foundation,

Toomey

Luxury suites available: 2/24 – Pistons vs Cavs @ 7:30 p.m.

Ludden

Erin Toomey to partner, Foley & Lardner LLP, Detroit, from senior counsel.

Karen Libertiny Ludden to shareholder, Maddin, Hauser, Roth & Heller PC, Southfield, from associate.

Kline

Santer

2/27 – Pistons vs Knicks @ 7:30 p.m.

MANUFACTURING

Richard Kline to executive director of

Erin Ascher to vice president-talent de-

3/26 – Bob Seger @ 6 p.m.

velopment and chief human resources officer, Gentherm Inc., Northville,

United Methodist Retirement Communities Inc., Chelsea, from executive di-

the Chelsea Retirement Community, rector, Covenant Retirement Commu-

Ann Arbor, from COO and vice president of community investment. Also, Patricia Walker to COO, from vice president and COO, Michigan Science Center, Detroit, and Jillian Rosen to director of community investment, from program officer.

Terri Hamad to corporate director, Cedars of Dexter and Rivertown Assisted Living, United Methodist Retirement Communities Inc., Chelsea, from executive director, the Cedars of Dexter, Dexter. Also, Crystal Collin to executive director, the Cedars of Dexter, Dexter, from director of operations, the Dispute Resolution Center, Ann Arbor.

6/14 – Rush @ 6 p.m.

BUSINESS DIARY ACQUISITIONS & MERGERS Penske Automotive Group Inc., Bloomfield Hills, an international transportation services company, has completed the acquisition of Freightliner medium and heavy-duty commercial truck dealerships in Chattanooga and Knoxville, Tenn. Website: penskeautomotive.com.

CONTRACTS

SUITES START AT $999 Including: VIP parking, private restrooms, and up to $600 in catering credits!

Pistons.com/premium

(248) 377-8477

700 Credit LLC, Southfield, a provider of credit reporting and compliance work for the automotive industry, announced an agreement with DealerClick, Santa Ana, Calif., a provider of automotive software, to allow DealerClick dealers access to credit reports, compliance and prescreen products from within DealerClick systems. Websites: 700credit.com, dealerclick.com.

ArborMetrix Inc., Ann Arbor, a provider of a cloud-based health care analytics platform, announced that Vanderbilt University Medical Center, Nashville, Tenn., will use its SurgicalMetrix to manage performances in its surgical services lines to improve the quality of care and patient outcomes.

Website: arbormetrix.com.

Barton Malow Co., Southfield, has been approved by the Holland Board of Public Works and Holland City Council for the design and construction of the new 125-megawatt combined cycle Holland Energy Park natural gas power plant for the city of Holland, replacing the coal-burning waterfront James DeYoung plant. The contract calls for generation and testing in late 2016 and substantial completion by February 2017. Website: bartonmalow.com.

PublicCity PR LLC, Southfield, a public relations agency, has added clients Gardner-White Furniture Co. Inc., Auburn Hills; Belle Tire Distributors Inc., Allen Park; Affinity Tool Works LLC, Troy; InstaBoost, Southfield;

Michigan Women’s Foundation, Detroit; and TVStoreOnline.com, Commerce Township, which also operates uglychristmassweater.com. Website: publiccitypr.net.

EXPANSIONS Biggby Coffee, East Lansing, has opened a franchise at 27735 Harper Ave., St. Clair Shores. Telephone: (586) 859-5352. Website: biggby.com.

Great Expression Dental Centers PC, Bloomfield Hills, announced the opening of West Bloomfield Orthodontics, 3435 Orchard Lake Road, West Bloomfield Township. Telephone: (248) 4815227. Website: greatexpressions.com.

NAME CHANGE Grosse Pointe Community Rink has been renamed the East Side Hockey Foundation Ice Arena, 4831 Canyon St., Detroit. Website: eshfoundation.com.

NEW PRODUCTS Doeren Mayhew Insurance Group LLC, Troy, a provider of property and casualty, personal, life and disability insurance, announced it has added health

care insurance to its service offerings.

Website: doereninsurance.com.

ProQuest LLC, Ann Arbor, is launching in mid-2015 its new e-book platform, ProQuest Ebook Central, designed to use the strengths of the Ebook Library and e-brary platform to improve e-book research and management. The patron interface for Ebook Central and the Ebook Central Reader will be based on e-brary’s modern reader. The librarian portal — ProQuest LibCentral— will be based on Ebook Library’s newly rebuilt LibCentral administrative module. Website: proquest.com.

Fortunatus Investments Inc., Brighton, an independent investment adviser, has launched its first mutual fund, the Fortunatus Protactical New Opportunity Fund, that will target small cap stocks. Website: fortunatusfunds.com.

NEW SERVICES Marcus & Grant PLLC, Sterling Heights, announced the launch of First Call Law, a law firm designed to match clients with the right attorney.

Telephone: (844) 234-1212. Website: firstcalllaw.com.

Request for Proposals for General Counsel for the Police and Fire Retirement System of the City of Detroit The Trustees of the Police and Fire Retirement System of the City of Detroit are seeking proposals for General Counsel Services.

Individuals or rms are invited to submit a proposal. The request for proposal will be available on Feb. 9, 2015. The RFP will be posted on the Police and Fire Retirement System of the City of Detroit’s web site at www.pfrsdetroit.org.

The RFP will be on the PFRS home page.

Responses are due on March 2, 2015 by 3 p.m. EST. For all correspondence and inquiries concerning this RFP, contact: David Cetlinski, Assistant Executive Director, dcetlinski@rscd.org.

20150216-NEWS--0021-NAT-CCI-CD_--

2/13/2015

6:37 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 21

Equity: Investing in a new approach to crowdfunding in Mich.

■ From Page 1

business to Tessler’s mind.

“There is $400 billion of Gross Domestic Product contribution coming from Michigan every year and 10 million people,” he said. “If you told me I could connect $400 billion and 10 million people, I would tell you I don’t need to expand. There is enough here to work with. We believe in this state.”

Bullish start Tessler has always believed in Michigan. The Southfield native left briefly for Los Angeles but quickly made his way home.

“I thought that I needed to leave to see something else and didn’t even make it a year before I was coming home,” said Tessler, 32. “I liked it better here.”

His partner, Heron, 28, stayed longer in the City of Angels, having moved there with Tessler’s younger brother. But eventually he came home, too.

“I was always very sure that I was not going to be here,” said Herron, 28. “I think by the time I was 13 or 14 I knew I was not staying in Detroit.

What I didn’t anticipate in that move was how much I would want to come home. Once Detroit started turning, though, I thought I could come home.”

The first taste of entrepreneurship came early for Tessler and it came in the form of Red Bull. He was 16 when a friend brought a can of the Austrian energy drink back from Ireland. They were immediately hooked, but they couldn’t find it in Michigan. When they wrote to Red Bull, the company said it was seeking distributors.

“We said, ‘We can distribute it,’ ” Tessler said. “We’re kids. We think we can do anything. So we went to the library and online and researched.”

Eventually, they wrote an 111page business plan and incorporated as an LLC under a friend’s father because they were too young. Red Bull eventually met with them but, shocking no one, declined to work with the boys.

But when the company decided to self-distribute in Michigan, Tessler said representatives called and asked him to be involved as a brand ambassador because they liked his enthusiasm.

“By the time that all happened, I was 18 and living downtown,” he said. “From then on I got involved in marketing and advertising.”

That turned him into a serial entrepreneur. He’s been involved with starting or growing 15 businesses. He is currently the founder and owner of Jabs Gym in Birmingham, vice president of Rain Marketing Inc. where he manages day-today financial operations, and is vice president of the Aaron Group, which is an incentive marketing company for casinos that he said does $17 million per year in revenue.

Meanwhile, Heron was working in business development in Los Angeles and the two were getting progressively frustrated by the lack of investment opportunity in Michigan. “I was watching a lot of VCs play with a lot of money in San Francisco and L.A., and I kept thinking how awesome it would be if we had that same enthusiasm for development back home,” Heron said.

