Crain's Detroit Business, June 22, 2015 issue by Crain's Detroit Business

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS June 22-28, 2015

Wesley Berry: 30 years of change ... and a thorn in its side

House goes on break, leaves roads funding to Senate

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Fisher, Kahn buildings eyed for multifamily use By Kirk Pinho kpinho@crain.com

Maybe the Fisher Building and Albert Kahn Building need new leases on life — or maybe they just need new leases from a different type of tenant. The three-day auction for the iconic New Center office buildings begins today, and real estate experts say out-of-state investors are viewing at least one of the buildings as a multifamily conversion. This potentially would bring hundreds of new rental units to an area short on such housing — and a new residential emphasis to two Detroit landmarks. Portions of both buildings — perhaps 20 percent to 40 percent or 185,000 to 370,000 square feet of their total square footage of 925,000 — could be converted to multifamily in an area that multifamily real estate experts see as ripe for such redevelopment. By the time the high bidder closes on the deal, receives city approvals and completes construction, the $179.4 million M-1 Rail mass transit project likely would be finished, and New Center would become the next pocket of greater downtown ripe for multifamily redevelopment. A big selling point of New Center is a market option for renters Multifamily in the Fisher? It’s possible, real estate experts say

SHINOLA

‘Friends and family’ plan to grow Shinola Rock, Kresge among investors in $125M funding round to expand company

See BUILDINGS, Page 23

By Kirk Pinho and Tom Henderson

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n infusion of capital to support the growth of Shinola and other American-made consumer product lines was signed under a sort of “friends and family” financing plan last

month.

Bedrock Manufacturing Co. raised $125 million, sources say, in a funding round that includes Dan Gilbert’s Rock Ventures LLC and the Troy-based Kresge Foundation, plus other investors. The funding is in exchange for a minority equity stake in Bedrock Manufacturing, the Plano, Texas-based parent company to Shinola/Detroit LLC. Shinola, Rock and Kresge declined to confirm the terms of the deal, which closed in May. The funding is described by the Shinola leadership team as relationship-based outreach to a close circle of friends and colleagues as part of a mission to expand the business and create more American jobs. “In the process of getting to know each other, we recognized that we have several mutual friends who are adventurous and like-minded,” said Tom Kartsotis, founder of Shinola, in a Bicycles are also part ofthe statement to Crain’s. “As time passed, we decided that a small Shinola product lineup ‘friends and family’ round of financing would enhance our ability to aggressively build businesses that are predicated on creating world-class manufacturing jobs in America,” he said. “We are excited to welcome our new partners who include Dan Gilbert and Kresge.” Bedrock Manufacturing is not related to Bedrock Real Estate Services LLC, Gilbert’s real estate company that owns more than 70 properties in See SHINOLA, Page 22

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CRAIN’S DETROIT BUSINESS // June 22, 2015

MICHIGAN

BRIEFS MSU Human Medicine dean leaving; led move to GR Marsha Rappley, who led the Michigan State University College of Human Medicine ’s move to Grand

Rapids, plans to leave her position this summer as dean to join Virginia Commonwealth University in Richmond, Va., and run its health system, MiBiz reported. Rappley’s last day is Aug. 14. She’ll become vice president for health sciences and CEO of VCU Health System , which includes a cancer center and children’s hospital, has more than 1,100 beds and serves more than 600,000 people annually. Also last week, MSU broke ground on an $88.1 million biomedical research center in downtown Grand Rapids.

Train route linking Grand Rapids, Detroit studied Grand Rapids and Detroit are the two biggest cities in Michigan, but

try riding a train from one to the other. You can buy a train ticket in Grand Rapids, but the first leg of the trip is on a bus to Kalamazoo. Enter the Michigan Environmental Council, which is trying to determine whether demand would be sufficient for a direct rail line. Liz Treutel of the Environmental Council, who is managing the project, told Michigan Radio that, based on public feedback, people “want to see at least two trains a day, and it has to be competitive. If you’re traveling for work or if you’re traveling for fun, you still want it to be at least as fast if not faster than being able to drive in your own personal car.” The council plans to release a report by the end of the year.

W. Mich. chamber contest: $50K if you locate biz here The Ludington and Scottville Chamber of Commerce is holding a contest that will award $50,000 to an owner looking to start or relocate an early

stage business to Mason County in West Michigan, The Muskegon Chronicle reported. The Momentum Business Plan Competition is open to any independent for-profit or nonprofit venture with a viable business idea, plan or invention. Existing organizations or companies with less than $100,000 in sales or annual revenue also are eligible.

MICH-CELLANEOUS 䡲 The Michigan State University board of trustees approved a campuswide tobacco-free ordinance that goes into effect Aug. 15, 2016, and includes electronic cigarettes and vaporizers. 䡲 Saranac-based Herbruck’s Poultry Ranch plans to spend $44 million to expand its organic and cage-free egg production and create 50 jobs, The Associated Press reported. Herbruck’s received a $750,000 grant from the Michigan Strategic Fund. 䡲 Kalamazoo-based distributor I m p e r i a l B e v e r a g e C o . tripled is warehouse space in Southeast Michigan by moving from Plymouth to Livonia, MiBiz reported. The company distributes craft beer, wine and other beverages across the state. 䡲 Jody Lundquist started work last week as the new CFO of the city of Flint. She formerly was finance director and treasurer in Benton Harbor. Flint has been run by four state-appointed emergency man-

agers since 2011. 䡲 The Kalamazoo City Commission will sell Eastern Hills Golf Course for $2.2 million to JTM Management , which plans to redevelop the site into commercial and residential properties, the Kalamazoo Gazette reported. The move comes amid debate about the use of the city’s golf courses and as officials work to deal with an anticipated $3 million budget deficit in 2016. 䡲 Organizers with the newly announced Michigan Good Food Fund seek potential borrowers, investors and others to get involved with the fund, which aims to address the lack of access to healthy food in underserved communities statewide, The Associated Press reported. The fund will provide financing and business assistance to entrepreneurs involved in food production, distribution, processing, marketing and retail projects. The goal is to raise $30 million. 䡲 The Benton Harbor Area Schools had to give up an $18 million grant to improve student success because it lacked the staff to support it, officials of the district told Michigan Radio. Last year, Gov. Rick Snyder determined that a financial emergency existed in the district, which faces a deficit of about $16 million. Enrollment has fallen 43 percent to 2,680 in the past decade. 䡲 The Davison Community Schools Board of Education voted to go to a year-round academic calendar

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INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 6 CALENDAR . . . . . . . . . . . . . . . . . . . . . . .17 CAPITOL BRIEFINGS . . . . . . . . . . . . . 21 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 DEALS & DETAILS . . . . . . . . . . . . . . . 20 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 8 OTHER VOICES . . . . . . . . . . . . . . . . . . . 9 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 26 WEEK ON THE WEB . . . . . . . . . . . . . . 26

COMPANY INDEX: SEE PAGE 25 starting with the 2016-17 school year, The Flint Journal reported. Students will begin school in late August and end in late June, with one-week breaks in October, February and May. 䡲 This week’s summer bummer brought to you by your friends at Michigan’s public universities, which announced the following instate tuition increases last week: Michigan State University , 2.7 percent; Eastern Michigan University, 7.8 percent, which means EMU loses $1 million in state incentive funding by exceeding the state cap of 3.2 percent so it can generate $10 million in new revenue; Michigan Tech nological University , 3.1 percent; Northern Michigan University, 3.2 percent; and the University of Michigan, 2.7 percent. 䡲

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CRAIN’S DETROIT BUSINESS // June 22, 2015

LOOKING BACK: On June 24, 1985, Crain’s reported that Wesley Berry Florist Inc. sold its first franchise. Now Wesley Berry Flowers, the business has grown rapidly online in recent years, but nowa despite faces a courtwith battle court battle a with a florist giant.

DETROIT INSTITUTE OF ARTS

The Detroit Institute ofArts Inside/Out program has been taking reproductions of masterpieces to local venues. Now it’s taking them to two new cities in Michigan each year, starting with Bay City and Grand Haven this month.

ISTOCK PHOTO

More at crainsdetroit.com/30

The world’s a gallery for DIA $2M from Knight Foundation sends Inside/Out program to other Michigan cities, other states

Court fight creates a thorn for Wesley Berry Flowers By Sherri Welch swelch@crain.com

hirty years ago, Wesley Berry Florist Inc., then a small, family-owned company, sold its first franchise. It went on to establish 30 franchises across five states before selling most of them in the 1990s and launching an e-commerce business in 1994. Today, the family operates one of the larger online floral businesses in the U.S. through FlowerDeliveryExpress.com, with a single franchise left in Canton Township, plus four brick-and-mortar stores in metro Detroit operating as Commerce Township-based Wesley Berry Flowers. Under the Wesley Berry Flowers name, the combined businesses ranked No. 1,755 onInc. magazine’s 2014 list of

By Sherri Welch swelch@crain.com

the 5,000 fastest-growing companies, with $40.2 million in reported revenue for 2013, up from $11.9 million in 2010. FDE’s growing footprint — with deliveries in 152 countries and a network of tens of thousands of florists filling those orders — has put it into conflict — and court — with florist giant Teleflora LLC. FDE had been a member of the Teleflora network going back to the 1950s and used its services for order fulfillment and credit card processing. But more recently, the two have sparred over issues tied to a large number of refunds to credit card transactions Teleflora considers questionable. Teleflora cut Wesley Berry from its floral network in April,

The Detroit Institute of Arts ’ Inside/Out program — which takes reproductions of artistic masterpieces to parks, libraries, pizza places and other outdoor spots — is being replicated in Philadelphia, Miami and Akron, Ohio, this year. The idea? Attract visitors to the museum but also allow people to appreciate the works of art in their own communities and making the art and the museum itself more accessible. The Miami-based John S. and James L. Knight Foundation has committed $2 million to expand the program over the next three years to seven other U.S. cities and to continue the DIA program over the next two years. With its renewed funding, the DIA is taking its masterpieces to two new cities in Michigan each year, beginning with Bay City and Grand Haven this month. Displaying the artwork on the streets is a way for the museum to connect to its community, making it less of an ivory tower and more accessible, said Dennis Scholl, adviser to Knight’s president and CEO and the impetus behind the program’s expansion as former vice president of arts at the foundation. The program showed a sense of generosity on the part of the DIA that is not what people typically think of with a museum, he said.

See WESLEY BERRY, Page 24

See DIA, Page 25

Startup’s magic bullet for safer lithium-ion: Fiber in Kevlar By Tom Henderson thenderson@crain.com

BLOOMBERG

Elegus’ plan: Use the fibers in Kevlar to help lithium-ion batteries keep a charge longer with less risk of overheating.

Elegus Technologies Inc., one of the 10 startups that began a threemonth accelerator program Tech stars launched at Ford Field this month, hopes the same material that helps Kevlar stop bullets will lead to safer and more efficient lithium-ion batteries. Kevlar is a registered trademark of DuPont for a class of synthetic

material called aramid fiber. The fibers are extremely strong and heat-resistant, with a range of applications that include aerospace, the military and as an asbestos substitute. And, of course, for bulletproof vests. Elegus’ four co-founders think they have found another commercial use for the fibers: Increasing the time between charges for lithiumion batteries and, more important,

resolving one of their most widely acknowledged flaws: a dangerous propensity for overheating. In 2006, Dell, Apple Inc. and Toshi ba Corp. recalled a total of more than 6 million lithium-ion batteries powering notebook computers because of their tendency to overheat and sometimes even catch fire — eventually costing their maker, Sony , $250 million in replacement costs. And in 2013, all of Boeing Co. ’s

new and long-awaited 787 Dreamliner aircraft were grounded because of fires ignited by lithium-ion batteries until stronger battery containment systems could be devised. Elegus was spun out from the University of Michigan last August, a product of Nicholas Kotov’s lab at the school. Kotov has an endowed chair in chemical engineering and See ELEGUS, Page 24

MUST READS of the week ... Trade expertise, locally sourced

News to raise your spirits

Chicago’s Baker Tilly Virchow Krause LLP is ramping up its presence here, with its latest move being an acquisition of trade consultant Global Development Partners, Page 4

Read about recent restaurant openings on Page 7 of this week’s issue. You also can catch up on food and restaurant news — including Atwater Brewing’s new line of spirits — on our website, crainsdetroit.com/food ATWATER BREWING CO.

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Baker Tilly acquires trade consultant firm in Royal Oak By Bill Shea bshea@crain.com

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Royal Oak-based trade consultant Global Development Partners has been acquired in a noncash transaction by Chicago-based Baker Tilly Virchow Krause LLP and will begin offering overseas turnkey services from the accounting and advisory giant’s Southfield office. The move is the latest in a series of acquisitions and hirings as Baker Tilly ramps up its metro Detroit profile. Jeff Jorge, who founded Global Development Partners in 2006, becomes a non-CPA principal at Baker Tilly and now runs its new Latin America Services Desk for its International Services Team. “It’s something I can help augment that they needed to shore up,” Jorge said. “This is a classic one plus one equals more than three.” Baker Tilly’s International Services Team in Michigan is a $35 million practice, and adding Global Development Partners brings about $2 million in new U.S. revenue, Jorge said. Baker Tilly Virchow Krause’s full U.S. revenue last year was $475 million. “Our clients will benefit from the depth and breadth of GDP’s international experience and from Jeff and his team’s insightful view of the global marketplace,” Alan Whitman, Baker Tilly CEO-elect and managing Alan Whitman: partner of the Managing partner metro Detroit ofhere set to become fice, said in a Baker Tilly CEO. statement. “They will be leading both inbound and outbound opportunities for Baker Tilly.” The acquisition was finalized June 1. Global Development Partners was debt-free, Jorge said. Jorge and a to-be-determined number of Global Development Partners’ 50 full- and part-time employees are moving into Baker Tilly’s office space off I-696 in Southfield. Adding Jorge and GDP are the latest local Baker Tilly moves. It recently bought the Detroitbased accounting and consulting firm of Wolinski & Co. CPA PC. Marina Houghton, Wolinski’s founder and president, joined Baker Tilly as managing partner of its Michigan practice. She will replace Whitman as top executive for Michigan when he takes over on June 1, 2016, as CEO of Baker Tilly Virchow Krause nationally. He will remain in Southfield and Detroit as CEO, he said. Some of the not-for-profit Southfield staff will move downtown to work in the former Wolinski office, Whitman said. “We’re committed to Detroit. We entered Detroit with a Detroit firm, which I think is different than sign-

LARRY PEPLIN

JeffJorge, who founded Global Development Partners, now runs BakerTilly’s new Latin America Services Desk. ing a lease and moving downtown,” he said. “We’re looking to make a big push downtown, doubling down our efforts on Detroit clientele.” Additionally, Baker Tilly is in acquisition talks with three boutique service firms, Whitman said. The names cannot yet be disclosed, he said, but they are not audit or tax firms. “We have a strategic plan to continue filling out the service complement and the size of our practice. We’re not done,” Whitman said. Other notable local Baker Tilly personnel changes include the addition of David Tang, who last year became the China practice director, and Laurie Horvath, who became the local office’s not-for-profit practice leader in 2012 and a partner in 2013. The addition of Jorge and Global Development Partners to Baker Tilly’s local office fills a gap in the professional service firm’s client offerings, Jorge said. GDP offers services for small and midsize companies, ranging from $5 million to $1 billion, that seek to break into trade and foreign markets. Its clients typically lack the regionspecific business know-how, linguistic skills, cultural awareness and the resources — structurally and financially — to successfully pursue foreign markets, Jorge said. GDP brings to Baker Tilly its portfolio of services that includes risk assessment, market research, strategic planning, export/import tariff reduction, alliance/partnership development, new business pipeline assistance and in-region operations. Global Development Partners specializes in the Americas, with emphasis on Mexico and Brazil. GDP’s separate Brazil unit isn’t part of the Baker Tilly deal and is being sold to one of its executives, Jorge said. It could be acquired by Baker Tilly in the future, he added. Some of the GDP clients that now will be serviced by Jorge and his team at Baker Tilly include Wixombased Hosco Fittings LLC , which makes finishing systems components, and Auburn Hills-based Oxus America Inc. , which makes medical oxygen products. The Brazilian-born Jorge, whose fluency in Portuguese and Spanish aided a career that included trade-

oriented jobs at TRW and Delphi, became a naturalized citizen in 2008. Jorge, 40, graduated from high school at age 16 and began his career with a trade company in South America. He immigrated to the United States at age 20 and earned degrees from Middle Ten nessee State Univer sity and the Universi-

ty of Michigan.

