Crain's Detroit Business, Nov. 9, 2015 issue by Crain's Detroit Business

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CRAIN’S Readers first for 30 Years

DETROIT BUSINESS

Crain’s Michigan Business

West Michigan struggles to recruit IT workers, PAGE 9

NOVEMBER 9-15, 2015

Dice roll on sports betting

GAINING ALTITUDE

State floats rules changes; will they score in courts, Congress? By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

turmoil and fallout from the recession, when jets became a symbol of corporate greed, but is now gaining altitude while adjusting to the new normal. The value of new corporate jets to U.S. businesses and operators, an indicator of industry health, peaked in 2008 at $14.5 billion before plummeting to $7.1 billion in 2009, according to aviation analysis firm Teal Group Corp . But the industry is hitting the runway again,

LANSING — Will changes to Michigan sports betting rules be tied to a new round of state regulations, forthcoming case law decisions or a federal overhaul of the industry? So far, the answer to that question is a political roll of the dice. Partly to keep up with changing technology, Michigan lawmakers are floating bills that would update gaming laws — some of which are decades old — and give casinos, horse tracks and millions of fantasy sports players in Michigan more control over sports gambling. Yet some of the changes lawmakers and the gaming industry want to see — allowing Michigan casinos to operate sports books and codifying legal status for fantasy sports players, among them — are either forbidden in Michigan under federal law or operating in a gray area without consistent state regulations. That means, barring any court ruling or vote by Congress to update federal gaming laws, the bills

SEE AVIATION, PAGE 21

SEE BETTING, PAGE 24

OAKLAND COUNTY

Oakland County International Airport has seen tentative growth in corporate jet traffic after the industry fell to Earth in the Great Recession.

Corporate aviation taking off again; advantages rise above past scorn By Dustin Walsh dwalsh@crain.com

The $40 million Magnolia by the Lakes senior living center nestled between Cass and Sylvan lakes in Keego Harbor is preparing to open next spring, but its management is looking to the skies. With plans to open six more “luxury European style” senior centers across the U.S., President and CEO Farideh Bagne is weighing financial options for owning a corporate jet.

“In order to utilize our staff in a costeffective manner, we really need to make sure their time is not spent at the airport in lines and waiting on planes,” Bagne said. “Commercial planes are often late, and delays cost us a great deal of money.” Bagne and her company are looking to enter corporate aviation only a few years after many local companies abandoned the practice. Southeast Michigan’s industry has faced seven years of

VisionIT has its head in ‘cloud’ on health care New lab’s first project to improve medical communications By Tom Henderson thenderson@crain.com

Vision Information Technologies Inc.

is cooking up a new tech laboratory, and its first project is intended to help doctors, nurses and others in health care solve a knotty problem — communication.

Microsoft Inc. , Henry Ford Health System and Detroit-based Vision In-

formation are collaborating on a cloud-based system called StatChat to let health care professionals track patient care remotely — whether they’re on a desktop computer, iPad or smartphone.

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It will be the first product developed by the new VisionIT Innovation Center that Vision Information plans for its New Center headquarters. Vision Information has hired Detroit-based firm dPop! to design the center. Though the build-out hasn’t started, David Segura, Vision Information’s founder and CEO, said he has hired 25 employees already working on projects, and he will hire 125 more over the next year. The innovation center will work on a wide variety of projects. Some will be owned by Segura’s company, some will be joint ventures with other large tech companies, and some will be stand-alone businesses for which he will seek venture capital funding.

LARRY PEPLIN

Vision Information Technologies CEO David Segura (left) and Henry Ford Health ’s Ward Detwiler are working on a new health care communications system.

VisionIT was one of the first institutional investors in Michigan eLab, an Ann Arbor-based VC firm founded in 2012 by four Silicon Valley veterans. Segura said eLab would be a

natural fit if he needs capital to grow a business, including StatChat if it has the kind of growth he anticipates. SEE TECH , PAGE 23

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MICHIGAN

BRIEFS Consumers Mutual to close after opt-out with state East Lansing-based Consumers Mutual Insurance of Michigan , a 2year-old health insurance cooperative, will close after choosing to opt out of the state’s health exchange for 2016, the Michigan Department of In surance and Financial Services said. The agency said Consumers Mutual will enter into a runoff and wind down operations. Individual policies end Dec. 31. Consumers Mutual was formed as a nonprofit co-op with help from a $72 million federal loan that must be repaid by 2033, and the co-op received its insurance license in 2013. Fifteen Michigan county health plans pooled money to pay for the loan application; plans for how the loan would be repaid were not immediately disclosed. Lindsay VanHulle

EPA: Lead in Flint water could continue as hazard Flint residents should be warned of the potential risk of increased

lead in drinking water when crews do underground work that could dislodge scale and sediment in water pipes, the U.S. Environmental Protection Agency told the city and state, MLive.com reported. A final report from the EPA regarding high lead levels in drinking water at homes in Flint warns not only of lead leaching directly into water from lead service lines leading to individual homes, but for lead to have spread to pipes made of other materials, such as galvanized pipe or interior plumbing. The city was reconnected to Detroit’s water system last month after researchers found increasing lead levels in Flint water and in the blood of infants and children in the city.

MICH-CELLANEOUS A spokesman for Grand Rapids-based The Right Place Inc . confirmed rumors that the economic development agency is working with a possible new tenant for the giant pyramid-shaped “corporate development center” that office furniture company Steelcase

moved out of five years ago, MLive.com reported. The sevenstory building, built for $111 million in the late 1980s, has been empty since 2010 and constitutes one of the largest “white elephants” on West Michigan’s commercial and industrial real estate market. A Swedish maker of spaceplanning software has partnered with Zeeland-based furniture maker Herman Miller to create more realistic digital experiences for customers, the Grand Rapids Business Journal reported. Linköping, Sweden-based Configura , which operates an office in Grand Rapids, said it will provide Herman Miller with a simplified planning tool that will allow customers to visualize products in spatial settings. Grand Rapids-based private equity firm Blackford Capital announced the appointment of Jeffrey Johnson as managing director, MiBiz reported. Johnson had been managing director for New Yorkbased private equity fund Gilbert Global Equity Partners LP , where he closed several platform investments worth up to $150 million. Holland will get a Smart Zone technology park after the project gained approval from the Michigan Economic Development Corp. , MLive.com reported. The economic development zone, approved as a satellite of the Grand Rapids Smart Zone, allows startup businesses to tap into preseed microloan and

other business accelerator funds. Kettering University in Flint is best among Michigan colleges in alumni earnings, according to the first ranking of colleges by The Economist. The London-based newspaper used several factors, including earnings above school reputation. Kettering ranked 59th nationwide out of 1,275 four-year, non-vocational colleges. The state’s biggest schools didn’t fare so well: Michigan State University ranked No. 288 and the University of Michigan placed 574th. Consumers Energy Co. is hiring more line workers to respond to emergencies, enhance reliability and restore electric service following storms, The Associated Press reported. The unit of Jackson-based CMS Energy Corp . said last week it plans to hire more than 50 journeyman line workers in 2016 and up to 50 apprentice line workers annually for the next several years. Renters in the Leelanau County village of Northport could someday have an easier time finding space than under the current housing crunch. The Woda Group Inc., an Ohio-based housing developer, is eyeing the long-empty site of the former Leelanau Memorial Health Center as a possible subsidized housing development, the Traverse City Record-Eagle reported. A Meijer store opened last week in Grand Traverse County, drawing thousands of customers to the

INSIDE THIS ISSUE BANKRUPTCIES . . . . . . . . . . . . . . . . . . 5 CALENDAR . . . . . . . . . . . . . . . . . . . . . . 20 CLASSIFIED ADS . . . . . . . . . . . . . . . . 21 DEALS & DETAILS . . . . . . . . . . . . . . . 18 MARY KRAMER . . . . . . . . . . . . . . . . . . . 9 OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 PEOPLE . . . . . . . . . . . . . . . . . . . . . . . . . 20 RUMBLINGS . . . . . . . . . . . . . . . . . . . . 26 STAGE TWO STRATEGIES . . . . . . . . 17 WEEK ON THE WEB . . . . . . . . . . . . . . 26

COMPANY INDEX: SEE PAGE 25 Acme Township site despite a 15year battle that included fierce opposition to the project over environmental concerns, an illegally funded recall campaign by corporate leaders and state investigations, MLive.com reported. Meijer first proposed a second Traverse City-area store nearly 15 years ago to join its busy first location. A high-tech buoy credited with supplying critical information about waves and weather on Lake Michigan to researchers, the U.S. Coast Guard and others for four summers might not return to the West Michigan coast next year unless money is found, MLive.com reported. LimnoTech , an Ann Arbor company that owns the buoy off Port Sheldon Township, said a federal grant is running out and no one has stepped forward.

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U.S. Mattress rouses in-store sales strategy By Sherri Welch swelch@crain.com

U.S. Mattress World is looking to bricks to keep up king-sized growth for its mattress sales. The Brighton-based company hit $50 million in revenue last year, almost entirely from the online sale of mattresses. Now, it is adding new brick-and-mortar stores to capture customers who want to test their beds before they buy. The company’s plan calls for up to 20 stores in the region over the next several years — up from the two it has operated for a decade or more in Plymouth and Commerce Township. An outlet warehouse in Livonia is set to open Nov. 16, the fourth location it’s opened over the past year. Between those locations and three more stores planned for the coming year, the company is making a $1 million investment to build out the leased locations, said President and CEO Joe Nashif, who founded the company in 2001. The local expansion will lay the groundwork to begin establishing a

physical presence in states across the country, Nashif said. A decade ago, the company was still in its infancy and not in a position to open more physical locations, he said. “Fast forward to where we are now. As a business we are much stronger and more developed and have more resources,” Nashif said. U.S. Mattress had $50 million in revenue last year, up about 5 percent from the year before. About 95 percent of its sales came through its website at www.us-mattress.com, Nashif said. He projects the company’s revenue will increase 5 to 10 percent in the coming year as the new stores open. “We have built a fairly sizable business online with strong brand, service and product offering,” he said. “We’re looking to expand that in the retail setting.” The mattress business has gotten a firm bounce from the economic recovery. The wholesale value of mattresses sold in the U.S. last year grew 8.7 perSEE MATTRESS, PAGE 22

PHOTO COURTESY U.S. MATTRESS

At U.S.Mattress’ Bloomfield Hills location, the big numbers on the wall mirror a firmness rating that the company has successfully used in its online business.

MUST READS OF THE WEEK Second Stage: How to pick a tech vendor Making IT decisions might not be the most gripping of tasks for business owners, but they concern companies’ core operations. Read how three companies made theirs, Page 13

LISA SAWYER SOURCE: CORPORATION FOR SKILLED WORKFORCE

100,000-job goal highlights big labor gap By Dustin Walsh dwalsh@crain.com

Drone startup gains altitude SkySpecs closes funding round worth $3 million, adds customers for a system that uses drones for inspections, Page 4

Detroit faces a labor problem of epic proportions. The revived Detroit Workforce Development Board, which convened for the first time late last month to tackle the goal of creating 100,000 jobs in the city, is working toward streamlining programs to create a systematic, unified approach to employing Detroit residents — who are largely underemployed and undereducated. But the problem is complex and massive in scope in a city where jobs don’t match the population. Just over half of Detroit residents work, and a majority of those working have no more than a high school diploma.

The harsh reality that faces the board: The city needs to put 49,000 of its residents to work just to match the state average of labor force participation. Despite dozens of labor training programs, new business investments and fixes to the city’s broken education system, the jobs aren’t coming fast enough. “This is the biggest problem Detroit faces and (is) why it hasn’t been revitalized beyond downtown and Midtown,” said Marick Masters, director of Wayne State University’s labor studies program, Labor@Wayne. “All the other problems devolve from this: the inability to have good schools, to have adequate lighting, the lack of infrastructure, housing, etc.” SEE JOBS, PAGE 22

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SkySpecs closes $3M funding round, lands first customers

TOM HENDERSON

SkySpecs Inc. expects to land $1 million in revenue next year.The flight crew (from left): President and CEO Danny Ellis; Jim Adox, managing director of Venture Investors; and Tom Brady, chief technology officer. By Tom Henderson thenderson@crain.com

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SkySpecs Inc. , an Ann Arborbased company that provides drones for the inspection of wind turbines, bridges and other infrastructure projects, has closed on an investment round of $3 million. The company has received approval from the Federal Aviation Ad ministration to fly its drones, has landed its first two customers and hopes to hit at least $1 million in revenue next year. The investment round was led by Jim Adox, managing director of the Ann Arbor office of Madison, Wis.based Venture Investors LLC , and joined by Ann Arbor-based Huron River Partners , Detroit-based Invest Michigan and some angel investors. The investment, which will be used to ramp up business development and marketing — the company employs eight and will soon add another eight or so, according to President and CEO Danny Ellis — comes one year after SkySpecs won $500,000 as the grand prize winner of the fifth annual Accelerate Michigan Innovation event at Orchestra Hall in Detroit. The sixth annual event was held last Thursday, with a seventh event in doubt. Accelerate Michigan was launched by the New Economy Initiative for Southeast Michigan, a foundation-led economic development effort. David Egner, who was instrumental in creating Accelerate Michigan in 2010, recently announced he is stepping down as president of the NEI to become president and CEO of the Ralph C. Wilson Jr. Foundation. Egner recently told Crain’s that the steering committee at NEI has been discussing the possibility of raising a third fund to continue its economic development activities, but nothing has been decided. SEE NEXT PAGE

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“This is a real example of a company that wouldn’t be here without state help,” Adox said about SkySpecs. “All these guys could have got jobs at drone companies in California. They could have gone anywhere, but they built a company here. “It was the $500,000 they won last year that allowed them to get to the point where they are now, where they are able to raise a bigger funding round; they have their first customers and are going to start generating revenue,” said Adox. “It proves the concept behind Accelerate Michigan.” Adox said he had been following SkySpecs since it was launched in 2012 by three engineering students at the University of Michigan. It is not a licensee of the school. The company finished third in the student category and won $10,000 at the Accelerate Michigan event in 2012 and was a semifinalist in 2013 before winning last year. Last year was crucial in another way — SkySpecs was accepted into a Techstars incubation program in New York, which raised the company’s profile and led to informal offers to move the company out of Michigan. “We shot those down pretty quickly,” said Ellis. “We let everyone know we were a Michigan company and were adamant about coming back.” In 2013, SkySpecs won $50,000 for finishing first in the Michigan Clean Energy Venture Challenge, put on by UM and Detroit-based DTE Energy Co. In all, it won $100,000 at various business plan competitions Also in 2013, the company raised a seed round of $595,000, led by the Detroit-based First Step Fund. In 2014, it won a small-business innovation research grant of $150,000 from the National Science Foundation , and Ellis was named a member of the 2014 class of Crain’s 20 in their 20s. Adox said a trip to the Consumers Energy Co. wind farm in Bay City early this fall clinched his decision to lead this round of funding. “There were a record number of drone-company investments in the last year, but based on our due diligence, most of them had nice websites and great animation, but few of them had actually flying prototypes,” he said. “Watching their drones fly was a milestone for me. I could see how

SkySpecs was the only drone company there and caught the eye of Dave Peachey, UpWind’s vice president of engineering. In January 2014, UpWind and SkySpecs formalized a relationship to test and eventually commercialize the drone technology. Last year, Peachey told Crain’s that the plan was, once the FAA gave approval, to use the drones to replace the current inspection process. Those inspections require ground-based cameras and visual inspection by two-person teams, which involves long set-up and take-down times and using ropes to rappel down the surface of turbine blades. “Now, it takes two or three people a day to inspect one turbine,” Adox

“This is a real example of a company that wouldn’t be here without state help. All these guys ... could have gone anywhere, but they built a company here.” Jim Adox,Venture Investors

easy it was for them to fly and inspect turbines in real time. They didn’t crash; they were easy to control; the customer liked it. The proof was in the pudding,” said Adox. SkySpecs’ first customer was Up Wind Solutions Inc. , a San Diegobased company that manages and maintains large wind turbine farms around the country and plans to use SkySpecs for its inspections.