Tessler began researching and

Like crowdfunding, only you’re an owner Equity crowdfunding uses the principles of Kickstarter, in that it allows many people to contribute money to a project, distributing the risk among many people. But instead of receiving a “reward,” equity crowdfunding investors have some sort of ownership stake or a piece of the revenue.

That makes the deals more complex and involves significant legal and regulatory oversight.

Still a number of platforms have popped up across the country and are raising significant cash.

One of the biggest platforms, Venice, Calif.-based CrowdFunder.com, has raised $153.2 million for 20,927 businesses since launching in 2012.

Most sites serve “accredited” investors, those who have an annual income exceeding $200,000 — $300,000 for households — or net worth greater than $1 million.

That’s because the 2012 JOBS Act, which authorized equity crowdfunding, made it relatively simple to solicit accredited investors but left strict restrictions on how companies can solicit investment making initial angel investments through national crowdfunding sites, but he found that restrictive.

So when he read about Michigan writing its own crowdfunding laws, he knew what he wanted his next company to be.

When Heron moved home, they met for dinner and began discussing the issue. “Nine months later we were starting a company,” Tessler said.

To date the company has seven employees, including the founders, and has raised about $250,000 using a beta version of MichiganFunders.com.

Mining backers MichiganFunders currently has 11 investments in the pipeline, including three Detroit firms — Ellis Island Tea, Social Sushi and Detroit Waste Systems — and Bloomfield Hills-based Ovshinsky Innovation LLC. Social Sushi was to go live on Feb. 16, while Detroit Waste Systems is expected to launch on March 2. Another seven businesses will launch their campaigns in March and April.

To find the deal flow, Tessler and Heron started by mining area tech incubators and accelerators, such as OU Inc., an accelerator at Oakland University.

“We really like what MichiganFunders is doing as far as the community focus on Michigan,” said Amy Butler, executive director of OU Inc. “This is a pilot for us all. It’s a pilot for our clients to see if this is a mechanism for them.

We’re Butler pretty excited.”

Nailah Ellis-Brown, CEO of Ellis Infinity LLC, found them through community connections: Dennis Archer Jr. told her she wanted to

from nonaccredited investors.

Congress asked the U.S. Securities and Exchange Commission to develop guidelines for those regular investors, but it has yet to publish them. As a result, many states, including Michigan, decided to write their own legislation to allow nonaccredited investors to participate in equity crowdfunding within their borders.

In Michigan, the most active platforms are Indianapolis-based LocalStake LLC and Southfieldbased Funderbuilt. Ypsilanti-based Unity Vibration Living Kombucha Tea LLC, for example, raised $136,300 on LocalStake to expand its brewing operations and add a tasting room.

Still, the number of equity crowdfunding deals is hard to come by. Michael Melfi, a Birmingham-based attorney and general counsel for Funderbuilt, recently told Crain’s he estimates that between 15 and 50 equity crowdfunding deals have happened in Michigan. “It’s definitely not 10,” he said, “and it’s definitely not 100.”

— Amy Haimerl meet Tessler and Heron. She agreed and they came and toured the facility where she makes the bottled tea that she distributes to Whole Foods and Busch’s markets in Southeast Michigan.

“I had never heard of this,” said Ellis-Brown, 27. “I was only familiar with crowdfunding like Kickstarter.

And originally I was opposed to it.

Initially, my thing was ‘Why don’t I just do a Kickstarter and get money donated?’ Why would I choose this option and give up equity?”

But she is also right at the point of expansion and needs more capital than she might raise from a typical Kickstarter campaign. Kroger is interested in picking up her teas, and Whole Foods would like to distribute them throughout the Midwest.

She eventually agreed to move forward and is seeking to raise about $50,000 — though that number is still being debated — in order to buy equipment and pay for the inventory needed to expand.

“After a few meetings I realized that with people owning a small piece of equity in your company, it creates brand ambassadors for your company,” she said. “There is a sense of pride that comes with it. To me, that’s worth it.

Other entrepreneurs see the potential, too: Tessler said that they are talking to five or six businesses a day.

But they are also clear with potential companies. This is risky and not right for every firm. First and foremost, the minimum amount a company can raise on MichiganFunders is $50,000, otherwise the financials don’t make sense.

It costs $1,800, plus monthly fees, to launch on the platform, and another $1,500 if firms choose to have MichiganFunders manage the paperwork and logistics after the money has been raised.

“If you can get your money from the bank for 3 or 4 percent, go that

route,” Tessler said. “Crowdfunding will never be the cheapest money. This money is always going to be more expensive because your investors, the crowd, are taking more risk. But this is the most valuable money you can get. Investors are going to be your customers, your spokespeople. The bank isn’t going to go out and build your brand.”

Investing how-to One of the selling points for investors is being able to spend as little as $100 or as much as $10,000, which makes this viable for community-oriented projects. If they are accredited, there is no cap.

To participate, interested investors have to self-certify on the website that they are a Michigan resident. After that, they can see all of the potential deals and choose to make an investment.

Once they do that, MichiganFunders confirms residency and issues a questionnaire designed to determine the investor’s profile.

If that all checks out, the investment is transferred to a local bank that holds the money in escrow. If the campaign raises its stated fundraising goal, the money is distributed; if it doesn’t, the money comes back to the investor.

“We will never tell anyone that this is not high risk,” said Tessler.

“We always lead with that. If this is your first or last $5,000, you need to run away. If this is your rent money, you need to go somewhere else.”

But if all of your background checks out, the site won’t turn investors away — even if it might be their last $5,000. But each business raising funds receives a profile of investors, and they have the ability to say “no” to someone.

Initially, the founders expect mostly accredited investors, though those are harder to come by in Michigan than in other metro areas. A $200,000 individual income or $300,000 household income isn’t outrageous in New York City or San Francisco, but in Michigan, less than 5 percent of households make $200,000, according to the U.S. Census Bureau.

So as word spreads, Heron hopes to see more community-based fundraising.

“Venture capitalists and banks have a very strict and limited profile of what they like to invest in,” he said. “I don’t know that it is indicative of public demand, but it’s the most stability with the highest return. Tech gets pushed and art doesn’t. Art doesn’t make anyone any consistent money. Opening a community center doesn’t interest venture capitalists.

“But if you understand that you have a revenue model to keep the lights on, pay back investors and make a modest profit, then you should have the right to put that on the table. You should be able to invest in the future.”

Amy Haimerl: (313) 446-0416, ahaimerl@crain.com.

Twitter: @haimerlad

MARKET PLACE BUSINESS OPPORTUNITIES PARTNER / INVESTER WANTED Now interviewing for future partner/investor to run/takeover established Winery and Pub in Fort Gratiot and Port Huron (on waterfront).

OFFICE FURNITURE Office Furniture Warehouse Clearance Stack Chairs, Conference Chairs & Tables Panels & Cubicles, Herman Miller, Steelcase, Hon, File & Storage Cabinets, Reception Desks Exec.

Desks, New & Used, Mahogany & Cherry.

For more information call 810-434-6551

www.betterbusinesssystems.com fred240@aol.com ~ 248-548-6404

BUSINESSES FOR SALE

WEDDING SERVICES

Mobile Auto Interior Cleaning Business.

Cash Flow $80,000.Gross Sales $191,000. Est. b2b opp. Work with metro Det. new car dealers. info@yourfranchisesuccess.com (248) 714-5532

JOB FRONT POSITIONS AVAILABLE

Waterfront Weddings Straits of Mackinac

DestinationWeddingsUpNorth.com

906-643-8621

REAL ESTATE

ACCOUNTING MANAGER

APARTMENT BUILDINGS

Taylor Truck Dealership. BA with 5+ years exp. with full charge accounting req., manage staff of 5, HR duties. CPA helpful but not req.

ADP experience a plus. Full time. Excellent pay and team.

