Crain's Detroit Business, Feb. 23, 2015 issue by Crain's Detroit Business

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www.crainsdetroit.com Vol. 31, No. 8

FEBRUARY 23 – MARCH 1, 2015

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Page 3 Hub for tech startups planned for Ann Arbor Energy suppliers have 5-year plans; they’re secret Focus: Law

The big business cases of 2014, Page 11 This Just In Fountain Bistro will close for revamp, reopen in April The Fountain Bistro restaurant in Campus Martius Park will close for several weeks as interior renovations are completed. The park is managed and operated by the Detroit 300 Conservancy. Owner Jay Lambrecht said the restaurant will close its leased space March 2 and is expected to reopen April 2. The renovations include new floors, new lighting, adding a waitress station and changing the color scheme. The tablecloths in the bistro will also be removed “to make the restaurant a little more approachable,” Lambrecht said. “Downtown has a great demographic right now — a lot of younger people in their 20s and 30s, and the core businesspeople who have been down here for the good times and bad,” said Lambrecht, who also owns Bookie’s Bar & Grill on Cass Avenue in Foxtown. Lambrecht said the renovation will cost at least $100,000; seasonal menu changes are also planned, as usual. Fountain Bistro, which opened in 2010, seats 80 people inside and at least 60 on an outdoor patio. — Kirk Pinho

Affordable senior complex prompts Midtown concerns

Some say Michigan’s corporate tax incentives helped save the auto industry, save jobs and keep taxpayers here. But with more than $9 billion in credits still outstanding, others say the program planted the seeds of big-time budget trouble

Mixed income needed to bring biz, Mosey says BY SHERRI WELCH CRAIN’S DETROIT BUSINESS

Good policy or a MEGA mess? BY DUSTIN WALSH CRAIN’S DETROIT BUSINESS

tate-sponsored corporate tax incentives, which aided the auto industry during last decade’s recession, are coming home to roost. The state faces a $289 million budget shortfall in 2015, largely attributed to the nearly $11.7 billion in business tax credits promised to as many as 240 businesses over the past 20 years. A large portion of those credits were authorized for the automotive industry to leverage new jobs and retain jobs during an industry bleed-out last decade — which claimed more than 219,000 auto manufacturing jobs between 2000 and 2009 out of the more than 800,000 total job losses during that period. Ford Motor Co., General Motors Co. and FCA USA LLC (formerly Chrysler Group LLC) were promised tax cred-

its worth nearly $4.5 billion if they retain more than 86,000 jobs in Michigan through 2032, according to the Michigan Economic Devel-

opment Corp.

Demand is reportedly outstripping housing stock in Detroit’s Midtown area, but a new affordable senior living complex planned along its northern edge isn’t getting a welcome from the neighborhood. Midtown Detroit Inc., the economic development group working to revitalize the area, believes Seward Street, where the complex is planned, needs a different kind of development to further economic development there. “If you want to attract retail and commercial, you have to have mixed income,” said Midtown Detroit Inc. President Sue Mosey. Ann Arbor-based LC Consultants LLC, whose principals Michael and Bob Jacobson also own Leelanau Wine CelMosey lars Ltd. in northern Michigan, have an agreement to purchase a building at 59 Seward between Woodward and Second avenues for an undisclosed amount. See Midtown, Page 25

But with $9.38 billion in credits overall still outstanding, elected officials and tax policy experts are left wondering whether the program, which was discontinued in 2011, will result in a net positive for the state economy. Mike Johnston, vice president of government affairs for the Michigan Manufacturers Association, told legislators last week the billions invested by the auto industry during the recession would not have happened if the

Michigan Economic Growth Authority program didn’t exist. “Some policymakers are attributing the budget challenge to the MEGA program,” he told the House tax policy committee.

UM report: Take time to weigh impact of fracking BY JAY GREENE CRAIN’S DETROIT BUSINESS

To frack or not to frack? Michigan is still sorting out the answer to that question. One option to safeguard water quality and public health in the state on the practice of deep-well hydraulic fracturing is to impose a temporary moratorium to give time for an indepth environmental impact study and further regulations on the practice, according to a draft report released last week by the University of Michigan’s Graham Sustainability Institute. For now, environmental concerns — plus market dynamics driving cheaper energy from natural gas — seem to outweigh pressure from the hydraulic fracturing industry for permission to proceed with additional high-volume

See Credits, Page 22 See Fracking, Page 24

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CRAIN’S DETROIT BUSINESS

MICHIGAN BRIEFS One way Grand Rapids handles parking problem: Sell your space When Bill Kirk became mobility manager for Downtown Grand Rapids Inc., he decided to pocket an extra $149 a month by forgoing a company-supplied parking space. Kirk is among the growing number of people benefiting from what’s known as a parking cash-out program, which has been gaining traction in Grand Rapids, MiBiz reported. Executives at the city’s economic development organization think the program is just one option to help handle demand for parking in downtown Grand Rapids. Studies commissioned by the Grand Rapids City Commission have found that the supply of parking in the central business district does not necessarily match demand.

Growing Grand Valley approves $44.8M in construction projects The Grand Valley State University board of trustees approved $44.8 million for building projects to accommodate growing demand, the Grand Rapids Business Journal reported. Projects include a nearly 145,000-square-foot housing and academic building and a 16,900-squarefoot addition to the existing Recreation Center on its Allendale campus. Construction on both projects is expected to be completed by August 2016.

Report gives mixed grades to charter school authorizers A new report from The Education Trust-Midwest found huge disparities in performance among Michigan’s charter school authorizers. The report released by the Royal Oak-based nonpartisan research, policy and advocacy organization shows that of the nearly 150 charter schools opened since the state charter school cap was lifted in fall 2011, about 20 percent were authorized by authorizers that received “D” or “F” grades in the nonprofit’s report. Authorizers receiving a D were Oakland University, Detroit Public Schools and Saginaw Valley State University. Eastern Michigan University and Northern Michigan University received F’s. The highest-ranked authorizers: Washtenaw Community College, Washtenaw Intermediate School District, Grand Rapids Public Schools, Wayne RESA, Hillsdale Intermediate School District and Macomb Intermediate School District, all A’s; Lake Superior State University, Andy Beachnau, Grand Valley’s associate vice provost of student affairs, said the university has had strong enrollment for first-year students and was at capacity in freshman housing.

Group to study train service linking Ann Arbor, Traverse City The Traverse City-based Michigan Land Use Institute launched a campaign to establish commuter train service connecting Traverse City and Ann Arbor, The Associated Press reported. The proposed train, which would run on a 240-mile line

Ferris State University, Grand Valley State University and Bay Mills Community College, all B’s; and Central Michigan University received a C. The grades were based on the authorizers’ decisions regarding charter school openings and the quality of their operators, setting performance standards for current schools and improving chronically failing schools. Of the 16 authorizers evaluated, their total enrollment of about 135,000 students represents about 95 percent of the statewide charter enrollment of 140,000. “We are looking at the methodology of this new report and haven’t had a chance to review it in much detail yet,” said C. Robert Maxfield, interim dean of OU’s School of Education. “That letter grade is not consistent with our experience and track record in helping our charter schools excel.” — Kirk Pinho

currently used for freight, also would make stops in cities including Cadillac, Mt. Pleasant and Owosso. The Land Use Institute hopes to begin conducting feasibility studies next summer. Officials estimate the commuter train service could be ready by 2025.

MICH-CELLANEOUS Wisconsin Energy Corp. and Cliffs Natural Resources reached a deal in an effort to find a solution to the Upper Peninsula’s energy problems, The Associated Press reported.

Gov. Rick Snyder said the agreement will reduce electricity rates for U.P. residents and businesses. The Hannahville Tribal Council plans to expand and renovate its Island Resort & Casino in Harris Township, about 15 miles west of Escanaba, The Associated Press reported.

CORRECTIONS An editorial on Page 8 of the Feb. 16 issue gave an incorrect street for the unfinished Wayne County Jail. It is on Gratiot Avenue. A Rumbling on Page 26 of the Feb. 16 issue should have included the information that Chef George Vutetakis, former owner of Inn Season in Royal Oak, is consulting and has developed the menu for GreenSpace Café, expected to open in Ferndale in April.

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It’s owned and operated by the Hannahville Indian Community, a band of the Potawatomi Nation. The number of passengers departing from and arriving at Gerald R. Ford International Airport in Grand Rapids — 181,049, to be precise — rose 15 percent last month compared with January 2014, MLive.com reported. “Apparently, West Michigan has learned to get out of the snow in January,” said airport spokeswoman Tara Hernandez, who gets points for sarcasm above and beyond her pay grade. If the craft brewing industry one day looks back in lamentation at its “jump the shark” moment, it could be this: Brewery Vivant in Grand Rapids created a “Fat Paczki” brew in honor of Mardi Gras last week. It is made with prunes and powdered sugar, “with actual paczki tossed into the mash for good measure,” MLive.com reports. Find business news from around the state at crainsdetroit .com/crainsmichiganbusiness. Sign up for the Crain’s Michigan Morning e-newsletter at crainsdetroit.com/emailsignup.

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CRAIN’S DETROIT BUSINESS

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Vision for AA: Hub for tech startups Former execs buy 2 downtown buildings BY TOM HENDERSON CRAIN’S DETROIT BUSINESS

Using the Madison Building in downtown Detroit as the model, a group of former Barracuda Networks Inc. executives wants to create a large hub for tech startups in downtown Ann Arbor. They have signed a purchase agreement to buy two adjacent office buildings downtown and are negotiating to buy one or two more buildings. They hope to close on the first deal in about a month and have a build-out done in six months. Pending the closing on the real estate sales, they declined to specify the specific location. But the premise of the idea is that startups in the area need a place to call home, and current op-

TOM HENDERSON

Nutshell Inc. CEO Joe Malcoun (center) and cofounder Guy Suter (left) plan to open a tech incubator in downtown Ann Arbor and have their first tenant: Jordan Breighner and his Coolhouse Labs.

tions in downtown Ann Arbor are too hard to come by. “Developers want you to sign a five-year lease, and for a startup, that makes no sense. In five years, you’ll either need four times the space, or you’ll already be dead,” said Joe Malcoun, CEO of Ann Arbor-based Nutshell Inc.,

who is one of the investors in the real estate project.“There are startups scattered around downtown, hidden in back offices on the third floor. They don’t know each other. There’s no sense of community,” said another investor, Nutshell co-founder Guy Suter. “They don’t want to be in office parks; they want to be downtown. They want to be able to walk to nice restaurants. We want to get them into one area and build a startup ecosystem that has density. We need a vibrant tech scene downtown.” The investors say they will launch operations with at least 12,000 square feet and could have as much as 25,000, if two more buildings are bought. They say they will offer short-term leases that startups generally can’t find in the tight office market in downtown Ann Arbor, as well as services startups can share to reduce costs. But the investors have already landed their See Tech, Page 25

Inside

Go Shoe: UM student’s hobby has legs as a biz, Page 18

Company index These companies have significant mention in this week’s Crain’s Detroit Business: A123 Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Altair Engineering . . . . . . . . . . . . . . . . . . . . . . . . . 15

Keys to energy suppliers’ 5-year plans: Confidential BY JAY GREENE CRAIN’S DETROIT BUSINESS

More than two dozen regulated utilities, alternative energy suppliers and other electricity cooperatives and distributors last week filed reports to the Michigan Public Service Commission on how they plan to supply electricity to their customers over the next five years. But there’s a catch. The main findings of the reports are marked as confidential and not available to the public. “I don’t know what their energy plans are because all the data that would be useful on how sound the plans are have been filed under seals,” said Robert Strong, general counsel of the Association of Businesses Advocating Tariff Strong Equity, a Birmingham-based industrial power user group, adding that he is asking the PSC how they will make the data available for review and public comment. Strong said customers need to know the energy suppliers’ sales forecasts over the next five years and the precise breakdown of how they will supply required capacity during that period. “They have filed summer energy plan reports and three-year reports in the past and they did not have as much secrecy,” Strong said. “This

On Feb. 25, 1985, Crain’s reported on filmmaker Sue Marx’s promotional a film designed to bring business to work forThirty Detroit. Thirty years assesses Detroit. years later, Suelater, Marxshe assesses thethe city,city, PAGEPAGE 4. 4

LOOKING BACK

American Society of Employers . . . . . . . . . . . . . . . 13 Associated Builders and Contractors of Michigan . 11 Association of Businesses Advocating Tariff Equity . 3 Autocam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Autocam Medical . . . . . . . . . . . . . . . . . . . . . . . . . 12 Beaumont Health System . . . . . . . . . . . . . . . . . . . 16

30 YEARS AGO THIS WEEK

Carlson Gaskey & Olds . . . . . . . . . . . . . . . . . . . . . 11 Choon’s Design . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Consumers Energy . . . . . . . . . . . . . . . . . . . . . . . . 24 Coolhouse Labs . . . . . . . . . . . . . . . . . . . . . . . . . . 25

A life in rewind

Detroit Creative Corridor Center . . . . . . . . . . . . . . . 6 DTE Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Fountain Bistro . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Ghafari & Associates . . . . . . . . . . . . . . . . . . . . . . . 6 Global Titanium . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 LC Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Loft Warehouse . . . . . . . . . . . . . . . . . . . . . . . . . . 21 McLaren Health Care . . . . . . . . . . . . . . . . . . . . . . 16 Michigan Economic Development . . . . . . . . . . . 1, 22 Michigan Manufacturers Association . . . . . . . . . . . 1 Michigan Municipal League . . . . . . . . . . . . . . . . . 11 Michigan Public Services Commission . . . . . . . . . . . 3 Michigan State Housing Development Authority . . . 25 Midtown Detroit . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Moceri Cos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Nutshell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Plunkett Cooney . . . . . . . . . . . . . . . . . . . . . . . . . . 12 St. John Providence Health System . . . . . . . . . . . . 23 Shelborne Development Group . . . . . . . . . . . . . . . 25 Sideline Sneakers . . . . . . . . . . . . . . . . . . . . . . . . 18 Stout Risius Ross . . . . . . . . . . . . . . . . . . . . . . . . . 25 Sue Marx Films . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 United Auto Workers . . . . . . . . . . . . . . . . . . . . . . . 17 University of Michigan . . . . . . . . . . . . . . . . . . . 1, 25 U.S. Health and Life Insurance . . . . . . . . . . . . . . . 23

Department index BANKRUPTCIES . . . . . . . . . . . . . . . . . . 6 BUSINESS DIARY . . . . . . . . . . . . . . . . 20 CALENDAR . . . . . . . . . . . . . . . . . . . . 19 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 8 LETTERS . . . . . . . . . . . . . . . . . . . . . . . 8 OPINION . . . . . . . . . . . . . . . . . . . . . . . 8 PEOPLE . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . 26 WEEK ON THE WEB . . . . . . . . . . . . . . 26

See Energy, Page 24 GLENN TRIEST

THIS WEEK @ WWW.CRAINSDETROIT.COM

A little bird told you Crain’s will be live tweeting Wednesday’s Newsmaker luncheon featuring Kevyn Orr, bankruptcy Judge Steven Rhodes and mediator Gerald Rosen. Follow it on @crainsdetroit.

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CRAIN’S DETROIT BUSINESS

Oscar-winning Detroit filmmaker reflects on changes in the city and movie industry BY AMY HAIMERL

LOOKING BACK ON THE WEB

CRAIN’S DETROIT BUSINESS

In 1988, Sue Marx won an Oscar for her documentary, “Young at Heart,” about her widower father’s romance with a widow in her mid80s. But before she was hitting the red carpet, she was in charge of putting Detroit in its best light. Thirty years ago this week, the filmmaker was awarded a contract to produce “Detroit Means Business” as a way to sell the city. Such wellSue Marx, known DetroiSue Marx Films ters as Lee Iacocca, Walter McCarthy, Esther Edwards and Dave Bing all made appearances. Crain’s called Marx to catch up with changes in the film industry and changes in the city. When we reached her, she was deep into an archival review of her professional life. She was a prolific filmmaker, starting her career in the early 1970s at WDIV-TV (then WWJ-TV), where she created the “Profiles in Black” series that featured Stevie Wonder, Rosa Parks, Marvin Gaye and others inside their homes and workspaces. That work has all disappeared over the years, but she’s sifting through her more than two-dozen Emmys for such projects as a series on the Detroit Zoo that featured narration by James Earl Jones, Jeff Daniels, Tim Allen and more. She’s also reflecting on more than five decades in Detroit, having followed her husband from Lake County, Ind.

Thirty years ago, Crain’s reported on Sue Marx’s production work on “Detroit Means Business,” a short film aimed at attracting more business for the city. Read that 1985 story and see more Detroit history at crainsdetroit.com/30.

Q&A

You’ve done so many high-profile films; do you remember “Detroit Means Business”? I remember it very well. That film and another one we did about a year later, both of them were done during Coleman Young’s early years and they both won awards. It’s been buried for so many years, so I called someone at the Free Press because of their film festival. Maybe it’s time to show them again. How does the city compare then to now? Physically it’s different, but the story is still the same. I lived in the city until 2000. We were late in moving out, but my husband, who died in 2007, decided it was time to move. What was it like living here? I got that job at Channel 4 and decided it was fun to live in the city. So we just sort of developed a different group of friends than our friends who had already moved out. I have three daughters, none of whom live here. At the time I was feeling like I should get out of town. My oldest daughter went to Cass Tech High School at a time when there were very few white kids at Cass. So I ask them if we should have left, and they say, “No mom, you did the right thing.” Did we do the right thing? It was a challenging time to raise kids. What caused you to finally leave? It was a house that we didn’t

GLENN TRIEST

Sue Marx on the Detroit story she would tell: “I think there is a lot of hopefulness. And yet I wouldn’t want to have to deal with the racial issues.”

need. It had a pool. The grandkids of our neighbors were now swimming in it. It wasn’t necessarily because we were ready to move, it just felt like it was the right time. This is the first time in my life with a house with attached garage, so I’m as happy as a clam in Birmingham. You started Sue Marx Films in 1980. What did you learn in 35 years? I somehow always lucked out to find someone that I was compatible with. I’m a collaborator. I always want to be able to say, “What do you think?” I didn’t know how to grow a company, I’m embarrassed to say it. My husband was in business, but there was no reason he could help me, it was such different fields. Thank God I didn’t have to support myself. That’s what I look upon with a lot of the young people now doing everything on their own. I was lucky to have someone to help pay the rent. We lived a great life. I got to meet a lot of people. How did the evolution of digital media impact your work? When I first started the company, I was Sue Marx Films. I had an attitude about video that was like I’m never going to do video. I had a fabulous editing table in my house. Those were the film years and the most wonderful times. Gradually it became obvious that video was going to replace film. It was a little more affordable and it got more and more, until it was very affordable. So I was gradually accepting of a new format and then appreciative of it. Now all these young people have their own Macs and they can cut and shoot and do everything for $2.95. It’s a different world. But people’s appreciation for quality still exits. Why did you quit making films? The last film I did was for the RiverFront Conservancy. I decided that enough was enough. Growing up sort of changes your life. I had some aches and pains. I thought it was time to clean house and go through films. I kept paper files on almost every project I ever did. But I’ve talked about doing something about the city again, and I’ve talked to other people who are beginning to think it’s time.

