Crain's Detroit Business, Jan. 23, 2017 issue by Crain's Detroit Business

JANUARY 23-29, 2017

Breathing life into the Henry Ford mansion

SPECIAL REPORT: SMALL BUSINESS Independent bookstores make a go of it in the age of electronic reading,

Restoration aims to open Fair Lane to visitors, Page 3

Page 8

Development

Packard Plant owner eyes spring construction

Talent

Ban-the-box policy gains backers Lazlo LLC founder Christian Birky (left) with Aaron Branch. Branch works to make high-end T-shirts for Lazlo, a fashion startup that operates out of Ponyride, a coworking space for light manufacturing companies in Detroit’s Corktown neighborhood. Branch spent 22 years in state prison.

By Chad Livengood clivengood@crain.com

The Peru-based developer attempting to resurrect the former Packard Plant says it has secured financing and tenants to start construction this spring on renovating the first hollowed-out building at the sprawling factory complex on Detroit’s near east side. The developments are a step forward for an ambitious renovation of one of the world’s best-known industrial eyesores — a grand plan that has drawn both hope and skepticism. Arte Express Detroit LLC, the local holding company of Peruvian developer Fernando Palazuelo, will begin construction of office, commercial and event space in the 121,000-squarefoot former Packard administration building along East Grand Boulevard after the top two floors are cleared of debris and contaminants, according to project manager Kari Smith. Smith expects to the close on financing of $17 million-$21 million from unspecified lenders for the project within the “next two months.” “A lot of it will be private equity,” Smith said. “And people are often surprised by that.” The committed tenants for the now-windowless four-story building include Silveri Architects, Environmental Consulting & Technology Inc., Testing Engineers & Consultants, Sterling Security and the Detroit Training Center, a nonprofit job training organization. Construction is expected to last through the end of 2018 with the tenants moving into the space by the first quarter of 2019, Smith said. Architect Marco Silveri said he and his wife, Cynthia, plan to move their three-person architectural firm from Ferndale to the Packard Plant to get closer to their Midtown clientele.

ED BALLOTTS FOR CRAIN’S

“We’re doing it because we have a business need, and we’re pursuing it because it’s the right thing to do.” Rebecca Dioso, human resources vice president for Alta Equipment Co, on why Alta participates in the ban-the-box program.

SEE PACKARD, PAGE 15

Advocates say movement helps ex-inmates, companies By Lindsay VanHulle

Crain’s Detroit Business/Bridge Magazine

Jordan Abdullah checked the box. Again and again on job searches after he left prison in 2015, the ex-felon marked the space where job applications ask about criminal history. Eventually, tired of getting turned down, Abdullah, 24, said he lied about his criminal record, only to be fired when the employer found out. “A lot of people don’t really want to risk hiring someone like me,” Abdullah said. He said he saw a man beating a child in 2013. He intervened. The situation

escalated into a brawl, a gun was involved, and the man was shot in the leg. He says now he should have just called the police. Abdullah served his time for armed assault and finally, after finding an employer who thought beyond the box, Abdullah is an ironworkers apprentice helping to build the new Little Caesars Arena. The checkbox has long been an object of fear and dread for people like Abdullah. Now, a new effort to get rid of it is gathering steam. The “ban the box” movement advocates that ex-offenders can be a valuable source of labor as the unemploy-

ment rate ticks lower and it’s becoming harder to find people with experience in the trades. Proponents also see it as a way to remove barriers to work for a population of people who often have limited skills or gaps in their work histories while lowering the chances that they will return to prison. In all, 24 states and more than 150 cities and counties have adopted ban-the-box policies, according to the National Employment Law Project, a New York-based advocacy organization that has studied the issue. The

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MICHIGAN BRIEFS Snyder pushes to amp up investments in state infrastructure Gov. Rick Snyder called for major new state investment in maintaining sewers, water systems and other public works in his State of the State address, citing failures including the Flint water crisis and the Fraser sinkhole. The call came during a speech that heartily touted numerous successes — declining unemployment, more private-sector job creation, large companies like Google and Amazon setting up shop in Detroit and its suburbs. Snyder also pushed a goal to boost the state’s population above 10 million by the 2020 census. He said the first step toward improving the condition of Michigan’s roads, bridges and drinking water is to keep track of the state’s infrastructure systems, and he proposed creating a central database that can act as a clearinghouse to help state and local governments and utilities better plan for repairs. The database, known as an asset management system, was among the recommendations put forth last month in a report by a task force appointed by Snyder to identify Michigan's infrastructure priorities. The

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“We’re at risk in every corner of Michigan” for failed infrastructure, Gov. Rick Snyder said during his State of the State address. “We know this is a huge challenge.”

group was created in response to the lead-poisoning crisis in Flint’s drinking water. The crisis in Flint — and the real infrastructure challenges across the state that it raised — will remain a priority in the coming year. More recently, a sinkhole opened up in Fraser due to a leaking underground sewer line. “We’re at risk in every corner of Michigan” for failed infrastructure, Snyder said during the speech, delivered to a joint session of the Legislature at the Capitol. “We know this is a huge challenge.”

INSIDE

He called the Flint emergency a “sad chapter in the history of our state,” pledging to continue working to end the lead emergency. A year ago, Snyder used his State of the State address to apologize for the crisis in Flint and ask lawmakers for millions of dollars in state aid. He also said he would release two years’ worth of emails related to Flint, which was an unusual step considering the governor’s office is exempt from state open records laws. A package of bills that would have opened up the governor’s office and the Legislature to the Michigan Freedom of Information Act failed to get out of the legislative term that ended in December. Democratic lawmakers continue to call for increased transparency as the Flint crisis heads into another year.

State tags 38 public schools for closure For the first time, the state of Michigan is planning to close public schools for academic reasons, The Associated Press reported. The Michigan School Reform Office said Friday 38 schools are failing and subject to closure. Some schools may not close if state officials decide it would pose an unreasonable hard-

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ship for students because no better options are available. More than half of the 38 schools are in Detroit. The others are in Benton Harbor, Bridgeport, East Detroit, Kalamazoo, Pontiac, River Rouge and Saginaw. The law allows for state-ordered school closures if chronically underperforming schools have not improved despite receiving other forms of intervention. The closure option had gone unused. Also Friday, 79 “priority” schools were freed from state intervention — the first time more schools were released than were flagged for intervention.

DEALS & DETAILS

6 new ACOs approved

Performance Network LLC; Trillium Health LLC; UOP ACO LLC and OSF Healthcare System, which also oper-

Affirmant Health Partners in Kalamazoo has been approved as one of six new Medicare accountable care organizations in Michigan and will join 15 other ACOs already taking care of more than 300,000 seniors. Affirmant’s new contracting entity, called The Federation ACO, will be assigned 71,000 traditional Medicare patients over the next several months in the five markets — Kalamazoo, Saginaw, Jackson, Lansing and St. Joseph — in which its partici-

KEITH CRAIN

OPINION

PEOPLE

RUMBLINGS

WEEK ON THE WEB

COMPANY INDEX: SEE PAGE 18 pating five partner systems and 1,200 doctors, including 400 primary care and 800 specialty physicians, are located. The other ACOs newly approved to operate in Michigan are: Aledade Independent ACO LLC; McLaren High

ates in Illinois.

CORRECTION Flagstar Bancorp Inc. was ranked incorrectly on Crain's list of largest Michigan banks published Dec. 26. Flagstar should have been listed at No. 7 with $8,772,782,000 in deposits inside the market as of June 30, 2016. A corrected version of the list is at crainsdetroit.com/section/data_ lists.

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Real estate

Nonprofits

Auction prices up as values climb By Kirk Pinho kpinho@crain.com

Fewer things are more emblematic of Detroit’s worst days than the $500 house. While those properties are still around, they are becoming rarer purchases as average sale prices at Wayne County tax-foreclosure auctions have risen more than 50 percent since 2011 and the number of properties auctioned has decreased by almost 65 percent since the peak in 2014, a sign of increasing interest in the city. The decline in $500 property sales can also be attributed to increased interest in the city’s real estate, plus other administrative policies instituted by the Wayne County Treasurer’s Office, according to some of the top property buyers at the 2016 tax-foreclosure auction. Some of those include requiring a $2,500 refundable deposit for buyers of one property and $10,000 for those who are buying multiple properties, said Stevey Hagerman, regional manager for Brick Home Management’s east-side Detroit office, a subsidiary of which purchased the most properties (288) at the 2016 tax-foreclosure auction. He also said the treasurer’s auction has made the current year’s taxes due at the time of the purchase. “The market and the prices have gone up,” he said. “There has been more competition on the good, quality, sturdy, brick three-bed bungalow that from all appearances on the outside is good shape. I think a lot of investors or speculators don’t go after those (lower-priced homes) anymore; they might not see the value.” Brick Home Management subsidiary Motown Rentals LLC spent $1.05 million on its 288 properties, all in SEE AUCTION, PAGE 18

The restored sun porch room at Fair Lane, recreated from a 1919 photo (inset) taken when Henry and Clara Ford lived there.

HENRY FORD ESTATE INC.

The feeling of Fair Lane

Once it’s renovated, visitors to get chance to experience everyday life at historic mansion By Sherri Welch swelch@crain.com

Imagine sitting on the wicker chairs in the sun porch room at Henry and Clara Ford’s Dearborn mansion, listening to music from 1919 as you look out at the Rouge River, hanging out in the hunting-themed field room where Ford gathered with friends like Thomas Edison, or shooting pool in the billiards room. These experiences are what Henry Ford Estate Inc., the historic Fair Lane home’s nonprofit operator, is going for as it continues to restore the Fords’ mansion — with the eventual aim of reopening the home as a tourist attraction. The estate had been shuttered for about three years when the nonprofit took ownership and set to fixing

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the crumbling retaining wall along the Rouge River, leaking roofs and bowing walls before moving to restoration of leaded glass windows, rich fabric wall coverings and antique door hinges. Three years into the project, the estate is working to bring the everyday experiences the estate’s residents once enjoyed to life for visitors. When further along, the mansion will offer a “no velvet ropes tour,” CEO Kathleen Mullins said, a novel approach for an historic estate made possible through the recreation of many of the original furnishings. A larger tour of the first floor of the 57-room home is still several years out, as work to peel back nearly 70 years continues on everything from the doorknobs to painted wood pan-

eling, tarnished sconces, original chandeliers found in the attic and oak floors darkened from years of wax and wear. But Henry Ford Estate hopes to reopen Fair Lane to the public for at least one day a week this year, depending on the progress of renovations, to give visitors already attempting to peek in the windows a glimpse of what’s happening inside. And beginning this month, it will open to small groups of registered visitors coming to get an up-close view of the work and learn from the experts about cleaning and restoring masonry, reglazing antique, leaded glass windows and refinishing flooring using a process to strip away the grime rather than sanding away the SEE FAIRLANE, PAGE 18

HENRY FORD ESTATE INC.

Austin Eighmey of Historic Surfaces LLC works to remove decades of paint from woodwork in the music room.

Manufacturing jobs are no salvation, but manufacturing might be Manufacturing plants will not save our country’s economy. Manufacturing still might. Donald Trump has been sworn in as the 45th president of the United States. the businessman-turned-politician has continually touted recent announcements by Detroit’s automakers about creating jobs, or “bringing jobs back” to the U.S. We could take a fine-toothed comb to assertions about whether the decisions by General Motors, Ford and FCA were, in fact, influenced by the president-elect or were made long before Trump was elected. But it’s meaningless.

DUSTIN WALSH dwalsh@crain.com Twitter: @DustinPWalsh

Manufacturing holds a special place in the imagination of this nation and its politicians. Sparks, the smell of hot oil and blue-shirted men in steel-toed boots brought this country power — politically, financially and militarily.