Email resumes to: jobs@matruck.com

3 Buildings ~ All Brick ~ 55% Occupancy

MEXICAN VILLAGE ~ 126 UNITS Price Reduced to $881,000 Call Income Property Organization

Call Us For Personalized Service: (313) 446-6068 FAX: (313) 446-0347 E-MAIL: cdbclassified@crain.com INTERNET: www.crainsdetroit.com/section/classifieds

See Crainsdetroit.com/Section/Classifieds for more classified advertisements

248-932-0300

COMMERCIAL PROPERTIES JEFFERSON AVE - N. of 16 MILE RD 10,000 sq. ft. Bldg, Blt. 2001, Like New, Fully AC’d, 2 Acres w/56 Pking Spaces, $580K O.B.O. 4 Acres of land on Jeff. N of 16, WNS on prop, can be Condo’s/Apts/Res. Housing $200K.

BILL McMACHEN (586) 915-4441 ~ billmcmachen@comcast.net

20150216-NEWS--0022-NAT-CCI-CD_--

2/13/2015

4:36 PM

Page 1

Page 22

February 16, 2015

CRAIN’S DETROIT BUSINESS

Victory: Program aims to show grads there’s a future selling cars ■ From Page 3

Ross School of Business, one of the nation’s most prestigious business schools. In fact, Olson got his MBA from UM. The difficulty in hiring and keeping good retail sales talent is one of the industry’s worst-kept secrets.

That’s one reason that Olson’s boss, Victory CEO Jeffrey Cappo, donated $3 million to the university to fund the new sales certificate program, which launched last year.

Cappo, a big booster of UM athletics, said he wanted to do something to let business students know that there are opportunities outside working on Wall Street or becoming an accountant.

If it was my dealership, I would hire “ university graduates. I’d train them. I’d put them on a quota. ... There needs to be a process that is different from how many cars you sold.

”

Follett Carter, Stephen M. Ross School of Business, University of Michigan

UM “asked me what they could use money for, and I said, ‘Could we do something in sales?’ They looked at me like I had three

heads,” said Cappo.

But he likes to point out a fundamental truth about business: “When you think about it, nothing happens

until somebody sells something.”

Cappo, 59, never attended college.

He went into business selling vacuum cleaners door to door right out of high school.

From there, he graduated to selling used cars at Varsity Ford in Ann Arbor. Cappo is Exhibit A for anyone who needs convincing that selling cars can be lucrative.

“I was making about 250 grand a year working at Varsity Ford, and my first month owning my own dealership, I made about 200 grand,” he said of his early days when he bought East Tennessee Nissan in Morristown, Tenn., 18 years ago.

“CAN DTE ENERGY HELP MY BUSINESS SAVE MONEY?” DTE Energy wants to help your business manage your energy usage to save money. We offer all kinds of energy efficiency information and tools, plus easy tips to help you be more efficient. For instance, you’ll cut heating and cooling costs by simply adding insulation where there isn’t any, especially along piping and ductwork. Install a programmable thermostat to automatically lower heating and raise air conditioning temperatures during off hours. Seal doors and windows to prevent air leaks. You’ll find even more ways to save using our Interactive Business tool. And you can find a certified contractor with our Energy Efficiency Directory. It’s easy. Just go to dteenergy.com/savenow and start saving today.

Start saving today, visit:

dteenergy.com/savenow

Cappo expanded the group to 26 dealerships and four pre-owned stores in seven states, concentrated in the South, the Midwest and California.

In 2010, Cappo moved Victory from its headquarters in Morristown to Canton Township. A major reason was to put headquarters close to the university and its talent pool. Victory ranks third on Crain’s List of Largest Auto Dealers, reporting $830.1 million in revenue for 2013.

Cappo doesn’t expect students will graduate from UM and start selling cars.

“There’s not many kids in that class who have ever had their tank on empty with no money to put in gas,” he said. “Most people who are really good in the car business, at one time they were broke.”

But he believes the sales certificate program can help them get an essential understanding of what selling is all about.

Follett Carter, adjunct professor in the marketing department at the UM business school who runs the sales certificate program funded by Cappo, shares Cappo’s view: “I don’t think college graduates would go into selling cars. But I think there are opportunities in dealerships where they could find meaningful jobs, and knowledge of sales would be helpful.”

Carter says the sales certificate program consists of four courses: marketing, fundamentals of sales management, retail sales marketing and consumer behavior. This winter term, 65 students are enrolled.

Carter and Olson hope the sales certificate program, with all those students, might incubate some new ideas for dealership sales-compensation plans that could reduce the notoriously high turnover rate.

“If it was my dealership, I would hire university graduates. I’d train them. I’d put them on a quota, maybe a revenue quota. There needs to be a process that is different from how many cars you sold,” said Carter. “These kids can’t be on 100 percent incentive pay. They have to get a portion of their income in salary. That’s a big change.

“You can’t revolve over 40, 50, 60 percent of sales reps every year.

That’s unsustainable.”

Victory already has recruited several UM graduates, including management prospects. Students have done internships at the group’s dealerships.

“One guy just wants to be a sales guy and is already selling 25 cars a month,” said Olson.

Devin McParlane, a student in Olson’s class from Livonia, said she will be going to work in Ford’s marketing training program after she graduates in June.

“I’m going to be a zone manager working with retail managers,” said McParlane, who believes Olson’s lessons will help her understand dealers.

Olson said he tells students their experience in sales can lead to management: “I really push the fact that the auto industry has so many opportunities, and the pay and benefits can be phenomenal.

The fact that some of our general managers are making more than $500,000, that opens their eyes.”

From Automotive News

20150216-NEWS--0023-NAT-CCI-CD_--

2/13/2015

6:12 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 23

Chassix: Leveraged supplier struggles; creditors are concerned ■ From Page 1

heard that in the last few months.”

In November, Chassix urged bondholders to seek advisers as it sought to restructure debt, sources told Bloomberg News. Moody’s Investor Service Inc. downgraded its Chassix credit rating to Caa in November, then withdrew all ratings for the company and its bond notes, saying it did not have sufficient information to maintain a rating.

According to Debtwire, AlixPartners LLC is advising the bondholders, San Francisco-based Golden Gate Capital, Tokyo-based Nomura Holdings Inc. and New York Citybased Oaktree Capital Group LLC. AlixPartners and Nomura subsidiary Nomura Holding America Inc. declined to comment on Chassix.

Golden Gate and Oaktree Capital did not return phone calls last week.

Turning to court Chassix has taken steps to shore up its supply chain.

The company brought six lawsuits between Nov. 14 and Dec. 22 against its own suppliers at Oakland County Circuit Court after those companies either stopped shipment on parts and materials, threatened to do so or moved to discontinue trade credit and require advance payment on future shipments.

Most of those suppliers sought financial disclosures or assurances from Chassix that it could still perform on its contracts —

and some were not encouraged by the results. Classix sued to enforce the contracts. “(Our) review of this (financial) information confirmed what has already been publicly disclosed — that Chassix is financially unstable, highly leveraged, engaged in restructuring negotiations with its bondholders and OEM customers, among others, and is taking steps to prepare for (an) imminent bankruptcy filing,” brake parts maker Akebono Brake Corp. of Farmington Hills states in a late December court filing responding to Chassix’s suit.

The companies had collectively claimed more than $23 million owed on parts shipped to Chassix, with about $2 million of it past due.

Chassix has settled five of the cases out of court, and a sixth, against Lake Forest, Ill.-based Tenneco Automotive Operating Co. Ltd., awaits a settlement conference Feb. 24 before Oakland County Circuit Judge Wendy Potts.

Sources close to the dispute confirmed that the companies continue to supply parts to Chassix and that some have entered into deals that shorten payment timetables.

Shorter timetables to pay for parts shipped would mean lower outstanding balances that Chassix can carry, and likely less exposure for the other companies if Chassix does proceed to bankruptcy court.

Max Newman, partner and bankruptcy attorney for Butzel

Long PC in Bloomfield Hills, said the fear of a production shutdown likely has customers and suppliers working around the clock.

“There’s a heavy cost to the supply chain when a company gets in this situation,” said Newman, who is not involved with the Chassix situation.

“Any production shutdown can be devastatingly costly.”