If SkySpecs’ funding round can be considered proof of the success of Accelerate Michigan, its relationship with UpWind can be considered proof of the success of a Pure Michigan marketing effort. In 2013, SkySpecs was invited to show its wares at a booth Pure Michigan rented at the American Wind Energy Association ’s annual trade fair in Chicago. Ellis said

said. “They’ll be able to inspect six to eight a day with one person and a drone.” Ellis said SkySpecs will own its drones and charge on a per-project basis. Originally, SkySpecs planned to manufacture drones. But its business model has evolved to buying off-the-shelf drones, then modifying them with hardware such as lasers and cameras and using its proprietary software to do inspections. Ellis said the second paying customer for SkySpecs is an Australian firm he isn’t at liberty to name. He said that contract will begin generating revenue in the first quarter next year. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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BANKRUPTCIES The following businesses filed for protection in U.S. Bankruptcy Court in Detroit Oct. 30-Nov. 5 . Under Chapter 11, a company files for reorganization. Chapter 7 involves total liquidation. 䡲 Ron Starzyk Delivery Service Inc. , 44187 Orion Drive, Sterling Heights, voluntary Chapter 11. Assets and liabilities not available. 䡲 The Village Apothecary Inc., 1112 S. University Ave., Ann Arbor, voluntary Chapter 7. Assets: $36,529.40; liabilities: $685,049.97. Natalie Broda

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CRAIN’S DETROIT BUSINESS

OPINION Road funding’s not perfect, but it’s done T

he road funding plan passed by the Legislature last week is a stew of provisions born of horse-trading, and it looks like it. But it also reflects that the Legislature — or at least its Republican majority — took seriously the message sent by voters in the overwhelming defeat of an overly complicated road funding referendum in May: Do your job and figure this out. The plan increases gas and diesel taxes starting in 2017, along with vehicle registration fees, and starts funneling general fund money toward roads in 2019. To help balance off those costs for lower-income residents, more homeowners and renters will be eligible for a In the end, homestead tax credit, and the maximum amount of that credit is being the plan sends money increased. And unrelated to roads, the legistoward roads lation also includes an income tax that wasn’t rollback provision tied to inflation. The plan is expected to eventualthere before. ly raise $1.2 billion a year, but half of that would come from the general fund. That’s a bet on a lot of things, including a mostly healthy economy, a rainy day fund for when it isn’t and that unpalatable program cuts won’t need to be made to pay for it. The risks involved are why major business groups — including Business Leaders for Michigan and the Detroit Regional Chamber — preferred a plan with $400 million from the general fund and $800 million in new funding. The idea was to make sure state funding was available for other critical needs such as lowering the cost of college, job training and economic development. The plan that ultimately passed isn’t perfect. But it also seems clear that neither the Legislature nor the electorate had the appetite for raising an entirely new $1.2 billion annually. In the end, the plan sends money toward roads that wasn’t there before, and the Legislature is now free to move on to other pressing issues.

Detroit needs more big donors The $40 million donation by Mike and Marian Ilitch to build and endow the Mike Ilitch School of Business at Wayne State University is an example of something Detroit could use more of: Projects named for their donors, especially living ones. This isn’t hard to find in some other places — Grand Rapids comes to mind — but it’s surprisingly rare in the city itself. The new business school will be built on land donated by the Ilitches in the evolving District Detroit area being shepherded by son Chris. The Ilitches previously had endowed a chair in the medical school with $8.5 million, but this gift is a visible philanthropic contribution to the city and to the area where they have developed their businesses over the past 25 years. Who’s next?

LETTERS

Keep the politics out of proton therapy Editor: The Nov. 2 Page 1 article, “McLaren proton center stalled: Problems with former JV partner cited,” asserts that controversy surrounds proton therapy. But whether insurance companies will authorize payment for proton therapy is directly related to profit and politics, not the effectiveness of the treatment. In those instances where proton therapy is the best course of treatment, scientists clearly know that the precision of proton therapy greatly minimizes damage to surrounding tissue while it more effectively focuses on destroying tumors. Beaumont Health System first introduced bringing proton therapy to Michigan in 2008. Beaumont’s Proton Therapy Center will employ the most advanced proton therapy available — intensity modulated proton therapy. This treatment utilizes an image guidance system as it essentially paints the radiation dose in layers onto the tumor. This treatment has been especially successful in pediatric cancer, lung cancer and head and neck cancer. My lifelong friend, Jon Steinberg, was one of the first individuals treated with proton therapy in 1983. In simple terms, it saved Jon’s life. As

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a result, I became interested in proton therapy and followed the evolution of this very important treatment. In honor of Jon, I have advocated for Beaumont in its effort

to procure it. Don’t be fooled by those who believe that political fortunes and profit should trump effective cutting-edge medical treatment. Residents should count their blessings that proton therapy will soon be available in our area. This life-saving treatment will stand the test of time. Meanwhile, the political nonsense that has stood in the way needs to be identified and disregarded. Ray Dubin Farmington Hills

MCLAREN HEALTH CARE

McLaren Health Care’s planned opening of a proton beam cancer treatment center in Flint is expected to be delayed at least until spring.

TALK ON THE WEB Re: Ilitches add $95 million of features to new Red Wings arena Very excited to see this come to fruition and provide one more crown jewel for the city, taking out a few blocks worth of eyesores in the process. We will truly be the class of the sports world once this is complete.

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

NoSpinJustFacts

tire Great Lakes chain of lakes. This is not rocket science. VehicleLibrarian

lost millions of people over the years. It’s gonna take a lot of investments like this by Ilitch (the arena district will cover 45 blocks) and Gilbert, who’s investing in the business district and Brush Park development.

The EPA has lots of time, money and energy for other things, including shutting down power plants and harassing industry. This threat to the Great Lakes has been systemati cally ignored , and proposals to stop the invasive species denied. Why has the Obama administration turned its back on the Great Lakes and refused to act? Links to Chicago shipping interests?

James

Announcer

MDA

You can’t fix a city this big overnight , especially when you’ve

So even when Ilitch spends his own money to make this the best arena in the world, people find a way to complain about it. DCFC

Re: Sounding off on medical marijuana dispensaries If this passes in a city already beset with massive substance abuse, it will eventually be seen as a factor in the demise of a once-great city.

Re: Detroit Lions fire execs Lewand, Mayhew Sell the Lions already. Enough with

Bill Martin

the Ford family ownership. TKLiar

Re: Congress members want faster action on Asian carp Block the channels with sand until they can figure out another way to keep the dangerous fish from getting into Lake Michigan and the en-

building trades. Value creation comes from creating a culture of tapping an individual’s passion to deliver his best in the service of others, not who pays the most.

Re: Group starts petition drive to repeal prevailing-wage law Gov. Snyder does not accept the fact there is a shortage of skilled trades when for 50 years prevailingwage law has existed. This is not a wage issue, this is a matter of attracting people with a passion for

Re: Legislature passes roads plan, sends to governor I don’t like the idea of taking such a huge chunk — $600 million — from the general fund, knowing it supports so many essential services, but half that amount might be doable. And 2020, when this isn’t even 2016 yet and the roads are in such dire condition? What is that about? But we’re out of time to argue. This is the best we’re going to get from the Michigan Legislature, so we have to go with it. The roads needed fixing yesterday. Citymec

All this stupidity over $54 per year? Are you kidding me? Last week I saw the price of gas jump 40 cents a gallon. It bounces day to day. Nobody is going to notice a gas tax hike. Just get a real fix in place! Rock & Roll 35

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Three decades apart, Detroit mayors face similar challenges By Dustin Walsh dwalsh@crain.com

In November 1985, Coleman Young celebrated his re-election as mayor of Detroit to an unprecedented fourth term. He would win a fifth term in 1989. Young, the first black mayor of Detroit, won in landslides during a divisive time in the city’s history. Race and economic inequality were large issues then, as they are today. He won over the business community by supporting large-scale projects intended to revitalize a city whose residents continued to migrate out of its limits, leaving behind a largely black, increasingly impoverished population. But Young rallied voters on the promise that Detroit was on a roll and recovery was only around the next bend. It wasn’t. Detroit lost a few hundred thousand residents during Young’s 20-year reign as mayor, dropping below 1 million in the mid-1990s. The current mayor, Mike Duggan, leads the city with many of the same widespread issues. There are parallels between Young and Duggan; the latter is also calling for more private investment, hoping to boost population, create jobs and end 40 years of economic decay. In an editorial titled “New term: Time to end bitterness,” published on Nov. 11, 1985, then-Crain’s Detroit Business Publisher Peter Brown wrote: “Sometime during the mayor’s unprecedented fourth term, Detroit may drop out of the club of cities over 1 million in population. … Dropping below a million will be a psychological blow, like losing a major-league sports team … the drop will be seen as one more blow against a once-great city.” Detroit took that blow to the chin, but the Great Recession took the city to its knees, with the fallout of its largest industry, its own bankruptcy filing and its population falling to fewer than 700,000 residents in 2013. For Duggan, growing the population is his number one goal. “I’ve said it over and over again; by the end of my first term, the population should be rising,” Duggan said. “We see it as the ultimate goal and the unifying for our administrative strategy.” Duggan said Detroit’s more positive image and his administration’s emphasis on blight removal, service improvements and business attraction are moving the needle. “There’s no such thing as a big strategy. There’s a whole series of steps to make Detroit attractive to live,” Duggan said. “It means the grass is cut, the ambulances show up, the abandoned homes are taken down, and other homes are selling. People have been moving into downtown and Midtown for a few years now, but the critical thing is to stop them from moving out of the neighborhoods, and we’re confident we’re doing that.” Duggan may have an easier go as mayor than Young with a city cleansed of billions in debt thanks

“I suppose I’d like to be remembered as the mayor who served in a period of ongoing crisis and took some important steps to keep the city together, but left office with his work incomplete.” Coleman A.Young,formerDetroit mayor

to the “Grand Bargain,” increased buy-in from businesses in the city and suburbs, and crime rates following the national trend. In 2014,

Detroit reported the fewest number of homicides in 40 years and is no longer ranked by the FBI as the country’s most dangerous city.

Stabilizing Detroit’s neighborhoods, along with reversing population decline, will dictate Duggan’s legacy and finish what Young believed he started. Young said, as documented in Bill McGraw’s 1991 book The Quotations of Mayor Coleman A. Young: “I suppose I’d like to be remembered as the mayor who served in a period of ongoing crisis and took some important steps to keep the city together, but left office with his work incomplete.” 䡲 Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

LOOKING BACK: On Nov. 11, 1985, Crain’s predicted in an editorial that Detroit’s population dip below 1 million would be seen “as one more blow against a once-great city” then under the leadership of Mayor Coleman Young. Thirty years later, Detroit’s new leader deals with many of the same issues. More at crainsdetroit.com/30

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Under pressure, Lions hunt for new president, GM By Bill Shea bshea@crain.com

The Detroit Lions aren’t discussing how they’ll permanently replace the front office executives fired last week, but football insiders say the hires will be crucial to the team reversing nearly 60 years of losing and repairing a battered brand. Team owner Martha Ford has not said if she will use internal advisers or hire a search firm to find replacements for President Tom Lewand and General Manager Martin Mayhew, whom she fired Thursday after a 1-7 start to the season.

Hiring a corporate headhunting company is increasingly common for pro teams and colleges to find top executives and coaches. For example, the University of Michigan used Los Angeles-based executive search firm Korn/Ferry In ternational to hire its last two head football coaches and an athletic director. Whatever method the Lions use, the pressure from fans and media to hire the right people is palpable. “You’ve got to have the elite onfield performance match what you do off the field,” said Joe Bailey,

managing director of the sports practice at Greenwich, Conn.-based RSR Partners Inc.