But there’s more to manufacturing than assembly — a fact lost in today’s discourse about “bringing our jobs back.” Manufacturing is research, design, engineering, supply chain management, and much, much more. That whole chain is what delivered innovation. But the same innovation also has meant fewer workers were needed to assemble things. As men and women learned to make machines smarter and faster, productivity grew higher and workers grew fewer. Technology allowed automakers to use more suppliers, creating SEE JOBS, PAGE 16

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“Everstream’s fiber network is built from the ground up. It has state-of-the-art equipment designed with reliability in mind because we know that’s what our customers want the most from us: speed and reliability.” Mikail Shomade, VP, Engineering

Rosen on Grand Bargain, Detroit’s future and Kwame Kilpatrick Gerald Rosen, one of the key architects of Detroit’s so-called Grand Bargain deal in its historic bankruptcy case, is retiring for good from his position as chief judge of the U.S. District

Court for the Eastern District of Michigan at the end of the month and starting a downtown Detroit office of Judicial Arbitration and Mediation Services

Feb. 1. The mediator in Detroit’s bankruptcy case, Rosen is starting the JAMS office with Steven Rhodes, who oversaw the case as the federal judge and since retired from the bench, and Clarence “Rocky” Pozza Jr., partner at Detroit-based Miller, Canfield, Paddock and Stone PLC. Since they announced the new business venture in October, former Michigan Supreme Court Justice Mary Beth Kelly, who joined Bodman PLC in Detroit as partner and vice chair of the firm’s litigation and alternative dispute resolution practice group in 2015, also has decided to join the JAMS office. One of the key points in the bankruptcy process was the Grand Bargain, which raised $816 million to pay for pensions and spin the Detroit Institute of Arts and its collection to an independent nonprofit, out of reach of creditors. Last week, Rosen, who also handled key aspects of the Kwame Kilpatrick saga, spoke with reporter Kirk Pinho in his seventh-floor chambers on Fort Street downtown.

What’s your sense of how well Detroit has been adhering to the plan of adjustments?

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DIA website and I saw that the DIA attracted over 600,000 people a year to Midtown. I thought, “Gee whiz, liquidating the DIA would be like dropping a hydrogen bomb in Midtown.” It would suck the life out of it. So there was that part of it.

We are hitting the marks, exceeding them in most areas — certainly revenue, I think the last report I saw was about 2 percent above the projected revenue. On budget. Expenditures are below — not much — but slightly below what was projected. Those are two important things. Certainly, investment and growth in the downtown area, certainly Midtown, and with the Ilitch development coming to fruition, the Red Wings, Pistons, some of the entertainment venues becoming a reality now, I expect the area between Midtown and downtown will become very vibrant over the next two-three years.

What was the most difficult part of that case aside from the Grand Bargain?

Before you get to the Grand Bargain, you have to go back and see what the case was when we found it, which was an assetless bankruptcy. That was the most difficult part, for me. Certainly, there were a lot of first-impression legal issues. Certainly there were issues that could have gone all the way up to the Supreme Court, whether it was the collision between the federal bankruptcy code and the federal constitutional supremacy clause and the Michigan Constitution’s provisions to protect pensions. But there were also a lot of other really important issues: The tenor of the security instruments, of the finance instruments, the level and tenor of their security, were all major issues in the bankruptcy, whether they could be crammed down all

What would be the theme song for Detroit’s bankruptcy case?

“Don’t Stop Thinking About Tomorrow.” Favorite lawyer joke?

“I’ll never forget when I was reading Kevyn Orr’s proposal for creditors, coming to the asset section and realizing that there really weren’t any assets other than the art.” Gerald Rosen across the rope line on the financial creditors’ side were really first-impression issues. But overwhelmingly, the most challenging issue for me was an assetless bankruptcy — other than the art. I’ll never forget when I was reading Kevyn Orr’s proposal for creditors, coming to the asset section and realizing that there really weren’t any assets other than the art. That was a devastating report.

It was devastating. Kevyn, he had just hired Christie’s to appraise the art, so he was clearly serious about it. I remember thinking, “What the hell have I gotten myself into?” My job is to get deals. To get deals, you have to have revenue or assets that can be monetized into revenue, and the cupboard was pretty much bare. There didn’t seem to be much to work with for deals, other than the art. There were other aspects to the DIA that I was concerned about. This was a time when Detroit was cannibalizing its heritage to mortgage its future, consistently over the decades. In terms of Detroit’s future, it didn’t make sense to me to do that again, but I was realistic. Time was Detroit’s enemy. The only way to get through the bankruptcy in any sort of expeditious way was through consensual agreements, and the only asset that could be monetized was the art. So that’s basically what led to the idea of the Grand Bargain — trying to figure out a way to monetize the art without liquidating it, and giving the proceeds to the retirees. Neat trick. I’ll never forget sitting in this little condo (in Florida) thinking, “What the hell have I gotten myself into? Is my legacy going to be that we liquidated one of the great art collections in the world for sheikhs in Dubai and oligarchs in Russia?” I wasn’t very excited about that. There was another aspect too. One of the few nascently growing areas in Detroit was Midtown. I went on the

I don’t do lawyer jokes. I like lawyers. I respect them. In the bankruptcy case, we had some of the very, very best lawyers in the world. They worked hard. They were open-minded. It was a crisis situation that we were all in. They realized it, and they were willing to open their eyes to creative, innovative ideas, not just the Grand Bargain.

We might be having some new City Council members a year from now. What would you suggest to the new ones potentially coming on board?

I’m not in politics. I’m not a political person in the sense of being involved in the political maw, but my observation is that Mayor (Mike) Duggan is working very positively with President (Brenda) Jones and other members of the council in a way that has not been done by any mayor in years and years. At the same time, my word of caution is that we have to be careful to continue to provide the fertile ground that Detroit is for investment for people coming in. Part of that is not placing onerous regulation on people coming in, with artificial employment requirements. I understand the social need for that and I applaud it. I think if Detroit is going to continue the comeback that we are on, the neighborhoods have to be part of it and the African-American population has to be part of it. But you can't disincentivize people coming in. You think that’s been done recently?

I’m a little bit concerned about the community benefits ordinance. The one that was passed was certainly better than the alternative, but I’m still leery of it because it’s creating entry barriers.

What was the most surprising individual (Kwame Kilpatrick text) message you saw?

A lot of that is sealed. I would just refer to it generically by saying there was very little public business conducted by the mayor and his associates. I’m sure they conducted business by communication means other than texts, but these were city-provided pagers. I assume that the city provided the pagers for people to be able to conduct city business on them, and I saw very little. I learned a lot of new text language that I hadn’t known before, and I appreciate urbandictionary.com.

Twenty-four hours left in the Obama administration. It’s pardon and commutation time. Does the former mayor deserve one?

No. Absolutely not. I have to be a little cautious, but I presided over that grand jury for 2 1/2 years.

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OPINION

Fouts drama needs resolution

arren is the third-largest city in Michigan, and its mayor needs to be somebody with whom business can do business. Jim Fouts isn’t that guy. Fouts, 74, first elected in 2007 after 26 years on the City Council, denies that it’s his voice on two sets of recordings of a man disparaging African-Americans, women, and disabled people. While he gets a presumption of innocence in legal quarters, the public square is less forgiving. “It is his voice,” said Macomb County Executive Mark Hackel, a longtime critic of Fouts who released the first recording. “That’s the way this person thinks.” Hackel has denied being the Warren is the source of a second recording, released last week by the news site third-largest Motor City Muckraker. city in On that tape, a voice alleged to Michigan, and be Fouts’ is heard comparing Afriits mayor can-Americans to chimpanzees and calling older women hags who needs to be are “mean, hateful, dried up.” somebody It was a last straw for three other with whom political leaders who joined Hackbusiness can el at the Detroit Economic Club’s do business. annual “Big Four” lunch. “I think he’s probably ended his career,” said Oakland County Executive L. Brooks Patterson. No stranger to intemperate remarks, Brooks tried to joke that Fouts’ proctologist called the mayor last week to say “they found his head.” This is no laughing matter. Detroit Mayor Mike Duggan said if Fouts truly believes the tapes are fabricated, he should pursue felony charges. Otherwise, “he needs to resign because he’s lying.” Wayne County Executive Warren Evans said Fouts’ denials are not convincing. “His statements do not represent everybody, and so there’s a hypocrisy, I think, in sitting back not asserting more vigorously that he didn’t do it, if in fact, he didn’t.” Fouts must decide whether to fight harder, or resign, which he hadn’t done as of Crain’s Friday deadline. If the mayor happens to quit before you read this editorial, it still won’t be soon enough for the “Big Four” and the good people they represent.

Does a slap-in-your-face management style work? Proud. Loud. Pugnacious. He is Donald Trump, our new president. This fellow from the patrician class spoke the language of the working class and to the surprise of the “experts” won the election. He projected the aura of a winner, and he delivered. The challenge now: How will he govern? Elections can be won by being negative. Good governance requires people to come together. Mr. Trump’s style is very much a slap in the face to people in my business, the field of human development. We preach leadership that embraces difference, one that is inclusive as well as consensual. Were we wrong about what people expect in a leader? Did we fail to understand Mr. Trump? Should we teach something new? The answer is yes, yes, and hell no! Respect for others is fundamental to sound leadership. A leader who puts himself first by putting down others is no leader. Make no mistake. Leaders do not make a positive difference by standing back and watching. They act with resolve. One of my favorite quotes on

decision-making comes from CEO Jeff Immelt, who told Joe Nocera, then of The New York Times, “When you run General Electric, there are 7 to 12 times a year when you have to say, ‘You’re doing it my way.’” Immelt added that if he made too many decisions, or too few, he would not be doing his job properly. As Admiral James Stockdale, who studied Stoic philosophy after spending seven years as a POW in the Hanoi Hilton, wrote “Leadership must be based upon good will. … What we need for leaders are men of the heart who are so helpful that they, in effect, do away with the need of their jobs." Such leadership fosters a culture

where good people, smart people want to participate. Consultants call this engagement, which really is nothing more than the idea that people like what they do and want to come to work every day. Most importantly, engagement requires leaders with strong moral character: men and women who know themselves and are centered professionally and personally. One value that the best leaders practice is humility. While such a topic is seldom taught in business schools, humble leaders are people who know themselves, warts and all. They are confident in their own skins and unafraid to own up to mistakes. They seek counsel from people they respect, and they demand their direct reports speak up. Trump in person may not be the man he is in public. We are told he is a good listener and respects other points of view. If so, hurrah, hurrah, our country will be better for such leadership. But if he practices the belittling behaviors we have seen to date, then his administration will be in for a rocky tenure. All of his voters will be disappointed by the failures of the man in which they invested high hopes.

per gallon and higher fees add up to more than $1 billion to be spent to fix roads and bridges, including dangerous potholes. Like most loyal Michiganders, I am willing to contribute my share to this noble cause. I am sure that my friends in the road-building business are going to become richer, but that’s OK. Unfortunately, wheel shops could see their business drop by 90 percent as drivers no longer need to get wheels and rims repaired and replaced.

I’ve started to give. It’s kind of like a United Way campaign for transportation. We give a little every week. So where are the orange barrels? As much as I hate those barrels, impatient person that I am, I want to see some action for my gas tax. That means the orange barrels should start appearing — not next month or this summer, but now. Make my driving miserable, starting now. It’s worth it. Let’s get our Michigan roads fixed. Now. Forever.

OTHER VOICES John Baldoni

Baldoni, based in Ann Arbor, is an executive coach and author.

I am waiting for the orange barrels It is that time of year again. No, not auto show. Nor skiing. It’s pothole season. Recently, Fraser was attacked by a giant sinkhole. It’s the only thing that rivals the holes in our roads, trying to devour our automobiles. When pavement freezes, then thaws, the potholes appear. And in the spring, just about the time of baseball’s spring training, crews appear with asphalt patches to try and protect us until winter arrives and the cycle starts all over.