Sources confirmed that Ford Motor Co., General Motors Co. and Newman other OEMs have been working with Chassix since September to accelerate payments and make financial accommodations to keep it operating, or monitoring the health of its trade creditors, to avoid a supply interruption.

More to come?

Newman agreed bankruptcy is an option for Chassix. He added that a breakup is one of the options bankruptcy offers.

David Post, partner and chief investment officer at wealth management firm Telemus Capital Partners LLC, said a breakup is just one of several possibilities — the company could also have a pre-packaged bankruptcy in development that

allows it to stay largely intact, or get a new infusion of cash from its owners or reach a resolution with creditors outside of court.

While Post is not involved with the Chassix matter, he said Gores’ private equity firms are strong financial performers and bondholders generally have little to fear as secured creditors in a bankruptcy.

“Bondholders are typically senior to the equity holders. In order for the (owners’) equity to survive, it really comes down to the equity holder having to come to an agreement with the creditors. The bondholders are senior to (the equity holders),” he said.

A history of debt Chassix was born leveraged in April 2013, when Platinum Equity formed it by merging Wixombased Diversified Machine Inc. and SMW Automotive Inc. of Troy.

Gores, billionaire owner of the Detroit Pistons, acquired Diversified Machine through his equity firm from The Carlyle Group in December 2011.

In 2011, Bloomberg reported that Diversified Machine sought $235 million in loans to back the sale to Platinum. More debt was taken on the following year when Platinum bought SMW and partially funded the deal through $150 million in financing secured through PNC Bank.

Carlyle formed Diversified Ma-

chine in 2005 by acquiring the assets of Howell-based supplier UniBoring Inc. out of bankruptcy and adding assets from then-bankrupt Metaldyne and Hayes-Lemmerz.

Diversified Machine generated $450 million in revenue in 2010 and $335 million in 2009. Diversified and SMW together generated $1.2 billion revenue in 2012, which Chassix looked to grow to as much as $1.5 billion in 2013.

Around that time, Chassix employed 3,600 worldwide, including 1,200 at 10 Michigan locations.

Then-CEO Robert Remenar told Crain’s the supplier planned to hire about 200 in Michigan by this year, and spend about $96 million to expand the business.

“We’re expanding our capabilities; our capital spending is double that of our competitors,” he said at the time. “Our owners are doubling down on this business.”

It’s unclear whether Chassix followed up on the hiring or investments.

Remenar left the company in June 2014, replaced by Mark Allan, who previously served as the senior vice president of operations at Platinum.

Chad Halcom: (313) 446-6796, chalcom@crain.com.

Twitter: @chadhalcom Dustin Walsh: (313) 446-6042, dwalsh@crain.com.

Twitter: @dustinpwalsh

Medical ed: Tax on hospitals would replace general fund money ■ From Page 3

ation board met last week and found Snyder’s proposed budget “unacceptable.”

“We’re in the process of analyzing the full impact of the proposal on Michigan hospitals, the health care community and the patients they serve,” Johnson said in a statement. “The MHA will consider all its options as the Legislature confronts the state’s budget shortfall.”

Officials for two of the state’s other large graduate medical education providers (GME) — the University of Michigan Health System, which receives about $32 million in total state GME funds, and Ascension Health Michigan, which receives some $14.1 million — declined to comment.

Tim Becker, deputy chief director at the Michigan Department of Community Health, said a total of $151 million in budget cuts this year to the $18.5 billion department was necessary to address a large deficit in state government.

Last week, the House Appropriations Committee approved for this year a total of $169.4 million in additional cuts, including the cuts to Community Health and just under $8 million to the Department of Health and Human Services, which will be merging with Community Health this year. Snyder earlier ordered another $15.5 million in DHS cuts.

However, Becker said, the Snyder administration is proposing to replace the state’s general funds for GME and rural hospitals by increasing hospital provider taxes in 2016.

Snyder administration officials argue that hospitals have reaped at least $80 million more in Medicaid revenue than they expected through the expansion of Healthy Michigan.

“We want to see these programs continue in 2016. We are proposing to reinstate these programs at 2014 levels with (an increase in hospital) provider taxes,” Becker said.

In a statement, Sara Wurfel, the governor’s press secretary, said that Healthy Michigan enrollment has surged to more than 549,000 enrollees, much higher than the

MEDICAL EDUCATION MONEY State Medicaid graduate medical education funding, fiscal 2013-14: Total state System GME payments Ascension Health Michigan $14.1 million Beaumont Health System $8.9 million Bronson Methodist Hospital $3.4 million Detroit Medical Center $53.3 million Henry Ford Health System $15.9 million LifePoint Hospital $451,003 McLaren Health Care $5.1 million MidMichigan Medical Center $304,197 Munson Medical Center $236,783 Sparrow Hospital $4.5 million Spectrum Health $7.4 million Trinity Health $5.2 million University of Michigan $32.8 million Other $11.3 million Total $162.9 million Source: Michigan Department of Community Health

original estimates of 322,000.

“That’s significant additional resources flowing into hospitals — $80 million plus that hadn’t been accounted for or planned on earlier,” said Wurfel in an email to Crain’s. “This helps provide some key offsets for this loss of state specific dollars.”

But Appel said it is difficult to expect hospitals to increase provider taxes by millions of dollars to receive the federal matching share.

“The state is asking us to put up the state match (for 2016),” Appel said. “That is $56 million to get the $163 million, but our net would only be $107 million. To get to $163 million, we would have to put up much more.”

Becker said hospitals would have to pay a 10.1 percent increase in the provider tax to fully fund GME and the small and rural hos-

pital programs.

For example, hospitals paid $763.4 million in provider taxes this fiscal year to generate additional federal matching dollars. To pay for the state general fund replacement, hospitals would have to pay an additional $77.1 million, state officials said.

However, Appel said, MHA estimates hospitals would have to increase provider taxes by $109 million to replace the full benefit of all three slashed programs.

Hearings expected in Senate Republicans in the Michigan House and Senate have said they want to finalize the 2016 state budget in early June. The next fiscal year starts Oct. 1.

Sen. Jim Marleau, R-Orion Township, chairman of the Senate health policy committee, said he will hold hearings to delve into how GME funding impacts the quality and access of health care services for Michiganders.

“We need to take a hard look at GME and whether it leads to better health care services for our residents,” Marleau said. “GME is now funded out of general funds. We never really drilled down into the numbers and where it goes.”

James Grant, M.D., president of the Michigan State Medical Society, said cutting state GME funding could devastate Michigan’s efforts to increase the supply of physicians.

“We just opened three medical schools (Oakland Beaumont Medical School, Central Michigan University and Western Michigan University), and cutting residencies creates a bottleneck,” Grant said. “When someone goes to residency, they usually stay where they train.”

Grant said the state Legislature needs to quickly find another way to fund GME. “Medical students make decisions on where they want to train and practice,” he said. “If they feel the program they choose

might not be there when they finish, they may be reluctant” to come to Michigan.

“Reducing GME will do nothing but compound the physician shortages for the next generation,” Grant said.

Over the past four years, Snyder has regularly proposed slashing state GME funding.

The state Legislature has restored most of the proposed cuts, but annual GME funding to hospitals is still below the level when Snyder took office in 2011, according to a Senate Fiscal Agency memo.

Last week, Snyder began to sign executive orders that eventually will cut between $289 million to $325 million in this year’s budget to address a funding shortfall created by an increase in redeemed business tax credits.

This year’s immediate cuts ordered by Snyder include $5 million for hospital GME programs and $2 million to support small and rural hospitals. This amounts to about $20 million when federal matching shares are included, Appel said.

For fiscal 2016, the $74 million in general fund cuts to hospitals breaks down this way: $57 million general fund cut to GME, $12 million cut for small and rural hospitals, and $5 million cut to hospitals that perform obstetrical services in rural areas.

Randy Bickle, D.O., president of Livoniabased Olympia Medical Services PLLC and a family practice professor with Michigan State University College of Osteopathic Medicine, said cutting hospital residency programs is shortsighted on the part of politicians.

