First Crain's Detroit Business, Feb. 4, 1985 by Crain's Detroit Business

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Crams

Lousma takes off in high-tech sales PAGE 12

Stroh's woes: Weak sales at home <IIIIIIII

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ass WEEK OF FEBRUARY 4 -

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FEBRUARY 10, 1985

City may rescue B. Siegel

VOLUME 1 0 NUMBER 1

Grand Trunk. â&#x20AC;˘

lDaneuvers ID Conrail sale

BY JOYCE DAVIS ADAMS CRAIN'S DETROIT BUSINESS

BY BRADFORD WERNLE

Detroit's Downtown Development Authority will ask U.S. Bankruptcy Judge George Brody Monday to allow it to save the last two of seven B. Siegel stores from insolvency, Ken Dobson, acting executive vice president of the DDA, said. If money is found to prop up the stores and if DDA officials conclude that a workout is feasible, the city could be getting into the women's apparel business. Five B. Siegel suburban stores have closed in the last six months. The remaining storesin Detroit at Woodward and State downtown, and at Livernois and Seven Mile - could be liquidated in bankruptcy proceedings. "If we lose B. Siegel," Dobson said, "it would set us back five years at ever getting any quality retail magnets downtown." The DDA scheduled two emergency meetings for Monday morning to decide whether to allocate $50,000 for a study of B. Siegel's problems or to grant an emergency loan of nearly $1 million to the store's owner. If the DDA gives the loan, it would take over temporary control of the stores, Dobson said. The DDA was to inform the judge of its decision 'Monday afternoon. Dobson said he would recommend that the board allocate $50,000 over a 90-day period to pay financial and industry experts to analyze B. Siegel's problems. While the DDA will ask the judge for more time to analyze the situation, it will also request that it be allowed to negotiate a repayment schedule with the company's more than 250 creditors, seven of whom filed a Chapter 7 involuntary bankruptcy petition against the company in December. B. Siegel escaped liquidation proceedings in January, when the DDA asked the judge for a delay to determine whether saving the stores would be in the public interest and to figure out See SIEGEL, Page 28

Industrial real-estate market heats up

CRAIN'S DETROIT BUSINESS

DWIGHT CENDAOWSKI

Free Press publisher David Lawrence Jr. (left) and Knight-Ridder chairman and chief executive officer Alvah H. Chapman Jr.

Free Press shakeup fans war with News BY KATIE LANE-WILKE CRAIN'S DETROIT BUSINESS

Two blocks apart, the Detroit Free Press and The Detroit News face off in a battle that could knock out one or unite them. Some view 1985 as a critical year in the nation's toughest newspaper battle in the fourth largest newspaper market. ..., Gearing to repeat its recent victory in Philadelphia, Knight-Ridder Newspapers Inc. has in the past two months restructured its Free Press top management with an aggressive publisher, a "streetfighter" president and a hard-news executive editor.

The News has tried to shed its "Old Gray Lady" image, improving its color and graphic look, long considered inferior to its competitor's. The competitive tempo of this century-old battle has stepped up in the past decade - The News leading in circulation and advertising and the Free Press gaining, struggling to pull ahead. Both are in the red and refuse to pinpoint losses, which outsiders estimate have approached $20 million a year for The News and $10 million for the Free Press. Executives of the papers say there's room for both; analysts say a showdown is imminent. See WAR, Page 30 ~

Detroit's Grand Trunk Western Railroad Corp., fearful that the sale of Conrail could create a monopoly that would squeeze Grand Trunk out of business, has asked the federal government for a piece of the Conrail system. Grand Trunk's proposal for a ''Prorail'' system would be viable only if the government's Consolidated Rail Corp. is sold to the giant Norfolk Southern Corp. Grand Trunk fears that Transportation SecretaIy Elizabeth Dole will shortly recommend the sale of Conrail to Norfolk Southern. In a position paper submitted to the U.S. departments of Justice and Transportation, Grand Trunk predicted a Norfolk Southern-Conrail combine would divert 36,700 annual carloads from Grand Trunk at a revenue loss of $17 million. Grand Trunk, owned by the American holding company of the Canadian National Railway Co., reported revenues of $341 million in 1984 and an operating profit of $10 million. Even if the merger doesn't happen, Grand Trunk wants any new Conrail management to refrain from what Grand Trunk officials say is anti-competitive action. Conrail is a dominant rail service in the Northeast, and Norfolk Southern in the South. The Conrail-NS combination, Grand Trunk fears, would divide the railroad map east of the Mississippi between the new combine, with more than 30,000 miles of track and gross revenues of $6 billion, and Chessie Systems Railroads, which has nearly 30,000 miles of track. Prorail is a joint proposal of Grand Trunk and the Pittsburgh & Lake Erie Railroad Co., a small railroad, hauling primarily coal and steel products, between West Virginia, Creveland and Buffalo. Grand Trunk, which serves primarily the auto industry, connects Detroit with Cincinnati, Chicago and major Michigan cities. Prorail would connect the two railroadsLby giving them ownership or trackage rights to lines that are now part of Norfolk Southern or Conrail. Grand Trunk and P&LE contend that having access to these lines would keep the routes competitive where Conrail and Norfolk Southern would no longer compete after the merger, The Prorail system would contain about 3,600 miles of See GRAND TRUNK, Page 7

HMO sell-out vote set BY STEVE RAPHAEL

CRAIN'S DETROIT BUSINESS

Owners of ndependence Health Plans Inc., a health maintenance organization in Southfield, are keeping mum about a proposed sell-out of their company to a California health care organization, but industry analysts say the motive of the sellers is profit taking. The sale price for IHP is $59 million, "give or take a million," quipped Harlan Loomas, chairman and CEO of Greatwest Hospitals Inc., which is trying to buy up the remaining 49 percent of IHP.

On Thursday, Loomas led a meeting of the boards of Greatwest Hospitals and IHP to discuss integration of the two companies. The boards set March 27 for an IHP shareholders meeting in Detroit for a vote on the buyout. Greatwest Hospitals, a forprofit health care organization in Santa Ana, Calif., proposed a tender offer in November to purchase all outstanding stock of IHP for $26 per share in cash, or cash and securities. Greatwest Hospitals owned 51 percent of IHP stock before the See IHP, PAGE 28 ~

A 240-unit hotel consisting solely of upscale suites planned in Southfield. StofY, Page 3 ~

2 CRAIN'S DETROIT BUSINESS

FEBRUARY 4, 1985

Don Barden, president of Barden Cablevision Inc., says he has successfully negotiated a new agreement with the staff of the Detroit Cable Communication Commission to wire Detroit. "At this point," says Robert Berg, press secretary to Mayor Coleman Young, "contract language is being developed to accurately reflect what he's (Barden's) proposing." The commission will review th.e proposed contract and hold a public hearing on the matter. It will then make make a recommendation to the mayor, who may then make a recommendation to the Detroit City Council. "We came to an agreement just before Christmas and finalized the deal in January," says Barden, 41 , who generated heated controversy last August when he sought to substantially scale down the $160 million, 120-channel offer he had made to beat out other bidders and provide cable service for the whole city. Barden, who flew to Texas Thursday to seek financing, says the revised proposal calls for a 78-channel, 550 MHz, single-cable system at $152 million.

Business activity up Real private economic activity in Michigan grew to pre-recession levels in calendar year 1984, according to the Michigan Business Activity Index compiled by Manufacturers National Bank of Detroit. The index showed growth of 13.3 percent in 1984, the second highest upsurge in the index's 28-year history. The biggest gain was 15.9 percent in 1959. The index - based on a 1967 level of 100 - hit 129 in December and averaged 128 for 1984. The biggest growth occurred in the first half of the year, while the auto strike and the national slowdown in the second half cut back gains. MNB economist Patrick L. Anderson said the index is at the same level as in 1978. It dropped sharply in the 1979-1982 recession, falling to a low of 98 in October 1982. Anderson attributed 1984's gains to low inflation, which spurred manufacturers' investments and consumer purchasing, a strong national growth rate of 6.8 percent, and the Michigan economy's tendency to expand and decline more sharply than in most states.

Drug chain in trouble Paul's Cut Rate Drugs, with three stores throughout Detroit including two downtown locations at Kinsel's Corner and Broadway, may go under without a $400,000 cash infusion, according to city officials. Harvey Deutch, principal owner ofthe chain his father started in 1924, has appealed for financial help from the Downtown Development Authority, the city's urban redevelopment arm. With the money, Deutch proposes to increase his sales 20 percent by launching a new marketing program. One facet of the revival effort would be a prescription drug delivery service. For several years, the drug store chain has been struggling against a huge debt, which the DDA - if it becomes involved - would help reorganize and consolidate. Deutch attributes his decline in sales to construction of the People Mover and the closing of two downtown landmarks, Hudson's and the Book Cadillac Hotel.

Trip to Japan set

"Detroit is through its roughest times, and we expect it will become more and more of a financial center," he said. The office manages corporate underwritings, private financings, mergers and acquisitions, and other investment banking business in Michigan, Ohio, Kentucky and West Virginia.

Dayton Hudson sales rise Dayton Hudson Corp.reported a 12.7 percent in net retail sales for the first four weeks of January, compared with the same period last year, in a statement Friday. Sales rose from $386,780,000 (adjusted for sale of the John Brown and Diamond stores) to $435,951,000 this year. . Dayton Hudson is the nation's fifth-largest general merchandise retailer, operating 1,137 stores. The Minneapolis-based chain's Michigan operations include the J.L. Hudson stores and B.Dalton Bookseller stores.

ANR foregos $500,000 award ANR Pipeline Co. will not collect a $500,000 award from the Federal Energy Regulatory Commission, according to James F. Cordes, president and chief executive officer. The firm, a subsidiary of Detroit-based American Natural Resources Co., qualified for the incentive award by reducing the cost of its domestic gas supplies by $38 million during its rate year that ended Oct. 31. ANR Pipeline provides nearly half the natural gas used in Michigan. ANR Pipeline qualified for the award under terms of an innovative incentive and penalty mechanism which was included in the company's rate settlement approved by the Commission last year. The cost incentive program - a first in the industry - authorized higher earnings for ANR Pipeline if it reduced its gas-purchase costs. ANR Pipeline's earnings would have been reduced if its gas costs went up.

INSIDE A SOUTHFIELD SOFTWARE FIRM that had been invested in by Michigan's Venture Capital Fund is moving its small Michigan staff to Florida. PAGE 10 ~ DETROIT & NORTHERN SAVINGS, Michigan's fourth largest savings and loan association, will convert to a public corporation next week. PAGE 13 ~ LOCKER ROOMS AND A NEARBY golf course are perks for tenants in a new Farmington Hills office building. PAGE 14 ~ A NEW RUSTPROOFING FIRM has won a three-year,

$4.2 million contract at General Motor Corp.'s Poletown Plant. PAGE 16 ~ MICHIGAN'S HIGH-TECH POTENTIAL is being backed by investments by the state's Venture Capital Fund. PAGE 18 ~ RELOCATION SERVICES ARE GROWING in popularity among corporations that move employees around frequently. PAGE 19 ~ METRO DETROIT'S LARGEST SECURITY firm is positioning itself to dominate a growing market. PAGE 20 ~

Officials of the Michigan Department of Commerce will journey to Japan in April to lure auto suppliers to the Detroit area to service Mazda Motor Corp.'s new $450 million assembly plant in Flat Rock. Although Japan's fourth largest auto maker has already pledged to use North American parts for more than 50 percent of each car, state leaders would like to push the percentage closer to 100, according to Walt Sorg, public affairs director for the department.

People

Jenks to manage Westin

Opinions

Lee C. Jenks, 51, has been named managing director of The Westin Hotel, Renaissance Center. A Detroit native, Jenks had been managing director of The Westin Bonaventure in Los Angeles for five years. Jenks replaces Kim Chappell, 41, who has been named vice president of operations for Westin Hotels, a Seattle-based hotel management company. Chappell will remain in Detroit to oversee operations of six Westin Hotels around the country.

CREDIT CARD OPERATIONS of state banks are being moved out of Michigan in response to state usury laws. PAGE 22 ~

DEPARTMENTS Keith Crain Peter Brown Guest commentary Business Diary Dividends and Earnings Calendar Classified advertising

New office for city Merrill Lynch Capital Markets, the investment banking group of the New York-based financial giant, has made Detroit the headquarters of its new Great Lakes region. The reorganization, announced in late January, brought 10 more staffers to the 32 already working in the Detroit office, said Charles Wright Jr., manager of the region.

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Pulse of Detroit Stockworth

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CRAIN'S DETROIT BUSINESS is published weekly by Crain Communications Inc. at 1400 Woodbridge, Detroit, MI 48207. Application to mail at second-class postage rates is pending at Detroit, MI. POSTMASTER: Send address changes to CRAIN'S DETROIT BUSINESS, Circulation Department, 1400 Woodbridge, Detroit, MI 48207.

DEBORAH J . BORIN

Old Globe Tobacco Building at 407 E. Fort St., Detroit.

Tobacco factory getting facelift BY MARY SOLOMON SMYKA CRAIN'S DETROIT BUSINESS

A $3.8 million renovation project, financed largely through a Detroit pension fund, has rescued a historic downtown building from 50 years of near-disuse. Restoration of the former Globe Tobacco Co. factory at 407 E . Fort St. as an office complex is nearly complete, and leasing is underway. Motivated by generous federal government tax incentives established to encourage the acquisition and renovation of historic property, GTB Associates purchased the Globe building in January 1984 for $410,000. Work began in May. The project is financed primarily by a $2.9 million construction and end (permanent) loan from the General Retirement System of the city of Detroit, channeled through Mellon Financial Services Corp., a subsidiary of Mellon Bank NA of Pittsburgh. About 35 percent of the 43,000 square feet of leasable space in the six-story, red brick structure had been taken by mid-January. But leasing agent Chuck Malcho, property management di vision manager for Proctor Homer Warren Inc. of Troy, was not worried. He predicted the rest would move quickly, once prospects see the building's sky-lit atrium, restored natural brick, and oak interior. "Leasing renovated office space isn't the same as leasing suburban space, where everyone knows what to expect," said Malcho. "I think people want to see the building, because they can't picture it in their minds." Architects Louis G. Redstone Associates Inc. of Livonia transformed the Globe from a dark, narrow warehouse to an airy office center, where space will rent for about $14.50 per square foot. GTB Associates consists of general partners F. Philip Colista, John Urso and Kenneth LaMotte, along with 10 limited partners. Colista and Urso are also partners in a Renaissance Center law firm which will take over the Globe building's fifth floor in late spring. LaMotte is an attorney with Kerr, Russell and Weber in the Comerica building. GTB contributed $1 million to

the Globe renovation, including the $50,000-per-share limited partnerships. In 1891 , tobacco processing was Detroit's largest industry. Globe Tobacco opened its building at the corner of Fort and Brush streets in 1888. The Romanesque structure was the curing house and manufacturing site for more than 1.5 million pounds of fine Virginia and Kentucky leaf the company processed for smoking and chewing. By 1927, however, Globe Tobacco was no longer on the site; and from the 1930s until last year, the building was seldom used. GTB requested and received a tax abatement for historic property to keep taxes near prerenovation levels for 12 years. GTB recei ved a facade easement grant, which means the city has permanent rights to protect and maintain the facade. In exchange, GTB received a charitable contribution credit for federal income tax purposes, based on a percentage of the property's value. The most significant tax advantage comes from the Economic Recovery Tax Act of 1981 (amended by the Tax Reform Act of 1984), which allows investors in designated historic building renovations to deduct 25 percent of total rehabilitaion costs from their tax bill. The Globe Building's strategic location between Greektown and Bricktown - and near a planned People Mover stop - makes it an attractive spot for relocation. The same wasn't true of Globe's interior. "As soon as I saw the building, I knew it should have natural light," said Carmine Petrilli, project designer for Redstone. "Old buildings always have this seedy look. "It needed anew, bright design that would stop people from thinking of it as an old building." So the 24-by-24 foot atrium was cut through all the floors, and a skylight was added. The designers had no difficulty persuading GTB to give up 2,600 square feet of potentially leasable space in exchange for ambience. Daniel Redstone said GTB took to the plan immediately, realizing the design greatly enhanced the building's leasabili ty.