KEITH CRAIN Editor-in-chief

This is nothing new. We have lived with potholes for years. Drivers are challenged to maneuver around

having their vehicles swallowed — or just blowing a tire. But there might be hope. More than a year ago, in what seemed to all of us as the dark of night, state lawmakers passed a promising solution for this ongoing nightmare. This year, as a New Year’s gift from Lansing, we all started paying higher taxes at the gas pump, a little over 7 cents a gallon more for gas and 15 cents for diesel fuel. It was the first increase in 20 years. With higher vehicle registration fees, the pennies

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How Crain’s helps you win Last week, I introduced myself to the Crain’s Detroit Business community and promised to use this space to share stories about the city’s rise, as well as warn when Detroit falls back on bad habits. “And I’ll explain how Crain’s can help you tell your stories — how we will help you succeed.” That last sentence might make you wonder: “How can Crain’s help me succeed? How does a newsroom help me win at business?” After all, even the best business reporter doesn’t know your business like you do. The answer requires you to understand that Crain’s is more than a highly regarded publication about the city’s business community. Crain’s is a full-service communications company that is creating new ways to solve your business problems — from inside and, increasingly, far outside our fiercely independent newsroom. At Crain’s, we cover the people with whom we do business. Our reporters speak truth to power. Our business units — marketing, advertising, native advertising and other forms of custom content — speak truth with power. How does all this help you? First, the Crain’s newsroom has just been restructured to produce more news that my predecessor, Mary Kramer, calls “business intelligence” — information and insights that help you find new business and reshape yours. This is our bread and butter, information you can’t get anywhere else, and we’re doubling down on it. Crain’s beat reporters will no longer be responsible for more than one topic area, a practice that spread our coverage thin. Our top reporters will focus on a single beat and nail it — developing sources, mining those sources for scoops and insights, and writing stories that provoke new thinking and action. In short, they’ll go deeper: Jay Greene on health care, Kirk Pinho on real estate, Bill Shea on sports business, Lindsay VanHulle on government, Sherri Welch on nonprofits and Dustin Walsh on economic issues. Our latest addition, Chad Livengood, will connect the dots on a beat we call Detroit Rising. I’ve never worked with a better batch of reporters. While these veterans dig deeper, we’ve hired three young but experienced journalists to broaden our coverage. Tyler Clifford, Annalise Frank and Kurt Nagl will work with News Editor Beth Valone on our breaking news desk to bring you the latest developments from news outlets throughout Michigan, as well as from our own sources. If you’ve got news that a beat reporter can’t address, this team will crank it out. Beth and her Big Three will make Crain’s a one-stop shop for business coverage. To be clear, Crain’s reporters will cover the business community with no fear or favor. Their stories might make you uncomfortable, even angry, but the truth often hurts. They will be fair and accurate and smart, rededicated to the best practices of journalism just as many other news outlets are deserting them. So please pitch us your stories.

RON FOURNIER

EDITOR, PUBLISHER rfournier@crain.com Twitter: @ron_fournier Independent of the newsroom, Crain’s is expanding a suite of business services that help you tell your stories and deliver them to targeted audienc-

es. We’ve long been on the forefront of fully integrated ad campaigns: print and digital ads, and events. Now we produce content marketing, also called “custom content,” selling products and burnishing brands via native advertising, sponsored content, advertorials, and branded content. You can do some of this work inhouse or hire an agency, but storytelling is in our DNA. Our head of custom content is Kristin Bull, a brilliant editor and writer who has worked for 22 years inside newsrooms. Now, she works directly for you. Finally, we want you to join our enterprise. Later this year, Crain’s Detroit

Business will launch a membership program, featuring full access to our journalism plus a suite of business products and services that we’ll develop with your input. Membership offerings will change and grow as your businesses grow and change. Here’s the thing: Our aim at Crain’s isn’t simply to find new readers. We want new partners. Ron Fournier is editor and publisher of Crain’s Detroit Business. Catch his take on business news at 6:10 a.m. Mondays on the Paul W. Smith show on WJR AM 760.

To be clear, Crain’s reporters will cover the business community with no fear or favor. Their stories might make you uncomfortable, but the truth often hurts.

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Experts: Small biz should start 2017’s tax planning now

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

SPECIAL REPORT: SMALL BUSINESS

By Leslie D. Green

Special to Crain's Detroit Business

Little can be done to help small business owners get their finances straight in time for tax filings this April. However, if they haven’t filed taxes yet, they can still try to maximize benefits from the current tax rate. “Given the results of the election, it is likely tax reform will be enacted,” said David Rehrauer, managing director of Tax for KPMG in Detroit. “Initial information suggests the tax rate will decrease and some other deductions/ incentives may be eliminated. Companies should consider accelerating deductions into 2016 and/or deferring revenue recognition to future years.” Startups, he said, should consider if they are eligible to claim a research and experimentation credit. A provision in the PATH Act allows qualifying companies to take up to $250,000 in credits that offset payroll taxes. Moving forward though, Lisa Carroll, audit partner at KPMG Private Markets Group in Detroit, said there are three things small business owners need to do to begin 2017 on the right foot. First, understand what your organization’s cash flow needs will be in three to six months and in one to three years. This includes knowing your expenses and potential income in advance. Those looking to make acquisitions or increase hiring need to determine whether they will require additional outside funding or funders. “You need to determine if there are going to be times when you’re in a lowcash situation,” Carroll said. For example, if you’re busy buying products to increase inventory and hoping to grow your business, but there is going to be a longer return time before getting paid by customers, look at the terms for your customers. “Do you need to have customers prepay?” Second, examine how the December interest rate increase and possible additional rate increases in 2017 will affect your organization. “Small businesses should check to see if they have adjustable lines of credit that may increase, so they aren’t surprised by the impact,” Carroll said. “Do they have credit cards where they may pay higher interest rates or term loans with fixed interest rates that need to be renegotiated?” Third, review significant contracts or policies created over the last year. “Do your insurance policies still cover what you need to have covered? Additional inventory and space need to be protected in case of adverse incidents,” she said. “Understand what your policies cover and the deductibles.” Of course, throughout the year, you should keep thorough accounting records and routinely speak with a tax accountant to identify opportunities to increase deductions and understand how changes will impact your business.

A good read

on books Janet Webster Jones is owner of Source Booksellers in Detroit.

IFOMA STUBBS

Local independent bookstore owners find success with author events, personal touch By Leslie D. Green

Special to Crain's Detroit Business

The advent of electronic books, surge in Amazon sales and closure of big-box bookstores have had many assuming independent bookshops will crash and burn, never to rise again. Yet, in Detroit, indie bookstore Source Booksellers has been growing since opening some 12 years ago, and another opened just recently. “Opening a bookstore is a risky business. You have to have a pretty

good plan of how you’re going to compete,” said Susan Murphy. She opened Pages Bookshop on the city’s west side in May 2015, she said, to the appreciation of nearby residents who were thrilled not to have to shop online. Michigan ranked 42nd in terms of the number of bookstores per capita, according to a 2012 Publishers Weekly study, the most recent available. The estimated 327 bookstores — 24 chain, 150 independent and 153 big-box stores — serve 9.9 million Michigan resi-

dents. That’s about one bookstore for every 30,000 people. However, the Michigan Retailers Association’s Tom Scott points to the nationwide resurgence of independent bookstores as an indicator of what’s to come. “They’re coming back,” said the group's vice president of communications and marketing. “The number of independent bookstores climbed last year in the U.S. They’re such great community assets. They’re coming.” Oren Teicher, CEO of the American Booksellers Association, said the number of member independent bookstores across the country increased about 26 percent, to

1,775 in 2016 from about 1,400 in 2009, and physical book sales have been steadily growing since 2012. Late last fall, the organization was reporting 2016 sales were 5 percent higher than 2015. “Nationally in the U.S., new stores are opening, established stores are finding new owners and a new generation is coming into the independent business as both owner/managers and frontline booksellers,” the ABA said. “All of this is a result of the fact that indie booksellers remain a resilient and entrepreneurial group.” Cristina Benton, director of Market and Industry Analysis at SEE BOOKS,PAGE 9

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

SPECIAL REPORT: SMALL BUSINESS

BOOKS FROM PAGE 8

Anderson Economic Group LLC in

East Lansing, said cities with numerous bookstores often have strong neighborhoods or commercial centers with considerable foot traffic. “There are places that are coming back — downtown, Midtown — that are growing people and definitely more retailers and places to eat and drink. That’s where more bookstores could do well because they could take advantage of the foot traffic in those areas.” With retailers like Amazon, a successful bookstore would need to offer more than books, such as a coffee shop; frequent book signings; a specialty store to cater to certain crowds, such as comic books, local music, decor or sports, explained Warren Anderson, assistant professor of economics at the University of Michigan-Dearborn. In addition to being two of just a few indie bookshops selling new books in Detroit, Source Booksellers in Midtown and Pages Bookshop in north Rosedale Park seem to have the right locations and plans when it comes to creating unique experiences for their customers.

Steadily growing In 1989, Janet Webster Jones, who worked in the Detroit Public Schools before retiring in 2000, began selling books related to a study tour she took in Egypt at local events. Eventually, art gallery owner Dell Pryor suggested they open Spiral Collective, a consortium of four women-owned businesses in Midtown. Source Booksellers opened in 2005 and operated there for eight years before seizing the growth opportunities in the area and moving across the street to the Auburn building in 2013. In 2015, the company earned about $100,000 in revenue, she said. “We have been steadily growing over the years, not very much, but there has been larger incremental growth since moving.” The considerable development activity in Midtown and her street presence is resulting in more street traffic and new people coming to the store. Webster Jones confessed she had no previous business experience. “My training was in education and liberal arts. My instinct led me to do what I do. In business, you have to build.” What she built was a “presence over time with people in the city and all around the city, establishing relationships, trust and a reputation.” Source’s book collection emphasizes four categories: History and culture, metaphysical or new age, health and wellbeing and books by and about women. “I don’t really want a general interest bookstore. For me, it’s too hard to keep up with that inventory. I have high quality books, books new and not new, books that are interesting.” The

SHAWN LEE STUDIOS

Susan Murphy, owner of Pages Bookshop in Detroit, said she believes there’s a benefit in having a bookstore to bring the community together. store also holds frequent author events, and mind, body and spirit exercise classes each Saturday. The 79-year-old said she has been able to operate Source because she has a pension that pays for her basic living needs and the freedom to focus in a more relaxed manner on the needs and wants of her customers. “It’s not just about the sale of the books but about building community and affirming what they want and what they need; and at the same time, we can sell a book.” Webster Jones believes there’s room for more bookstores in Detroit, adding “They don’t have to be all the same.”

Like Webster Jones, Murphy wanted to build a community. She knew she wanted to be in a neighborhood and her marketing experience told her she needed to locate near a density of people with higher-than-average income and education levels. She chose Rosedale Park, received location assistance from

PROPOSED NEW ISSUE

the Grandmont Rosedale Development Corp., and self-financed the venture. “My belief is there’s a benefit in having a community bookstore to bring the community together. People seem to want that sense of belonging. I support all the local authors and big name authors by

selling their books. I differentiate. I don’t feel I compete against Amazon. I can’t compete on price. I stress customer services, special orders, gift wrapping. I’m trying to do that personal stuff people don’t get online.” The work isn’t easy, Murphy acknowledged. “But it’s paying off for me. I met all my targets. I’ve grown the second year. I do get customers from the northeast and west suburbs, and that’s going to be important for me going forward.” Helping to bring people in the store, Pages regularly holds author events and programs for children. “It’s not a matter of just going and buying a book,” she said. “It’s the whole experience. I know customers, and I sometimes call them when a book comes in when I think they’ll like. It’s a low-tech, high-touch business.”

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“It’s the whole experience... It’s a low-tech, hightouch business.”

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Tuesday, January 24, 2017 The offering of Bonds will be made only by the Official Statement, which describes the security for such issue and which may be obtained in any state in which the undersigned may lawfully offer such issue.

Susan Murphy, Pages Bookshop

Murphy, a 60-year-old MBA, spent much of her career in IT and finance at General Motors Co. She went back to school to earn a master’s degree in library science but upon graduating was unable to find a job at a public library where she wanted to work with kids. In the meantime, she opened a market research firm. Eventually, someone asked if she could do anything, what would it be? Her answer: Open a bookstore. Murphy worked “a lot” on her business plan and spent more than a year talking to “all of the independent bookstore owners” in Ann Arbor and metro Detroit, which included frequent conversations with Webster Jones.