What would you call that movie? “Detroit Open for Business” is a really good title. It’s just a dynamic and exciting time in the city of Detroit. We were told three or four years ago when Midtown started to grow that it was too soon. We had done some spec shooting, thinking we have a helluva proposal, so we went to some heads of foundations but they all came back with the message to give us a little more time. They were right, but there is always more time. What story would you tell? There is a new feeling, I think, in the city of Detroit. I think there is a lot of hopefulness. And yet I wouldn’t want to have to deal with the racial issues. I wouldn’t know how to handle those stories that downtown and Midtown are white. I don’t know that there was hopefulness to the same degree that is now after ’67 or ’70, but the city wasn’t as polarized as it is now. How does that fit into a film that is honest? It’s a very strange time. This is my home, this is Detroit. If the story were told today it would be in a strange way, it would be the same story with different images. The story is about looking forward with hope. I don’t know, but I guess all cities have the same yearning. I don’t think we’re there yet— and I don’t know what there is or where there is — and maybe that’s just life. You were a big supporter of Coleman Young. What do you think of the leadership today? I think Mike Duggan is as fabulous a leader as we could possibly have. There are so many positive signs. But I remember when Duggan was at Wayne County and he and (Wayne County Executive Ed) McNamara decided it was time to put a nursery school in the building, which is a gorgeous building, and Mike’s kid was there. Mike would come down from his office, like many of the parents did, coming down to play with him. A few years ago, I went to a party and saw Duggan and he says, “You’ve got to meet Eddie.” Now he’s a lawyer practicing law. What do you see for the city’s future? I can’t picture Detroit 15 years from now, 20 years. I wish I could peer into the future and see what would really happen. But if there was an opportunity to do a film on the city again, I would do it. I wish I were younger right now and could take on a big heft project. This interview was edited for length and clarity.

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Retooling Globalization Strategies for Auto Suppliers By Gary Anglebrandt he automotive industry team at Bank of America Merrill Lynch (BofAML) spends its days fine-tuning and funding the strategic plans of middle-market parts suppliers. What do these companies say are their most pressing concerns as the new year begins? Globalization and capacity. Matthew Elliott Michigan State But there is a new twist on these familPresident iar pressures — a paradigm shift toward Bank of America Merrill Lynch what the BofAML team calls “manufacturing in theater.” OEMs expect suppliers to follow them around the globe, setting up shop near assembly plants instead of shipping parts around the world from one country to another. This presents considerable risk to suppliers who must weigh which countries to enter first, then figure out how to go Brian Kundich about it. All options are costly, but also Senior Credit Products Manager potentially very profitable. Bank of America BofAML sees these forces at work Merrill Lynch from the inside out as it helps its clients manage capital investments, acquisitions, joint ventures, international cash flow and currency fluctuations. These clients cover the industry spectrum: raw materials producers, parts suppliers, OEMs, dealerships and consumers. Covering the full spectrum of the automotive ecosystem helps BofAML see David K. Komrska Senior Credit Products trends and pressures before they become Officer Bank of America apparent to much of the rest of the Merrill Lynch world. Here’s more on these trends from my conversation with the BofAML team that included Matt Elliott, Michigan state president and commercial banking market executive, and senior credit officers Brian Kundich and David Komrska.

a cash management system to handle the expanded global enterprise and we’re now reevaluating the capital structure to position the company for the next phase of growth. The company has made five acquisitions in the last 18 months in Europe and the U.S. The next project is a joint venture in China. Another client of ours was thinking about buying a foreign company for the first time. The first thing on their plate was arranging a financial package — before getting into deep discussions with potential buyout targets. Their big concern in picking a financial partner was they wanted to know we had done it before, that we knew how to structure a deal and had the people who know how to do it. Clients like these are looking for an international bank. They’re saying, “We need a partner that can help us go to places like Europe, China, India, Brazil.” We have bankers who structure and advise automotive clients in those markets and they work alongside our local U.S.-based teams to deliver the entire global firm to the client.

WHAT ISSUES DO COMPANIES FACE IN THESE SITUATIONS? There’s a lot of risk and complexity when entering a foreign market, and much of that stems from jumping into an unknown regulatory environment, which is why it’s important to bring in knowledgeable people. One supplier, a smaller public company, always had used a contract manufacturer to make its product, in what really was a two-player market — this company and a European company.

Our client wanted to buy their competitor, but it was three times its size, and was majority owned by a German hedge fund and a collection of individual investors. This supplier needed help financing the purchase and navigating German laws concerning tender offers and shareholder rights. It had asked a few banks for ideas and nobody came back with a great answer. They came to us and we recommended and executed a strategy for them, getting them financed and working through all the legalities, while arranging a cash management system for what had become overnight a global company. We were able to do this in a short time because of our in-market expertise.

WHAT OTHER PRESSURES ARE SUPPLIERS FACING? Lightweighting (removing weight from vehicles), powertrain electrification, autonomous vehicle technology and mobility are coming into play. These developments will drive change, and change requires investment, talent and experience. Another big issue we consistently hear from business owners is that lack of talent is handicapping growth. They’re also wondering about the sustainability of the current sales volume. Every supplier is skeptical of sales projections they get from customers. Excess capacity in this industry is not your friend if you’re a supplier. It’s a classic greed-versus-fear dilemma. To learn more, visit go.bofaml.com/auto and contact our dedicated automotive team: matthew.b.elliott@baml.com, brian.kundich@baml.com, david.komrska@baml.com.

HOW DOES THE CAPACITY SITUATION LOOK? The capacity envelope left after the economic crisis has been filled up. Now expansion is required to support an increase in sales volume. The slow growth of sales after the recession really delayed capacity concerns, but everyone knew we’d hit that wall eventually. Now we’re at the tipping point.

WHY ARE AUTOMAKERS SO KEEN TO BRING SUPPLIERS CLOSER TO PLANTS? For one, OEMs want to shorten and strengthen their supply chains — it’s a lesson from the 2011 tsunami in Japan that highlighted weaknesses in the supply chain. At the same time, OEMs also expect suppliers to work at an international scale to support the automakers’ global platforms. So, for example, a manufacturer that wants to supply a part in North America also has to produce it in two or three other geographies. We call this “manufacturing in theater,” and it means the supplier either has to find a local partner or build a plant in that new location. Each option costs money and entails risk, but has the potential to be very lucrative.

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WHAT DO SUPPLIERS HAVE TO DO TO GET STARTED, AND WHAT’S THEIR BIGGEST CONCERN WHEN PLANNING THESE GLOBAL STRATEGIES? Getting the finances in place is usually one of the first orders of business. We have a client, a small public company, that knew it needed more of a global manufacturing footprint but was behind the curve. We first helped them increase debt capacity to make acquisitions. Then we helped implement

The power of global connections

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February 23, 2015

CRAIN’S DETROIT BUSINESS

Ex-Im Bank sees opportunity to increase Detroit exports BY AMY HAIMERL CRAIN’S DETROIT BUSINESS

The chairman of the Export-Import Bank of the United States was in Detroit last week, looking at the resurgence of design-related manufacturing here and discussing how to increase export opportunities. “I’m confident Detroit can be the center of this,” Fred Hochberg told a group of small-business owners, bankers and government aides gathered by the Detroit Creative Corridor Center at the Taubman Center on Tuesday. The bank, which is an independent agency of the U.S. government, provides export credit and guarantees for working capital loans. Many banks, for example, won’t lend based on foreign receivables — even if the business is well-qualified. The deal can be too risky for traditional underwriting because it’s hard to track down the money if the buyers default. But if the Ex-Im Bank steps in and guarantees the loan, banks can loosen the purse strings. Because the deals are based on strong revenue streams, the bank had less than a .2 percent default rate as of September 2014. “We are Plan B,” Hochberg said. “Commercial banks are Plan A. We’re not here to compete with banks.” For Dearborn-based Ghafari & Associates, Plan A didn’t work even though it had been a customer of

It was a $17 billion project with a $3 billion cut for Ghafari. But financing that deal would tie up all his lines of credit and jeopardize the company’s existing clients. So Bank of America connected him with the Ex-Im Bank, which issued a $7 million guarantee of working capital. “When you’re going ANDREW HARRER/BLOOMBERG overseas, it’s difficult Fred Hochberg, chairman of the Export-Import Bank of the United States, on Ex-Im’s role: “We are Plan B. for a bank to lend on Commercial banks are Plan A. We’re not here to those assets,” said compete with banks.” Robert Kling, who represented Bank of Bank of America for more than 30 years. The firm now provides archi- America at the event. “When tecture, engineering, consulting you’re generating a great deal of and construction services to a vari- receivables overseas, how do you ety of clients, from American Airlines leverage those? The Ex-Im facility to Ford Motor Co., across the globe. was the perfect fit for Ghafari to do But when it started, owner Yousif that.” Being able to export services inGhafari focused on designing ternationally has propelled the company’s growth: Ghafari & Assomanufacturing facilities for au- ciates grew by 3 percent domestically in 2014 — and 28 percent internatomotive firms. In 2004, how- tionally. Across the country, Ex-Im has ever, a friend connected him underwritten deals for 8,973 firms, with ministers generating $279 billion of total exin Doha, the cap- port value since 2007. That supportital city of ed more than 164,000 jobs in 2014, Ghafari Qatar, and Gha- the bank said. In Michigan, Ex-Im Bank has asfari won a contract to design and manage the construction of the sisted 224 companies to finance New Doha International Airport. their export plans, generating more

than $10 billion in total export value since 2007. And while the bulk of that — $7.3 billion — comes from the bank’s support of Ford Motor Co. during the recession years, 74 percent of firms assisted are small businesses. That, in turn, helps cities grow and add jobs, Hochberg explained. “There is more to growth than convention centers and stadiums,” he said. “We tap local small businesses and help them to grow into international markets.” The bank does that without any cost to U.S. taxpayers. Ex-Im is an independent, revenue-generating agency that contributed $675 million to the U.S. Treasury in 2014. Having this assistance is critical to helping reignite Detroit’s designfocused manufacturing industries, according to Matt Clayson, director of DC3, who helped organize the meeting. Unlike in other countries where small businesses start by exportClayson ing because borders are so small, U.S. companies often don’t consider the option or even understand how to make it possible. “One of our goals is to connect to markets,” Clayson said. “We want to become more international and connected and get more rev-

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enue back to the hometown.” The support could have a shelf life, however. Ex-Im’s charter is up for renewal by Congress this June. And while Gov. Rick Snyder and both of Michigan’s senators, Debbie Stabenow and Gary Peters, are supportive of the agency, there has been criticism. U.S. Rep. Justin Amash, R-Grand Rapids, introduced legislation in 2012 to end the bank and is not supporting its reauthorization now. And Mike LaFaive, director of fiscal policy for Midland-based conservative think tank Mackinac Center for Public Policy, told Crain’s last fall that he doesn’t believe the federal government should be involved in the private markets. “If a company claims they couldn’t find financing without Ex-Im Bank, one would question whether they should be in the export business if a private bank isn’t willing to take that risk,” he said. “It’s simply not the proper role for any level of government to provide this type of export encouragement; it distorts the marketplace, unfavorably.” And yet Ghafari said that he would not have been able to grow without the loan guarantees offered by the Ex-Im Bank. Instead, the airport contract — and the American jobs created — would have gone to another firm in another country. That’s the same for Detroitbased Global Titanium Inc., which buys titanium scrap on the global market, refines it and then sells it to steel makers. Ex-Im Bank provides a $2 million loan guarantee to Wells Fargo so that it can extend a line of credit to Global Titanium. “We get into areas where we’re not sure the quality of the receivable,” said Vice President and CFO Dennis McCarthy. “We’re a cash intensive business. Having a lot of cash tied up and waiting for a receivable, well, a lot of exports can be 90 days, which is more like 100 or 120 days; that’s hard. Ex-Im Bank is a great resource. It helps us with the stability and making sure our cash is safe and making sure that we’re going to collect the money.” Amy Haimerl: (313) 446-0416, ahaimerl@crain.com. Twitter: @haimerl

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The following businesses filed for protection in U.S. Bankruptcy Court in Detroit Feb. 13-19. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation: Chair Covers and Linens Inc., 25914 John R Road, Madison Heights, voluntary Chapter 11. Assets: $502,918.98; liabilities: $2,294,734.86. Chair Covers Leasing Inc., 25914 John R Road, Madison Heights, voluntary Chapter 11. Assets: $986.18; liabilities: $84,496. Chair Covers Inc., 25914 John R Road, Madison Heights, voluntary Chapter 11. Assets: $400,829.72; liabilities: $1,194,291.40. Detroit Intermodal Transport Inc., 7475 Holland Road, Taylor, voluntary Chapter 7. Assets: $6,878; liabilities: $675,061. Polar Heating & Cooling Inc., 6986 Rattalee Lake Road, Clarkston, voluntary Chapter 7. Assets: $2,502; liabilities: $135,711. — Compiled by Natalie Broda

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CRAIN’S DETROIT BUSINESS

OPINION

Bridge plan may be model for funding A

t last. The last major financing obstacle to building a new bridge linking Detroit to Canada was resolved last week with an announcement that a “P3” partnership created by the Canadian government will take on the U.S. customs plaza, too. The entire bridge project will be built under this structure. The government in Ottawa is not spending the cash but will back private-sector financing, with the “public-private partnership” repaid through tolls. So the construction jobs will be coming soon; the bridge is scheduled for completion in 2020, offering redundancy to a critical trade crossing. While we celebrate progress, we lament that it has taken this long and with no investment by President Barack Obama, who did not include any money for the customs plaza in his budget this year — or any year. That makes many Canadians wonder just how valued they are as allies. Meanwhile, U.S. Rep. Candice Miller is a mite irked with Washington leadership because she proposed virtually the same model to fund a customs plaza for the Blue Water Bridge in Port Huron a year ago. That project has languished for a decade. The good news: The spotlight on the P3 model may lead to its use in other projects. Michigan, and the U.S. as a whole, have billions of dollars in infrastructure needs. And an antitax climate among voters. We need more strategies to fund infrastructure investments. Our Canadian neighbors might have the right idea.

LETTERS

Tax structure fix took too long

Health study too focused on Detroit

It could be worse. As Dustin Walsh reports on Page 1, Michigan’s liability on tax credits given to mostly large employers during the state’s economic doldrums in the 2000s could have been four times greater if the state hadn’t dumped its Michigan Business Tax. Some companies simply abandoned the credits when the state adopted a corporate income tax model under Gov. Rick Snyder; to claim the credits, a company has to stay on the old tax structure. Hindsight suggests the credits — awarded primarily during Gov. Jennifer Granholm’s tenure as a way to hang on to thousands of jobs — were too generous. Will there be a legislative remedy? If the state can find a way to increase revenue without eternal litigation, we’re sure there will be many other states in the same boat that will follow. The lesson here may be: Michigan would have been better off fixing its business tax structure years ago rather than piling on the credits.

Editor: The Jan. 26 issue of Crain’s reported in a Rumblings item (“Ranking: Detroit is an unhealthy city”) on a study from BetterDoctor.com that ranked Detroit as the 40th-healthiest city out of the 50 tracked. This is how the article began: “It’s probably not a surprise that Detroit is at the bottom when it comes to health.” Later it says, “A high number of uninsured residents and a poor American Fitness Index score contributed to Detroit’s dismal health rating.” If one had taken the time to explore the study’s methodology, as I am wont to do, one would see that the rate of uninsured and the AFI score were both regional, not city,

Crain’s Detroit Business welcomes letters to the editor. All letters will be considered for publication, provided they are signed and do not defame individuals or organizations. Letters may be edited for length and clarity. Write: Editor, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 48207-2997. Email: cgoodaker@crain.com measures. So it wasn’t the city alone contributing to the dismal ranking but suburbanites who account for a much larger share of the population. And these two measures accounted for 60 percent of the final score.

Only two city indicators were used (accounting for 40 percent of the final score): 1. The number of doctors per 1,000 residents; 2. The percentage of doctors who were highly rated on BetterDoctor.com. Let us be very clear that these measures do not reflect on the residents of Detroit. Rather, this is an indicator of how the medical establishment has abandoned the inner city over the years, as doctors, hospitals and hospital beds head to the suburbs. Let us be clear on our measures and not blame the residents of Detroit, who are the victims. Kurt Metzger Mayor, Pleasant Ridge Director emeritus, Data Driven Detroit

KEITH CRAIN: There are some folks who are smiling You always figure that when we get really bad winter weather, everybody hates it. Well, I am happy to report that there are a lot of people in Southeast Michigan who are smiling all the way to the bank. I don’t mean just the snowmobile dealers who are, no doubt, having one of the best years ever. The guy who plows our driveway is smiling because once again I said we’d pay by the plow, not the season. And let us not forget there are a lot of folks who have furnace and heating companies that have been busy all season making sure

that their customers aren’t freezing in the dark. Regardless of what Detroit Edison says, every time there is another power outage, I am sure hundreds of DTE customers call up their local auxiliary power company to have a home power supply installed. I sure hope DTE doesn’t have an interest in any of those companies that seem to be doing a land-office business these days.

Hardware stores are smiling as we load up on salt and shovels and snowblowers for our homes. Of course, the landscape companies are keeping busy until spring making sure that our driveways are clear. We live in a seasonal climate, and for business all over Michigan, we get used to seeing seasonal businesses learning to adapt to the ever-changing seasons. From hockey rinks to golf courses, we learn to live with and enjoy

the changing climates. Somehow, we may think that our winters are getting tougher, with colder temperatures and more snow. But if we check the records, we might discover that our seasons are about the same as always, despite the threats of global warming. In a couple of months, we’ll see lots of businesses change their inventory and put away the snowmobiles and bring out the motorcycles. Snowblowers will be switched for lawn mowers, and salt will be replaced by chemicals for our pools.

It seems like forever these days — but it won’t be long before the golf courses open and the ski slopes close. And businesses all over Michigan will switch once again from winter to summer, and we’ll all look forward to the next season. More business for some, different businesses for others. But let’s enjoy our seasons. Especially since we don’t really have any choice. Winter will end and summer will appear. And we’ll stop rooting for the Red Wings and start checking out the Tigers.