“I believe we don’t spend enough on GME,” he said. “Medicare has limited residencies since 1997, and we are turning out more and more medical students with nowhere to train them. We don’t have enough primary care doctors in the U.S., and we are cutting training programs.”

Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

20150216-NEWS--0024-NAT-CCI-CD_--

2/13/2015

6:31 PM

Page 1

Page 24

February 16, 2015

CRAIN’S DETROIT BUSINESS

2015 UPCOMING

PARTNER EVENTS Marketing & Sales Executives of Detroit (MSED) Networking at Valentine Vodka Join MSED as we revisit one of our most popular networking locations at Valentine Distilling Co. in Ferndale. Enjoy time with some of the top sales marketing professionals in Michigan. The evening includes pizza, networking and cash bar featuring unique cocktail concoctions!

Feb. 25 • 5 - 7 p.m.

Valentine Vodka, Ferndale MSED Members: $35; non-nembers: $50 Register at www.msedetroit.org or call Meeting Coordinators at (248) 643-6590.

Southfield State of the City Address March 13 • 8 – 10 a.m.

Westin Southfield Members: $35; non-members: $45 Get your tickets at www.southfieldchamber.com 3rd Thursday March 19 •4:30 – 6:30 p.m.

Comfort Suites Southfield No RSVP Necessary In today’s world we need new practices that allow us to thrive in an increasingly global, constantly changing world, where communication is instant, the planet is the market, and competence is key.

The Leadership Institute for Women, brought to you by the Center for Empowerment and Economic Development, is scheduled for March 5 at Lear Corporation Headquarters in Southfield, Michigan.

The agenda includes a conversation with influential women business leaders and an experiential learning exercise led by experts in their field featuring world-renowned Speaker and Trainer Chris Majer, Founder and CEO, Human Potential Project.

We will look at the whole notion of what it really takes to transform an organization, be it a small company or a vast enterprise. The principles and practices are the same; it is merely a matter of scale.

For more information: www.miceed.org/2015Leadership/

For more local events, visit Crain’s Executive Calendar at crainsdetroit.com/executivecalendar

Pensions: Trying to tame a funding gap ■ From Page 1

unable to cut pension benefits, which are protected by the Michigan Constitution, outside of bankruptcy.

Unfunded pensions and retiree health care account for nearly 70 percent of the county’s long-term debt of $2.9 billion. The county can’t make up for pension shortfalls by taking money from other places, since it has so little money.

Evans said the county has been running at an annual deficit of $50 million the last three years, its pooled cash was just $49 million last September, and its general fund could be out of money by mid-2016.

“Ultimately, our target is to get pensions funded at 100 percent, but that is going to take some time,” said Saunders. “The E&Y report said the county needs to contribute $40 million a year over the next 10 years to hit a funding rate of 70 percent. Reducing our health care costs will help us do that.”

Saunders said that because of current budget woes, the county is unlikely to switch soon from a defined benefits retirement plan, which is the traditional pension plan for most county employees, current and retired, to the kind of defined-contributions plan to which many private-sector businesses have switched.

“That’s something we might eventually consider, but if you close a defined-benefits plan, it accelerates short-term costs, so that has to be handled with extreme caution,” he said. “There may be a long-term benefit.”

As for issuing bonds to cover the shortfall sooner, Saunders said: “That’s not something we’re considering right now. That’s something we’re very cautious about pursuing.”

One last sticking point in the recent city of Detroit bankruptcy was how to placate bondholders from a $1.4 billion offering the city did in 2005 to cover pension obligations.

The city then entered into a complicated series of transactions to hedge against increases in interest rates, but when interest rates crashed during the Great Recession of 2008, the city was left with a liability of $439 million as of June 30, 2012.

While pension obligation bonds have been mushrooming across the country, according to a report last July by the Center for Retirement Research at Boston College, the bonds “offer budget relief and potential cost savings, but also carry significant risk.”

The report said that while the bonds can offer a useful tool for municipalities in distress, the benefits often prove illusory.

In 1985, Illinois and California became the first states to issue pension obligation bonds. In 2012, Michigan began allowing its municipalities to issue bonds to cover health care and pension costs.

The Boston College report said that low interest on debt has some municipalities thinking they can borrow low, then make a profit by investing in equities that give greater returns, a strategy Saunders dismisses.

“You’d be borrowing money to invest in a system that wasn’t investing well already,” he said.

“And what if the stock market tanks again?”

PENSION PARTICULARS Here are current numbers for contributions by Wayne County and its employees for their pensions: 䡲 Union members with less than 20 years of service may contribute not less than 1 percent and no more than 2.5 percent, with the county making a match of four times that amount. 䡲 Union members with more than 20 years of service can contribute up to 3 percent and get a match of 5 to 1, or 15 percent. 䡲 Appointees subject to what is called the Executive Benefit Plan contribute 4 percent, with the county making a match of 2.5 to 1, or 10 percent.

Source: Wayne County

Cause for optimism?

Dana Muir, a professor of business law at the Ross School of Business at the University of Michigan, said the city of Detroit’s recent bankruptcy should work in the county’s favor during talks with an array of unions.

“They have contract negotiations with the unions coming up, and the county can hold out the prospect of bankruptcy to bargain down pension benefits,” she said.

Saunders agreed that the recent bankruptcy should be in the county’s favor. “Thus far, our labor partners have been very receptive and open to discussing solutions to these issues. There’s a sense of reality, post-Detroit bankruptcy.”

Muir said that the ongoing decline in pension funding in Wayne County bucks a recent trend for municipal pensions, which have seen their funding percentages increase because of a persistent bull market and sharp stock market rises.

“The averages are improving a bit in the recent results I’ve seen.

The average, now, is back to about 70 percent funded. Wayne County is well below average. It’s a big concern any time you see that kind of decline,” she said.

One turnaround consultant who worked on Detroit’s bankruptcy, and asked not to be named because he hopes to get work from Wayne County, said the decline in pension funding from 95 percent to 43 percent is likely a result of lower interest rates and, consequently, lower rates of returns on investments now, compared to 2004.

The portion of pension money invested in fixed-rate-of-return products such as bonds and U.S. Treasuries, which have been at near-record lows for years, is a major factor.

He said actuarial rates for both corporate and municipal pension plans are notoriously optimistic, both in considering higher-thanrealistic mortality rates of pensioners who live longer now than they used to, and projected rates of returns for investments.

Saunders said Ernst & Young thought rate-of-return assumptions for the Wayne County pension system were optimistic. He said current assumptions were for a return of 7.75 percent, while E&Y thought 6.75 percent was more likely.

The turnaround specialist said one possibility to shed pension obligations would be for Wayne County to take the state of Michigan to court over the constitutional provision that pensions can’t be cut.

He said the issue wouldn’t be that that provision was illegal; the issue, he said, would be that if the state mandates the payments, then the state has a fiduciary obligation in the event of shortfalls.

“It’s never been litigated. You

could make an interesting case. It’s open to interpretation,” he said.

Saunders thinks the shortfall can be alleviated without drastic measures, and without filing for Chapter 9 bankruptcy protection.

Past practices “It’s a dramatic decline. They did everything wrong,” said an attorney who specializes in public finance when asked about the fall in pension funding. He asked not to be named because his firm has done work for Wayne County.

The attorney was critical of the county for offering lucrative retirement benefits as a way to induce people to take early retirement. Matthew Schenk, a former chief of staff for former County Executive Robert Ficano who later was COO of the Detroit Water and Sewerage Department, was the highly publicized poster child of that.

In 2013, it came to light that Schenk was taking an early retirement that would pay him an annual pension of $96,000 beginning at age 42, even though he’d only worked for the country for 8½ years.

Ficano was generous in other ways, too, with pension money. The county made a 5-to-1 contribution match to his political appointees, and its 4-to-1 match for other employees was generous, too.

The attorney was also critical of the pension system for issuing what were called 13th paychecks, in effect a bonus check above the 12 that were required. The bonus checks cover shortfalls in cost-of-living increases and cost the county $16 million a year.