VAN J. HAUSWIRTH Senior Vice President, Investments Managing Director // Branch Manager van.hauswirth@raymondjames.com // vanhauswirth.com 15 Kercheval Avenue Grosse Pointe Farms, MI 48236

313.885.9470 This is neither an offer to sell nor a solicitation to buy any security. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revisions, suspension, reduction or withdrawal at any time by the assigning rating agency. A decision to purchase the Bonds is an investment decision that should only be made after a complete review and understanding of the terms of the Bonds, including investment risks. No decision should be made prior to receipt and review of the Preliminary Official Statement and applicable pricing information. Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. *Preliminary, subject to change

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

SPECIAL REPORT: LAW

The Trump rules President Donald Trump plans a litany of regulatory changes, many of which will directly impact businesses. BLOOMBERG

Promise of vast change in regulatory landscape “Right now, we’re has businesses taking wait-and-see approach all pausing on By Dustin Walsh dwalsh@crain.com

Ford Motor Co., General Motors Co. and Fiat Chrysler recently announced plans to reinvest in the U.S. and Southeast Michigan, goaded by new President Donald Trump and threats of new U.S. limits on trade. Yet companies in the supply chain remain in a holding pattern as looming regulatory changes remain murky. Steve Wybo, senior managing director at Birmingham-based advisory firm Conway MacKenzie Inc., said two current clients prepared to invest significantly in Mexico have suspended those plans for the first hundred days of Trump’s presidency. Wybo is representing a stamping company generating more than $300 million in revenue and a midsize plastic molding supplier. The stamper had planned to double the size of its production plant in Mexico to support its customers, but can’t afford the risk with tariffs designed to punish importers to the U.S. on the president’s agenda. “Right now, we’re all pausing on Mexico,” Wybo said. “It’s safe to say everyone is advising the same thing: to wait and see.” Trump has said he wants a plan to punish importers, taking aim at automakers who produce in Mexico and import to the U.S. market. During his presidential campaign, he threatened a 35 percent tariff on auto

imports. Since his win in November, Detroit’s automakers have collectively announced nearly $3 billion in U.S. investment and the promise to create thousands of jobs. Experts, like Wybo, believe Trump’s attacks had little to do with the announcements and market conditions were the deciding factor. But Trump is demanding Congress present a plan to impose import tariffs in the first 100 days of his presidency. House Republicans jump-started an old plan as a more business-friendly alternative to Trump’s 35 percent “big border tax.” The House plan calls for a reduction in the corporate tax rate to 20 percent from 35 percent, coupled with a border adjustment tax of 20 percent while also exempting exports. The plan accomplishes several goals: Reduce the world’s highest corporate tax rate; eliminate the taxation of foreign profits; promote exports, while also punishing companies that use low-cost countries like Mexico to manufacture their products for the U.S. market. The border adjustment is a core part of the House’s tax plan, released originally in June 2016, to offset the slashing of the corporate tax rate. The adjustment would generate $1 trillion over a decade, according to several analyses. Daniel Kelly, the Americas auto

Mexico. It’s safe to say everyone is advising the same thing: to wait and see.” Steve Wybo, Conway MacKenzie Inc.

sector technology leader for Ernst & Young LLC in Detroit, said the firm’s clients are being urged to model imports and exports against the Republican plan to determine exposure. “There’s not a lot of certainty in the details, and obviously things can change on a dime, but these discussions are happening across the supply chain,” Kelly said. “Our clients, particularly the suppliers and automakers can be impacted heavily from this. It’s in their best interest to understand their position.” Economists, however, seem split over the effectiveness of the House plan. Charles Ballard, economist at Michigan State University, said the plan hinges on the dangers of carrying a trade deficit — which Trump railed against throughout his campaign. “We’re losing a tremendous amount of money, according to many stats, $800 billion a year on trade,” Trump told the New York Times during his campaign. SEE TRADE, PAGE 11

100-day action plan targets trade, China, health care By Dustin Walsh dwalsh@crain.com

President Donald Trump plans a litany of regulatory changes, many of which will directly impact businesses. However, a main tenet of his regulatory reform platform is eliminating two existing regulations for every new one enacted. Below is a summary, not all-encompassing, of Trump’s 100-day action plan:

n Renegotiate or withdraw from

the North American Free Trade Agreement: Trump has said he

would accomplish this through Article 2205 of the agreement, which allows a party to withdraw with six months’ notice. It’s unclear whether the president’s office has the authority to do this unilaterally. The impacts of renegotiation or withdrawal are mixed, but experts predict it would deeply impact Southeast Michigan’s automotive industry and make manufactured goods, like cars, that are imported from Mexico more expensive.

Immediate withdrawal from the Trans-Pacific Partnership: The

controversial trade agreement with American and Asian-Pacific countries is designed to slash tar-

iffs between the nations and boost the U.S.’s exports, mostly for agricultural goods. However, China’s involvement in TPP has many skeptical, including Trump, who believes the world’s largest economy participates unfairly in trade and currency.

n Under new Secretary of Treasury Steve Mnuchin, U.S. will label China a currency manipulator: The

administration’s argument is that China has used fiscal and monetary measures to artificially deflate its currency, making its product cheaper on the international market, particularly in countries like the U.S. where the dollar is strong. Potential effects include reactionary measures by China that impact U.S. businesses’ ability to expand in the growing Chinese economy. China is a strong growth market for the Southeast Michigan auto industry.

n Identify all foreign-trading abuses: The goal here is to level the

playing field. Trump and his administration believe U.S. trading partners do not follow the guidelines of trade regulations, making U.S. businesses less competitive. If SEE TARGETS, PAGE 11

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

SPECIAL REPORT: LAW

TRADE FROM PAGE 10

Right now, the U.S. imports $460 billion more than it exports, resulting in a trade deficit of about 2.5 percent of the gross domestic product. This, simplified, means the U.S. consumes more than it produces — we buy more products made elsewhere than we sell elsewhere. Ballard said the trade deficit has far more to do with U.S. consumer spending habits, or the lack of savings, than imports. Ballard said, “a major rewrite of our tax law to address that problems seems misplaced.” The House plan would also cause rampant appreciation of the dollar, which would cause products made outside the U.S. to be cheaper and incentivize consumers to want those products. Harvard University economist Martin Feldstein said earlier this month that the plan would cause appreciation of up to 25 percent. That, however, makes the border adjustment moot in its goal of forcing domestic production as it would offset taxes on importing products, Ballard said. “I’ve got more questions than answers about this,” Ballard said. “I don’t feel comfortable with this

“I’ve got more questions than answers about this (House plan). I don’t feel comfortable with this proposal because I see so many question marks.” Charles Ballard, Michigan State University

proposal because I see so many question marks.” Trump also isn’t sold on the House plan. “Anytime I hear border adjustment, I don’t love it,” he said in an interview with the Wall Street Journal. “...it usually means we’re going to get adjusted into a bad deal.” The World Trade Organization is also likely to have a problem with the border adjustment, said Rick Walawender, senior partner at Detroit-based law firm Miller Canfield Paddock and Stone PLC. While the WTO allows border adjustments on indirect levies, such as sales tax, it’s explicit in its denial of border adjustments on income tax, which provides an unfair advantage, in its view, to U.S. producers. The WTO could respond with trade sanctions against the U.S. if the House plan is ratified.

Walawender said this creates another wrinkle in the plan and puts business on pins and needles for even more time. “You’re going to have a lot of cases filed with the WTO (if this plan becomes law),” he said. “The process in the WTO is multi-year, so it could be three years before there’s any sort of resolution. What does business do then?” Wybo believes the concern will be short-lived and that Trump and Congress won’t come to an easy agreement — and other political hot-button issues will distract the trade talks. “I don’t see trade unwinding; Trump will pick up another win or two, tweet about it and move on,” Wybo said. “The supply chain is not going to change course, in my opinion, because of politics.” Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

TARGETS FROM PAGE 10

measures are too strong, a trade war could ensue, which would immediately impact Michigan exporters.

deferred action, many of which are now in college or working in the U.S., or only restrict new DACA designation.

n Suspend immigration from “terror-prone regions”: Trump, who

were largely installed as environmental protections. Impact to local industry is minimal at the onset, but could minimize energy costs and increase production in the state.

railed against the Middle East throughout his presidential campaign, has longed to end immigration from countries where terrorism is more prevalent. It’s unclear how the administration plans to accomplish this and whether that will directly impact businesses’ ability to bring in workers on certain work visas.

cus on immigration, including the canceling of the Deferred Action for Childhood Arrivals rule, which allows undocumented immigrants who entered the country as minors to receive a renewable two-year period of deferred action from deportation. It’s unclear whether this would affect those already under

administration and vilified by Republicans and many business owners, ACA brought health insurance to more than 20 million Americans. Hoped-for reductions in health care costs have not happened, however. Congress has yet to offer a replacement yet, but it could lead to more breathing room for bottom lines of businesses.

n Lift regulations on coal, shale oil,

natural gas and greenlight the stalled Keystone Pipeline: The regulations

n Cancel every executive order issued by former President Barack Obama: Trump’s plan seems to fo-

n Repeal and replace the Affordable Care Act: A staple of the Obama

Trump and his administration believe U.S. trading partners do not follow the guidelines of trade regulation, making U.S. businesses less competitive.

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

CALENDAR WEDNESDAY JAN. 25

Perfecting Company Culture. 8:30-

10 a.m. Automation Alley. A discussion on creating a great culture and how to use it to reduce turnover, attract top candidates and find out how poor company culture negatively impacts an organization’s bottom line. Guest speaker: Kris Powell, president and CEO, HRPro/BenePro. Automation Alley, Troy. $15 members; $25 nonmembers; $20 walk-in members; $30 walk-in nonmembers. Email: events@automationalley.com; phone: (800) 427-5100. State of the Region. 11 a.m.-1:30

p.m. Detroit Regional Chamber. Chamber President Sandy Baruah will deliver a presentation on the third State of the Region report, an analysis of the economic indicators related to business growth, talent, Baruah innovation and international commerce for Southeast Michigan. The report highlights assets, rankings and opportunities for key industries. Westin Book Cadillac, Detroit. $50 chamber members; $100 nonmembers. Price increases on Jan. 18 to $65 members and $115 nonmembers. Contact: Andrea Rayburn, phone: (313) 5960340.

UPCOMING EVENTS

Car industry briefing: Driving Regional Competitiveness in Advanced Mobility. 9 a.m.-noon. Feb. 8. Center

for Automotive Research. Event will provide a forum for organizations leading the way to next-generation automotive and mobility technologies to present their latest developments and shed light on transportation of the future. VisTaTech Center, Schoolcraft College. $95. Contact: Shaun Whitehouse, phone: (734) 929-0493; email: swhitehouse@cargroup.org; website: cargroup.org 2017 Technology Industry Outlook. 8-11 a.m. Feb. 13. Automation Alley. The 2017 Technology Industry Report will be unveiled from Automation Alley’s survey of technology and manufacturing executives from Southeast Michigan and across the country to determine their knowledge of Industry 4.0, or the fourth industrial revolution, and whether they are ready for the coming changes in the manufacturing industry. Detroit Institute of Arts, Detroit. $25 members; $45 nonmembers. Email: events@automationalley.com ; phone: (800) 427-5100. Giving Up the Wheel: The Future of Mobility and Its Impact on Michigan. 11:30 a.m.-1:30 p.m. Feb. 14. Detroit Economic Club. David Dauch, chairman and CEO, American Axle & Manufacturing Holdings; Matt Simoncini, president and CEO, Lear Corp.; and James Verrier, president and CEO,

BorgWarner Inc., will dissect current mobility efforts and share insights on the rapidly evolving road ahead. Westin Book Cadillac, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. Mobility — Its Disruption to the Auto Industry and Beyond. 5-8 p.m. Feb. 16.

Marketing and Sales Executives of Detroit. John McElroy, host of Autoline Daily and president of Blue Sky Productions, will discuss the ins and outs of the auto industry. Management Education Center, Troy. $45 members; $60 nonmembers. Website: msedetroit.org. Young Professionals Panel — The Changing Face of Leadership. 7:30-9 a.m. Feb. 21. Leadership Oakland. Moderator: Jennifer Korman, Mercedes-Benz Financial Services. Panelists: Talisa Norton, co-owner/COO, All Pro Color; Sara Stoddard, chief of

emergency management, Oakland County Homeland Security Division; Jordan Twardy, community and economic development director, city of Ferndale. MSU Management Education Center, Troy. $32 members; $36 nonmembers. Website: leadershipoakland.com. The State of Manufacturing 2017: A New Way Forward. 11:30 a.m.-1:30 p.m. Feb. 24. Detroit Economic Club. Jay Timmons, president and CEO, National Association of Manufacturers, on to-

day’s industry, the latest on the Trump administration, the new Congress and manufacturing in America. Westin Book Cadillac, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org.