As part of the acquisition, Jorge gets equity in Baker Tilly, and his compensation includes a percentage of current and future client revenue, he said. “The economics of the merger were very favorable for both parties,” he said, adding that Global Development Partners and Baker Tilly are sharing in the transition costs. Jorge said he wouldn’t have done the deal if “it didn’t provide comparable freedom with much greater upside” for himself, his family, his employees and GDP’s clients. “I’m an entrepreneur. I feel like I’m a young guy. I would never give up freedom or security,” he said. Jorge said he decided to merge with Baker Tilly because it would allow him to scale up the trade practice far more quickly than what would have been possible as a standalone firm. “I could continue to grow GDP organically, but it would take a long time in my career, if ever, to reach the size of Baker Tilly,” he said. “The know-how we’re both getting, the clients that are becoming joint clients, it accelerates the growth of Baker Tilly and GDP.” Jorge termed the deal an “aquimerger” and said he wasn’t paid outright for his company. “There are no upfront checks in this. If this was an acquisition, I would have cashed out and gone off to do something else,” he said. The initial idea was to create a joint venture equally owned by both companies, but the feeling was that joint ventures have a limited shelf life and don’t yield enough market impact and sustainable growth, Jorge said. Baker Tilly Virchow Krause is a member of London-based Baker Tilly International Ltd., which acts as the parent network for 154 independent member companies. Under the global Baker Tilly brand are 27,000 people spread across 693 offices in 133 countries. Baker Tilly International last year posted $3.6 billion in networkwide revenue, of which $1.5 billion was U.S.-generated. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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THANKS FOR LIVING UNITED We commend Jeff Bergeron for his unprecedented 25 years of support and service to United Way. His leadership as a campaign chair and board chair has made a lasting impact on the lives of others. We look forward to many more years working alongside Jeff.

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Senators differ on summer action for roads plan Olive, and other Republican senators is exploring cuts to the state’s existing budget, diverting other revenue and generating new money as part of its plan to come up with at least $1.2 billion needed to repair the state’s roads. The House package, introduced by Republican lawmakers, would raise more than $1 billion by 2019 through mostly existing revenue and expected future revenue growth that would be set aside for roads. The House plan would raise the diesel tax to match the 19-cent tax on regular fuel and charge user fees to drivers of hybrid and electric vehicles. Its more controversial pieces would divert money away from the Michigan Economic Development Corp. and end an income tax credit for the work-

By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — With the state House on summer break, the answer to Michigan’s roads funding problem will spend the summer in the Senate. Business groups and lobbyists working on behalf of the roads industry have offered recommendations to Republican Senate leaders, who are meeting behind closed doors to work out their version of a plan to fix the state’s deteriorating roads and bridges. Senate Majority Leader Arlan Meekhof and his spokeswoman, Amber McCann, Arlan Meekhof: did not respond Leading a group to to multiple mesexplore cuts in sages from state budget Crain’s seeking comment. It’s unclear when the Senate GOP caucus will introduce its proposal, or whether it plans to take up any of the 12 bills passed by the House this month. But McCann said in a June 11 Detroit Free Press report she doesn’t believe the chamber will vote on any bills until its own plan is ready. A group led by Meekhof, R-West

ing poor. The House recessed after session wrapped last week, despite the urging of some business leaders and lawmakers to postpone vacations until a final roads funding deal was reached. The chamber has added two session days each in July and August — for a total of six — and can add more if needed, said Gideon D’Assandro, spokesman for House Speaker Kevin Cotter. But he said the House can’t do much until the Senate returns with its plan. The bills, D’Assandro said, are thoughtful and address Cotter’s priorities, starting with using existing revenue before asking taxpayers for more money. But not everyone agrees.

NATHAN SKID/CDB

“It was symbolic,” said Rep. Sam Singh, DEast Lansing. “There are so many different pieces of that package that are dead on arrival Kevin Cotter: with the Senate Open to fuel tax or dead on arincrease rival with the governor that we know that package will not be the package that is approved when all is said and done.” Singh said he won’t support any roads funding deal that doesn’t include a long-term, dedicated revenue source. His preference would be a combination of user fees or gas tax increases. Cotter, R-Mt. Pleasant, has said he would be open to considering a fuel tax increase as part of a final package, but will not be the one to introduce it. Rather than vote out bills in order to leave for vacation, Singh said, House leaders should have gone straight into negotiations with Gov. Rick Snyder and Senate leaders on a joint package they could have presented this summer. “Why go through the theatrics of doing a House plan and then a Senate plan and then eventually getting the quadrant together with the gov-

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ernor to hash out the real plan?” Singh said. “We know all of the facts, so let’s just get down to final negotiations.” D’Assandro said Cotter will be in Lansing all summer and a roads deal is “our first priority.” “We’re not really going to get a lot done on road funding until they come out with a plan,” D’Assandro said of the Senate. “It’d look great for PR (to stay in town), but we’re committed to getting it done.”

New revenue? Some lobbyists, including the Michigan Infrastructure & Transporta tion Association, are urging the Sen-

ate to include new revenue as part of its proposal. Michigan’s flat 19-cent fuel tax hasn’t increased since 1997. A combination of higher gas taxes and vehicle registration fees could help the state come up with a chunk of revenue dedicated solely to roads, said Lance Binoniemi, MITA’s vice president of government affairs. Voters soundly defeated a statewide ballot issue to pay for road repairs last month in part because it included a sales tax increase and funding for areas besides just roads, including schools and local governments. “If they want to increase the gas tax in one fell swoop, the industry can handle that,” Binoniemi said. “If they think a gradual increase is more important, then eventually we’ll get to that goal and we’ll be comfortable with that, as well.” Both he and Kelly Chesney, spokeswoman for the nonprofitbusiness advocacy group Business Leaders for Michigan , caution against transferring existing revenue to roads because of the potential for cuts elsewhere. Using money from the state’s general fund and the MEDC, as the House proposed, “adversely impacts other critical priorities that help us grow our economy,” Chesney said. That includes funding for job training and economic development. “As we’re making gains, this is not the time to pull back on those things that help us,” she said. “Other states aren’t standing still, and for us to be a competitive state, we need to continue to invest in those areas.” 䡲 Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

BANKRUPTCIES The following businesses filed for protection in U.S. Bankruptcy Court in Detroit June 12-18. Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. 䡲 Wel Tek International Corp. , 29777 Telegraph Road, Suite 2455, Southfield, voluntary Chapter 7. Assets and liabilities not available. 䡲 Extreme Express LLC, 29193 Northwestern Highway, Suite 742, Southfield, voluntary Chapter 7. Assets: $0; liabilities: $0. Natalie Broda

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Survey: No driver, no problem; insurance execs see little impact By Dustin Walsh dwalsh@crain.com

The automotive and tech industries are confident in the future of autonomous vehicles, a new study found, with many automakers and suppliers thinking that many vehicles will be highly functional without driver intervention by 2020. The insurance industry, however, is less convinced of the driverlesscar revolution, according to a study released last week by the audit, tax and advisory firm KPMG LLP. The survey, “Automobile Insurance in the Era of Autonomous Vehicles,” asked senior executives representing $85 billion of the personal and commercial auto insurance industry about the impact of autonomous cars on their business. The results are a bit startling, given the potential pitfall that driverless cars could have on insurance and premiums.

TABLE TALK

Of those surveyed, 84 percent don’t expect autonomous vehicles to significantly affect the insurance business until 2025. Experts think significant portions of driving will be automated by 2020, including where drivers don’t drive in traffic jams, on freeways or in other highly predictable situations. Fully driverless cars are expected to reach 11.8 million units in the U.S. in 2035, said Egil Juliussen, an analyst at IHS Automotive . And by 2050, he expects almost all cars to be self-driving. At issue is whether the insurance executives are educated on the im-

plementation and effects of autonomous cars on society. Only 29 percent of those surveyed said they felt knowledgeable about autonomous vehicles. Even fewer, 10 percent, had developed a strategy to handle the likely shift in their business plan. “The disruption of autonomous vehicles to the entire automotive ecosystem will be profound, and the change will happen faster than most in the insurance industry think,” Jerry Albright, a principal in KPMG’s actuarial and insurance risk practice, said in a statement. “To remain relevant in the future,

insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy and operations.” The insurance executives, while skeptical of the technology’s impact, say they do think the industry will change over the next 10 years. Of note, 39 percent of respondents said they think new providers will crop up to take on the driverless market. Fifty-eight percent of respondents cited automakers as potential new insurance providers. 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

Findings ofsurveyon driverless vehicles

Don’t expect autonomous vehicles to significantly affect the insurance business until 2025.

Insurance executives who felt knowledgeable about the vehicles.

29 % 10

Insurance execs who have strategy to handle shift in their

business plan

“HOW DID MR. BUCK TRIM HIS ENERGY BILL?”

4 Northville bistros opening Four new restaurants have opened or are opening this summer in downtown Northville: 䡲 Wok Asian Bistro, 144 Mary Alexander Court, is open and serves Asian fusion cuisine. Entrees are individually cooked in a wok and can be created from a recipe or based on diners’ tastes. The menu also includes appetizers, shared plates and desserts, including Wok’d Cheesecake. 䡲 Urge Juice, 137 E. Main St., is open and serves handcrafted, coldpressed raw juice and vegan snacks. 䡲 Lucy & the Wolf, 102 E. Main, a Spanish-inspired small plates bistro, is scheduled to open within the next week. 䡲 Center Street Grille, 135 N. Center St., is scheduled to open in July. Its menu will feature gourmet pizza, pasta, burgers, salads, sandwiches and a children’s menu.

Roak pub opens Royal Oak has a new pub with the opening of Roak Brewing Co ., a 30barrel brewhouse and 70-seat taproom. It opened last week at 332 E. Lincoln Ave. More than 16,000 square feet of the 18,000-square-foot brewery is dedicated to the production and bottling of seven new Michigan-inspired craft brews. Roak beer is served in-house and distributed for sale in restaurants and retailers in Southeast Michigan. Roak employs more than 25, including Director of Operations John Rodopoulos; two brewers, Brandon MacClaren and Trace Redmond; and Chef Ralph Leone. Roak is open 4-10 p.m. MondayWednesday, noon-11 p.m. Thursday-Saturday and noon-10 p.m. Sunday. A menu features pizzas and other small plates. 䡲 Laura Cassar Send your restaurant and food industry news tips to Assistant Managing Editor Kristin Bull at kbull@crain.com

After visiting DTE Energy’s online Lighting Advisor, Mr. Buck replaced old incandescent bulbs with more efﬁcient models to reduce lighting costs. He also adjusted his thermostat just a few degrees when his business was closed. Then he wrapped his water pipes and adjusted his hot water heater to save him even more. All in all, Mr. Buck says he saved around 10%, despite the harsh winter. DTE Energy wants to help you give your costs a trim, too.

Go to dteenergy.com/savenow today.

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CRAIN’S

UAW president’s legacy rides on bridging tier-two pay gap

DETROIT BUSINESS

OPINION Find long-term fix for road funding egislators are right to feel chastened by Proposal 1’s overwhelming rejection last month. One of the clear messages was that voters were unhappy with the Legislature and the governor punting a complex, poorly explained plan onto the electorate, instead of solving the problem themselves. Because of that, we understand the Legislature’s desire to respond quickly by putting money into future budgets. (See story, Page 6.) However, we still would hope that whatever plan is settled on would have a long-term, adequate source or sources of funding instead of one that includes playing the hokeypokey with various pots of program budgets. While road funding is certainly the issue du jour, other state programs will fare better with a level of predictability as well.

Evans does what’s needed It hasn’t been easy being Wayne County Executive Warren Evans. The new county executive has been wrestling with a structural budget deficit since he took office in January. Last week, he asked for the state to declare a financial emergency. In response, the Michigan Department of Treasury said it will begin a preliminary review. Pension funding shortfalls and property tax declines are the primary culprits; the former could be addressed under a consent agreement. Evans deserves commendation for moving forward expeditiously. A financial emergency is not ideal, but likely represents the county’s only chance not to end up in Chapter 9 bankruptcy.

TALK ON THE WEB Re: Compuware Building Olga’s cost hurt chain, exec confirms A little hard to believe that the build-out of one store, in Compuware, drove the company and all its locations into bankruptcy. There is more to this story than what’s being said. Sounds like too much growth, too fast is the reason. James Renn

Re: Prevailing wage bumps into skilled trades debate Little doubt that this proposal will result in lower wages for skilled trades workers and therefore fewer of them, more money in the hands of a few owners and no savings for taxpayers. MWAC

Skilled

trades are valued everywhere . Do those workers

Reader responses to stories and blogs that appeared on Crain’s website. Comments may be edited for length and clarity.

need a government mandated pay rate to justify their skills? William J

Re: Pontiac Silverdome for sale With its massive parking lot and proximity to major freeways, this location would be a good mass transit parking lot. Thousands from the suburbs could park here and take the rails from Pontiac into Royal Oak, Detroit, Metro Airport, Ann Arbor and Chicago. The current parking lot for the Pontiac Amtrak station has a laughable few dozen spaces. Dave Gifford

OTHER VOICES: David Barkholz

Barkholz is information technology and labor reporter at Automotive News, a sister publication of Crain’s Detroit Business.

President Dennis Williams UAW flashed an unmistakable determination to solve the union’s tiertwo dilemma during this year’s contract negotiations with the Detroit 3. In a final press conference last week before entering radio silence, Williams said his members expect him to close the wage disparity between entry-level and more-senior workers. He said he intended to deliver on the promise he made to “bridge the gap.” I’ll add that his legacy as an agelimited, one-term president of the UAW also depends on it, though I don’t for a second believe he’s concerned today about that legacy. He’s focused on moving past tier two — a practice that started at the Detroit 3 in 2007 intended as a temporary measure to help the carmakers mend but has ballooned almost out of control. As the UAW enters collective bargaining for new, four-year contracts with each of the Detroit 3, Fiat Chrysler has a workforce that is 43 percent tier two. Those workers start at wages of $16 an hour vs. $28 an hour for their veteran coworkers. That disparity in pay for workers

OTHER VOICES: David Christensen

Christensen is an auto accident attorney at Christensen Law with offices in Southfield and Ann Arbor.

“D-Insurance” automobile Theinsurance proposal that Mayor Mike Duggan revealed on April 30 could hurt many more people than it helps. The mayor believes his alternative no-fault auto insurance will be more affordable for the residents of Detroit, so they won’t leave the city. However, the proposal does nothing to cut premiums, yet drastically undercuts the protection Detroiters need. Duggan’s proposal would let Detroiters buy a “qualified no-fault policy,” which provides only very low benefits and eliminates patients’ medical treatment options for Detroit residents. However, the proposal does not guarantee even one dollar of savings for Detroit residents. In exchange for no promise of any reduction in premiums, the following changes would be imposed on Detroiters.

doing the same jobs is a bone in the throat to any worker who cares about equal pay for equal work: In other words, every breathing hourly employee who turns a bolt, hangs a bumper, drives a forklift or otherwise helps in building cars at Detroit 3 plants. At Ford Motor Co., the percentage of tier two is 28 percent. At General Motors, it is 19 percent. The Detroit 3’s four-year contracts with the UAW expire Sept. 14. Two months ago, Automotive News detailed how the Detroit 3 and their Canadian union, Unifor, deal with entry-level workers. As part of Unifor contracts negotiated with the Detroit 3 in 2012, a new hire can “grow into” full wages over 10 years of designated raises. That’s different from the tier-two system in the United States, where new hires can never achieve the top wage of senior workers. Williams said at his press conference that the union has studied the model and others. It’s actually pretty commonplace. U.S. school districts typically use a similar ladder to bring teachers up to maximum pay. If Williams wants to go in that direction with tier two, he’ll have bargaining counterparts at the Detroit 3 who said “yes” to that approach in Canada. Whether it could work in U.S. plants is to be determined. In my opinion, as I expressed in a blog, the easy way to solve tier two — without major structural

changes to the practice — would be to throw additional signing bonus money at it when the contracts are ratified. An extra $4,000 for each tier-two worker at FCA, for example, would only cost FCA about $68 million. Even bumping the additional signing bonus to $6,000 would be a bargain for the Detroit 3 that would give tier-two workers a $3-an-hour raise for a year. These lump sums would be in addition to other signing bonuses. But to say my idea was poorly received by rank and file on various worker Facebook pages would be the understatement of the year. “Idiot” was the kindest thing said about me for daring to suggest such an approach. How tier two gets resolved will define Williams’ presidency. His predecessor, Bob King, staked his legacy on organizing a nonunion automaker in the South and failed. Before King, Ron Gettelfinger had to deal with major concessions and the offloading of retiree health care from the Detroit 3 into independent trusts to help keep the domestics solvent. Tier two already is deeply entrenched at the Detroit 3. Fully 29 percent of the combined 138,000 hourly employees at the Detroit 3 are tier two. Unless tier two is rolled back during these contract talks, it is liable to become a permanent fixture in Detroit 3 factories.