“There were just all kinds of draws that put huge obligations on the system. They reopened defined benefits after they’d been closed to try to get people to retire, and that 13th check just blows my mind.

That’s so nuts. It’s just a case of current pensioners taking money from future pensioners,” he said.

Evans said assumptions for pension-cost increases remained low even as Ficano’s practices drove them much higher.

“The increase in retirement benefits was 50 percent, while the actuaries were expecting maybe a 2 percent increase each year,” he said. According to the E&Y report, pension costs rose 48 percent between 2004 and 2013, from $88.7 million to $131.4 million.

“We’re clear on what happened.

Now we’re focused on how to improve the situation. I’m sick and tired of people coming down to Wayne County and fixing problems we didn’t have the intestinal fortitude to fix. I can fix it. It’s got to get fixed. I don’t want $100 million in attorneys’ bills for bankruptcy.”

Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

20150216-NEWS--0025-NAT-CCI-CD_--

2/13/2015

6:40 PM

Page 1

CRAIN’S DETROIT BUSINESS

February 16, 2015

Page 25

Braxton: IPO setback couldn’t hold him down ■ From Page 3

That was the devastating global stock market crash on Oct. 19, 1987, which saw the Dow Jones industrial average plunge 508 points, losing nearly 23 percent of its value.

“That just destroyed me,” Braxton said.

Analysts told him an initial public offering would have raised $5 million, but the crash killed investor interest, he said.

But unlike other businesses that went under that year, Braxton could fall back on his temporarytoilet company for sustained revenue. Porta John was a subsidiary of Enzymes of America.

“We survived because we had a core business that made money,” he said.

It wasn’t long after that, Braxton said, that he gave up on the urine business to concentrate on portable toilets.

In 1991, he closed out Porta John Corp. and created Porta John Industries Inc. as an entirely new company.

While Braxton’s voice is cheerful, there’s a distant hint of frustration that forces beyond his control kept Enzymes of America from becoming a major player.

Even before the crash, Braxton faced an uphill climb in going to market because he wasn’t a scientist, and biotech companies were wary of buying into products their own labs hadn’t invented.

“We were naïve. It’s irrelevant if you have a better product,” he said.

“Our problem was, we were more cost efficient but we couldn’t get past the not-invented-here stigma.”

Braxton, 74, said he was able to raise about $3 million privately, but he thought he needed the IPO to have the cash on hand to formalize research and marketing efforts.

“We raised a lot of money, we went to the drug companies and they gave us a lot of money,” he said. “The Japanese do a billion a year off urine collected in Asia.”

After the crash, he didn’t have the desire to start over, he said, and in retrospect he’s glad the IPO didn’t happen.

Mac Gerlach, managing director and partner at Southfieldbased investment banking and venture capital firm Cascade Partners LLC, isn’t surprised at Braxton’s story.

Bringing anything to market in biotech is difficult and expensive, and Braxton not being a scientist would have exacerbated the complexity, said Gerlach, who has degrees in chemistry and cellular/molecular biology from the University of Michigan. He’s also been part of biotech startups and also invested in them.

“It may be that they didn’t have enough data to convince anyone it was hard science. It probably didn’t help that he wasn’t a scientist,” Gerlach said. “It’s more of a risk problem than anything. Everybody wants the product that has the least amount of risk.”

Companies that buy biotech technology typically do so after the inventors have spent millions on the science and also on due diligence for intellectual property rights and other legal issues, Gerlach said.

In the 1980s, Braxton had few op-

the late 1970s, and when she needed to stop to use a bathroom, she completely rejected his suggestion of using one of the thousand or so Porta John portable toilets they had passed.

Because, she said, portable toilets are gross.

“I said, ‘I’ve got to make one you can use,’ ” he said. “I wanted to get rid of the portable toilet no one wanted to use.”

After that, Braxton had the idea of manufacturing and selling portable toilets that are much more like a bathroom you’d find at a Porta John kept Braxton from home or business — an idea he kept becoming another of the Black on the back burner, tinkering with Monday casualties. ideas and designs over the years.

He started his business career “I had a lot of flops. Nothing as a tax accountant in metro De- works the first time,” he said. troit, mainly for The general small hospitals and idea came to businesses, and he be a ceramic said he bought what flush toilet was then and sink, a called Porta mirror, and a John Corp. water hookup for $5,000 in so that mal1969 from a odorous client who chemicals are owned part of unnecessary it and owed and all waste Braxton that moves outside much money. the unit to a Portable sewer or a toilets then were holding or mostly wooden sheds septic tank. with a steel floor, a Third-party Mac Gerlach, Cascade Partners slat seat, and a cutcompanies down 55-gallon steel later dispose drum used to collect the waste. of the waste for the units that need They were delivered to clients in it. the summer and picked up the folThe units, called the Comfort lowing March.

Station, come in a range of “It was kind of repulsive, to be portable and permanent models, honest with you,” Braxton said. from modest stalls to larger, tiled “My wife almost left me.” luxury lavatories. Units that acHe didn’t do anything with the commodate people with disabilicompany until a couple of years ties are available. later when he discovered at the LiThe average retail price of a Porbrary of Congress that portable ta John lavatory stall is $3,860, and toilets were about to be governed Braxton said he expects that to inby the federal Occupational Safety crease to $4,200 later this year. and Health Administration — creatThe priciest single stall is $9,000, ing a legislated market — that he while a three-stall building retails decided real money could be made for $33,000. The cheapest is $2,800, from Porta John. he said.

“I said, ‘I am going to make this He did $1.4 million in 2014 sales into a hell of a business,’ ” he said. to 640 different clients, he said.

He began experimenting with He’s working on an online marketfiberglass stalls to replace the ing strategy with a goal of boosting wooden units, and later switched sales to $4.5 million by 2017. to the cheaper and safer heatBraxton designed and patented shaped plastic stalls that are so what would become the Comfort well known today.

Station, and went to market with Working with fiberglass was a the first units in 2003. He got his health risk, and he said he gets patent a year later. multiple medical tests annually as The company manufactures its a result. toilets and ancillary products Braxton had to learn woodwork- (such as hand-washing stations, ing and other physical skills from showers, decontamination stalls, scratch. and toilets designed to double as “I was a desk jockey before that,” hunting blinds) at a thermoformhe said, laughing. He and his com- ing plant in Utica that employs a pany manufactured about 10,000 dozen people. fiberglass stalls before the switch to “I’ve been kicking ass and takplastic molded stalls in 1977. ing numbers ever since,” he said.

Along the way, he was sued by “My phone rings off the hook. I get Johnny Carson — who eventually 20-30 emails a day for orders.” prevailed — after Porta John beIn one week earlier this month, gan using the iconic “Here’s John- Porta John sold 58 toilets for ny” slogan to market its toilets. $191,000, he said.

By the 1980s, Braxton was doing Braxton said he’s backed up upwards of $5 million annually with two months’ worth of orders. from selling, leasing or franchisOne of those orders is for a pair ing portable toilets, he said. of Comfort Stations for the third Braxton tells an amusing story floor of the Old Shillelagh bar in about how he got into upscale downtown Detroit. portable toilets: He was traveling In March, Porta John is schedthrough Phoenix with his wife in uled to replace a pair of older stalls tions other than to go public for the millions of dollars such a venture would need, Gerlach said.

That’s because the sort of super angel investors who fuel such ventures today didn’t exist then.

“I wanted to do the protein business real bad, and I needed the portable toilet business to do that.

It was just too costly,” he said. “If I had my druthers and the money, I’d get right back into it. But this is so easy.”

Portable toilet king of Utica

be that “ It may they didn’t

have enough data to convince anyone it was hard science.

”

with 51-by-51 Comfort Stations that have hot and cold running water, in time for the Irish bar’s massive St. Patrick’s Day party.

“I think it’s one of the top-of-theline units,” said Rory Osborne, the bar’s property manager.

Other Comfort Station customers, Braxton said, include the president of Haiti and the U.S. presidents using Camp David, the presidential retreat.