SEASON TICKETS O N SA L E N O W

2017 Detroit Policy Conference: Reigniting an Innovative Spirit. 7:30 a.m. March 2. Detroit

Regional Chamber. Urban planner Toni Griffin, founder of Urban

Planning for the American City,

will deliver a keynote address and Detroit Mayor Mike DugDuggan gan will have a one-on-one conversation with Stephen Henderson, Pulitzer Prize-winning editorial page editor for the Detroit Free Press. MotorCity Casino Hotel, Detroit. $159 chamber members; $235 nonmembers. Contact: Sarah Nagel, phone: (313) 596-0384; email: snagel@detroitchamber.com. How Trump Economics Will Fail The Middle Class. 11:30 a.m.-1:30 p.m. March 7. Detroit Economic Club. Speaker Neera Tanden, president, Center for American Progress.

Townsend Hotel, Birmingham. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org. Asian Pacific American Chamber of Commerce 14th Annual East-West Business Connection. 9:30 a.m.-3:30 p.m. March 8. Global business net-

working event, comprised of Asian and U.S. businesses and minority business enterprises throughout the Midwest. Edward Village, Dearborn. APACC $70 member; $95 nonmember; $100 walk-in. Contact: Leonie Teichman, phone: (248) 430-5855; email: leonie@ apacc.net

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9th annual Trade Secrets with Connie Holzer. 6-9:30 p.m. March 29. JVS. Keynote speaker Connie Holzer, owner of Tom Holzer Ford, who has built it

into one of the top Ford dealerships in the country. Holzer took over the dealership when her husband passed away in 2006, at the same time the country was going into an economic tailspin. Troy Marriott. $150. Contact: Judy Strongman, phone: (248) 233-4213; email: jstrongman@jvsdet.org; website:jvsdet.org/tradesecrets

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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C.H. Robinson leaving RenCen, Flint locations for Auburn Hills kpinho@crain.com

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Trump policy impacts and he will forecast important indicators such as U.S. energy production, unemployment and interest rates, the stock market and consumer spending. Westin Book Cadillac, Detroit. $45 members; $55 guests of members; $75 nonmembers. Website: econclub.org.

Logistics company C.H. Robinson Worldwide Inc. plans to move into this building on Pond Run Road off University Drive in Auburn Hills.

By Kirk Pinho

AS LOW AS

Economic Prospects for the U.S. and Regional Economy in 2017-2018. 11:30 a.m.-1:30 p.m. March 16. Detroit Economic Club. Stuart Hoffman, senior vice president and chief economist at PNC Financial Services Group. will share his insights on

Logistics company C.H. Robinson Worldwide Inc. is bucking the trend of companies moving to downtown Detroit by consolidating its Renaissance Center and Flint offices in Auburn Hills. Tony Reggio, general manager of the local office of the publicly traded Eden Prairie, Minn.-based company (NASDAQ: CHRW), said in a Tuesday statement that 160 employees will move into a 40,000-square-foot building. “This specific location specializes in working with our automotive customers — providing global logistics solutions for both suppliers and OEMs.” Steve Cohen, director of community development for Auburn Hills, said C.H. Robinson submitted a building permit to the city in September to renovate a 40,700-square-foot building at 1885 Pond Run Road off of University Drive between I-75 and North Squirrel Road. He said the company is trying to

occupy the building by the beginning of next month with its $1.75 million build-out. According to CoStar Group Inc., a Washington, D.C.-based real estate information service, Southfield-based Hantz Group LLC bought the building in August for $5.55 million. It was built in 2005 and sits on over 5 acres, according to a marketing brochure from Bingham Farms-based Core Partners LLC. Core was the brokerage firm on the building sale and C.H. Robinson lease and is handling property management on the building. Crain’s reported in 2009 that the company was moving from Southfield to 11,000 square feet in the RenCen. C.H. Robinson had been in the Travelers Towers office complex in Southfield prior to moving to the RenCen. The local office of Los Angeles-based CBRE Inc. handles leasing and management for the property. The company’s Flint location is west of I-75 off Hill Road.

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Ulliance Inc., Troy, a provider of human resources services, is providing its Life Advisor EAP service line to the Detroit Zoological Society, Royal Oak, HELLA Corporate Center USA Inc., Plymouth, and Spicer Group Inc., Detroit. Website: ulliance.com. Near Perfect Media LLC, Birmingham, a public relations firm, has been named the agency of record for The Ashton Detroit, Detroit; Bowman Auto Group, Clarkston; Concours d’Elegance, Troy; Maison Birmingham, Birmingham; Meadowlark Design + Build, Ann Arbor; and Wolverine Human Services, Detroit. Website: nearperfectmedia.com. Continuity Programs Inc., Walled Lake, a customer relationship marketing firm, has partnered with Service Rountable, Lewisville, Texas, a private contractor business alliance in plumbing, electrical, solar, heating and air conditioning trades, to offer tools that help find leads, close sales and market their companies. Websites: continuityprograms.com, serviceroundtable.com.

EXPANSIONS

Denso, Southfield, a global auto

supplier, announced the opening of the Denso R&D Lab at the University of Michigan, Ann Arbor. The lab will accelerate development of new auto safety technologies and create new research opportunities for engineering students. Website: denso. com.

MOVES

Merrill Lynch has moved its office

from 16835 Kercheval Ave., Grosse Pointe, to 17000 Kercheval Ave., Grosse Pointe. Telephone: (888) 637-7837. Website: ml.com.

NEW SERVICES

Amber Engine, Detroit, a technol-

ogy firm, launched Amber Engine for Retailers, a digital portal that allows home furnishings retailers to manage their product data in one simplified location. Website: amberengine.com.

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ADVERTISEMENT SECTION

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Building Owners and Managers Association (BOMA) Metro Detroit Paula Goldman-Spinner, RPA, was recently honored with BOMA Metro Detroit’s second ever Lifetime Achievement Award. GoldmanSpinner is Vice President and Director of Commercial Properties at Schostak Brothers & Company Inc., a full-service commercial and residential real estate company based in Livonia. She has been employed at Schostak Brothers since March 1978. A graduate of Wayne State University, Goldman-Spinner also has a distinguished history of service to BOMA/Metro Detroit.

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Klamerus president at Karmanos Hospital Justin Klamerus, M.D., has been appointed president of the

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he will head all clinical operations at treatment centers in Detroit and Farmington Hills. Klamerus has served as interim president since April 2016, following the exit of Margaret Dimond, who left to become president of Crittenton Hospital Medical Center.

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airports. He had served previously as the airport authority’s vice president of business development. He became interim CEO when his predecessor, Thomas Naughton, retired in September. The initial term of Nardone's employment agreement is three years.

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vice president of management serv i c e s , marking a return to metro Detroit for the real estate veteran. Schneider Schneider, 52, has worked for the real estate company in Georgia, Tennessee, Kentucky and Ohio. Her most recent position was senior vice president of broker and agent development for Re/Max Regional Services, based in Georgia. In 2003, Schneider was recognized by Crain's Detroit Business as a 40 under 40, an annual salute to young achievers who made their mark before the age of 40.

January 23, 2017

Page 1515

USINESS C R A I N ’ S D E T R O I TCRAIN B U’SSDIETROIT N E SBS // J A N U A R Y 2 3 , 2 0 1 7

JOB FRONT MISCELLANEOUS

POSITIONS AVAILABLE

SURVEY ANALYZE MATCH CHAD LIVENGOOD

PACKARD FROM PAGE 1

“Because it’s part of our business, we’re excited to be associated with and located in such an important project of that type,” Silveri said. Silveri said architects he’s met from around the world know about the Packard because of its revolutionary early 20th century design for automobile production and later because it became a symbol of Detroit’s decades-long decay. “There aren’t a lot of places for an architect to set up shop that is immediately recognizable by anyone,” Silveri said. Bringing the former Packard Motor Car Co.’s administration building back to life is the first phase of Palazuelo’s multimillion-dollar bid to resurrect one of Detroit’s most infamous industrial eyesores. “I believe in the plan, I believe in the project,” said Eric Williamson, owner of Southfield-based Sterling Security. “I believe it’s going to be something that happens.” The first phase includes rehabilitating the bridge over East Grand Boulevard that was once part of the Packard Plant assembly line. For the past two years, the graffiti-tagged bridge has been wrapped by a giant picture showing an image of what the bridge looked like in the 1930s — and how it will look once it is restored. The bridge will become a pedestrian crossing to the south side of the 3.5 million square foot complex, Smith said. The Detroit City Council has already granted the developer a 12-year freeze on the taxable value of the property, basing it on the current decrepit condition of the buildings. Smith said the first building will serve as a “pinnacle” for renovating the Packard’s other buildings, though she acknowledges the first phase of the redevelopment likely won’t be a moneymaker. “This building is the first building of several, so we’re not expecting great revenue from this building,” Smith said. “We’re expecting a lot to go out for this building.” Removing debris and asbestos is already complete on the first two floors, but was halted for the winter because of the harsh conditions of working in the open-air building with no windows, Smith said. Since purchasing the Packard plant over three years ago, Palazuelo has spent about $4 million securing the complex, clearing debris, overgrown trees and removing dangerous pillars from one collapsed floor. Like the rest of the complex, the administration building was stripped

Work in phases Smith, an architectural historian and historic preservationist, has a personal connection to the first Packard building that will be renovated. Her grandfather, Russell A. Smith, worked for the Packard car company from 1927 to 1952, ending his career as the automaker’s executive steel buyer. “His office was in this building, which makes it even more important for a historian to have that family connection,” She said. “It really draws you emotionally into the project more.” Sterling Security is already providing on-site 24-hour security at the Packard Plant and plans to house a complexwide camera surveillance system and back office operations in the Packard administration building, Williamson said. The company has five security guards who patrol the grounds and surrounding streets in white Ford Fusions. The first floor of the administration building will be largely used for art galleries and event space, Smith said. “We have a lot of different organizations who’d like to rent space,” Smith said. Arte Express Detroit has purchased vacant lots along East Grand Boulevard that will be used to build three parking lots, Smith said. The second phase of the Packard plant redevelopment include “a recreational component,” which Smith declined to divulge specifics. “Phase 3 is a our residential com-

ponent, which will be artist live-work space,” she said. Smith said Arte Express has a timeline of completing the second and third phases by 2021. Arte Express is running its Packard Plant redevelopment operations out of the former Packard marine engine plant at 1600 E. Grand Blvd., which is owned by AmeriSource Industrial Supply Co. and is next door to the Packard building slated for rehabilitation. Two of the committed tenants, Environmental Consulting & Technology Inc. and Testing Engineers & Consultants, have existing offices in Detroit. Testing Engineers & Consultants, plans to move out of its five-person office on West Fort Street to space in the Packard, where the company is consulting the owner on asbestos and environmental cleanup and other engineering work. “We’ve had a good relationship with them and it seemed a like a good fit to be there once it’s up and running,” said Carey Suhan, vice president of the Troy-based engineering firm.