Bailey, a former Miami Dolphins CEO and vice president of administration of the Dallas Cowboys , said the position of team president is “vital” for a National Football League club. “These kinds of searches are so important. You want to be as good off the field as on the field because they’re all interconnected,” he said. Lewand’s business and financial roles are filled in the interim by Allison Maki, the team’s CFO since

April who joined the Lions in 2004. She’s acting COO rather than CEO or president, and Ford did not specify a title for whoever permaAllison Maki: nently takes the Filling Lewand’s biz, top business pofinancial roles. sition in the organization. Mayhew, who was responsible for all football personnel decisions, is replaced for now by Sheldon

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White, the team’s vice president of pro personnel since 2009 and an employee for 19 years. Sports industry watchers say the Lions probably will use a search firm because of the team’s long history of internally deciding to promote or hire unqualified or mediocre executives and then waiting too long to fire them — the poor formula that’s led to just a single playoff win since Detroit’s 1957 NFL championship victory. “Normally, in the NFL or in major sports, if a coaching or GM position comes up, you sort of know who the likely candidates are. You could do this internally,” said Michael Cramer, former Texas Rangers team president and now director of the Texas Program in Sports and Media at the University of Texas. “However, the Lions obviously have not been able to pull the trigger and find and hire the right person. They clearly have had the coaches, GM, presidents out there in the past, and somehow they don’t do a good job of picking the right person for the job.” Bailey said it’s important that any search firm hired by the Lions know the intricacies of NFL hiring processes. “Anybody that’s going to be a professional services provider to the Ford family, really they should be domain experts in the way the NFL works,” he said. “Part of the role is to advise them on what you can and cannot do.” For example, the Lions must interview minority candidates for the general manager position under the league’s “Rooney Rule,” established in 2003. Detroit was fined $200,000 by the NFL for failing to follow the rule when it hired Steve Mariucci to replace Marty Mornhinweg as head coach. While the rule doesn’t apply to the team presidency or CEO jobs, the NFL recommends teams still follow it. Ford said in a Thursday press conference that the Lions would conduct a national search, but didn’t disclose details or take questions. The team’s media relations staff declined to answer additional questions. The league has resources available to help the Lions find candidates, said Brian McCarthy, the NFL’s vice president of communications. The Career Advisory Panel, made up of some of the most recognizable names in NFL history — John Madden and Tony Dungy are part of the group — meets throughout the season to identify potential head coaches and general managers. The panel added identifying potential team presidents to its duties this season, McCarthy said. Teams can request the lists, along with video interviews done during the annual scouting combine, he said. Coincidentally, the panel met last week. 䡲 Bill Shea: (313) 446-1626 Twitter: @Bill_Shea19

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SPECIAL REPORT: MICHIGAN MARY KRAMER Publisher mkramer@crain.com

More firms need to be ‘20 percenters’ urray for Hush Puppies! Three of 11 directors at Wolverine World Wide Inc. are women, which puts the Rockford-based shoemaker comfortably in the “20 percent club” in a research report released last week on the status of women in Michigan’s publicly traded companies. Wolverine joins other West Michigan companies on that list, including office furniture makers Herman Miller Inc. (36 percent) and Steelcase Inc. (27 percent); grocery food distributor SpartanNash (27 percent); medical equipment maker Stryker Corp. (22 percent); and Communi ty Shores Bank Corp. in Muskegon (33 percent). Other standouts: Jackson-based CMS Energy Corp. (25 percent) and global staffing company Kelly Services Inc. in Troy (27 percent). In all, I counted 18 companies on the list of 100 statewide who could boast at least 20 percent female board membership. But the Michigan Women’s Leadership Report — produced by the Inforum Center for Leadership, the education and research arm of the state’s leading women’s organization, and Wayne State University’s Mike Ilitch School of Business — shows the needle hasn’t really moved much: 11.5 percent of all seats on the top 100 companies are held by women, down from 11.6 percent in 2013. Top female C-suite earners dropped to 8 percent from 9.6 percent two years ago; the percentage of CEOs is the same, 13 percent. You can’t really argue that companies “can’t find” talented female directors. Not when standouts like General Motors Co. and Kellogg Co. each have five female directors (42 percent for GM and 38 percent for cereal maker Kellogg). Wayne State researchers noted that studies suggest the closer a company is to its customers the greater the likelihood of board diversity. No surprise, then, that GM and Kellogg each have five women directors. Some European countries have mandated that public companies hit a specific target for board diversity. In the U.S., Warren Buffett and Bloomberg LP Chairman Peter Grauer created a “30% Club” to promote voluntary board diversity. But they say it starts with more women at the top in executive corporate roles. In Road to Power, reporter Laura Colby’s book about Mary Barra’s rise at GM, there’s a fascinating account of the

BUSINESS

Equal Employment Opportunity Commission case against GM and the UAW that

was settled out of court in 1983. GM paid a fine and agreed to promote and recruit women and minorities. Finding diverse talent became a management objective. Could that be one reason GM today has so many top female executives? 䡲

404 —

employee not found West Michigan IT community struggles to recruit, retain qualified talent By Rod Kackley Special to Crain’s Detroit Business

est Michigan’s information technology community is booming. But the demand for talent is outstripping supply, especially in software and application development. Doug Paulo, vice president and IT product leader in Kelly Services Inc .’s Centers of Excellence, said just in application development alone, over the past six months there were more than 670 job postings. But only 51 people who subPay comparison mitted a résumé to a job According to the U.S. Bureau board or in some other of Labor Statistics, the mean way expressed interest in hourly wage for “computer and a new job applied for one mathematical,” as of May 2014, of the positions. is $40.37 for the U.S., $34.98 for “In application develMichigan and $33.16 for metro opment, everybody is hurtGrand Rapids. ing (for talent),” Paulo said. “The only question is the degree of the hurt.” Beth DeWilde, the owner and senior technology recruiter at Paragon Recruiting in Holland, southwest of Grand Rapids, said there has been a shortage of IT workers in West Michigan for several years. Most recently, Paragon’s summer/fall 2015 survey of senior IT managers showed 60 percent of them said they plan to hire new employees. Not a single company planned to reduce staff. Three-fourths of the firms that will be hiring new people also plan to increase IT pay, the Paragon survey showed. Half of the companies that are not planning to hire expect to increase salaries and benefits. But Meredith Bronk, the president and CEO of Open Systems Technologies in Grand Rapids, said the need for qualified IT professionals and the availability of

Application developers are paid an annual mean wage of $99,500 in the U.S., $81,860 in Michigan and $78,860 in Grand Rapids. REX LARSEN

Beth DeWilde, owner of Paragon Recruiting in Holland, said

there has been a shortage of IT workers in West Michigan for several years. Software systems developers are paid a mean annual wage of $106,050 in the U.S., $88,500 in Michigan and $87,840 in Grand Rapids.

SEE TALENT, PAGE 10

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SPECIAL REPORT: MICHIGAN BUSINESS

TALENT FROM PAGE 9

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that talent is cyclical. It ebbs and flows. She has seen it worse. “If you look at the macro picture over the last 18, 24 or 36 months, which in the IT industry is a long time, there have been some challenges,” she said. “But it has been softening a little over the last three to six months.” OST has offices in Southeast Michigan, Minneapolis, Chicago and London, England, along with the company’s headquarters in Grand Rapids. She said the talent pool and demand for that talent is different in each of those markets. Bronk said the talent supply in Detroit, Chicago and Minneapolis is good, if only because of the market size. She agreed Grand Rapids didn’t have the same level of talent. And that’s the rub, said Mike Williams, owner and CEO of Springthrough, an IT consulting and application development company that employs 43 in Grand Rapids. He said demand is higher than he has seen in more than 15 years. “There are tons of organizations gobbling up developer talent,” Williams said. Consequently, Williams said he has changed some of Springthrough’s practices. Chief among those was the decision to bring talent acquisition in house a little more than a year ago. Williams said he decided Springthrough could no longer afford to outsource its recruiting efforts, nor could it sit back and wait for talent to knock on its doors. “We are not in an era where people are sending in résumés,” he said. “We have to go out there and actively have conversations.” Williams said Kevin Johnson, Springthrough’s talent acquisition lead, understands the company’s strategy and culture. That helps him find the right talent. “Our approach has been ‘Let’s be honest. Let’s be direct. Let’s have great conversations’ so that when we do find people, hopefully they really fit in well and stay here for a good amount of time,” Williams said. “There is a talent shortage, and we want to be very purposeful about how we find people.” Johnson also works with local colleges and universities to develop new IT talent, Williams said. Because OST has a larger and more diverse geographical footprint than does a company the size of Springthrough, Bronk said her company is able to transfer its people between markets to fill a talent need. OST has 190 employees, 136 of whom are in Grand Rapids. But the OST employees who are working on projects outside of their home office don’t always have to move, thanks to technology. “We have folks in our Minneapolis team working on projects that are based in Grand Rapids, and vice versa,” she said. “We are able to find and use the talent we need, kind of cross geography.”

Not that simple The solution would seem simple. If there are not enough people in the employment pipeline, simply put more people into the pipeline. There are plenty of people out of work or underemployed. Couldn’t the answer be as simple as training them to fill the need? Kelly Services has partnered with organizations like Automation Alley and Oakland University in Southeast Michigan to run what amounted to IT training boot camps in an attempt to build a workforce capable of filling the talent void. “But the reality is, even though we try to help with those activities, there just isn’t a deep enough pool of people with the aptitude and experience that we can pull from,” Paulo said. The two programming classes Kelly ran with Automation Alley included 40 or so people who were interested, but only 15 had the aptitude, training and experience to be admitted. “Out of that, about 10-13 people graduated,” he said. “At the end of the day, all of those folks ended up with employment.” Paulo also said that in most cases, boot camp-style training isn’t enough. Most managers want to see a résumé with programming experience. All of this means that those who have the IT talent and experience employers are looking for are in the driver’s seat, DeWilde said. “It is a struggle,” said DeWilde.

Keeping women in IT Grand Rapids also shares with most markets difficulty in attracting and retaining women to IT. Cindy Warner, a global managing partner at IBM and the president of the Michigan Council of Women in Technology , said a disparity in employment and pay for men and women is keeping many women out of IT entirely and making it difficult to retain the best female talent. Warner said women in Michigan’s IT community are, on average, earning 80 cents for every dollar that a man earns. “And that has come up, over probably the last two or three years by at least 10 points,” she said. “It used to be 70 cents.” Warner also said, again on average, women account for only 25 percent of state IT employment. That disparity, DeWilde said, helps dry up the talent pool. “If someone in your group is a woman or a person of diversity and they are not treated as an equal in terms of pay and responsibilities, at some point those people move on,” she said. “They may even move on to a whole new discipline.” Warner agreed. She said that once they get into the tech field, women may well find it’s a rather lonely professional life. “At some point, women give up. They want something more fulfilling than spending all day battling SEE NEXT PAGE

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men,” Warner said. “When women get tired of putting up with all the gender bias stuff all day long, it becomes hard to retain them.” Warner said when female IT professionals start jumping to other careers, it should serve as a red flag. “This (IT) is a career path that has so much stability to it and so much economic potential as you continue to go up the ladder, that if somebody runs from it, they must really be feeling some pain,” Warner said.

Power of mentoring Warner said it doesn’t have to be this way. She stressed there are steps that can be taken to at least ease disparity within an IT organization. Warner recommended selecting visible, accessible female mentors in the organization that other women can look up to. Second, go the extra mile to make sure qualified women are promoted. “If you have 10 slots for promotion this year, make six of them women and four of them men,” she said. “But make sure those women are qualified.” Finally, she recommends being very visible as an organization that wants to attract women and has programs in place that make the business attractive to women. But Warner also said women bear

a large responsibility for attracting and retaining other women. She urged women to support each other in the workplace. She also stressed female managers need to commit to being mentors. Bronk believes in the power of mentoring other women and knows she is a role model for young women. She wants them, like her three teenage daughters, to see women running tech companies. “You can’t be what you can’t see,” she said. Bronk said that as one of those new role models, she bears a responsibility to help other women define their own reality. “My reality,” Bronk said, “is that I can be whatever I want to be.” Mentorship should not be a strictly female endeavor, Paulo said. He advised IT employers running short on talent to invest time putting together mentorship programs for prospects who might lack the desired experience on their résumés, but still have the desired aptitude and training. “Utilizing your resources to mentor some of these people is really going to pay off in spades in your ability to get more talent that you can retain,” he said. “It also creates an emotional bond between the new employee and the company.” An increased focus on mentorship has worked for Springthrough. Williams said that before the tal-

ent crunch, a standard interview line of questioning for prospective developers would focus on their knowledge of Microsoft .NET, C#, and other technologies. Now, Williams said, Springthrough is open to hiring younger people who know programming but might not know Microsoft or have much experience in professional software or application development. He said effective mentorship bridges the gap. “It comes down to finding passionate people with good heads on their shoulders,” he said. “Passionate people with good heads on their shoulders we can typically train and get them to where we need them.” But that attitude comes with realworld limits. Johnson said the company does need candidates to have some level of technical training or experience. “We are always willing to train new languages or ways of doing things … but we typically don’t have the ability to bring someone on who doesn’t have some baseline understanding of development,” Johnson said. DeWilde said employers thirsting for IT talent are going to have recalibrate their expectations. “Even if that person only has 80 percent of what they are looking for,” she said, “they have to move on it.” 䡲

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WORLD WATCH WHERE MICHIGAN DOES BUSINESS

Altair’s Shanghai office.

Altair Engineering Inc. Based: Troy Operations: Offices in Beijing,

Shanghai and Guangzhou Employees: 100 Products/Services: Proprietary software and services, which include software for engineering simulation, for on-demand computing, industrial design, and engineering Top executive: Liu Yuan, general manager of Altair China Clients: SAIC Motor, Pan Asia Technical Automotive Center, Dongfeng Motor Corp., Chery Automobile Co., Geely, TRW, JAC Motors, Chang’an Automobile Group, China Railway Corp., Huawei, Lenovo, Midea, Foxconn, Avia tion Industry Corp. of China, Commercial Aircraft Corp. of China

Amway Corp. Based: Ada Operations: Headquarters in

Guangzhou, two regional offices in Beijing and Shanghai, a manufacturing facility in Guangzhou, an R&D facility in Shanghai, a botanical research and development center in Wuxi, experience centers in Shanghai and Shenzhen, and 280 shops across 240 cities Products/Services: More than 150 products for nutrition, beauty, home Employees: 8,000 Top executives: Gan Chee Eng, regional president of Amway Greater China; Audie Wong, president of Amway China

Belfor Holdings Inc. Based: Birmingham Operations: A location in Shang-

hai and an office in Dongguan Employees: 20 Products/Services: Commercial and industrial fire, smoke and water restoration services; document and data recovery; mold remediation; electronics and machinery restoration; and environmental services Top executives: Tommy Kang, regional director for greater China; Richard Chang, China operations manager

Bissell Homecare Inc. Based: Grand Rapids Operations: Regional headquar-

CHINA

Kelly Services

in Beijing, Chengdu, Guangzhou and Suzhou and Shanghai, along with a corporate office Employees: 90 Products/Services: Placement, recruitment process outsourcing, managed service provider, payroll process outsourcing, contracting and labor dispatching Top executive: Nathan Li, chief administration officer and chief financial officer for North Asia

Based: Troy Operations: Recruitment centers

hina is the Changchun world’s largest economy with a 2014 Beijing GDP of $10.38 trillion, according to the CIA World Suzhou Chengdu Shanghai Factbook. China passed the United States in 2014, but still has a Taiwan Guangzhou lower per capita income than the world average. Hong Kong China’s largest exports are electrical and other machinery, furniture, textiles, apparel and integrated circuits. Its biggest export partners are the U.S. (16.9 percent), Hong Kong (15.5 percent), Japan (6.4 percent) and South Korea (4.3 percent). China’s largest imports are metal ores; motor vehicles; electrical and other machinery; nuclear reactor, boiler and machinery parts; medical equipment; and soybeans. Its biggest import partners are South Korea (9.7 percent), Japan (8.3 percent), the U.S. (8.1 percent) and Taiwan (7.8 percent). Each World Watch features a different country. If you know of a Michigan company that exports, manufactures abroad or has facilities abroad, email Gary Piatek, senior editor, at gpiatek@crain.com.