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

All-suite hotel eyes Southfield

Lexitel fights long-distance war BY AMY C. BODWIN CRAIN'S DETROIT BUSINESS

As long-distance phone companies across the nation prepare for what some say will be a major shakeout this year, Lexitel Corp.in Birmingham has embraced a regional strategy to short circuit the competition. Lexitel will survive the impending battle and emerge as the second or third largest alternative long-distance carrier in the Midwest by concentrating its sales effort and owning its equipment, said George J . Vasilakos, the firm's president and chief executive officer. That conservative approach already has proven itself for the privately-held Lexitel, Vasilakos said. Sales have jumped from $18 million in fiscal 1983 to a projected $160 million in fiscal 1985. Employees have quadrupled to 800 in four years. Lexitel itself may be a significant player in the upcoming long-distance wars. It recently acquired a long-distance carrier with annual sales of $40 million to position itself as the nation's ninth largest long-distance phone company by revenues. And it may buy two more companies this year, Vasilakos said. No more than six national carriers will be able to survive the competitive market, according to Mary Johnston, analyst with the Yankee Group in Boston. But there will be about 30 smaller, "niche market carriers" like Lexitel which will provide specific services or serve a defined geographic area. Smaller carriers that lease long distance lines wholesale and then resell the service will be in "really bad shape," said Johnston. Survivors of the shakeout, which will occur over the next year and a half as equal access sweeps the country, will own their own transmission facilities. Since most of Lexitel's long distance calls are shorter than 500 miles, the company's transmission facilities handle a good percentage of its traffic.

BY AMY C. BODWIN CRAIN'S DETROIT B USINESS

RANDY EDMONDS

Lexitel president George J. Vasilakos. Proposed Fibertrak network :== = Proposed LOX fiber network o Switching centers _

Andrew Silton, telecommunications analyst at First Albany Corp. in Albany, N.Y., said regional carriers can be in a more defensible position than national carriers if they define their market, concentrate marketing and sales efforts, and keep capital expenses low.

"Regional carriers' networks will be more efficient than national carriers, and can more closely meet their market's needs," Silton said. "Lexitel is one of the regional companies that will end up doing very well by concentrating its traffic." "Regional carriers have an ad-

Service availability States

vantage over national carriers in that they have developed customer loyalty," Johnston said. "As a regional carrier, Lexitel is certainly one of the carriers in the best shape." Analysts say customers are more likely to try long-distance carriers other than AT&T when equal access becomes available in their area. Equal access, which swept through the southeastern Michigan market in September, eliminates the need for customers calling long distance to dial a series of See LEXITEL, Page 25

BY BRADFORD WERNLE CRAIN'S DETROIT BUSINESS

GEORGE BROSTOFF

Not many 26-year-olds would quit a secure, $600,000-a-year sales job to take a walk on the dangerous, shifting sands of a new high-tech business venture. George Brostoff is not your average 26-year-old. Though the baby-faced Brostoff would probably still get carded at some bars, he's already chief executive officer of Symplex Communications Corp., an Ann Arbor-based company that is moving rapidly into the fast lane of the dynamic data communications industry on the strength of a little black box which does things people don't expect it to do. Brostoff expounds his company's philosophy in homespun analogies. "We like to think of ourselves as being in a room that's filled with gold coins," he said. "We're picking up those coins from the floor, but there's a door with a time lock on it, and other people are outside banging on it.

"We're trying to get as much of the marketplace as we can while we're the only ones with the product." Brostoffs product is Datamizer, a pair of boxes that compress electronic data streams to improve efficiency of telephone lines connecting mainframe computers. Symplex guarantees that the Datamizer will allow a phone line designed to transmit 9,601 bits per second to more than double its capacity to 19,200 bps. If a company has reached the capacity of a leased line and its data exchange is grinding to a halt, it can install a Datamizer for $5,000 instead of going through the trouble and expense of waiting for a new phone line. Brostoff came up with the idea when he was a salesman for Arc Associates, an Ann Arbor-based manufacturers' representative for data communications firms. Through his work as a supersalesman at Arc, Brostoff saw his customers spending more and more for telephone lines to con-

nect their computers. In 1981 he took the problem to childhood friend Jeff Jacobowitz, then director of computer resources at Ampex in Belmont, Calif., in Silicon Valley. Brostoff gave Jacobowitz about $5,000 to work on prototypes. After two years of research, development and lab testing, Brostoff, Jacobowitz and Cyrus Azar, another engineer, decided in March 1983 to market their product by year's end. Brostoff had so much faith that he gave up his $600,000 annual income from Arc . Although the company began with his money, it needed more capital for field testing and marketing. Help came in the form of a cash infusion from Warren A vis, founder of Avis Inc., the car rental company. Wi th the extra backing, Symplex hiked production capaci ty and expanded its marketing efforts. Avis, who heads a series of companies from See DATAMIZER, Page 25

A Chicago-based management group that owns or operates 23 hotels across the country has announced plans to build a 240-suite hotel in Southfield. The Management Group Inc. has presented Southfield city planners with a site plan and rezoning application for an Embassy Sui te hotel. The mne-story, upscale hotel would be part of a nationwide chain of 30 E"mbassy Suite hotels and could open in late 1986 . Developers on the project are LoPatin & Co. in Southfield. However, Southfield planning technician Nicholas Banda said the hotel plans are preliminary and have not yet received city approval. Although the company expects to break ground on the project in May, Banda said chances of that happening are "non-existent" because the plans are incomplete and must go through various city approvals. The hotel would be bounded by Northwestern Highway, Beck Road and 1-696 in Southfield, said John Reavley, vice president of marketing for The Management Group. Designed to cater to the business traveler, the suites would cost about $10 more and should be around 180 square feet larger than standard, single hotel rooms, said Judy Heinrich, Embassy's public relations manager. Embassy, a Dallas, Texasbased subsidiary of Holiday Inns Inc., is a nationwide chain of all - suite hotels. The Management Group has obtained a franchise from Embassy to build the Southfield project. Southfield is an ideal location for an all-suite hotel because the area's thriving business climate attracts corporate travelers, Reavley said. CDB

Quality Inn seeks building permit

Little black box making firm rich

.We found out our assumptions about Michigan were all wrong. Our production costs dropped dramatically here in Michigan."

Spurred by a growing demand for hotel space in Farmington Hills, a local developer is seeking -approval to build a 164-room Quality Inn. If the building permit is approved, the three-story, 91,000square-foot hotel will be built at 31425 Twelve Mile Road in Farmington Hills, said Edward Gardiner, staff planner for the city of Farmington Hills. Construction on the $4 million project, developed by Uniland Corp. of Farmington Hills, could begin in early March, said Uniland construction manager Michael Boggio. Boggio said the hotel would take a year to complete and could open in the spring of 1986. Rapid business growth in the area has caused a steady rise in the demand for hotel rooms, Gardiner said. "There's definitely a need for hotel space in this area," he said. Quality Inns International Inc. has 700 hotels worldwide and is owned by Manor Care Inc., a health care company based in Silver Spring, Md. CDS

4 CRAIN'S DETROIT BUSINESS

FEBRUARY 4, 1985

Employees ' press-induced panic state put to rest That sigh of relief you hear is coming from Ross Roy Inc. on East Jefferson. The nearly 600 employees, including some executives, had been in a state of panic. A newspaper story in January said Ross Roy was going to be dumped by K mart Corp. of Troy. Two young advertising turks for the nation's second largest retailer crowed to the Free Press that their in-house ad agency, Media Momentum, would capture the lion's share of Ross Roy's broadcast, magazine and outdoor advertising after 1987. And that's not peanuts. An industry source put the billings at a minimum of $58 million. K mart's PR office quickly issued a denial, calling implications that it was "reducing our participation" with Ross Roy "not accurate." It called its 22-year relationship with the agency "a very good one." Meanwhile, Glen Fortinberry, Ross Roy chairman and president, issued company

The relationship between Ross Roy and K mart 'has never been stronger.' GLENN FORTINBERRY

â&#x20AC;˘

employees an internal memo that was more explicit. It said K mart chairman and CEO Bernard Fauber, and Norman Milley, president of the K mart Stores Group, called him personally to express "embarrassment and apologies for what they considered to be inaccurate statements in the press." They said the article "in no way reflected the policy or intentions of K mart and offered to make statements to the press accordingly." Fortinberry added that the relationship between Ross Roy and K mart "has never been stronger."

What's in a name? Bad vibes, it seems, for stocks and bonds that contain "Detroit" or "Michigan" in their titles. One local investment banker said it's harder - and more expensive, in some cases - to sell equity or debt offerings referring to Detroit or Michigan, because they have "negative connotations" for out-of-state investors. At the height of the recession, a Michigan firm floating a bond issue would have had to pay one-eighth to one-quarter percentage

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â&#x20AC;˘

U.S. Rep. Jack Kemp, who made a thinly-veiled presidential campaign speech before the Economic Club of Detroit a few days ago, made either a verbal slip or an announcement. The New York Republican introduced a string of Republicans and then said, lest he be accused of partisanship, that he would introduce a Democrat, former U.S. Rep. Bill Brodhead. Included in that string of Republican names was the name of Wayne County Executive Bill Lucas. Lucas, a nominal Democrat who is often mentioned as a possible GOP gubernatorial candidate, was conspicuously sitting at the head table next to Kemp's podium. He did not demand a retraction.

Caesars' pizza plan sizzling BY AMY C. BODWIN CRAIN'S DETROIT B USINESS

Farmington Hills-based Little Caesar Enterprises Inc. is hopping into the restaurant fast lane with drive-through pizza. Little Caesars' new drivethrough restaurants serve up hot pizza, sandwiches, salads , beverages and other regular menu items while the customer remains in the car. The second Detroi t-area drive-through - and fourth in the nation - is set to open this month at 900 W . Eight Mile Road in Ferndale. Detroit's first drive-through , at 10200 W. Seven Mile Road, opened last Aug. 15. Five other drive-throughs in Oak Park, Lincoln Park, Berkley, Detroit and Pontiac are in various stages of planning or construction and will be open by the end of 1985, Charles Jones, senior vice president at Little Caesars, said. Little Caesars, which reported 1984 sales of $225 million, opened more than 200 pizza restaurants in 1984 and plans to open about 300 in 1985, according to Susan Sherbow, public relations manager at Little Caesars. CDS

Radio Shack move slated CRAIN'S DETROIT BUSINESS Radio Shack has signed a 10-year lease to move its retail computer center into the House of Fabrics Building at 1500 Woodward Avenue. The center has been located in the David Whitney Building, 1553 Woodward at Grand Circus Park, since 1981. Manager Walter Williamson said the new location provides 4,500 square feet on one floor. The extra space could enable the company to add a business telephone center in the near future, he said. He said the move shows his company's faith in downtown Detroit. CDB

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Troy bank taps Fauver • John Fauver has been elected to the board of directors of NBD Troy Bank, N.A. Fauver is the retired chairman and chief executive officer of J. N. Fauver Co. Inc., distributor of hydraulic, pneumatic, lubrication, process and environmental systems, and high-tech electronic products. Past president of the National Industrial Distributors Association, he served as city commissioner and mayor of Bloomfield Hills and is governor emeritus of the Cranbrook Schools there. NBD Troy Bank is a subsidiary of NBD Bancorp Inc., Michigan's largest bank holding company and the parent of National Bank of Detroit.

appointed Don Michau to the new position of national account manager in its diversified products group. Michau formerly held the same post with Owatonna Tool Co. • Jack Robinson, founder and chief executive officer of Perry Drug Stores Inc. , will receive one of three 1985 Wayne State University corporate leadership awards at a Feb. 12 dinner in McGregor Memorial Conference Center. This is the third year for the awards. The other recipients are Sol Love, former CEO of Vought Corp., and Byron Pond Jr., chairman of Mare mont Corp. • Barbara Gaston has been named vice president, public relations director, for McCann-Erickson Detroit. She joined McCann in 1982 as associate director, marketing planning. Russell Chick has joined McCann-Erickson as account coordinator/GMC Truck, a new position. He came to Michigan from a position with Tricorn Systems Corp., Hayward, Calif. • Crain Communications Inc. has named Alice Sieloff to the newly-created position of corporate marketing manager. Sieloff, who will be based in Detroit, had been marketing services manager with

The Detroit News. • John Logan has been named director of marketing, media and research for Stone, August & Co. He was director of client relations for CPM, a Chicago-based media management firm, before joining the Birmingham advertising agency. • Harry M. Gordon & Co. of Bloomfield Hills has promoted Richard Radner to the position of semi-senior accountant in the tax department. • Two promotions have been announced by W. B. Doner & Co. Hugh Broder, who joined the advertising agency in 1977, has been named vice president, director of broadcast production. He was vice president, administrative producer. Sheldon Cohn has been promoted to vice president, executive producer, from vice president, producer. He has been with the firm six years. • Barbara Hansen has been appointed vice president and legal counsel at National Bank of Royal Oak. Since 1981, she had been practicing law with the firm Vandeveer, Garzia, Tonkin, Kerr, Heaphy, Moore, Sills & Poling. • Rosenfeld, Sirowitz & Lawson Inc. of Bloomfield Hills has promoted June Burkeen and Daryl Monfils to vice president. Both were formerly account superviusors for the McDonald's Account Group in Michigan, which they will continue to supervise.

Send items to CRAIN'S DETROIT BUSINESS, 1400 Woodbridge, Detroit, Mich., 48027.

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

GRAND TRUNK â&#x20AC;˘ continued from PAGE 1 track, including 500 from the P&LE, 1,500 from Grand Trunk and 1,600 additional miles from Norfolk Southern and Conrail. "U nifica tion of N orfolkSouthern and Conrail will eliminate rail competition in much of the eastern United States ," said Grand Trunk President John Burdak in a joint statement with P&LE President Richard Thompson. Secretary Dole must make a recommendation from among three bidders: Norfolk Southern, Alleghany Corp., and a group of investors headed by hotel executive J.W. Marriott Jr. Congress must then pass enabling legislation to complete any sale, and a battle there is expected no matter whom Dole chooses. The federal government is asking $1.2 billion for its 85 percent of Conrail shares. If either Alleghany or the Marriott group wins the sale, or if Conrail remains independent, Grand Trunk says Prorail would not be necessary. Robert Walker, Grand Trunk's vice president for corporate planning, has been flying between Detroit and Washington, lobbying against the sale to Norfolk Southern or in favor of Pro rail. The Justice Department said no sale to Norfolk Southern would take place unless the merged railroad makes certain tracks available under a Prorail-type arrangement. Norfolk Southern officials have had meetings with Grand Trunk and Pittsburgh & Lake Erie officials to discuss possible sale of track. "What Prorail has put on the table, we regard as a serious proposal," said Chris Rooney, deputy administrator for the Federal Railroad Administration, an organ of DOT. Shippers do not seem to share Grand Trunk's fears about the possible monopolistic impact of a Conrail sale to NorfolkSouthern. Ford Motor Co., one of Grand Trunk's large customers, sent a letter to the Department of Transportation last summer backing the Norfolk Southern bid, but Linda Lee of Ford's public relations department said that letter did not necessarily reflect the company's current position. Jim Greenfield, director of distribution for The Stroh Brewery Co. , said Stroh would probably support Norfolk Southern over the other bidders. "The question in my mind is very simple," he said. "We need transportation services provided by someone who knows what they ' re doing . Personal experience with Norfolk Southern does not indicate that they would engage in any monopolistic practices." All Grand Trunk's protests may prove unnecessary if Congress decides to ignore Dole's expected recommendation. Burton Strauss, stock analyst for the E. F . Hutton Group of New York, said Congress may reject all three Conrail bidders. "There are powerful forces still favoring Conrail's independence," he said. All 19 major railroad unions

last week agreed to back the Alleghany bid, and many believe labor's support could be crucial in Congress, if not with Dole. The unions feel jobs may be lost if the two big roads merge. Strauss predicted Congress would take six to nine months to reach a decision. If Conrail remains independent or goes to Alleghany or Marriott, Grand Trunk faces a different set of problems: a continuation of what Grand Trunk officials consider anti-competitive practices of Conrail management. In a position paper submitted in December to the departments of Justice and Transportation,

Grand Trunk calls for "enforceable legislative directives to rekindle competition." "Short haul" carriers such as Grand Trunk rely on "long haul" railroads such as Norfolk Southern and Conrail to provide joint rates so customers can get the best deal possible hauling goods between cities. If a customer could move a carload of autos from one city to another more directly and economically via a combination of Grand Trunk and Conrail track than by Conrail alone, Grand Trunk believes the rates should reflect that difference. Grand Trunk charges that, since deregulation, Conrail has

simply been closing many of these joint routes and canceling rates which allow regional railroads like Grand Trunk access to longer hauls. If Grand Trunk serves an auto plant that needs to have a carload moved to a Conrail connecting point, Grand Trunk charges Conrail a certain fee to move that car. Before deregulation, the same rate would have applied if Conrail performed the same service for Grand Trunk. Deregulation allowed railroads to adjust those rates. Grand Trunk charges that Conrail has charged such high switching fees that Grand Trunk can't make any money, once it gets the car on its main line.