Catering space Esto’s Garage, a southwest Detroit catering company, also has committed to leasing space on the first floor next to an area designated for a coffee shop in Arte Express’ architectural drawings. Esteban Castro, owner of Esto’s Garage, said he’s going to have a kitchen inside the Packard building and then park his food truck in a former loading dock that faces East Grand Boulevard. Castro does catering part-time. He works full time in the engineering lab at the Detroit Diesel plant as he slowly ramps up his catering and food truck business. “I’ve put my chips on this building,” Castro said. “It will be a great part of the city’s story.” Palazuelo’s plans for restoring the long-neglected Packard Plant has drawn skepticism from local real estate developers, particularly because the complex is more than three miles away from the resurgence in greater downtown Detroit. Castro said he’s become a believer in Palazuelo’s seven- to 15-year rehabilitation plan, which has suffered setbacks since the native Spaniard purchased the Packard Plant in late 2013 for $405,000 at a Wayne County tax foreclosure auction. “Everything is thoughtful about this project,” Castro said. “This isn’t Twitter. This is like the real world. It will take time.” Chad Livengood: (313) 446-1654 clivengood@crain.com

TO APPLY: Email resume to:

The Packard Plant is a symbol of Detroit’s decades-long decay and is about to undergo a multimillion-dollar renovation. of its fixtures, metal pipes and marble floors years ago by scrappers. “All we have is the shell of the building,” Smith said. Albert Kahn Associates Inc., the Detroit architectural firm founded by Packard Plant designer Albert Kahn, conducted a structural analysis of the plant and found 90 percent of the buildings are viable for renovation, Smith said. Smith credits the steel-reinforced concrete construction invented by Kahn’s engineer-brother, Julius Kahn, for the much of the Packard plant remaining intact. Julius Kahn’s design reinforced each column in the plant with eight sections of 1-inch thick steel rebar wrapped in a metal coil and cast in concrete and stone, Smith said. “They’re hard to demolish, very expensive to demolish, which is why they have withstood because the expense was too much for the city of Detroit, pre-bankruptcy, to demolish these buildings,” Smith said. “And we’re glad that they didn’t, because these buildings are viable and we’ll bring them back to life.”

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

CHECKBOX FROM PAGE 1

city of Detroit has removed the box from its job applications and requires contractors to do the same, according to the employment law project. The Michigan Department of Corrections

backs the concept; Gov. Rick Snyder has said he is open to considering it. Banning the box doesn’t mean ending criminal background checks. Employers who have taken the checkbox off of their applications say they still check backgrounds, but leave the discussion about an applicant’s record until later in the process, and perhaps only a few senior managers are ever aware. Several said they use their own discretion on the types of convictions they will allow; some pass on candidates with violent or sexual offenses, while others are willing to look past the nature of the offense if the candidate shows technical aptitude. “We’re doing it because we have a business need, and we’re pursuing it because it’s the right thing to do,” said Rebecca Dioso, human resources vice president for Alta Equipment Co. in Livonia, a forklift and heavy construction equipment distributor. The company took the checkbox off of its job applications a few years ago and hired its first ex-inmate in 2014, Dioso said. Today it employs five — less than 1 percent of Alta’s 735-person workforce. The company is in the process of hiring its sixth, who still is incarcerated. Yet even as more are willing to consider ex-offenders, convincing employers to hire someone with a felony record remains a hurdle to success. State corrections administrators have made re-entry employment a priority. The department has opened new vocational training programs within two prisons, intended for inmates who show the most potential for employment. Re-entry specialists shop inmates’ resumes around to employers and take them to career fairs. They refer their best candidates directly to employers and to nonprofits that help with financial coaching and job placement. In some cases, they set up video interviews while the inmate is still incarcerated. Some have left prison with job offers.

Companies can receive tax credits and other incentives for hiring ex-offenders. Much of the new interest, however, is driven by business realities. A number of managers say their employees with felony convictions are among their most dedicated, perhaps because they recognize the job is a second chance. “No one as a 5-year-old child says, ‘When I grow up, I want to be a drug dealer,’” Dioso said, adding that if ex-inmates have no job or support system upon release, “(if) someone says, ‘If you take this from Point A to Point B and I’ll pay you $200,’ guess what? You’re going to do that so you can get your kids dinner.”

Skilled trades shortage At Alta, the decision to recruit parolees started with a math problem. When Dioso started with the company more than three years ago, she and her team looked at the demographics of their mechanics to estimate how many might retire by the time they turn 65. The numbers stunned her: Between 40 percent and 60 percent of the company’s mechanics could be ready to retire within four to six years — between 120 and 180 employees. “That is a massive number,” Dioso said. So massive that it quickly prompted conversations about how to get enough mechanics in the pipeline amid a steep shortage in people with skills in the trade. Alta even bought a building and leased a portion of it to a for-profit company that created a heavy equipment mechanic training program; in exchange for Alta paying a portion of a student’s training, the candidate commits to three years of employment for Alta. Two-thirds of Alta’s business comes from the forklift side. It has more than $300 million in revenue from business in three states — Michigan, Indiana and Illinois. Alta started to work with various state departments and nonprofits that serve ex-offenders, including the Michigan Department of Corrections; Michigan Rehabilitation Services, a unit of the Michigan Depart-

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Aaron Branch works on a T-shirt for Lazlo LLC. Branch learned to sew while incarcerated. ED BALLOTTS FOR CRAIN’S

that helps people with disabilities; and Goodwill Industries of Greater Detroit, whose “Flip the Script” program prepares people with felony records for work. Dioso said Alta generally doesn’t consider applicants convicted of violent crimes. It conducts an extensive background check after a job offer is extended, when a discussion about a criminal history would happen. If a candidate is referred from a service agency, she said it’s likely she already knows about the record. Usually, just two people — Dioso and a human resources manager — are aware of a new hire’s record, she said. The company’s starting wage ranges from $15 to 18 per hour depending on the type of equipment an employee handles. Dioso said all five of its ex-offender employees earn more than starting wage. A road technician, the first one to be hired, earns $23.40 an hour and received a promotion within his first six months, she said. “It’s safe to say that he’s earning well in excess of $50,000 a year as a mechanic,” with full benefits, she said. “Every year, he writes me the nicest thank-you letter: ‘You’ve changed my life. You’ve changed my family. You’ve changed my neighborhood. Thank you for giving me the opportunity.’ I put my neck out there, and it was a good decision.”

Post-prison jobs The link between employment and staying out of prison shows up in the numbers. In 1998, close to half of all inmates paroled that year — 45.7 percent — wound up back behind bars within three years. Since then, the state corrections department has focused on changing prison culture to emphasize successful release, said Janella Robinson, regional manager for field operations for the Michigan Department of Corrections. That includes identifying the reasons why someone might be doing time and offering help, such as substance abuse counseling or general or vocational education. Today, fewer inmates in Michigan are returning to prison. Of those paroled in 2012, the most recent year available, 31 percent returned within three years, state data show. The data predate some of the department’s current initiatives, including Vocational Village, a residential skills training program at prisons in Ionia and Jackson that launched last year. In general, between 8,500 and 12,000 people are paroled in a given year, data show. It’s difficult to say definitively that the increased approach toward obtaining post-prison employment —

from skills training to direct employer outreach — caused the drop in recidivism. Yet they undoubtedly have helped, Robinson said. “We know that not every company is going to ban the box,” said Robinson, who previously worked as a prisoner re-entry specialist covering Southeast Michigan. “We just want employers not to exclude the population.” Advocates for the prison population say the challenges run deep. In Detroit, service providers face a “perfect storm” that includes not just felony convictions but high illiteracy rates and suspended driver’s licenses, said Keith Bennett, director of Goodwill Detroit’s “Flip the Script” programs and services. Job placement is the nonprofit’s core business. “What employers are finding is if they wait the process out until we can really get someone ready, then it’s worth the wait.” Kit McDonald, who owns a small auto repair shop called DK’s Repairs in Detroit, hired an ex-offender in September after someone with the state corrections department noticed a job ad he’d posted on Craigslist and asked if he’d be willing to consider someone coming out of prison. The parolee he hired, Jacob Pratt, studied automotive repair through the Vocational Village program in Ionia but had little hands-on work experience. Before prison, Pratt said, he’d had few job skills and often resorted to criminal activity — including selling drugs — to make money. He said he did some jail time for a drunken fight in 2012 in Oakland County, but another fight while intoxicated a few years later sent him to prison for a probation violation. The mechanic job is a new path, he said, for him and his young son. “If no one helps them, they’re going to be right back out there doing the same thing they did because they can’t get a job and they don’t have money,” McDonald said, adding that he doesn’t dwell on an applicant’s criminal past during interviews. “He may be the best employee you’ll ever have. You don’t know that, but he’s sure not going to be the best employee you ever had if you don’t give him a shot.”

Sewing skills Christian Birky and his sister cofounded Lazlo LLC, a fashion startup in a coworking space in Detroit’s Corktown neighborhood, in 2015 with dual goals: To pay a living wage of $15, and to hire someone who had been in prison. Birky tutored in prisons during his junior year at Princeton University, where he wrote a senior thesis on American prison policy. He has an

interest in social justice. Lazlo specializes in luxury T-shirts priced at $120 for white and $160 for an indigo version that is hand-dyed inside the company’s headquarters. A second line, dubbed TBD, is set to launch at a lower price in an effort to reach a broader market. He reached out to the state corrections system and asked if they knew anyone who might be close to release who had some skills in sewing. Prison administrators connected Birky with Aaron Branch, who served 22 years in prison for assault with intent to commit murder after, he said, an incident involving a friend. While in prison, he was brought up on charges of assaulting a staffer that he said landed him in a solitary cell for more than six years. Branch said it was then that his attitude began to change. His behavior improved. He got a job sewing for Michigan State Industries, which employs prisoners to produce a variety of items for use inside and outside prisons. Branch, 47, sewed duffel bags, mattress covers, kitchen linens and other fabrics. He was released in September 2015. He had no credit history, no driver’s license, no place to live. But he had a job. Birky interviewed Branch for the Lazlo job via the internet video chat service Skype while Branch was still in prison. Despite the fact that he didn’t technically have a formal job offer at the time, Branch said, “in my mind, I had the job.” Birky said he didn’t interview anyone else for the job.

More opportunities The corrections department has revamped some training programs, including automotive repair, and introduced others based on market demand for skills, Robinson said. She added that the department invited the International Brotherhood of Electrical Workers union into Vocational Village and asked about the current skills electricians need to help improve its program. The state has partnered with Pinnacle Truck Driver Training Inc., a training school in Cadillac, to help prepare new truck drivers. As many as 15 ex-offenders have completed training so far, said Tim Baker, Pinnacle’s operations vice president. Trucking, facing a shortage in labor, has turned more to drivers with criminal records, Baker said — a “game-changer” in an industry that charges higher insurance premiums to companies that hire felons. Partnerships with service organizations like Goodwill and labor unions have helped create more opportunities, Robinson said. Abdullah, who once felt compelled to lie about his past on a job application to get his foot in the door, was accepted as an ironworkers apprentice. The Detroit resident says he has done some of the ironwork at the new Little Caesars Arena under construction downtown. “If you’re around somebody who’s fighting in your corner ... that alone is priceless,” he said. Lindsay VanHulle: (517) 657-2204 Twitter: @LindsayVanHulle

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

JOBS FROM PAGE 3

longer supply chains and the ability to manufacture things farther from where they would be sold. Low-cost countries, like Trump’s favorite target, Mexico, were the recipient of new assembly jobs as the need for reinvestment in technologies became a larger portion of a manufactured product’s retail cost. The fact remains, however: Manufacturing didn’t leave; it changed. In 1991, as many as 234 million people in developing countries worked in manufacturing, according to the United Nations Industrial Development Organization. By 2014, that figure grew to 304 million. In developed countries, like the U.S., only 63 million people worked in manufacturing. Yet, the U.S. is still rich, and Mexico and others are still, by our standards, poor. Assembly jobs are not making those countries rich, just as they didn’t make the U.S. rich. Innovation did. One of the greatest myths in manufacturing, particularly ingrained in Southeast Michigan folklore, is that Henry Ford started to pay his assembly workers $5 a day, double the average wage, in January 1914 so his workers could afford to buy a Ford car. This wasn’t the case. Ford hired more than 52,000 a year earlier ... to keep 14,000 jobs filled. The conditions of Ford’s plants were so deplorable, workers were quitting faster than he could hire. Ford knew turnover cost money. Paying more made economic sense. Advancements in the assembly line, which also started operation in 1913 at Ford, made carmaking less strenuous and improved conditions. It also required fewer and fewer laborers over time. Innovation created customers, but cost the workforce. That’s no different