Coming up December: Iraq

ters in Hong Kong, including marketing and sales and three tech centers for global product development and engineering in Shenzhen and Suzhou Employees: 150 Products/Services: Floor care devices and consumer products plus product testing Top executive: Paul Voets, vice president of global operations

Cooper-Standard Automotive Inc. Based: Novi Operations: Headquarters, manu-

facturing and technical facilities in Shanghai; three manufacturing facilities in Chongqing, Shenyang and Wuhu; one joint venture manufacturing facility in Guangzhou; one manufacturing and one joint venture manufacturing facility in Huai’an; one manufacturing and one technical facility in Kunshan Employees: 3,743 Products: Anti-vibration systems, fluid transfer systems, fuel and break delivery systems, sealing and trim systems Top executive: Song Min Lee, president for Asia Pacific Clients: BMW, Chang’an Automobile Group, Chery Automobile Co., Daimler, Ford, Fuyao, Geely, General Motors, Honda, Inergy Automotive Systems, PSA, SAIC Motor, Tata, Volkswagen

Dow Chemical Co. Based: Midland Operations: Nine business centers

in Shanghai, Beijing, Guangzhou, Chengdu, Wuhan, Harbin, Ürümqi, Hong Kong and Taiwan and 17

manufacturing sites in the country Employees: 3,500 employees Products/Services: Sustainable technologies that address food safety and security, infrastructure upgrade, energy efficiency and environmental protections in China Top executive: Peter Wong, president for Dow Greater China

Faurecia North America Inc. Based: Auburn Hills Operations: 38 plants and four re-

search and development centers located in 22 cities across the country Employees: 11,000 Products/Services: Seat mechanisms and frames, complete seats, instrument panels, center consoles, door panels, cockpits, acoustic and trim, exhaust lines, manifolds, catalytic converters, other Top executive: Jean-Michel Vallin, president, Faurecia China.

Inteva Products LLC Based: Troy Operations: Manufacturing facili-

ties in Changchun, Chengdu, Wuhan and Waigaoqiao; two manufacturing and tech center joint venture facilities in Shanghai; one operations and tech center in Zhenjiang Employees: 2,500 Products/Services: Door modules, sunroofs, latches, window regulators and motors Top executive: Richard Zheng, managing director Clients: Volkswagen, SAIC Motor, General Motors, Dongfeng Peugeot Citroen Automobile Co., Chery Automobile Co., Haima

Metaldyne LLC Based: Plymouth Operations: Two manufacturing

facilities in Suzhou Employees: 350 Products/Services: Products for automotive engine applications such as powder metal connecting rods, crankshaft dampers and balance shaft assemblies, and products for automotive transmission applications Top executive: Jose Miranda, general manager of Metaldyne Suzhou Clients: Chang’an Ford, Mazda Engine, Dongfeng Peugeot Citroen Automobile Co., SAIC Motor, Beijing Foton Cummins Engine Co., Chery Automobile Co., Cummins North America

Milco International Based: Warren Operations: One international

full-service supplier for resistance welding equipment and copper components in Hangzhou Employees: 45 Products/Services: Manual welding guns, servo welding guns, precision production and specialized technical support Top executive: Jeff Beach, general manager Clients: General Motors, Dong Feng Group, Magna, FAW Group Corp., Ford More information: Milco International’s China-based company, Welform Precision LTD, was formed

in Hangzhou in 2007 as a central location for all Milco International and Milco business in Asia.

MSX International Inc. Based: Detroit Operations: Headquarters in

Shanghai Employees: 100 Products/Services: Parts and ac-

cessories sales programs, dealer standards, training, technical and warranty suppport to vehicle manufacturers Top executive: Stuart Faid, managing director of China, MSXI Clients: BMW, Ford, Fujian Benz, In finiti, Jaguar Land Rover, Jiangling Mo tors Co., John Deere, Mercedes-Benz, Volvo

The Stahls’ facility in Jiangsu Province.

Stahls’ Inc. Based: Sterling Heights Operations: A sales office, distri-

bution center, manufacturing and research and development facility in Jiangsu Province Employees: 70 Products/Services: Heat transfer materials used to personalize, embellish and decorate textiles, garment construction and assembly, printed heat transfer material and decorations Top executives: Thomas Karr, CEO of GroupeStahl Europe; Richard Genrich, VP of supply chain

TI Automotive Ltd. Based: Auburn Hills Operations: Manufacturing plants

in Changchun, Guangzhou, Haikou, Chongqing, Qinhuangdao, Shanghai, Shenyang, Tianjin and Wuhan; a corporate and sales office in Hong Kong Employees: 3,500 Products/Services: Gasoline direct-injection lines, GDI rails, turbocharger lines, brake and fuel lines, engine lines, transmission lines and more Top executives: Kim Ooi, managing director of fluid carrying systems for Asia-Pacific; Brian Kaiser, managing director of fuel tank and delivery systems for Asia-Pacific Clients: FAW-Volkswagen, BMW, Brilliance Auto, Kautex, Nissan, Toyota, Audi AG, Shanghai-Volkswagen, Chang’an Ford, Chang’an Mazda, LiFan, DFL-Nissan, Geely, Daimler China, Great Wall Motor, Beijing Automotive Industry Holdings Co., Beijing Benz

Visteon Corp. Based: Van Buren Township Operations: Technical centers in

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SPECIAL REPORT:

SECOND STAGE How to know which IT is it egardless of industry, every company needs information technology to run its business. A one-sizefits-all approach rarely suits the needs of companies that have very specific products or services they offer the world to set them apart from their competitors. This month, we asked three companies how they went about selecting an IT system — what conditions their systems needed to meet, how they made sure they ended up with systems that met the conditions, and who they got to do the work. We heard from Weber’s Inn, the Ann Arbor mainstay restaurant and hotel, which has learned a few things about managing operations over the years. We also heard from a lighting company and a maker of employee assessment software. “When you’re deciding which items to pursue, each upgrade or each new technology is a big undertaking, so you have to know which ones are actually going to be crucial to your business to attract more customers and which ones are going to be a waste of your time. That’s making a smart business decision for your company,” said Weber’s Inn Vice President Michael Weber. It’s also a pricey one. Salaries for IT talent vary widely, but Courtland Anderson, an attorney at Bodman PLC’s Troy office who works on IT contracts, figures it will cost a company $150,000-$250,000 a year for a project manager and more than $200,000 for someone to run a department. “You can get a decent IT programmer for under $100,000,” Anderson said. Hiring a vendor comes with similar costs, making it all the more important to avoid costly do-overs. “IT vendors are in very high demand. They are expanding their functionality almost exponentially, and people are looking for those cost-savings more than ever,” Anderson said. 䡲

Michael Weber,vice president ofWeber’s Inn in Ann Arbor

LON HORWEDEL

Weber’s Inn rests easier with accommodating vendors By Rachelle Damico Special to Crain’s Detroit Business

eber’s Inn has had its share of technology issues in its 78-year history. In the early 1980s, the Ann Arbor-based restaurant and hotel found a vendor that sold an optical scanning system. The technology scanned restaurant orders from a special sheet of paper by recognizing the presence of a pencil mark made by employees, not too different from the Scantron system many colleges use to score tests. But Weber’s had issues processing orders. If there was even a spot of grease on the paper, the scanning technology would not be able to read the order requests. “That technology was not the wave of the future,” said Michael Weber, vice presi-

“As an entrepreneur, you have to pay attention to different technology trends and how people want to spend their money.” Michael Weber,vice president,Weber’s Inn

dent of Weber’s Inn. “It ended up flopping. It was a disaster.” The inn, with 222 employees, has been operating since before digital computers were invented. It originally tracked purchases and inventory by hand. “As an entrepreneur, you have to pay attention to different technology trends and how people want to spend their money,” Weber said. “It will put your business ahead of others.” This year, Weber’s made major software

upgrades to its point-of-sale, accounting and frequent diners program. The project cost more than $100,000. “Whenever you’re dealing with new technology, you want to try to see into the future and go with what will still be relevant in 10 years,” said Weber. Weber’s also had a July 15 deadline to upgrade its Windows Server 2003 operating system because that’s when Microsoft would stop supporting it. The point-of-sale and accounting soft-

ware also had to be upgraded to be compatible with Weber’s new server. The pointof-sale upgrade cost $75,000 to replace and install equipment and make software upgrades that included technology that makes it easier to change menu items and monitor guest requests. For this project, Weber went with the same company, Micros , it has used since 1982. Weber’s purchased an electronic cash register from the Maryland-based company shortly after the optical scanning technology system failed. “At the time, Micros was a small company and hungry to do business with us,” said Weber. “We chose to stay with Micros because we have a history.” Micros also rebuilt Weber’s database so SEE WEBER’S, PAGE 14

Help from outside

Cloud a cost saver

A winning strategy

When AcuMax grew too big for its IT developer, the software company sought a service to help, Page 15

Like many smaller companies, Arborlight Inc. uses cloud-based services as an alternative to in-house servers, Page 16

When Helm Inc. began losing revenue, it found a solution in managing point-of-sale displays, Page 17

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SPECIAL REPORT: SECOND STAGE

WEBER’S FROM PAGE 13

it would work with the new software. Weber’s General Manager John Staples had created the original database more than 20 years ago and was not eager to rebuild it from scratch. Staples works with Michael Weber on negotiating vendor contracts and overseeing Weber’s computer system. Staples said Weber’s has not changed point-of-sale vendors because the software has to be integrated into Weber’s system to work with the company’s other software. “I’ve gone through enough conversions at Weber’s to see that if you change how that is done, it often brings along a lot of mistakes,” Staples said. “There’s a cost factor there that isn’t just the product, but what it’s going to cost to make the conversion?” Staples also said that when negotiating contracts with a longtime vendor, they sometimes compare prices for other companies’ software. “They know that we’re loyal to them and we expect loyalty — especially price-wise, in return,” said Staples. When it came time to upgrade the accounting software and customer loyalty programs, Staples and Weber asked its point-of-sale and property-management vendors for recommendations. “We needed companies that would work with the other vendors that we have,” said Weber. The vendors came back with a list, which Weber researched by searching for reviews online. “It’s amazing what you could find when you research companies on your own that way,” said Weber. Weber organized a meeting with the accounting vendor, Londonbased SunAccounts . He liked that

LON HORWEDEL

Michael Weber is vice president of Weber’s Inn, which has made major software up-

grades this year at a cost of more than $100,000. the company was willing to customize its software to work with Weber’s system. It also would train Weber’s accounting department on how to use it. “The upgrade is the easy part. The difficult part is training,” Weber said. Weber’s also needed to find a vendor to create an app for its customer loyalty program members. This allows Weber’s customers to view their loyalty account online and access electronic coupons from their smartphones. After tapping Weber’s vendor network, Weber met with the CEO of AppSuite to discuss how its loyalty software would work with Weber’s programming. It got the job in part because the CEO took the time to arrange meetings and discuss in detail how they would work with Weber’s software. “We liked that they were a small company that was willing to customize what their normal (software) offerings were to fit our mold,” said Weber. “Some of the bigger players had a one-size-fits-all approach.”

To meet Weber’s July 15 deadline, Weber and Staples held monthly meetings with all of the vendors to answer questions, discuss how the system setup and status of the upgrade process. “Making sure everybody’s on the same page before it’s going live is really important,” said Weber. Weber said that when it comes to technology, it’s not unusual to need extra time to work out some kinks. Even though Weber and Staples held the monthly meetings, the updates still ended up coming down to the last minute. “Everything always takes longer than you think it will,” said Weber. “We gave them the extra time to end up with a better product when we went live.” Weber said the process went smoother because all of the vendors worked together. “It’s important to find companies who are willing to work with you and understand your company and what you’re trying to accomplish,” said Weber. “It allows more time to focus on the business and your customers.” 䡲

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Courtland Anderson is an attorney at Detroit- vendor or who the vendor has sued.” based Bodman PLC who works in the firm’s Troy office When negotiating, Anderson said, it’s important to and is co-founder of its enterprise procurement understand all terms and that they are accurate. group, which negotiates IT contracts on behalf of “A lot of people can look at a document and unclients. He offered some advice for businesses when derstand what they’re reading for the most part, but it comes to searching for an IT vendor. they may have no idea what terms aren’t “Always remember that you’re the cuspresented,” he said. tomer,” said Anderson. “It sounds cliché, but Anderson said that, at minimum, read these folks are asking for your money.” the contract. He has a client who recently Anderson said a lot of IT vendors have a signed a document with a different price tendency to intimidate customers. than originally negotiated. “You have to understand your business “They want to get out of the deal and the requirements and go out and get them,” said vendor’s not letting him out of the deal,” AnAnderson. “Avoid paying the full price until derson said. “All they had to do was look at you’ve ensured that you’ve tested the sys- Courtland the contract.” Anderson: Vet IT tem and have it meet your requirements.” Anderson also recommends negotiating He also recommends vetting IT vendors vendors for both more than once. small and large for both small and large deals. “Avoid thinking that you have to take the “There are a lot of things you can find out deals. vendor’s template as-is,” he said. “Include just by searching Google or doing litigation timeframes and remedies if the vendor searches,” said Anderson. cannot get the system fully operational within a reaFor larger transactions, Anderson said to get a list sonable amount of time.” of customer user groups or adviser groups from the Anderson said customers should always include a vendor. Trade associations also often have informa- provision for termination without cause, even if means tion on vendors. paying a fee, to protect against bad performance. “Try to find customers who have left the vendor “A good contract is a necessity, but the best protecand see what the problems were,” said Anderson. tion is not doing business with poor vendors or ven“Ask for the name of any customer who has sued the dors with poor products,” Anderson said. 䡲

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SPECIAL REPORT: SECOND STAGE

After maxing out IT, AcuMax hires service By Rachelle Damico Special to Crain’s Detroit Business

