MiBiz August 17, 2020 print edition by MiBiz

New business applications skyrocket during pandemic

Birgit Klohs reflects on 33 years leading The Right Place Inc.

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AUGUST 17, 2020 • VOL. 32/NO. 22 • $3.00

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Business groups, health experts say employers play key role as school starts

LESSONS LEARNED?

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

By KATE CARLSON, ANDY BALASKOVITZ and JOE BOOMGAARD | MiBiz kcarlson@mibiz.com

GR officials ‘pivot’ after lack of incentives, infrastructure challenges doom $270M development

am Gregoire went from college student to small business owner within a few months, driven by the reality that many K-12 schools wouldn’t be returning to in-person instruction this fall. A Grand Rapids resident who graduated last spring from Grand Valley State University with degrees in biology and women and gender studies, Gregoire has spent the past month launching a tutoring service for students. Although a small one-person operation, Fiddlehead Tutoring is helping fill a widening gap as schools turn to virtual learning to curb the spread of COVID-19. A conversation with a friend who was homeschooled about the implications of virtual learning — specifically the recognition that working parents may be faced with homeschooling for the first time — “sparked a fire in me to want to help and contribute to the community,” Gregoire said. Gregoire began advertising her business on social media this month, and as of mid August was still in the process of forming an LLC. She’s meeting with parents to discuss their needs and is willing to teach students their curriculum in settings where they’re most comfortable. “I want to be an extra resource for them and help with the challenges of switching from in-person to online learning (and) give them that one-on-one attention they’re not getting in the classroom,” Gregoire said. See BACK TO SCHOOL on page 10

Grand Rapids resident Sam Gregoire started Fiddlehead Tutoring shortly after graduating from Grand Valley State University last spring to help meet parents’ needs as students return to school virtually. MIBIZ PHOTO: SETH THOMPSON, GREEN FROG PHOTO

New $160M COVID-19 vaccine contract ‘takes GRAM to the next level’ By MARK SANCHEZ | MiBiz msanchez@mibiz.com GRAND RAPIDS — The $160 million federal contract to produce a COVID-19 vaccine when it’s ready elevates Grand River Aseptic Manufacturing Inc. into what Tom Ross calls the “big leagues.” The deal with the U.S. Department of Defense and the Department of Health and Human Services (HHS) accelerates growth and can give GRAM greater visibility Ross

across the industry, said Ross, president and CEO of the Grand Rapids-based contract developer and manufacturer of sterile injectable drugs. “It really takes GRAM to the next level,” Ross told MiBiz. “We have consistently grown and become a leading contract development and manufacturing organization. “Now with the program, with the government support and what we’re doing to support the COVID vaccine, it accelerates our growth and allows us to invest in the future much quicker than we would have anticipated. What that does is enables us to continue to enhance our reputation in the marketplace.”

Through the contract, the federal government essentially reserved the company’s production and distribution capacity for a vaccine that a number of pharmaceutical companies are racing to develop through what’s known as “Operation Warp Speed.” The $10 billion publicprivate partnership aims to develop and have 300 million safe and effective doses of a COVID19 vaccine on the market by January 2021. After completing and opening a $60 million, 60,000-square-foot expansion this summer, GRAM is “incredibly well positioned to support any pandemic effort over the next several years,” Ross said. The new facility on Butterworth Street See GRAM on page 17

GRAND RAPIDS — The city of Grand Rapids has walked away from a nearly $270 million proposal to redevelop prime city-owned riverfront property after its chosen developer failed to secure crucial tax incentives for the project. City officials say they will now “pivot” after spending about $230,000 on a multi-year process to evaluate proposals to redevelop 201 Market Ave. SW. Underscoring the complex nature of redeveloping the site, the city is now considering its own plan to relocate city services at 201 Market as part of an option to purchase a county-owned property farther north along the Grand River. It’s a major shift from late 2017 when the city selected an Indianapolis-based developer’s plan to transform the 201 Market site with a hotel, residential housing, retail, parking and greenspace. The city had selected Flaherty & Collins Properties’ $268.5 million proposal over plans from Grand Rapidsbased Rockford Construction Co. Inc. and Southfield developer REDICO LLC. After three years with no changes at the 201 Market property, city officials maintain the previous RFP submissions effectively remain in play and that other proposals can be considered. Although Flaherty & Collins’ plan is now off the table, the city “learned a lot in the process,” said Grand Rapids Deputy City Manager Eric DeLong. “We have the flexibility that future discussions might include talks with developers that submitted previous proposals or other parties,” he said. Rockford Construction submitted a $238.8 million proposal for the site that included a 10,000-seat open-air soccer stadium and pedestrian bridge along the Grand River with 200 housing units, parking, office and retail components. Company spokesperson Kate Betts declined to comment for this report, citing a nondisclosure agreement. REDICO has not been in contact with the city about its proposal since it was submitted three years ago, a spokesperson told MiBiz. According to Flaherty & Collins Vice President of Development Brian Prince, the See 201 MARKET on page 14