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Oakland Township faces lawsuits over proposed Moceri development BY KIRK PINHO CRAIN’S DETROIT BUSINESS

Oakland Township finds itself in federal court facing a pair of housing discrimination lawsuits centered on the proposed development of a $93 million senior and disabled living community. If the court sways in favor of Auburn Hills-based developer Moceri Cos., which is suing the township in a zoning dispute over a project proposed in 2011, the Blossom Ridge development of 134 apartments, 60 single-family homes and 44 duplexes for senior and assisted living care at Adams and Dutton roads can move forward and be completed in about two years. If the legal tangle results in a ruling in favor of the township, the 42-acre site will remain zoned for up to 61 single-family residential homes only. In December, Moceri/DM Investments LLC, a wholly owned subsidiary of Moceri Cos., and former township supervisor Joan Buser, now a South Carolina resident, and the Michigan Paralyzed Veterans of America filed separate lawsuits against the township alleging violations of the federal Fair Housing Act, the Americans with Disabilities Act, the Michigan Persons with Disabilities Civil Rights Act, and the equal protection guarantee of the U.S. Constitution, among others. This month, Daniel Kelly, partner at Troy-based Giarmarco Mullins & Horton PC who is representing the township, filed a response in U.S. District Court denying the allegations. Voicemails and an email left with Kelly last week were not returned in time for deadline Friday. Jamie Moore, interim township manager, and township Supervisor Terry Gosner declined to comment last week. In August 2012, the township board approved rezoning the land to accommodate the Blossom Ridge development, which would sit on property that Dominic Moceri, partner of Moceri Co., said his company has owned for about three decades. A referendum on the rezoning the next month, however, was approved to go on the ballot following public outcry from what the Moceri lawsuit calls “a relatively small and uninformed, but impassioned and vocal minority of residents.” In November 2012, five new members of the township board were elected, replacing the majority that had voted in favor of the rezoning. In August 2013, township voters overturned the rezoning in a 73-27 vote. Opponents of the development have cited concerns about traffic congestion and depletion of housing values due to the development. They have also said other communities could accommodate Blossom Ridge. The company has developed about 1,400 of the 6,000 homes in the township, including the $137 million Pinnacle development on Silverbell Road east of Adams Road, Moceri said. The Moceri suit alleges that the township’s zoning requirements are “unreasonably narrow, restrictive and exclusionary, and are designed to exclude multifamily rental housing and to discourage all but luxury housing in the township and preserve a ‘rural character’ for

the aesthetic pleasure and benefit of current residents at the expense of the owners of vacant land.” The zoning ordinance prohibits multifamily buildings taller than 35 feet, more than two stories, or more than 135 feet in length. In addition, no building can have more than 16 units, according to the lawsuit. “Those restrictions render assisted living facilities with common dining and other amenities impracticable and cost prohibitive,” the lawsuit says. It says the township has no land zoned for multifamily develop-

ment even though the township has a designation in its zoning ordinance for multifamily. “Under federal law and state law, you have to vary from what you’d like to do and make some accommodations for the handicapped so they can participate,” said Edward Kickham, member of Royal Oak-based Kickham Hanley PLLC, the firm representing Moceri in the lawsuit. “Oakland Township has refused to do this. They will have a whole litany of reasons why they don’t want assisted living in the township. But the law says you don’t al-

ways get what you want. You have to make an accommodation so that the disabled are able to participate in your community.” Jack Dolan, a partner at Clinton Township-based York Dolan & Tomlinson PC who has represented municipalities in the past, said communities can’t discriminate with regard to housing based on age under provisions of the state’s Zoning Enabling Act of 2006. “If there is a demonstrated need for a lawful land use, then a zoning ordinance should accommodate it, not prohibit it.” Timothy Wittebort, member in

the Royal Oak office of Howard & Howard Attorneys PLLC, also said senior or assisted living housing can’t be prohibited through zoning. “If the zoning had been changed to accommodate assisted living and then changed back based on a referendum, there is probably a good argument to be made that the change in zoning or the intent in change in zoning may have been based upon discriminating against assisted living (development) or people who need it,” he said. Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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February 23, 2015

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REPORTER’S NOTEBOOK Chad Halcom covers litigation and the defense industry. Call (313) 446-6796 or write chalcom @crain.com.

Law Chad Halcom

Rainbow Loom gains tool for knockoff fight A series of patent infringement lawsuits may finish weaving their way through the courts soon as Choon’s Design LLC readies a new tactic for coping with knockoff products. The Wixom-based maker of Rainbow Loom bracelet craft kits, owned by inventor-engineer Cheong Choon Ng and his wife, Fen Chan, won a Feb. 11 ruling from a U.S. International Trade Commission administrative law judge that 10 companies, including six based in or importing Ng goods from China, infringed on Ng’s patent. The matter now goes to the Trade Commission board to sign off on a proposed exclusion order to U.S. Customs and Border Protection, barring such products from the country and authorizing agents to seize them. “We’d already had a trademark approved to help enforce the name, so we had the power to get customs to look into things that were named the same … or similar,” said Choon’s attorney, John Siragusa of Carlson, Gaskey & Olds PC in Birmingham. “But a lot of infringers had stopped using the word ‘loom’ or anything that obvious, and if it wasn’t similar enough there wasn’t an argument to help you stop that shipment — before this ruling.” An ITC exclusion order, he said, will allow customs enforcement against knockoffs based on structural or design similarities to Rainbow Loom as well. Choon’s Design has filed 14 federal lawsuits since August 2013 for patent infringement against would-be competitors. Ten have been settled or otherwise closed, while four are pending. Siragusa said litigation grew when Rainbow Loom sales were rapidly expanding about a year ago but should abate now that sales are normalizing. The company says it has sold more than 7 million Rainbow Looms since the product was launched in late 2011. “A year ago last holiday season, it was the kind of turnaround where a Rainbow Loom product gained some exposure and became popular in a September-October time frame, and by November-December there were copies in mall kiosks all over the country,” Siragusa said. Ng has said he developed the Rainbow Loom in 2010 after watching his daughters twist ponytail bands into rubber band bracelets. He and Chan invested $10,000 to bring it to market, and the company reported revenue grew to $44 million in 2013. The company has rolled out several new products, Siragusa said. The travelsized Monster Tail loom debuted last year, and the company showcased its Alpha Loom and Hair Loom products at the New York toy fair Feb. 14-17.

Big biz cases of 2014 2

014 was a year in which long-simmering legal controversies over Obamacare, same-sex marriage and a state law governing businesses with public contracts reached pivotal trial court orders or appellate decisions. Some of these disputes are not over, and legal

experts believe they will either reshape public policy through upcoming rulings from the U.S. Supreme Court or its counterpart in Michigan, or generate future litigation. Cases included here could also become guideposts in future cases involving environmental contamination, theft of trade secrets and more.

Conflicting prevailing-wage rulings head to state’s high court BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

court battle 90 years in the making has just landed before the Michigan Supreme Court, and it could rewrite the wage and benefit rules for municipal construction and government contracting for businesses statewide. The high court in December agreed to hear an appeal from the Associated Builders and Contractors of Michigan, which prevailed before an Ingham County judge in 2012 but then lost at the Michigan Court of Appeals last May in its challenge to a prevailing-wage ordinance in Lansing. The May ruling on local prevailing wage ordinances is significant because it directly conflicts with a 2009 appeals court ruling over Detroit’s living-wage ordinance. The cases tackled different laws, but they both hinge on a 1923 court ruling that the state hadn’t given local governments power to govern wages or working conditions. It now falls to the Supreme Court to decide which interpretation is correct. At issue before the court are prevailingwage ordinances, which are local government rules modeled in part on a 1965 state law requiring the state, its school districts and public universities to pay the going rate of wages and benefits negotiated with contractors in that area. The Detroit case involved a group of employees suing Guardian Protective Services Inc. over alleged living-wage violations in its contract to provide security guard services at Cobo Center. The Court of Appeals found that the 1923 case, Attorney General ex rel Lennane v. Detroit, was long obsolete, but it still “is binding precedent and we must follow it,” siding with Guardian. But in May, on the Lansing case, the appeals court, with a different set of judges,

JUDGMENT SUMMARIES Hobby Lobby ruling on birth control coverage left wiggle room over definition of ‘closely held’ firm, Page 12 A federal judge’s decision to strike down Michigan’s ban on same-sex marriage could shape a new national policy on such marriages, Page 13 Altair Engineering case could have impact on valuations of trade secrets, Page 15 Other verdicts and settlements, Page 14 found it did not have to adhere to Lennane, which relied on a 1908 version of the state constitution that was replaced in 1963, and upheld a Lansing prevailing-wage ordinance governing municipal building contracts. “But that position is also at odds with the court’s own ruling in the (Detroit) case,” said Chris Fisher, president and CEO of Lansingbased Associated Builders. “And I think that’s one of the reasons the Supreme Court wants to take this up now — just to be consistent in (the courts’) position on these issues.” The court wants to hear arguments on whether cities have authority to make prevailing-wage ordinances, and whether Lennane should be overturned. Senate Bills 1-3 and House Bills 4001-4003, a tie-barred package of legislation to repeal the state’s prevailing-wage laws, were the first bills introduced in the new legislative session of both chambers last month. Gov. Rick Snyder, however, has opposed the legislation, and the bills haven’t seen any movement in committee since mid-January. The state law doesn’t cover municipal governments, but many have passed ordinances of their own. William Mathewson,

ISTOCK PHOTO

general counsel for the Ann Arbor-based Michigan Municipal League, said not all local governments have the same views toward prevailing wage, but the court case is about balancing state and local control. “Aside from how communities might feel politically Mathewson about this particular ordinance, this (issue) is something that could, and should, be decided at the local level,” said Mathewson, adding that the league expects to file its own brief in the court case supporting cities. “Lansing clearly feels this is in the best interest of its own community. Some on the board of our legal defense fund felt maybe this potential ruling from the court could affect other ordinances their cities enact, even See Wage, Page 12

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Law

Wage: Who will prevail? ■ From Page 11

if they have nothing to do with prevailing wage.” Fisher said the issue is one of competition and opportunity for small business, and also of returning value to taxpayers on costly construction projects. Small contractors often have a disincentive to add the administrative and personnel costs of overseeing prevailing wage job classifications and labor markets on government projects, which larger contractors typically manage as a routine business function. Fixed overhead costs can also make it difficult to compete with a larger bidder without the offset of a wage advantage, he said. “If the court sides with us, it’s a big win for competition for construction firms of all sizes as long as they’re qualified and able to do the work required,” he said. “It’s also a win for taxpayers, and it’s ultimately even a win for construction jobs, because you can increase the scope of construction you’re able to do if each dollar goes farther and costs are better managed.” But if the Supreme Court also strikes down Lennane, it could strengthen living wage ordinances like Detroit’s and affect companies that have non-construction contracts with local governments. “The old constitution said cities have

whatever authority has been given to them, otherwise power remains with the state, while the current constitution says cities now have all authority except that which the state has withheld from them,” said Michael Bogren, chairman of the board of Bloomfield Hills-based Plunkett Cooney PC, which is representing Lansing in the case. “So the issue for us isn’t the ordinance itself, it’s Bogren the authority of the city.” The Municipal League and some labor groups are expected to submit briefs for the court to review, along with Lansing and the builder association. Fisher said Associated Builders hopes to see a ruling by late summer or early fall. Associated Builders and Contractors of Michigan v. City of Lansing, Docket #149622, Michigan Supreme Court. Kraig Schutter, partner, Masud, Patterson, Schutter, Peters & Vary PC, Saginaw, for Associated Builders. Michael Bogren, partner, Plunkett Cooney PC, for Lansing. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

Hobby Lobby ruling left wiggle room over definition of ‘closely held’ firm BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

Ever since the U.S. Supreme Court held that some corporations with religious owners don’t have to offer insurance for birth control, many employers and attorneys have wondered who qualifies for that exemption and how far it goes. The court found that “closely held” companies like Hobby Lobby Stores Inc. or Conestoga Wood Specialties Corp. did not have to cover forms of contraception that its owners object to on religious grounds. But what makes a company closely held, and can those employers also object to other federal regulations? The Internal Revenue Service defines a closely held corporation as being more than 50 percent owned by five or fewer individuals in the last half of a tax year, and not a personal service corporation. But the court opinion doesn’t reference IRS or define the term, and local experts told Crain’s the debate isn’t over which corporations might have religious views — or acquire them.

Wixom-based weapons sightings manufacturer Trijicon Inc., Oxford-based defense industry supplier Barron Industries Inc., Utica-based Weingartz Supply Co. and Ann Arbor Township-based Domino’s Pizza Inc. were among about a dozen Michigan businesses in litigation with the federal government over some forms of contraception coverage, before the high court’s Burwell v. Hobby Lobby Stores ruling in June. Barron, Weingartz and Domino’s have since obtained court injunctions in their favor in those cases. Trijicon has been sparring with federal officials in another court about the language of a proposed ruling in its own favor. Autocam Corp., a Kentwood auto parts supplier with more than 2,100 employees, bowed out of a legal challenge to a contraception mandate by the U.S. Department of Health and Human Services after Johnson City, Tenn., private equity firm NN Inc. in July acquired a majority stake in Autocam in a deal worth $300 million. Partly at issue after the sale was whether Autocam still quali-

fied as closely held for purposes of Hobby Lobby, said Patrick Gillen, an attorney for the company and an associate professor at Ave Maria School of Law. Autocam Medical LLC, an affiliated medical device component maker that is still owned by the devoutly Catholic Kennedy family, went forward with its portion of the case after the sale. That company won a ruling in January that it’s covered by Hobby Lobby and the government must pay its legal bills. The high court found that the federal Religious Freedom Restoration Act of 1993 forbade the government from requiring companies like Hobby Lobby and Conestoga to offer contraception coverage under a 2012 edict from the U.S. Department of Health and Human Services. The ruling did not fully define what constitutes a closely held company, however, since there was no dispute that Hobby Lobby and Conestoga qualify as familyowned businesses. Gillen said he See Next Page

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did not know if Autocam Corp. now covers contraceptives, but it is not exempted by the January court injunction in favor of Autocam Medical. Meanwhile, legislatures in six states â&#x20AC;&#x201D; Georgia, Indiana, North Carolina, Texas, Utah and Wyoming â&#x20AC;&#x201D; have seen bills introduced to create or expand a state law similar to the federal religious freedom act. Michigan, which doesnâ&#x20AC;&#x2122;t have a state RFRA law of its own, saw one proposed during the lame-duck session of the Legislature in November. The bill, which then-Speaker Jase Bolger proposed to pair with a proposed protection of sexual orientation under the state ElliottLarsen Civil Rights Act, cleared the House but died at the end of the legislative session in December. The 1993 religious freedom law applies to the federal government, not to states. State bills introduced in the past year have often been assailed as an attempt to authorize some forms of discrimination against gays and lesbians. Local attorneys have said they expect other cases to emerge about regulations that violate business ownersâ&#x20AC;&#x2122; rights under the religious freedom law, in other areas, even though the lead opinion in the Supreme Court case states the ruling is limited to contraception insurance. For example, the National Right to Work Legal Defense and Education Foundation Inc. also tried to argue to the National Labor Relations Board that Hobby Lobby bolstered Pacific Lutheran Universityâ&#x20AC;&#x2122;s challenge to a unionization election for non-tenure-track professors. The NLRB in January found the professors didnâ&#x20AC;&#x2122;t perform a religious function, and sided against the university. Michael Burns, executive vice president of the American Society of Employers in Southfield, Burns said itâ&#x20AC;&#x2122;s possible the ruling could have implications for employee dress codes, or perhaps an employerâ&#x20AC;&#x2122;s choice to cover vaccinations or other medical pro-

cedures outside of contraception. But he did not expect it to affect many Michigan companies. â&#x20AC;&#x153;I have no doubt someone, somewhere might raise those kinds of arguments. But the Hobby Lobby ruling was an uphill battle, where an employer had to really demonstrate a need to have its policy a certain way,â&#x20AC;? he said. â&#x20AC;&#x153;Most employers do not have that same depth of conviction, they just want to do business and do it the right (legal) way.â&#x20AC;? Gillen, however, said the ownership issue and scope of Hobby Lobby is likely to come up again, even if private equity co-owned Autocam Corp. didnâ&#x20AC;&#x2122;t choose to raise the issue in court. â&#x20AC;&#x153;The court ruled on the case in front of it in Hobby Lobby, and didnâ&#x20AC;&#x2122;t have to answer this broader question (of who is covered),â&#x20AC;? he said. â&#x20AC;&#x153;But the logic of the decision applies to all corporations, much like Citizens United (v. Federal Election Commission in 2010), which engages the question of the First Amendment rights of corporations and individuals who own them. â&#x20AC;&#x153;I think the courtâ&#x20AC;&#x2122;s going to have a hard time limiting Hobby Lobby just to the most closely held corporations.â&#x20AC;? Justice Ruth Bader Ginsburg, in a dissenting opinion, was inclined to agree. â&#x20AC;&#x153;Although the court (lead opinion) attempts to cabin its language to closely held corporations, its logic extends to corporations of any size, public or private,â&#x20AC;? she states. â&#x20AC;&#x153;(Thereâ&#x20AC;&#x2122;s) little doubt that RFRA claims will proliferate, for the courtâ&#x20AC;&#x2122;s expansive notion of corporate personhood â&#x20AC;&#x201D; combined with its other errors in construing RFRA â&#x20AC;&#x201D; invites for-profit entities to seek religion-based exemptions from regulations they deem offensive to their faith.â&#x20AC;? Studies by Columbia University and New York University indicate 52 percent of all private sector employees work for â&#x20AC;&#x153;closely heldâ&#x20AC;? corporations â&#x20AC;&#x201D; those with a small number of shareholders, no ready market for company stock and substantial shareholder involvement in management decisions. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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Same-sex marriage dispute could shape national policy A Detroit federal judgeâ&#x20AC;&#x2122;s decision to strike down Michiganâ&#x20AC;&#x2122;s 2004 ban on same-sex marriage was widely anticipated when it came last March out of a Hazel Park coupleâ&#x20AC;&#x2122;s lawsuit. But the dispute has taken on a few twists in the courts since then, and could shape a new national policy on such marriages. U.S. District Judge Bernard Friedman found the voter-approved Michigan Marriage Amendment to the state constitution violates the Equal Protection Clause of the federal one. The U.S. Supreme Court agreed last month to hear that case

and three others from the 6th U.S. Circuit Court of Appeals. At issue was whether April DeBoer and Jayne Rowse, two nurses from Hazel Park, can adopt children as a couple. Michigan law allows only married couples or single people to adopt. Rowse has individually adopted two of the three children in their home, and DeBoer the third. But the Friedman ruling March 21 prompted about 300 same-sex couples to obtain marriage licenses before Michigan Attorney Bill Schuette appealed and obtained a stay on the decision the next day from the 6th Circuit. See Marriage, Page 14

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Law obtained a separate $9.5 million judgment against Onyx Capital, Farr and Dixon, who has since appealed.