James Hawreluk, CEO and consultant at Dearborn-based AcuMax Inc. , needed to make some decisions when his sole information technology developer told him it was time to leave the company. “He approached me and said that the system was getting too big and too complex so that one person couldn’t handle it anymore,” Hawreluk said. “As your company grows, there will always be IT issues.” AcuMax provides employee assessment software to help businesses improve hiring, employee placement and engagement through electronic surveys and other tools. It has five employees. Upgrades to the company’s system were becoming too difficult to manage. For instance, AcuMax’s software product initially ran one survey at a time. Now it runs as many as 50 at once. Hawreluk’s departing IT developer suggested that AcuMax form an IT department or hire a professional IT vendor and helpfully gave a seven-week notice before leaving the company. “It gave me a good chunk of time to talk to different vendors and do our due diligence,” said Hawreluk. After crunching numbers, he decided the most cost-effective solution was to hire an IT service. “I know what IT developers command in the marketplace,” said Hawreluk. “If I was to create a team of three, it would cost me four times what it would to go with an outside firm that already has developers.” Hawreluk vetted IT companies by tapping industry contacts for recommendations. He also called the companies and interviewed them. “You need to know exactly what you want and talk to as many companies as you can,” said Hawreluk. “Don’t ever compromise.” In August, AcuMax began to search for priced vendors that knew C#, a programming language that allows developers to run on Mi crosoft’s .NET framework. “Some of the vendors didn’t know C# or couldn’t even do anything till the first quarter of 2016,” said Hawreluk. “Obviously that was too late.” Through the recommendation of an AcuMax employee, Hawreluk found Troy-based company IPS Technology Services . This October, Hawreluk met with IPS President Pradip Sengupta. He liked that IPS was willing to agree to a guarantee of prompt communications. “What happens a lot in IT is you’ll have an issue, send an email and hear crickets in return,” said Hawreluk. In addition to monthly maintenance service, an approximately $100,000 contract was negotiated for a 15-month project that includes reprogramming and upgrades to AcuMax’s product. Hawreluk was

sure to negotiate a four-hour response time for IT issues into the contract. Hawreluk also liked that the vendor was able to offer suggestions on how to improve the speed and look of AcuMax software products. “It’s helpful to have someone that has good ideas and knows where to improve and make some tweaks,” said Hawreluk. Hawreluk said negotiations went smoothly because he was candid about what the company needed

and what he was willing to pay. “Since I’m paying less for my IT services, I can keep my prices where they currently are for my customers,” said Hawreluk. “I don’t have to have price increases and can maintain our margins.” Another benefit that came with a vendor was that AcuMax didn’t need to employ staffers around the clock to meet the needs of customers in Europe and China. “When you only have one person working on the system and they’re

not 24 hours a day, you can have something go wrong in a time zone that’s eight hours ahead of ours,” said Hawreluk. “It gives me better peace of mind knowing that our clients can be taken care of.” Hawreluk also believes hiring a professional IT service will give AcuMax a competitive advantage. “We can get better, faster service and more enhancements done on the system at a lower cost,” said Hawreluk. “It only makes good business sense.” 䡲

“Since I’m paying less for my IT services, I can keep my prices where they currently are for my customers.” James Hawreluk, CEO, consultant, AcuMax Inc.

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SPECIAL REPORT: SECOND STAGE

Cloud saves costs for Ann Arbor firm By Rachelle Damico Special to Crain’s Detroit Business

Like many smaller companies, Ann Arbor-based Arborlight Inc. uses cloud-based services as a less costly alternative to in-house servers. Arborlight produces LED lighting systems that appear as skylights. The technology tracks and mimics the sun’s lighting and positioning in real time and can be adjusted from any WiFi-enabled device. The company started in 2011 and has nine employees. It has had to build its IT processes from scratch. But going the cloud computing route means it hasn’t had to invest in as much equipment or people to run it. Employees access information over the Internet instead of on local hard drives, allowing easy access to company files and data away from the office. “It’s mainteMichael Forbis: nance-free,” said CEO Cloud-based servMichael Forbis. ice cost-effective. Forbis said another benefit of using cloudbased services is the level of security. The company uses Google Apps for business, which allows Arborlight to have access to website, email, data storage and aroundthe-clock customer service support. The company also set up a Dropbox account for file sharing, but has elected to use a desktop verson of Quickbooks for financials. Forbis takes time to try different software and experiment with new systems when first attempts don’t work out. The company is on its third customer relationship management tool, HubSpot. Eventually, Arborlight evolved to other cloud-based software such as Asana that allows users to manage different tasks within the company. It uses Smartsheet to track progress of customers and shipments. Forbis said functionality just as often drives his IT spending decisions as much as price does. “Sometimes we choose things depending on the price over functionality,” he said. “It just depends on where we are in the trajectory.” Arborlight’s IT plan may change as the company evolves, Forbis said, but for now, the company will continue to use the cloud instead of IT vendors or consultants. “We try to maximize the potential of every dollar we receive,” said Forbis. “It didn’t even occur to us to go find someone else to tell us what to do.” 䡲

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SPECIAL REPORT: SECOND STAGE

Sales displays service a winning strategy for Helm One word that strikes fear into the heart of many a business owner is the dreaded “commoditization.” That’s what was rearing its head in 2014 for Helm Inc. President and CEO Justin Gusick, who bought the Plymouth-based company from its two previous owners last year after working in it for 18 years. Helm used to be known for printing service manuals for automakers. That business now accounts for just 20 percent of revenue. Helm’s other lines of business fall into two categories. One is thirdparty logistics and fulfillment — industry-speak for storing and shipping products on customers’ behalf. The other, and faster-growing, division is promotional products. Helm manages the online branded merchandise sites for companies such as Ford Motor Co. , Castrol and footwear company Wolverine World wide. It handles everything from design of a product, such as a branded T-shirt, to sourcing materials and manufacturers, and then shipping the finished goods. Problem : It was this latter part of Helm’s business that faced commoditization pressure in early 2014. Customers were basing purchasing decisions on price alone and conse-

Helm Inc. Location: Plymouth Description: Third-party marketing and logistics services provider President and CEO: Justin Gusick Employees: 125 Revenue: $56 million in 2014; on pace this year for a 10 percent increase to $61.6 million

Justin Gusick: Bought company last year.

quently directing their business to the lowest bidder. “We were losing competitive bids to prices we couldn’t even believe people were offering. We needed to figure out how to bring customers more value,” Gusick said. This was no hypothetical threat. Helm lost a major account when a customer of five years flipped to a competitor. Solution: The problem came from customer demands, and so did the solution. They were asking for help with a problem they faced within

their industries, that of managing their sales displays at retailers. These “point of sale” displays are those placed near cash registers at stores to sway shoppers into buying something. Manufacturers go to great expense to create and send these displays but then have no way of knowing if and how they are being used, Gusick said. Helm, which already handled the shipping of these displays, developed software to track them. Customers log in to see where the displays are. A red dot on a map

indicates one placed at a store but that hasn’t been set up. A green one indicates a display at a store that has been set up. Adding a service like this gives customers a reason to stick with Helm. “Our whole role here is really just to ship packages,” Gusick said. “It strengthens our value proposition.” Helm developed the system from the ground up. Gusick formed a team of 10 software developers to make it happen. It rolled out early this year, having taken about six months and $150,000. Gusick wished he’d done it sooner. Helm has added four large consumer market customers, and Gusick said he’s talking to more large brands for deals next year. “Growth has been phenomenal,” Gusick said. Risks and considerations : “We weren’t sure if we could sell it,” Gusick said. Helm is known for serving automotive customers. Pitching to consumer brand makers would mark a departure for the 72-year-old company. “It has given us entrée into retail brands,” Gusick said. “Now we’re making a name for ourselves in the

consumer space.” Expert opinion : Marisa Smith has had clients who’ve faced the same commoditization pressure. The founder of Ann Arbor-based marketing and management consultancy Whole Brain Group LLC said business leaders too often get dazzled by what others are doing. The result is they end up chasing services already offered by competitors rather than offering something that sets them apart. “Quit following and start leading,” Smith said. Offering customers expert-level help is one way for owners to differentiate their companies from the next one. By showcasing inside knowledge of their respective industry, through extensive blog posting and sales messages, companies can let customers know more services are on offer than just the obvious ones. These companies then can become known as the go-to people for a given niche, which justifies charging more than bargain-bin prices. “They can say, ‘We bring value because we have all this expertise that presents you from making mistakes,’” Smith said.

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18 ACQUISITIONS & MERGERS Greystone Financial Group Inc., Troy and Houston, Texas, merged with Polaris Wealth Advisers LLC, San Rafael, Calif., to form Polaris Greystone Financial Group LLC. The firm operates two divisions: Polaris Greystone Wealth Management, which provides financial planning and investment management for individual high-net-worth families, and Polaris Greystone Retirement Services,

which offers retirement plans and services to plan sponsors and participants. The company has offices in Troy, San Rafael and Irvine, Calif., and Houston. Websites: polariswealth.net, greystonefg.com.

American Cancer Society Inc., Atlanta. Users can read each Kroger store’s details on their fundraising efforts and more. Websites: www2. idashboards.com/KrogerMaking Strides2015, idashboards.com.

CONTRACTS

Plumbing Professors, Canton Township, a plumbing, sewer repair and epoxy pipe lining company, with Serene Surroundings Inc., Plymouth, a landscape design company, were awarded a repair and diagnostic contract by the Plymouth District Library, Plymouth. The contract includes repairs to storm drainage, high pressure water jetting and video camera diagnostics to clean and check condition of existing piping. Websites: plumbingprofessors.com, serenesurroundings.com.

iDashboards, Troy, a supplier of

business intelligence dashboards, created a “Making Strides Against Breast Cancer” dashboard for Kroger Co. of Michigan, Novi and the

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Toggled, Troy, a developer and

producer of lighting technology and a subsidiary of Altair Engineering Inc., has added International Develop ment LLC, Roanoke, Texas, to its licensing program. International Development has access to Toggled’s portfolio of more than 60 patents primarily related to LED replacements for fluorescent tubes. Website: toggled.com.

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XanEdu Publishing Inc., Ann Arbor, provider of customized educational content for the K-12, university and corporate markets, announced that MBS Direct LLC, Columbia, Mo., a provider of online bookstore solu-

DEALS & DETAILS tions for schools, has integrated and launched a white-label version of XanEdu’s Customized Platform called eText Builder. It allows faculty to provide course materials specifically tailored to their class objectives, while reducing the cost of traditional textbooks. Websites: xanedu.com, mbsdirect.net. G2 Consulting Group, Troy, a geotechnical, environmental and construction engineering services firm, has been selected by RS Engineering LLC, Lansing, to work on the upcoming Michigan Department of Transportation’s I-94 reconstruction project in Detroit. RSE and G2 will be responsible for time-critical aspects of design and construction services for the Cadillac bridge, one of eight to be reconstructed in preparation of the 20-year, $3 billion I-94 project. Websites: g2consultinggroup.com, rs-eng.com.

sell its non-core automotive interiors plant in Berlin, Germany, held by Visteon Deutschland GmbH and APTUS GmbH, to APCH Automotive Plastic Components Holdings GmbH, effective Dec. 1. The transaction effectively results in a management buyout of the manufacturing operation, including roughly 400 employees . Terms were not disclosed. Website: visteon.com.

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ham, is opening a dental office at 1 Woodward Ave., Suite 1625, Detroit. Telephone: (313) 246-8288. Website: drdipilla.com. 123Net Inc., Southfield, has added a new wireless tower to serve businesses in the industrial park area at I-275 and Grand River, Farmington Hills. The tower will provide greater capability and bandwidth to area businesses that rely on carrier class connectivity. Website: 123.net.

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FROM PREVIOUS PAGE

BorgWarner Transmission Systems Korea, a BorgWarner Inc., Auburn

Hills, majority-held joint venture, opened a new facility in Jincheon, South Korea. It will produce a variety of automatic transmission components, including clutch modules, clutch sets and friction plates. Website: www.borgwarner.com. Re/Max of Southeastern Michigan, Troy, and Re/Max Encore, Clarkston, opened a Re/Max Encore office at 436 S. Broadway, Suite E, Lake Orion. Telephone: (248) 690-4003. Websites: encoreagent.com, remax-semichigan.com.

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Roncelli Inc., Sterling Heights, a construction company, has opened an office in the Guardian Building, 500 Griswold St., Suite 2440, Detroit. Telephone: (313) 964-5689. Website: roncelli-inc.com. ZBallerini LLC, Birmingham, an online retailer featuring handmade travel, business and everyday bags, is opening a holiday pop-up store at 4215 Cass Ave., Detroit. Website: zballerini.com.

MOVES Airfoil Group, a public relations

and marketing firm, has moved its headquarters from 1000 Town Center Drive, Suite 600, Southfield, to 336 N. Main St., Royal Oak. Telephone: (248) 304-1400. Website: airfoilgroup.com.

NEW PRODUCTS MedNetOne Health Solutions, Oak-

land Township, a health care management organization, announced the company’s new website, designed by Douglas Marketing Group LLC, Detroit. Website: mednetone.net. Burroughs Inc., Plymouth, a provider of network check scanning technology, released the SmartSource Expert Elite intelligent network check scanner, which adds an Ethernet connection and built-in intelligence to the SmartSource Elite series platform. Website: burroughs.com.

NEW SERVICES ProQuest LLC, Ann Arbor, an-

nounced the ProQuest Electronic Thesis and Dissertation Administrator, a submission and review platform for dissertations and theses authors. Website: proquest.com. Meijer Inc., Walker, announced its Meijer Curbside program is now available at the Ann Arbor Meijer store at 3145 Ann Arbor-Saline Road, Ann Arbor. The program offers customers the option to shop online and pick up their groceries curbside. Website: meijer.com. 䡲

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20 WEDNESDAY

CALENDAR

NOV. 11

Superpower: Three Choices for America’s Role in the World. 11:30

a.m.-1:30 p.m. Detroit Economic Club. Program features Ian Bremmer, president and founder of Eurasia Group. Cobo Center, Detroit. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Phone: (313) 963-8547; email: info@econclub.org.

a perspective on Canada-U.S. business relations after the recent national elections. Marriott Renaissance Center, Detroit. $65; $50 CUSBA board members. Contact: Colin McKillop, (519) 259-9836; website: cusbaonline.com.

THURSDAY

UPCOMING EVENTS

NOV. 12

Michigan CEO Summit. 8 a.m.-

noon. Business Leaders for Michigan. Annual gathering with speakers, networking opportunities and inspiration. Keynote speaker is Tim Kelly, general manager, IDEO. Westin Book Cadillac, Detroit. $125. Contact: Jennifer Hayes, (313) 2595400. Seventh Annual Forecast Luncheon. Noon-2 p.m. Chartered Financial Analysts Society of Detroit. Jim Grant, founder of Grant’s Interest Rate Observer, will offer his take on Federal Reserve policy and the bond markets into next year. Jason Trennert, CEO at Strategas Securities LLC and managing partner and chief investment strategist at Strategas Research Partners, will discuss stock markets. The Westin, Southfield. $55. Contact: Michelle Doran, (734) 546-2390; email: info@cfadetroit.org.