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‘Questions and concerns’

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Outdoor drinking areas may offer lifeline for bars and restaurants, but oversight questions remain By KATE CARLSON | MiBiz kcarlson@mibiz.com

Diners in a designated social zone along Monroe Center in downtown Grand Rapids. MIBIZ PHOTO: KATE CARLSON

esignating outdoor drinking areas is not only a way to modernize Michigan’s alcohol regulations, but also extends a critical lifeline for restaurants and bars grappling with limited activity during the COVID-19 pandemic. However, these new “social districts” — the state’s relatively quick entrance into a new normal for drinking establishments — have raised a series of questions and concerns over enforcement and who will get to participate. Legal experts say the Michigan Liquor Control Commission, which oversees the sale and distribution of alcohol statewide, has been notably absent in providing owners guidance. Social districts are necessary for struggling bars and restaurants, but it is unclear if anyone fully understands how they will work, said Joseph Infante, principal attorney at Miller Canfield Paddock and Stone PLC who leads the firm’s alcoholic beverage regulation team. “Most people have questions and concerns, and the MLCC has concerns about enforcement,” he said. “The biggest concern I have with all of this is you’re going to create a situation of haves and have-nots. Some locations are not conducive to this.” The MLCC does not have jurisdiction within social districts and it will be up to local authorities to police them, MLCC spokesperson Jeannie Vogel told MiBiz via email. Vogel did not respond directly to questions about liability insurance or the commission’s approval process for applicants in social districts. Infante said the MLCC also has not put out its own rules or guidelines for how social districts should run. Establishments’ responsibility for tracking who they serve alcohol to and making sure it doesn’t leave a designated area becomes much harder in social districts, he added.

“There will be signs where the (social districts) end and you will see it clearly marked where you reach the end, and see rules on how you can utilize it,” Canfield said.

Conducive to smaller areas Social districts were signed into law on July 1 by Gov. Gretchen Whitmer as a way to provide more outdoor options for bars and restaurants that have been negatively affected by COVID-19. Municipalities, which can establish social districts by resolution, are required to give the first step of approval for each restaurant and bar that wishes to use them. The Grand Rapids City Commission approved plans on July 21 for three separate designated drinking areas in and around downtown and one on Wealthy Street. The social districts include common areas where alcohol can be sold and consumed, building on outdoor social zones that the city previously established downtown. The first social districts approved by the Grand Rapids City Commission comprise: • The hotel/arena district around DeVos Place and Calder Plaza, stretching toward Van Andel Arena and the Downtown Market. • The Bridge Street district that stretches from Gold Avenue to Mt. Vernon Avenue. • The Monroe North district that contains part of Monroe Avenue and Ottawa Avenue. • The Wealthy Street district between Union and Eastern avenues. Social districts are different from already-established social zones, which allow bars and restaurants to use adjacent public spaces such as city streets and sidewalks to seat customers. However, alcohol sold within each licensees’ zone must be consumed within that zone; only unopened, sealed beer and wine containers can be transferred out of the zone. The statewide social district legislation is more conducive to smaller towns, Infante said, where there is a small main street area that can be blocked off — unlike Grand Rapids with multiple pockets around downtown that may want to use social districts. “The larger the zone or district is, the harder it is to regulate or control that,” Infante said. “Overall, it’s still a great tool that we need,” he added. “People don’t want to eat indoors and the ones that don’t have outdoor space will have to participate in this.” With lingering questions about the specifics of social districts, Infante said bars and business owners should make sure they are keeping a paper trail of questions they ask city officials and the MLCC about how to operate within social districts. Downtown Grand Rapids Inc. and the city will monitor how the social districts are operating once they are up and running, said Lou Canfield, the city’s development center manager. Options to change the districts based on use could include shrinking the districts or breaking up a larger area into smaller districts if safety or enforcement becomes an issue, he said. Social districts are required to be marked off with designated borders. The city is still working out exactly how it will mark off the districts, Canfield said. Visit www.mibiz.com