Grand Trunk's management has won praise in some quarters. "Grand Trunk has struck me in the last six months as being very intelligent," said Jeffrey Stone, a stock analyst for Wertheim & Co. of N ew York. Stone cited Grand Trunk's voluntary coordination agreement with the Burlington Northern Railroad of St. Paul, which links Canadian National with the western United States via Grand Trunk and Burlington Northern. James Voytko, an analyst for Paine Webber in New York, agreed: "They've entered into some of the more innovative deals lately. One surmises that they are not fools." CDB

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8 CRAIN'S DETROIT BUSINESS

FEBRUARY 4,1985

Crain's pledge: timely business news First of all, this is a business newsweekly. The emphasis is on news, and the delivery is weekly - every Monday, 52 weeks a year. Crain's Detroit Business follows in the tradition of Crain Communications business newsweeklies in Chicago, Cleveland and New York City. Like them, we will cover our community. The businesses of Wayne, Oakland, Macomb and Washtenaw counties are our beat. We will report on the activities of companies big and small, successful and failing. Our pledge to the reader is to present timely business news in a way that is accurate, fair and interesting.

Let's hope city dailies can thrive Few cities have a choice of two responsible, substantial local daily newspapers. Detroit does, and is better for it. So despite gloomy predictions that either the Detroit Free Press or The Detroit News will have to die, we hope both papers hang on in Detroit. Each daily vigorously courts the reader. But neither has stooped to the Tabloid School of Sleaze and Screaming Headlines. ("Rag Immolates Self!" might be the headline from that school if one paper drops.) Detroit's dailies offer a choice, both of approach and of opinion. The News, despite its recent graphic makeover, remains the Old Gray Lady. But the paper's staunchly conservative editorial line, echoed by its columnists, rarely creeps into the news columns, where professionals report the news straightforwardly. The Free Press, tightly edited, presents the news (less news) in an easily-read package and is a national leader in feature coverage. Its generally liberal editorial line contrasts with the opinions of its competitor. Competition gives advertisers a choice, too. The papers offer different kinds of readers, and rates must remain competitive. In some cities where only one newspaper survives, it has been able to raise rates without reinvesting in the community through better coverage. Should Knight-Ridder Newspapers Inc., which owns the Free Press, and The Evening News Association, which owns The News, tire of financial losses in Detroit, the Newspaper Preservation Act permits competing newspapers to join forces if the alternative is a one-newspaper town. Papers can produce two news products while merging their expensive business and production operations. Some editorial competition is maintained, but not competition in the marketplace. Readers often have to pay more for the papers, and advertisers usually see their rates go up. As Detroit's dailies position themselves to pole-ax each other, we hope both of them thrive.

Thousands of businesses of a stunning variety reside in the Detroit area. Only a small fraction have been covered by the general-interest newspapers or the national business press. Our reporters are assigned to all the beats of Detroit business, including real estate, retail sales, manufacturing, high technology, advertising, banking, communications, politics and even entertainment. But this is not particularly a Motor City publication. The automobile industry is well-covered by lots of publications. Crain's Detroit Business will cover the businesses that feed the automobile industry and that are affected by it.

Changes in car building affect the real estate market in Detroit. We'll report that. New kinds of suppliers are growing up around the auto industry. We'll tell you about them. But you won't read the kinds of stories about the automobile companies that you've already read in the dailies or the trade press. When you see an automotive story, it will be from a different point of view, telling what it means to Detroit and to Detroit suppliers. We'll cover the world, but only as it affects the Detroit area; we'll tell you what events mean to the business community that you live and work in.

Regular features of Crain's Detroit Business include: this editorial page, with the paper's opinions on a variety of business topics and a column by publisher Keith Crain; the facing, or "oped" page, with a weekly guest commentary by a business, political or civic figure; pages of earnings reports from publicly-traded companies; reports on new positions for people in Detroit business; and on the next to last page, a collection of indexes and charts revealing how money and businesses are doing, including never-before collected figures for automotive production, by plant, in Michigan only.

Grains

Detroit Business

"N'CK'G~ rtAtION~

wANK

PUBlISHER Keith E. Crain EDITOR Peter Brown

MAUGIIG EDITOR Matt Gryczan IEWS EDITOR Betty Lou Kitzman ASST. MAUGIIG EDITOR/Graphics David Guilford REPORTERS Joyce Davis Adams, Amy Bodwin, Charles Child, Kathy Jackson, Steve Raphael, Mary Solomon Smyka, Brad Wernle, Jane White

EDITORIAL ASSISTUTS Katie Lane-Wilke, Richard Fortinberry PHOTOGRAPHER Joe Wilssens WASIIIISTOI BUREAU Paul Merrion, Crain Communications, 814 National Press Building, Washington, D.C., 20045; phone (202) 662-7200 WISING CORRESPONDENT Carole Eberly; phone (517)351-7299 ADVERTISING DIRECTOR Phillip L. Buck

ADVERTISING REPRESEITAnVES

Welcome to Crain No. 25!

Crain Communications is more than that familiar sign in downtown Detroit at Jefferson Avenue and the Chrysler Freeway. The introduction this week of Crain's Detroit Business brings to four the number of Crain publications in Detroit, and gives our company an even 25 publications. Although we have had a news bureau in Detroit for 25 years, our company's involvement in this city really took off in 1971,

when we purchased Automotive News from the Slocum family and I took up residence here. Several years later, we added AutoWeek, the nation's only weekly car publication for enthusiasts, and in 1983 we bought Monthly Detroit from its owners in Cleveland. In 1982, we moved our financial headquarters to Detroit from Chicago, which remains the corporate headquarters and base for our chairman, my mom, and president, my brother Rance (who seems to be spending most of his time in New York since we started Crain's New York Business in January). And a couple of weeks ago we announced that we would be moving the company's circulation department to Detroit. Crain's Detroit Business is the fourth city business paper we publish. When we started with Chicago in 1978, a local business paper was almost unheard of. It quickly established itself as the nation's leader in local business coverage, and scores of local business publications followed. We added the second Crain's business publication in Cleveland in 1981. They have been ex-

citing, industry-leading publications, and we are very excited about the launch of Crain's Detroit Business. There is a tremendous amount of business news happening in Detroit. Unfortunately, most of it has been unreported. A couple of dozen examples of such stories are in these pages. Sure, we hear a lot of news about cars, and of course our A utomotive News has been covering the automobile business weekly since 1925. But there is a lot more to Detroit than just cars. Crain's Detroit Business will concentrate on the non-automotive side of business life in the Detroit area, from Pontiac to Flat Rock to Ann Arbor. We think our readers are going to be surprised and delighted when they discover just how much is going on in Detroit. We will have a lot of fun publishing Crain's Detroit Business. We've put together one of the best staffs of business writers in the country. In the weeks and months ahead, you may run into one of those reporters. If you do, go up and introduce yourself. We want to know how we're doing, and we want to hear from you.

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CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

Strategic fund or state folly?

Michigan drives on at home, abroad If you had the No. 1 draft pick, what industry would you choose to build your economy around? Doug Ross, director of the Michigan Department of Commerce, asked the question in answering another: What's the new gang in Lansing doing about diversifying Michigan's economy? Would you use that No.1 pick on the cleaning-products industry? Naw. Fruit canning? Negative. The burgeoning field of ballooning? Gimme a break. Steel-making? You're getting warmer. Ross's choice, of course, was automobile manufacturing, an industry so large that it nearly represents a diversified economy all by itself. General Motors Corp. buys Electronic Data Systems Corp. of Dallas, and Oakland County suddenly becomes a leader in data processing. Robotics - a futuristic buzzword - is practically a service industry to the automotive industry. World markets, trans-Pacific trade? Besides the trade of automobiles and parts, there are new international arrangements with Detroit roots. The Jervis B. Webb Co., an old-line Detroit company that makes conveyors for assembly lines, signs a seven-year contract with the People's RepUblic of China to provide the technology for overhead conveyor systems. Jervis Webb made its first such international agreement with France after World War II. American industry prospered as Europe rebuilt after the war. Now companies like Webb are making new agreements with Korea, Japan and China. So Ross and the rest of Gov. James Blanchard's administration will pick the automotivebased economy of Michigan. They'll work hard to attract Japanese automakers to the state (as they did successfully in helping Mazda Motor Corp. decide to locate in Flat Rock), and to keep Michigan as the home of the domestic automakers' operations (as they hope to do with GM's new Saturn division). The Blanchard administration marched into Michigan at a time of despair and cynicism. (Would the last person out of Michigan please turn out the ~i~hts?~ But just two years later, It IS eVIdent that Blanchard's reign coincided with a time of great change and opportunity. Asians, who sent Michiganders into anxiety attacks with imported automobiles, are offering markets to some Michigan companies, joining ventures with others, and setting up their own American shops in Michigan cities. Blanchard predicts that 25 Japanese companies will soon be established in Detroit. After the Mazda deal and its 3,500 jobs were announced in December, it was hard to get the triumphant governor to talk

BY PATRICK L. ANDERSON

about anything else. Doubtless his administration should get credit for showing Mazda that Michigan cared and for speeding up the regulatory time warp. But some of the credit must also go to the times. Ross says that simply building and equipping the "factory of the future" will be a big business. Jervis Webb and others are well situated to do that job. Autoworkers had reason to fear the global economy, but there's a flip side of world trade: new opportunities. Michigan doesn't necessarily need major surgery on its tax laws and regulatory system, the governor argues. It needs an administration that makes businesses feel welcome. Critics look at Mazda and say big deal, the big companies get the breaks while the rest still suffer. But there is evidence that the Michigan business climate has warmed for everyone. Witness Michigan's Venture Capital Division, which invests part of the state's huge pension fund in emerging companies. Doug Ross sees Michigan's recent economic history in terms of the stages of mourning. The first stage is denial, ignoring the loss. Ross thinks that corresponds to the early 1970s in Michigan, when fundamental changes were dismissed as cyclical. Next comes anger, the pointing of fingers at business or labor or government - expressed in part by the Tisch tax revolt. Then there is depression, the notion (incorrect, he says) that all the businesses were fleeing this industrial relic for Texas. Finally comes acceptance that things have changed and that it's time to move on. Michigan, he thinks, is ready to move on.

Michigan needs more investment! It sure does, but will the state-administered, taxpayer-financed "Michigan Strategic Fund" provide additional monies to deserving Michigan businesses? Both history and economic theory have very unsettling things to say about such a plan, which at best will do nothing to increase investment in viable companies, and at worst will become a political slush fund. In a capitalist economy, financial intermediaries (such as banks, savings and loans, stock and bond markets, venture capital organizations, etc.) collect the savings and profits generated in the economy, then loan the funds to other businesses and individuals. Competition within the free market forces financial organizations to keep prices low and the quality of service high. If, for example, a bank did not pay high enough rates on its deposits, its customers would soon find other financial institutions offering higher rates. Similarly, if a businessman in need of a loan were refused by one bank, he could seek loans from other institutions. The competitive pressures of the free market force institutions to loan money to businesses which could reliably be expected to repay the loan. If an institution refused, it would be passing up a profitable opportunity that soon would be seized by another institution. In a free economy, supply and demand determine the allocation of resources. The state-run Michigan Strategic Fund will not increase the supply of loanable funds, which is determined by the amount of savings and profits in the economy. In fact, the higher taxes and larger government expenditures needed to support such a fund will actually reduce the supply. Likewise, the strategic fund will not increase the demand for loanable funds, namely the number of good investment opportunities. Risk, costs and business prospects determine the attractiveness of investment opportunities, not the number of banks willing to make loans to qualified businesses. To make Michigan more attractive for investment, we must improve the business climate by lowering taxes, regulatory burdens and other government-sponsored costs. As the strategic fund does nothing to address the fundamental problem of a poor Michigan business climate, it will not generate more viable investment. Thus, at its very best it does nothing positive. Unfortunately, because government programs

Patrick L. Anderson is staff economist at Manufacturers National Bank of Detroit.

can quickly become political footballs, the strategic fund could deteriorate into a slush fund. Politicians are constantly pressured by both large, wellorganized groups and powerful private interests. The Michigan Strategic Fund will be all too vulnerable to these pressures. Our country's experience with the Reconstruction Finance Corporation (RFC) provides a clear example of how a government. lending oper.ation can degenerate into an expenSIve, scandal-rIdden disaster. The RFC was created by Congress in 1932, the last year of President Herbert H<?Over's admini~ tration. Under President FranklIn Roosevelt, It largely aided banks and railroads. During ~orld War II, the RFC shifted its emphasis to national defense industries. After the war, the RFC expanded greatly and began to make direct business loans and loan guarantees. The Michigan Strategic Fund resembles this stage of the RFC and will likely repeat its performance. A subcommittee of the U.S. Senate Committee on Banking and Currency, under Senator William Fulbright, investigated the RFC in 1950 and 1951, and revealed the following: • RFC loans often went against market forces, subsidizing companies the private sector lending institutions would not finance. Eventually, many of the RFC loan recipients went bankrupt anyway. The RFC succeeded only in propping up a few inefficient firms for a few years. Those that did survive could in most instances, have easily obtained private-sector financing. The Michigan Strategic Fund could easily fall into this same pattern of financing weak. compani~s in c~ntract ing industries, especially If those mdustnes had powerful lobbies. See FUND, Page 10 •

BLASTOFF - AT LAST! This first issue of Crain's Detroit Business is the culmination of months of assembling a staff of good journalists, planning stories, and talking to the business people of the Detroit area about their businesses and about the kinds of stories a business weekly might have. Even last fall, I was astonished by the enthusiasm people showed for a publication like this. Week by week, as the date of publication grew closer, that enthusiasm grew, and so did mine. And week by week, Crain's reporters fanned out into the business community and discovered unreported stories. In the frustrating period when they had stories and no publication in which to tell them, they held their breath, hoping the stories wouldn't break elsewhere. A few of them did; most of them didn't. With a sense of relief, we can start telling those stories this week. Let me know how we're doing.

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FEBRUARY 4, 1985

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Internet Systems Corp . , a Southfield-based computer software company, has moved its administrative offices to Ft. Lauderdale in order to consolidate them with the company's research and development arm. Internet had employed three people at its Southfield office. One staff member will remain in Michigan in charge of what is now a regional sales office. "A company this small shouldn't be in two locations," said Randy Ellsperman, vice president and chief executive

officer. He said the equipment needed to develop the software was located in Florida and that that consideration made the move cost-effective. Ellsperman said Internet's research and development arm employs 15 people. The company's other five employees are engaged in administrative, marketing and clerical work. Last June, the Venture Capital Division of Michigan's Treasury Department invested $200,000 in Internet. The division (see story, page 18) can invest up to 5 percent of the Michigan Retirement System Fund in high-tech companies. Though Michigan invested in

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hopes of persuading Internet to combine its operations in the state, the managers of the state fund aren't upset by Internet's move to Florida. "If we can create jobs, great," said Paul Rice, a spokesman for the fund. But he said employment isn't the fund's main goal. Although the fund has a commitment to invest in Michigan companies, Rice said managers of the fund aren't afraid to put money into companies outside the state if those investments show promise of a good return. "It has to be a good investment opportunity for us," said Rice. "We felt it was and we still feel it is." CDB

FUND continued from PAGE 9 ~

• The RFC had a dismal record in picking new, emerging technology. Its largest single loss came from the bankruptcy of Lustron Corp., a company developing the "new" product of steelframe houses. • The RFC , despite its considerable advantages (such as being exempt from the taxes and regulations that its private sector competitors were subject to), lost money during both good and bad economic years. Moreover, the deceptive accounting practices used by the agency disguised its losses. • The RFC's policy of making loans in the "public interest" effectively justified any loan the RFC wanted to make. In addition to failing companies in various industries, the RFC also made loans to speculative hotel developments, gambling casinos, bars and breweries. The politically appointed board overseeing the Michigan Strategic Fund would have considerable discretion in determining just what was in the public interest. • The RFC made loans on the basis of political favoritism. The newspapers of the day were filled with stories of influence-peddling and corruption. By givin~ political appointees large sum~ of money to loan out, the Michigan Strategic Fund invites thE same kind of scandal. Economic theory proves tha1 in a free market economy, com· petition among lenders forces po· tential investments to be consid· ered on their merits . Good investments will be financed because such loans are profitable to the lending institutions. To encourage more investment, the government should make investment more attractive by lowering the costs of doing business. The Michigan Strategic Fund will add no new productive investment because the truly productive investments will be financed by private sector institutions. Furthermore, the strategic fund, like the RFC of 1932-52, could easily become a tool for influence peddling, making loans that were politically popular but economically unfeasible. The misuse of taxpayer money by the RFC points out that Michigan's reconstructed RFC, the strategic fund, would be strategic folly CDB