FRIDAY NOV. 13

The Impact of the Canadian Election on U.S.-Canada Relations. 11:30 a.m.-

1:30 p.m. Canada U.S. Business Association. Four experts will provide

Relational Coordination: Transforming Relationships for High Performance. 4:30-5:30 p.m. Nov. 16.

University of Michigan. Hosted by Jane Dutton, the Robert L. Kahn Distinguished University Professor of Business Administration and Psychology at the Ross School of Business. Jody Hoffer Gittell, professor at Brandeis University’s Heller School for Social Policy and Management, will discuss how to transform relationships. Ross School, Ann Arbor. Free. Contact: Angela Ceely, (734) 764-2811; email: aceely@umich.edu. The National Conversation on Board Diversity. 7:30-9:30 a.m. Nov. 19. On

the same day in cities around the world, business leaders will discuss one strategic question: Why and how do winning companies recruit to maximize board effectiveness? Skyline Club, Southfield. $30 Inforum and National Association of Women Business Owners members; $45 nonmembers. Website: inforummichigan.org. Create Global-Focused Business Plans and Marketing Strategies for

Success. 8-11:30 a.m. Nov. 19. Automation Alley. Speakers include Noel Nevshehir, director of international business services, Automation Alley; Eve C. Lerman, senior international trade specialist, U.S. Department of Commerce; Jeff Jorge, principal, Michigan’s international services practice leader and Latin American services desk leader, Baker Tilly; Bill Richeson, senior vice president, manager of global financial institutions and market manager for international banking in Michigan, FirstMerit Bank; David Newhouse, international trade development manager, Michigan Economic Development Corp.; Sam Hoff, president, LEID Products LLC; and Yannick Greiner, director, international sales, Rugged Liner Inc. Automation Alley, Troy. $20

members, $30 nonmembers, $40 walk-in members, $50 walk-in nonmembers. Phone: (800) 427-5100; email: info@automationalley.com. Inside the CEO Mind. 8-10 a.m. Dec. 1. Detroit Regional Chamber. Kouhaila Hammer, CEO, Ghafari Associates LLC, shares her story and

unique perspective on leadership. Hammer is the board president of the Engineering Society of Detroit and on the Detroit Regional Chamber Board of Directors. Cranbrook Institute of Science, Bloomfield Hills. $30 chamber members, $55 nonmembers. Preregistration is required; no refunds. Contact: Beverly Maddox, (313) 596-0343; email: bmaddox@detroitchamber.com.

Successful Turnarounds: The U.S. Banking Industry and Detroit. 11:30 a.m.-1:30 p.m. Dec. 7. Detroit Economic Club. Speaker is Bruce Van Saun, chairman and CEO, Citizens Financial Group. Westin Book

Cadillac, Detroit. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Contact: (313) 963-8547; email: info@econclub.org. State of the Region. 5-7 p.m. Dec. 9. Detroit Regional Chamber.

The chamber’s second annual analysis of the economic indicators related to business growth, innovation, talent and international commerce for Southeast Michigan. Westin Book Cadillac, Detroit. $30 chamber members, $595 to join. Contact: Janelle Arbuckle, (313) 596-0340; email: jarbuckle@detroitchamber.org. Michigan Supreme Court Justices. 11:30 a.m.-1:30 p.m. Dec. 15. With Justice Bridget Mary McCormack and Chief Justice Robert Young Jr. MotorCity Casino Hotel, Detroit. $45 DEC members, $55 guests of DEC members, $75 nonmembers. Phone: (313) 963-8547; email: info@econclub.org. 䡲

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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Crain’s has moved its complete list of appointments and promotions to www.crainsdetroit.com/peopleonthemove. Brief online listings for management-level positions are available at no cost, at editor’s discretion. Guaranteed print placement in this promotional feature can be purchased at the website above.

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Here are some of last week’s executive appointments reported by Crain’s:

Hanus adds audience development role for Crain’s Nancy Hanus, director of digital strategy for Crain’s Detroit Business and Crain’s Cleveland Business, has added the role of audience development director for Hanus both publications. Hanus has coordinated online strategies for e-newsletters and website and digital products. Hanus, 54, led the recent redesign of both publications’ websites. She will focus on growing both online and print audiences, and working on a premium subscription product. “This expanded role is recognition of the remarkable work Nancy has done since joining us in July 2012,” said Crain Group Publisher Mary Kramer. “Visits and the number of visitors to our website have more than doubled.”

Cervone to lead GM Foundation, keep VP post General Motors Co. named Tony Cervone chairman of the GM Foundation. He will assume over-

sight of GM’s corporate giving activities while retaining his role as senior vice president of global communications for the Detroit automaker. Cervone, 52, succeeds Bob Ferguson, who was chairman of Cervone the foundation and senior vice president of GM global public policy. Ferguson left Nov. 1 to establish a consulting agency and pursue other opportunities.

Wurfel to step down as Snyder’s press secretary

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Sara Wurfel, Gov. Rick Snyder’s press secretary since 2011, is leaving at the end of the month to work for Lansing public relations firm Truscott Rossman as public affairs vice president. Dave Murray, Snyder’s deputy press secretary, will be Wurfel’s replacement. Wurfel was communications director for the Michigan Department of Agriculture under former Govs. John Engler and Jennifer Granholm. Murray joined the Snyder administration in 2013 after writing for the Flint Journal, Grand Rapids Press and MLive.com. 䡲

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AVIATION

Takeoffs and landings continue to decline, falling to 111,672 in 2014, despite a rise in corporate jet use, VanderVeen said. The decline is mostly attributed to fewer privately owned recreational planes , he said. Jet fuel sales at the airport fell from 12.8 million gallons in 2007 to 8.6 million gallons in 2010, but increased to 9.1 million in 2014. “Generally, aviation is the first to enter the recession and the last out,” VanderVeen said. Corporate Eagle , which operates fractional jet ownership and jet management services out of the Oakland County airport, lost twothirds of its billable flying hours, said Rick Nini, president and CEO. Corporate Eagle’s revenue fell from $13 million in 2007 to $8.5 million in 2009, Nini said. “People understood the benefits of business aviation, but the optics of what happened in D.C. had such an impact,” Nini said. “Executives just didn’t want their picture being taken getting on or off a private jet at that time, and it really hurt.”

FROM PAGE 1

and deliveries of new business jets are climbing, reaching $10.5 billion in 2014.

Rough landing In 2008, the CEOs of General Mo tors Co. , Chrysler and Ford Motor Co. flew on corporate-owned jets to go before Congress seeking a publicly financed bailout to save their companies from collapse. The trio was met with rancor from elected officials and public outrage over lavish corporate spending while asking for taxpayer dollars. “There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they’re going to be trimming down and streamlining their businesses,” Rep. Gary Ackerman, D-New York, told the Detroit 3 CEOs at a hearing of the House Financial Services Committee. The result was the executives driving to the U.S. Capitol weeks later in the automakers’ newest electric vehicles. GM and Chrysler were later forced sell their corporate jet fleets as part of the bailout. But the public shellacking hit more than just the automakers — corporate aviation itself practically collapsed between that one event and the Great Recession, said William Garvey, of Business and Commercial Aviation magazine. “That single event in front of Congress was ground zero for everything that happened to this industry,” Garvey said. “It wasn’t a downturn. It fell off the cliff.” Annual shipments of business jets worldwide dropped from an all-time high of 1,317 in 2008 to 874 in 2009 and continued to slide to 672 in 2012, according to data by the General Aviation Manufacturers Association. New business jet deliveries are growing again, but at 722 in 2014, they are much lower than peak years. Locally, it devastated operations at Oakland County International Air port in Waterford Township and the support companies that call its airfield home.

A myth of frivolity The downturn and corporate cutbacks fueled misconceptions about the industry, said Greg Schmidt, president and CEO of Waterford Township-based jet management and maintenance firm Pentastar Aviation LLC. “We serviced a number of the (automakers’) fleet, but then came the very public dismantling of those fleets; that hurt,” Schmidt said. “The public saw the fleets as the ultimate perk, but it’s really a business tool for more than CEOs.” Schmidt said 78 percent of corporate jet passengers are below the C-suite. John Hatfield, chairman of the Michigan Business Aviation Associa tion and aviation director for Midland-based Dow Corning Corp. , said

Takeoffs and landings of private jets and recreational planes at the airport dropped from 202,345 in 2007 to 119,581 in 2010, according to figures provided by J. David VanderVeen, director of central services for Oakland County.

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how executives spend their time is critical, and corporate aviation is one way to maximize those hours. According to a 2009 study of S&P 500 corporate jet users by NEXA Capital Advisors , companies that used corporate jets experienced 116 percent higher annual revenue growth between 2003 and 2007 than companies that did not. Income was 434 percent higher during that time, according to the study. “Time is not a renewable resource; we’re all bound by the same 24 hours a day,” Hatfield said. “What we do in that 24 hours makes a difference on how effectively we run our businesses, and corporate jets leverage and multiply that ability to be effective.” Lear Corp. owns one corporate jet, said Mel Stephens, senior vice president of communications and facilities. “It’s a company asset; we’re a global company that operates in 35 countries,” Stephens said. “The fastest-growing part of our business is Asia, and it’s not the most dense areas, but smaller cities. We need to get to these plants. (Our jet) is much more effective and efficient to get to these places versus flying commercial.” For Bagne, public perception isn’t part of the equation.

“It’s not a status symbol or for pleasure. It’s a business tool,” Bagne said.

Back to the skies With the public’s short memory and a recovering economy, businesses are renewing their interest in corporate aviation. This year, GM re-established its corporate jet fleet by acquiring “a few” used corporate jets, said Pat Morrissey, GM’s director of corporate communications. He declined to reveal the exact number, but said the jets make the automaker “more competitive and efficient in the U.S. and globally.” Bagne said the healthier economy and low interest rates make the decision to enter corporate aviation a no-brainer as she weighs fractional ownership with Corporate Eagle or acquiring a $24 million Gulfstream G280. “Right now, the cost of money is negligible, and it may be cheaper to buy a plane right now than do fractional ownership and find we need to buy one later,” she said. Bagne said she expects to make a decision by early next year. For Southeast Michigan’s business aviation industry, Bagne represents a glimmer of hope as it adjusts to a different type of buyer. “Business aviation is coming back, but it’s coming back different,” Nini said. “Many companies own their own planes, but we’re seeing more and more fractional ownership.” The company’s fractional ownership program has grown from 22 mem-

21 bers in 2010 to 39 today, Nini said. Corporate Eagle sells shares of its 13-jet fleet, where its members pay for an eighth-share of the jet, which allows them to use the jet without outright owning it. Corporate Eagle manages the maintenance, crew and flight details for each of its members out of its four hangars at Oakland County International Airport. A typical eighth-share of one of its Hawker 800 jets, which holds eight to 10 passengers, costs $485,000. The corporate member can buy or lease that share, Nini said. On top of the cost of shared ownership is an $8,000 monthly management fee and about $2,800 an hour for flight time. On Oct. 23, Corporate Eagle closed on its second fractional share of a new $10 million Dassault Falcon jet, which seats 10 and has a top speed of 520 mph. Nini said the company plans to reach a fleet of 15 jets by 2018. Nini projects revenue to top $20.5 million this year. Corporate Eagle, which employs 54, is also considering adding more hangar space at Oakland County airport and Detroit Metropolitan Airport. In the past 12 months, Corporate Eagle’s fleet has flown 1,529 trips, taking nearly 9,000 business executives to 27 countries. “The time of businesses recoiling and hiding their planes is coming to an end,” Hatfield said. “Companies are coming around to what we can do, and that’s help them make money.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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MATTRESS FROM PAGE 3

cent to $6.2 billion, with the number of mattresses sold rising 4 percent to 20.9 million, according to the Alexandria, Va.-based Interna tional Sleep Products Association.

According to a Furniture Today report, the association’s latest industry forecast projects consistent growth the next two years, with the wholesale value of mattresses sold increasing 6.5 percent in 2016 and 2017 and the number of mattresses sold rising 4 percent each year. The trade publication said the ISPA’s industry forecast attributes the increases to growth in disposable income and a solid recovery in housing. Last fall, U.S. Mattress added a store in Birmingham, and this summer opened stores in Southfield and

JOBS FROM PAGE 3

In 2014, Detroit had 258,807 jobs and a population of 706,663, according to an April report by the Corporation for a Skilled Workforce and funded by J.P. Morgan Chase & Co. That’s only 0.37 jobs for every resident — abysmal compared to other cities. For instance, Atlanta has 818,462 jobs in its city and a population of 447,848, or 1.83 jobs for every resident. Cleveland has a population of 394,335 and 466,305 jobs, or 1.2 jobs for every resident. These cities must

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Bloomfield Hills. A 15,500square-foot warehouse outlet center is also set to open in Livonia on Industrial Road beJoe Nashif: Majori- tween Wayne and Levan roads ty of people buy mattresses in store. Nov. 16, following the closing of one of two warehouses in Brighton. And within the next year, Nashif said, the plan is to open three more stores in leased locations, giving the company nine sites. Those stores will add a projected 10 more jobs, on top of 12 created by the recent store openings, he said, noting the company now employs 90 people. According to industry estimates, 3 percent to 4 percent of mattress buyers purchase

them online, Nashif said. “While that’s growing, and we are a leader in that niche, the vast majority of mattresses are still purchased in a store. That’s the audience we’re trying to reach,” he said. Brick-and-mortar stores also enable U.S. Mattress to offer brands that are not sold online, he said. In addition, stores increase brand awareness and can drive more people to a retailer’s website, said Ken Nisch, chairman of Southfieldbased retail consulting firm JGA Inc. “When an online retailer has a local presence, customers feel more comfortable that if they have issues or returns, those will be more easily handled with a physical store,” he said. U.S. Mattress’ strong online presence means it doesn’t need as many stores in the region “because customers have the convenience of shopping online 24-7,” Nisch said.