AUCTION FROM PAGE 3

Detroit and Highland Park, or an average of $3,646 each. Hagerman’s father, Steve, said his company has been among the top five buyers the last several years, and its 2016 haul was its largest purchase to date. The man who oversaw the auction, Wayne County Treasurer Eric Sabree, said the county is getting more per property than it has in recent years. “People feel the city is coming back, and they are willing to pay more because they are hopeful the value will keep going on,” he said. Since the 2011 property tax auction, the average purchase price per property has risen 54 percent from $3,539 to $5,455 last year. The highest average in the last six cycles was in 2015, when it was $5,830 across the 9,500 properties sold, bringing in $55.39 million. In the most recent foreclosure auction last year, 5,974 properties were sold, and 1,672 went to bidders who bid $500, the minimum a property can sell for at auction, according to a Crain’s analysis of the auction results. That’s substantially fewer than the 2,284 in 2014, 2,719 in 2013 and 2,863 in 2012, according to data from Detroit-based Loveland Technologies re-

today than it was 100 years ago. Today, Ford can accommodate the rapid pace of innovation, reinvest in the top engineering talent and add the best features customers demand and still make a profit, thanks to low-cost labor. Automakers, suppliers and other manufacturers have the benefit of a delineated enterprise with clear distinctions between research and development, design, marketing, supply chain management and assembly. The latter of which is the easiest part of the process thanks to technology and, well, practice. We’ve now been making things for a very, very long time. Politicians like President-elect Trump play to a populist din against globalization and off-shoring because it’s an easy sum to calculate. We have fewer manufacturing jobs, they have more. They stole our jobs. But chasing the return of manufacturing jobs, particularly assembly jobs, will not Make America Great Again. It would do the opposite, in fact. Resources to throw at economic development are limited. Spending them on low-paying, low-skilled jobs is a mismanagement of those resources. Going all in on a race to the bottom. Are we aspiring to be more like Mexico? More like Thailand? Assembly jobs didn’t save their economies, which continue to suffer from financial inequality far greater than the U.S. The jobs being created — not brought back — by GM, Ford and FCA are a drop in the bucket of the million or so manufacturing jobs lost over the past 30 years. Policies that further plague our manufacturers with creating more and more low-wage assembly jobs in the U.S. is dangerous and challenges manufacturers’ competitiveness. Workers want to work for competitive, profitable companies. Altering their ability to do so through unnatural regulation is counterproviewed by Crain’s. Data on $500 purchases for 2015 and 2011 was not available. However, as a percentage of total property sales, the number of $500 properties sold has remained fairly consistent, with those properties comprising 28 percent of the foreclosure auction last year. In 2014, it was 13 percent — when there were the most properties up for auction since 2011 — while it was 26 percent in 2013 and 24 percent in 2012, a Crain’s analysis shows. In part, said Darin McKleskey, a Detroit real estate investor who bought 44 properties at auction last year, part of the issue is that investors are “struggling to make sense” of whether it’s worth it to buy a $500 home when taxes in the city are high and renovation costs can be overwhelming. But McKleskey, a real estate salesperson and managing partner of Detroit-based Denovo Real Estate LLC, said he’s seen value in those properties. According to McKleskey, a home on Melbourne Street in the North End neighborhood next to the New Center area purchased by a nonprofit for $500 recently sold for $75,000 without “a whole lot of work on it.” He also said fewer properties are going into foreclosure because of an improving economy, meaning there

ductive. Instead, the new administration must focus on programs and policies that place more emphasis on what we’re really good at — R&D, design and testing. The U.S., thanks to Michigan, has the biggest R&D investment, the most engineers and the most patents. Ensuring manufacturers have the best talent at labs, tech centers and sales offices is far more important than re-establishing the U.S. as a manufacturing powerhouse. Those functions provide far more value to the chain of manufacturing, adding more profits, more bonuses and larger salaries. The U.S. doesn’t need to reinvent the wheel here. Look to Germany, where dual-training programs — apprenticeships split between the classroom and the workplace — are commonplace. In the U.S., fewer than 5 percent of people young adults are in apprenticeship programs. In Germany, that figure is closer to 60 percent, and such programs span fields such as manufacturing, IT, banking, etc. By 2020, the U.S. is predicted to be short 5 million workers with the necessary skills to succeed in high-growth industries, according to the Georgetown University Center on Education and the Workforce. That will be exacer-

bated in places like Michigan that have a burgeoning mobility sector. The Trump administration is better served using its time to streamline retraining programs and find new ways to advance them. So let’s not join the populism and continue to focus Michigan on growing its manufacturing prowess — by creating more designers, engineers, lab technicians, 3-D printing machine operators, etc. After all, we’re really, really good at making stuff. Let’s focus on the jobs of the future that add more value — and pay better. Dustin Walsh: (313) 446-6042 Twitter: @dustinpwalsh

is less supply for the auctions. Investors who spoke with Crain’s said they plan to renovate the homes and rent them out if they are unoccupied, or rent or sell them to current occupants if a deal can be reached. In certain cases, evictions are expected. Jasmine McMorris, whose Detroit-based Great Lakes Property and Investment Inc. bought 106 properties in the 2016 auction for about $700,000 at an average of about $6,600 each, said she plans to have her in-house contractors renovate the homes she purchased in Detroit. She declined to disclose her investors. “We are not flippers. We hold all of our collateral, and we are renovating and do mostly market rate,” she said. “Our goal is to clean them out, rent them up,” said Arlen Mifflin, an Ontario-based representative for a group of undisclosed investors operating as an entity called 1522125 Ontario Inc. “We don’t have plans to flip anything.” Mifflin, whose investors bought 44 properties in Detroit, Taylor and Dearborn Heights for about $56,000 (average of $1,273), said his investors ramped up their purchases in the 2016 auction because of a better selection of property. Kirk Pinho: (313) 446-0412 Twitter: @kirkpinhoCDB

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C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

FAIRLANE

dens in North Carolina.

FROM PAGE 3 www.crainsdetroit.com Editor-in-Chief Keith E. Crain Executive Vice President KC Crain Publisher/Editor Ron Fournier, (313) 446-1674 or rfournier@crain.com Group Publisher Mary Kramer, (313) 446-0399 or mkramer@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 Kristin Bull, (313) 446-1608 or kbull@crain.com Digital Editor Carlos Portocarrero (313) 446-6056 or cportocarrero@crain.com News Editor Beth Reeber Valone, (313) 446-5875 or bvalone@crain.com Research and Data Editor Sonya Hill, (313) 446-0402 or shill@crain.com Newsroom (313) 446-0329, FAX (313) 446-1687, TIP LINE (313) 446-6766

REPORTERS Tyler Clifford, breaking news. (313) 446-1612 or tclifford@crain.com Annalise Frank, breaking news. (313) 446-0416 or afrank@crain.com Jay Greene, senior reporter Covers health care. (313) 446-0325 or jgreene@crain.com Chad Livengood Covers Detroit rising. (313) 446-1654 or clivengood@crain.com Kurt Nagl Breaking news. (313) 446-0337 or knagl@ crain.com Kirk Pinho Covers real estate. (313) 446-0412 or kpinho@crain.com Bill Shea, enterprise editor Covers the business of sports. (313) 446-1626 or bshea@crain.com Lindsay VanHulle, Lansing reporter. (517) 657-2204 or lvanhulle@crain.com Dustin Walsh, senior reporter Covers economic issues. (313) 446-6042 or dwalsh@crain.com Sherri Welch, senior reporter Covers nonprofits and philanthropy. (313) 446-1694 or swelch@crain.com

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character and physical integrity of the floor. The first workshop is nearly filled and is already attracting out-of-state interest with attendees from Pennsylvania. The workshops are yet another way the restoration process is being used to educate, Mullins said. An apprentice works with experienced experts on detailed restoration, and students from University of Michigan-Dearborn and the University of Detroit Mercy have been invited in as well. “One of the jobs under the restoration is to make it a learning experience,” she said. “It’s not common to have (a project) of this magnitude in one’s backyard.”

Closing and rebirth Fair Lane closed to the public in 2010 as the costs to maintain it began to rise and structural problems began to stack up. Following Clara’s death in 1950, three years after Henry, most of the estate’s furnishings were auctioned off. From about 1951 until 1956, Ford Motor Co. used the mansion as offices and archives before Henry Ford II, grandson of the home’s original owner, helped broker the agreement to transfer it to the University of Michigan to establish a Dearborn campus. UM opened the house to public tours, operated a restaurant in its former swimming pool room (the pool had been filled in by the automaker) and used some rooms as offices up until its transfer to the new Henry Ford Estate nonprofit in 2013, three years after it closed to the public. UM contacted Mullins, CEO of the Edsel & Eleanor Ford House in Grosse Pointe Shores, after realizing it could not fund the capital restoration needs of the estate by itself, UM-Dearborn Chancellor Daniel Little said at the time. Henry Ford Estate, which now shares an administrative team with the Edsel & Eleanor Ford House, has since launched an international campaign to raise $50 million in two phases to support renovations, programming and operation of the estate. To date, it has raised nearly $14 million from the Ford family, Ford Motor Co., Ford and Lincoln dealers across the U.S., and others, Mullins said. The goal is to complete the first phase of the campaign by 2018 and then move into the second phase of raising an additional $25 million. Ten cents of every dollar is going toward an endowment to sustain the house into the future. The Edsel & Eleanor Ford House, once owned by Henry Ford’s son, has a sustainable operating model, thanks to $15 million Eleanor left to maintain the estate after her death in 1976. “What we’re doing is that same philosophy. ... It allows us not to have to depend on fundraising,” Mullins said. “We have an obligation to make sure these places are sus-

HENRY FORD ESTATE INC.

The historic Fair Lane mansion in Dearborn has been undergoing renovations including fixing leaking roofs and bowing walls. tainable; donors want to see something that’s sustainable.”

Shoring up the structure Early renovations begun in 2014 targeted urgent infrastructure issues, including rebuilding the retaining wall along the banks of the Rouge River abutting the estate grounds and redoing the roofs and foundations on the house and powerhouse. Inside the mansion, bowing walls were fixed and exploratory work was done to remove layers of paint from parts of the ornate, carved wooden panels on the living room’s walls and stenciled ceilings in the billiards room and the built-up wax and grime from a small area of the grand oak staircase to uncover a rich, warm hue. In the attic, the nonprofit found three chandeliers from the music room stored decades earlier, windows for the billiards room and wall sconces for the main stairway, said Mark Heppner, vice president for historic resources. To create a model for what it plans for the rest of the estate, the nonprofit began working in earnest in the sun room, redoing the ceiling, restoring its limestone and stonework on the walls before restoring the light fixtures and taking it back to a muted color akin to its original shade. While some of the home’s original furniture has returned to the estate through donation or acquisition, most has not. Family movies, pictures and voluminous receipts kept for the home provided a map to the way it looked a century ago, and Henry Ford Estate tapped about 18 artisans from near and far to recreate every aspect of the room. That included everything from the wicker furniture to the carved marble urns, Austrian shades and Oriental-inspired carpeting can take up to two years to make, from design to finish, Mullins said. Birmingham-based Hagopian, Pewabic Pottery, David Ellison Ceramic Art in St. Clair Shores and Michigan Design Center in Troy are among the

local organizations that worked on elements of the room. Others tapped were further away, like Zeeland Architectural Components, Capitol Stoneworks in Bridgeport, Heritage Metalworks in Penn-

sylvania and Leslie Curtis Designs in Maine. The nonprofit acquired a standing 1915 Edison phonograph and 50 records from that era for the corner of the room on eBay after discovering records indicating one had existed in the room, Heppner said. “You can sit and spend as much time as you want ... pick up a book or a magazine. You will now be part of that storytelling,” Mullins said. As part of the first phase of its work, the estate is restoring nine core rooms on the first level, with a goal to have them completed by the end of this year and refurnished by 2020. The next phase of the restoration will move the estate’s powerhouse (where Ford worked on new inventions) and multiple greenhouses to get them restored for tours and operating to help care for the estate’s 18 acres. As it continues with renovations, the estate is also working with Washington, D.C.-based museum planning and design firm Gallagher & Associates, the same consultant working with the Motown Museum on its expansion, to create the tour experience for the home when it opens. “We want to humanize (Henry and Clara),” Mullins said. “This is something houses allow you to do ... bring them to life in their environments.” The experiential approach is something historic houses across the country are just beginning to dabble in, but most aren’t doing it as holistically as Henry Ford Estate, said Franklin Vagnone, president and CEO, of New York-based international historic house consultancy Twisted Preservation Cultural Consulting and the incoming president and CEO of Old Salem Museums & Gar-