Duggan’s ‘D-Insurance’ would hurt more than help After an auto accident, Detroiters would be entitled to a mere $250,000 in “critical care” and a paltry $25,000 in continuing care. This cap applies to the total bills for everyone in the vehicle insured by that policy. They may not even be able to sue the at-fault driver for any shortfall. Instead of the same care everyone else in Michigan receives, Detroiters with catastrophic injuries will end up on the Medicaid rolls, with substandard care. Depending on how judges read the new proposal, should it become law, all those unpaid medical expenses could fall on the shoulders of the at-fault driver. Since all drivers are potentially at-fault drivers, everyone will need to buy much higher collision coverage just in case they hit a Detroit resident or run the risk of having to pay hundreds of thousands of dollars out of pocket. Additionally, the D-Insurance policy is not limited to Detroiters. It would apply to any city where more than half of the drivers are uninsured. So if the proposal becomes law, it would also apply to many other low-income areas across the

state. If this spreads, it could be the beginning of the end of the Michigan no-fault system. The proposal could also leave doctors and other medical providers out of work. D-Insurance will limit the doctors that Detroiters can see to those who are favored by the insurance company. So doctors and other medical providers may have to be pre-approved by the insurance company first, then treat patients second. Additionally, insurance companies will pre-authorize treatments and only grant coverage if the service is “medically necessary, in the insurer’s opinion.” So if the treatment facility provides services without pre-authorization, it won’t receive compensation. D-Insurance providers will be permitted to second guess the treating doctors’ decisions regarding critical care and when a patient is considered “stabilized,” so lengthy and expensive litigation will be needed to determine whether the doctor can be compensated. The “D-Insurance” proposal will hurt more than it helps.

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Wayne State names med school dean, adds liaison to partners to the Association of American Med ical Colleges, president of the University of Chicago Medical Center and executive director and COO of Penn State University ’s Hershey Medical

By Tom Henderson thenderson@crain.com

Wayne State University named a two-year dean for its school of medicine and added a new position of vice president for health affairs as part of efforts to improve relationships with partners including Uni versity Physician Group , the Detroit Medical Center and Henry Ford Health System. President M. Roy Wilson last week named Jack Sobel, M.D., dean of the school of medicine for two years and David Hefner to a new position of vice president for health affairs for an 18-month term. Last November, Sobel, an infectious-disease specialist, was appointed interim dean. He replaced Valerie Parisi, who became vice dean for faculty affairs at the Uni versity of South Florida. “Jack is trusted and respected by the faculty and our hospital partners, and his intimate knowledge of the strengths and weaknesses of the school of medicine will benefit us greatly during his tenure. I anticipate beginning a search for a longterm dean in about two years,” Wilson wrote in an email last week to colleagues at the university. Wilson said Hefner will concentrate on aligning the goals of the medical school with its partners. Previously, Hefner was executive vice president for health affairs at the Georgia Regents Health System in Augusta, Ga.; executive vice president for clinical affairs at Georgia

Health Heroes sought Crain’s Detroit Business is seeking nominations for Health Care Heroes, a special report on health care professionals that will run in the Aug. 17 issue. Winners will be chosen in five categories:

䡲

Corporate achievement in health care: Honors a company that has created an innovative health benefits plan or solved a problem in health care administration.

Center.

Jack Sobel: Named dean for two-year term

David Hefner: Vice president for health affairs

Regents University; and CEO of Georgia Regents Medical Center and Med ical Associates.

Before his positions with Georgia Regents, Hefner was senior adviser

Hefner’s assignment is to begin July 1. In November, Crain’s reported that the university had hired ECG Management Consultants to suggest more effective ways that the 2,000physician UPG could interact with the university. The UPG is an independent 501(c)(3) nonprofit, but the medical school dean chairs its board

and hires and fires the group’s CEO. On Nov. 17, four days before she stepped down as dean, Parisi fired Robert Frank, then UPG’s CEO, for unspecified reasons. At the time, Wilson told Crain’s: “I think there is a general perception that UPG is not as tied into the university and medical school as would be appropriate. There is frustration in some quarters.” Sources then told Crain’s that Frank had clashed with university officials and some tenured faculty at the medical school over management style and efforts to im-

prove UPG’s financial performance through compensation changes. Wilson said in his email June 17 that both a university task force and ECG Management recommended that the school add the position of vice president for health affairs. Wilson said that Hefner’s term, which ends on Dec. 31, 2016, provides “sufficient time to assess whether or not we should recruit a permanent vice president for health affairs.” 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Growing PACE aims to keep seniors out of nursing homes By Jay Greene jgreene@crain.com

PACE Southeast Michigan , a Detroit-based senior daycare and health services program, has cut average annual health care costs for seniors enrolled in its coordinated care program below that of the annual costs of nursing home care. PACE’s annual costs per Medicare recipient are 26 percent lower than at a long-term care facility — $72,000 compared with $97,000 per year, said Mary Naber, Mary Naber: CEO CEO of PACE of PACE Southeast Southeast. “Our interdisciplinary team proactively communicates and coordinates holistic care to prevent avoidable emergency visits, hospitalizations and nursing home placements, thus providing higher quality care at a lower cost for this very

Because PACE’s two Detroit centers are bursting at the seams, it plans to expand into Oakland and Macomb counties and add at least four satellite locations. frail population,” Naber said. PACE Southeast, which formerly was called the Center for Senior Independence since its founding in 1994, is a nonprofit organization coowned by Henry Ford Health System and Presbyterian Villages of Michigan. Its 2013 Form 990 shows assets of $4.6 million, down $543,000 from the year before. Its two centers are at Detroit Northwest College Park, 7800 W. Outer Drive, and the Thome Rivertown Neighborhood at 250 McDougall Ave. The senior center changed its name to PACE Southeast earlier this year to reflect its 20-year participation with the national PACE program, Naber said. Funded jointly by Medicare and

Medicaid, PACE — the Program of All-Inclusive Care for the Elderly — has 107 branches nationally, including eight in Michigan, said Rod Auton, executive director of PACE Association of Michigan. Because PACE Southeast’s two centers in Detroit are bursting at the seams with nearly 400 seniors with projections for 500 by end of this year, Naber said the plan is to expand into Oakland and Macomb counties and add at least four satellite locations. PACE Southeast was recently approved by the state Department of Health and Human Services to expand to Warren this summer to serve southern Macomb County to accommodate 50 to 65 participants in a 9,300-square-foot center. Project-

ed capacity with the proposed locations is dependent on state approval. “We won’t buy or build,” Naber said. “We help investors find a building and we will pay a lease rate.” In early 2016, PACE hopes to locate a small alternative care setting site in the Southfield/Oak Park/Farmington Hills area and the Dearborn/Dearborn Heights area, and in the Westland/Livonia area sometime in 2017, Naber said. “We’ve been assigned these ZIP codes by the state,” said Laurie Arora, spokesman for PACE Southeast. “Our goal is to position sites closer to where seniors live so they can access our comprehensive services — allowing them to remain independent in their home for as long as possible.” Since 2005, when the second PACE program began in Grand Rapids, six other programs have opened in seven cities — Lansing, Saginaw, Ypsilanti, St. Joseph, Muskegon, Battle Creek and Kala-

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mazoo, Auton said. The programs serve 1,300 participants with a maximum capacity of 3,000. Two others will open this year in Flint through Genesys and in Jackson with United Methodist Retirement Communities Inc. and Region 2 Area Agency on Aging, Auton said. “Ninety to 94 percent of participants are dual-eligible (Medicare and Medicaid beneficiaries),” Auton said. “PACE deals with the most frail, more complicated (dual eligible beneficiaries).” Eligible individuals, whose average age is about 83, must be at least 55, certified to need nursing home care, able to live safely in the community at the time of enrollment and live in a PACE service area. Seniors have regular medical, dental, audiology and behavioral health appointments, if necessary, at each of PACE’s two centers, coordinated by Gwendolyn Graddy, M.D., PACE’s medical director the last 14 years. They also receive nutritional, pharmaceutical, rehabilitative and transportation services. “The seniors that PACE Southeast Michigan services have multiple, chronic conditions,” Graddy said. “The care coordination available through this program allows participants to receive services when and where they need it. Staying in front of challenging conditions helps keep our participants healthier, reduces avoidable hospitalizations, and enables them to remain independent in their own homes.” If a PACE enrollee ultimately needs nursing home care, the PACE program pays for it and continues to coordinate the enrollee’s care. Some 7 percent of PACE members live in a nursing home. “Not only is (PACE Southeast) reaching a mass of frail older adults in the Detroit area, but the partnership of Henry Ford and Presbyterian Villages is creating housing and other services to help keep the seniors at home,” Auton said. In 2015, PACE Southeast’s budget is $30 million, which is based on number of participants. Funding comes from per member per month payments from Medicaid and Medicare, which total about $6,000 per enrollee. Later this year, PACE will begin a fundraising campaign to seek grants from foundations and others to fund safety improvements in seniors’ homes, Naber said. “We need help to pay for repairs and upgrades on participants’ homes,” Naber said. “Some need additional security – locks on doors. We have installed wheelchair ramps for homes (where a participant needs wheelchair access). We paid the water bill for one resident.” “Everything we do is preventive, to enable (seniors) to safely live in their homes for as long as they can,” Naber said. 䡲 Jay Greene: (313) 446-0325 Twitter: @jaybgreene

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CRAIN’S DETROIT BUSINESS // June 22, 2015

SPECIAL REPORT CHAD HALCOM Reporter’s Notebook WEB: chalcom@crain.com TWITTER: @chadhalcom

An inventor feeling some good vibrations Glen Moore sold his contracts and closed his Oakland County cleaning company more than a decade ago, but he hasn’t given up trying to ease the workload for janitorial service workers — or commercializing his ideas. Moore, 70, former co-owner of Corporate Facility Services LLC in Rochester and now a partner at VacBarrel LLC in Roseville, said that late last year he filed the patent application for an anti-vibration floor scrubber like the kind used to polish tile floors in schools and offices. This month, he sold the first unit, which he built at a Ferndale maker space, to a Macomb County school district that he declined to identify. Talks are underway with several makers of cleaning equipment about producing and distributing products. The floor scrubber features a system of rings that attach to the engine or mechanical housing of the machine, with motion isolators to reduce the vibration that carries into the handle and lessen the stress of repetitive motion for the worker. The floor cleaning device, which Moore tentatively calls FastScrub, is actually the third major approach in cleaning products for his company in just over 10 years. “The most important thing is that the part where the person grips the handle, that the vibrations don’t occur there,” he said. “My system reduces the vibrations in the entire machine.” In April, Moore had a patent issued for the vibration-dampening floor scrubber system by the U.S. Patent and Trademark Office, said his attorney, Jeffrey Sadowski of Royal Oak-based Howard & Howard Attorneys PLLC. VacBarrel has applied to patent variations of the same vibration control in other products, such as a hand-held sander, and those applications are pending, Sadowski said. Previously, Moore had sought a patent in 2001 and obtained it in 2004 for a DollyVac, which integrates a conventional vacuum cleaner with a garbage container on a dolly cart. In 2011, he patented a backpack-mounted vacuum that connects with a portable cart and recharges its battery. “We are getting the manufacturing process in order for our floor scrubbers now,” Moore said. “We belong to a hacker space, … and we built our prototypes there using all of their (equipment and some expertise from) members who had skills we did not have.” Moore said he has held one meeting with a cleaning equipment manufacturer about licensing and producing his products, and two more are planned. 䡲

LAW:INTELLECTUAL PROPERTY

> Copyright conundrum Do rules for literature, music also govern cars? One of several exemptions under review would allow car he U.S. Copyright Office will owners, tinkerers, mechanics and likely decide within others to bypass technology promonths whether a law tection measures and gain access written partly to protect literature to electronic control units, or and music copyrights in the digisoftware and computer data used tal age also prevents car owners to control various systems. The and mechanics from making vesystems involved range from hicle repairs or braking and “It used to be that steering to diagnoses. That airbag deploythe only federal ment and speed limitation agency, a control in moddivision of on what you ern automothe Library biles. Also incould do to cluded: of Congress, held hearagricultural repair or ings last modify your equipment. month and Consumer expects own car was advocates and suppleassociayour level of trade mental materials tions like the knowledge.” Electronic Fron from attorneys tier Foundation shortly in its regMatt Mowers,WarnerNorcross & Judd and the Specialty ular three-year Equipment Marreview of proket Association support creating an posed exemptions to the specific exemption to the digital copyright law involved: the Digital Millennilaw. Their argument: Car enthusium Copyright Act of 1998. By Chad Halcom chalcom@crain.com

Exemption pros and cons The issue: An exemption in digital copyright law would allow car owners, tinkerers, mechanics and others to bypass technology protection and gain access to electronic control units or software and computer data used to control systems involved in functions such as braking, steering, airbag deployment and speed control. Also affected: agriculture equipment. Proponents say … Consumer advocates and trade associations such as the Electronic Frontier Foundation and Specialty Equipment Market Association think car enthusiasts and farmers and others should be able to repair, diagnose, customize and upgrade software-controlled machines. Opponents say … Companies including General Motors Co. and Deere & Co. along with the Alliance of Automobile Manufacturers claim the software controls help ensure user safety and comply with federal emission control, fuel economy and other regulations.

asts and farmers and others should be able to repair, diagnose, customize and upgrade software-controlled machines “in a decades-old tradition of mechanical curiosity and self-reliance.” But companies including General Motors Co. and Deere & Co. have opposed the exemption, as does the Alliance of Automobile Manufacturers. They have argued that the software controls often allow the companies to ensure user safety and comply with federal emission control, fuel economy and other regulations. Attorneys expect a decision to come by late summer or fall. An exemption, if granted, would be subject to renewal every three years. “It used to be that the only

limitation on what you could do to repair or modify your own car was your level of knowledge,” said Matt Mowers, partner in the automotive practice and an IP attorney in the Southfield office of Warner Norcross & Judd LLP, which has several automotive supplier clients and is following the copyright issue. “Now the car is so much more electronic these days, (and) the new limitation might be whether we can still make sure that software systems are operating as they were designed.” GM, in particular, argues that open access to the software could compromise those protections or put corrupted “vulnerable” softSee COPYRIGHT, Page 13

Inside: Ups and downs of number of local IP attorneys, Page 13 | The ante rises on patent cases, Page 15

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CRAIN’S DETROIT BUSINESS // June 22, 2015

SPECIAL REPORT: INTELLECTUAL PROPERTY

In patent law, there’s no standing pat While IP-focused firms shed attorneys, general practice firms hold steady or beef up By Chad Halcom chalcom@crain.com

The traditional intellectual property boutique law firm is grappling with a slowdown in traditional patent litigation, and many firms are adjusting their size or shifting their areas of emphasis to adapt. But it’s too soon to know whether these shifts are normal course corrections for particular firms or more significant, long-term changes to this prominent practice area. Five of the 10 largest law firms devoted primarily to IP in metro Detroit reported shedding attorneys in the region between June 2013 and January of this year, according to law firm data submitted to Crain’s. Meanwhile, 10 of the 13 larger general practice business law firms with an IP law practice or department either held steady or grew their IP head count in the same period. Law360.com , the online legal

news service owned by LexisNexis , reported in March that eight national IP Case studies: firms, includ Rulings up ante ing three on patent cases. with a metro IP firms look Detroit presbeyone litigation ence, refor growth. duced head Both on Page 15 count compared with a year ago. They are Troy-based Har ness Dickey & Pierce PLC ; Chicagobased Brinks Gilson & Lione , which has 19 attorneys in Ann Arbor; and Connecticut-based Cantor Colburn LLP, which has a Troy office. But of these, only Harness Dickey saw a local contraction compared with last year in Crain’s data, at 59 local attorneys. The litigation slowdown, attorneys said, stems from three U.S. Supreme Court rulings last year that make patent lawsuits riskier if the

COPYRIGHT, from Page 11 ware into the automotive consumer market. In addition, GM argues, consumers already have ways to access the software for repairs without skirting copyright law. “Allowing individuals to access and make modifications to vehicle software risks altering vehicle systems such that they no longer comply with federal regulatory requirements and weakening the complex safety and security framework,” the automaker states in comments submitted to the copyright office in March. “Any adverse safety, performance or compliance issues that result from the affected uses will directly and negatively impact the value of the copyrighted work.” Another issue the copyright office will likely address is whether car and farm equipment buyers own the software within the vehicle or simply have a license to use it. Mowers said making the software open for public access could also discourage important research and development and mean regular software infringement for the automakers. “If I’m trying to read the tea leaves, it’s likely the Library of Congress will take some steps to allow access, but not make any significant precedential decision here,” he said. “In some of the previous (exemption) hearings, very few changes were made, but as software becomes to have more applications in our lives, this will likely get more review.” John Rothchild, an associate professor at Wayne State University Law School who teaches copyright law, also said history suggests the office won’t create broad new protections

for consumers. “Historically, they (the copyright office) just haven’t been very generous with exemptions,” he said. “In fact, the last rule-making there to get a lot of attention had to do with unlocking phones. The Copyright Office denied it, and Congress was so incensed they went on to reverse it by statute.” Congress enacted the Unlocking Consumer Choice and Wireless Competition Act after the last copyright office review of the digital copyright act in 2012 limited consumers’ ability to change carriers for some smartphones. Creating a new protection for car owners now, Rothchild said, also doesn’t John Rothchild: mean it will “Each exemption is carry forward only good for three through the next years.” three-year review in 2017-18, once the copyright office can see the effects of its previous decisions. “Each of the exemptions is only good for three years, and the default position when they expire is that there is no exemption,” he said. “They may decide after three years of use that it didn’t create the uses that were expected. “A decision this time might be considered on the expertise or opinion of interested parties, and next time a decision might be made more on what available data is out there to work with.” Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

facts and law behind them aren’t airtight. Another factor in the past year is a surge in challenges to the validity of patents at the U.S. Patent and Trademark Office. These new proceedings, created or redefined by the federal America Invents Act of 2011, are an increasingly popular tool to either resolve litigation or avoid it completely. A great deal of litigation gets put on hold in federal court if one side initiates one of these reviews at the patent office.