The online mattress segment is exploding, driven mainly by strong marketing on the part of Casper , which is largely an online mattress retailer, said David Perry, executive editor of Furniture Today. “There’s virtually a new online mattress retailer every week popping up,” he said. Those include Casper, Tuft & Needle and Leesa Sleep LLC. U.S. Mattress World’s brick-andmortar expansion is a response to others coming into the online category, Perry said. But it’s also a smart model to expand the business. “If you can be attracted to the brand online but actually go try the mattress, that can be a significant advantage,” he said. Michigan is likely an attractive market for U.S. Mattress because with Art Van Furniture Inc . it has a strong retailer advertising bedding

needs and increasing awareness of sleep sets, Perry said. Though Art Van has sold mattresses online for about five years, well over 90 percent of Pure Sleep mattress sales are through stores, said David Van Elslander, president of Art Van Pure Sleep and senior vice president of Art Van Furniture. “If you’re going to spend that kind of money, people want to see and feel what they’re buying.” Art Van is now looking to establish stand-alone Pure Sleep stores near its nine furniture stores in the Chicago market. He looks at U.S. Mattress World stores expanding in metro Detroit as a good thing. “We actually welcome the competition — it just brings more eyes to the importance of sleep.” 䡲

attract workers from the suburbs to the city for jobs. Detroit’s problem is quite the opposite. Of those 258,807 jobs in the city, 71 percent are held by employees commuting from the suburbs. This conundrum stems from the fact that there are more middle- to high-skilled jobs in the city than in the suburbs, while the city’s labor force is largely undertrained and undereducated. For instance, 38 percent of jobs in Detroit are considered high-skill, requiring at least an associate degree. That compares with just 35 percent in

Wayne, Macomb and Oakland counties, excluding Detroit. Detroit’s labor force largely doesn’t meet that standard, with 63 percent of working Detroiters possessing no more than a high school diploma, according to the study. This leaves Detroiters unqualified for jobs where they live, forcing many to travel outside the city where 39 percent of the jobs in the tri-county region, excluding Detroit, require minimal skills. According to the study, 108,000, or 61 percent of employed Detroit residents, travel outside the city for their jobs. Roughly 46 percent of those travel more than 10 miles from home, with the most common destinations being Warren, Southfield, Dearborn, Sterling Heights and Farmington Hills, the study said. “What this says is that we need to do a whole lot better with our buses,” Duggan said in an interview with Crain’s. “We need a whole range of jobs, and what we’ve done is make it easier for business to open in the city by simplifying the permitting process.” Duggan pointed to the recent investments made by Sakthi Automo tive Group USA Inc. , which is in the middle of a projected $60 million

expansion on Detroit’s southwest side, as well as the construction of the Detroit Red Wings arena. “We’re getting a mix of jobs, and it’s dramatically better than it was a year and a half ago,” Duggan said. But the city’s immediate need is in low-skilled positions in industries rife with those positions, such as retail, hospitality, warehousing and transportation and construction, the study said. Detroiters, especially those who are underemployed, unemployed and undereducated, did not learn the “soft skills” — such as teamwork, communication skills and conflict resolution needed to hold jobs above low-skill, the study said. “Many of the workforce development agencies in Detroit report that they cannot even begin to look at moving workers into middle-skilled jobs because they need help just to be ready for lower-skilled jobs,” the study said. “Since minimal-preparation jobs provide pathways to employment for low-skilled adults, this makes it hard for Detroit residents to access on-ramp success.” Masters said there is a short-term need for low-skilled jobs as the workforce board builds its plan. “There are a lot of holes to plug

before we can get these workers into skilled positions,” Masters said. “You can’t just take people who are basically illiterate and throw them into a class and have them workready in two months.” The city, in theory, needs large employers with tons of low-skilled jobs to materialize. Companies like Wal-Mart Stores Inc. , Amazon Inc. or Deutsche Post DHL could move the needle, but only slightly. The world’s largest retailer, WalMart employs roughly 335 associates per store. So Detroit would need Wal-Mart to open 147 stores in the city to create the 49,000 jobs needed. Dozens and dozens of Amazon and DHL warehouses would work, too. While that isn’t realistic, it sets the point. Detroit can’t rely on attracting those employers alone. The workforce board plan must be of a large scale, Masters said. “A problem like this requires a large-scale undertaking that will be very expensive,” Masters said. “We’ve got to think outside the box. What we’ve been doing hasn’t worked.” Masters said the workforce board needs to attract federal dollars to make any plan work and to create a cohesive one-stop shop through which to funnel Detroit’s unemployed workforce. David Meador, co-chair of the workforce board and chief administrative officer at Detroit-based DTE Energy Co. , said the group plans to open a one-stop resource center next to the state offices in Cadillac Place on West Grand Boulevard. “Our sense is that we have to pick the problem apart and take on one piece at a time,” he said. “We need an understanding of the systems that need to be put in place and to create a more thoughtful way to work with the city’s unemployed.” Meador said it will take time for the board to put a dent in the crisis, but said it’s the city’s best option. “There’s lot of work going on, and we need to put everyone together and on the same page,” Meador said. “We need a ‘Grand Bargain’ for unemployment, because no one group can solve this; and if we don’t do something now, we’ll soon have entire generations that never held a job.” 䡲

Sherri Welch: (313) 446-1694 Twitter: @SherriWelch

Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

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TECH FROM PAGE 1

StatChat, which has been licensed from Detroit-based Henry Ford, will be owned by Segura. The Henry Ford Innovation Institute created the requirements for StatChat, to replace the hodgepodge of communication tools now used in hospitals — including pagers, cellphones, land lines, text messages, emails and face-to-face conversation. StatChat will use Microsoft’s Skype for Business as the basic platform, with Vision Technologies building on features and capabilities deemed necessary by the Innovation Institute. Microsoft’s international health care business unit will market StatChat in the U.S. and overseas. Segura said StatChat will begin generating revenue next year. He said pricing is still being worked out and declined to provide revenue projections. “We already have health care systems around the country telling us they want in,” he said. “We’re very excited about this collaboration,” said Michael Robinson, vice president of Microsoft’s health and life sciences business unit. “This is a new model for us to take technology to the marketplace. In this day and age, it amazed me we still have pagers in the hospital environment.” He said he took a tour at the Henry Ford Innovation Institute almost a year ago and was briefed on plans for StatChat Michael Robinson: then. New model for tech “They really in the marketplace. have a framework that I think is mature enough to bring to market,” he said. “We can help them get into the Cleveland Clinic or wherever we have customers.” Ward Detwiler, project manager at the Henry Ford Innovation Institute, said StatChat has been in the works for two years, growing out of a request for two residents at the Henry Ford to scout around for problems to solve. “You look at how doctors and nurses communicate, and it’s very disaggregated,” he said. And some of it, text messages particularly, don’t comply with the Health Insurance Portability and Accountability Act of 1996, which requires patient confidentiality. Detwiler said about 250 Henry Ford professionals, in the departments of surgery and orthopedic surgery, will beta test StatChat later this year. Rajesh Kothari, managing director of Cascade Partners, a Southfieldbased investment banking and venture capital firm that focuses on health care, said that while StatChat may solve a real need for better workflow tracking and communication about patient care, VisionIT may have a tough time convincing hospital executives to pay for it when they are under pressure to cut costs.

“If you look at the top five problems hospital CEOs are looking at, I doubt this makes the top five,” he said. In March, VisionIT, annually ranked as one of the fastest-growing IT companies in the U.S. and as one of the largest Hispanic-owned companies in Michigan, was rebranded as Vision Information, the holding company for three LLCs — VisionIT, which is developing StatChat, other mobile apps, IT products for smart homes, wearable technologies and the so-called

GROWING:

Internet of Things; VisionPRO, an IT staffing business; and Prime Work force, a managed-services provider. The holding company employs more than 1,100. The company has 30,000 square feet at its headquarters at 3031 W. Grand Blvd., with 7,000 square feet being carved out for the innovation center. Segura said the innovation center will also host community events, training programs for Detroit students and hackathons. 䡲 Tom Henderson: (313) 446-0337 Twitter: @TomHenderson2

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BETTING FROM PAGE 1

pending in the Michigan Legislature could be invalid on the day they’re adopted, provided they get that far. Any efforts inevitably will encounter resistance to the notion of expanded gambling in Michigan. Governors from John Engler to Rick Snyder have been hesitant to allow horse racing tracks to install slot machines or video lottery terminals — something these bills don’t attempt, though track owners continue to call for them as a way to raise revenue. And a 2004 amendment to the state constitution requires a statewide vote before any new form of gambling or state lottery game is approved, with the exception of tribal casinos and Detroit’s three commercial ones. Some industry insiders, though, say attitudes toward sports betting are changing nationally, as gambling in general becomes more widely accepted and bettors, with few legally sanctioned options, spend billions on the underground market. Proponents of looser federal laws concerning sports gambling gained a high-profile ally in Adam Silver, commissioner of the National Bas ketball Association , who penned a November 2014 op-ed piece for The New York Times calling for “a comprehensive federal solution.” That would include standard rules governing licensing, monitoring and minimum-age requirements while preserving the games’ integrity. The country’s major sports leagues all had opposed any softer stance toward sports betting since at least the early 1990s. “This industry has been moving so fast that the legislatures are really a little bit behind,” said Michael Huff, an attorney with Grand Rapids-based Mika Meyers PLC and a member of the Reston, Va.-based Sports Lawyers Association. In Michigan, newly introduced gaming bills would allow casinos to operate sports books and take bets on simulcast horse races, offer legal protections to fantasy sports betting, and update the state’s horse racing statute.

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A big reason for the recent legislative push is financial. State Rep. Robert Kosowski, D-Westland, whose casino bills earned a hearing last month in the House regulatory reform committee, proposed using some of the tax revenue from sports books to fund road repairs. Gaming is big business in Michigan. Detroit’s three commercial casinos top $1 billion in annual receipts. They each pay a state wagering tax equal to 8.1 percent of their net win, which has generated $83.4 million in tax revenue through September, according to data from the Michigan Gaming Control Board , the casinos’ regulating agency. No one knows the size of the illegal market, but some estimates peg it at $400 billion annually flowing outside the watch of state and federal regulators, said Joseph Asher, CEO of British bookmaker William Hill PLC’s U.S. division, who testified

About the gaming bills Bills pending in the Michigan Legislature would update state gaming laws and give more control over sports betting to casinos, horse tracks and fantasy sports players. The bills include:

䡲 House Bills 4669 and 4670: Sponsored by Rep. Robert Kosowski, DWestland, the bills would allow Michigan casinos to operate a sports book and accept bets on simulcast live horse races. Kosowski said that would include both tribal casinos and MotorCity Casino Hotel, MGM Grand Detroit and Greektown Casino-Hotel in Detroit. 䡲

Senate Bill 459: Sponsored by Sen. Curtis Hertel Jr., D-Meridian Township, this would remove fantasy sports participation from potential criminal penalty under Michigan’s penal code. Hertel says he wants daily sports classified as “games of skill,” rather than “games of chance” — a key regulatory distinction.

䡲

Senate Bill 504: Sponsored by Sen. David Robertson, R-Grand Blanc Township, the bill would update Michigan’s 20-year-old horse racing law, including changing how purses are distributed.

recently before the House committee. The House Fiscal Agency, in an analysis of Kosowski’s bill, estimated Detroit’s casinos could generate $25 million to $30 million in adjusted gross receipts annually on sports wagering, based on data from Nevada. That could drop up to $2.4 million per year in state casino taxes into Michigan’s School Aid Fund and another $3.3 million annually into the city of Detroit’s coffers from a local casino tax. Yet sports betting totals just 2 percent of the statewide gaming pie in Nevada, the agency wrote, so it’s not likely to be a major revenue factor. It’s not clear that all of Detroit’s casinos could operate a sports book even if they wanted to. Some professional sports league contracts prohibit casinos from offering sports betting if their owners also own teams. This could affect MotorCity Casino Hotel in particular, if it were to be decided that casino owner Marian Ilitch also shares ownership of the Detroit Tigers and Detroit Red Wings with husband Mike Ilitch. Major League Baseball has more specific bans on this than the Na tional Hockey League does, Huff said. Detroit’s casinos would not comment for this story. The American Gaming Association , a Washington, D.C.-based trade group representing the casino industry, said it has no position on the pending Michigan legislation. The best solution would be for the state to manage all gaming, rather than leaving sports betting to black-market bookmakers, Kosowski said. Should Michigan casinos be allowed to operate sports books, he added, it’s not inconceivable that it could be a boon to state tourism. “People go to Vegas just to sportsgamble,” he said. “I think the market is there. I think we can capture it.”

Federal law prevails One problem with efforts to grow sports betting in Michigan: Federal law trumps states that want to set their own sports gambling rules. The Professional and Amateur Sports Protection Act, passed in 1992, prohibits all state-sanctioned sports gambling. It exempted four states — Nevada, Delaware, Oregon and Montana — because they had previously operated some form of sports betting. But that law, intended to prevent sports betting, led to a proliferation of under-the-table gambling, Asher

said. William Hill operates sports books in Las Vegas and is the manager of Delaware’s sports lottery permitted under PASPA. The issue is playing out in New Jersey, which passed a law in 2012 to legalize sports gambling. Major professional sports leagues and the National Collegiate Athletic Association

sued, claiming New Jersey’s statute violated federal law. The state lost. New Jersey lawmakers partially repealed the state law in 2014, but the sports leagues sued again. A three-judge panel with the U.S. Third Circuit Court of Appeals again ruled against the state, but last month the court agreed to re-hear a challenge to the decision en banc, or in front of the entire appellate bench. And that decision vacated the earlier panel ruling. This can happen when questions of precedent arise or if judges are concerned the first decision was wrong. Eileen DiRocco, publisher of Las Vegas-based trade journal Gaming Today, said regulating sports betting “is not something I believe the federal government should do. It should be up to the states.” In any case, a decision in New Jersey wouldn’t be binding on Michigan because it’s in a different judicial circuit, Huff said. He doesn’t anticipate the U.S. Supreme Court would take up an appeal without split decisions from multiple appeals courts. Still, the ramifications not only could pave the way for sports books at Michigan casinos, but also end the legal limbo about fantasy sites.