OTHER VERDICTS AND SETTLEMENTS General Retirement System and Police and Fire Retirement System of Detroit, Board of Trustees of Pontiac General Employees Retirement System v. Onyx Capital Advisors LLC, Second Chance Motors LLC et al. Judge Denise Page Hood, U.S. District Court, $119.1 million, March 26. Attorneys for city employee pensions in Detroit and Pontiac won a pair of default judgments in a 2010 lawsuit: one for $71.1 million against private equity firm Onyx Capital and two related companies, and another for $48 million against Georgia car dealer Michael Farr and three businesses he controlled. The lawsuit said the pension funds deposited $23.9 million with Onyx to invest in middle-market, primarily Midwestern companies. Instead it invested nearly $16 million in a dealership company and two related finance companies for Farr, a former Detroit Lions player and friend of Onyx founder Roy Dixon. It also allegedly did not disclose that a $7 million investment deal had failed and the money raised for it was diverted to a Farr investment, and Dixon collected excessive management fees and converted some Onyx investment capital to personal use. The U.S. Securities and Exchange Commission in January

The Shane Group Inc. et al v. Blue Cross Blue Shield of Michigan. Judge Denise Page Hood, U.S. District Court, $30 million, June 24 (subject to final approval). Several million businesses, unions, insurance companies and individuals in Michigan could get partial refunds for health care costs in a Blue Cross settlement preliminarily approved by Hood in June. The $29.99 million deal would resolve a lawsuit consolidating several cases that surfaced after the Michigan attorney general and the U.S. Department of Justice filed their own suit over the Blues’ “most favored nation” and “most favored nation-plus” clauses in contracts with hospitals. The most-favored-nation agreements allegedly required only that Blue Cross get a billing rate at least equal to any other insurer, but the plus agreements allegedly caused hospitals to charge its competitors more. Anyone who paid for health care at an acute care hospital between 2006 and last summer is eligible because they ostensibly bought a service at a noncompetitive price because of the contracts, which then-Michigan Insurance Commissioner Kevin Clinton formally banned in 2013. Less than 0.1 percent of plaintiffs have opted out of the settlement

deal, but one of them is Health Alliance Plan of Michigan, which claims in its own suit brought last fall that the deal undervalued its damages from Blue Cross practices.

Precious Holder, Darwin Watts et al v. Enbridge Energy LP, Enbridge Pipelines Lakehead LLC et al. Judge Gordon Quist, U.S. District Court – Grand Rapids, $6.25 million, Dec. 24. The settlement stems from a 2010 oil spill in the Kalamazoo River and Talmadge Creek, from a pipeline belonging to Calgary, Alberta-based Enbridge Inc. The pipe spewed more than 800,000 gallons of crude oil, and the company has previously estimated the cleanup cost to be about $1.2 billion, including $227 million on environmental consultants. A class action settlement reached in December covers owners and occupants of land within 1,000 feet of the river, between Talmadge Creek and Morrow Lake. The size of payments depends on whether each parcel of property is commercial or noncommercial, and its distance from the water, but most claims fall into “bands” based on distance increments of 200 feet. Payments within those bands of property are expected to total around $2.2 million. Another $1.5 million is allocated to cover claims for general expenses like meals, lost wages and relocation expenses during the spill cleanup.

Marriage: Same-sex ruling in Mich. may resonate in high court ■ From Page 13

The appeals court upheld the state ban in November along with similar laws in Ohio, Tennessee and Kentucky — even though four other appellate circuits had struck down such state bans and same-sex marriage supporters saw more than 30 other federal court victories nationwide since the Supreme Court last ruled on the issue in June 2013. That created an unusual status for couples who wed before the stay took effect — and some confusion

for both individuals and employers. The Obama administration has said it recognizes such marriages for federal benefit purposes, but originally the state did not. That was interpreted to mean couples could file jointly in federal tax returns but not state ones; or an employee could take a leave of absence under the federal Family Medical Leave Act to care for a spouse, but gay couples still could not adopt children together in Michigan.

Eight of those couples filed a lawsuit in April before U.S. District Judge Mark Goldsmith in Detroit, who ruled Jan. 15 the state must recognize those marriages as well. On Feb. 4, Gov. Rick Snyder decided that the state would not appeal. “Our nation’s highest court will decide this issue,” Snyder said in a statement. “I know there are strong feelings on both sides of this issue, and it’s vitally important for an ex-

pedient resolution that will allow people in Michigan, as well as other states, to move forward together on the other challenges we face.” The high court in June 2013 struck down a section of the federal Defense of Marriage Act restricting marriage to a union between a man and a woman, but also deferred to states to decide about such marriages on their own. Since then, the number of states

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authorizing gay marriage has grown from 12 to 36, and four appellate circuit courts have sided against bans in various states. After the 6th Circuit ruling, however, the Supreme Court asked attorneys from Michigan and three other states to argue on whether the federal constitution requires states to license samesex marriages, and to recognize them when legally performed elsewhere. Carole Stanyar, attorney for DeBoer and Rowse in the 2012 case, said oral arguments are expected in late April, and Michigan and Kentucky attorneys will argue the marriage licensing issue. Attorneys from Ohio and elsewhere will argue the recognition question. “The court may limit the arguments to one person on each side of the issue, or President Obama may also be afforded time (to present the federal government’s position) through his solicitor general,” Stanyar said via email. The April lawsuit, by the Michigan couples who wed after Friedman’s ruling, also alleges some couples were unable to receive health insurance benefits from their employers for their spouses on the grounds that Michigan law does not recognize their marriages. Attorneys said it was not immediately clear if Goldsmith’s January ruling addresses employers or only compels the state government to recognize the marriages. A Supreme Court decision is expected in June. April DeBoer and Jayne Rowse v. Gov. Rick Snyder and Attorney General Bill Schuette et al, Docket No. 14-571, U.S. Supreme Court. Carole Stanyar, attorney, for the plaintiffs. Joseph Potchen, Michigan attorney general corporate oversight division, for the defense. Marsha Caspar and Glenna DeJong et al v. Snyder, former Department of Human Services Director Maura Corrigan et al, Docket No. 14-cv-11499, U.S. District Court, Detroit. Jay Kaplan and Michael Steinberg, ACLU of Michigan, for the plaintiffs. Michael Murphy, Michigan Department of Attorney General, for the defense. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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Even with smaller judgment, Altair trade secrets case could have impact BY CHAD HALCOM CRAIN’S DETROIT BUSINESS

A $26 million-plus judgment in April against Troy-based Altair Engineering Inc. for misappropriation of trade secrets and breach of confidentiality agreements was originally one of the largest Detroit federal court verdicts of the year, before a judge set aside most of it in November. But even as a modified $442,000 judgment awaiting a partial retrial this year, the verdict could have significance for other businesses in computing the value of royalties owed on trade secret theft cases. The case deals largely in the proper way to compute a royalty payment for the damages that can be attributed to theft of a trade secret, which isn’t as fully explored in prior court rulings as the theft or misappropriation of a company patent has been. A new trial later this year, or an appeal if one follows, could lead to new standards for computing those damages in future cases. Jurors took nearly three days of deliberation in April before U.S. District Judge Avern Cohn before awarding $26.5 million for California-based MSC Software Corp. in a 2007 lawsuit. Just over $26.3 million of that was against Altair, and another $170,000 was against three former MSC employees who left in 2005 and 2006 and later joined Altair. At issue was source code as well as concepts or processes that get used to write code for 3-D model prototyping software products using computer-aided design and simulating real-world conditions, at both companies. But Cohn scrapped all but about $400,000 of the award as excessive, finding in part that MSC attorneys had improperly speculated in estimating Altair’s revenue from its appropriated version of the software. The case returns to court for a pretrial conference July 14, with a new trial to follow to re-determine damages. Altair had grown from revenue of about $105.6 million in 2008 to more than $171 million in 2012, with about 90 percent of that revenue coming from HyperWorks, a suite of software products, according to evidence presented at trial. One of the HyperWorks programs is MotionSolve, which competed directly with an MSC product called Adams/Solver. Altair began putting resources into MotionSolve after it began hiring some former MSC employees, according to the MSC lawsuit, and the jury found in part that MotionSolve had appropriated three features also found in MSC’s own Adams/Solver. MSC attorneys argued in court that some evidence indicated MotionSolve accounted for about 10 percent of HyperWorks revenue over the period, or about $60 million, and an MSC executive testified in court the company would not have sold the trade secrets for any less than $30 million. But a defense expert for Altair had testified that MotionSolve accounted for less than 1 percent of total HyperWorks usage time reported by customers, so revenue

The case deals largely in the proper way to compute a royalty payment for the damages that can be attributed to theft of a trade secret, which isn’t as fully explored as the theft or misappropriation of a patent . attributable to that program was actually less than $2 million. MSC “proved it was more likely

than not Altair misappropriated three trade secrets of MSC. … What MSC did not do, however, was intro-

duce competent evidence at trial of the damages suffered by the misappropriation,” Judge Cohn’s post-trial order states. Patrick Hickey, an attorney for MSC and partner at Detroit-based Dykema Gossett PLLC, said the company will likely appeal the ruling, but not before the second trial takes place. Christopher Dillon, an attorney for Altair and partner at Fish & Richardson PC, referred a query about the case to a public relations representative for the Boston-based

law firm, who declined to comment. MSC Software Corp. v. Altair Engineering Inc., Marc Klinger, Rajiv Rampalli and Michael Hoffman. Docket No. 07-cv-12807, U.S. District Court, Detroit, Judge Avern Cohn. Dykema Gossett PLLC and Anthony Rusciano of Plunkett Cooney PC, Bloomfield Hills, for MSC Software; Fish & Richardson PC and Young Basile Hanlon & MacFarlane PC, for Altair. Chad Halcom: (313) 446-6796, chalcom@crain.com. Twitter: @chadhalcom

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Beaumont breaks ground on $40M proton beam center in Royal Oak BY JAY GREENE CRAIN’S DETROIT BUSINESS

Beaumont Health System got the ball rolling in early 2008 for a proposed $100 million proton beam therapy cancer center when it filed the region’s first certificate of need application. But a failing economy later that year, plus fast-changing technology and competing hospital interests, led to a six-year delay on any hospital building an alternative to standard radiation treatment for a limited number of cancers. Last week, Beaumont announced it had broken ground on a smaller, $40 million single-room proton therapy center at its Royal Oak campus. While Beaumont was the first hospital to propose proton beam therapy in Southeast Michigan, McLaren Health Care Corp. in Flint will be the first to open a proton beam center. It will be located at McLaren’s Great Lakes Cancer Institute, adjacent to its 458-bed McLaren Regional Medical Center in Flint. McLaren officials told Crain’s they hope to begin treating cancer patients in the three-room, $70 million proton beam center in March. Proton-beam therapy, which delivers a narrow beam of radiation to destroy cancerous cells, is a controversial form of megavoltage radiation that has been suggested by some to be effective in some prostate and pediatric cancers because it causes less damage to surrounding tissues while directing high dosages of radiation at tumors. In 2008, the Economic Alliance for Michigan opposed plans for several proposed proton beam centers. However, those plans called for large proton or carbon ion therapy centers that were said to cost between $150 million to $300 million to build. At the time, Beaumont experts stated they believed the state could support up to three proton beam centers. When Beaumont completes its proton center in the spring of 2017, the two-story, 25,200-square-foot facility will be located next to its cancer center in the southeast section of the Royal Oak campus. It will feature a cyclotron that produces the proton beams on the first-floor treatment room, and an 8,000-square-foot second floor that will house Beaumont Children’s Hospital’s pediatric oncology and hematology program. “This technology will allow us to define future treatment strategies for cancer,” said Craig Stevens, M.D., Beaumont’s chairman of radiation oncology, in a statement. “We will have the capability to treat cancer that would have otherwise been considered unsalvageable and incurable.” Stevens said proton beam therapy is very effective in treating solid and localized tumors, including some pediatric cancers, soft tissue sarcomas, brain tumors, and head and neck cancers. Beaumont selected Ion Beam Applications of Belgium to construct the proton system. It also hired Pro-

ton International, an Atlanta-based proton therapy consultant with expertise in all phases of proton therapy development and operations. Jones Lang LaSalle Inc. will oversee design and construction. Kasco Construction Services is the contractor, and SmithGroup JJR is the architect. “This technology (intensity modulated proton therapy) is very precise. Real-time CT image guidance can target a tumor with millimeter precision,” said Stevens, noting that the patented cone beam technology was developed by Beaumont researchers. Stevens estimates the proton beam center will create at least 30 clinical positions at Beaumont. Several physicians and physicists skilled already have been hired, he said. Beaumont received state certificate of need approval to build a proton center in July 2008. It had formed a for-profit joint venture with ProCure Treatment Centers of

Bloomington, Ind., to build the $100 million center. While the Beaumont project was on hold, advancements in proton technology cut the cost of the project in half and improved the dose delivery accuracy, Stevens said. But why did Beaumont decide to build now? “Couple things,” Stevens said. “First, intensity modulated proton therapy really allows you to paint a dose in a very precise way. Two, we needed daily image guidance built into the treatment. Only in the last year did this commercially become available.” Stevens said other improvements, due to better compensators to direct beams, allow clinicians to quickly treat patients; the health system expects to double the volume of patients treated because of the new technology. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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As the rich get richer, unions are poised for comeback BLOOMBERG NEWS

Is tumult re-emerging from players in the U.S. labor movement? After years of avoiding confrontation, labor is reasserting itself as contracts come up for review, including those for auto industry workers, and threats of strikes appear on the horizon. From OEM and some supplier plants to the ports of Los Angeles, unions are demanding payback for sacrifices they say helped revive the economy. What are the triggers? Union leaders are taking advantage of a tightening labor market and favorable political environment. With middle-class wages stagnating and the affluent Americans getting richer, income inequality has become a rallying cry for Democrats and Republicans alike. Reviving opportunity for all resonates with many Americans who feel left out as growth picks up and the market notches record highs. In metro Detroit, union leaders girding for contract talks this year will push for the first raise veteran autoworkers have received in a decade. Concurrently, oil workers have walked off the job for higher wages and better working conditions. Dock workers have snarled West Coast ports. Personnel staffing oil terminals at the Port of Long Beach, Calif., are threatening to strike. “Employers seem to think that they can push unions — the roots of the American working class — off a cliff,” said Dave Campbell, whose union local represents oil terminal workers at the Port of Long Beach. “Well, these corporations have made a significant miscalculation in our ability to fight back. There’s a lot of labor strife now, and they could have a major confrontation on their hands.” Campbell’s combative rhetoric evokes an era when unions had the clout to win significant lifestyle upgrades for their members. Wielding the threat of strikes and work slowdowns, organized labor helped generations of Americans join the middle class and stay there.

Union power In recent years, however, globalization and weak economic growth have hollowed out union power. In 1979, 21 million American workers belonged to a union. By last year, 14.6 million did. In the 1980s, strikes averaged 75 a year, according to the Bureau of Labor Statistics. Last year, there were 11. Harley Shaiken, a labor professor at the University of California at Berkeley, has long watched the ebbing of union power and wondered if walkouts were an endangered species. The surge in labor unrest has caught his attention. Shaiken says the main catalyst is inequality, considered the defining economic challenge of this era by everyone from President Barack Obama to Republican presidential aspirant Jeb Bush. On Thursday, Wal-Mart Stores Inc., America’s largest private employer, said it would raise wages to $9 an hour, well above the $7.25 federal minimum wage. The move, by a

retailer that has thwarted unions trying to organize its stores, strikes back at critics who say it underpays employees.

Wage hit A 2011 study drew a link between the decline in union membership since 1973 and expanding wage disparity. Those trends have since continued, said Bruce Western, a professor of sociology at Harvard University who co-authored the study. Union workers say they took a hit on wages and benefits after the financial crisis to help keep companies and the economy afloat and expect to be rewarded for their sacrifice. “You don’t want to be the senior partner in failure and the junior partner in success,” said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. Since 2009, management compensation has grown about 50 percent faster than union workers’ income. In the auto industry, real wages have declined 24 percent since 2003, according to the Center for Automotive Research. Dennis Williams, the United Auto Workers’ new president, has made getting his members a raise a top priority in contract talks with General Motors Co., Ford Motor Co. and FCA US, formerly known as Chrysler Group LLC. And he’s not above rattling the

What are the triggers? Union leaders are taking advantage of a tightening labor market and favorable political environment. strike saber. Williams stressed the importance of the right to strike. During the last contract talks, in 2011, the UAW gave up that right at GM and Chrysler to help the automakers recover from their bankruptcies. Now, that power has been restored. The current four-year auto contract expires Sept. 15. “The right to collective bargaining is a building block to Williams good economics, shared prosperity, a strong middle class and a country that believes in balanced democracy,” Williams said in a statement.

The Detroit Three are loath to increase their labor costs since that’s what helped nearly drive them out of business. They prefer to reward workers with profit-sharing checks that can shrink or disappear in tough times. Detroit autoworkers have received record profit sharing for the last five years. But Detroit’s automakers may have to boost wages, said Art Schwartz, a former GM labor negotiator who runs Labor & Economics Associates, a consulting firm in Ann Arbor. If the UAW wins traditional wage increases, “that will embolden other unions to try and get more,” Schwartz said.

Price cudgel The United Steelworkers, which represents oil refinery workers, is seeking better wages, benefits and restrictions on the use of nonunion contract workers. The companies are expected to use the worldwide collapse in crude prices as a cudgel in negotiations, but the unions may dig in. When oil workers across the country last walked off the job, 35 years ago, the strike lasted three months. “The oil companies think they have a strong case because the international price is down so much, but they have made such phenomenal profits in the past, they don’t have a strong case,” said Chaison,

the labor relations professor. One of the challenges for labor leaders is overcoming a perception among Americans rich and poor that union workers are overpaid and protected even if they perform poorly on the job. The Pacific Maritime Association, which represents port employers, says dock workers make $147,000 a year. Craig Merrilees, a spokesman for the longshore union, calls the calculation “demonstrably false” and says workers earn about $80,000 a year and can reach the higher wage only by working maximum overtime on weekends and holidays. “Workers are seeing the high pay chipped away, and they’re concerned about outsourcing,” said Shaiken, the Berkeley professor. “It’s not that they’re lower paid, but they gave up a lot to get there. That’s why you’ve got this collision.” For the first time in a generation, the labor movement is aligned with millions of Americans who don’t belong to a union but feel marginalized. “This is a political opportunity for organized labor,” said Western, the Harvard professor. “Although the inequality discussion is opening up a space, the conversation has so far not really addressed the problems of parents trying to raise their children, trying to guarantee them a better future.”