Firm strategy Meanwhile, some larger business law firms are hunting for solo practitioner or boutique patent litigators to beef up their own IP practices, in a move to offer high-stakes litigation service to some clients, experts said. Glenn Forbis, a senior litigation partner at Harness Dickey, said the firm was likely seeing only a normal periodic fluctuation or turnover in attorneys at the beginning of the year. The firm as a whole has been growing since the end of the last recession, he said. Patent litigation demand is actually growing, too, but Forbis said that he suspects IP litigation as a whole is contracting nationwide and that his firm is landing a bigger piece of a smaller pie.

“Here we’re seeing an increase in demand for our litigation services, but that’s probably a cost-consciousness issue from the clients Glenn Forbis: who are moving Staffing fluctuation away from some normal turnover of the other national firms,” Forbis said. “As a firm with (110) lawyers, we can get into those spaces to pick up clients and court cases that don’t demand marquis name coverage but do need professional service.” General practice law firms with sizable IP practices are picking up lawyers in those practice areas — firms such as Detroit-based Honig man Miller Schwartz & Cohn LLP, Royal Oak-based Howard & Howard Attor neys PLLC and Grand Rapids-based Warner Norcross & Judd LLP , which has local offices in Southfield and Macomb County. So why aren’t the dedicated IP boutiques seeing the same growth? Several factors are creating challenges for those firms, said Michael Rynowecer, president and founder of Massachusetts-based BTI Consulting Group Inc. , which provides re-

search and analysis on professional service firms. “Up until a couple years ago, there were no real big settlements in IP litigation,” he said. “Everything was fought tooth and nail to protect your IP, and you never knew what a court case’s effect on your product line was, so you didn’t want to settle. “Now corporate counsel has more information, and with some recent rulings and settlements, there’s an increased comfort with understanding the risks.” At the same time, Rynowecer said, some of the patent lawsuits that do go forward have high stakes — requiring highly specialized lawyers, clients that will pay more to litigate and firms with a greater range of legal expertise. Several larger business law firms have been beefing up IP practices just for that kind of litigation, he said.

Game-changing cases One big game-changer in IP law, local attorneys said, was Alice Corp. v. CLS Bank International, a ruling that invalidated a series of 1999 patents and found last June that abstract business methods may not be patented when computers See PATENT LAW, Page 14

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CRAIN’S DETROIT BUSINESS // June 22, 2015

SPECIAL REPORT: INTELLECTUAL PROPERTY

PATENTLAW,from Page 13: IP firms shed attorneys; general practice firms steady or rising apply them. Another is Octane Fitness LLC v. Icon Health & Fitness Inc., which some attorneys said could be curtailing tenuous lawsuits because it made it easier for winners to collect attorney fee awards against the losers in patent litigation (See story, Page 15). The Nautilus Inc. v. Biosig Instruments Inc. ruling last June also found that some patents could be invalidated for “indefiniteness” in their claims. The Alice ruling, the Supreme Court’s first on software patentability in more than 30 years, found that an algorithm to gauge and eliminate “settlement risk” and transaction defaults was essentially a digital version of the concept of escrow. But the case also could make other software patents easier to challenge, and some attorneys said companies could be wary of suing infringers if it exposes their own patents to dispute because of Alice. Also, the America Invents Act of 2011 created a new mechanism for challenging the validity of patents at the U.S. Patent and Trademark Office, based on evidence that inventions were previously known. That review tool has proved quite popular, and lawsuits routinely get stayed in federal court while the validity challenges are pending. Currently, there are more of those cases, called inter partes

Course correction?

Changes in number of local IP attorneys Local attorneys at IP focused firms Brooks Kushman PC Harness Dickey & Pierce PLC Young Basile Hanlon & MacFarlane PC Reising Ethington PC Carlson Gaskey & Olds PC Brinks Gilson & Lione Fishman Stewart Yamaguchi PLLC Gifford, Krass, Sprinkle, Anderson & Citowski Quinn Law Group PLLC Cantor Colburn Bejin Bieneman Dobrusin Law Firm MacMillan Sobanski & Todd Carrier Blackman Assoc Dierker & Associates Warn Partners TOTAL

Jun-13 Jan-15 64 80 64 59 24 18 20 16

36 20 19 19

19 17 9 6 6 4 5 3 4 299

17 16 11 10 9 5 5 4 4 332

Local IP attorneys at business law firms Dickinson Wright PLLC Honigman Miller Schwartz and Cohn LLP

Howard & Howard Attorneys PLLC

Bodman PLC

Warner Norcross & Judd LLP

Miller Canfield Paddock and Stone PLC

Jaffe Raitt Heuer & Weiss PC

Butzel Long PC

Foley & Lardner LLP

Garan Lucow Miller PC

Varnum LLP

Dykema Gossett PLLC

Secrest, Wardle, Lynch PC TOTAL

Another kind of review, called a covered business method review, was also created by the America Invents Act and has been growing in recent months, according to patent office data. Covered business methods are patented methods or techniques to manage financial products or services, as distinct from technological patents.

reviews, pending at the patent office than there are patent lawsuits at any given federal court in the country, Forbis said. Inter partes reviews are proceedings before the patent office’s Patent Trial and Appeal Board to challenge the validity of a patent based on prior inventions or a body of knowledge that may question its originality.

Jun-13 Jan-15 31 38

146

178

Mark Cantor, president of Southfield-based Brooks Kushman PC, said he thinks the litigation slowdown is coupled with a corresponding uptick in inter partes review business — a trend the Patent and Trademark Office confirms in a statistical report released this month on patent challenges related to the 2011 act.

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Brooks Kushman has added more than a dozen attorneys since 2013, and Cantor thinks the shift in where some IP attorneys practice, from litigation to patent Mark Cantor: challenges, is Suspects the shift temporary. in where some IP “I think what’s attorneys practice really happened is temporary is (court) cases have been stayed, and patent litigation hours are just being shifted to the (inter partes review) stage while everyone figures out their effectiveness as a tool,” he said. “And the change will probably be correcting itself in maybe two years as many of the disputes come out of the patent office and back into court.” Scott McBain, managing partner of the Troy office of Cantor Colburn, said head count has held steady for the local office in the past two years, and he called the contraction that Law360 reported for the firm “a statistically insignificant snapshot.” He also said software companies in particular may fear Alice, but how substantial that fear is remains to be seen. Theodore Olds, president and CEO of Birmingham-based Carlson Gaskey & Olds PC , said his firm has held fairly steady in head count but shifted recently to hiring attorneys with commercial litigation and other experience outside IP. He also said administrative review work is growing at the firm, but it may not necessarily be a permanent shift within IP law. The firm also has picked up some automotive IP work recently, he said, diversifying from its mix of medical device makers and nonautomotive manufacturers that were its core client base for years. “We had a lot of infringement litigation work to cover for Rainbow Loom (Choon’s Design LLC of Wixom, makers of the bracelet-making loom kits),” Olds said. “Every body we could find had to be on top of that for a while, but that’s not as hot or urgent now as it was two years ago.” “One of my early firm managers talked about business having a piston effect — as one client’s work goes down, another goes up.” Inter partes review also has grown steadily in the past two years as an alternative to patent litigation, Olds said. He also noted that larger firms often want to grow their IP practices and compete with the boutiques, but the trend can be cyclical — several firms, including his own, were born in part out of practice groups that amassed within larger law firms but eventually struck out on their own. “The grass is always greener, somewhere,” Olds said. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

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CRAIN’S DETROIT BUSINESS // June 22, 2015

SPECIAL REPORT: INTELLECTUAL PROPERTY

Ruling ups ante on patent cases where there is no case By Chad Halcom chalcom@crain.com

Filing or defending patent infringement lawsuits when you don’t have a case probably will get much costlier soon, since a U.S. Supreme Court ruling and two bills in Congress would make it easier for winners to collect attorney fees. Troy-based Harness, Dickey & Pierce PLC , an intellectual property law firm with more than 110 attorneys in four offices nationwide, was on the winning side of Octane Fitness LLC v. Icon Health & Fitness Inc. In that case, the Supreme Court broadened the definition of “exceptional cases” where one side pays the other’s legal bills. Before 2014’s Octane decision — which was an infringement dispute between two fitness equipment makers in Minnesota and Utah over a component of elliptical workout machines — the courts took “exceptional” to mean one side in court committed misconduct or a case was clearly baseless and brought in bad faith. But the high court took the word to mean “not typical” or a case “stands out from others with respect to the strength” of one side’s position.

Fee awards rise Since then, attorney awards have been on a sharp climb in other patent suits nationwide, according to the Federal Court Bar Association. In an April report for members of the House Judiciary Committee, the association noted that 36 percent of fee requests had been granted in the year since Octane, including 50 percent in the first quarter of 2015. That compares with just 13 percent of requests granted in the year before Octane. The ruling is considered a boon for businesses defending litigation against patent trolls, or companies that hold patent portfolios without commercializing the technology so they possibly can file infringement litigation. It also could shorten protracted litigation against large companies that infringe on the patents of small businesses but expect to outlast a plaintiff with limited resources in court. “I haven’t yet had a chance to file another motion for fees since Octane, but I have been able to raise the issue of fees if a party won’t settle or insists on going forward in court, to help bring a resolution,” said Rudy Telscher, a partner in the St. Louis office of Harness Dickey and lead counsel for Octane Fitness in the Supreme Court case. “Because the other side has exposure now. “It can make a (federal) district judge more inclined to award fees

after you win if you can show the other side was very much on notice about the risk of fees early on.”

Legislation in the works The House Judiciary Committee is considering the Innovation Act, which proposes several modifications to the America Invents Act of 2011, including a provision that would shift fees to losing parties in some lawsuits. The Senate Judiciary Committee this month reported a similar Protecting American Talent and Entrepreneurship Act, or PATENT Act, with a cost-shifting clause, to the floor of the chamber by a 16-4 vote. Litigation partners Richard Hoffman and Michael Druzinski of Troy-based Reising Ethington PC said the Supreme Court ruling only allows federal judges to award fees based on their discretion, while the Senate’s PATENT Act could require fee awards unless exceptional circumstances apply. “In theory, this should help deter abusive patent practices by making it riskier to initiate truly frivolous patent infringement suits for the sole purpose of trying to extort a settlement for less than the cost of litigation.” But Harness Dickey’s Telscher said he thinks the extra measures in Congress may be unnecessary. “I’m a firm believer that Congress should take a stab at stopping bad patent litigation,” Telscher said. “(But) with a trio of recent court RudyTelscher: All rulings including the ingredients are Octane now in there for the letting place, I think all the courts decide. of the ingredients are there for letting the courts deal with this particular issue. “And any time you get legislative action, you always get the risk of having both the intended effect and unintended consequence. In trying to prevent trolls, you don’t want measures that deter inventors with legitimate cases. You don’t want to risk not protecting small business as well.” Samuel Haidle, an attorney who practices intellectual property law at Howard & Howard Attorneys PLLC in Royal Oak, said he was unaware of anyone at the firm or in the local legal community collecting a judgment for attorney fees since Octane — but he suspects it’s only a matter of time. “It’s going to happen,” he said. “But those requests probably still need to be (heard in court, and) a lot of your facts have to line up right.” 䡲

IP firms look beyond litigation for growth By Chad Halcom chalcom@crain.com

There’s more to running an intellectual property law firm than filing patent lawsuits, and a handful of firms in metro Detroit are seeing substantial growth outside the traditional litigation practice, which has experienced recent upheaval. While a majority of IP boutiques in the region have seen a flat or falling IP attorney head count in the past two years, Troy-based Young Basile Hanlon & MacFarlane PC has grown to about 35 attorneys between its headquarters and its Ann Arbor office, with a half-dozen more in Chicago and Palo Alto, Calif. Andrew Basile Jr., president and a shareholder of the law firm, said the growth has come from a combination of trademark law and some transactional work, such as acquisitions for technology companies with expansive IP portfolios. Also a growth driver: some related commercial litigation outside of patent infringement — theft of trade secrets or vendor and customer dis-

putes for software companies. Young Basile has had an office in California for around 10 years, and Basile said Silicon Valley tech clients including Google Inc. keep the firm busy on a range of issues. “Our patent litigation practice is flat, and I do think there’s some potential for conventional patent litigation and even patent filings to diminish, given recent changes” in the law, he said. “But our response has been to figure out where the trends play to our other fundamental strengths.” California and software also have been ingredients in the success of Brooks Kushman PC, said law firm President Mark Cantor — along with licensing agreements, trademark law and litigation over copyrights or theft of trade secrets. The firm, with Southfield and Los Angeles offices, has nearly 90 attorneys, about 80 of them in Michigan. But also keeping attorneys busy, he said, are inter partes reviews — or administrative challenges to a patent’s validity at the U.S. Patent

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and Trademark Office based on evidence from prior inventions or knowledge. “I know patent prosecutions (seeking new patents at the patent office) and trademarks have also grown for us,” Cantor said, “but another big piece of the puzzle” are the reviews, Cantor said. “And it’s hard to know how to categorize that work because it becomes sort of a prosecution-litigation hybrid.” Also growing in Southeast Michigan are the Chicago-based IP firm Brinks Gilson & Lione PC, which maintains an office in Ann Arbor and had 19 local attorneys as of earlier this year; and Detroit-based Bejin VanOphem & Bieneman PLC. Bejin Bieneman was incorporated in 2012, and Brinks Gilson added a Detroit office at the end of that year. Both located at the Stroh River Place building in Detroit shortly after the Elijah J. McCoy satellite office of the Patent and Trademark Office opened there. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Creditor creates potential snag in Chassix plan to leave bankruptcy By Chad Halcom chalcom@crain.com

Southfield-based Chassix Holdings Inc. could have trouble winning approval from a class of trade creditors for its plan to exit bankruptcy if Indianapolis-based Allison Transmis sion Inc. can get its litigation claim against Chassix temporarily valued at $1.1 billion. Chassix, which reported annual revenue of about $1.4 billion in a statement this year, awaits a hearing Wednesday before Judge Michael Wiles of U.S. Bankruptcy Court in New York City on Allison’s request to give its pending lawsuit claim in Marion County, Ind., a temporary value. Creditors were supposed to vote by Friday on whether to approve the payment terms in Chassix’s April 24 reorganization plan before a confirmation hearing June 30. But Allison will get an extension until Wiles can hear arguments and decide on the breach-of-contract suit. Chassix, a supplier of chassis, brake and powertrain components that is owned by Tom Gores’ Platinum Equity LLC, filed for Chapter 11 bankruptcy March 12, claiming it owes more than $525 million to bondholders and more than $65 million to other classes of creditors including other auto suppliers, materials manufacturers and staffing companies. But Allison, which this year brought a breach-of-contract lawsuit against a handful of U.S. subsidiaries of Chassix before the bankruptcy, wants to get about 18 claims temporarily valued at more than $65 million each for purposes of creditor voting ballots on the plan. Although it would be temporary and not binding on the Indiana suit, the valuation could effectively give Allison sole decision-making power over whether one class of creditors approves Chassix’s restructuring plan. The U.S. bankruptcy code requires a debtor to gain approval from a majority of creditors by number within one class, representing more than two-thirds of the class claims by value, in order for the whole class of creditors to be considered on board with an exit plan. Chassix, which calls Allison its largest trade creditor in court pleadings, is asking Judge Wiles to give the litigation claim a value of $1 for voting purposes. Tom Radom, a shareholder at Butzel Long PC , which represents a different creditor in the case, said that he was unfamiliar with the Allison claim but that it is not uncommon for attorneys to argue for the highest valuation possible. “In these types of bankruptcies where there is a lot at stake, the supplier is going to put its best case forward,” Radom said. “Whether he can prove he is owed $1 billion is really another question.