‘Not worried about it’ Karie Koster, co-owner of Osteria Rossa in downtown Grand Rapids, said she is confident her restaurant will be able to enforce the new social district policies. Osteria Rossa was also among the 23 establishments approved by the City Commission. “I’m not worried about it. The staff has been here a long time and are good about asking for IDs and knowing who can drink and who can’t,” Koster said. The rules for restaurants and bars this summer have been changing frequently, but the city has done a good job of working with owners and operators, Koster said. “They’re trying to think outside of the box as much as they can,” Koster said. “We’ve got to kind of figure it out, think it through and be able to adjust. Throughout this whole COVID-19 situation, there has been a learning curve and adjustment and you have to learn something new every day.” Businesses permitted to use the districts will need to have clearly marked cups that identify which district they can be used in, Canfield said. The plan is for special event permits to still be available in social districts, but if a nonprofit wants to do a fundraiser, those entities will not be eligible to get a social district permit, Canfield said. The state legislation allows social districts until the end of 2024. In Grand Rapids, the city will evaluate each district at the end of 2020 to determine whether to keep or revoke the district’s license. Canfield said it’s important for businesses to spend the time learning about the social district process. “Both the state and the city are wanting to be helpful to businesses and adopt an approach that enables them to be successful, rather than be punitive. Businesses should trust that if they are doing their best to follow the guidelines, they should be OK.”

Important tool Grand Rapids approved 23 restaurants and bars on July 21 to use the future social districts. The designated drinking districts will not be established until the MLCC approves each business. Canfield said he expects the MLCC could possibly grant the social district permits approval by mid August. Applying for a social district permit costs business owners $320 in fees. There is no local criteria the Grand Rapids City Commission considered when approving the 23 establishments, Canfield said. About 100 liquor license holders downtown can apply for a social district permit, and Canfield expects more will apply in the future. Social districts will not be allowed any place in the city where there is not an already established social zone, Canfield said. This was done because social zones require a group to step forward and apply for the zones, and also be in charge of maintaining the space. DGRI applied for the social zones in the downtown area, so it will be the body responsible for maintaining the future social districts as well. “This was a tremendous collaboration between the city and Downtown Grand Rapids Inc.,” said DGRI President Tim Kelly. “This will be an important tool for businesses.” Restaurants and bars have struggled this summer with a variety of executive orders limiting operations in order to slow the spread of the coronavirus. Across most of the Lower Peninsula, restaurants and bars are allowed to have indoor dining at 50 percent capacity, and indoor dining is prohibited for establishments that earn more than 70 percent of their gross receipts from alcohol sales. “Anything you can do to draw more people to a business district really just opens up more opportunities for retail and other businesses as well to have more people around,” said Paul Lee, who co-owns Winchester, Donkey, Hancock and Royals restaurants along Wealthy Street. Lee wishes the social districts would have been implemented sooner, especially because of Michigan’s short summer season and the close proximity to the upcoming school year. Lee applied to the MLCC for social districts for three of his restaurants — Donkey, Winchester and Royals — which are located in the Wealthy Street district and were among the 23 approved by the city. Koster, of Osteria Rossa, is also waiting for MLCC approval and agrees with the potential added benefits of social districts. “Hopefully this will create a cozier, more neighborhood feel downtown,” Koster said.

Editor Joe Boomgaard / jboomgaard@mibiz.com Managing Editor Andy Balaskovitz / abalaskovitz@mibiz.com (energy, policy) Senior Editor Jayson Bussa / jbussa@mibiz.com (manufacturing, tech, sports) Senior Writer Mark Sanchez / msanchez@mibiz.com (finance, health care, life sciences) Staff Writer Kate Carlson / kcarlson@mibiz.com (real estate & development, small biz) Contributing Reporters Marla Miller, Jane Parikh Contributing Photographers Seth Thompson, Katy Batdorff Copy Editor Claire Boomgaard VP of Production & Audience Development Kristi Kortman / kkortman@mibiz.com Senior Advertising Consultant Shelly Keel / skeel@mibiz.com Digital Specialist Danielle Affholter graphics@mibiz.com