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

UM student ties academics, hobby into startup that has legs BY BILL SHEA CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

University of Michigan junior Jordana Schrager is an arts major with a business minor on pace to graduate next year â&#x20AC;&#x201D; but sheâ&#x20AC;&#x2122;s already putting both disciplines to work. Schrager, 21, took her hobby of making custom artwork shoes for her friends and classmates and made it into a business that has sold more than 10,000 pairs of licensed footwear in dozens of college logos and colors. She is co-owner of Boca Raton, Fla.-based Sideline Sneakers LLC, which markets the high- and lowtop canvas sneakers under the brand name Skicks. Since launching in August, the single largest-seller is the line of University of Michigan shoes, followed by Michigan State University, said Jordanaâ&#x20AC;&#x2122;s mother and business partner, Meryl Schrager.

The Converse-style sneakers, which have a custom sole, are sold online at Skicks.com, and in fan shops and college bookstores. The high-tops retail on the companyâ&#x20AC;&#x2122;s website for $69.99 and lowtops sell for $59.99. Selling more than 10,000 since August translates into more than $600,000 in revenue. Sideline Sneakers has a license with each university, and the schools typically get about 10 percent of the retail sales price as a licensing fee. Licensing deals generate millions in revenue for universities. Collegiate Licensing Co., based in Atlanta, handles UMâ&#x20AC;&#x2122;s apparel and merchandise licensing, which has generated $3.2 million to $6.8 million annually for the university over the past decade. CLC is an arm of Winston-Salem, N.C.-based IMG College, which has been contracted since 2007 to man-

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age and sell all marketing and sponsorship deals for UM athletics. Skicks isnâ&#x20AC;&#x2122;t the only collegebranded footwear maker. CLCâ&#x20AC;&#x2122;s database shows nine companies alone licensed for Michigan sneakers, including Gladwyne, Pa.based Reversus LLC, which makes a Keds-like two-tone shoe, and Matthews, N.C.-based Renaissance Imports Inc., which does sandals and casual footwear. Other schools, such as Michigan State, directly license products such as Skicks rather than using a third-party company, Meryl Schrager said. Besides the two Michigan colleges, the schools available now include Indiana, Wisconsin, Florida State, Syracuse, Penn State, Miami (Fla.), Tennessee, Georgia, Auburn, Cincinnati, Louisville, Baylor and Clemson. Skicks is currently applying for a license from Ohio State University â&#x20AC;&#x201D; a potentially hot seller because the Buckeyes won college footballâ&#x20AC;&#x2122;s national championship in January. Soon to be added to the Skicks lineup are Mississippi, Massachusetts, Rutgers, Maryland, Florida, Arizona, Nebraska, Tulane and Cal.

School days

University of Michigan student Jordana Schrager has sold more than 10,000 pairs of footwear in dozens of college logos and colors through her Sideline Sneakers LLC.

COURTESY OF SIDELINE SNEAKERS LLC

which are made in China, also resist weather. â&#x20AC;&#x153;The kids wear (homemade shoes) to a tailgate and they get ruined in 5 minutes. They never had sneakers to go with outfits,â&#x20AC;? Meryl Schrager said. The UM shoes come in five styles â&#x20AC;&#x201D; three high-top and two low-top, the most of any Skicks. Other schools have two styles, a high and low top. The company also makes a pink low-top sneaker for breast cancer awareness.

Jordana Schrager began decorating shoes as a high school sophomore, starting with doodles on an old pair of white Vans. Her friends began wearing them. She kept it up once she enrolled at Michigan. The non-Skicks custom sneakers â&#x20AC;&#x153;She did a Michigan-themed pair for herself and her friends. on the SneakersByJordana.com site Everybody wanted that Michigan- are an array of colorful footwear themed sneaker,â&#x20AC;? said Meryl collages that include famous retail brand logos, bands and musicians, Schrager, who is co-president. When students began putting celebrities, pro and college sports the sneaker on their social media teams, states, and famous artwork. accounts, the university noticed Some are made on off-the-shelf and posted a photo on its official Vans and Converse sneakers. The nonInstagram account. Skicks custom That was free marsneakers â&#x20AC;&#x201D; keting. So is having sheâ&#x20AC;&#x2122;ll put up to students 15 designs on a wearing her shoe for $250 to shoes. $400 â&#x20AC;&#x201D; can â&#x20AC;&#x153;It was take up to walking adthree months vertising,â&#x20AC;? to ship because Jordana said. of a 50-order Before backlog and long, she and her busy colher mother, lege schedule. along with She also sells her motherâ&#x20AC;&#x2122;s non-collegiate close friend since artsy shoes ontheir days at Syraline for $150 a cuse University, Lisa Len Middleton, UM adjunct professor pair. Benedict, launched â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s hard Sideline Sneakers and began the hard work of getting work and Iâ&#x20AC;&#x2122;m always busy, but I recollegiate licensing. Benedict also ally enjoy creating all the sneakers. Itâ&#x20AC;&#x2122;s relaxing. Itâ&#x20AC;&#x2122;s really fun. Iâ&#x20AC;&#x2122;m is co-president. Jordana creates the designs, and really learning a lot with the busiher mother and Benedict handle nesses,â&#x20AC;? she said, adding that she typically completes four pair of the business side. Most of the college shoes are rel- custom shoes a week. What helped launch her career, atively simple designs, but Jordana continues to create her hand- she said, was being contacted by made custom shoes as a separate Barclays Center in Brooklyn to create shoes for the arenaâ&#x20AC;&#x2122;s gifts to business. For the handmade shoes, she performers as part of a gift selecuses Sharpie paint pens that en- tion. Now, entertainers such as Nick sure the designs are water-resistant and allow her to create small, Cannon, Selena Gomez and Pink all wear custom sneakers designed vivid details. The professionally manufac- by Schrager. Her shoe success has resulted in tured university logo/color Skicks,

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knew â&#x20AC;&#x153; You just she was

going to be successful. Sheâ&#x20AC;&#x2122;s got good focus and discipline.

â&#x20AC;?

profiles in Teen Vogue and Seventeen magazines, and she has more than 10,000 Instagram followers at sneakersbyjordana. Once she graduates in 2016, Schragerâ&#x20AC;&#x2122;s plan is to keep doing what sheâ&#x20AC;&#x2122;s doing already. â&#x20AC;&#x153;I want to continue to grow both Skicks and SneakersByJordana.com,â&#x20AC;? she said. That includes expanding into other licensed merchandise, but the ideas remain under wraps because theyâ&#x20AC;&#x2122;re still in the concept phase.

Business education In the meantime, Schragerâ&#x20AC;&#x2122;s real-world business education has included a glimpse at the ultra-protectionist side of the footwear industry â&#x20AC;&#x201D; which is nearing $200 billion in annual U.S. sales overall. In October, Nike-owned Converse sued more than 30 shoemakers in U.S. District Court in Brooklyn, alleging trademark infringement over its iconic Chuck Taylor sneakers, The New York Times reported. Skicks isnâ&#x20AC;&#x2122;t among those being sued, but to avoid being caught up in any legal entanglements, the company this fall will use a newly designed shoe to ensure it is easily distinguished. Schragerâ&#x20AC;&#x2122;s colorful shoes caught the attention of a UM faculty member, Len Middleton, an adjunct professor of corporate strategy, international business, and entrepreneurship at the Ross School of Business He taught her entrepreneurship studies class last year, and advised her as Sideline Sneakers was launching. â&#x20AC;&#x153;You just knew she was going to be successful. Sheâ&#x20AC;&#x2122;s got good focus and discipline,â&#x20AC;? he said. â&#x20AC;&#x153;I like the facts sheâ&#x20AC;&#x2122;s mixing her passion for art with her passion for business. Thatâ&#x20AC;&#x2122;s really unique. You need both aspects to be successful. Middleton said heâ&#x20AC;&#x2122;s impressed with what sheâ&#x20AC;&#x2122;s done with the company, in part because itâ&#x20AC;&#x2122;s had early success without a major corporationâ&#x20AC;&#x2122;s marketing dollars behind it. â&#x20AC;&#x153;This is only going to get bigger and bigger,â&#x20AC;? he said. Bill Shea: (313) 446-1626, bshea@crain.com. Twitter: @bill_shea19

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CALENDAR WEDNESDAY FEB. 25 Commercial Real Estate Financing A-Z. 4-6 p.m. CREW Detroit. Speakers 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: crew detroit.org. Walk-ins accepted.

THURSDAY FEB. 26 Detroit Policy Conference. 7:30 a.m.4 p.m. Detroit Regional Chamber. Focus on “Power Perspectives” as Rodrick Miller, Detroit Economic Growth Corp. president and CEO, and Paul Pastorek, education adviser to Gov. Rick Snyder, will discuss the future of economic development in the Detroit region and the importance of education in a changing world. MotorCity Casino Hotel, Detroit. $99 for chamber members, $165 for nonmembers (cost includes membership). Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@detroitchamber. com; website: detroitchamber.com/ events.

FRIDAY FEB. 27 19th Chinese New Year Gala. 5-11 p.m. Detroit Chinese Business Association. Keynote speaker Gov. Rick Snyder among government and industry leaders. Reception, dinner, entertainment. MotorCity Casino Hotel, Detroit. $250. Registration ends 4:30 p.m. Feb. 24. No walk-ins accepted. Register: (248) 918-0391 or www.dcba.com; email: milan@dcba.com or cathy@dcba.com.

UPCOMING EVENTS Hearts for the Arts. 6-10:30 p.m. Feb. 28. Ann Arbor Symphony Orchestra. Fundraiser honors Cheryl Elliott, retired Ann Arbor Area Community Foundation president and CEO, and Bruce Elliott, partner at the Law Offices of Conlin, McKenney & Philbrick PC. An auction, champagne reception, dinner and performances by orchestra musicians are planned. Barton Hills Country Club, Ann Arbor. $175. Contact: (734) 994-4801; email: tickets@a2so.com; website: a2so.com/fundraisers/ heartsforthearts.

Cirque – Empire. 8:30 p.m. Feb. 28. Founders Junior Council. The Detroit Institute of Arts’ Rivera Court is transformed into a 1930s speakeasy in honor of the museum’s upcoming Diego Rivera and Frida Kahlo in Detroit exhibition; features music, cocktails, appetizers and a masquerade competition. Detroit Institute of Arts, Detroit. $110; $125 at the door (valet parking included). Contact: (313) 833-4005; website: dia.org/fjc. 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@tech towndetroit.org; website: techtown detroit.org.

People, Profit, Progress Conference and Workshops. 7:15 a.m.-4:15 p.m. March 5. American Society of Employers. Event equips HR professionals and leaders to develop their organizations’ people. Keynote speakers are John O’Leary, president, Rising Above; and Greg McKeown, CEO, This Inc.; 12 breakout sessions are planned.

2014 NEWSMAKER OF THE YEAR Who made news in 2014? Find out at Crain’s Detroit Business’ Newsmaker of the Year luncheon. It takes place 11:30 a.m.-1:30 p.m. Wednesday. 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 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 Best-Managed Nonprofit winner will be honored. The event will be at MotorCity Casino Hotel, 2901 Grand River Ave., Detroit. Walk-in registration is $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 with #crainsnewsmaker. Suburban Collection Showplace, Novi. $235 members, $295 nonmembers. Contact: (248) 353-4500; website: aseonline.org.

Fundraising in Your Own Backyard. 8:30-10:30 a.m. March 5. New Solutions for Nonprofits. Learn five tactics for board, staff and volunteers to raise money, and discover how to launch a successful giving campaign. Hannan House, Detroit. $25. Contact: (734) 9980160 or new@new.org; website: new.org. Project Give Gala. 6:30-11:30 p.m. March 7. Canton Community Foundation. The foundation celebrates 25 years with music from the Michigan Philharmonic Youth Orchestra and Steve King and the Dittilies. The Henry Ford, Dearborn. $175. Contact: Beth Meade, (734) 495-1200; email: bmeade@cantonfoundation.org; website: cantonfoundation.org.

Five Steps to Creating a Successful Wellness Program. 8-10 a.m. March 11. Michigan Wellness Council. Speakers include Kandi Lannen, director of wellness services, Priority Health; and Lindsey DesArmo, health wellness specialist, Grand Valley State University. $25 in advance, $30 day of event. Priority Health, Southfield. Contact: Rita Patel, (917) 913-8394; email: rita.patel@michi ganwellnesscouncil.org; website: michiganwellnesscouncil.org.

Managing Global Volatility: A 90-Year Track Record. 11:30 a.m.-1:30 p.m. March 11. Detroit Economic Club. Douglas Oberhelman, chairman and CEO, Caterpillar Inc., is the keynote speaker. Daniel Howes, business columnist and associate business editor, The Detroit News, will moderate. The Westin Book Cadillac Detroit. $45 DEC members, $55 guests of DEC members, and $75 nonmembers. Ticket sales end at noon March 10. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org.

Taste of Leadership Oakland. 4:30-7 p.m. March 19. Leadership Oakland. Event

features

address

L. Brooks Patterson, presentation of “Leader of Leaders” awards, a silent auction, strolling hors d’oeuvres and a cash bar. Troy Marriott, Troy. $25 members, $40 non-members. Contact: (248) 952.6880; e-mail: info@leader shipoakland.com; website: leader shipoakland.com.

DEC Presents. 11:30 a.m.-1:30 p.m. March 24. Detroit Economic Club.

Stuart Hoffman, senior vice president and chief economist, PNC Financial Services Group, is the featured speaker. Westin Book Cadillac Detroit. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Ticket sales end at noon March 23. Contact: (313) 963-8547; email: info@econ club.org; website: econclub.org. Inside the CEO Mind. 3 p.m.March 25. Detroit Regional Chamber. Frank Venegas Jr. of the Ideal Group will speak; a tour follows the presentation and question-and-answer session. The Ideal Group Inc., Detroit. $25 chamber members, $50 nonmembers (cost goes toward membership). Contact: Maggie Oldenburg, (313) 596-0482; email: mold enburg@detroitchamber.com; website: detroitchamber.com/events.

2015 Great Lakes Business Intelligence and Big Data Summit. 8 a.m.-5 p.m. March 26. WIT Inc. Summit is a cross-industry educational and networking event for IT and business executives interested in big data topics and trends. Keynote speakers include Boris Evelson, vice president at Forrester Research, and Don Farmer, vice president of innovation and design at Qlik. Somerset Inn Hotel, Troy. $149. Contact: Amanda Mansour, bisummit@witinc.com or (248) 6415900, ext. 244; website: greatlakes bisummit.com.

Business Leaders for Michigan Leadership Summit: Building a New Michigan. 8 a.m.-noon March 26. Business Leaders for Michigan. Speakers and panelists include Doug Rothwell, president and CEO, Business Leaders for Michigan; Hans-Werner Kaas, senior partner and director, McKinsey & Co.; Ray Leach, CEO, JumpStart Inc.; Brian Hicks, president and CEO, Hicks Partners, and chief architect of Ohio Third Frontier; Steve Arwood, director, Talent & Economic Development Dept., and CEO, Michigan Economic Development Corp.; Michael Jandernoa, board of directors, Perrigo Co.; Charles “Chip” McClure, managing director, Michigan Capital Partners LLC; and Sandra Pierce, chairman and CEO, Business Leaders for Michigan. Lansing Center, Lansing. Free. Contact: Jennifer Hayes, (313) 259-5400, email: jenniferh@businessleadersformichigan.com; website: busi nessleadersformichigan.com/events.

Health Care Leaders Forum. 7:30 a.m. March 31. Detroit Regional Chamber. The forum will focus on the Patient Protection and Affordable Care Act’s wins, losses and consequences for patients and the business community, as well as offer a five-year forecast of the health care industry. Federal Reserve Bank of Chicago-Detroit Branch, Detroit. $129 chamber members, $179 nonmembers (fee includes membership). Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@det roitchamber.com; website: det roitchamber.com/events.

CALENDAR GUIDELINES If you want to ensure listing online and be considered for print publication in Crain’s Detroit Business, please use the online calendar listings section of www.crainsdetroit.com. Here’s how to submit your events: From the Crain’s home page, click “Events” in the red bar near the top of the page. Then, click “Submit Your Events” from the drop-down menu that will appear, and you’ll be taken to our online submission form. Fill out the form as instructed, and then click the “Submit event” button at the bottom of the page. That’s all there is to it. More Calendar items can be found on the Web at www.crainsdetroit.com.

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CRAIN’S DETROIT BUSINESS

PEOPLE FINANCE

LAW

Michael Brennan

Donelle Buratto to shareholder, Ogletree, Deakins, Nash, Smoak & Stewart PC, Birm-

to managing director, Mackinac Partners LLC, Bloomfield Hills, from director.

ingham, from associate. Paul Galea to partner, Gallagher Detroit, Sharp, Galea from shareholder, Foster, Meadows & Ballard, PC, Detroit.

INSURANCE Gulick

Sandra Gulick to director, Aon Risk Services Central

Inc., Southfield, from senior broker.

MANUFACTURING Alex Guerrero to

Guerrero

NONPROFITS

Request for Proposals for General Counsel for the Police and Fire Retirement System of the City of Detroit

Martha Foreman

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.

Find new customers through engaging content.

Do you want to

Reach the right people?

Generate content? Organize, summarize and distribute findings? Be seen as a thought leader?

Crain’s Can Help! Contact Marla Wise at mwise@crain.com or (313) 446-6032

Little

Greg Little has been named CFO of Troy-based Re/Max of Southeastern Michigan. In this newly created position, Little oversees all finance and accounting operations of the region, which encompasses nearly 800 sales associates and 46 offices. Before he joined Re/Max, Little was controller and director of finance for Advanced Customer Services in Madison Heights. Little, 59, has a bachelor’s degree in accounting from Oakland University and a master’s in finance from Walsh College.

associate, Environmental Law Institute, Washington, D.C.

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

For all correspondence and inquiries concerning this RFP, contact: David Cetlinski, Assistant Executive Director, dcetlinski@rscd.org.