“But I would doubt it that this (derails the Chassix plan). The bankruptcy code has enough flexibility in it that debtor plans can still go forward without every question necessarily resolved, claims with pending litigation notwithstanding.”

Other unsecured creditors in the bankruptcy include Grede Holdings LLC and Central Corp., both of Southfield and owed more than $4 million combined, according to a Chassix creditor list. 䡲 Chad Halcom: (313) 446-6796 Twitter: @chadhalcom

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CRAIN’S DETROIT BUSINESS // June 22, 2015

WEDNESDAY JUNE 24

An evening with Zack Urlocker. 5:30-8:30 p.m. TIE Detroit and Ann Arbor Spark. Urlocker, COO at Duo Security, a venture-backed startup in Ann Arbor, will talk about how to scale your business. Spark Central, Ann Arbor. Free. Contact: (248) 2544043; email: sarahm@kyyba.com.

THURSDAY JUNE 25

Doing Business in Mexico. 8-11:30 a.m. Automation Alley. A discussion on the changing dynamics of doing business in Mexico, Michigan’s largest export market. Speakers: Noel Nevshehir, director of international business, Automation Alley; Juan Manuel Solana, Consul of Mexico, Consulate of Mexico; Eve Lerman, senior international trade specialist, U.S. Department of Commerce; David Newhouse, international trade development manager, Michigan Economic Development Corp. $20 preregistered members, $40 nonmembers, free for foundation, $30 walkin members, $50 walk-in nonmembers. Preregistration closes at 1 p.m. June 23. Automation Alley, Troy. Contact: (800) 427-5100; email: info@automationalley.com.

UPCOMING EVENTS Mashable’s 6th Annual Social Media Day. 5:30-10 p.m. June 26. Social

Media Association of Michigan. Fireside chat on the topic of technology’s role in a resurgent city.

CALENDAR Crain’s honors 20 in their 20s, Class of 2015 Join Crain’s in honoring its 10th class of 20 in their 20s: the best and brightest up-and-coming businesspeople in Southeast Michigan. The event is 5-9 p.m. June 29 at HopCat Detroit, 4265 Woodward Ave., Detroit, and includes 2015 honorees, friends, family, past recipients, food and an open bar. Tickets are $50 individual, $45 each for groups of 10 or more, $40 for alumni. Preregistration closes at 9 a.m. June 26. If available, walk-in registration will be $60 per person. For information, contact Kacey Anderson (313) 446-0300; email: cdbevents@crain.com; website: crainsdetroit.com/events.

Guests include David Anderson, cofounder at Bamboo Detroit; Jake Cohen, managing partner at Detroit Venture Partners; Edi Demaj, cofounder at Rocket Fiber; Michael Evans, senior developer at Loveland Technologies and Jill Ford, head of innovation and entrepreneurship at the City of Detroit. MotorCity Casino Hotel, Detroit. $55, $35 Social Media Association members. Con-

tact: Lisa Gibala-Warren, (586) 3831465; email: smamiorg@gmail.com; www.bit.ly/SMDayDet. Pearls of Wisdom. 5:30-7:30 p.m. July 1. Michigan Association for Fe-

male Entrepreneurs. Connect with other women and learn more about planning for the future. Beans & Cornbread, Southfield. $32. Contact: Tonya McNeal-Weary, (313) 363-4075; email: info@mafedetroit.org. Veterans: The Untapped Talent Pool. 10 a.m.-1 p.m. July 14. Automa-

tion Alley. Season 2 of the “Michigan’s Got Talent” event series is a seminar focused on hiring veterans. David Dunckel, Roush Veterans Initiatives Program manager, will speak about the program. Automation Alley headquarters, Troy. $20 members, $40 nonmembers, $30 walk-in members, $50 walk-in nonmembers. Preregistration closes July 10. Contact: (800) 427-5100; email: info@automationalley.com. A New Automotive Era. 11:30 a.m.1:30 p.m. July 15. Inforum. In her book Road to Power: How GM’s Mary Barra Shattered the Glass Ceiling, author Laura Colby describes the personal character, choices and leadership style that steered Barra’s career trajectory to become CEO of

General Motors. Westin Book Cadillac. $40 Inforum members, $55 nonmembers, $25 students, $500 table sponsor (includes table of 10 with preferred seating and recognition in event presentation). Website: inforummichigan.org.

Crain’s 2015 CFO of the Year Awards. 7:30-10 a.m. July 23. Crain’s Detroit

Business. A panel discussion with the top financial executives from Detroit’s four major professional teams. The Henry, Dearborn. $75 individual, $800 reserved table of 10. Preregistration closes at 9 a.m. July 21. If available, walk-in registration will be $90 per person. Contact: Kacey Anderson, (313) 4460300; email: cdbevents@crain.com. New Enterprise Forum. 5-7:30 p.m. July 23. Ann Arbor Spark. Training

entrepreneurs on how to present to investors. Three entrepreneurs each give a 4-minute pitch of their business idea to a panel of investor judges in a kinder version of television’s “Shark Tank.” Spark Central, Ann Arbor. Free. Contact: (734) 214-0110; email: PR@NewEnterpriseForum.org HealthcareNext: Risk-Taking Strategies. 7:30-9:30 a.m. July 28. Inforum. Laura Byars, vice president human performance, Blue Cross Blue Shield of

Michigan, looks at the importance of risk-taking strategies for careers in health care. St. John MacombOakland Hospital. $20 Inforum members, $30 nonmembers. Website: inforummichigan.org. Best Strategies in Supplier Diversity Luncheon. Noon-2 p.m. Aug. 19. Diversity Information Resources. Eric Holder Jr., former U.S. attorney

general, will speak. $124. Detroit Marriott Renaissance Center. Contact: Betsy Gabler (612) 7816819; email: info@diversityinfo resources.com. Email Marketing for Success. 8:3010:00 a.m. Aug. 25. Troy Chamber of Commerce. Kim Schott of Constant Contact on marketing activities that help a small business or organization to achieve its goals and objectives. Northwood University, Troy. $10, free for Troy Chamber members. Contact: Jaimi Brook, (248) 641-0031; email: jaimi@troychamber.com.

Calendar guidelines. Visit crainsdetroit.com and click “Events” near the top of the home page. Then, click “Submit Your Events” from the drop-down menu that will appear. Fill out the submission form, then click “Submit event” at the bottom of the page. More Calendar items can be found at crainsdetroit.com/events.

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS // June 22, 2015

CRAIN'S LIST: LARGEST OEM PARTS SUPPLIERS Ranked by 2014 automotive original-equipment parts sales Company Address Phone; website

Top local executive(s)

Johnson Controls - Automotive Experience 49200 Halyard Drive, Plymouth 48170 (734) 254-5000; www.johnsoncontrols.com

Beda Bolzenius, vice chairman, Johnson Controls; president, Automotive Experience

Magna International of America Inc. 750 Tower Drive, Troy 48098 (248) 631-1100; www.magna.com

Jim Tobin 19,616.0 D chief marketing officer and president, Magna Asia

Lear Corp. 21557 Telegraph Road, Southfield 48033 (248) 447-1500; www.lear.com

Matthew Simoncini president and CEO

ZF TRW E 12001 Tech Center Drive, Livonia 48150 (734) 855-2600; www.trwauto.com

John Plant, CEO, TRW and Franz Kleiner, CEO designate, ZF TRW

Delphi Automotive plc 5725 Delphi Drive, Troy 48098 (248) 813-2000; www.delphi.com

Rank

OEM sales OEM sales ($000,000) ($000,000) Percent 2014 2013 change Products

$23,589.0 B $21,781.0 C

8.3%

Automotive seating systems and interiors

17,643.0

11.2

Body, chassis, interior, exterior, seating, powertrain, electronic, vision, closure, and roof systems and modules, vehicle engineering and contract manufacturing.

17,727.0 B

16,234.0

9.2

Seating and electrical

16,240.0 D

14,442.0

12.4

Automotive braking products

Kevin Clark CEO

16,002.0

16,463.0

-2.8

Global supplier of electronics and technologies for automotive, commercial vehicle and other market segments

Robert Bosch LLC 38000 Hills Tech Drive, Farmington Hills 48331 (248) 876-1000; www.boschusa.com

Mike Mansuetti president

8,406.0 D

7,233.0

16.2

Automotive brake components; diesel and gasoline fuel injection systems; linear motion and assembly technologies; range of automotive spare parts as well as diagnostic and repair shop solutions

BorgWarner Inc. 3850 Hamlin Road, Auburn Hills 48326 (248) 754-9200; www.borgwarner.com

James Verrier president and CEO

8,305.1 B

7,437.0 B

11.7

Engine and drivetrain systems and components

Continental Automotive Systems U.S. Inc. 1 Continental Drive, Auburn Hills 48326 (248) 393-5300; www.conti-online.com

Samir Salman CEO, Continental, North America

7,916.0 B

7,705.0 B

2.7

Tires, stability management systems, electronic chassis systems, brake systems

Visteon Corp. 1 Village Center Drive, Van Buren Township 48111 (734) 710-5000; www.visteon.com

Sachin Lawande F CEO

7,509.0 B

7,439.0

0.9

Climate controls, electronics, interiors

Denso International America Inc. 24777 Denso Drive, Southfield 48033 (248) 350-7500; www.densocorp-na.com

Sadahiro "Sam" Usui CEO

7,169.0 D

7,077.0 D

1.3

Automotive air conditioning and engine cooling components and systems, including condensers, radiators, CRFMs (condenser, radiator, and fan modules), heater cores, evaporators and HVAC units

Faurecia North America 2800 High Meadow Circle, Auburn Hills 48326 (248) 724-5100; na.faurecia.com

Mark Stidham, president, Faurecia North America

6,200.0

6,250.0

-0.8

Automotive seating, emissions control technologies, interior systems, automotive exteriors

International Automotive Components (IAC) 28333 Telegraph Road, Southfield 48034 (248) 455-7000; www.iacgroup.com

James Kamsickas, president and CEO

5,900.0

5,200.0

13.5

Instrument panels, cockpits, door panels, headliners, flooring, acoustic systems, exterior components

Mobis North America 23255 Commerce Drive, Farmington Hills 48335 (248) 426-5577; www.mobis.co.kr

Chung Myung-Chul, president and CEO

5,541.0 B

5,207.0 B

6.4

Chassis, cockpit and front-end modules; ABS, ESC, MDPS, ASV parts, LED lamps, sensors, electronic control systems, airbags, hybrid powertrains, parts and power control units

Aisin World Corp. of America 15300 Centennial Drive, Northville 48168 (734) 453-5551; www.aisinworld.com

Masayasu "Mike" Saito president and CEO

4,722.0

4,357.0

8.4

Body, brake and chassis systems; electronics; drivetrain and engine components

ZF North America Inc. 15811 Centennial Drive, Northville Township 48168 (734) 416-6200; www.zf.com

Julio Caspari, president

4,438.0 B

4,268.0

4.0

Transmissions, steering systems, suspension components, axles, clutches, dampers

Federal-Mogul Holdings Corp. 27300 W. 11 Mile Road, Tower 300, Southfield 48034 (248) 354-7700; www.federalmogul.com

Rainer Jueckstock, co-CEO, cochairman and CEO, Federal-Mogul Powertrain and Daniel Ninivaggi, coCEO, co-chairman and CEO, FederalMogul Motorparts Nigel Thompson president and CEO

4,400.0

4,200.0

4.8

Engine bearings; pistons; piston rings; sealing systems; ignition products; systems protection products; valvetrain products; braking, lighting and wiper products

3,800.0

0.0

Connection systems, electrical distribution systems, electronic components, instrumentation

16 17

Yazaki North America Inc. 6801 Haggerty Road, Canton Township 48187 (734) 983-1000; www.yazaki-na.com

American Axle & Manufacturing Holdings Inc. One Dauch Drive, Detroit 48211 (313) 758-2000; www.aam.com

David Dauch, chairman, president and CEO

3,696.0

3,207.3

15.2

Driveline and drivetrain components and systems

TI Automotive Ltd. 1272 Doris Road, Auburn Hills 48326 (248) 494-5000; www.tiautomotive.com

Bill Kozyra chairman, president and CEO

3,300.0

3,200.0

3.1

Automotive fluid storage, carrying and delivery technology

Cooper-Standard Holdings Inc. 39550 Orchard Hill Place Drive, Novi 48375 (248) 596-5900; www.cooperstandard.com

Jeffrey Edwards chairman, president and CEO

3,244.0 D

3,090.5

5.0

Sealing and trim, fuel and brake delivery, fluid transfer and anti-vibration systems

Autoliv North America 1320 Pacific Drive, Auburn Hills 48326 (248) 475-9000; www.autoliv.com

Steve Fredin, president, the Americas

3,142.0 B

2,905.0 B

8.2

Airbags, inflators, seatbelts, electronics, steering wheels

Dow Automotive/Related Businesses 1250 Harmon Road, Auburn Hills 48326 (248) 391-6300; www.dowautomotive.com

Steve Henderson, president

2,800.0

2,600.0

7.7

Composites, structural and elastic adhesives, acoustic-management systems, chassis applications

Valeo Inc. 150 Stephenson Highway, Troy 48083 (248) 619-8300; www.valeo.com

Francoise Colpron, president, Valeo North America

2,800.0

2,590.0

8.1

Mahle Industries Inc. 23030 Mahle Drive, Farmington Hills 48335 (248) 305-8200; www.us.mahle.com

Roland Zitt president

2,664.0 B

1,871.0 B

42.4

Electrical systems, transmission systems, engine management systems, air management systems, hybrid and electric vehicle systems, climate control, powertrain thermal systems, compressors, front-end modules, driving assistance, interior controls, interior electronics, access mechanisms, lighting systems, wiper systems, wiper motors Vehicle air conditioning and engine cooling

JTEKT Automotive Group Cos. 47771 Halyard Drive, Plymouth 48170 (734) 454-1500; www.jtekt-na.com

Noriya Murase president

2,576.0 D

1,930.0 B

33.5

Bearings, steering systems, driveline

This list of automotive suppliers is an approximate compilation. For companies based in Detroit and divisions of U.S.-based companies in Detroit, figure is for worldwide OEM sales. For divisions of foreign-owned companies, figure is for North American OEM sales. It is not a complete listing but the most comprehensive available. Crain's estimates are based on industry analyses and benchmarks, news reports and a wide range of other sources. Unless otherwise noted, information was provided by the companies. Actual revenue figures may vary. NA = not available.

B From Automotive News. C Includes OEM sales from power solutions division. D Automotive News estimate. E TRW Automotive Holdings Corp. merged into ZF Friedrichshafen AG May 15, 2015. F To succeed Tim Leuliette on June 29.

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CRAIN’S DETROIT BUSINESS // June 22, 2015

PEOPLE

LAW S. Rae Gross to shareholder, Ogle-

ON THE MOVE

tree, Deakins, Nash, Smoak & Stewart PC, from director

and assistant general counsel, labor and employment, DTE Energy Co., Detroit.

Send news items and photos to cdbdepartments@crain.com

SPOTLIGHT JOHN HENDRICKSON, COO, Ramco-Gershenson John Hendrickson has been ap-

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MANUFACTURING Sindy Klonke to business development manager, Detroit market, Dennen Steel Corp., Rochester Hills, from program manager, Sogefi Engine Systems USA Inc.,

pointed COO of Ramco-GerJordan

Maloney

HOSPITALITY Joe Jordan to

vice president, chief marketing officer, Domino’s Pizza Inc., Ann Arbor, from vice president of field marketing. Also Dennis Maloney to vice Oswald president, chief digital officer, from vice president of multimedia marketing; Julia Oswald to vice president, head of strategy and inSweeney sights, Domino’s USA, from vice president, marketing strategy and insights; and Debbie Sweeney to vice president of national field and Team USA marketing, from director of national field marketing, Domino’s Pizza Inc., Baltimore.

ACQUISITIONS & MERGERS Huron Capital Partners LLC, Detroit, announced that its portfolio company Jensen Hughes Inc., Baltimore, a provider of specialty engineering and consulting services for the built environment, has merged with Erin Engineering and Research Inc., Walnut Creek, Calif., a nuclear safety and reliability consulting firm. Websites: huroncapital.com, jensen hughes.com.