He said he also sells to the U.S. Navy, widely to the oil industry, and to upward of 80 Fortune 500 companies.

“The one percent can afford me,” he said, chuckling.

The oil industry is his largest client, and his products are used on ocean oil platforms and in remote drilling locations such as Africa, he said.

His former toilet rental business was used for the masses. At one point, it had 85 branches across 26 states, he said.

The 1996 Summer Olympics in Atlanta used his portable toilets, and the games grossed $3 million, he said. His temporary lavatories were used at Woodstock 1999 in Rome, N.Y., which attracted more than 200,000 music fans.

His products also are used at nuclear plants, and for emergency and disaster relief agencies, he said.

Porta John had a franchise business, which Braxton sold to about 20 different buyers in 2006 so he could entirely concentrate on Comfort Station as a direct sales product. But today, he’s mulling the idea of franchising again.

While the Comfort Station is the backbone of his business, Braxton said his product line is 22 items, and he has patent applications in the works that could add another 10.

Even larger money is out there, but Braxton said he no longer wants the hassle of becoming the much larger company he envisioned a few years ago.

For example, the company had a tentative agreement for a $130 million contract that fell apart with the Saudi Arabian military for Comfort Stations in 2010 after the Arab Spring uprisings roiled the Middle East, he said.

That’s OK, he said.

The booming market — and a lack of personal business stress — over high-end portable toilets has Braxton cheerful.

“I don’t want to build the business where I need 100 employees.

Been there, done that, and I don’t need the pain,” he said.

Braxton also has proved Internet savvy. In the 1990s, he said, he bought a thousand domain names.

Among them was the URL that is his primary business link online: Toilets.com.

He said he’s been offered $4 million for the name, and another $200,000 for PortableRestrooms.com, but he’s not selling. He’s a toilet guy.

“It’s an interesting life. I am really proud of the products I make,” he said.

Bill Shea: (313) 446-1626, bshea@crain.com.

Twitter: @bill_shea19

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

ADVERTISING SALES INQUIRIES (313) 446-6052; FAX (313) 393-0997 SALES MANAGER Tammy Rokowski SENIOR ACCOUNT EXECUTIVE: Matthew J. Langan ADVERTISING SALES Christine Galasso, Joe Miller, Sarah Stachowicz CLASSIFIED SALES MANAGER Angela Schutte, (313) 446-6051 CLASSIFIED SALES Lynn Calcaterra, (313) 4466086 AUDIENCE DEVELOPMENT DIRECTOR Eric Cedo EVENTS MANAGER Kacey Anderson CREATIVE SERVICES DIRECTOR Pierrette Dagg SENIOR ART DIRECTOR Sylvia Kolaski MARKETING COORDINATOR Ariel Black SPECIAL PROJECTS COORDINATOR Keenan Covington SALES SUPPORT Suzanne Janik, YahNica Crawford EDITORIAL ASSISTANT Nancy Powers PRODUCTION MANAGER Wendy Kobylarz PRODUCTION SUPERVISOR Andrew Spanos

CUSTOMER SERVICE

MAIN NUMBER: Call (877) 824-9374 or customerservice@crainsdetroit.com SUBSCRIPTIONS $59 one year, $98 two years.

Out of state, $79 one year, $138 for two years.

Outside U.S.A., add $48 per year to out-of-state rate for surface mail. Call (313) 446-0450 or (877) 824-9374.

SINGLE COPIES: (877) 824-9374 REPRINTS: (212) 210-0750; or Alicia Samuel at asamuel@crain.com TO FIND A DATE A STORY WAS PUBLISHED: (313) 446-0406 or e-mail infocenter@crain.com CRAIN’S DETROIT BUSINESS IS PUBLISHED BY CRAIN COMMUNICATIONS INC. CHAIRMAN Keith E. Crain PRESIDENT Rance Crain TREASURER Mary Kay Crain Executive Vice President/Operations William A. Morrow Executive Vice President/Director of Strategic Operations Chris Crain Executive Vice President/Director of Corporate Operations KC Crain Vice President/Production & Manufacturing Dave Kamis Chief Financial Officer Thomas Stevens Chief Information Officer Anthony DiPonio G.D. Crain Jr. Founder (1885-1973) Mrs. G.D. Crain Jr. Chairman (1911-1996) EDITORIAL & BUSINESS OFFICES: 1155 Gratiot Ave., Detroit MI 48207-2732; (313) 446-6000 Cable address: TWX 248-221-5122 AUTNEW DET CRAIN’S DETROIT BUSINESS ISSN # 0882-1992 is published weekly, except for a special issue the third week of October, and no issue the fourth week of December by Crain Communications Inc. at 1155 Gratiot Ave., Detroit MI 48207-2732.

Periodicals postage paid at Detroit, MI and additional mailing offices. POSTMASTER: Send address changes to CRAIN’S DETROIT BUSINESS, Circulation Department, P.O. Box 07925, Detroit, MI 48207-9732. GST # 136760444. Printed in U.S.A. Entire contents copyright 2015 by Crain Communications Inc. All rights reserved.

Reproduction or use of editorial content in any manner without permission is strictly prohibited.

20150216-NEWS--0026-NAT-CCI-CD_--

2/13/2015

6:51 PM

Page 1

Page 26

February 16, 2015

CRAIN’S DETROIT BUSINESS

RUMBLINGS

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF FEB. 7-13

Medicaid HMOs to fight state on pharmacy plan n a surprise announcement last week, the Michigan Department of Community Health proposed removing pharmacy management from Michigan’s Medicaid health plans and contracting out to a national pharmacy benefit management company in a move they say will save taxpayer money.

Medicaid HMOs say they’ll fight the state’s proposal because they say it will cause layoffs at many of the 13 Medicaid health plans, which contract with Community Health for the state’s nearly 2 million Medicaid beneficiaries. They also said the plan could increase pharmacy costs.

“This is a huge issue (that is) opposed by every one of my member CEOs,” said Rick Murdock, executive director of the Michigan Association of Health Plans in an email to Crain’s. “Removing the pharmacy benefit takes away the Murdock largest tool health plans have to manage care and meet expectations under Healthy Michigan Act and Medicaid.”

Community Health said in a statement the purpose of the plan is to consolidate the HMOs’ rosters of drugs, called formularies, into one.

“The present arrangement with a mix of fee-forservice and managed care formularies adds administrative costs and complexities that can be simplified with a single formulary with fewer administrative layers,” the statement said.

If the plan goes into effect,

I

Jon Cotton, president of Meridian Health Plan Michigan, said that, among other problems, the state could face increased financial risks.

For more on this story, see crainsdetroit.com.

Restaurant idea comes from the heart A cardiology-designed restaurant is expected to open in Ferndale in April.

Joel Kahn, M.D., a cardiologist on staff at several hospitals in Southeast Michigan and a professor at the Wayne State University School of Medicine, coowns the GreenSpace Cafe with his son Daniel, Joel Kahn who with his MBA in finance and restaurant experience will run the business side.

“It’s a health restaurant serving liquor,” said Kahn, an author and local Fox 2 News medical expert who is known as “America’s Holistic Heart Doctor.”

The 1,700-square-foot restaurant at 215 W. Nine Mile Road inhabits the former space of Maria’s Front Room. It will seat about 60 inside at tables and the bar, and 40 on an extended patio.

“We are working on the menu now. It will be vegan, plant-based and organic as much as possible with a portion that is no-oil,” said Daniel Kahn. “We will serve vegan wine and organic beer with all the liquor as local as possible.”

Chef George Vutetakis, director of product research at Ferndale-based Garden Fresh

Gourmet, is the former owner of Inn Season vegetarian restaurant in Royal Oak.

Macomb biz honored The third annual Macomb Business Awards were presented last week, and the following companies walked away as winners: PTI Engineered Plastics, Macomb Township: Champion of workforce development; for the launch of its technical academy for high school students.

First State Bank, St. Clair Shores: Corporate citizen; for community initiatives.