IN THE SPOTLIGHT

general merchandising manager, Carhartt Inc., Dearborn, from vice president merchandising/ general manager, U.S. men’s business, Jockey International Inc., Kenosha, Wis.

Edgar

Ingram

Rana Edgar to director of exhibitions/art market, Paint Creek Center for the Arts, Rochester, from exhibitions coordinator, Savannah College of Art and Design, Savannah, Ga. Also, Ellie Ingram to manager of the art school, from adjunct instructor of drawing and printmaking, Herron School of Art and Design, Indianapolis.

to director of program manageOpTech ment, LLC, Troy, from global business development executive, VisionIT Inc., Detroit. David Helt to turf division director, Residex LLC, Foreman Novi, from U.S. manager of sales and marketing, Direct Solutions LLC, Aurora, Colo. Trevor Peitz to vice president of sales and business development, Export Corp. , Brighton, from project manager.

REAL ESTATE

TECHNOLOGY

Sharyl Shereda to general manager, NAI Farbman, Detroit, from property

Christopher Bala

manager.

SERVICES

to vice president of sales and marketing,

J. Cory Connolly to clean energy project manager, Levin Energy Partners LLC, Southfield, from senior research

Hirschmann Car Communication Inc., Auburn

Bala

Urlocker

Hills, from vice president of sales and marketing, OPS Solutions LLC, Novi. Zack Urlocker to COO, Duo Security Inc. , Ann Arbor, from senior vice president of product and marketing.

PEOPLE GUIDELINES Announcements are limited to management positions. Email them to cdbdepartments@crain.com or mail notices to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 482072997. Releases must contain the person’s name, new title, company, city in which the person will work, former title, former company (if not promoted from within) and former city in which the person worked. Photos are welcome, but we cannot guarantee they will be used.

BUSINESS DIARY CONTRACTS Altair Engineering Inc., Troy, a provider of computer-aided engineering and computing software and services, was selected by Artemis Racing, Alameda, Calif., to serve as a technical supplier in the team’s bid to win the America’s Cup in 2017. Altair’s OptiStruct composite optimization technology helps companies design composite structures. Websites: altair.com, artemisracing.com. Arotech Corp., Ann Arbor, a provider of defense and security products for military, law enforcement and homeland security markets, said that it has retained Hayden IR, a national investor relations consulting firm, with offices in New York City, Phoenix and Minneapolis, to lead a new strategic investor relations effort. Websites: arotech.com, haydenir.com. Simons Michelson Zieve Inc., Troy, an advertising agency, has been named the creative agency of record for the Mackinac Island Tourism Bureau to promote guest stays and visits to the island. SMZ also has been named the agency of record for Group 10 Management Co. Inc., Farmington Hills, owner and operator of three of Detroit Metropolitan Airport’s primary off-site parking lots in Romulus: Qwik Park, Airlines Parking and U.S. Park. Websites: smz.com, mackinacisland.org, group10management.com.

EXPANSIONS BarFly Ventures LLC, Grand Rapids, has opened HopCat Ann Arbor, 311 Maynard St., Ann Arbor. Telephone: (734) 436-2875. Website: hopcat.com. Domino’s Pizza Inc., Ann Arbor, has opened a new store in Baku, Azerbaijan, owned by Fides, a private equity

company that holds master franchise rights to Domino’s in Azerbaijan. Domino’s has also opened a store in Phnom Penh, Cambodia, owned by D. Pizza PLC, a joint venture between CBM Corp. Co. Ltd. and Evolution Capital, Thailand. Website: dominos.com.

MOVES Computing Source, a digital evidence and legal support firm, has moved its headquarters from 26877 Northwestern Highway, Southfield, to 29401 Stephenson Highway, Madison Heights. Website: computingsource.com.

NEW PRODUCTS Acromag Inc., Wixom, has introduced its new 6U VME fourth-generation Intel Coresingle board computer that allows users to update their systems rather than undergo a total redesign. Website: acromag.com. Hallite Seals Americas Inc., Wixom, a global manufacturer of high-performance hydraulic sealing solutions and member of the Fenner PLC group of companies, announced the a new test procedure for assessing the amount of dirt and dust that enters a typical hydraulic system through the rod wiper. The process was developed in cooperation with Milwaukee School of Engineering’s Fluid Power Institute. Websites: hallite.com, msoe.edu/fpi. Washtenaw Contractors Association, Ann Arbor, introduced its job board, where employers can list available industry internships and full-time or part-time positions or view candidate profiles. Website: wcaonline.org.

NEW SERVICES Adapt Technology LLC, Rochester

Hills, an engineering, computer-aided design, computer-aided engineering, metrology 3-D scanning and quality control inspection service provider, has a new patented fastener/rivet inspection technology and process for automotive OEMs and assembly plants to help improve quality control while saving cost and time on the production line. Website: adapttechteam.com. ProQuest LLC, Ann Arbor, is digitizing early 20th century British magazines. The new British Periodicals Collection III digitizes the archives of the most important magazines of the period and extends the scope of the popular British Periodicals program, which is rescuing rare, important and fragile print works and making their contents available to researchers. When complete in April, the collection will encompass more than 850,000 pages. Website: proquest.com. Rent My Rink LLC, Detroit, has launched a website that helps hockey coaches, managers and ice arenas buy and sell their excess ice time. Website: rentmyrink.com.

DIARY GUIDELINES Email news releases for Business Diary to cdbdepartments@ crain.com or mail to Departments, Crain’s Detroit Business, 1155 Gratiot Ave., Detroit, MI 482072997. Use any Business Diary item as a model for your release, and look for the appropriate category. Without complete information, your item will not run. Photos are welcome, but we cannot guarantee they will be used.

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Coupleâ&#x20AC;&#x2122;s job dissatisfaction yields real estate success story BY KIRK PINHO CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS

A stress-related heart attack in 2010 was the first in a string of events that persuaded Jerome Huez to abandon his 18-year career as an electronics and software engineer in favor of a second career in real estate. In his previous career, he worked long hours and traveled extensively for French automotive supplier Valeo SA. Similarly, years of frequent relocations for work prompted his wife, Sabra Sanzotta, a Case Western Reserve University-trained construction engineer, to leave her job nine years earlier. The pairâ&#x20AC;&#x2122;s story is one of professional burnout and reinvention, taking risks in Detroit real estate and, ultimately, success in the greater downtown multifamily market for their company, Detroitbased The Loft Warehouse. For founder and broker Sanzotta, the draw to real estate came from her love of downtown developments. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t want any part in suburban sprawl, and downtown condo sales and marketing fulfills those interests for me,â&#x20AC;? she said. The company â&#x20AC;&#x201D; which primarily sells and leases lofts, condominiums and apartments and whose agentsâ&#x20AC;&#x2122; and brokersâ&#x20AC;&#x2122; gross commissions since 2011 increased from $218,000 to $1.23 million last year â&#x20AC;&#x201D; didnâ&#x20AC;&#x2122;t always seem poised for the success itâ&#x20AC;&#x2122;s seen. Things were tough in the early years as condo sales shriveled during the recession because of constricted lending. Developers were bringing little, if any, new units to the market to sell for the thenfledgling company, founded in 2006. â&#x20AC;&#x153;I wanted it to be the biggest (real estate company) in Detroit,â&#x20AC;? said Sanzotta, 46, who married Huez in 2009. He became company president in 2011. But recently, the wave of interest in greater downtown has been a boon for The Loft Warehouse, which today employs 18 people in brokerage and property management, up from seven in 2011, and has increased unit sales from 11 in 2011 with a combined value of $3.11 million to 106 last year with a combined value of $29.37 million, according to company-provided figures. That gives the company 32 percent of the Detroit condo market share, the highest in the city. Itâ&#x20AC;&#x2122;s not just sales. Leasing is also up, from 79 to 102 leases in the same period. In addition to Huez and Sanzotta, three other employees have engineering backgrounds, which Huez said is beneficial to the company. â&#x20AC;&#x153;We can speak the same language as builders, developers, investors and even bankers as we all have had financial training in one form or another,â&#x20AC;? Huez said.

Chain of events Huez didnâ&#x20AC;&#x2122;t have any of the earmarks in his health profile to point to a risk of heart attack. He doesnâ&#x20AC;&#x2122;t

smoke, has no cholesterol problems, exercises regularly and eats healthily. Yet, he had a heart attack in the summer of 2010. The culprit? Work-related stress, the 45-year-old Huez said. That was the first in a chain of events that led the graduate of Ă&#x2030;cole SupĂŠrieure dâ&#x20AC;&#x2122;Ă&#x2030;lectricitĂŠ â&#x20AC;&#x201D; considered the Massachusetts Institute of Technology for electronics and software in France â&#x20AC;&#x201D; to quit Valeo the next year and join The Loft Warehouse full time. (He had been working there part time.) He was also fed up with work. Even though he and Sanzotta had a newborn girl at home, he was told he should be spending 50 percent of his time in Mexico for his job. He said he tried for a different position that allowed him to work primarily in Detroit, but didnâ&#x20AC;&#x2122;t get it. â&#x20AC;&#x153;(Sanzotta and I) sat down and said, â&#x20AC;&#x2DC;You make this much and you make this much â&#x20AC;Ś can we survive?â&#x20AC;&#x2122; We said, â&#x20AC;&#x2DC;Yes, we can.â&#x20AC;&#x2122; It was scary. For a long time we didnâ&#x20AC;&#x2122;t make much money.â&#x20AC;?

Moving on Similarly, it was 13 years ago that Sanzotta had enough of her work-related stress. Between 1995 and 2002, she was overseeing construction projects across the U.S. as senior project manager for the former Londonbased Bovis Lend Lease. But it was wearing on her. â&#x20AC;&#x153;I didnâ&#x20AC;&#x2122;t want to do any more of it,â&#x20AC;? she said. After starting a construction company that closed within a year and working in real estate for what is now Berkshire Hathaway HomeServices in Birmingham, she started working for Colin Hubbell, the late developer of The Art Center Town Homes, 55 West Canfield and the Canfield Lofts in Midtown. â&#x20AC;&#x153;I ended up with those listings because he didnâ&#x20AC;&#x2122;t have a brokerâ&#x20AC;&#x2122;s license. And when we finished selling those off in 2007, it was really tough,â&#x20AC;? she said.

Exclusive client It was in 2012 that The Loft Warehouse began to make more of a name for itself when it picked up the exclusive listing for The Residences at the Westin Book Cadillac Detroit, which has 63 condo units developed by Cleveland-based The Ferchill Group along with the hotel in a $180 million redevelopment. â&#x20AC;&#x153;Everyone started to know us and trust us because we have been here through the tough times of 2008, 2009, 2010 and 2011,â&#x20AC;? Huez said. The company still has the listing. The Loft Warehouse added property management to its list of services in 2009 and currently manages 330 units, including 135 condos, in the greater downtown area. â&#x20AC;&#x153;It was an adaptation to a sales market where values crashed but where the rental market stayed very strong, thus attracting many investors who needed a full-service offering: purchase assistance, rehab, leasing and property management,â&#x20AC;? Huez said.

The company, which opened a second office in Royal Oak last year, has also taken an active role in commercial redevelopment. The Loft Warehouse brokered a $1.3 million deal last fall for a pair of Texas investors to buy four buildings in the New Center area that are planned for 24-27 loft-style residential units. The company will be responsible for securing the financing and filling the units as part of the $2.7 million redevelopment. They also brokered a deal late last year for the same investors, Bill Ball and Jerry Lindenmuth, to buy a 119,000-square-foot industrial warehouse for $2.5 million on Trumbull Street north of I-94 that could turn into more loft-style multifamily units. The building is leased through 2019. Boston-based document management company Iron Mountain Inc. is a tenant in the building and has a lease that expires at the end of 2019. LARRY PEPLIN

Experienced staff Other employees at The Loft Warehouse also boast many years in other corporate roles. Jerome Poisac, real estate investment adviser for the company, was project manager for Sogeti and project manager Ford Motor Co. before receiving his MBA from IE Business School in Madrid. Todd Sykes, a Michigan State University graduate, spent 10 years in construction management for Tempe, Ariz.-based Sundt Construction and two years as an LEED consultant for San Diego-based EcoLogic Studio before becoming property manager and then real estate agent for The Loft Warehouse. Darin McLeskey received his masterâ&#x20AC;&#x2122;s in environmental engineering from the University of Michigan and worked as an engineer for Plymouth-based Soil and Materials Engineers Inc. before making the career shift, becoming a full-time agent late last year.

Sabra Sanzotta and Jerome Huez both left their jobs to find satisfaction and success with their company, The Loft Warehouse.

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Anticipating growth Austin Black II, president of City Living Detroit, a Detroit-based real estate brokerage firm, expects continued growth for The Loft Warehouse. â&#x20AC;&#x153;For a lot of businesses that made it through the recession, now with whatâ&#x20AC;&#x2122;s going on in the city, many of us are benefiting from the cityâ&#x20AC;&#x2122;s growth, and the long-term prospect is to continue to grow more than today,â&#x20AC;? he said. Even people who work for other real estate companies like Dennis Kefallinosâ&#x20AC;&#x2122; Detroit-based Boydell Development Co., which has developed loft buildings throughout the city, say theyâ&#x20AC;&#x2122;ve used The Loft Warehouse in their personal lives. â&#x20AC;&#x153;If you are in a relationship with them, youâ&#x20AC;&#x2122;ll find itâ&#x20AC;&#x2122;s pretty easygoing,â&#x20AC;? said Eric Novack, senior project manager for Boydell. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s good for the owners and the clients. They are an excellent brokerage firm for luxury living.â&#x20AC;? Kirk Pinho: (313) 446-0412, kpinho@crain.com. Twitter: @kirkpinhoCDB

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CRAIN’S DETROIT BUSINESS

Credits: Were tax incentives good policy ... or a MEGA mess? ■ From Page 1

“I would submit that the budget challenge would be far greater if the $16.3 billion in auto investment had not come to Michigan and instead went to another state. Without (MEGA), Michigan would be languishing in the doldrums of 2009.” But officials question whether the program was too much for too long. Rep. Jeff Farrington, R-Utica and chairman of the House tax policy committee, said “too much fertilizer was used on economic gardening” for the program. Farrington said the job retention program, which accounts for nearly $7.5 billion of the total credits authorized, was overused during the recession to benefit the auto industry at too high a cost to the taxpayer. “We paid an enormous amount to keep employees here, and that doesn’t make a lot of sense,” Farrington said. “Were most of those jobs going to leave the state? We’re not sure.” Norton Francis, a senior research associate at Washington, D.C.-based think tank The Brook-

Mich. may pave the way to tax credit fix Michigan isn’t alone in its corporate tax incentive burden. States such as Oklahoma, Louisiana and others face budget constraints tied to business tax credits and incentives, but Michigan may be the road map to alleviate the woes nationwide, experts say. State and local tax incentives cost taxpayers as much as $70 billion annually, the Wall Street Journal reported. And many of these entities are unaware of the liability, created by the incentives, said Norton Francis, a senior research associate at Washington D.C.-based think tank The Brookings Institution. “These credits make revenue estimating very difficult,” Francis said. “While people are getting better about reporting, which means we’re getting a better warning for problems, many states don’t know how much they have outstanding.” From 2012 to 2014, 10 states and the District of Coings Institution, said the downturn spurred these programs to unsustainable proportions. “The credit program seemed to get out of size for its scope; it got bigger than anyone intended,” Francis said. “During the recession, it was hard to argue with the

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lumbia passed laws that will require regular evaluation of these tax incentives and are designed to improve existing evaluation processes, according to a January analysis by The Pew Charitable Trusts. However, the states remain on the hook for existing tax credits. Gov. Rick Snyder and his administration have been open about potential pitfalls from the Michigan Economic Growth Authority tax credit program, which was eliminated in 2011. Francis said interstate competition created the problem; now other states will look to Michigan as it sorts out its own issue with tax credits. “What’s happening in Michigan will make this much more transparent for the other states that will need to take a hard look at this overhead,” Francis said. — Dustin Walsh

perception that companies were going to leave if you (government) didn’t do something.” Johnston told the House committee that the state had no choice but to offer these incentives to compete with other states offering similar measures. “When you think about the (plant) closures around the country, other states didn’t play the game as aggressively and lost,” Johnston said. “The discussion of MEGA is essentially a discussion of the never-ending interstate battle for high capital investment. … If Michigan had not been aggressive with a MEGA-style program, we would not have beaten the other states … and we did.” Jason Forcier, CEO of A123 Systems LLC, said MEGA credits were directly responsible for the lithium-ion battery maker’s plants in Livonia and Romulus. A123 was authorized for $100 million in MEGA credits from the state in 2009, but didn’t redeem the credits until last year due to its Chapter 11 filing in 2012, Forcier said. In 2009, the U.S. Department of Energy awarded then-Massachusettsbased A123 a $249 million grant through the American Reinvestment and Recovery Act. A123 spent $300 million to retrofit a plant in Livonia — the former home of Technicolor Inc., which vacated the building more than a decade ago. Its Michigan operations, now housed in its Livonia headquarters, once employed more than 1,000, now down to 500. MEGA required A123 to create and maintain only 300 jobs in Michigan, at a value of more than $33,333 per job. Forcier said it’s too early to be critical of the MEGA program. “If it hadn’t been for the MEGA credits, we would have never built factories in Michigan,” Forcier said. “There’s an argument that $100 million is expensive for 300 Forcier jobs, but let’s look at the outcome over 10 years to see the real results.” A123 claimed $50 million in 2014 in two installments from the state

and is expected to claim the other $50 million this year, Forcier said. The state has paid out $1.5 billion of the current $9.4 billion in liabilities, the MEDC confirmed. Many credits were not claimed due to the repealing of the Michigan Business Tax in 2011. Companies were forced to choose between keeping the tax credits and remain under the MBT until those credits expire or enter the new flat Corporate Income Tax structure, which applies only to C-Corps.

most of “ Were those jobs going to leave the state? We’re not sure.