EXPANSIONS Ulta Salon, Cosmetics & Fragrance Inc., Bolingbrook, Ill., has opened

an Ulta Beauty store at Macomb Mall, 32295 Gratiot Ave., Space 680, Roseville. Telephone: (586) 296-2559. Website: ulta.com. SVS Vision Optical Centers, Mount

Clemens, has opened an optical center at 41472 E. Ann Arbor Road, Plymouth Township. Telephone: (734) 233-6500. Website: svsvision.com. Kelley Cawthorne, Lansing, a lobbying firm, has opened an office at the Fisher Building, 3011 W. Grand Blvd., Suite 2600, Room 109, Detroit. Telephone: (313) 293-7477. Website: kelleycawthorne.com.

shenson Properties Trust in

Farmington Hills. Hendrickson, 43, has more than 20 Hendrickson years of real estate experience, the last 16 of which were with Federal Realty Trust, where he most recently was regional COO in charge of thes Northeast region and head of thes East Coast mixed-use division. He holds a BBA from George Washington University. People on the Move announcements are limited to management positions. Email cdbdepartments@crain.com. Include 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.

DEALS

& DETAILS Submit news to cdbdepartments@crain.com

BestDrive LLC and its parent company, Continental Tire the Americas LLC, Fort Mill, S.C., opened BestDrive Great Lakes Commercial Tire and Retread Facility, 22100 Trolley Indus-

trial Drive, Taylor. Telephone: (313) 203-1350. Website: continentaltruck.com.

Klonke Rochester Hills.

MARKETING Carrie Sweeney

to senior account director, MVP Collaborative Inc., Madison

Sweeney

Heights, from account director, Duffy Petrosky & Co., Farmington Hills. Marie Stawasz to senior account executive, Franco Public Relations Group, Detroit,

Stawasz

from account executive.

Antoine’s Salon of Troy, Troy, is now the exclusive distributor and provider in the Midwest of Hair Botox by RG Cosmetics, Pompano Beach, Fla. Websites: antoinesalonoftroy.com, rgcosmetics.com.

NEW SERVICES ViMax Media LLC, Southfield, a

custom-branded content marketing agency, has launched a new company website at vimaxmedia.com.

STARTUPS 168 Asian Market has opened at

Domino’s Pizza Inc., Ann Arbor, has opened its first store in Portugal, in the Telheiras area of Lisbon. Website: dominos.com.

NEW PRODUCTS Hirschmann Solutions, Auburn

Hills, a supplier of antenna and transceiver systems and a business unit of Hirschmann Car Communication GmbH, Germany, expanded its iridium transceiver antenna system product family with the new Iridium 9602 (N) modem option for heavy-duty trucking and equipment markets. Additionally, the entire product family is now CE certified. Website: hirschmann-solutions.com.

32393 John R Road, Madison Heights. Ricky Dong is the owner. Telephone: (248) 929-1868. The Detroit Bubble Tea Co., has opened at 22821 Woodward Ave., Ferndale. The company was started by Arun Prasad and Alycia Courneya. Telephone: (248) 239-1131. Website: detroitbubbletea.com.

Deals & Details guidelines. Email cdbdepartments@crain.com. Use any Deals & Details 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.

20150622-NEWS--0021-NAT-CCI-CD_--

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CRAINâ&#x20AC;&#x2122;S DETROIT BUSINESS // June 22, 2015

Bill would ban questions, discrimination over contraceptive use LANSING â&#x20AC;&#x201D; Employers would be barred from asking employees or job candidates about their use of contraceptives under legislation introduced by Senate Democrats. The Employee Contraceptive Privacy Act, as the bill would be known, also would prevent employers from discriminating against employees or potential hires if they choose not to disclose whether they use birth control or if they file a complaint alleging their employer violated the act. Employees or job applicants would be allowed to file a civil suit seeking damages or injunctive relief. â&#x20AC;&#x153;Your boss has a say in what you do when youâ&#x20AC;&#x2122;re on the clock â&#x20AC;&#x201D; not when youâ&#x20AC;&#x2122;re at the doctorâ&#x20AC;&#x2122;s office,â&#x20AC;? Senate Minority Leader Jim

LINSDAY VANHULLE Capitol Briefings lvanhulle@crain.com

Ananich, D-Flint, the billâ&#x20AC;&#x2122;s sponsor, said in a statement. â&#x20AC;&#x153;There is no reason an employer should be involved in anyoneâ&#x20AC;&#x2122;s health care decisions, and this legislation makes that clear.â&#x20AC;? Senate Bill 397 was introduced this month and has been referred to

the Senateâ&#x20AC;&#x2122;s government operations committee. Angela Wittrock, Ananichâ&#x20AC;&#x2122;s spokeswoman, said the bill is in response to the 2014 Supreme Court ruling on Hobby Lobby, which allows some family-owned companies to opt out of providing contraceptive coverage. Separately, Sen. Curtis Hertel, DMeridian Township, and Rep. Sarah Roberts, D-St. Clair Shores, have introduced bills in both chambers to repeal a law that requires women to purchase additional insurance coverage for abortions with their health insurance policies. The Legislature approved the law in December 2013. Right to Life of Michigan initiated the legislation through a petition drive, which Gov.

Rick Snyder could not veto. Hertelâ&#x20AC;&#x2122;s bill, Senate Bill 63, was introduced in January and has been pending in the Senateâ&#x20AC;&#x2122;s insurance committee. Robertsâ&#x20AC;&#x2122; bill will be House Bill 4764.

Capitol tour Michiganâ&#x20AC;&#x2122;s Capitol is getting the Google treatment. Novi-based LunaTech 3D plans to photograph the entire building â&#x20AC;&#x201D; inside, out and possibly from the air â&#x20AC;&#x201D; as part of a virtual tour that could go live later this year. The Michigan Capitol Commission, which oversees the 136-year-old statehouse, awarded the $9,950 contract. Soon, trekking to Lansing wonâ&#x20AC;&#x2122;t

be the only way to visit the Capitol, which LunaTech CEO Doug Willett says will be great for school groups and other far-flung visitors. LunaTech, founded in 2008, uses Google Inc.â&#x20AC;&#x2122;s Street View technology to give virtual life to restaurants, hotels and other businesses. The company will use its Inneract software with the tour, which links visitors to videos and other interactive features about the location, Willett said. Itâ&#x20AC;&#x2122;s part of an effort to open up the Capitol to more visitors, both physical and virtual, said John Truscott, a Lansing public relations executive and vice chairman of the Capitol Commission. The group is finishing up a photography schedule so LunaTech can get to work.

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CRAIN’S DETROIT BUSINESS // June 22, 2015

Prism Plastics seeks to expand with medical acquisition By Dustin Walsh dwalsh@crain.com

On a mission to more than triple revenue in the next five years, Prism Plastics Inc. is seeking a bolt-on acquisition to enter the growing medical industry. Prism, a Chesterfield Townshipbased plastic injection molder, manufactures plastic components for automotive safety parts such as seatbelts and fuel system components. But the medical industry offers stable opportunities that could combat the ebb and flow of automotive demand, said Gerry Phillips, vice president and co-founder. “We’ve tried in the past to break into the medical industry using a nonacquisition strategy with no success,” Phillips said. “The auto industry is cyclical, so when it’s down, many auto molders rush out to bid in other industries, but as soon as auto picks back up again they go away. This doesn’t sit well with medical customers.” Prism tried for years to bid on

medical work. After no success, it hired advisory firm Stout Risius Ross Inc. in Southfield to find acquisition targets. “The best way to show them we’re committed is to make a statement by acquiring a medical molder,” Phillips said. Prism is seeking a medical molder with revenue between $10 million and $20 million, Phillips said, and expects a deal to be completed in the next six months. Phillips said medical is expected to make up one-third of Prism’s revenue mix by 2020. Prism plans to more than triple revenue to $100 million in 2020 from $30 million in 2014. The money is there, if an expansion into the medical industry is successful. Because of aging populations and technology advancements, the U.S. medical device industry is nearly a $60 billion industry in 2015. The global market for plastic in the medical industry is expected to reach $34.9 billion by 2016, with

U.S. suppliers processing more than 4.4 billion pounds of plastic this year, Harry Hamme, formerly of Becton, Dickinson and Co., told Crain’s sister publication Plastics News. Chuck Hadden, president and CEO of the Michigan Manufacturers Association , said those large numbers are causing Michigan companies to jump at the chance to supply medical. According to the association’s 2015 Manufacturing Survey, 29 percent of Michigan manufacturers are already supplying the medical industry. “In the last decade, manufacturers learned a valuable lesson on the importance of diversifying their customer base,” Hadden said in an emailed statement. “(Medical) is not the largest sector manufacturers supply to, but one that will continue to grow as our population ages, making it a viable choice for manufacturers to look to expand their customer base.” Southfield-based automotive sup-

plier International Automotive Components Group, the largest automotive injection molder in North America, supplies the medical industry with molded equipment through a subsidiary created in 2012 called IAC Creative LLC. David Ladd, executive director of marketing and communications at IAC, said if a company has extensive automotive molding and materials expertise, several industries open up beyond automotive. IAC Creative also supplies plastic injection-molded parts and products to the recreational vehicle and consumer appliance industries, but those products make up only a very small part of its overall $3.1 billion in revenue, Ladd said. Prism, which employs 74, has been expanding since its acquisition last year by Connecticut private equity firm Altus Capital Part ners II LP . Phillips and other co-founders Rod Bricker and the late Jerry Williams retained an ownership stake in the deal. Terms

were not disclosed. In May, Prism announced it planned to invest $3.5 million to add new equipment at its plants in Chesterfield Township and Harlingen, Texas. Prism invested $2 million in additional capacity at the two plants in 2013, a move expected to boost production by 20 percent. Those plants, along with its plant in Port Huron, supply parts to several tier-one auto suppliers including Takata Corp., Nexteer Automotive Corp. and TI Automotive Inc. Phillips said no medical work will be done at its existing plants. It also plans to open a fourth automotive plant at an undetermined location. “We’re enjoying a great growth rate and we’re in great shape,” Phillips said. “We definitely don’t need to be in medical, but this is a desire because we believe we can do great things in that space even though a lot of our competitors have tried to diversify here and failed.” 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

SHINOLA, from Page 1: ‘Friends and family’ plan raises $125 million to expand company and around downtown Detroit. Bedrock Manufacturing is an investment firm Kartsotis founded and which owns Shinola and C.C. Filson Co., the Seattle-based manufacturer of upscale outdoor gear. Shinola product lines range from the company’s signature watches to bicycles and leather goods. Filson produces a range of clothing, luggage and accessories. The Bedrock Manufacturing funding round was managed by Revolution Growth , the well-known venture capital fund led by Chairman and CEO Steve Case, a cofounder of AOL , and Ted Leonsis, founder and managing partner. Leonsis is founder, chairman and majority owner of Monumental Sports & Entertainment. Monumental Sports owns the Washington Capitals of the National Hockey League, the Washington Wizards of the National Basketball Association , the Washing ton Mystics of the WNBA and the Verizon Center in downtown Washington, D.C. “As we were exploring methods for financing new initiatives, we met the folks from Revolution Growth,” Kartsotis said, adding that the multitude of new opportunities that the Filson and Shinola brands present to Bedrock manufacturing on a daily basis are unique. Those new initiatives include manufacturing of products like headphones and turntables. Kartsotis, the founder and former chairman and CEO of watch, handbag and clothing maker Fossil , founded Shinola four years ago. Shinola has stores in Detroit, Ann Arbor, New York City, Los Angeles, Washington, D.C., Minneapolis, Chicago, London and Plano. Bedrock Manufacturing did not disclose the names of any other investors in the new funding round. Gilbert, the founder and chair-

capital firm of Cascade Partners LLC.

“Having a few stores is one thing, but adding more and leveraging the growth Raj Kothari: of the brand, can “Leveraging the be very expengrowth of the brand sive. Could Shican be very nola do it on its expensive.” own? Absolutely. But Shinola is a hot brand, and while your brand’s hot, you want to take advantage of that as fast as you can,” he said. “Raising money can help you execute your plan and reach your end results quicker. And it increases your certainty of success.”

Kresge’s role SHINOLA

Raj Kothari of venture capital firm Cascade Partners: “Shinola is a hot brand, and while your brand’s hot, you want to take advantage of that as fast as you can.” man of Quicken Loans Inc. and Rock Ventures, provided the following statement to Crain’s: “We are excited to participate in the latest round of financing for Bedrock Manufacturing (no relation to Bedrock Real Estate Services), the owner of Detroit-based Shinola. The Shinola brand reflects intense passion for the city and is the exact type of innovative, assembly and manufacturing company being built in Detroit. “Influential investors such as Ted Leonsis, Steve Case and the Kresge Foundation, along with our Rock Ventures team, believe in the opportunity that is Detroit. Together we will work toward our common goal of transforming the city into a high-tech, entrepreneurial wealth and job creating center.” Leonsis, also a former vice chairman and president of AOL, said on his blog, Ted’s Take, in a post Thurs-

day that the Bedrock investment is Revolution Growth’s largest to date. In addition, he said that he and Donn Davis, managing partner of Revolution Growth and another former AOL senior executive, accepted invitations to serve on Bedrock Manufacturing’s board.

Timely strategy Local private equity experts said the investment makes sense as Bedrock Manufacturing plans to expand its businesses. “I know some of the Shinola folks. I know they’re looking to expand quite rapidly. You need capital to do that, and you can’t count on the credit markets to do it,” said Brian Demkowicz, managing partner of Detroit-based Huron Capital Partners LLC. “This is a business situation we deal with all the time, talking to busi-

ness owners who need capital to grow,” said Demkowicz, whose private equity company generally invests in healthy comBrian Demkowicz: panies to help “Can’t count on the them grow. credit markets.” “From what I know about Dan, this seems to be a great fit, a good marriage that’s great for Detroit.” Shinola needed the capital infusion to get to the next level partly due to its specific product segments, another expert said. “Shinola is a consumer-brand company, and building out products to grow the brand can be expensive,” said Raj Kothari, managing director of the Southfield-based investment banking and venture

Rob Manilla, CIO for the Kresge Foundation, said in a statement that the foundation’s investment “will help power the continued growth of (Bedrock Manufacturing’s) Shinola and Filson brands while creating jobs in Detroit and across America.” Kresge is investing in Bedrock Manufacturing through the missiondriven portion of its endowment portfolio, said Jennifer Kulczycki, director of external affairs and communications for the foundation. “The Bedrock Manufacturing job creation opportunities that the investment supports aligns with Kresge’s mission: To promote human progress. “This investment advances our mission specifically by creating access and opportunity in underserved communities and assisting in the revitalization of Detroit.” 䡲 Sherri Welch contributed to this report. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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CRAIN’S DETROIT BUSINESS // June 22, 2015

BUILDINGS,from Page 1: Fisher, Kahn among downtown structures eyed for multifamily use priced out of downtown and Midtown. Brokers say there would be no shortage of prospective office tenants, either.

Sources have estimated that the Albert Kahn Building, like the Fisher Building, will fetch $20 to $30 a square foot at auction this week. That would make the purchase price for both as high as $27.8 million.

Demand drivers New Center is a key employment and education hub, with Henry Ford Health System and the College for Creative Studies, plus thousands of office employees in the Fisher and Kahn buildings as well as New Center One and Cadillac Place. These workers are increasingly looking for nearby housing. “You’re running out of room in downtown to get apartments. People are looking and there are no vacancies,” said Chris Futo, a senior associate specializing in multifamily housing in the Southfield office of Marcus & Millichap. According to the most recent “7.2 Square Mile” report by the HudsonWebber Foundation, more than 1,300 new multifamily units were opened in greater downtown between 2000 and 2010. That marked a 5 percent increase that brought the 7.2square-mile area to 26,722 units. But in the years since, thousands of additional units have been proposed or completed in the area, so far largely in downtown, Midtown and Corktown. There is, however, growing demand to spur new projects. Jonathan Holtzman, CEO of Farmington Hills-based Village Green Ltd. — whose company plans to build the Statler City Apart ments with 250-

300 units at Washington Boulevard and Park Avenue — Jonathan said greater Holtzman: downtown needs Thousands more at least 5,000 new rental units needed rental units per each year. And Jerome Huez, president of The Loft Ware house in Detroit, agreed that many renters are getting priced out in certain pockets of town. New Center, he said, is “an area that’s largely forgotten, and more and more Jerome Huez: people are being New Center “a pushed out and perfect target” going to areas like Boston-Edison. But New Center is a perfect target for that move. We should see an evolution of New Center just as we saw in Midtown.” A study released this year by Zimmerman/Volk Associates Inc. and commissioned by the Downtown Detroit Partnership stated that greater downtown could support nearly 10,500 new multifamily units a year (7,370 for rent and 3,120 for sale). As part of the study, Zimmerman/Volk surveyed seven multifamily properties in New Center with a total of 466 units ranging

COSTAR GROUP INC.

Who might bid on Fisher, Kahn buildings? Here are some of the possible bidders on the Fisher Building and Albert Kahn Building as identified by real estate sources. Other bidders are expected to emerge during the June 22-24 auction.

Fernando Palazuelo, owner of the 3.5 million-square-foot Packard plant. He said in a February interview with Crain’s that he’s interested in the properties. Dan Gilbert, founder and chairman of Quicken Loans Inc. and Rock Ventures LLC. Last month, his Bedrock Real Estate Services LLC bought two New Center area parking decks totaling 1,800 spaces at 116 Lothrop Road and 6540 Cass Ave.