Coliant Corp., Warren: Diversification leader; for deepening its work with the Department of Defense and efforts to make inroads in other industries. It makes rugged electrical accessories.

Shelby Foam Systems, Magna, Shelby Township: Energy efficiency.

Chaldean Community Foundation, Sterling Heights: Model of One Macomb; for advancing Chaldean-American community needs through education, charitable giving and advocacy.

SkyBlade Fan Co., Warren: Startup business of the year; it makes high-volume, low-speed ceiling fans.

Detroit Regional Chamber: Named the Macomb County economic development partner of the year.

BITS & PIECES Vivian Rogers Pickard, di-

rector of corporate relations for General Motors Co. and president of its foundation, was named to The Network Journal’s 2015 list of “25 Influential Black Women in Business.”

Denise Ilitch will be recognized in May with University Liggett School’s Distinguished Alumni Award. The award is presented each year to an alum for leadership, professional achievements and civic contributions. Ilitch, a 1973 Liggett grad, is president of Ilitch Enterprises LLC and partial owner of 220 Restaurant Hospitality.

BEST FROM THE BLOGS READ THESE POSTS AND MORE AT WWW.CRAINSDETROIT.COM/BLOGS

Jumping on bike night idea

“

An investor in the downtown Pontiac Indian Hill redevelopment plan and a downtown shop owner are in the early stages of organizing a bike night event for downtown Pontiac this summer.

”

Kirk Pinho’s “Big City, Big Deals” blog on real estate and metro Detroit can be found at www.crainsdetroit.com/section/blogKirkPinho

John Waters eluded me again

“

The filmmaker was in Detroit to kick off the annual The Dirty Show erotic art exhibition, now in its 16th year, with a performance of an updated version of his one-man show “This Filthy World: Filthier and Dirtier.”

”

Bill Shea’s “For Immediate Release” blog on the media, transportation and marketing can be found at www.crainsdetroit.com/shea

Duggan appoints FIRST LOOK AT TECH CENTER planning head; from New Orleans aurice Cox is coming north from New Orleans as Detroit’s new planning and development director. The weekly City Council book includes his signed appointment letter.

Cox, who has been director of the Tulane City Center and associate dean for community engagement at the Tulane University School of Architecture, will be paid $147,500 in the post.

M

ON THE MOVE Madonna University in Livonia hired its first lay president, Michael Grandillo, to replace Sister Rose Marie Kujawa, who is retiring.

Grandillo, 57, most recently was interim vice president at St. Mary’s College of Maryland, and had been president and CEO of Lakeland College in Sheboygan, Wis. Denver-based Digital First Media named Jeannie Parent as publisher for its Michigan region, which includes The Oakland Press and The Macomb Daily.

Most recently senior vice president of sales for Digital First’s corporate division, She has held management positions with the Detroit Media Partnership and Observer and Eccentric Newspapers.

Greg Auner, a Wayne State University engineering professor, was named research director of the Detroit Institute of Ophthalmology, part of the Henry Ford Health System. He will remain WSU’s director of smart sensors and integrated microsystems and a professor in the surgery and biomedical engineering departments.

Paul Hillegonds, a former state legislator and retired corporate affairs executive with DTE Energy Co., will be CEO of the Lansing-based Michigan Health Endowment Fund, effective March 16.

COMPANY NEWS Ann Arbor-based Elec-

tric Field Solutions, a University of Michigan startup that uses technology first developed for measuring electric fields caused by dust storms on the surface of Mars, was acquired by New York Citybased Premier, a service company for the gas and electrical industries that is a unit of Houston’s Willbros Group.

Terms were not released.

Accretive Health Inc., a Chicago-based hospital revenue-cycle management company, will lease about 107,000 square feet in the Travelers Tower II office

COURTESY OF LOVIO GEORGE COMMUNICATIONS

A red brick exterior, decorative fences and landscaping to match the feel of the surrounding neighborhood are part of the design of the new M-1 Rail Penske Tech Center, according to newly released conceptual renderings. The 19,000-square-foot facility, under construction east of Woodward Avenue between Bethune Avenue and Custer Street, will store the vehicles and streetcar technology systems, as well as house the operations team for the rail system. The facility, expected to cost $6.9 million, is expected to be completed by the end of this year. The rail line, along Woodward from downtown Detroit to the New Center area, is to start running in 2016. For more renderings, visit crainsdetroit.com.

building in Southfield. The company plans to move into the 339,000-square-foot building over several years.

Brew Detroit, which bills itself as the largest automated brewery in the city, opened to the public at 1401 Abbott St. The 68,000square-foot facility is capable of producing close to 1 million cases of beer a year.

Haven Inc. is $500,000 shy of raising the $5 million it needs to round out funding for the new domestic violence and sexual abuse shelter and services center it is building in Pontiac.

The new site is set to be completed in October.

General Motors Co. confirmed that it will make a production version of the Chevrolet Bolt concept it unveiled last month, with plans to build the electric vehicle at its Orion Assembly and Pontiac Metal Center plants, Automotive News reported.

Meanwhile, GM is rolling back controversial changes it made last year to its purchasing contract, including terms that some suppliers believed exposed them to greater warranty liability.

STATE GOVERNMENT The Michigan Department of Environmental Quality plans new rules related to advance notification and precautions for oil and gas companies seeking to put new wells in the Detroit area, AP reported. They would require more residents and government officials be told about prospective drilling.

Gov. Rick Snyder proposed a $54 billion state budget that he said prioritizes education and health services, including focusing on improved reading for third-graders, more training in the skilled trades and increased dental coverage for low-income children, AP reported.

The Republican-led

Michigan Senate voted to schedule a presidential primary for March 2016, AP reported. The action next will be considered by the House.

OTHER NEWS In his second State of the City address, Detroit Mayor Mike Duggan said he will focus on inclusion, from affordable housing and home improvement aid to funding for startups.

Former Wayne County Executive Robert Ficano said his “good name” had been cleared after federal agents closed a corruption investigation that had led to convictions against a key aide and four other people, AP reported.

U.S. Bankruptcy Judge Steven Rhodes approved $178 million in fees charged by law firms and other professionals in the Detroit bankruptcy, AP reported.

The state’s economic recovery is hinged on the success of its higher education institutions, a report from the Lansing-based Business Leaders for Michigan said. The state ranks 36th in the U.S. in per capita income and 31st in educational attainment.

The Southeast Michigan Purchasing Managers Index had a steep drop in January, falling 14.2 points to 50, the break-even level between an expanding economy and a shrinking economy.

Southeast Michigan ranks No. 1 nationally in the number of advanced automotive industry jobs (67,825) and businesses (462) and in architectural and engineering jobs (78,740), said an annual report by the Anderson Economic Group of East Lansing that ranked 15 nationally recognized technology hubs.

OBITUARIES Ernest Nagy, former publisher of Heritage Newspapers and Mellus Newspapers, died Feb. 11. He was 85.

DBpageAD_DBpageAD.qxd 2/5/2015 9:59 AM Page 1

APRIL 13

A SEVERE BRAINSTORM IS IN THE FORECAST.

Fuel: Detroit

Presented by

4/13/15, 8 am to 5 pm SOUND BOARD AT MOTOR CITY CASINO

In one exciting, power-packed business day, companies like yours will be inspired by the leadership ideas of Magic Johnson. Jessica Alba and Brian Lee (The Honest Co.). Seth Godin. Mark Fields (Ford Motor Co.). And other rock-star leaders. Don’t miss one of the biggest business events ever in Detroit. Seating is limited. Register today. FuelLeadership.com/register.

DBpageAD_DBpageAD.qxd 1/26/2015 3:17 PM Page 1

having options

Blue Cross Blue Shield of Michigan and Blue Care Network have a wide range of comprehensive health plans to help you make the right choice for your business.

GROUP HEALTH PLANS

|

DENTAL

|

VISION

|

bcbsm.com/employer

Blue Cross Blue Shield of Michigan and Blue Care Network are nonproďŹ t corporations and independent licensees of the Blue Cross and Blue Shield Association.