Chance vs. skill Proponents of fantasy sports say Congress carved out an exception for them in the Unlawful Internet Gambling Enforcement Act, passed in 2006 to ban wagering on games with chance outcomes. But the issue remains open to interpretation about whether players are actually gambling when they pay to enter the game, create virtual teams and earn points — and potentially prizes — based on their virtual players’ performance. Sen. Curtis Hertel Jr., a Democrat from Ingham County’s Meridian Township, sponsored the Michigan bill to decriminalize fantasy play. The chance-versus-skill question is clear, he said. Fantasy sports players with the most knowledge have the advantage, he said. “It’s different.” 䡲

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CRAIN’S Michigan Senate bill calls for DETROIT BUSINESS www.crainsdetroit.com

Editor-in-Chief Keith E. Crain Group Publisher Mary Kramer, (313) 446-0399 or mkramer@crain.com Associate Publisher Marla Wise, (313) 446-6032 or mwise@crain.com Editor Jennette Smith, (313) 446-1622 or jhsmith@crain.com Executive Editor Cindy Goodaker, (313) 446-0460 or cgoodaker@crain.com Director, Digital Strategy, Audience Development Nancy Hanus, (313) 446-1621 or nhanus@crain.com Managing Editor Michael Lee, (313) 446-1630 or malee@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 News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@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 Editorial Support (313) 446-0419; YahNica Crawford, (313) 446-0329 Newsroom (313) 446-0329, FAX (313) 446-1687 , TIP LINE (313) 446-6766

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changes in purse payouts By Lindsay VanHulle Crain’s Detroit Business/Bridge Magazine

LANSING — An update to Michigan’s 20-year-old horse racing statute pending in the state Senate could reconfigure the way purse money is paid out to the state’s two remaining tracks. Senate Bill 504, introduced by Sen. David Robertson, R-Grand Blanc Township, would update a 1995 state law that deals with everything from revenue distribution to the number of days of live racing. Robertson did not return messages seeking comment. Perhaps the biggest change in his bill? What supporters call a “breedspecific distribution model,” requiring that 100 percent of the money wagered on thoroughbred and standardbred simulcast races stays with the respective horsemen’s groups for the following year’s purses. Current practice splits the wagers placed on simulcast thoroughbred and standardbred races. After winning bettors receive their payouts and a 3.5 percent state tax is paid, the remainder of the common purse pool is divided with roughly 60 percent going to standardbred groups and about 40 percent going to thoroughbred groups, said George Kutlenios, president of the Howell-based Michigan Horsemen’s Benevolent & Protective Association, which represents

thoroughbred racers. That tilts the funding balance in favor of standardbred groups. The issue now is whether that’s fair, considering seven race tracks have closed across the state since 1998. Just two remain — Hazel Park Raceway, which operates as a thoroughbred track, and Northville Downs, which holds live harness races. “Why can’t we just make it fair?” Kutlenios said. Top executives at Hazel Park and Northville Downs disagree on the structure of purse changes. Dan Adkins, vice president of Southfield-based real estate developer Hartman and Tyner Inc. and vice president of the Hazel Park track, said any challenge mounted by the standardbred industry is an effort to keep its share of the revenue pool intact, since harness racing benefits most from the existing setup. Yet revenue splitting is “always going to be a constant battle between the groups that do operate in Michigan, and the reason why it’s such a battle is because that pot continues to shrink year after year,” said Mike Carlo, operations manager of familyowned Northville Downs. “Everybody, naturally, is trying to hold on to the biggest piece that they can, and I don’t begrudge anybody for trying to do that.” Betting at Michigan’s horse tracks has been sliding for 15 years, with wagers falling nearly 8 percent in 2014 compared to the previous year, according to an annual report issued in April by the Michigan Gaming Control Board, which regulates the industry.

The $116.8 million horse bettors waged in 2014 generated state tax revenue of $3.9 million, a loss of nearly 13 percent from the year before. Northville Downs reported a combined $40.6 million last year in live and simulcast wagers, with all but $465,000 coming from simulcast races. Hazel Park had a total of $60.4 million in bets placed. The two tracks do agree on this: The horse racing industry needs to generate additional income if it is to remain viable. Horse racing has lost ground in Michigan as gamblers increasingly have other options — casinos, expanded lottery games and fantasy sports. But Michigan governors have resisted efforts to allow horse tracks to install slot machines or video lottery terminals for new revenue. Gov. Rick Snyder opposes the “racino” concept, despite understanding that the horse racing industry is struggling, said spokesman Dave Murray. A bill from Rep. Robert Kosowski, D-Westland, would allow casinos to offer sports betting and take bets on simulcast horse races — something track executives oppose without receiving something from the casinos. Carlo said he was skeptical of the latest proposals. “We have a future when we have more revenue coming in,” he said. 䡲 LindsayVanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

Fantasy sports skill or chance? Senate bill would clarify legal issue LANSING — An effort to clarify whether fantasy sports are games of skill or chance is underway in the state Senate. Senate Bill 459, introduced by Sen. Curtis Hertel Jr., would specifically exempt fantasy sports from a section of the Michigan Penal Code that prohibits a person from taking money from someone else in exchange for a payout dependent on a chance result. That carries a misdemeanor charge and up to a year in jail. Hertel, D-Meridian Township, said he thinks the change will match a similar legal carve-out in federal law affecting millions of players. Fantasy sports have drawn significant national attention in the past several months, as states consider how to regulate daily fantasy websites like FanDuel Inc.

and DraftKings Inc. They launched a major ad campaign during the start of the National Football League season, but have been dogged by allegations of insider trading. A resolution to the issue will have financial effects. The Fantasy Sports Trade Association, a Chicagobased industry group, says the nearly 57 million people who will play fantasy sports in the U.S. and Canada this year will spend, on average, $465 over 12 months . That translates to more than $26 billion. States have an interest in capturing potential tax revenue that could come from regulation, said Michael Huff, an attorney with Grand Rapids-based Mika Meyers PLC . Plus, Huff said, the major sports leagues stand to make money from advertising and from more viewers tuning in to games. Lindsay VanHulle

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: AcuMax .............................................................. 15 Arborlight .......................................................... 16 Art Van Furniture ............................................. 22 Bodman ........................................................ 13, 14 Corporate Eagle ................................................ 21 Detroit Lions....................................................... 8 Detroit Workforce Development Board ......... 3 General Motors ............................................. 9, 21 Hazel Park Raceway......................................... 25 Helm.................................................................... 17 Henry Ford Health System ................................ 1 IPS Technology Services ................................. 15 JGA ..................................................................... 22

Kelly Services...................................................... 9 Lear ..................................................................... 21 Magnolia by the Lakes........................................ 1 Northville Downs ............................................. 25 Open Systems Technologies............................ 9 Paragon Recruiting ............................................ 9 Pentastar Aviation ............................................ 21 Skyspecs ............................................................. 4 Springthrough................................................... 10 U.S. Mattress World........................................... 3 Vision Information Technologies ..................... 1 Wayne State University .................................... 3 Weber’s Inn........................................................ 13

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WEEK Ford, UAW agree on 4-year pact

5:16 PM

ord Motor Co. and the UAW

reached a tentative agreement Friday on a new four-year contract, The Associated Press reported. The contract, which covers 53,000 workers at 22 U.S. plants, was expected to mirror deals reached with General Motors and Fiat Chrysler. Chrysler workers approved their contract last month; GM workers were voting late last week and were expected to pass their agreement.

COMPANY NEWS 䡲 Owners of the Detroit Red Wings said they will spend an additional $95 million on the team’s new arena — pushing the total project cost to $627 million — for enhancements that include unique seating, a practice rink and outside public spaces. The arena will offer fans access to a club that players will walk through to and from the ice during games, Olympia Entertainment President Tom Wilson told Crain’s. 䡲 Bizdom, founded in 2007 by Dan Gilbert to help launch startup companies, will end those activities in Detroit and Cleveland, the Detroit-based organization said. An organization official said Bizdom will help existing businesses find resources at Gilbert’s Rock Ventures family of companies. 䡲 Flint-based HealthPlus of Michigan and Detroit-based Health Alliance Plan reached a final agreement on the terms of their planned merger, which is expected to become effective Jan. 1, pending state regulatory approval. Plans include the HealthPlus corporate name ceasing to exist. 䡲 Peter Karmanos Jr. is suing Compuware, the Detroit IT company he founded, over its $2.4 billion sale to Chicago-based private equity firm Thoma Bravo LLC. The lawsuit, filed in Wayne County Circuit Court, alleges fraud in the transaction and that the sale price of $10.92 per share was too low. 䡲 Ann Arbor-based St. Joseph Mercy Health System announced plans to spend $41 million to upgrade one of its hospitals in Howell and a medical center in Brighton to accommodate increases in patients. 䡲 Southfield-based advertising agency Doner Partners LLC laid off an undisclosed number of staffers after losing its J.C. Penney account last month. Doner’s corporate owner said the layoffs accounted for less than 10 percent of the agency’s headcount.

䡲 Faurecia Automotive Seating

LLC, a subsidiary of French supplier Faurecia SA, plans to invest $8 million to upgrade its Sterling

ON THE WEB NOV. 2-6

Detroit Digits A numbers-focused look at last week’s headlines:

18,000

The square footage of a planned mixed-use development in Royal Oak. Tasso Teftsis, co-owner of Red Smoke Barbeque, Astoria Pastry Shop and Krema in Greektown, plans to demolish the former Citizens Bank building in a $4 million investment that will include restaurant, retail and office space.

$420M

The amount for which the private art collection of the late A. Alfred Taubman sold in the first two of four auctions. The total collection, with more than 500 works, was valued at more than $500 million. Proceeds will go to the Bloomfield Hills-based A. Alfred Taubman Foundation, after estate taxes.

$600M

The annual increase to roads funding expected to be gained from a new proposal passed by the Michigan Legislature. The plan, which includes a 7.3-cent gas tax increase and a 20 percent hike in vehicle registration fees, drew most of its support from Republicans.

Heights plant. The project, expected to create 90 jobs, is supported by a $350,000 performance-based grant, the Michigan Economic Development Corp. said. 䡲 Will Leather Goods, the Eugene, Ore.-based luxury leather products maker, settled into its new location in Detroit’s Midtown, which officially opened last week. 䡲 Rochester Hills-based Leader Dogs for the Blind completed the first phase of construction for its new Canine Development Center and is closing in on its goal for a capital campaign launched two years ago to fund the center. 䡲 A Plum Market featuring Zingerman’s products opened at Detroit Metropolitan Airport. Another location for the Farmington Hills-based market that features products from the Ann Arborbased food company is to open in Ann Arbor this week. 䡲 Beaumont Health opened its second health care facility —an urgent care center in West Bloomfield — under the newly merged eight-hospital system. The Beaumont Health Urgent Care Center, at 6900 Orchard Lake Road, occupies 2,200 square feet within the existing Beaumont Medical Center. 䡲 Money magazine named Akron, Ohio-based FirstMerit Bank as the Midwest’s best regional bank and Detroit-based Ally Bank as the country’s best online bank. 䡲 The University of MichiganShanghai Jiao Tong University Joint Institute in Shanghai, China, will

receive a $10 million gift from for-

mer Alibaba.com CTO John Wu and his wife. Wu is a UM alumnus.

OTHER NEWS 䡲 The presence of the North American International Auto Show killed Detroit’s chances to get the 2019 college football national championship game at Ford Field, said event officials, who instead awarded it to Levi Stadium in Santa Clara, Calif. 䡲 Construction began on The Griswold, an 80-unit apartment development on top of an existing 10-story building next to the Westin Book Cadillac, Detroit hotel in Capitol Park. 䡲 A three-block stretch of Detroit’s North End neighborhood just east of the New Center area is being looked at for a redevelopment geared to small manufacturers, artisans and other businesses, along with live-work spaces. 䡲 “Wells Castle” — the ornate, historic William H. Wells House on East Jefferson Avenue in Detroit — has a new owner, Banyan Investments, with a plan to attract office tenants. 䡲 The state of Michigan approved its newest nursing school, at Concordia University Ann Arbor, which will start in fall 2016. 䡲 Bryan Barnett, the Rochester Hills mayor who had hit the twoterm limit, won a write-in campaign, and incumbent mayors Jim Fouts in Warren, Bob Gatt in Novi and Michael Taylor in Sterling Heights easily won re-election. Meanwhile, in Flint, Mayor Dayne Walling was unseated by newcomer Karen Weaver amid fallout over the city’s drinking water problems.

OBITUARIES 䡲 Dennis Sullivan, the former Vlasic Pickles Co. president who founded Birmingham-based executive search company Sullivan & Associates, died Oct. 30. He was 74. 䡲

RUMBLINGS RiverFront Conservancy seeks development plan for 400 acres he Detroit RiverFront Conservancy and the city of Detroit are looking for a company to develop a district plan and real estate development framework for the east riverfront. Bounded by St. Antoine Street, East Grand Boulevard, Larned Street and the Detroit River, the area is nearly 400 acres, most of which is vacant or underutilized, the request for qualifications says. Responses to the RFQ are due by 5 p.m. on Dec. 4, and the winner will be selected early next year. Work is expected to begin on the study in March. For more information about the RFQ proposal submission process, contact Ritchie Harrison, riverfront development planner for the conservancy, at (313) 566-8206 or email him at ritchie.harrison@detroitriverfront.org.

Chickpea pasta maker wins Accelerate Michigan prize Banza LLC, a company founded in Detroit last year to make pasta from chickpeas, won the grand prize of $500,000 on Nov. 5 at the sixth annual Accelerate Michigan Innovation event at Orchestra Hall. Genomenon Inc., a University of Michigan spinoff that hopes to improve cancer diagnosis and treatment through quicker analysis of genome sequencing, won the runner-up prize of $100,000. Banza was launched last year after a successful crowdsourcing campaign. Before winning the money last week, the company had already raised $1.3 million in funding and has claimed revenue in the past 12 months of $631,000. The company will use its award to ramp up production. Banza says its pasta tastes like regular pasta but is lower in calories

ANDREW POTTER

Banza LLC will ramp up production of its chickpea pasta after winning the Accelerate Michigan Innovation contest.

and is gluten-free. In October 2014, it landed its first big account, getting shelf space in Meijer stores. It now claims to be in 1,700 stores nationwide and is even available at Eataly, a combination of Italian marketplace and restaurants coowned by celebrity chef Mario Batali in New York City and Chicago. Among eight companies winning $25,000 was Ann Arbor-based Arborlight Inc., which makes lighting systems that mimic natural light indoors, including getting brighter and dimmer as the day progresses. (It’s featured on Page 16.)

Detroit gains more high speed Internet options Two companies announced last week the launch of high speed Internet service to businesses and residents in downtown Detroit. Southfield-based ManagedWay Co. said it had begun offering high speed Internet on a fiber network to residents of the Broderick Tower next to Grand Circus Park. A second company, Royal Oakbased Metro Wireless International Inc., is using that system as a base to then offer high speed Internet, either wirelessly or through a fiber network, to other residents and businesses in a seven mile radius from the Broderick Tower. The base price for the service is $99.

Somerset Collection to get two new stores Chicago-based Marbles: The Brain Store will make its Michigan debut at The Somerset Collection in Troy in

Ron Wells, president of the Detroit Executives Association, presents Mary Kramer, group publisher of Crain’s Detroit Business and Crain’s Cleveland Business, with the 2015 Executive of the Year award.The award is given annually by the business networking group to a top civic or business leader.

time for the holidays, and locally owned Beyond Juicery + Eatery will open its third restaurant at the upscale mall. At Marbles, customers will find games and activities meant to stimulate the brain and challenge the whole family. Its new store will open Nov. 21 in Somerset Collection North on Level 3 and offer gift card giveaways to celebrate. 䡲

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