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Jack Lousma, the former astronaut who lost in his bid for the U.S. Senate last fall , has launched a new career as a consultant and salesman for high-technology businesses in the Ann Arbor area. Lousma has already signed to represent two Ann Arbor firms, Machine Vision International Inc. (MVI), a four-year-old machine vision company, and Servo-Kinetics Inc., a new company dealing in refurbished manufacturing equipment. Lousma, 48, said he is negotiating with officials of the Environmental Research Institute of Michigan (ERIM), an Ann Arbor research and development laboratory specializing in remote sensing and communications technology. ERIM is a private, non-profit institute formed in 1973 from the former Willow Run Laboratories, where much defense-funded research at the University of Michigan was performed. About half of ERIM's $20 million annual budget comes from classified defense research contracts. In the meantime, Lousma said he has put politics on the "back burner," but will remain active in Republican politics and maintain visibility around the state. He won't be eligible for the 1986 gubernatorial race in Michigan - a candidate for governor needs to have been a registered state voter for at least four years - but he has his eye on the 1988 U.S. Senate race when the seat held by Democrat Donald Riegle will be contested. Although all his campaign bills are paid, Lousma lost income while running in the primary against East Lansing businessman James Dunn, and later against incumbent Democratic Sen. Carl Levin, who beat him by 4.5 percent. "I need to buckle down and make a living," he said. Lousma said his primary role, at least in the beginning, will be as a sales representative, especially in the aerospace industry. He said he knows the needs and people of the industry. "Most of the firms around here have done a lot of business with the automotive industry and not so much with aerospace. I can help them do that," he said. In working his new trade, Lousma hopes to draw on his experience in aerospace and defense work, especially his 17 years as an astronaut for the National Aeronautics and Space Administration. He has a combined 25 years as an astronaut and U.S. Marine pilot. He was aboard the second Skylab mission in 1973 and on the third flight of the U.S. Space Shuttle in 1982. "A great deal of my effort at NASA was in the design, development and testing of hardware. Is it safe? Does it do the job it was intended to do? That's how a fledgling astronaut earns his spurs," Lousma said. "I've had 17 years in evaluating, establishing

Jack Lousma requirements, testing designs and developing procedures on new products. It's not new to me; it's something I've done all these years. "I hope to have input on product development, to help produce a better product when people are making a piece of gear." While he has set up office at MVI headquarters on the south side of Ann Arbor, Lousma said he intends to represent "the whole spectrum of technology." He said he has been approached by several companies around the state, but he can't take everyone on. Lousma said he expects to do a lot of "one-shot requests" for businesses, rather than signing on to consult on a daily basis. MVI has announced its intention to expand beyond the automotive industry into aerospace, and the company is banking on Lousma's background to give it an edge in a highly-competitive industry. The machine vision industry is equally competitive, according to MVI founder and president Stanley Sternberg. Machine vision systems give robots the ability to be guided to three-dimensional space for tasks such as parts handling, assembly, inspection and final finishing. "It is so competitive you can't believe it," Sternberg said. "I've had clients tell me they've talked to 40 machine vision companies. People walk around with samples under their arms." At the same time, the potential market for machine vision systems is immense, he said. "There is nothing you can imagine in manufacturing that wouldn't use vision if it was available and cheap enough," Sternberg said. For Lousma, the decision to work with Michigan-based firms put to rest speculation that he might leave the state after his unsuccessful Senate campaign. He said he has received offers from several aerospace companies around the country. Lousma said he wants to spend more time with his family after being on "a very fast treadmill" for 25 years, but he still finds time for a little travel, such as his recent trip to Cape Canaveral to work on the CBS News broadcast of the launch of the Space Shuttle Jan. 25. "We keep in touch," he said of NASA. CDS

CRAIN'S DETROIT BUSINESS 0 FEBRUARY

Detroit & Northern to go public CRAIN'S DETROIT B USINESS

Detroit & Northern Savings, Michigan's fourth largest savings and loan association, will convert to a public corporation next week. Based in Hancock in the Upper Peninsula, D&N will offer some 2 million shares of stock to the general public through three investment banking firms. The new capital will go to expand a Detroit & Northern subsidiary that makes home loans in Michigan and six other states, said Kenneth Seaton, chairman of the board and chief executive officer. D&N also plans to purchase the Michigan franchise of Realty World, the sixth largest realty firm in the United States, he said. The stock will be attractive because "interest rates are coming down and that bodes well for S&Ls," said Seaton. "1985 looks like a very stable and profitable year for the S&L industry." Despite its name, D&N does only limited business in the Detroit metropolitan area. It

operates 27 branches - 17 in Flint and central Michigan and nine in the U.P. Its lone, full service office in the Detroit area is in Romeo. D&N absorbed substantial losses in 1981 and 1982, when nearly all S&Ls were suffering. D&N carried a large portfolio of fixed-rate mortgages at low interest rates. When interest rates skyrocketed from 1979-82, income from the portfolio could not keep up with increased pay-outs on borrowings and deregulated deposit accounts, according to the stock sale's prospectus. D&N lost $9.6 million in 1980 and $2.8 million in 1981. The S&L earned $21.7 million in 1983, largely because it sold 10 branch offices in the Detroit area for $27.3 million. During the first nine months of 1984, D&N lost $941,000. D&N's stock will be offered to the public at between $6.75 and $9.25 per share starting the week of Feb. 11. The company will issue 3.125 million shares, but probably only about 2.1 million will be available to the public next week, said James Lovay, managing director of corporate finance in the Detroit office of Thomson McKinnon Securities Inc. COB

u.s. Mutual seeks more city bonds BY JOYCE DAVIS ADAMS CRAIN'S DETROIT BUSINESS

Detroit-based U.S. Mutual Financial Corp. is seeking additional industrial revenue bonds from the city of Detroit to add a sixth floor to the five-story downtown building it is renovating for its national headquarters. The Detroit Economic Development Corp. last April approved the company's project plan requiring $4.8 million in bonds for renovation of the 65,000-square-foot building at 613 Abbott St. between Second and Third avenues. The original plan, which was to provide office space for 96 workers scattered in offices throughout Michigan, became outmoded because of a rapid increase in employees, according to company officials. U.S. Mutual is a real estate finance and investment services company. U.S. Mutual wants to add a sixth floor and renovate an adjoining, one-story, 4,500-square-foot building at 601 Abbott Street. In addition, the publicly-held corporation will build anew, four-level parking deck on the vacant portion of the 613 Abbott site. In all, an estimated 68,000 square feet of office space will be created, with U.S. Mutual initially occupying about 40,000 square feet. The revised project plan must be approved by the Detroit City Council before the bonds can be approved. Industrial revenue bonds, issued by the EDe, are exempt from all income taxes, so the rate generally runs 3-4 percent below private lending rates, EDe officials said. The EDe in January approved the company's new plan, which requires an additional $3.4 million in EDe bonds. The company also has received preliminary approval of a $950,000 Urban Development Action Grant, to be repaid at about 10 percent interest, said U.S. Mutual Executive Vice President James Quinlin. The corporation plans to spend at least $9 million on the renovation, Quinlin said. COB

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14 CRAIN'S DETROIT BUSINESS

REAL ESTATE_

FEBRUARY 4, 1985

Four area buildings win masonry awards BY MARY SOLOMON SMYKA CRAIN'S DETROIT BUSINESS

The Masonry Institute of Michigan- Inc. recently named six winners of its 10th annual M Awards, given for outstanding examples of masonry design. Four of the buildings cited are in the metropolitan Detroit area. Architects submitted 36 entries. Prize-winners in the Detroit area include the St. Andrew Activities Building in Rochester, owned by St. Andrew Catholic Church and the Archdiocese of Detroit; architectural firm, John Dziurman Associates Inc. of Rochester; masonry contractor, Roy A. Seelbinder Construction Co., Troy.

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The other three area winners are in Washtenaw County: • Hoover Universal's Plastics Machinery Division headquarters renovation; architectural firm, Hobbs + Black Associates Inc. of Ann Arbor; masonry contractor, Krieghoff-Lenawee Co., Adrian. • The new division headquarters office building of the Detroit Edison Co., owned by the Garrison Company, leased by Detroit Edison; architectural firm, Harley Ellington Pierce Yee Associates of Southfield. • Brauer Office Building, owned by Carl Brauer Jr. and the Brauer Investment Co.; architectural firm, Hobbs + Black Associates Inc. CDB

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The term "luxury office space" may take on a whole new dimension, come 1986. Early that year , a three-story, 80,000-square-foot office building is scheduled to open on the northeast corner of Grand River Avenue and Halstead Road in Farmington Hills. It will offer all the usual lush trappings of custom office space, plus one extra: locker rooms with walk-out access to an 18-hole golf course. Set on a seven-acre parcel, the $5 million structure will stand on a hill overlooking Independence Gree,n Golf Course. Thomas A. Duke Jr., ~ommercial real estate broker who will own the building when it is completed, said the project will be put out for bids within two months, with groundbreaking scheduled for midsummer. Architects are Siegal, Tuomaala Associates Inc. in Farmington Hills, who also designed that city's Beznos Beztak Building. Duke said a lending institution, which he declined to name, will locate its main office there. It will be the building's major tenant and probable namesake. For the remaining space, Duke intends to act as his own leasing agent. Besides being in a picturesque setting, the project will have the advantage of location, said Duke. Near the convergence of 1-696, 1-275 and

M-102, the site is a quarter-mile from both the 320-acre Farmington Freeway Industrial Park and the 44-acre Farmington Research and Industrial Center. "If you study a zoning map of Farmington Hills, you'll notice that most of the development has been in the northwest corner and along the Twelve Mile Road corridor," Duke said. "There are no office complexes within a mile." The new building also will be the only structure of its kind immediately off the Grand River exit ofM-102. With the banking institution as anchor, the building's other tenants are expected to be ancillary firms servicing the industrial parks, and companies anxious to join the booming Farmington Hills business community. Duke's property opens onto the 10th green directly across from the clubhouse area of Independence Green course. Lessees of the Grand River-Halstead building will have ground-floor showers, locker rooms with storage space for clubs, and walk-out access to the course. A weight room, sauna and other amenities are under consideration, as is a fee for use of those facilities, said Duke. Free golf club memberships also are being contemplated as a marketing tool, he added. Closing a business deal while shooting a round of golf is destined to be de rigueur for tenants of the new offices. CDB

Coldwell opens commercial office BY MARY SOLOMON SMYKA CRAIN'S DETROIT BUSINESS

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Coldwell Banker, the largest real estate company in North America, has opened its first commercial real estate office in the Detroit area. Coldwell Banker Commercial, Real Estate Services slipped quietly into temporary space in the Travelers Tower One in Southfield on Jan. 14. Operating behind a black door bearing only suite number 1120 and no name, sales manager John Young and office manager Christine Deola have begun setting up shop and interviewing candidates for the 30 broker and sales agent positions and seven support staff the office will employ. Although Coldwell Banker owned by Sears Roebuck & Co. and part of the Sears Financial Network - has 32 affiliate

offices in Michigan, this is the first of Coldwell's company-owned subsidiaries. The appearance indicates national interest in Detroit's recent real estate activity. "This is a tremendous opportunity for us to help Detroit, as well as ourselves," said Young. "Because we're nationwide, we can be a conduit for new business through the companies that we helped in other areas." Coldwell Commercial will deal with the leasing and sales of office, retail, industrial and apartment buildings and land, primarily in transactions of $200,000 or more. Interest in the Detroit market was sparked several years ago, said Young, but the recession delayed action. Serious planning to open the branch began in 1983, and Young came here to

get his broker's license last fall. "Detroit is the largest market in the country that Coldwell hadn't gotten involved in," said Young. Within the year, companyowned branches of Coldwell residential real estate are expected to join the local Sears Financial Network in space next to Allstate and Dean Witter Reynolds Inc. inside the Sears stores. Coldwell Commercial will move into 6,000 square feet of permanent office space in Travelers Tower Two on May l. "Don't expect to hear much from us for the next 90 to 180 days," said Young. "We'll do no real brokerages until we've done our homework and are ready." Young is a Detroit native who has returned with his wife and two children, via Tucson, after a 14-year absence. CDS

_ REAL ESTATE

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

Industrial real estate market heats up BYMARYSOLOMONSMYKA CRAiN'S DETROIT BUSINESS

Industrial real estate activity in the Detroit area, which slumped with the automobile industry beginning in 1979, was up dramatically in 1984, and the trend is expected to continue through this year. Industrial real estate firms report that leasing of buildings and sales of used suburban property were up as much as 50 percent in 1984 over 1983. New construction jumped significantly, particularly in Oakland County, where $76.3 million in new industrial buildings was built in the first 10 months of 1984, compared to $21.1 million for the same period in 1983. Hank Dietz, chief executive officer of Manhattan Company Inc. of Troy, calls this the strongest industrial real estate market since at least 1971. His company, one of Detroit's largest industrial real estate firms, recorded a nearly 50 percent increase in 1984 business over the previous year. "Industrial real estate has come back much better than residential," said Michael Van Lokeren, of the industrial real estate firm Hanzl, Kepic and Van Lokeren of Troy. "The need for plants and for people to get back to work logically has to come before a great need for housing. "Much of the industrial real estate activity has been stimulated through lots of changes in car building, and because newer, more efficient buildings and better environments are being sought." On top of the Oakland County construction, other area counties also had big 1983-84 increases in new industrial building, according to VVayne State University's Bureau of Business Research: Macomb County went from $30.2 million in 1983 to $41.3 million in 1984; and VV ashtenaw County, from $7.4 million to $11 million. Reliable figures are not available for VVayne County, according to the Bureau of the Census, which compiles the special reports that VVSU uses. Large metropolitan areas are often late with figures, census officials said. The increased sales activity, which began to pick up in the last quarter of 1983, has created a shortage of small and mid-sized industrial buildings in the 10,000-50,000 square foot range, and has driven prices up. VVhile $4 per square foot suburban leases were unheard of 10 months ago, that is now the common price. The GCA Corp. robotics training facility in Troy is renting for $4.50 . Some buildings go as high as $4.75 per square foot, according to the last Society of Industrial Realtors Market Survey. Used real estate which 10 months ago sold in the 10w-$20's to $30-per-square foot range now typically goes for $30-$35. Much new development and research activity is found in the Rochester Hills/Auburn Hills area of Oakland County, where ground is expected to be broken this spring on Chrysler Corp.'s $500 million research center and test track. Nearby are the sites

of Comerica's $42 million computer center, which is now partially occupied while the second phase heads for a midsummer completion; GMF Robotics Inc.'s headquarters and assembly plant, which is still locked in a zoning struggle; and the new center for GM's recent acquisition, Electronic Data Systems Corp., which broke ground in December. Hanzl, Kepic & Van Lokeren Inc. of Troy recorded a 40 percent business increase between 1983 and 1984, about the average reported by most firms. Last year's total sales reached $35 million, up from about $20 million in 1983, according to company President Peter Kepic, who is also

president of the Michigan chapter of Society of Industrial Realtors. He expects the same healthy market in 1985. The company recently hired the first additional salesman in its five-year history and expects to add more this year. The auto industry's extensive retooling has resulted in moves by many industrial firms. High-tech companies are also buying industrial real estate as they grow in response to increased auto industry demands. For example, Manhattan recently leased a 130,000-square-foot Madison Heights building to EDS. Plastics manufacturers, whose products are being used increasingly in cars, are

expanding, too. Sterling Plastics Inc. of Sterling Heights, for example, bought a fourth plant last year. Because specific needs such as cranes, loading docks and special power lines vary between companies, used industrial real estate is often difficult to sell. Traditionally, industrial buildings were built to maximum lot capacity, with about 10 percent of the space in offices and the remainder in manufacturing area - and a minimum of parking . New high-tech buildings are contructed with as much as 60 percent of the space designed for dense office use; and the increase of people-per-building ratio means an increased need for

parking. "People are moving out of $18 square foot office space," said Kepic, "and into $8-$9 square foot high-tech space, and adding research facilities." The much-publicized, high-tech industry still comprises only a 5 to 10 percent portion of the local industrial real estate market, Kepic says, but it is rapidly expanding, and many new speculative buildings are being designed for it. Traditional automotive suppliers have changing needs. More storage space and close proximity are often needed as the result of the auto industry's move toward the Japanese "Kan-Ban" or Just-in-Time system of storing less. COB

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FEBRUARY 4, 1985

New firm wins rnstproofing at Poletown BY JANE WHITE CRAIN'S DETROIT BUSINESS

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U of D's MBA program offers important convenience features to busy professionals: flexible class scheduling, a centrally located campus, and an opportunity to accelerate the MBA studies based on previous college coursework. Currently some 800 students representing more than 300 corporations and government and service organizations are enrolled in the program. If you would like more information, call or write the University of Detroit, MBA Office, 4001 W. McNichols, Detroit, MI 48221. Phone: (313) 927-1202.