New York City-based HFZ Capital Group, a real estate investment and development company. The company’s website says it is developing and managing more than 5 million square feet of Manhattan real estate. Ziel Feldman is chairman and founder.

Bloomfield Township-based Princeton Enterprises LLC, whose founder and CEO is Matt Lester.

Detroit-based developer Roxbury Group in a joint-venture with an unknown partner company. David Di Rita is Roxbury’s principal. New York City-based GHC Development LLC, a real estate development company controlled by hedge fund manager Michael Steinhardt and Allan Fried, his real estate adviser. Kirk Pinho

from 360 to 1,400 square feet. Those units rented for between $355 and $1,875 per month or 78 cents to $1.69 a square foot. The properties surveyed were the Marlenor Apartments , New Center Plaza Apartments , New Center Com mons, Pallister Plaisance Apartments, Fisher Kahn Apartments , Graphic Arts Lofts and New Amsterdam Lofts.

Expensive redevelopment If New Center begins to get in on the large housing development action in Detroit, the new owners of the Fisher and Kahn properties would need deep pockets. The redevelopment of either building as multifamily would be a massive undertaking, said Austin Black II, president of City Living De -

troit , a Detroitbased real estate brokerage. “An out-ofstate investor will say he can get the buildings for relatively cheap, but they Austin Black: Out- really have to of-state investor understand must know how to what goes into do renovation the conversion and renovation process,” Black said. Matt Lester, founder and CEO of Bloomfield Township-based Prince ton Enterprises LLC , said that his company plans to bid on the buildings and that he is aware of at least a dozen well-known and experienced real estate firms from the East and

West coasts with high interest in the properties. They have experience with significant redevelopment projects in major cities such as Matt Lester: Plans New York City, to bid on both Philadelphia and buildings Los Angeles, he said, declining to name them specifically. “Their plans include anywhere from 20 to 30 to even 40 percent of the square footage of the buildings — plural — being converted to residential, and in my opinion, it will be every bit of $200 (per square foot) to do that,” Lester said. “And it makes sense if you can stick to that budgetary constraint, and I think you can, but there are always contingencies.” Joe Barbat, who is redeveloping a 64,000-square-foot building attached to the nearby Hotel St. Regis into 58 studio and onebedroom units, estimated that converting either the Fisher or Kahn would cost Joe Barbat: Would $150 to $200 a be “very large square foot. undertaking.” Conversion of 40 percent of the Fisher’s 635,000 square feet would be about $51 million, while 40 percent of the Kahn’s 290,000 square feet would be about $23 million. “They have to make sure they can make sense of it because it’s going to be a very large undertaking,” Barbat said. “Those are large

assets, much more complex than some of your smaller, 50,000- to 100,000-square-foot assets.” Barbat, who also is CEO and chairman of Southfield-based Wire less Toyz and chairman of the West Bloomfield Township-based real estate investment and management company Barbat Holdings LLC , said his Regis House apartments will be ready for occupancy in the fourth quarter. They will rent for around $1.75 a square foot — or $875 a month for a 500-square-foot studio or $1,312 for a 750-square-foot onebedroom. Huez said he agreed that both buildings would be suited for a partial residential conversion. Because both have good commercial uses on their lower levels, some of the floors above that space would be ideal for apartments or condominiums. In the more opulent Fisher Building, the units could be pricier, starting around the 11th floor and up, with the lower floors that aren’t dedicated to retail remaining office space. Meanwhile, in the Kahn, the third to seventh floors are appropriate for multifamily use, Huez said. “The Fisher Building would be able to offer much higher-level amenities to its residents as well as a more grandiose environment and should be aimed at a high-end clientele,” he said. Still, Holtzman reiterated that conversion of either building must make economic sense and that any redeveloper would have to be prepared for a long, grueling process. “Look at Broderick Tower . That took almost 10 years, and that was only 100 apartments,” he said. “The (David ) Whitney took six or seven years, and that’s 100 apartments. In Capitol Park, they are doing 75 apartments at a time, and that probably took five years.”

Deal forecast FK Acquisitions LLC , whose registered agent is Andy Farbman, CEO of the Southfield-based Farbman Group , defaulted last year on a $27 million mortgage. That prompted Miami Beach, Fla.-based special servicer LNR Property Inc. to take title on the Fisher and Kahn buildings this year. Farmington Hills-based Friedman Integrated Real Estate Solutions LLC is coordinating the auction and has the management contract on the buildings. The auction, announced earlier this year, also includes more than 2,000 parking spaces spread over two parking decks and three surface parking lots. Sources have estimated that the buildings will fetch $20 to $30 a square foot, which would make the purchase price as high as $27.8 million. Or higher, Lester said. “We really do not have a great handle of just exactly how high someone will go. It’s hard to know,” he said. “The range here remains very wide.” Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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ELEGUS,from Page 3: Startup’s magic bullet for safer lithium-ion batteries is fiber in Kevlar is a professor of biomedical engineering, materials science engineering and macromolecular engineering.

Separating for safety Three patents have been applied to cover its technology — which involves making extremely thin layers made of aramid fiber to separate the anodes from the cathodes in lithium-ion batteries. Currently, lithium-ion batteries use thin layers of polyethylene, the same material in trash bags, for the separating layer. The benefit of using lithium in batteries is it is the least dense metal, which means that, ounce for ounce, it can store more power than the metal used in other batteries. But lithium is also a highly reactive element, a member of the alkali metal group that also includes potassium, another highly reactive element. The trouble comes if a fault occurs in the separator, a rare occurrence but a dangerous one. That can trigger a short circuit called a thermal runaway that in turn can cause adjacent battery cells to overheat. Dreamliners were allowed to fly again after the cells were given more protection from each other. Tests at UM show that batteries using aramid fibers as separators store up to 20 percent more energy, need less time between charges and remain stable at much higher temperatures than polyethylene, said Elegus COO Daniel VanderLey. VanderLey said independent tests, which will be crucial to Elegus’ commercialization plans, are scheduled to be conducted this summer by Navitas Systems LLC of Woodbridge, Ill. He said Elegus has signed

TOM HENDERSON

Elegus Technologies executives, from left: COO Daniel VanderLey, CEO John Hennessy and CFO Long Qian. nondisclosure agreements with large chemical and battery companies to vet the technology. If tests by Navitas go as hoped, VanderLey said, Elegus will look for local manufacturers to make the aramid separators it will sell to battery makers. The company plans to start production in the fourth quarter of 2017, generating $4.2 million in revenue that year based on the manufacturing of an estimated 2.4 million square meters of product. VanderLey said the company hopes to produce 17 million square meters in 2020, with revenue of about $30 million. “We’re looking for an early exit to a chemical company after we prove out the technology,” VanderLey said. “We’d liked to have an exit in the next two or three years for $20 million. But if that doesn’t happen, we’re looking at an exit to a customer in five years.”

Techstars boost The 10 companies who were accepted into Techstars’ program, formally known as Mobility, Driven by Detroit, each got $20,000 in funding from Techstars. Each also has the option of taking a loan of $100,000, convertible later to equity, from the program’s seven

sponsors or the three venture capital firms that Techstars has engaged. The sponsors are Ford Motor Co. , Magna International Inc. , Verizon Telematics, Dana Holding Corp., Honda R&D Americas, McDonald’s Corp. and Munich Reinsurance America Inc. The VC firms are Detroit Venture Partners , Detroit-based Fontinalis Partners and Ann Arbor-based Re naissance Venture Capital Fund.

VanderLey said Elegus eagerly agreed to accept a convertible note for $100,000, which came from Verizon and Fontinalis. Why so eager? Because it has an immediate use for the funds — hiring one of the co-inventors of its technology, Ming Yang, away from his teaching position in China for a full-time research position as chief science officer of the company. “Our option was to hire a Ph.D. student or to hire him, and he said he’d be delighted to come back,” VanderLey said. Three of Elegus’ founders are engineers who went through the MBA in entrepreneurship program at UM — CEO John Hennessy, VanderLey and CFO Long Qian. The fourth cofounder, Chief Technology Officer Siu on Tung, is a Ph.D. student in macromolecular engineering in Kotov’s lab. Michael Psarouthakis is assistant

director at UM’s Venture Center, the office of technology transfer’s tech incubator at the North Campus Re search Complex. Psarouthakis and one of his center’s mentors in residence, Meera Vijan, coached Elegus’ four founders on their business plan and with their pitches for equity capital, with Vijan focusing on what they needed to move the technology out of the lab and into the market. Vijan has more than 30 years in the battery industry. She was president of Ovonic Battery Co., a subsidiary of Auburn Hills-based Energy Conversion Devices Inc., and was a plant manager for A123 Systems Inc., helping it set up in Livonia the largest lithium-ion battery plant in the U.S. “This market opportunity is huge. More than 5 billion lithiumion batteries were sold in 2013,” Psarouthakis said. “And since 2002, there have been 50 large recalls of lithium-ion batteries for safety concerns.” Elegus also got commercialization help last year as part of the first class at NextEnergy in Detroit of I-Corps Energy and Transportation, a National Science Foundation-funded commercialization training program. On Sept. 10, at the end of the three-month Techstars program, each of the 10 companies will make pitches for investment capital to national and local venture capitalists and angel investors. A major goal of the Techstars program is helping companies refine their pitches, synthesizing into a few minutes what the market opportunities are for complex technologies that can be hard to describe. Elegus already has had success at pitch contests, thanks to coaching from Psarouthakis and Vijan.

In May, it won $3,000 by finishing third of 37 collegiate startups from around the world at the Global Venture Labs Investment Competition in Austin, Texas. In April, it was a semifinalist at the Rice University student business plan competition in Houston. Also in April, Elegus was a finalist in the Global Automotive Innovation Challenge at the SAE World Congress at Cobo Center. Psarouthakis introduced Elegus to Detroit-based Invest Michigan, an affiliate of the Michigan Economic Development Corp. that was launched in May 2014 to manage the $6.8 million Michigan Pre-Seed Capital Fund 2.0. In March, Invest Michigan invested $50,000. To date, Elegus has raised $340,000, including grants and the money from Techstars. Last year, it got a $75,000 grant from M-TRAC Transportation, a program funded by the MEDC at UM to translate transportation-related research into companies and jobs. “Their technology could have a significant impact. … Their acceptance into Techstars will significantly accelerate their time to market,” said Invest Michigan President and CEO Charlie Moret. Techstars is the Boulder, Colo.based organization that provides seed money and mentoring for promising technology startups. It launched its Detroit operation in 10,000 square feet on the second floor of the office space at Ford Field. The first program was started in 2007. Program locations now include Austin, San Antonio, Boston, Boulder, Seattle, Chicago, New York City and London. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

WESLEY BERRY, from Page 3: Court fight creates a thorn for expanding family florists and lawsuits filed by each side ensued. Wesley Berry subsequently dropped a Detroit case filed in federal court in April against Teleflora. In the meantime, two cases filed by Teleflora in May in U.S. District Court in California are ongoing. Kaveh Kashef, a litigation partner at Clark Hill PLC in Birmingham representing Wesley Berry, said the relationship between the two companies has broken down primarily because “as Wesley Berry has grown, Teleflora sees us as a competitor in their treatment of us.” A Teleflora attorney declined to comment.

Room for growth As e-commerce started to unfold in the early ’90s, Wesley Berry Flowers could see the growth opportunity that came with it, said FDE CEO Wesley Berry II, who is also a principal Wesley Berry Flowers. “The type of business we’re in, which allowed us to have same-day delivery across the country as a traditional brick-and-mortar shop, was the key component needed to be an Internet business.”

JOHN SOBCZAK

In the early 1990s, Wesley Berry Flowers saw a growth opportunity not in storefronts but in e-commerce. After seeing some of its competitors move online, Wesley Berry Flowers shifted from the franchise growth strategy to an e-commerce one. “The good thing about it was nobody knew what to do because it was a new, Wild West type of environment,” Berry said. “Everybody had the same opportunity; you weren’t locked out because you hadn’t been doing it for 50 years.” Today, Wesley Berry Flowers’ Michigan operations and online business employ 100 people in Michigan and 50 at a call center in

the Philippines, Berry said. Each day, the company deals with 5,000 to 6,000 people who are either placing orders or receiving flowers through the company from online orders, he said. The majority of FDE’s business is in the U.S., but it does take a few hundred orders a day from other countries, Berry said, noting it works closely with 1-800-Flowers.com Inc. and Florists’ Transworld Delivery through FTD.com. But doing business online has its pluses and minuses, he said.

Given the number of orders it processes online each year — roughly a million, according to Berry — and the breadth of its floral network, FDE sees its share of customer complaints. “It’s unfortunate, and we do make every effort to follow up on issues. (But) we don’t have any greater failure rate on our orders than do any of our major industry competitors,” Berry said. Recently, though, FDE has taken steps “to engage some greater levels of technology” to improve customer service, he said.

Clashes in court Those customer service breakdowns are tied to the credit card refunds. After Wesley Berry was dropped from the Teleflora network in April, it filed suit in Wayne County Circuit Court alleging that Teleflora didn’t make promised technology upgrades in its point of sale and e-commerce systems which would have helped reduce order fulfillment issues. As a result, the lawsuit said, Wesley Berry had to design and implement its own technology “at great expense.”

The lawsuit also alleges Teleflora didn’t communicate chargeback issues in a timely manner and that the high rate of refunds was “a direct result of Teleflora’s failure to enforce its delivery requirements.” Wesley Berry dropped that lawsuit after Teleflora filed its lawsuits. “Rather than waste judicial resources, we decided to consolidate the cases,” Kashef said. “We are confident that the allegations brought forth in eastern Michigan will be reintroduced in California.” The Teleflora lawsuits are seeking more than $21.5 million collectively in fees, interest and court costs from Wesley Berry and also accuse the company of false advertising, trademark infringement and unfair competition through, among other things, Wesley Berry’s alleged continued use of the Teleflora and Make Someone Smile trademarks Both cases will be heard in U.S. District Court for the Central District of California. Wesley Berry has yet to file its response, but Kashef said, “We absolutely, unequivocally deny the claims.” 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

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DIA, from Page 3: Inside/Out art program connects with community

DETROIT BUSINESS

He was struck by metro Detroit communities’ response to the artwork, with residents dressing up like their favorite paintings, and by the DIA’s wit in placing a dog painting in a dog park, for example. When you see that communities are clamoring to host one of the DIA’s Inside/Out installations, “that tells you you’ve hit upon an idea that resonates broadly and deserves attention,” Scholl said. “This really just goes to show you that (the DIA) kept (its) eye on the ball,” said Scholl, who is the observer on the DIA’s board on behalf of the Foundation for Detroit’s Future and foundations that participated in the “Grand Bargain.” “It’s not just about fighting for survival. The DIA is out there,” he said.

www.crainsdetroit.com

One of the DIA’s Inside/Out Installations stands in front of the historic Hecker-Smiley mansion on Woodward in Detroit.

DETROIT INSTITUTE OF ARTS

In 2011, the program’s second year, the DIA took 80 reproductions out into the community, expanding the installation in each from a single painting to between five and 10 works per city. It was then that ancillary programs began popping up around the artwork. Communities began taking ownership, planning themed walking tours, bike rides and even painting workshops, all tied to the Inside/Out reproductions. “This (took) a turn that was very different than ... the National Gallery,” Dimond said. To make the works relevant in each community, the DIA learned to consult with a local leader, or “community curator,” who would help it determine the best spot to place the artwork and any relevancy that made certain pieces a good fit. For example, in Taylor, where youth baseball is a big community draw, the DIA placed art around the baseball diamonds.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Albert Kahn Building ........................................ 1 Baker Tilly Virchow Krause .............................. 4 Barbat Holdings .............................................. 23 Brooks Kaufman ........................................ 14, 15 Business Leaders of Michigan ........................ 6 Butzel Long ...................................................... 16 Carlson Gaskey & Olds .................................. 14 Cascade Partners .............................................. 1 Center Street Grille .......................................... 7 Chassix Holdings ............................................ 16 City Living Detroit .......................................... 23 Clark Hill .......................................................... 24 Detroit Institute of Arts .................................. 3 Elegus Technologies ........................................ 3 Farbman Group .............................................. 23 Fisher Building .................................................... 1 FlowerDeliveryExpress.com .......................... 3 Friedman Integrated Real Estate Solutions .... 23 General Motors ................................................ 11 Global Development Partners ...................... 4 Harness, Dickey & Pierce ........................ 13, 15 Howard & Howard Attorneys ...................... 15 Huron Capital Partners .................................... 1 IAC Group ........................................................ 22 IHS Automotive ................................................ 7

Editor-in-Chief Keith E. Crain Group Publisher and Editor Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Managing Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Director, Digital Strategy Nancy Hanus, (313) 4461621 or nhanus@crain.com Managing Editor/Custom and Special Projects Daniel Duggan, (313) 446-0414 or dduggan@crain.com Assistant Managing Editor Kristin Bull, (313) 446-1608 or kbull@crain.com Senior Editor/Design Bob Allen, (313) 446-0344 or ballen@crain.com Senior Editor Gary Piatek, (313) 446-0357 or gpiatek@crain.com Research and Data Editor Sonya Hill,(313) 446-0402 orshill@crain.com Web Producer Norman Witte III, (313) 446-6059 or nwitte@crain.com Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

REPORTERS

Across the pond The DIA adapted its idea of putting its art on display in the community from the National Gallery in London, said Kathryn Dimond, director of community relations for the DIA. Graham Beal, the DIA’s director, and Ann Marie Erickson, executive vice president and COO, brought the idea back to Detroit after seeing the British museum’s “Grand Tour” reproductions at spots around Kathryn Dimond: London. But the DIA has developed National Gallery’s Inside/Out program didn’t “playbook” have the community programming tied to it, Dimond said. A DIA board member donated the cost to reproduce 40 paintings on vinyl canvas so the DIA could launch the program in 2010 for the museum’s 125th anniversary. Certainly, the idea is to attract people to come to the museum to see the real thing, Dimond said. “But at the same time, if they find a way to make that personal connection with the art in their community ... that’s fine, too.”