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MiBiz / AUGUST 17, 2020

FOCUS: AUTOMOTIVE SUPPLY CHAIN

Auto suppliers tackle disruptions with new ways of working, innovation By JAYSON BUSSA | MiBiz jbussa@mibiz.com

he topic of the day at this year’s Center for Automotive Research (CAR) Management Briefing Seminars was predictable. After all, it was impossible for attendees to ignore the presence of COVID-19, especially when the pandemic was the very reason they were attending the annual market intelligence event virtually instead of in person at the Grand Traverse Resort as usual. Touching on a variety of pressing issues and trends in the automotive industry, the 2020 Management Briefing Seminars focused heavily on COVID-19 discussions, measuring its effect on virtually every corner of the industry — from changing life inside manufacturing plants to influencing the components implemented in new vehicles. Endres By all accounts, COVID19 has thrust the auto industry into a market downturn. Despite the hopes for a V-shaped recovery, it will require a several-year grind to return to normalcy. A few of the telling numbers came via market research and consulting firm IHS Markit, which forecasts a Jacobson 20-million-unit drop in global vehicle production this year because of COVID-19. Global production in 2019 reached 88.9 million units, which is expected to fall to 68.8 million units in 2020. This includes a 3.7-million-unit drop in North America alone. Originally, production was only supposed to drop at a global level by less than 1 million vehicles and even see a slight uptick in North America. Now, IHS Markit forecasts that production won’t recover to 2019 volumes until 2025. The market downturn also has put many suppliers and manufacturers in distress, which PricewaterhouseCoopers predicts will usher in a

very busy next few years of M&A activity and supplier consolidation as many businesses look for a lifeline to avoid bankruptcy or closing altogether.

Driving discussions Aside from the hard numbers that point to a less than rosy automotive outlook, the COVID-19 pandemic has introduced a few unique dynamics into the industry that experts outlined during the CAR Management Briefing Seminars. Raj Batra, president of digital industries at Siemens Corp., explained that the pandemic not only highlighted the manufacturing industry as a whole and how vital it is to the country, but also it brought glaring inefficiencies to the surface, mainly an aging manufacturing infrastructure and the need for young talent to bring the industry into the digital age. “We have an aging asset base in the country that is at the end of its useful life,” Batra said during a session at the Management Briefing Seminars. “You simply can’t get the productivity needed with technology that is 30-plus years old. You think about the fact you have to change your iPhone every six months. It’s not OK to have 30-year-old technology sitting in manufacturing environments that are really responsible for driving cutting-edge productivity.” Also, a chaotic health event that could potentially cause strain in supplier relationships actually had the opposite effect, according to Kathy Worthen, vice president of direct purchasing for Yazaki North America in Canton, Mich. “It’s very collaborative both within the OEs and within my supply base,” said Worthen, who spent more than 20 years at General Motors in various roles within global purchasing and the supply chain. “We’re in this together. This is so unique, this is so different as it relates to the things we’re managing through. We all want to continue to make money so we want to produce parts. We want to support each other. We want the OEs to continue building products. This is a very collaborative environment.”

Adjustments on the shop floor Everyone from OEMs and Tier 1 and Tier 2 suppliers to other vendors that support the

automotive industry found themselves returnworkforce around the country. ing to work under a completely new set of cir“Cleaning became much more critical cumstances, having to implement new proin places like the common areas,” said Jack cesses and practices to keep workers safe and Endres, vice president of operations for U.S. protect production efficiency. original equipment at Mann + Hummel. “What For a company like Grand Rapids-based we did was expand the services we currently Cascade Die Casting Group Inc., a manufachave as far as housekeeping and things like turer heavily concentrated in the automothat.” tive industry, those measures were relatively Endres reported that his facility has not simple. seen any employee-to-employee transmission “We take daily health checks — taking of COVID-19, and the cases that the company temperatures — and then we put a sticker on did experience originated from employees who everyone to signify they have been tested,” were on vacation or furloughed. said company President Endres also said the Pat Greene. “Everyone in primar y pain point for the workforce can, at a the company is the workglance, see that everyone force, specifically bringhas been tested. That has ing in enough people to been something that has fulfill orders. made people more conGrand Haven-based scious than they ever have JSJ Corp., which ow ns been before.” an extensive portfolio of Cascade Die Casting companies, has worked G r ou p a l s o r e q u i r e s closely with Cintas, and masks when socially dishas been using fogging tancing is not possible. as a means for disinfectBut because of the large ing. The company’s portmachines employees use, folio includes GHSP, a social distancing is relaTier 1 global supplier of tively easy to maintain mechanical and electrow it hin t he pla nt, sa id mechanical systems to Greene, who noted the the automotive, transcompany’s workers have portation and appliance had no reported cases of — NELSON JACOBSON industries. COVID-19. JSJ Corp. Chairman, Chairman, President and CEO at JSJ “There have been some President a nd CEO Corp. costs along those lines, Nelson Jacobson sa id where we had the need to that his team is adjusting spend some money, but to the new normal quite it’s primarily been our own people (implementseamlessly. ing safety protocols),” Greene said. “That’s an “All of us, we had to really significantly important attribute for us — making it a part rethink how we would come to work — social of their job so they all feel like they have a stake distance and how we had to reconfigure shop in this game.” floors,” Jacobson said. For Mann + Hummel USA Inc., a German As a result, Jacobson has seen permanent manufacturer of filtration equipment with changes to the way that his company does a plant located in Portage, the company business. embraced its global resources and collective “The technology is eye-opening,” he said. knowledge to create an internal task force to “We’ve learned that we have a lot of opportuexchange ideas and best practices among its nities to be much more efficient and effective in utilizing the technology, whether it’s Teams or Zoom or different meeting styles. I believe work is forever changed.”