Cars assembled at General Motors Corp.'s new Poletown plant will have their underbodies rusttreated at a former Fisher body plant purchased by Cameo Color Coat Inc. of Troy. Cameo, a new company, signed a three-year, $4.2 million agreement with GM last July and hopes to have the 600,000-square-foot plant ready for operation in May. The cost of the renovation and machinery is $5 million. In accordance with GM's emphasis on Just-in-Time inventory practices, the Cameo plant, at 6051 Hastings, is a scant 1.2 miles from the Poletown plant, where 1986-model Buick Rivieras, Oldsmobile Toronados and Cadillac SevilleslEldorados will be assembled. GM hasn't announced an opening date for the assembly plant - official centerpiece of the Central Industrial Park. "It's part of GM's goal to coat every part on the vehicle," said Cameo's president, Anthony L. Barclae. "Ultimately, they'd like to have a 10-year rust-free car." The initial agreement with GM will create 250 jobs, Barclae said. The number could mushroom if his company winds up with a bigger chunk of the automaker's rustbusting business. "There is potential to do an additional $8 million worth of business with one of the other GM plants," he said. And that doesn't count the "aftermarket" potential - treating replacements for parts damaged in accidents. "We expect a big area for us will be service parts," Barclae said. "We'll eventually have the capacity to do $50 million worth of automotive business in the area." Barclae gained his expertise in electro coating when he took over two stamping plants involved in electroplating after they had undergone Chapter 11 reorganization. Pigeon Manufacturing Co. in Pigeon, purchased in 1979, now has sales of $6 million; and Shadyside Stamping of Shadyside, Ohio, acquired in 1983, has sales of $25 million. The process to be used at Cameo, called electrodeposition (ED), involves dipping electrically charged steel into an oppositely charged epoxy resin solution. Using electricity to "glue" the paint on prevents the lumps that popped up with the old neutral approach. "Electrocoating has been in fair ly widespread use since the late '70s," said Tom Palaika, ED marketing manager for PPG Industries of Pittsburgh, manufacturer of the compound Cameo uses.

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"The new thing is that (automakers) are outsourcing the work, rather than doing it in-house," Palaika explained. "They probably would rather give another company the job of working out the problems that accompany this kind of work, such as dealing with the solid waste, monitoring the system, and so on." Both Ford Motor Co. and Chrysler Corp. continue to do all their rustproofing in-house. At GM, electrocoating of the other body parts is still done at the assembly plants. It's the underbelly - axle assemblies, engine cradles, springs and related parts - that GM finds cheaper to outsource. John Grix, a spokesperson for GM's Buick-Oldsmobile-Cadillac division, confirmed that the No.1 carmaker is jobbing out more of its rust-prevention work, citing its Orion and Wentzville, Mo., plants as examples. "GM basically feels that someone else is better suited to do that kind of work," he said. Cameo estimates it is one of about a half dozen pre-assembly rust-preventers in the state serving car makers. Sources in the paint industry put Crown Group Inc. of Warren in the top spot, with sales of more than $20 million in 1984. "We were the first to get into it four years ago," said Robert Howse, Crown Group's vice president of sales and marketing. "Currently, we're servicing five General Motors plants." While industry analysts see GM leading the carmakers in dollar expenditures on rust corrosion protection, Chrysler already has a five-year corrosion-free warranty, and Ford says it will have a fiveyear guarantee by 1986. CDB

Crain departments to move to Detroit from Chicago CRAIN'S DETROIT BUSINESS

_MBA

MICHAEL E. SAMOJEDEN

Anthony Barclae

Crain Communications Inc. will move its circulation, data processing and traffic departments from its Chicago headquarters to Detroit, beginning in May. The gradual move will bring at least 60 jobs to Detroit and raise the number of Crain employees here to approximately 210, according to Vice Chairman Keith Crain. All Crain employees currently working in the three departments

in Chicago have been offered positions in Detroit. "We believe that the relocation of these departments to Detroit makes a great deal of sense in our long-term plans for the company," said a prepared statement by Keith Crain and Rance Crain, president of the company. Crain Communications publishes Crain's Detroit Business, Automotive News, Advertising Age, and 22 other publications. CDB

17 .-.-.-.-.-.-.-.-.-. .-.-.-.-

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985 •

- - - -- - -- w

•

$9 million Ambassador Bridge renovation, expansion completed Construction was completed last week on the second stage of the Ambassador Bridge's single largest capital improvements program in its more than 50year history. The $9 million, four-year, reconstruction, modernization and expansion program has included a complete new roadway for the bridge span, a new U.S. Customs and Immigration office building, 12 new inspection lanes and a secondary car inspection facility. One-and -a -half million trucks and 4.5 million passenger vehicles cross the bridge each year. Brown and Sharpe Manufacturing Co. last week sold its worldwide fluid power operations to Vickers Inc., a whollyowned subsidiary of LibbeyOwens-Ford Co. that is headquartered in Troy and is a worldwide leader in the manufacture of electrohydraulic systems and components. The transaction closed Jan. 30 included the sale of Double A Products Co., a recognized leader in the fluid power industry, headquartered in Manchester. NBD Bancorp Inc. has changed the name of its assetbased lending subsidiary , American Business Finance Inc., to NBD Business Finance Inc. The change was made to more closely identify with NBD Bancorp , Michigan's largest bank holding company , with year-end 1984 assets of $14.2 billion. Hoover Universal Inc., of Ann Arbor, has acquired controlling interest in Costruzioni Meccaniche S.P.A., known as CoMec S.P.A., an Italian manufactur er and seller of plastics machinery in worldwide markets. The acquisition provides Hoover Universal with a manufacturing base in Europe and further broadens the international marketing and sales capabilities of its plastics machinery division. Amrecorp Realty Inc., of Birmingham , has selected Stone, August & Co.to provide total marketing communications for the Mackinac Hotel and Conference Center. The resort facilities include 359 guest rooms, more than 50 meeting rooms and a 575-seat, professionallyequipped theater and sound stage. New Century Bank Corp.'s common stock will be included in the NASDAQ National Market System (NMS) starting Feb. 19, Franklin Rittmueller, president and chairman, announced. NewCentury Bank Corp., with assets of $1.2 billion, is the state's eighth largest bank holding company. It will now be listed in the NMS newspaper stock table, and stockbrokers will be able to provide last-sale prices and up-to-the-second volume information on the company's common stock for their customers throughout the trading day.

Radio Shack Business Products Division has opened its third Radio Shack Telephone Center in the Detroit area. The new facility, housed in the Computer Center in Livonia, services multi-line business systems, and also home phones. OTF Equities Inc. has moved to 1400 Ford Building in Detroit from 1450 Buhl Building, Detroit. Henry Ford Hospital's Maplegrove Youth Treatment Center, Michigan's first intensive day treatment center for

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FEBRUARY 4, 1985

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123 So uth Illino is Indianapol is, Indiana

317/634-3000

High speed printers

2,505,000

Biological research

173,870

Laser welders

3,300,000

165

Synthetic vision systems

4,000,000

603,110

2,278,946

437

Computer software

200,000

Unique polymers

625,000

Computer software

1,200,000

Computer peripherals

1,883,390

Industrial robots

6,000,000

170

Machine vision

1,999,998

Computer peripherals

528,689

Computer peripherals

200,000

Food packaging

150,000

Tape cartridges

600,000

High alloy casUngs

116,223

Recreational vehicles

2,412,425

Computer software

1,500,000

34,n6,651

1,350

PERCEPTRON INC. Farmington Hills PRINTEK INC. Benton Harbor NEOGEN East Lansing PHOTON SOURCES INC. livonia SYNTHETIC VISION SYSTEMS INC. Ann Arbor MERIDIAN INSTRUMENTS INC. Okemos LEXITEL CORP. Birmingham SMC TECHNOLOGY CORP. Ann Arbor QUANTUM COMPOSITES INC. Midland CONDOR COMPUTER CORP. Ann Arbor IRWIN MAGNEnC SYSTEMS INC. Ann Arbor PRAB ROBOnCS Kalamazoo APPLIED INTELLIGENT SYSTEMS Ann Arbor PC TECHNOLOGIES Ann Arbor INTERNET SYSTEMS CORP. Southfield WORLDMARK Eau Claire CARTREX Grand Rapids SPECTRUM CASTING Flint VIXEN MOTORS Pontiac ATTACHE SOFTWARE Ann Arbor

Machine visions systems

Dec 82 Jan 83 Jan 83 Apr 83 May 83 Jul83 Aug 83 Sap 83

Feb 84 Mar 84 Jun a4 Jun 84 Jun 84

When the need is critical •••

Dec 82

Oct 83

U\NTERBURY

$4,500,000

Principal Product

Oct 83

THE

Empl~yees

Name

Oct 83

Investment To Date

DATE

Jul84 Aug 84 Aug 84

Medical diagnosis apparatus Telecommunications

TOTAL

State pins high-tech hopes on venture capital program

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COMMERCIAL & INDUSTRIAL REAL ESTATE

LANSING - The Venture Capital Division of the state of Michigan views the state as the potential California of the Midwest. As the only state to invest directly in companies through a venture fund, Michigan hopes to attract high-tech businesses that may be tempted to· locate elsewhere. At the same time, the state strives to earn 35-40 percent on its investments. The fund allows the division to invest up to 5 percent ($450 million) of the nearly $9 billion Michigan Retirement System fund - the 13th largest pension fund in the United States, according to Pensions and Investment Age. Since its birth in 1982, the division has invested $35.5 million in 21 Michigan companies. "Ten years ago, we wouldn't have had this program," said Mike Finn, administrator of the Venture Capital Division, "but the timing is right at this time." The growth of entrepreneurship across the nation is the reason, according to Finn. "There is a do-your-own-thing phenomenon going on that has finally hit Michigan . It's been going on for some time in California and on the East Coast ... " he said. "As the only state in the nation involved in investing directly in companies, we are becoming the California of the Midwest." Dwight Carlson, president of Perceptron Inc., a Farmington Hills machine vision firm that has received $4,500,000 from the state fund, said the fund "sends a strong signal to venture capitalists that Michigan is willing to do business." Private venture capital companies like partners, he said. "The government is providing good leadership. I'm very impressed with the group we have in Lansing now," Carlson said. "It seems like the young Democrats have taken up the charge for small businesses, not only in Michigan, but around the country." Founded in October 1981, Perceptron used the state money in development of its MV300, a machine vision system used in sheet metal assembly. Carlson was a member of Gov. William Milliken's Small Business Advocacy Council and currently chairs the Research and Technical Task Group of Gov. James Blanchard's Entrepreneurial Small Business Commission. The roster of high-tech companies in which the state has invested (see accompanying chart) includes

companies involved in biological research, machine vision systems, computer software and telecommunications. The largest investment, $6 million, is in Prab Robots of Kalamazoo. In addition to its Michigan investments, the state has invested $312,000 in a California medical instrument company, Sensormedic Corp., and has committed $77 million to participation in limited partnerships which are financing new ventures all over the country. The Venture Fund Division receives about 50 business plans a month, but invests in only about 1 percent of the applicants. "Some are ruled out right away," said Finn. The division is looking for high-tech businesses that will grow to $50 million in sales within five years . Finn said the division's top priority is to make money for the pension fund. "Sure, we may have some losers," he said, "but the high rate of return from the winners will more than make up for the losses." Along with the growth rate, Finn said, his eightperson staff looks at factors such as diversification of industry and long-range jobs in the state. The program has helped create more than 1,500 new jobs in Michigan, he said. Screening companies takes three to four months . And the final okay is given only if a private venture capital company also invests. As the only state with direct investments, F inn said, Michigan is under a national microscope. "However, I'm not sure this system would work in many other states," he said. "There are a number of factors you must have working for you." One is a good educational system that can support technological advances, he said. Michigan possesses that, with Wayne State University, the University of Michigan, Michigan State University and Michigan Technological University. And, of course, you need a pool of entrepreneurs willing to take risks. Yet even with all the activity and excitement in venture capital, there is nothing new under the sun. "Michigan was a pioneer in this field in the early 1900s with the auto industry," Finn said. "Although we didn't call it high-tech then, the auto industry was. And we had venture capitalists like William Durant and Walter Chrysler and Henry Ford, although we didn't call them venture capitalists." CDS

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

Specialists cure moving headaches for employees and companies alike BY JOYCE DAVIS ADAMS CRAIN'S DETROIT BUSINESS

The disorientation and expense that often accompany new hirees and tranfers migrating to Detroit have been sent packing by corporations that are increasingly turning to relocation services for help. "In the mix of the day-to-day demands, I look at relocation as being somewhat of a burden," said Charles Shamblee, director of employee relations for Allied Automotive in Southfield, the largest of five divisions of New Jersey-based Allied Corp. "People have 1,001 questions, and two out of three times, their timing in asking is not in keeping with the time we have." That's why Allied and other companies such as American N atural Resources Co., Comerica Bank Inc., United Technologies Inmont Corp., Detroit Edison Co ., General Dynamics Land Systems Division, Stroh Brewery Co., the Detroit Free Press and Ford Motor Co. have turned to outsiders to help their recruits, new hirees or transfers. At least one of those outsiders owns its own apartments to house employees in transit. "For good business and employee reasons, it was a good alternative," Shamblee said. "Now it's not an alternative - it's our only option." For about a year, Allied has sent its new hirees and transfers to Relocation Specialists in Southfield, owned and operated by Larry Goldsmith and Barbara Hoffmeyer. "Larry has the patience of Job," said Shamblee. "It's amazing how he can be so many places at once and deal with so many people on an individual basis." Goldsmith said Relocation Specialists has relocated 450 to 750 newcomers a year in the city and its surrounding suburbs. The company has three divisions: publishing, which prints a relocation map and an apartmenthunting guide called the Apartment Index; housing, which provides temporary lodging in 50 furnished apartments; and relocation services, which provides group presentations and individual consultations. For consultations, Relocation Specialists charges $60 an hour. The cost of a two-hour consultation and slide presentation is $150. A similar service, Detroit Upbeat, was started by Jill DeMaris eight years ago because she "saw a real need to promote the city." "We've had negative press for so long - somebody needed to sell the positive side," said DeMaris, who serves primarily couples. Of the 300 people who come to DeMaris monthly for lectures and tours, about four are newcomers sent by large corporations. Others are newcomers or students learning about the area on their own. Recently, DeMaris began reaching out to small businesses and individuals by offering tours on the third Saturday of each month for $15. Corporate clients pay $125 for a three-hour overview of Detroit and an additional charge for an audiovisual presention, she said. The cost of relocating mounts when temporary housing comes into play. With Relocation Specialists, Allied has cut its housing costs tremendously, said Shamblee. "We were spending $60 to $65 a day to put our employees up in a hotel, compared to $35 to $37 a day we now spend with the specialists for one of their two-bedroom apartments," he said. The monthly apartment rate starts at $930, about $30 a day.

Reginald Linebarger, who transferred from New Jersey last July to become manager/operations analysis for Allied Automotive, was housed for three months in a Relocation Specialists apartment near Allied with his wife and 20month-old daughter. They moved into their new Southfield home in December. Having an apartment where he could ''bring things we needed for our child" was a welcome change for the Linebargers, who lived in a New Jersey hotel for three months during a previous relocation experience. Native New Yorker Steve Zammarchi could have used the specialists back in 1980 when he transferred to Detroit to start up Cato Johnson, a subsidiary of the New York-based advertising agency of Young & Rubicam.