”

Rep. Jeff Farrington

S-Corps likely made the choice to ditch the MBT and the MEGA credits because S-Corps don’t pay corporate income tax under the new rules, said Lynn Gandhi, partner at Honigman Miller Schwartz and Cohn LLP and adjunct professor at Wayne State University Law School. “Many companies did the math and walked away from the credits,” said Gandhi, who is also the former assistant general counsel for Visteon Corp. “The current liability would have been four or five times larger had the administration not eliminated the MBT.” But the state remains on the hook for $9.4 billion in remaining credits, with no clarity on when companies will redeem them under the MEGA agreements. This creates volatility in revenue estimating for the state, Francis said. “The state may have an idea of the flow of credits, but it’s impossible to know the liability at any given point,” Francis said. “Most of these credits were given out during a recession, now (Michigan) is projecting its revenue on the current economy, and these factors from the previous economy come into play.” To combat the budget shortfall tied to the MEGA program, Snyder signed an executive order earlier

this month to make $102 million in budget cuts to state agencies — including the Michigan State Police, Department of Corrections and the Department of Community Health. MEDC CEO Steve Arwood told the House committee last week there will be no amendments to MEGA deals but that his administration had been revising agreements. The state is asking companies to take their credits in the year they are certified, to annually project a three-year credit redemption schedule, The Associated Press reported. Farrington, however, said the Legislature could take action to combat the MEGA liability. “I don’t think anyone wants to cut MEGA tomorrow, but we added a benefit to companies with the elimination of the MBT and the personal property tax (for companies),” Farrington said. “Companies came to us when it was to their advantage. Well, the playing field has changed. We shouldn’t have a kneejerk reaction, but it’s disingenuous to say we’re not looking at making some changes.” Dustin Walsh: (313) 446-6042, dwalsh@crain.com. Twitter: @dustinpwalsh

Change in formulas led to miscalculations The Michigan Economic Growth Authority job retention tax credits, estimated at nearly $9 billion, remain an unpredictable liability for the state. Volatility exists due to formulas used to calculate the credits, which do not limit when the credits are redeemed and fluctuate with rises in wages and health care costs. Before 2008, there were as many as 12 calculation formulas that were not affected by health care costs. Those formulas were condensed to one formula in April 2008, which then allowed for health care cost and wage growth cost fluctuations. For instance, under the old formula, a project retaining 3,000 jobs with wages at $60,000 per employee would generate credits worth $3.83 million. That same project, post-April 2008, would cost the state nearly $8 million by adding in health cost fluctuations, according to the Michigan Economic Development Corp. But once rising wages, mostly attributed to the auto industry resurgence, and rising health care costs, are added in, those figures rise by another 30 percent. These formulas led to the state’s $3 billion miscalculation of its MEGA credit liability in January. The state had calculated the totals based on original estimates when the MEGA credits were authorized. The state now has an estimated liability of $9.4 billion on the credits, with most not expiring until 2030. — Dustin Walsh

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February 23, 2015

BRIEFLY Toyota to consolidate, moving N. Amer. R&D base to Ann Arbor

Winter’s deep freeze turns most of Great Lakes’ surface to ice

State appeals court upholds ruling on GM retiree benefits

Toyota Motor Corp. is consolidating its North American R&D base in a step that moves it closer to creating the carmaker’s first truly self-sufficient product development center outside Japan. The shift will bring most of the company’s regional development functions to its technical center in Ann Arbor. It also includes $126 million in new investment in powertrain operations. The upgrade will allow for more enhanced vehicle and powertrain development and move about 85 jobs to Michigan from California by 2016. It follows another shift, announced last year, which will transfer 250 procurement and supplier engineering jobs to Michigan from Erlanger, Ky. The expansion is part of Toyota’s plan to establish a new North America headquarters in Plano, Texas. Texas will get manufacturing, sales and marketing and corporate functions; Michigan will become the regional hub for product development. Building an independent U.S. R&D hub has been a top priority for Toyota President Akio Toyoda, who wants to give regional operations greater autonomy in running their businesses. The Ann Arbor Toyota Technical Center already leads development of such vehicles as the Avalon sedan and the Tundra and Tacoma pickups. Toyota has named five American chief engineers to pilot those programs. But bolstering powertrain development is one of the last gaps to fill. Ann Arbor still leans on Japan for engines. As part of the overhaul, Toyota also is shifting prototype operations to Ann Arbor from two other metro Detroit sites. Toyota is building two large extensions to its main technical center campus in Ann Arbor. One will accommodate the new prototyping unit, the other workspace for parts procurement. — Automotive News

For the second consecutive winter, bitter weather threatens to turn the surface of the Great Lakes into a vast frozen plain. The federal Great Lakes research laboratory in Ann Arbor reports Friday that nearly 81 percent of the five lakes’ surface area is ice-covered. On Thursday, the ice cover exceeded 85 percent. The lab’s George Leshkevich says the small drop-off probably happened because winds broke apart some ice, creating open spots. Still, satellite imagery shows this year’s ice cover has grown rapidly, nearly doubling over the past couple of weeks. Records show the lakes’ most widespread freeze was 94.7 percent in 1979. The ice cover topped out at 92.2 percent last March. — Associated Press

The Michigan Court of Appeals upheld a magistrate’s 2011 ruling which found that General Motors Co. had improperly reduced workers compensation benefits to some retired workers. The three-judge panel ruled that a 2009 deal struck between the United Auto Workers and a financially distressed GM to coordinate pension and workers compensation benefits was improper. The now-deceased plaintiff in the case, Clifton Arbuckle, began working at GM in 1969 and was awarded workers compensation benefits in 1995 at a fixed rate of $362.78 a week. In November 2009, GM sent Arbuckle a letter informing him that as of Jan. 1, 2010, his benefits would be reduced to $262.55 per week in light of the coordination agreement struck with the UAW. In March of 2011, Kenneth Birch of the Michigan Workers’ Compensation Board of Magistrates issued a ruling that found that GM had improperly reduced Arbuckle’s benefits. Arbuckle died in April 2014. GM appealed Birch’s ruling and in 2012, the Michigan Compensation Appellate Commission reversed the magistrate’s decision. The ruling by the state appeals court reverses the compensation appellate commission’s decision. In their ruling, the judges said the union did not have the authority under federal labor law to change the collective bargaining rights of the retirees. A spokesman for GM said the company will appeal the decision. — Business Insurance

Grow Mich. issues 5 new loans, ups 4Q investment to $11.1M Grow Michigan LLC, an investment fund founded through a joint effort of the Michigan Strategic Fund and 19 Michigan banks, has announced five new loans, totaling $11.1 million in the last quarter of 2014. Receiving funding to grow operations are: Barracuda Industries LLC, a Wixom specialty glass fabricator. Fire Pros Inc., a Grand Rapidsbased provider of commercial fire system and suppression services. Michigan Custom Machines Inc., a machine manufacturer in Novi. PF Michigan Group LLC, a Northville-based franchisee for health and fitness facilities. Turbo Components Inc., a maker of turbochargers in Fruitport. Grow Michigan has invested $31.8 million in 19 Michigan companies since May 2013. Grow Michigan was founded in February 2013 with $60 million in capital to provides capital for growing small businesses in the form of subordinated debt. Combined with partnering loans from Michigan banks, the total loaned to Michigan companies is more than $200 million. — Tom Henderson

Page 23

Ascension subsidiary plans to buy U.S. Health and Life BY JAY GREENE CRAIN’S DETROIT BUSINESS

A subsidiary of St. Louis-based Ascension Health plans to buy Sterling Heights-based U.S. Health and Life Insurance Co. for $50 million, according to documents filed with the Michigan Department of Financial and Insurance Services. USHL is licensed in about 20 states, including Michigan, Ohio, Illinois and Indiana. Ascension Health is the parent company of Warren-based St. John Providence Health System, a five-hospital system, and nine other hospitals in Michigan. Joseph Aoun, health care lawyer with Nuyen, Tomtishen and Aoun PC in Ann Arbor, said the acquisition of USHL will provide Together Health Network LLC, a physician-led clinically integrated network, with the ability to participate on the state’s health insurance exchange with its narrow provider network. USHL’s target market is employers of less than 100 employees. It has received approval from the Centers of Medicare and Medicaid Services to sell various policies for small employers under the Affordable Care Act. Together Health is owned by two of the nation’s largest health care systems, Ascension Health and Livonia-based Trinity Health. The two systems own 27 hospitals with more than 5,000 physicians on medical staffs in Michigan.

“The acquisition makes a lot of sense,” Aoun said. “Hospitals are now expected to manage population health and owning a health plan provides both infrastructure and a way to connect more directly with insurance purchasers.” In 2013, USHL reported $67.4 million in net premiums, about half of which was from Michigan. Its surplus was approximately $8 million. USHL is also affiliated with Automated Benefits Services, a Michigan thirdparty administrator, according to documents filed with the insurance department on Jan. 14. The proposed acquisition of USHL will be through a newly formed subsidiary, Ascension Care Management LLC, which states its “primary business is to own and operate businesses that are part of the population health management platform of Ascension.” Tony Tersigni, Ascension Health’s CEO, is a one of three directors of Ascension Care Management. The other two are top Ascension executives, CFO Anthony Speranzo and Joseph Impicciche, general counsel. After the acquisition, USHL will be a wholly owned subsidiary of U.S. Health Holdings Ltd, a Michigan-based corporation. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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Energy: Utilities have 5-year plans – but they’re under wraps ■ From Page 3

(five-year) report seems to be a complete departure from that. Each utility is trying to guard its own future by not revealing how they meet the critical needs of their customers.” The PSC asked for five-year plans because of a recent finding by the Midcontinent Independent System Operator, the regional entity that oversees electric grid reliability, that it expects a 3,000-megawatt electric supply shortfall in the Lower Peninsula by 2016. The shortfall is expected primarily because at least nine coal-fired power plants in Michigan will be retired by 2016 due to plant age and to comply with more stringent air quality regulations from the U.S. Environmental Protection Agency. Strong said utilities could be planning additional power plants and not want the public to know because that could jeopardize potential rate increases they may be planning to request. Several energy sources told Crain’s that if Michigan does not have a enough power generation capacity, one outcome is that the PSC could order electricity providers to build new power plants to meet demand, although it’s unclear how a plant could be built and brought online in that time frame. PSC officials declined further comment since the case (U-17751) is pending before the commission.

Supply plans At least nine power suppliers, including Detroit-based DTE Energy Co., filed their five-year electricity supply plans under seal because they contained proprietary information. More than 12 others, including Jackson-based Consumers Energy Co., filed reports that had some public portions. Wolverine Power Supply Cooperative Inc., a nonprofit cooperative with seven members based in Cadillac, said it plans to add 384 megawatts of electricity over the next five years to meet demand. Some 214 megawatts will come from power generated in 2017 from two wind power plants — Deerfield Wind Farm and Apple Blossom Wind Farm — through Wolverine member Spartan Renewable Energy Inc., Wolverine said. Spartan sells renewable energy to industrial and commercial customers under Michigan’s 2000 Customer Choice and Reliability Act and later amended through Public Act 286 of 2008. Michigan’s 6-year-old customer choice cap limits the number of business customers that can leave the state’s utilities to purchase electricity from the state’s 24 alternative energy suppliers. The current cap is 10 percent of the average sales of a power company. In its 46-page public filing, Con-

sumers Energy said it is projecting sufficient power supplies over the five-year planning period to meet the needs of its full-service utility customers. However, Tim Sparks, Consumers vice president for energy supply, said Consumers Energy does not plan to increase generation capacity to meet the needs of the 300 former customers that chose to purchase about 600 megawatts of Sparks power from alternative energy suppliers. Officials for Consumers and DTE have said they would support ending the 2008 customer choice law that creates a hybrid regulated utility system. “These (alternative energy suppliers) traditionally rely on purchases from the MISO (regional) electricity market to meet the power needs of their customers,” Sparks said. But if the suppliers are unable to purchase excess electricity because of a shortfall or raise rates to choice customers, Sparks said those customers could choose to go back to DTE or Consumers. “If we planned to build a power plant (to serve the choice cus-

tomers), all that recovery and burden of the costs would be placed on our customers,” Sparks said. “We don’t think that is fair.”

Division of power In Consumers’ report, the utility said it plans to generate 8,000 megawatts of electricity, which includes peak load and required reserves, from coal, hydroelectric, natural gas and renewable energy. Of that, about 5,400 megawatts are owned generation with the remainder made up from purchase agreements, including from the Palisades Nuclear Power Plant in Covert, and the rest from various customer incentive programs, Sparks said. But when Consumers retires its seven coal-fired plants by April 2016, Sparks said, that will reduce peak power generation by about 900 megawatts. The company plans to replace that power with the purchase of a 524-megawatt gas-fired plant in Jackson, 30 additional megawatts by upgrading generators at the Ludington Pumped Storage Plant and by purchasing additional capacity on the regional power market, he said. Sparks also said Consumers plans to reduce peak power needs by incentivizing customers to reduce power through “demand side management programs.”

“(Consumers Energy) says they have all these new programs for demand side management, but when will they put them in place?” Strong said. “We don’t know. There is a cost for customers, well over $1,000, so there is some doubt people will sign up for it. How will they fund the conversion and how much will they charge the customer?” On the renewable energy side, Sparks said Consumers does not plan to add future generation with renewable energy beyond a 10megawatt community solar project announced earlier this year. “Renewable energy doesn’t provide you as much capacity as one might think,” Sparks said. “A 100megawatt wind farm, Cross Winds Energy Park, only counts 14 percent of installed capacity, or 14 megawatts based on a three-year rolling average. … Solar counts 30 to 40 percent of its capacity.” Sparks said Consumers is looking to the state Legislature this year for additional guidance on renewable energy, energy efficiency and customer choice. The 2008 energy law expires Dec. 31, and most observers expect the Legislature to take some action to renew all or parts of the energy law. “If we are required (to add renewable energy), we will,” he said. Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

Fracking: UM report offers options but no recommendations ■ From Page 1

projects in the state. “Banning (high-volume hydraulic fracturing) provides the most comprehensive solution for addressing concerns about the potential risks of unconventional shale gas development,” said the report, noting that more than 11 communities support a statewide ban. “However, this option comes at the cost of reducing income to the mineral rights owners, industry, and the state by preventing development of the resource,” said the 240-page report released Friday. Despite concern from the environmental community about the potential for a dangerous deep-well chemical spill, Shaw Lacy, a former Graham researcher now with the Catholic University of Chile in Santiago, said Michigan has no history of water pollution intrusion from deep-water injection of chemicals during the fracking process. In 2013, a surface water spill of about 400 gallons of fracturing fluid occurred in Kalkaska County from a well operated by Calgary-based Encana Corp. The state Department of Environmental Quality investigated but did not issue a fine.

Scientific review The UM report’s seven chapters offer various options covering public participation, water resources and chemical use related to highvolume hydraulic fracturing — the practice of removing natural gas and oil from deep within the earth. The two-part report is one of the most comprehensive looks to date at the practice of hydraulic fractur-

fined by the state of Michigan as a well that uses more than 100,000 gallons of hydraulic fracturing fluid — a mixture of water, sand and more than 750 chemicals — some considered carcinogenic, such as lead, benzene, merHEATHER ROUSSEAU/CIRCLE OF BLUE cury, formaldehyde, As of December, 13 high-volume hydraulic fracturing methanol, ethylene wells were producing natural gas in the state. glycol and hydrochloric acid. ing in Michigan. The first part was But because natural gas prices issued in 2013 and discussed the history of fracking, the potential have dropped in recent months, environmental dangers and eco- Michigan appears to have time to develop additional regulations on nomic benefits. UM researchers reiterated that high-volume water hydraulic fracthe Hydraulic Fracturing in Michigan turing, said the UM researchers in report does not offer any recom- a previous report, the Hydraulic mendations for public policy, leg- Fracturing in Michigan Integrated Asislation, regulations or permitting. sessment. It is meant as a science-oriented review of fracking that presents the strengths, weaknesses and outAnother option cited by the UM comes of various courses of action, said John Callewaert, Graham’s scientists in the current report project director. “It takes into ac- would be to require fracking operacount the possibility that (frack- tors to create emergency response ing) could become more wide- plans before drilling some 10,000 spread due to a desire for job feet into the ground begins and wacreation, economic growth, energy ter withdrawals of up to 10 million independence and lower-carbon gallons of water used. The report said frackers could fuels,” the report said. But Callewaert said the draft re- be required to immediately notify port will be shared with more than the public and state officials if 1,200 individuals, including Michi- spills occur. Moreover, operators could be regan legislators, government officials, industry experts, other acad- quired to carry a liability insuremics, environmental advocacy ance policy of $1 million per well and bonding policies improved. groups and the general public. How does high-volume hy- Michigan has no laws to require draulic fracturing work? It is de- insurance coverage.

Plan B

State of the industry As of last December, there were 13 high-volume hydraulic fracturing wells producing natural gas in Michigan and 11 sites where drilling has been completed, according to the report. Fracking has occurred in Michigan since the late 1940s, but those approximately 12,000 oil and gas wells were relatively shallow wells — up to 2,000 feet — with lower volumes of water, some 50,000 gallons. “With the intensity of wastewater generation associated with high-volume hydraulic fracturing, it is not clear whether the laws and regulations written at a time of small-scale, shallow hydraulic fracturing options will be adequate,” the report said. Michigan is among 24 states that require well operators to disclose the chemicals used in hydraulic fracturing fluids. But operators have 60 days after the well is drilled to submit the list to the state and can protect the identity of certain chemicals. Sara Gosman, lead author of the chemical use chapter and a former lecturer at the University of Michigan Law School, said the biggest concerns and objections center on the composition of the fracking fluid. “States take various approaches to limit the chemicals or require disclosure,” said Gosman, who now is at the University of Arkansas. “Michigan’s policies are built around remediation and adaptation.” The report said Michigan could impose “more extensive requirements for information about chemi-

cal use and water quality, possibly including the full disclosure to state officials of all chemicals used in the hydraulic fracturing process — even substances considered to be trade secrets.” For years, environmental groups like the Michigan chapter of Sierra Club and Michigan Clean Water Action have been cautioning of the dangers posed by fracking operations on potable water supply, soil, air and human health.