CRAIN’S

KPMG .................................................................. 7 Kresge Foundation ............................................ 1 Loft Warehouse .............................................. 23 Lucy & the Wolf ................................................ 7 LunaTech 3D...................................................... 21 Marcus & Millichap ........................................ 23 Mich. Infrastructure/Transportation Assoc. .. 6 Michigan Manufacturers Association ........ 22 PACE Southeast Michigan ............................ 10 Princeton Enterprises .................................. 23 Prism Plastics ................................................ 22 Reising Ethington .......................................... 15 Roak Brewing .................................................... 7 Rock Ventures .................................................... 1 Shinola/Detroit .................................................. 1 Techstars ............................................................ 3 University of Michigan .................................... 3 Urge Juice .......................................................... 7 VacBarrel .......................................................... 11 Village Green .................................................... 23 Warner Norcross & Judd ................................ 11 Wayne State University .................................. 9 Wesley Berry Flowers ........................................ 3 Wok Asian Bistro .............................................. 7 Young Basile Hanlon & MacFarlane .............. 15

And the Holly community asked to have a reproduction of Charles Harry Eaton’s “The Lily Pond,” done in 1886, placed in its community because the painter lived in the Holly area at some point, she said. Southfield-based LaVanway Sign Co. Inc., which makes the reproductions and does the installations, stores them in a warehouse during the off season, Dimond said. The museum reuses them every year until they are damaged or faded, or until a community says a piece isn’t appropriate for public display. That was the case with Pierre Auguste Renoir’s “Woman in Arm Chair.” While not a nude, the 1874 painting portrays a woman dressed in a low-cut gown. “Some communities, time and time again, have said, ‘This is not appropriate for our community.’ So we retired it,” Dimond said. The Knight Foundation came in with funding for Inside/Out in 2012 and 2013. It’s part of a $2.25 million grant made to the DIA to experiment with new programs that take its art out into the community.

Mackinac tour In 2012, the program’s third year, the DIA took eight to nine reproductions to Mackinac Island. The pieces were displayed around the island with maps to help visitors do a “treasure hunt” to find them, either by bike or through tours arranged by the Grand Hotel , Dimond said. Mackinac was a pilot to see how to do Inside/Out from a distance, she said. “We are … in the process of launching as part of DIA’s statewide outreach, statewide Inside/Out, installations in two out-Michigan locations each year,” Dimond said. Communities must apply and be selected for the traveling artwork program.

Program reproductions With Knight funding and assis-

tance, the DIA has developed a “playbook” to help other museums replicate Inside/Out in their own backyards. “We are helping them flatten out the learning curve,” Dimond said. The Akron Art Museum launched its Inside/Out program in April, and Philadelphia began its in May. Miami plans to launch this fall, and from there, the program will expand to Charlotte, N.C.; Macon, Ga.; San Jose, Calif.; and St. Paul, Minn. Rather than just replicating what the DIA has done, each community is making it its own, Dimond said. The Akron Art Museum, as an example, has developed an application that allows people viewing its contemporary art installations to dial a number and hear a community member’s thoughts about the piece. “I think it’s a great opportunity to share the authority with the community members,” rather than having the museum telling them what they should think about the art, Dimond said. “We might steal some ideas from (Akron),” she said. For years, art museums — Akron included — have had a specific relationship with audience and donors, said Mark Masuoka, executive director and CEO of the Akron Art Museum. “It’s been somewhat passive and not necessarily reached out to people where they’re at,” he said. Since launching the Inside/Out program in April, the Akron museum is already noticing a perceptible change in the tone of conversations with residents who no longer see it as “standoffish,” said Masuoka, who earned his master of fine arts in ceramics and sculpture at Cranbrook Academy of Art in Bloomfield Hills. “(Whether) you’re looking at it from building audiences to building support to engaging people, ... I think this helps make the art museum a lot more accessible,” he said. 䡲 Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

Jay Greene, senior reporter Covers health care, insurance, energy, utilities and the environment. (313) 446-0325 or jgreene@crain.com Chad Halcom Covers litigation and the defense industry. (313) 446-6796 or chalcom@crain.com Tom Henderson Covers banking, finance, technology and biotechnology. (313) 446-0337 or thenderson@crain.com Kirk Pinho Covers real estate, higher education, Oakland and Macomb counties. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers media, advertising and marketing, the business of sports, and transportation. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 6572204 or lvanhulle@crain.com Dustin Walsh Covers the business of law, auto suppliers, manufacturing and steel. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits, services, retail and hospitality. (313) 446-1694 or swelch@crain.com

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CRAIN’S DETROIT BUSINESS // June 22, 2015

WEEK ON THE WEB/JUNE 15-19

RUMBLINGS

Detroit Digits Payouts, poor football spur $7.9M deficit for $54.5 B UM athletics

Andiamo steers food truck at young diners

FULL VERSIONS OF THESE AND OTHER STORIES @ CRAINSDETROIT.COM

A numbers-focused look at the week’s headlines

he University of Michigan’s athletic department amassed a $7.9 million budget deficit last year, a shortfall fueled by payouts to former head football coach Brady Hoke and former Athletic Director David Brandon — and by fans giving up on a mediocre football season, Athletic Director Jim Hackett told university regents.

ON THE MOVE 䡲 The owners of Ferndalebased Detroit Metro Times picked former industry rival John Badanjek as publisher. Badanjek founded Royal Oak-based Real Detroit Weekly in 1999 and in 2014 formed a company with Metro Times owner Euclid Media LLC of Cleveland that merged the two alt-weeklies. Badanjek replaces Euclid COO Chris Keating, who becomes regional/group publisher. 䡲 J.D. Carlson was named executive vice president and CFO at Bloomfield Hills-based Penske Automotive Group Inc. Carlson, 45, replaces David Jones, who resigned to become CFO of New York Citybased Iconix Brand Group Inc. Carlson had been senior VP and corporate controller for Penske. 䡲 David Lam was named director of the University of Michigan’s Institute of Social Research, a fiveyear appointment that begins July 1. Lam, the chairman of the school’s department of economics and a professor of economics, succeeds James Jackson, who is ending his second five-year term. 䡲 Kim Brink, NASCAR senior vice president of marketing, has joined Dearborn-based Global Team Ford as COO. Team Detroit’s CEO, Satish Korde, had managed the team during the search to fill the position after COO Mark LaNeve went to Ford Motor Co. in January as vice president of U.S. marketing sales and service. Jill Gregory, who oversees NASCAR’s industry services department as a senior VP, will assume leadership of marketing. 䡲 The Toledo Mud Hens, the top farm team of the Detroit Tigers, named club President Joseph Napoli as CEO. Replacing Napoli as general manager of the Mud Hens and the Detroit Red Wings-affiliated Toledo Walleye are, respectively, Erik Ibsen and Neil Neukam, who were also named executive vice presidents.

COMPANY NEWS 䡲 After 37 years of ownership, brothers Mark and Greg Mitchell have sold Athens Coney Island in

The size of the state of Michigan budget that Gov. Rick Snyder signed last week. The budget includes spending increases for education and a temporary boost to road funding.

$150 M

The value of a contract secured by the Detroit-based advertising agency Campbell Ewald to market California’s state-run health insurance exchange. The three-year contract comes after the recent loss of a $457.4 million contract from the U.S. Navy.

The acreage of the Bloomfield Park redevelopment site on Telegraph Road in Pontiac and Bloomfield Township. Southfield-based Redico LLC and Pacific Coast Capital Partners LLC now officially own the site after the previous owners waived redemption rights.

Royal Oak to husband-and-wife team Zef and Marija Dedvukaj, who have 25 years of experience including 15 years running Nicky D’s Coney Island locations throughout metro Detroit. 䡲 Waco, Texas-based Dwyer Group Inc. acquired Ann Arborbased Service Brands International and its Molly Maid, Mr. Handyman and ProTect Painters franchises. Terms were not released; an office will remain in Ann Arbor. 䡲 A $584,000 donation by the Farmington Hills-based Delta Dental Foundation for a dental bus is expected to help students and faculty at the University of Detroit Mercy School of Dentistry provide children in Wayne County with access to preventive and other dental care. 䡲 Detroit-based AmeriSource Industrial Supply Co. said it’s poised to increase revenue 600 percent, from a projected $25 million this year to $125 million by 2020, by acquiring companies in the Midwest, company President Lou Ray said. 䡲 Detroit-based Are You A Human LLC, which distinguishes whether Web visitors are actual human beings or bots, said it has closed on a Series A funding round of $4.2 million. It previously raised a seed round of $750,000. 䡲 St. Clair Shores-based Prestige Automotive Group LLC broke ground on an $8 million dealership in Warren across from the General Motors Technical Center. The move is a mile north from the dealership’s current site. 䡲 The federal government is suing a subsidiary of BAE Systems Inc. in a Detroit court, claiming the defense contractor overcharged more than $40 million on

a truck production contract awarded in 2008 through the U.S. Army Tacom Life Cycle Management Command in Warren. 䡲 Troy-based United Shore Financial Services LLC will make a $500,000, five-year gift to Michigan State University’s Eli Broad College

of Business to fund a faculty fellow position in sales research and education. 䡲 Year-to-date revenue for the three Detroit casinos is up 5.6 percent through May compared with the same period of 2014, according to figures released by the Michigan Gaming Control Board. 䡲 The Lansing-based Great Lakes Capital Fund received $55 million in federal tax credits to help it invest in Michigan and other Great Lakes states. The fund has not decided what developments will be funded. 䡲 Ohio-based Cardinal Health Inc. sold $1.5 billion of bonds to back its purchases of Livoniabased Harvard Drug Group and Johnson & Johnson’s Cordis medical-device making business, Bloomberg reported.

OTHER NEWS 䡲 Wayne County Executive Warren Evans has asked the Michigan Department of Treasury to determine if a financial emergency exists in the county, which is grappling with a $52 million structural budget deficit. That could lead to a consent agreement with the state. 䡲 Construction began on the $16 million Science and Engineering Center at the University of Detroit Jesuit High School and Academy. The privately funded

center is set for completion in August 2016, AP reported. 䡲 A preserved part of the old Willow Run Bomber Plant, where Rosie the Riveter built World War II bombers, has been rededicated, AP reported. The locale will become home of the Yankee Air Museum. 䡲 The University of Michigan’s preliminary consumer sentiment index for June rose to 94.6, topping all estimates in a Bloomberg survey of economists, from a reading of 90.7 last month. 䡲 Michigan lawmakers voted to end an incentive program used to entice movie, TV and video game productions to the state over the past seven years, saving money that proponents said would be better spent improving crumbling roads, AP reported.

OBITUARIES 䡲 Alan Almond, longtime host of the popular WNIC-FM nighttime show “Pillow Talk,” was found dead June 16 after an apparent heart attack, AP reported. He was 67. 䡲 Kirk Kerkorian, the billionaire casino mogul who twice attempted takeovers of Chrysler and in 2006 tried to fashion a global alliance between General Motors and Renault-Nissan, died June 15. He was 98.

Warriors top Cavs, but Gilbert still wins Just minutes after the Golden State Warriors closed out Game 6 of

ANDIAMO

Andiamo’s 18-foot food truckis equipped

with a pasta cooker,fryer,flat top,chargrill, oven and coffee maker.Customers order from the windowand the truckfeatures a large pop-up baron the rearofthe truckoffering a spot to dine and overflowservice.

ith a goal of reaching younger diners, Warrenbased Andiamo Restaurant Group has invested $100,000 in an 18-foot-long purple truck and is taking it on the road. The food truck, adorned with a large spaghetti noodle coil on a fork, was scheduled to make its downtown Detroit debut last week. Plans for the food truck began a year ago as a proposal by the advertising department at Joe Vicari Restaurant Group, which owns Andiamo as well as Joe Muer Seafood in Detroit and Brownie’s on the Lake in St. Clair Shores, among others. Dominic Vicari, 30, director of operations for Andiamo, said that at first he was skeptical about the idea but was convinced after research indicated that the popularity of food trucks has risen in the Midwest. The idea also resonates with the restaurant group’s target audience for the truck: people in their late 20s or early 30s. Andiamo, which has nine restaurants in metro Detroit, also will offer speed and a price point attractive to millennials. “Our goal is to gain relevancy with the younger crowd,” Vicari said. The truck recently debuted at the Detroit Belle Isle Grand Prix and Harley Fest at Freedom Hill in Sterling Heights. A chalkboard menu offers 15 items ranging from $5 to $12, such as a meatball sub, mozzarella bottone (crispy fried mozzarella cubes in a tomato-bacon-olive sauce), eggplant rollatini, panini and salads. “We want to basically get your food in two minutes,” Vicari said. Traditional Andiamo items such as calamari, sausage and peppers, and pasta with meatballs also are offered. The menu will rotate. The truck also features a 6-footby-6-foot balcony/dining area on the back that seats 20, and it’s available for private events, with packages ranging from $10 to $20 a person. For details, and to locate the truck, visit andiamoitalia.com

the NBA Finals on Tuesday to beat the Cleveland Cavaliers, Detroitbased vinyl wall graphics maker Fathead LLC blasted an email touting “Just In! 2015 NBA Champions Wall Decals! 30% Off Everything!” The email link takes you to a 3foot-by-3-foot shield-shaped wall sticker that includes the Warriors logo and the words “NBA CHAMPS.” The $89.99 price includes four smaller stickers. The irony here is the Fathead is owned by Dan Gilbert, who bought the Cavaliers as head of an investment group for $375 million in 2005. So even the Cavs losing the finals was a (probably modest) financial gain for Gilbert. Gilbert’s Rock Ventures LLC bought the then-financially struggling Fathead from its founders in 2006 for an undisclosed sum. Rock Ventures is the umbrella entity that oversees Gilbert’s portfolio, which also includes Quicken Loans Inc. and the Cavs.

COURTESY/HENRY FORD & JOHN MARGOLIES

Roadside attractions topic of new exhibit An exhibit that looks at the vanishing landscape of roadside attractions along U.S. highways is now open at Henry Ford Museum in Dearborn. “Roadside America: Through the Lens of John Margolies” started Saturday and runs through Jan. 24 at the museum. For several decades, Margolies photographed the unusual and the everyday of roadside attractions, including movie theaters, gas stations, diners and motels. The museum said his photos are considered to be a comprehensive study of American roadside architecture. The exhibit includes slides and items recently acquired by The Henry Ford from Margolies’ collection of photos, diaries, pennants, postcards and luggage labels. Details and ticket information are at TheHenryFord.com. Henry Ford Museum is part of The Henry Ford, a history attraction that includes Greenfield Village. 䡲

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When you look in the mirror,

what do you see? What turns a dream into reality? A house into a home? A street corner into a neighborhood?

In a word, it’s commitment – the belief that you can make a difference. That’s what is happening right now, here in Detroit. There’s a reinvigorated sense of possibility in our city. Positive change is happening. All because our artists and our business leaders and our public workers and our teachers and our students and our tradespeople believe in the possible. Here at the GM Renaissance Center, we’re embracing our community’s positive spirit. We’re committed to the regeneration of Detroit, and we’re taking an active role. This week, we’re introducing a new brand for the Center, not because of what we’ve done in the past but because of what we’re committed to doing in the future. 2XU JRDO Ŋ WR VKRZ WKDW WKH WUXH UHŴHFWLRQ RI WKH New Detroit is the people of Detroit. We hope you’ll come see yourself here soon.