When his boss offered him the vice presidency of a start-up operation, Zammarchi said, he saw visions of "Paris, Chicago, London and Amsterdam, all these wonderful cities. But when he said 'Detroit,' my emotions sunk." Being single added to his reluctance, he said: "At 5:30, everybody went home, and I went back to my hotel room." Without the assistance of a relocation service, Zammarchi said it took him about a year and a half to get "hooked on the resurgence in Detroit." "It turned around when I realized you can't compare Detroit to New York," he said. "I began to see the positives - the waterways, sailing and fishing. The people are so friendly, and there is a caring community ... people work together in tough times."CDB

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COMERICA BROKERAGE SERVICES

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As the price of the "cop on the beat" goes up $55,000 a head by some estimates - citizens are relying less on police and more on Neighborhood Watch groups for protection. They're also seeking additional peace of mind electronically, through high-tech burglar alarms - a market that Southeastern Michigan's largest security firm is jockeying to corner. "We expect the number of residential alarms to go from 6 percent of the population to 50 percent by 1990," says Paul Parr, the voluble and energetic general manager of Guardian Alarm Inc. of Detroit. To milk this trend and accommodate its own burgeoning customer load, the provider of residential and corporate burglar alarms and corporate security guards and armored cars is moving to larger quarters. Guardian bought the former Palmer-Smith Co. building on Eight Mile and Southfield for $750,000 last July and will move there from its current west-side location at 16101 Schaefer Highway this summer. Guardian intends to beef up its staff of about 1,000 considerably in 1985. It expects to add 300 to its security guard staff of about 800. Parr says the company will also acquire readymade customers by buying new companies. "We're negotiating with a couple companies now - one on the alarm side and one on the (security) guard side - which will increase our revenues by about $200,000 a month," said Guardian's new president, Chic May, in a recent interview. May, 40, was brought in last Dec. 1 from National Guardian of Greenwich, Conn., specifically to concentrate on acquisitions. He and a partner created National Guardian through a series of purchases. In two years the company went from scratch to sales of $55 million through the takeover of 28 smaller companies, making National Guardian one of the top 10 security businesses in the country, according to industry analysts. ADT of New York, with sales of just under $500 million in 1984, is No. 1. Privately held Guardian Alarm, with sales in the mid-twenties last year, is said to be in the top 15.

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City

State

Zip

I I I I I I

IL_________ a>menCA_____ I ~~

Chic May at control panel.

May intends to make the Detroit Guardian the success story that National Guardian is. "We're going to be doing a similar thing here; we'll be broadening out of the Detroit area it could be Pennsylvania, New York, Washington and Illinois." These ventures won't be Guardian's first acquisitions. The purchase of Certified Alarms of Toledo in 1982 boosted its customer tally by 3,000. Then in 1983 it bought Interstate Alarms Inc. of Pontiac and Michigan Burglar Alarms of Detroit. The Toledo company continues to operate under the Certified name. Meanwhile, Guardian is tooling up its technology - already state-of-the-art - to accommodate new growth. The company will spend about $2 million this year to adapt the Southfield building, add new power-failure-proof generating systems and upgrade its computer system to better detect alarm trouble spots. There are also plans for 1985-86 to put about $2 million into print and broadcast advertising, Guardian's first venture into publicity. "We never advertised before," Parr said. "We could always rely on word-of-mouth." CDB

Health care cost-cutting program seeks participants CRAIN'S DETROIT BUSINESS

Name

Detroit is one of four communities selected for a program aimed at curbing business's health care costs. Up to 10 area companies with fewer than 1,000 employees each will be chosen for the Comprehensive Worksite Health Management Program, coordinated by Oakwood and Sinai hospitals. Program officials predict that the educational program could decrease employee absenteeism by 5-10 percent and cut follow-up medical care for work-related injuries by 25 percent, thus reducing employers' health care costs. The Robert Wood Johnson Foundation, a 49-year-old private philanthropy created to improve health care in America, has committed $150,000 to the four-year program in the Detroit area. Sinai, in Detroit, and Oakwood, in Dearborn, have each committed the same sum. The foundation, established by the son of the founder of the Johnson & Johnson Co. in New Brunswick, N.J., chose health care plans submitted by Detroit, New York, Pittsburgh and Worcester, Mass., from a field of 131 entrants. Participating companies will not pay for the first two years, but in the final two years must pay an amount that has not yet

been determined. Participants must commit to the program for all four years. The money is being channeled through two planning organizations, the Greater Detroit Area Health Council Inc. and the Comprehensive Health Planning Council of Southeastern Michigan. Dr. Max Lichter, director of community health and health education at Oakwood Hospital and worksite program developer, said he is looking for small businesses with above-average workers' compensation rates. Three certified occupational health nurses will make weekly visits to at least three businesses each. They will evaluate confidential questionnaires describing employees' work and lifestyle habits and will counsel the workers on improving those habits. They also will educate worKers about health and safety regulations and provide them with information on community health resources. With the employer's cooperation, the nurse also will do a safety inspection. The worksite program will begin as soon as Lichter signs up enough businesses. More information on the program is available by calling Lichter or project director Patricia McKee at Oakwood Hospital, 593-7947 or 5937205. CDS

AMC borrows $25 million for its new car financing arm CRAIN'S DETROIT BUSINESS

American Motors Financial Corp. has borrowed $25 million from a California savings and loan association to finance loans to new car buyers and auto dealers. AMFC signed the two-year, fixed-rate promissory note with California Federal Savings & Loan, based in Los Angeles. First of Michigan Corp., the Detroit-based brokerage house, acted as the investment banker in the private placement. The capital represents about 5 percent of AMFC's total assets of $460 million, said Robert Pisarski, vice president and treasurer of AMFC. Owned jointly by American Motors Corp. and Renault Credit International S.A. , AMFC was formed in August 1981 to buy auto loan contracts and finance dealer inventories. AMC was the last of the major car makers to form a financing arm. The loan is AMFC's first from an S&L, Pisarski said. Federal deregulation of the S&L industry permitted the institutions to make commercial loans about two years ago. Pisarski declined to reveal the interest rate on the note, completed Jan. 15. CDS

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

SIGNATURE OFFICES NEAR REN CEN

First Federal hits earnings peak First Federal of Michigan, the state's largest savings and loan association, recently posted the highest earnings in its history. For the year ended Dec. 31, net earnings after extraordinary items were $30.1 million, or $3.04 per share, compared with $28.2 million, or $2.85 per share, for 1983. James A. Aliber, chairman of First Federal, said the principal factors for the increased earnings were fees in increased mortgage lending, dividends from the Federal Home Loan Mortgage Corp., a growth in net earning assets, and improved interest spreads. First Federal, one of the 10 largest thrifts in the country, expanded into financial markets by issuing $200 million in Eurobonds and establishing a $1 billion secured commercial paper facility. The savings and loan also is experimenting in other financial services. In a cooperative venture with K mart Corp., a subsidiary of First Federal will open financial centers in four of the retailer's Richmond, Va. stores. Libbey-Owens-Ford has declared quarterly cash dividends of 33 cents per share on common stock and $1.1875 per share on preferred stock. LOF subsidiary Vickers Inc., of Troy, manufactures electrohydraulic systems and components. LOF also owns Aeroquip Corp. a manufacturer of hoses and fittings, LOF Glass, a manufacturer of automotive glass and LOF Plastics Inc., a supplier of decorative laminates. Perry Drug Stores Inc., headquartered in Pontiac, posted record year-end earnings of $7.65 million, or $1.26 per share fully diluted, compared to $4.55 million, or 94 cents a share, for year-end 1983. In the best fourth quarter in Perry's history, the company achieved earnings of $2.11 million, 63 percent higher than the $1.30 million in earnings of the comparable period in 1983. During fiscal 1984, Perry Drugs opened 12 drugstores and 26 auto parts stores while acquiring four companies. Thetford Corp., an Ann Arbor-based manufacturer of sanitation products for the recreational vehicle, marine and camping industries, reported net sales for the first quarter of fiscal 1985 at $5.48 million, down from the $6.13 million reported for the same period last fiscal year. Net income for the latest quarter was $3,000, compared to $113,000 the same period last fiscal year. Part of the lower sales was due to reduced shipments of recreational vehicle equipment. Michigan National Corp., the Bloomfield Hills-based holding company for 23 banks, reported for the last quarter of 1984 a net income of $6.18 million, or 50 cents per primary share, compared to a net loss of $15.1 million, or $1.37 per primary share, for the comparable period last year. Michigan National, with $6.8 billion in total assets, has 337 banking offices

and one of the nation's largest electronic banking systems. Detroit Edison Co., the state's largest electrical utility, announced that preliminary unaudited earnings for common stock for 1984 were $297.8 million, or $2.20 per share, compared to the 1983 earnings of $266 million, or $2.21 per share. A substantial increase in the average number of common shares outstanding resulted in a small decrease in the earnings per share. The average number of shares outstanding for the year 1984 was about 135 million compared with approximately 120 million a year earlier. Increased

earnings for common stock in 1984 were primar ly due to higher kilowatt sales and rate adjustments authorized by the Michigan Public Service Commission. Community National Bank of Pontiac reported total net income at year-end 1984 of $3.21 million, or $3.23 per common stock share, compared with $3.04 million, or $3.04 per share for total net income in 1983. Performance in the bank's bond portfolio played a significant role in achieving the net income result.

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22 CRAIN'S DETROIT BUSINESS

FEBRUARY 4,1985

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Banks looking elsewhere to cure credit card woes BY CHARLES CHILD CRAIN'S DETROIT BUSINESS

Manufacturers National Corp., seeking relief from Michigan's interest rate ceilings, may soon be the state's next bank holding company to establish an out-of-state credit card operation. Bankers say Michigan's usury laws, which regulate interest rates, threaten profits and could deny consumers access to credit. The state's 18-percent cap on interest rates for credit cards also gives out-of-state banks, such as New York's Citicorp, a competitive edge in the credit card market, they say. Manufacturers National, the state's fourth largest bank holding company, expects to receive permission this month to establish credit card operations in Delaware. If Michigan's usury laws were reformed, Manufacturers would keep its entire credit card operation in the state, said Patrick McQueen, head of the bank's consumer loan department. Comerica Inc., which has moved part of its credit card operations to Toledo, would prefer to operate in Michigan because separate offices are more expensive, said Michael Tierney, the bank's product manager for consumer loans. But to bring the operations back, "we need usury reform," he said. Comerica is Michigan's second largest bank holding company. NBD Bancorp Inc., Michigan's largest bank holding company, operates a credit carq network for customers of General Motors Corp. and Automobile Club of Michigan from an office in Delaware. Although NBD and Comerica service a majority of credit card customers from Michigan, more

.Can local companies compete if interest rates are restricted?" CLARK HINCKLEY work may be done elsewhere if interest rates rise to higher levels. Michigan National Corp., which has the most Visa and MasterCard customers in the state, failed to establish a credit card office in South Dakota in 1983 because it could not procure FDIC insurance. But the bank may reapply for a charter in that state, said Clark Hinckley, Michigan National's vice president of finance and planning. Not all Michigan banks, however, believe it's necessary to establish an out-of-state credit card operation. Security Bancorp Inc., second to Michigan National in credit cards, has kept its operations in Southgate. "We're not thinking of moving because we make a good profit here and want to keep it in the state of Michigan," said John Casey, Security's director of advertising and communications. The states that have attracted Michigan credit card operations have higher or no interest limits. Ohio law provides a higher maximum, 25 percent, while South Dakota and Delaware have no ceilings. Citicorp's credit card offices are in South Dakota. Limited to 18 percent interest charges, Michigan banks' credit card operations were burned badly when interest rates reached high levels from 1979-1982. The high rates meant tha t banks were paying more interest on funds they borrowed to support the credit card portfolio. Add on operational costs and loan losses, and the 18

percent was insufficient to earn a profit, bankers maintained. Interest rates have fallen recently, returning profits to Michigan credit card operations. But the state's bankers realize that the interest tide could rise again and beach them upon the usury laws. "We don't ever want to be in that position again," said McQueen. Michigan's laws also give out-of-state banks an edge, state bankers believe. When rates were particularly high, Manufacturers stopped offering cards, allowing out-of-state banks to move in, said McQueen. "We lost substantial market share. Our competition is Citicorp, Chase Manhattan, Bank of America," he said. Said Hinckley of Michigan National: "It's a national business. Can local companies compete if interest rates are restricted?" To level the playing field, Michigan banks have lobbied the Legislature to remove or at least relax the usury restrictions. A package of banking bills, including provisions for usury reform, collapsed in the Legislature in December. The package will be resubmitted during this session, said Steven Rohde, an aide for Governor Blanchard who is handling the banking bills. But the politics of interest-rate reform is sticky, bankers said. Constituents generally take a dim view of their legislators supporting higher interest-rate ceilings. "If they are going to change the usury laws in Michigan, it will have to happen in the first six months of 1985," said Michael Taschner, vice president and senior government relations officer at Manufacturers National. "After that, it gets too close to election time." CDB

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Shifting Sands of the Financial Marketplace, sponsored by the Economic Club of Detroit. John J. Phelan Jr., chairman and chief executive officer, New York Stock Exchange, speaker. Noon today, Cobo Hall. Luncheon tickets $10.50 members and spouses; $12.50 guests. Call 963-8547. Managing Troubled Employees, 6-9 p.m. today, Feb. 11 and Feb. 18. Macomb Community College, Fraser Campus at Masonic and Caroline in Fraser. $25. Call 445-7417. Market Outlook for 1985, sponsored by Financial Analysts Society of Detroit. Ralph Acampora Jr., vice president and head of technical research at Kidder Peabody, speaker. Noon Feb. 6, Renaissance Club, Tower 200, 36th Floor Renaissance Center. Luncheon tickets $11 members; $13 guests. Financial Analyst Society members and their guests only. Call 446-1350. Michigan Pharmacist Association Interim Meeting and Michigan Society of Hospital Pharmacists Annual Meeting. Theme: "Synergy of Excellence." 8 a.m. to 8 p.m. Feb. 8. Hyatt Regency, Dearborn. $85 members; $115 non-members. Call (517)484-1466. Second Annual Michigan Women's Hall of Fame Awards Dinner, sponsored by Michigan Women's Hall of Fame. Carmen Harlan, WDIV-TV (Ch. 4) anchorwoman, mistress of ceremonies. 6 p.m. reception, 7 p.m. dinner. Feb 9. Fairlane Manor,

Dearborn. Dinner tickets $60; reception tickets $65. Call 884-6699. Tax Savings and Money Strategies for the '80s, 9 a.m.-1 p.m. Feb. 9. Oakland Community College, Orchard Ridge Campus, Orchard Lake Road, Farmington Hills. $28 fee; $5 materials. Call 471-7514.

Coming events Ten Ways to Avoid Lawsuits in Construction, sponsored by Engineering Society of Detroit and the Construction Association of Michigan. Ralph J . Stephenson, P.E., speaker. 12:15 p.m. Feb. 12. Engineering Society of Detroit, 100 Farnsworth, Detroit. Luncheon tickets $18. Cash bar at 11:30 a.m. Call 832-5400. Micro-Computers in Marketing, 1-4 p.m. Feb. 13. Sponsored by the Detroit Chapter of the American Marketing Association. Ramada Inn, 28225 Telegraph Road, Southfield. $15 members; $20 non-members. Call 643-1108. Family Operated Business, 6:30-10:30 p.m. Feb. 13. Macomb Community College, Center Campus, K-137, Garfield and Hall Roads, Mt. Clemens. $20. Call 445-7417.

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4,1985

Wayne County officials refine planning BY JOYCE DAVIS ADAMS CRAIN'S DETROIT BUSINESS

Corporate strategic planners for Michigan Consolidated Gas Co., Ford Motor Co., Detroit Edison and American Natural Resources are winding up an unprecedented, two-year, hands-on relationship with Wayne County government leaders, after trying to impart the rudiments of strategic planning for a coordinated, efficient government. "Planning is new to county government," said Eda Weddington, manager of operational planning at MichCon, who worked closely with the county's Health and Community Services and Human Resources departments. "Most of them have been so buried in work load, handling volumes of work, that they haven't had the time to ask 'What are we doing?' We have attempted to give them this opportunity." About 50 county department heads, elected officials, and top aides to Wayne County Executive William Lucas gathered for a three-day conference last week at the Fair Lane Conference Center-Henry Ford Estate on the University of Michigan's Dearborn campus.

.Planning is new to county government. Most of them have been so buried in work load, handling volumes of work, that they haven't had the time to ask 'What are we doing?'" EDA WEDDINGTON For this second annual session, they met to refine planning ability, formulate goals, and learn how to pass the methods down to county workers. "The county is well along in the process, as any company would be in two years," said Tom Hall, an associate business planner for Ford Motor Co. Hall worked with the sheriffs department, prosecutor and corporation counsel. Hall said strategic planners are like "lawyers, bringing expertise to a business," and are used by many businesses, especially larger corporations. The initial step in the art of strategic planning, Hall said, is to identify the external factors affecting an organization's ability to work efficiently. "The county must consider the implications of the population, income

levels and trends, revenue sharing looking out, hopefully five years, to see what its planning horizon will be," Hall said. Before strategic planning began, department heads - each of whom submits an annual budget to the county board of commissioners - did not know where and in what amounts the county's money originated. For the first time, Budget Director Irvin Morehead could inform county leaders how much of fiscal year 1985-86's projected total revenues of $195.2 million would be generated by taxes, government grants and department charges. The county's fiscal year began Dec.I. "We are now putting the budget together by gQals, which we didn't have the basic data to do before," Morehead said.