Parallel rules? Another option brought up by UM researchers is to remove the exemption that fracking operations have from the regulations governing deep water withdrawal.“One option is to include it” in water withdrawal rules, Shaw said. “DEQ proposed regulation would bring more in line with how the water withdrawal process is for other users (including agriculture), but still it wouldn’t be an exact parallel. Another is to rescind the exemption.” Currently, frackers are required to use only Michigan’s Water Withdrawal Assessment Tool, an online program managed by DEQ to evaluate long-term groundwater withdrawal impacts. The UM report said, however, that the assessment tool may not effectively “address short-term, intensive withdrawals such as those associated with hydraulic fracturing operations.” Jay Greene: (313) 446-0325, jgreene@crain.com. Twitter: @jaybgreene

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Tech: Bringing startup hub to heart of Ann Arbor ■ From Page 3

first tenant: Coolhouse Labs, a tech incubator that was launched in downtown Harbor Springs in 2013. It will open up another incubator under that name in Ann Arbor, with plans to have eight to 12 startups taking space next January. “We’re going to create a really high-end environment. We want this to be the Madison Building of downtown Ann Arbor,” said Malcoun, referring to the Dan Gilbertowned building in the former Madison Theatre building that has become the focal point and poster child of the growing startup activity in downtown Detroit. Nutshell, which offers customer relationship management services to help companies organize and manage sales leads, on desktops and through apps, was founded in 2011 by Suter and Lindsay Snider while both were high-ranking executives in Barracuda’s Ann Arbor office. Snider was director of engineering, and Suter was head of the data storage unit called Barracuda Backup. They left Barracuda just before the company’s initial public offering in November 2013 to concentrate on Nutshell and another startup called LiftMail, a company still in beta testing that they hope will improve the way email is organized through the use of artificial intelligence. Last August, they hired Malcoun, a former DTE Energy Co. executive, to be Nutshell’s CEO. Malcoun is a member of the Ann Arbor Angels and owns his own small venture capital firm, CKM Capital Partners, which has made investments in several local startups, including Avegant Corp.

of Ann Arbor, LevelEleven of Detroit, Ablative Solutions Inc. of Kalamazoo, and AdAdaptive Inc. of Ann Arbor. Suter, Snider and Ian Berry, a former lead engineer at Barracuda who is a co-founder and chief technology officer at LiftMail, joined with Malcoun to form a dba called Space to purchase downtown Ann Arbor office buildings to help grow the startup ecosystem. Suter said he can’t disclose the formal name of the company’s LLC, because it would give away the location of the buildings under agreement. The total investment in the project also isn’t being disclosed, pending the real estate purchases. “The Space name is a play on the heart of the issue as we see it — one of the things startups in Ann Arbor need most is simply access to office space downtown,” said Suter. “Our approach with Space will combine short-term leases with startupfriendly services. The idea is to remove barriers so entrepreneurs can get started quickly making stuff. “This isn’t your typical commercial real estate project because its driving goal is to support our local entrepreneurs and help Ann Arbor’s startup ecosystem grow and gain national visibility. Space is a passion project,” he said. Coolhouse Labs had five incubator companies in its first threemonth summer session in 2013 and eight in its second session last summer. Its third session begins over the Memorial Day weekend. Thanks to help from a national startup support organization called TechStars, Coolhouse founder Jordan Breighner has been able to recruit companies to the small town

of Harbor Springs from London, San Francisco, Denver, Houston, Chicago, Philadelphia, New York, Toronto and Taipei, Taiwan. For the first two groups, Breighner invested $25,000 in each company in exchange for 6 percent of equity and provided them with onsite design help. He said six of the companies are still alive, with one in Michigan, Ann Arbor-based Localfu, a Webbased trip planner. That may seem like a small survival rate, but the point was to fund good ideas and see whether they could evolve to the point that they could attract serious investment. From the start, Breighner said, he assumed a large failure rate. Breighner said he will increase funding for the Ann Arbor companies to $50,000. He said companies can apply for entrance into the first class of startups at www.coolhouselabs.com, beginning about Labor Day. Malcoun was a mentor for last summer’s crop of tenants at Coolhouse. “Joe gave me a call in September and asked if I would be interested in doing something with him in Ann Arbor. It was a quick ‘yes,’ ” said Breighner. Malcoun said the goal is to create a sense of community to entrepreneurs that can be found in some other tech centers, such as Austin, Texas, and Boulder, Colo. And others who support the entrepreneur community say the new project will fill a gap. “When you hear about two buildings being bought, you don’t think Ann Arbor,” said Ken Nisbet, asso-

ciate vice president for research and director of technology transfer at the University of Michigan. UM operates an 18,000-squarefoot tech incubator called the Venture Accelerator at the school’s north campus complex. It’s not space available to the public, and even many of its tenants would probably prefer a downtown location once they graduate from a need to be incubated, said Nisbet. “This seems like a great development. People want to be downtown. They like to be able to congregate,” said Nisbet. “If Nisbet they’re not asking top dollar, I’m sure they’ll find plenty of tenants, some of whom will make it and some of whom won’t, which is the way it works. But they’ll have plenty of available entrepreneurs.” UM also manages a small incubator space for students that is downtown, called TechArb, which shares space under a parking structure with Menlo Innovations. Another incubator, the Tech Brewery, is in the former Northern Brewery Building northeast of downtown. “We still don’t have a national reputation for our startup ecosystem. Having an ecosystem here will help us recruit and retain employees and help us recruit companies,” he said. Tom Henderson: (313) 446-0337, thenderson@crain.com. Twitter: @tomhenderson2

Midtown: Neighborhood groups oppose project ■ From Page 1

The building is owned by Kathy Makino Leipsitz, president of Detroit-based Shelborne Development Group Inc. Following the deal’s closing, expected in July or August, LC Consultants plans to rehab the building to create 98 units of independent senior housing, open to people with incomes of up to 60 percent of area median income. Jacobson expects the rehab to take about a year. The $29 million project has attracted $2.46 million in low-income housing tax credits from the Michigan State Housing Development Authority, and LC Consultants also plans to pursue historic tax preservation credits, managing member Bob Jacobson said. To develop the project as marketrate senior housing would require large public or private subsidies to be economically viable, he said. The investment needed can’t be offset with rent. “You would need $2,000 per month in rent,” he said. There’s a need for affordable housing in Detroit, Jacobson said. “(And) we think it’s a great part of Detroit to be investing in.” LC Consultants and Leipsitz — who Midtown Detroit Inc. alleged in a late January story broadcast on WJBK-TV2 isn’t properly maintaining her buildings on Seward — are also talking about co-developing three other buildings she owns

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on the same block at 69, 90 and 100 Seward into 100 units of marketrate apartments, with a small number of affordable units to comply with Mayor Mike Duggan’s call for the inclusion of affordable housing units in new developments happening in the Midtown and downtown areas, Leipsitz said. Her goal all along has been to do some affordable development on Seward first, to bring people back to the area, and the remaining buildings at market rate, she said. Leipsitz said allegations of mismanagement of her buildings aren’t true. She doesn’t own a Seward property shown in the Fox 2 report as evidence of mismanageLeipsitz ment, and 59 Seward is secure, with boarded windows and fenced lot. Leipsitz said she bought the building in its distressed condition in 2012 and has been working on plans to develop it since then. But Mosey said Midtown Detroit Inc. believes another affordable building on Seward will hamper further economic development efforts there. The project could have a big impact on a relatively small dis-

trict, given the number of units, she said, and it should come from a policy about what is in the best interests of that part of the district, including the areas south and to the north in the Virginia Park area where investments have been made in single-family homes, she said. With a destabilized street like Seward, the best outcome is for the developer to work with the community groups, financing intermediaries, and local and state government to come up with a financial strategy, she said. Jacobson “is very aware we’re willing to work with him,” along with others, to develop the project as mixed-income, she said. “This is not what we need to be bringing back our neighborhoods,” Mosey said. “We need mixed-income, well-managed projects, especially on that street.” The affordable senior housing LC Consultants plans would mark its second such development in Detroit, following Bellemere Apartments on Greenfield, north of Grand River, which opened eight to nine years ago, Jacobson said. The father-son Jacobson duo has also done projects in Pontiac and Saginaw and currently is finishing an affordable development in downtown Grand Rapids, Bob Jacobson said. And it expects to close next month on a nine-story building

in Jackson. The Downtown Market in Grand Rapids, where Detroitbased Slows Bar BQ plans to open a location, is across from two of LC Consulting’s affordable developments, he said. The presence of affordable housing isn’t an automatic negative to other economic development and investment, said Kevin Kernen, managing director in the valuation and financial opinions group at Stout Risius Ross Inc. “Overall ... we don’t find it has an immediate negative impact on ... commercial and retail interest in the market.” There’s a need for housing in Detroit as everyone knows, and generally, it’s a positive, Kernen said. The presence of affordable housing will, however, impact which commercial users or retailers choose to locate nearby. Midtown Detroit and the Virginia Park neighborhood association have been clear they would prefer to have mixed-income housing, said Chris LaGrand, MSDHA chief housing investment officer. “We don’t disagree ... that ideally mixed-income is better than affordable because of the effects it has on the neighborhood. But from our perspective, a redevelopment that’s feasible is better than no development or (it) remaining a blighted structure.”

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.

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RUMBLINGS Caesars gets edgy with bacon pizza f you gave up pizza or bacon for Lent, or are calorie counting, don’t read any further. Detroit-based pizza chain Little Caesars last week unveiled a $12 deep-dish eightcorner pizza that uses more than 3.5 feet of bacon wrapped around the caramelized cheese edges. The “Bacon Wrapped Crust DEEP! DEEP! Dish Pizza” will be available beginning today until late April, the chain said. The pie is a Detroit-style deep dish pizza, Little Caesars said in a statement, and it uses whole strips of thick-cut bacon around the edges of the crust. It is topped with cheese, pepperoni and pieces of bacon. One slice is 450 calories. The bacon crust pizza will be available at U.S. locations as a Hot-N-Ready carryout option from 4 to 8 p.m., or by request all day, the chain said. Little Caesars, estimated by PMQ as the third-largest U.S. pizza chain with about $3 billion in sales, declined to say how many baconedge pizzas it expects to sell, but did say that it has done well in test markets. The chain first screened the bacon crust pizza last year in Albuquerque, N.M.; Madison, Wis.; Huntsville, Ala.; Butte, Mont.; and Great Falls, Minn. The pizza chain is owned by Mike and Marian Ilitch, the Detroit Tigers and Red Wings owners who founded it in Garden City in 1959. They relocated the company headquarters in 1989 from Farmington Hills to Detroit’s Fox Theatre and the existing office space above it, which they renovated. In December, they announced they will build a 205,000-square-foot Little Caesars headquarters at Woodward Avenue and Columbia Street, next to the

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Fox, beginning later this year. Little Caesars’ current 186,000-square-foot headquarters will also undergo a renovation. The new building also will include a flagship Little Caesars store.

Detroiters trying to lure Jimmy Fallon to Motown An effort to persuade Jimmy Fallon and his “Tonight Show” to broadcast from Detroit for a week has been gaining steam. The “Bring the Tonight Fallon Show to Detroit” Facebook page, as of Friday morning, had nearly 20,000 “likes.” It was created by Rochester resident Greg Hummel on Feb. 2, and he’s been interviewed by local media as the captain of the effort to persuade the NBC weeknight talk show’s producers to film in Detroit. The show’s studio is in New York City, but it also has aired live from Los Angeles and Phoenix. It will do shows Chicago in the future, too. Hummel has been getting help from prominent personalities. Gov. Rick Snyder on Feb. 6 tweeted from his official @onetoughnerd account: “I may be in the hospital, but I am well enough to know that @JimmyFallon should bring ‘The Tonight Show’ to Detroit!” That message got 218 retweets and 166 favorites. Former Detroit Red Wings great Darren McCarty also got in on the effort, recording a YouTube video encouraging Fallon to bring the show “to the D” and pointing to a

COURTESY OF LITTLE CAESARS

Little Caesars’ new deep-dish eight-corner pizza uses more than 3.5 feet of bacon wrapped around the caramelized cheese edges.

WEEK ON THE WEB FROM WWW.CRAINSDETROIT.COM, WEEK OF FEB. 14-20

photo of the infamous 1997 brawl at Joe Louis Arena during which McCarty famously pummeled Colorado’s Claude Lemieux. “We’ll have a great time, we’ll have a blast, and I won’t have to Lemieux your ass,” McCarty says in the video. Jason Warzecha, operations director for the Detroit Opera House, told WJR 760 AM’s Frank Beckmann that the venue will let the “Tonight Show” use its stage for free. The latest enticement is a video, shot at Detroit locations such as the Dakota Inn, Fillmore and Gaelic League, of locals encouraging Fallon to come here. It went live Thursday night. The video, at TVWeeklyNow.com, was the idea of Dan Criscenti, vice president of digital strategy of Troybased National Television Book Media Inc., a publisher of television magazines such as TV Weekly. His nephew Ryan Rupprecht shot the video and took stills on Valentine’s Day. “Let’s hope this works. It shines a light on the city,” Criscenti said. “It makes sense for us to help out in any way we can, and to help the Detroit resurgence.” Backers are using the hashtag #TonightShowDetroit on social media. Fallon, who took over the “Tonight Show” franchise last year from Jay Leno, and his producers have not responded to the campaign. He visited Detroit in November 2013 to promote his new job.

Historian Goodwin tabbed as Mackinac keynoter Doris Kearns Goodwin, the presidential historian, Pulitzer Prize-winning author and former presidential adviser, will deliver a keynote address at the Detroit ReGoodwin gional Chamber’s 2015 Mackinac Policy Conference, scheduled for May 26-29 on Mackinac Island. Goodwin will share her expertise on the composition of effective leaders. She is the author of six critically acclaimed and New York Times best-selling books, among them Team of Rivals: The Political Genius of Abraham Lincoln. Goodwin won the 1995 Pulitzer Prize in history for No Ordinary Time: Franklin and Eleanor Roosevelt: The Home Front in World War II. She was an assistant to President Lyndon Johnson in his last year in the White House and later assisted him in the preparation of his memoirs.

A123 sues Apple over alleged worker poaching ivonia-based A123 Systems LLC has sued Apple Inc., alleging the electronics giant campaigned to poach employees amid reports that it’s developing an electric car. The lawsuit, in federal court, accuses five former A123 employees of violating nondisclosure agreements as they either went to work for Apple or planned to. Apple rose to a record last week after people familiar with the matter said the Cupertino, Calif.-based company is working to develop its own electric car, rocking the automotive industry. Apple’s secretive electricvehicle project, code-named Titan, may not lead to the company introducing an automobile, a person familiar with the matter has said. The vehicle resembles a minivan, the person said.

ON THE MOVE Janet Tyler, the former co-CEO of Airfoil Group, a Southfield-based public relations and marketing firm, was named COO of Red Level Networks, an IT services and consulting firm based Tyler in Novi. Red Level’s former COO, Randy Cummings, was named director of the firm’s business consulting practice. The Auburn Hillsbased Michigan Council of Women in Technology named Sarah Prout executive director. Prout was executive director of Blue Water Safe Horizons, a Port Huron domestic violence homelessness service agency. She succeeds Janette Phillips, now a local vice president of business development for Indiana-based Chrysalis Global Consulting. University of Michigan regents approved the appointment of Theodore Lawrence, M.D., as director of the university’s Comprehensive Cancer Center. He succeeds Max Wicha, M.D., who is stepping down from the center he founded 27 years ago.

COMPANY NEWS Dan Gilbert, founder and chairman of Quicken Loans Inc. and Rock Ventures LLC, is the frontrunner to buy the 957,000-square-foot One Detroit Center and an attached 2,070-space parking deck for

about $100 million, sources in the real estate community told Crain’s. Other locals making it to the final round: Southfield-based Redico LLC and Troy-based The Hayman Co., sources said. Construction is wrapping up on Michigan’s first Field & Stream store, set to open March 11 outside Oakland Mall in Troy. Owned by Pittsburgh-based Dick’s Sporting Goods, it is one of 10 Field & Stream stores nationally and is unaffiliated with the magazine of that name. New York City-based Digital First Media, owner of a group of Michigan newspapers that are for sale, including The Oakland Press and Macomb Daily, is asking for some nonunion employees to quit their jobs, according to an internal memo obtained by Crain’s. Two weeks after receiving a letter from an activist investor urging the company to split into two separately traded public companies, Southfieldbased supplier Lear Corp. said it would increase its share repurchase program and quarterly dividend. Troy-based Talmer Bancorp Inc. bought back more than 2.5 million warrants from two funds managed by W.L. Ross & Co. LLC, the New York-based private equity company that helped finance the growth of Talmer from a one-branch operation in 2010 to a public bank. Takata Corp., the Japanese maker of airbags that have led to millions of car recalls worldwide, will be fined $14,000 for each day it fails to cooperate with a U.S. investigation into the part defect, Bloomberg News reported. Takata’s North American subsidiary is Auburn Hillsbased TK Holdings Inc. Mahle GmbH agreed to buy the thermal business of Troy-based Delphi Automotive plc for about $727 million in cash to expand the German auto-component maker’s technology offerings, Bloomberg reported. Ann Arbor-based Pixel Velocity Inc., which makes image-processing hardware and software to help keep commercial and government facilities more secure, closed on a funding round of $10 million. The Emergency Critical Care Center at the University of Michigan Health System opened within the adult emergency department in University Hospital in Ann Arbor, AP reported. A Ruth’s Chris Steak House will open in April in downtown Ann Arbor at 314 S. Fourth Ave. It will be the third Ruth’s Chris in Michigan, joining locations in Troy and Grand Rapids. The U.S. Marine Corps

could have a new military ground vehicle program worth more than $1.5 billion up for bids by April from defense contractors. BAE Systems Inc., which houses its Heavy Brigade Combat Team business unit in Sterling Heights, is collaborating with Iveco Defence Vehicles of Italy on a proposed version of the amphibious combat vehicle. Sterling Heights-based General Dynamics Land Systems is also expected to bid. The shareholders of Novi-based Lotus Bancorp Inc. approved the bank’s acquisition by Farmington Hills-based Level One Bancorp Inc. in a deal expected to close this week. The acquisition had been approved by state and federal regulators.

OTHER NEWS University of Michigan regents approved the $2.4 million demolition of an Ann Arbor building, formerly owned by Edwards Brothers Malloy and purchased by the school last year, to make way for a $168 million sports complex on the site, The Ann Arbor News reported. Under a new deal, the private sector will finance construction of the American inspection plaza for the $2.1 billion Detroit River bridge, said Canada’s transportation minister, Lisa Raitt. The Barbara Ann Karmanos Cancer Institute in Detroit was the beneficiary of a recent planned gift totaling more than $1.4 million from the estate of the late orthopedic surgeon Kathryn Cramer. Cramer died of breast cancer in 2005. Four Michigan chefs are semifinalists in the James Beard Foundation’s 2015 awards for culinary excellence. The New York foundation named Garrett Lipar, executive chef at Torino in Ferndale, a semifinalist as Rising Star of the Year. Marc Djozlija of Wright & Co. in Detroit, Andy Hollyday of Selden Standard in Detroit and Myles Anton of Trattoria Stella in Traverse City were listed in the Best Chef: Great Lakes category. Finalists will be announced March 24.

OBITUARIES Gary Marcicano, execu-

tive vice president and COO of the Michigan Business and Professional Association and the Michigan Food and Beverage Association, died Feb. 14. He was 55. Martin “Hoot” McInerney, a longtime Michigan auto dealer who was one of the first to assemble a nationwide chain of dealerships, died Feb. 16. He was 86.

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