The “velvet-ropes” tour many historic homes offer has traditionally been too passive and flat, he said, providing exactly the same experience each time someone visits and leans across the roping to peer into a room. If the experience is boring, visitors won’t come back, and they’re not going to bring their friends, Vagnone said. The traditional historic house tour “is like being invited to your friend’s house for dinner and being made to stand in the hall while they tell you about dinner for 20 minutes,” he said, when what you really want is to eat dinner. Historic homes are in the business of engaging people. That mission and their need to create revenue to help support the maintenance of the historic property necessitate high levels of engagement with visitors, said Vagnone, who has over 20 years of experience in managing historic homes in Philadelphia and New York and co-authored “Anarchist’s Guide to Historic House Museums.” Standing and listening is one distinct activity, but it’s also important to let visitors sit on the furniture, open doors and listen to the radio or record player, he said. “We need to expand the number of distinct activities visitors can do. ... The hypothesis is if we engage visitors in a normal fashion, they will be franchised to enjoy the site at a more intimate level and bring people back.” But the experiential approach isn’t just about letting people come in and sit on reproductions of furniture. What Henry Ford Estate is doing provides the opportunity for new levels of physical engagement which will open up a possibility of a wider narrative engagement, Vagnone said, going beyond a specific year and into things like the labor issues between Ford and his assembly line workers. “This notion of income and equality is an important one to have as you’re walking through Fair Lane; it’s relevant even today as the new (U.S.) president is sworn in.” Sherri Welch: 313 (446-1694) Twitter: @SherriWelch

BANKRUPTCIES The following businesses filed for bankruptcy protection in U.S. Bankruptcy Court in Detroit Jan 13-Jan 19. Chapter 7 involves total liquidation. 1st Stop Auto Care LLC, 21231 Kaiser, Gregory, voluntary Chapter 7. Assets: $0; liabilities: $60,053.85.

INDEX TO COMPANIES These companies have significant mention in this week’s Crain’s Detroit Business: Alta Equipment Co.

Ford Motor Co.

3, 10

Arte Express Detroit LLC

General Motors

3 , 10

Brick Home Management

Henry Ford Estate Inc.

C.H. Robinson Worldwide Inc.

KPMG Private Markets Group

Conway MacKenzie

Lazlo LLC

Detroit Institute of Arts Ernst & Young Fiat Chrysler

4 10 3, 10

Miller Canfield Paddock Stone PLC

Pages Bookshop

Source Booksellers

C R A I N ’ S D E T R O I T B U S I N E S S // J A N U A R Y 2 3 , 2 0 1 7

THE WEEK ON THE WEB JANUARY 14-20 Mullany’s departure linked to resistance to cost-cutting Joe Mullany was replaced last week as CEO of Detroit Medical Center partly because he refused to lay off more employees the past two years and the hospital system’s corporate parent was unhappy with a contract with Wayne State University medical school and spending to fix problems with dirty surgical instruments, people familiar with the situation told Crain’s. The moves have raised concerns that further cost-cutting may be on the way and that budgets for capital spending and maintenance could be on the chopping block at the Detroit-based hospital system, the state’s largest provider of Medicaid and indigent care. Mullany, who the sources said may have delegated authority too much and bucked his bosses at Dallas-based Tenet Healthcare Corp., is also one of the first of several top corporate executives to be cut in a national restructuring plan at Tenet. The plan to cut corporate overhead costs calls for Tenet to reduce the number of its markets and regions from 13 to 10 or fewer, sources said. Tenet and DMC officials declined to comment or address reasons why Mullany has been replaced by Tony Tedeschi, M.D., an executive from Tenet’s Chicago market. Tenet also declined to address regional restructuring.

COMPANY NEWS

J Detroit's Little Caesars Arena will open in September with four shows by hometown musician Kid Rock. The $635 million building will be a concert venue, as well as the home of the Detroit Red Wings and Pistons. J Costco Wholesale Corp. has agreed to pay nearly $12 million to settle Justice Department allegations of lax pharmacy controls. The case grew out of separate investigations conducted by federal authorities in Michigan, Washington and California. J Ford Field’s Wi-Fi upgrade should be complete for the entire stadium by the start of the 2017 season, the Detroit Lions said on Thursday. Fixing the 64,500-seat stadium’s notoriously dodgy wireless service has been a priority for team President Rod Wood. J Two of Dan Gilbert’s top development executives are no longer going to be involved in some of his biggest construction projects in Detroit. Steve Rosenthal is giving up his duties as principal of Gilbert’s Bedrock LLC real estate development and management firm. He and an associate, Jeff Cohen, will turn their attention to Rock Cos., a company they founded together. J NSF International, a global public health and product testing company based in Ann Arbor, has acquired German-based food and water test-

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

$2.4 million The federal funding granted to the Detroit Wayne County Port Authority to buy ferry boats seven years ago. The grant application said they would be purchased within 12 months.

46 percent

The amount of foreign investment received in Oakland County, out of its total $810 million in private business investment for 2016. The county received more than $1 million a day of international investment, marking the third consecutive year of growth.

The number of jobs to be eliminated when the Sears store in Grand Rapids closes its doors on March 26. Sears Holding Inc. also announced the closure of 10 Kmart stores earlier this month as part of a nationwide plan to close 150 stores.

ing organization G+S Laboratory. NSF would not disclose the purchase price, which is its second acquisition in Germany in as many years and its third recent acquisition in Europe. J La Rondinella Italian restaurant in Detroit’s Eastern Market closed after only a year of serving up upscale Italian fare, and Supino Pizzeria — right next door to La Rondinella, both owned by Dave Mancini — will be taking its place in an expansion of the more laid-back pizzeria. J Engineering and IT staffing provider Kyyba Inc. has purchased all staffing contracts belonging to ASG Renaissance, a Dearborn-based company focusing on technical and communication services. Kyyba acquired the entirety of ASG’s staffing arm, including employees, clients and equipment, but ASG will continue its other projects — namely marketing and consulting — with existing customers. Other terms of the deal were not disclosed. J Habitat for Humanity Detroit laid off most of its employees and closed its two Habitat Detroit ReStore locations to deal with financial problems. Habitat said in a written statement that a 40 percent delinquency rate among homeowners who had purchased its homes, a high number of empty homes in its portfolio and losses at the retail stores had forced the restructuring. J General Motors Co.’s plan to invest $1 billion into U.S. factories and add thousands of jobs comes at the expense of one Detroit supplier. American Axle & Manufacturing Holdings Inc. is losing part of its business to

supply GM’s next-generation fullsize pickup trucks and sport-utility

vehicles, as GM said it is moving some axle production in-house. J Detroit-based StockX, which was co-founded by Dan Gilbert last February and bills itself as “the world’s first online consumer ‘stock market of things,’” is partnering with Gilbert’s Cleveland Cavaliers and Nike to sell a LeBron James-centric championship package that is drawing bids in the thousands. J Yanfeng Automotive Interiors, a joint venture interior supplier, will invest $8.45 million to develop a new headquarters in Novi, while Kerkstra Precast Inc. will invest more than $16 million in its Trenton facility, the state announced. The two developments plus another in Litchfield in southwest Michigan will create a total of 148 jobs, according to a news release from the Michigan Economic Development Corp. J Billionaire investor Carl Icahn will take full ownership of Southfield-based auto parts supplier Federal-Mogul Holdings Corp. in a roughly $300 million deal. Icahn Enterprises LP, through his indirect wholly-owned subsidiary IEH FM Holdings LLC, sealed the deal after Federal-Mogul’s second-largest shareholder Gabelli Asset Management Company Investors tendered 7 million shares to Icahn, providing enough shares to take over the public company outright, Bloomberg reported.

RUMBLINGS

Lear CEO says he’s not planning run for governor The rumors continue to circulate: Will Lear Corp. CEO Matt Simoncini run for governor of Michigan? Simoncini has been urged by prominent local politicians to take a look at a gubernatorial run after Gov. Rick Snyder leaves office in 2018. But, so far, he’s not expressing interest. “I am honored to be considered as a good potential candidate by people I respect,” Simoncini told Crain’s in an email. “However, I have a great job running Lear and have no plans to run for any public office.” Simoncini has served as president, CEO and board director of the Southfield-based supplier since 2011, formerly serving as CFO. In recent years, he’s been a champion for the city of Detroit — serving on the boards of directors for the Wayne State University Foundation, Detroit Economic Club, Michigan Opera Theatre, Downtown Detroit Partnership, Bing Youth Institute and the Mayor Mike Duggan’s Workforce Development Board. One Metro Detroit businessman isn’t hesitating to jump into the race for governor.

Matt Simoncini: Will stay at Lear, not run for office.

Bill Cobbs: Launches bid for governor.

Bill Cobbs, an executive coaching consultant in Farmington Hills, has launched a bid for the Democratic nomination for governor. Cobbs, 63, is owner of Performance Dynamics, a firm that helps groom executives for Fortune 500 companies. The Detroit native spent his career in management roles in software and technology companies. Cobb told Crain’s his campaign platform is focused on boosting investment in K-12 schools, strengthening the state’s water policies, investing more money in infrastructure and ending tax incentives for large corporations. “We would stop doing all of these incentives,” Cobb said.

OTHER NEWS

The American Center for Mobility self-driving vehicle test bed under construction in Ypsilanti Township has been designated as a proving ground for the federal government’s development of driverless cars. Federal transportation administrators made the announcement on Thursday. The $80 million, 300-acre site is among 10 U.S. facilities selected for the program. J Michigan’s businesses should now find it easier to manage taxpayer transactions after the Michigan Department of Treasury announced that it has launched an improved website. The site allows firms to upload wage documents, submit fuel credit refunds and use other services. J The city of Detroit narrowed its search for a developer for a vacant 7-acre site in Midtown to build new apartments. The finalists to redevelop the former Wigle Recreation Center site at 901 Selden St., just east of the Lodge Freeway, are joint ventures between Livonia-based Schostak Bros. & Co. and New York City-based Rheal Capital Management LLC, and Douglass Diggs and New York City-based developer Procida Cos. LLC. J Almost two dozen Detroit applicants are among 144 finalists in the third and final installment of the Knight Cities Challenge, a competition to fund ideas to stimulate communities. Some 21 Detroit projects will be considered by the John S. and James L. Knight Foundation to receive a share of a $5 million grant. J

CHRISTOPHER DENSLOW

The UAW-GM Spirit of Detroit HydroFest will bring speedy hydroplane boats to the Detroit River in August.

Backers reorganize Gold Cup hydrofest race Backers of the annual hydrofest race on the Detroit River are reorganizing the event and its sponsorship structure as it seeks a new corporate underwriter. The Detroit-based UAW-GM Center for Human Resources has ended its title sponsorship of the APBA Gold Cup hydroplane boat race after two years, and at least three companies are interested in replacing it in that role, said Mark Weber, president of race organizer Detroit Riverfront Events Inc.

Plans for the 2017 event, scheduled for Aug. 26-27, are to split the weekend into two separate races instead of one race over two days, Weber said. Additionally, sponsorship costs are being reduced, he said. The title sponsorship for the Gold Cup race is pegged at $150,000 and the new second race is $100,000, Weber said. Those amounts buy

tickets, branding, hospitality and the usual title sponsor perks found at sporting events. There also are smaller sponsorship levels at $25,000 and $50,000. Some hospitality packages are priced at $7,500 and $14,000, and Weber said companies such as automotive suppliers — which don’t typically market to the general public — can use such packages to entertain clients and reward employees. “That’s another way to get ROI for your support. There are many ways to participate,” Weber said. He’s confident a sponsor will be in place to cover costs, and his goal is to unveil the name and details in late March or early April. Ticket prices will be set then. “We have companies that have shown interest,” Weber said. He declined to name the companies because they’re still in talks.