Stating a mission and developing goals were other key features of the strategic planning methods. "The mission is a statement of the business or function they provide, and the goals are a series of statements they agree to as a group, which show where they're heading and what they hope to accomplish in five years," Hall said. For example, at last year's conference, crime - how to reduce it and curtail its deterrence to economic development and new businesses - was identified as a major goal of government in Wayne County. At the recent conference, a criminal justice coordinating council was one of several objectives generated as a means to accomplish that goal. "It will be nice if it comes off," said Weddington, "but you have to be willing to put your money where your mouth is." Lucas invited businesses to help reform the government, which before his election as the first executive in 1982 was controlled by 27 commissioners "with 27 different points of view," he said. Lucas said the interaction between county officials has created a camaraderie among county leaders, who are now thinking more precisely and imaginatively about ways to serve the people. COB

J .P. Industries to buy Florida manufacturer BY STEVE RAPHAEL CRAIN'S DETROIT BUSINESS

In a move to strengthen itself in the national market, J.P. Industries Inc. of Ann Arbor has signed a definitive agreement to purchase a Tampa, Fla., manufacturer of residential and commercial plumbingware. J.P. Industries President and Chairman John Psarouthakis said the proposed purchase of the Briggs division of The Celotex Corp. is consistent with his firm's objective of expanding into

other U.s. markets in plumbing supplies. Briggs also is an ideal candidate for acquisition because it is "not as profi ta ble as it should be," Psarouthakis said, yet it has the potential for a "quick turnaround. " J.P. Industries is a manufacturer of plumbing and building products, as well as engine components for cars, boats and airplanes. The purchase of Briggs will more than double the sales of J.P. Industries, which posted

$66.6 million in fiscal 1984. Briggs had 1984 sales of $70 million. The proposed purchase price is approximately $24 million. The company is using about $20 million of a $35 million line of credit extended by the National Bank of Detroit for the purchase. It will pay the remaining sum through a $3.7 million promissory note to Celotex, a wholly-owned subsidiary of the Jim Walter Corp ., said John Menson II, senior vice

president-finance and treasurer for J.P. Industries. J.P. Industries will assume some of Briggs' operating liabilities totaling $6 million. The transaction does not include the purchase of Briggs' account receivables of approximately $10 million. Psarouthakis said Briggs' product lines complement those of JP Industries. Briggs is strong in the South and West, markets particularly appealing to JP Industries.

At last Tuesday's shareholders' meeting in Ann Arbor, Psarouthakis told shareholders that the acquisition is "a significant step in our strategy to become a major factor in the plumbing products market." Ih 1983 the privately-owned J.P. Industries went public, selling 1 million shares of stock. It recently consolidated operations of three other plumbing companies it had purchased since 1981. COB

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CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

LEXITEL

its rates lower than AT&T. They are currently 20 percent lower, numbers when using carriers said Vasilakos. However, his other than AT&T. company's rates will probably be Even with its notable only about 10 percent below successes, Lexitel currently AT&T's by the end of next year, handles only about 5 percent of after AT&T prices its services the Midwestern long-distance more competitively, he said. To keep its rates cheaper than traffic in the cities it serves, Vasilakos said. But he predicted the competition, Lexitel has its market share may reach 10 sought the proper mix of leasing percent by the end of next year, long-distance lines from other as equal access spreads carriers and building new throughout the Midwest. facilities in new markets. Lexitel leases 1.8 million By the end of 1985, about half of all the exchanges Lexitel circuit miles of microwave serves will have equal access, transmission network from said Andrew J. Margeson, vice Times Mirror Microwave presiden t of planning and Communications Co., to service corpo rate development at an area which reaches from Lexitel. He said that number Pittsburgh to Chicago and will increase to 80 percent in Cincinnati. It also leases limited, 1986. long-distance capacity from But equal access only puts AT&T to connect with long-distance phone companies sparsely-populated areas, on an even keel. To gain market Vasilakos said. share, carriers will still have to In addition to its microwave lure customers away from AT&T system, Lexitel has plans to both with lower prices - or AT&T lease and build fiber optics cable may retain customers because of networks that can transmit its special services such as conversations between conference calling. densely-populated areas much Lexitel plans to capture more more efficiently than microwave long-distance market by keeping facilities. â&#x20AC;˘ continued from PAGE 3

Lexitel is investing $21 million this year in fiber optics leases which will add about 4 million circuit miles of capacity to the company's long-distance network. Lexitel also is considering building a $12 million to $14 million microwave radio or fiber optics transmission system in Michigan. That system - which would be completed in early 1986 - could provide an additional 5 to 10 million circuit miles of transmission capacity, Vasilakos said. Lexitel plans to lease access on a 1,700-mile, fiber optics network that is being built along the right of way of the Kansas City Southern Railway Co. The network, which starts at St. Louis and extends south through Louisiana to Texas, is being built by LDX Group Inc., which owns 30 percent of Lexitel. Lexitel's purchase last fall of a subsidiary of LDX Group increased Lexitel's sales by nearly 40 percent. Even though Lexitel is lengthening its network south to Texas, Vasilakos said the company does not have any plans at this point to grow out of

the Midwest market - a growth strategy approved by Lexitel founder William O'Reilly. When it was incorporated in 1980, Lexitel was conceived to be a significant, regional player in the long-distance market , O'Reilly said. At one point, the firm drifted toward becoming a national carrier - a difference that caused O'Reilly to resign as chairman of the board in November 1983. O'Reilly is currently president of American Telemanagement Systems, a company he formed in March 1984 . It markets computer software and consulting services as aids to selecting long-distance carriers. However, Lexi tel has since reaffirmed its commitment to regional long distance markets, and that pleases O'Reilly, a major stockholder. "Within the next two years, we are thinking of going public, depending on the state of the financial market," V asilakos said. "The reason would be to raise additional equity capital to fund the business. "But we don't need to go public to grow." CDB

Diagram of the Datamizer shows data flowing from central processing units (CPUs) and terminals of sending system (at top), being condensed, going through a modem and over phone lines to receiving system (bottom), where it is restored to original state.

interest from other companies, which want to buy either the technology or the company. Brostoff says he isn't interested, even though discussions are continuing. The adulation doesn't seem to have gone to the heads of these young businessmen, but it's evident their greatest fear is complacency. They don't want to go the route of some young companies which grow too fast, building layers of bureaucracy which smother the adventurous entrepreneurial spirit that made

them successful in the first place. "Jeff, Cy and I have all worked for monstrosities," said Brostoff. "We know what it's like, and we want to stay lean and mean." Symplex is working on other products so it won't be strapped to the Datamizer when competitors begin to garner a portion of the market share. The company is working on incorpora ting a modem - a device that translates computer information so it can be transmitted over telephone lines

into the Datamizer. Datamizers are now hooked up to external modems. The company is also working on a product called a network controller which, when hooked up to an IBM PC, will graphically show what kind of performance a company is getting from its communications network. "In this business, being good isn't enough," said Brostoff. "We're shooting for the sweetest fruit at the top of the tree, and we want to pick it all." COB

DATAMIZER â&#x20AC;˘ continued from PAGE 3

president in charge of marketing, is putting together a an office in Ann Arbor, also network to market Datamizer in helped Symplex establish its such locations as Australia, banking and accounting Indonesia, South Africa and procedures. Europe. Expansion has been rapid. Morris says customers In January 1984, Symplex initially take a very skeptical employed seven people. Now 33 view of Symplex's claims, almost work at the company's offices on as though the Datamizer were Research Drive in Ann Arbor, one of those gizmos that do and Brostoff estimates as many everything from slicing bread to as 50 people may be on board by making coffee. But customers the end of this year. Brostoff often bear out the company's says the company may outgrow claims. its present home. RCA installed a Datamizer at The company turned a profit its Kuala Lumpur, Malaysia, during its first full year, location, and it paid for itself in registering nearly $2.5 million hours, Brostoff says. Though in sales in calendar 1984. that example is extreme, Morris Brostoff predicts sales will leap says the Datamizer will to $8 million in 1985, including normally pay for itself within 10 much business from repeat months. customers. "They're getting a very good The list of customers reveals track record," said Avis. "The diverse market areas: Procter & product is incredible. It will be Gamble Mfg. , Blue Cross and one of the hot products this year; Blue Shield, RCA Corp., Georgia there's nothing else like it on the Pacific Corp., Westinghouse market." Electric Corp., Hewlett Packard "We're very impressed and Co., Columbia Pictures Industry happy with the results," said Inc., Honda (Japan), NCR Corp. Randy Ross, manager of cords and the state of New York. design systems implementation Although production began in at Continental Telephone Co. in Silicon Valley, where suppliers Wentzville, Mo. Ross says are more numerous, the Continental, which has four company chose to consolidate in Datamizers, has ordered five Ann Arbor. more. A company such as Symplex "It's kind of a treat, actually," brings in parts from all over the said Ross. "The damn things world and ships them out to actually do what they're vendors for assembly. The supposed to do." assembled product is then Lloyd Tate, communications brought back to Symplex, where it goes through an extensive director of the Columbia Pictures office in Secaucus, N.J., says his quality control procedure. "Early on, we thought a dual company wasn't really expecting facility might be better," said the Datamizer to work but is Brostoff, "but we found out our pleased not only with the box assumptions about Michigan itself but also with the way Symplex has backed its product. were all wrong. "Our production costs dropped "We had one problem, and dramatically here in Michigan. they Federal Expressed a new ... The quality of work here is box to us the next day," said also much higher." Tate. "The service and technical Brostoff is chief executive support are very good. There's officer; Jacobowitz is president really nothing that compares to and manager of manufacturing, it now. It (the Datamizer) has and Azar is vice president in none of the idiosyncracies you charge of research and usually associated with this type development. of product." Now Howard Morris, 29, vice The quick success has brought

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26 CRAIN'S DETROIT BUSINESS

FEBRUARY 4, 1985

Civic booster Stroh needs local sales boost BY STEVE RAPHAEL CRAIN'S DETROIT BUSINESS

The Stroh Brewery Co., a major player in Detroit's revitalization, is a distant third in the Detroit beer market behind the Miller Brewing Co. and Anheuser-Busch Inc. "It's frustrating to be No.3 in our home market," admitted Christopher Lole, Stroh vice president for corporate planning and development. Lole said all Stroh-owned beers, including Schlitz beers, have roughly 17 percent ofthe market in the city. Just the Stroh, Stroh Light and Signature brands would hold third place by themselves. Miller has about 28 percent and Anheuser-Busch nearly 25 percent of the market. "It's tough going from 17 to 28 percent market share," conceded John Bissell, Stroh group vice president, marketing. There are no precise sales figures for the Detroit market, Lole said. But the company's City Sales Division did about $15 million in sales last year.

• It's criminal that Stroh pumps so much money into the city . . . and still is only No.3 ..... ROBERT HOLLAND JR. Stroh spokesmen attribute the local market dilemma to three factors: · Stroh, which had been Detroit's No. 1 beer in the 1950s, lost its lead in the 1960s when national premium brands, such as Budweiser and Miller, began aggressive marketing campaigns. · Native Detroiters have the habit of trashing all things Detroit. · The brewery is concentrating on its growing national market. Meanwhile, Stroh is actively involved in Detroit's rebirth, both to help the city and to improve the Stroh image among local consumers. The company's $150 million Riverplace development, just west of the Belle Isle Bridge, involves renovating several old buildings - including the red brick Parke-Davis building - into housing, offices and shops. Stroh executives sit on key civic organizations. Peter Stroh, chairman and chief executive officer, and John Hellweg, vice president, sales promotion, are on the board of Detroit Renaissance Inc. David Van Howe is on the board of the Greater Detroit Chamber of Commerce. Peter Stroh, through civic and arts organizations, has become one of Detroit's most visible leaders. In December, the company donated $50,000 to the Mayor's Emergency Relief Fund to feed the hungry. Stroh sponsors or co-sponsors more than 50 fun events locally each year, including the Montreux Jazz Festival, the Detroit Grand Prix and the International Freedom Festival fireworks. "It's criminal that Stroh pumps so much money into the city, compared to its competitors, and still is only No. 3 in the market," said Robert Holland Jr. , chairma n of City Marketing Inc. Holland's marketing/distribution firm wholesales Stroh's in Detroit, the Grosse Pointes and a corridor of southern Oakland County. Holland said he and partner Don Hill paid "in excess of $3 million" for Stroh's City Sales Division in December and renamed it City Marketing. Lole said Stroh was looking for a high-energy entrepreneur to turn city sales around: "The guys there (at the division) were less likely to go out at lO p.m. to service

a client because they got their paycheck from Stroh anyway. But Holland is an independent businessman. His livelihood will depend on making his customers happy." Lole and Holland agree that City Sales got a low priority when Stroh expanded nationally. In June 1982, the brewery bought Jos. Schlitz Brewing Co. and went from a regional beer in 17 states to a national beer in 50 states. Sales increased overnight from $600 million to $1.5 billion. A native of Albion, Holland was a mechanical engineer with an MBA in marketing. He spent 14 years working for McKinsey and Co. Inc., a New York management consulting firm, as an international marketing consultant specializing in the turnaround of companies not performing up to snuff. He formed his own consulting firm in 1982 with Hill. For two years, the company advised Stroh on its distribution network. In December, Holland and Hill bought City Sales. "It was fortuitous," Holland said. "Stroh was looking for a buyer. I was looking for a business. I knew the beer business." Something more than luck was involved in the sale. Holland is black and Stroh hopes to improve upon its 17-percent market share, particularly among city blacks whose Stroh beer purchases lag behind those in other black communities across the country. "Bob is a bright, aggressive businessman who may be able to do some marketing things differently from a cultural perspective," Lole said . Holland shrugged off his ethnic background as "coincidental" to his selection by Stroh as City Sales Division buyer: "My ethnicity won't make this business a success ... I know a lot about this business that wasn't being applied to the running of it." Bissell said the black community is important to Stroh for two reasons: "It represents an area of market growth and is a matter of pride to the company because our hometown is a majority-black city. "Sales are not as good in Detroit as they are nationwide. We don't know why." Stroh advertises in black newspapers and on black television and radio stations in Detroit and the nation. Last year it lured Hayes Jones, a 1964 Olympic gold medal winner in track who starred at Eastern Michigan University, from American Airlines Inc. to be its national manager of black market development. Lole said the brewery pays a "fairly significant" amount of money to a black-owned Chicago ad agency, Burrell Advertising Inc., for advertising aimed at the black community. Stroh was the sole sponsor of the Martin Luther King Jr. Salute to Greatness dinner in Atlanta in January. This segmented marketing approach has had mixed success. Lole emphasized that Stroh's primary marketing objective is to increase its market share among its target audience of male drinkers from legal age to age 34, and its secondary audience of males aged 35-49. The company tries to reach that market through national advertising, particularly sports events, Lole said. It ran two national and two local ads during the Super Bowl last month. "Nationally, our strategy is to project a company image of warmth and humor through commercials like Alex the dog," Lole said. "We want to project an image that the consumer wants to be associated with." Stroh, the nation's 56th largest advertiser, will spend nearly $75 million on advertising in 1985. In 1983, the most recent year for which figures are available, Anheuser-Busch spent $290.6 million on advertising, Miller $226 million and Stroh $73.4 million, according to Advertising Age. Stroh also will spend $25 million in 1985 for national and local promotions, such as Montreux and the Detroit fireworks, so the brewery can zero in on specific markets. While Stroh pursues its national markets, Holland and Hill attack the local sales enigma. They want to double market share and double 1984 sales of $15 million within three years.

"I have two publics to worry about - the consumer and the retailer," Holland said. He is developing marketing strategies aimed at the consumer in time for the heavy beer-drinking summer months. He said he is "aggressively" getting beer to the retail store owners. City Marketing serves 3,000 retail outlets. Holland, Hill and their 55 employees are going into retail stores, removing old beer and broken bottles from back rooms. They are removing weathered packs of Stroh beer from store coolers and replacing them with fresh beer to make both the beer and the shelves look more appealing. Gus Stevens, who buys all alcoholic beverages for Chatham Complete Food Centers Inc., hasn't noticed improvement in Chatham stores, but he isn't skeptical about Holland's intentions. Holland is "in a big market, so it's entirely possible that he hasn't reached us yet," Stevens said. "I give the guy a lot of credit if he's going out to the stores and hustling." In the meantime, shed no tears for Stroh. "You can view our situation in a more favorable light," Bissell said. "We are a strong No.3 in both Detroit and the nation," again behind Miller and Anheuser-Busch. In 1983, the company's percentage of barrels shipped increased 5 percent more than the beer industry average, according to a company spokesman. Lole said he expects 1984 sales will reach $1.6 billion, nearly 8 percent above 1983 sales. Stroh can take some consolation in the fact that Miller is battling it out for the top spot in its hometown of Milwaukee. Miller's competition there is another Milwaukee brewer, Pabst Brewing Co., according to Eric Shepard, an editor of Beer Marketers' Insights, a beer trade publication in W. Nyack, N.Y. Anheuser-Busch is No.1 in its hometown of St. Louis. Lole said that when he joined the brewery in 1977, Stroh was No. 4 locally behind Miller, Anheuser-Busch and Pabst. Acquisitions, the appearance of the super premium Stroh Signature beer and the decline of Pabst allowed Stroh to switch positions with Pabst. "More young people are drinking Stroh, locally and nationally," Bissell said. "Signature beer has 30 percent of the super premium beer market in Detroit, and it is only three years old."cca

LARRY KAPLAN

Local drinkers pick Miller, Anheuser-Busch brews.

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DetroitsHometown Business Newsweekly

28 CRAIN'S DETROIT BUSINESS

FEBRUARY 4, 1985

IHP

SIEGEL

continued from PAGE 1

tender offer. IHP officials would not comment on the proposed buyout, referring all calls to The Financial Relations Board Inc., a New York City public relations firm. A spokesman for that firm gave general details about the transaction, but would not comment on specifics. But Loomas said he has been stalking IHP as an acquisition since March. As of January 1984, IHP had about 85,300 members, making it Michigan's second largest HMO . Loomas said he persuaded major shareholders to sell their stock. Loomas said he noted after IHP's initial public offering that real estate tycoon Craig Hall of Dallas held a large position in the company. Loomas said that when he contacted Hall in March, Hall was eager to sell his stock, but IHP's six remaining founders were not. The six were IHP President Mitchell Jaworski and company officers Catherine Barr, Richard Becherer , James O'Connor,

Lawrence Richard and Wellington "Kip" Stretton. Another founder, President Bruce Mullican, died in 1983. Loomas bought Hall's stock and stock on the open market. But he declined to make a full tender offer until he had won over the founders, he said. "We had an on-again, off-again relationship over the next few months," Loomas said. "It took time for me to convince them my intentions and goals were similar to theirs. Before I got into an arrangement to acquire their stock, I wanted to make sure the company principals were there with me." Some insiders say the princi.pals were mainly won over by money. "It wasn't necessarily a management decision of IHP," said Donald Hultgren, assistant vice president of the investment banking firm of Eppler, Guerin & Turner Inc. in Dallas. "When IHP went public (in October 1983), they didn't think they

would be bought. "But it wasn't an unfriendly takeover, either. Management decided it could either continue the battle (against Greatwest) or work out terms agreeable to both sides." Steve Reid, a health care analyst with the Los Angeles regional brokerage house of Bateman Eichler, Hill Richards Inc., called the takeover friendly. Reid said Hall sold his stock for considerably less than some of the others, a contention that Loomas denies. But he said the founders and officers saw the buyout as a golden opportunity: "They made some fast money and are still employed. They have their cake and are eating it, too." Janet MacQueen, marketing director for Health Alliance Plan, the largest and oldest HMO in Michigan, speculated that IHP may have needed more capital or resources to continue its growth. After months of wooing, IHP

principals agreed to the buyout in November. Loomas, who founded the publicly-held Greatwest in 1969 with one hospital, feels IHP fits in well with his firm's new emphasis on the prepaid health plan industry. Greatwest, which posted revenues of $53.6 million in 1984, compared with $36.4 million a year earlier, owns seven hospitals, eight health service com.panies, medical office buildings and a medical clinic in southern California. It has put all those properties on the auction block to concentrate on prepaid health plans, which Loomas calls "the wave of the future." Current IHP employees will retain their jobs here, Loomas said, and management of IHP will continue to run the day-today operations and be offered places on the board of the two merged companies. "When you find good people, you leave them alone," Loomas said. CDB

continued from PAGE 1

an approach to save them. B. Siegel Inc. of Detroit is owned by Philip Fischer, who bought the 103-year-old company from Benjamin Siegel's son-in-law, Bernard Walker, three years ago. To date, the women's specialty store is about $4 million in debt, according to records the company submitted to the DDA. At least $500,000 is owed to the General Electric Credit Corp., a credit company often used by retailers for inventory and credit card financing. Trade creditors and tax claims make up the balance of the debt. Fischer asked the DDA for an emergency loan of nearly $1 million - $500,000 immediately and the remainder in June - to buy merchandise for the two stores and to support operations through 1985, Dobson said. Dobson said the DDA will probably take a "more conservative approach" and not invest until "after an independent audit is done, verifying all expenses and liabilities." CDS

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umn inch. Frequency discounts available. Minimum ad billing size of one inch. STRAIGHT CLASSIFIED ADS are available at $6.00 per line with a 4 line minimum. Frequency discount available. BOX NUMBERS are available at $10.00 extra per insertion. Advertisers must request this service when placing the ad. Replies are then forwarded, unopened, to advertisers the same day on which they are received. INSTRUCTIONS: All advertising instructions are due seven days prior

to publication date. Telephone orders are accepted from 9:00 am to 5:00 pm (Detroit time) Monday through Friday. Advertising can be placed by calling 313-446-6068 or writing care of Classified Advertising Department, Crain'S Detroit Business 1400 Woodbridge Ave., Detroit, Mi. 48207. ALL CLASSIFIED ADVERTISING MUST BE PREPAID. Visa, MasterCard, American Express, Check or Money Order accepted.

313-446-6068

, •

WINNING CIRCULATION GAINS Total Paid Circulation*

41 , 586 HIGHEST EVER! ·Dec. 1984 A8C Magazine Publisher's Statement

MONTHLY

DETROIT Putting Detroit First For advertising or subscription information call 446-6000.

WINNING DEMOGRAPHICS

Average HH Income:

$70,831

Median Age :

39 years

Top Management: Middle Management:

27 % ............ 450/

Professional/Technical : Total : Business & Industry: Attended/Graduated College: Advanced Degree:

18%~

22 % 65% 82%

22 %

ADVERTISERS LOVE A WINNER! In 1984 advertisers placed 827 pages of space in Monthly Detroit-an amazing 25% increase from 1983.

BE A WINNER TOO! To reach the most desirable audience in the greater Detroit area, there's just one choice- Monthly Detroit. Young, vital, active consumers who attend theatre, eat out, entertain and buy, buy, buy for themselves and their families.

30 CRAIN'S DETROIT BUSINESS

FEBRUARY 4, 1985

pers, a printing operation, and five TV and two radio stations. • Although the Free Press has ~ continued from PAGE 1 made impressive circulation gains - more than 40,000 daily "In the long run," said newspa- and more than 90,000 Sunday per analyst John Morton of John since 1980 - it has yet to crack Morton & Co., Washington, D.C., its competitor's stronghold in the "probably the only way to have primary market area (PMA) of both is for them to enter into a Wayne, Oakland and Macomb joint operating agreement with counties. The News sold about one morning, one evening and 574,000 daily copies and the Free Press 457 ,000 in the PMA in one Sunday paper." 1984, according to the Audit BuChampagne flowed at the Free reau of Circulation report. Press Dec . 17 when David • Detroit's eroding retail base, Lawrence Jr. , 42, was promoted along with increasing direct mail from executive editor to become advertising, is diminishing the the paper's first official publisher income prospects of both papers. since Lee Hills left the Free Advertising generally is 75 perPress in 1979. cent of a paper's revenue, accord"What we have now is the ad- ing to the International Newspavantage of all of us moving per Promotion Association. under the same flag," Lawrence • A heightened tension as evisaid. The paper's three chief offi- denced by the Free Press Sunday cers - editor, executive editor price increase from 50 to 75 and president, all of whom pre- cents, which appeared the same viously reported to corporate day The News came out with a headquarters in Miami - now new contest and a tidier look . report to Lawrence. While each concentrates on a Lawrence's promotion led off direct knockout, another littlethese appointments: mentioned strategy conceivably • Jerome Tilis, 42, president, could end the stalemate: a fresh from the Philadelphia In- merger. quirer's triumph over the Phila"The News is a great takeover delphia Bulletin, which folded in candidate," said Donald Becker, 1982, 13 years after Knigh t who left the presidency of the Newspapers bought the Inquirer. Free Press to move to Knight• Robert Hall, 39, general Ridder's Journal of Commerce in manager, a new position, an- New York City when Lawrence other Philadelphia veteran. was promoted to publisher . • Kent Bernhard, 42, execu- "Even at $250 a share, it's (ENA tive editor, noted for his strong stock) woefully underpriced. political coverage in Knight-RidAn attempt by Booth Amerider's Washington bureau. can Co., George Gillett Jr., a Industry insiders from coast to Tennessee media entrepreneur, coast say the lineup looks good. and certain brokerage firms to Lawrence is aggressive, in- buy EN A shares was reported in tense, energetic and dedicated to December. ENA sued for an invictory. He has been instrumen- junction to halt acquisition, cittal in uniting the paper's key de- ing Michigan's anti-takeover partments, leading to its steady statute to protect local business circulation gains since 1980. enterprises. A New York stock analyst deWayne County Circuit Court scribed Tilis as a "streetfighter." Judge William Giovan denied Gene Roberts, Inquirer execu- the injunction request. tive editor and former Free Press While newspaper executives city editor, said Tilis's role in consider the value of The News , Philadelphia was "so major he losses at the Free Press cost was like a four-star general.' stockholders 5 to 10 cents a Bernhard brings a reputation share, according to Value Line as a seasoned hard-news journal- Investment Survey. ist to a paper best known for its Responding to reports from feature coverage. Free Press executives that The "Hall and Tilis were the very News loses twice as much as the core of the Inquirer business Free Press, News President Nelside," Roberts said. "They leave son said "They believe in the an enormous hole here." tooth fairy." Roberts said the people who Officers of the Free Press acknow them believe they can knowledge the paper has lost break the competitive deadlock money every year since 1980. in Detroit's newspaper fight. The Free Press, Knight-RidIn the offices of The Detroit der's largest circulation paper, is News, the new Free Press lineup is believed to be the only one of is seen with less awe. its 29 dailies losing money, anaPhiladelphia was "not so much lysts said. a Knight-Ridder victory but a Analyst Morton estimates Free failure by the Bulletin," said Ex- Press annual operating losses ecutive Editor Benjamin Burns. between $5 million and $10 milNews president and publisher lion for each of the past three Robert Nelson, who enjoys his years. He estimates The News's image as a "junkyard dog," said operating losses in the $15 milhe doesn't think Knight-Ridder lion to $20 million range for has "the commitment, and I 1982-3. Last year, both papers don't think anyone would have probably showed some improvemore commitment than we do." ment because of the stronger Burns added, "This is our economy, he said. home. Everything that is the At recent Knight-Ridder anEvening News Association nual meetings, stockholders (News owner) started in The De- have questioned Detroit's drain troit News." on the company's resources. The battle is being fought Former Free Press President against this backdrop: Becker· said he thinks the Free • Publicly-traded Knight-Rid- Press can take the lead if it "can der is the country's second lar- keep the shareholders off their gest newspaper chain, with backs long enough." assets of $1.3 billion in 1984; the Peter Benjaminson, a former Evening News Association is De- Free Press reporter and author of troit-based and independently- Death in the Afternoon, a book owned, with assets of $153 mil- about the plight of big-city afterlion in 1984. ENA owns five noon newspapers, said, "Knightdaily and five weekly newspa- Ridder is not doing nearly as

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Business

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1When FREE WITH 1 you order a classified ad we will repeat the same ad the following week free. For information or to place an order, call:

446-6068

well against The Detroit News as it did against its competitor in Philadelphia." When the Inqu irer took the circulation lead, advertisers ''jumped en masse" to the leader, he added. Knight-Ridder executives said they are pleased with Detroit's circulation gains. They say a $50 million investment in a printing plant, opened in 1979, and talk of a $6 million expansion, reflect Knigh t- Ridder ' s commitment and optimism that it can return the Free Press to profitability. They say the Free Press is narrowing the circulation gap, gaining at a rate twice as fast as its competitor. The 12-month average 1984 audit report showed The News's daily paid circulation at 651,114, up 4,060 from 647 ,054 in 1983. Free Press figures for the same period were 631,956, down 1,870 from 633 ,826. The Sunday figures are: News, 858,903, a 9,383 increase; and Free Press , 787,649, an 11,784 increase. But numbers don't tell the whole story. Media buyers put circulation "under a microscope," said Richard McClennen, News marketing director and Bulletin advertising director until 1979. The real battle is over retail advertising dollars in the Primary Market Area, which accounts for half the retail sales and half the state population, he said. Here The News leads by more than 100,000 daily and more than 200,000 Sunday. In the mid-1950s, the Free Press tried to beat The News by becoming Michigan's newspaper. It had begun to establish itself as the dominant paper outstate and was on the verge of winning the battle for national advertising. Then electronic media grabbed national advertising revenue and left the Free Press with good outstate circulation and The News positioned strongly as the dominant revenue gatherer in the metro area. In a speech last week to the Economic Club of Detroit, Chairman Chapman said Knight-Ridder viewed Detroit, although fallen on hard times, as a "good, strong" market. He said the city's retail sector would return. The News holds tight to its roughly 60 percent retail and 70 percent classified market share. The Free Press recently filled its classified manager spot, which had been vacant for about a year. Burns said that no embattled metropolitan paper has won a stiff competitive fight without a stronghold on classified; a share below 30 percent means trouble, he said. Former employees of both papers say the combatants were blinded to threats of a trend in diversified marketing and direct mail and were late in developing total market coverage (TMC) strategies. Late last year, the Free Press began a TV and radio campaign which some say represented a gearing up for its January price increase. Although the Free Press wouldn't say, a News source said the Free Press spent about $500,000 on electronic media time between October and January, more than The News spent in the preceding year. The News reportedly has beefed up its 1985 promotional budget. COB

CRAIN'S DETROIT BUSINESS 0 FEBRUARY 4, 1985

WEEKLY CAR AND TRUCK PRODUCTION BY PLANT PLANT LOCATION

2/2 EST.

126 ACTUAL

FLINT

7,749

9,208

28,511

LANSING

6,328

4,052

18,430

DETROIT

4,400

3,929

15,932

PONTIAC

3,039

2,672

7,474

ORION

6,155

4,264

19,977

WILLOW RUN

4,000

3,894

12,913

882

887

4,592

FLINT

7,106

7,930

29,658

PONTIAC

4,901

2,838

15,156

STERLING HTS.

2,100

1,736

8,656

DETROIT

4,700

4,196

16,441

WARREN

4,000

3,727

18,047

DEARBORN

2,676

3,375

13,944

WIXOM

3,618

3,465

12,793

WAYNE

N/A

6,080

23,084

WAYNE

N/A

1,800

7,507

GENERAL MOTORS CARS

TRUCKS

DETROIT

CHRYSLER CORP. CARS TRUCKS

FORD MOTOR CO. CARS

TRUCKS

SOURCE : General Motors Corp., Chrysler Corp., Ford Motor Co. DETAIL OF MEASUREMENT: Number of cars and trucks produced by various automakers for the week, estimate of the next week's production , last week 's production .

SOURCE : Various DETAIL OF MEASUREMENT: Weekly figures of the prime interest rate , the federal funds rate , and the discount rate . The prime rate is the base rate on corporate loans at large U .S . money center commercial banks . Federal funds rate is the interest rate charged on reserves traded among commercial banks for overn ight use in amounts of $1 m illion or more. The discount rate is the interest rate charged on loans to member depository institutions by the New York Federal Reserve Bank. All rates are reported as percentages.

REAL ESTATE LOANS 4000

(millions)

3000

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WE'O LIKE TO BACK SOME. &)NOS WITH OUR RECEIVABLES.

ARE YOUR RECEIVABLES OF I-UGH QUALITY?

1000

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2000

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SOURCE : Federal Reserve Bank of Chicago DETAIL OF MEASUREMENT: A weekly report on the total amount of real estate loans made by the five largest banks in Detroit . In millions of dollars.

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400 ~

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110 M

300

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200

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SOURCE: Southeast Michigan Council of Governments DETAIL OF MEASUREMENT: Preliminary totals reported by communities in Wayne, Oakland, Macomb, and Washtenaw counties.

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SOURCE : U .S . Department of Commerce and consortium of retail department stores . DETAIL OF MEASUREMENT: Total sales of selected department stores in the Detroit area . Department stores are those stores employing 25 or more people in the sale of family apparel , hardgoods such as electronic appliances and dry goods such as domestic linens .

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