“The technology is eye-opening. We’ve learned that we have a lot of opportunities to be much more efficient and effective in utilizing the technology, whether it’s Teams or Zoom or different meeting styles. I believe work is forever changed.”

Opportunities arise

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AUGUST 17, 2020 / MiBiz

The COVID-19 pandemic even already has automakers reexamining components that go into their vehicles. As the need for more effective cabin air filtration or easy-to-disinfect surfaces rises, it spells opportunity for suppliers like Mann + Hummel. “We’re seeing a lot more interest in HEPA filtration-level cab filtering applications,” Endres said. “So it is moving in that direction. We have acquired a couple new projects for cabin filtration that are HEPA-level filtration systems or smart systems, where depending on what the sensors are detecting, (it will affect) the level of filtration it will provide. We’re definitely seeing that.” For Jacobson and JSJ Corp., his team had already made an investment in UV Angel, which specializes in ultraviolet disinfecting solutions. JSJ Corp. stands as key investor and manufacturing partner for UV Angel to apply the technology to passenger and commercial vehicles. “We are involved in a lot of discussions on how do we utilize UV disinfection technology to make sure the touch screens or center consoles … stay clean,” Jacobson said. Visit www.mibiz.com

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MiBiz / AUGUST 17, 2020

FOCUS: AUTOMOTIVE SUPPLY CHAIN

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

he recent and sudden downturn in the automotive industry is likely to lead to a flurry of bankruptcies and sell-offs by distressed suppliers, not unlike what the industry witnessed on the heels of the Great Recession. Dietmar Ostermann, partner and U.S. Automotive Advisor y Leader for PricewaterhouseCoopers in Detroit, spent time at the recent Center for Automotive Research Management Briefing Seminars to pick through the numbers that all but promised plenty of dealmaking among auto suppliers. Ostermann and PwC considered roughly 10 percent of suppliers to be in a position where they are able to buy. Another 45 to 60 percent of middling suppliers are below those prospective buyers, with the remaining 30 to 45 percent of suppliers considered to be at a medium to high risk of bankruptcy. “There is a big base in the middle that will probably do nothing and can do nothing,” Ostermann said. “Then there is a bottom area that is medium or high risk where we believe these suppliers will either go bankrupt or sell the entire company before bankruptcy or will sell certain assets in order to avoid future liquidity

crunches. That will be quite a bit.” Over the next 18 months, Ostermann forecasts that the North American region will see anywhere from five to 10 deals involving distressed automotive companies or large suppliers totalHarbour ing $3 billion to $7 billion in value. Over the same period of time, he is expecting 15 to 25 deals in Europe totaling up to $12 billion in value and also 60 to 100 deals for $20 to $25 billion of total value in Asia. The industry dynamic is similar to the M&A-heavy period that followed the Friar Great Recession. After that dramatic market downturn, global auto supplier M&A activity was bustling with 278 deals in 2010 for nearly $88 billion in value, which crept up to 303 deals for more than $90 billion in value in 2011. Since 2015, the activity has settled to roughly 150 to 200 deals each year globally, but that is expected to spike in the year following the COVID-19 pandemic-induced downturn.

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OEMs

TOP 10%

EXPECTED M&A ACTIVITY

SITUATION • Stronger finances than 2008-2009 but reporting big quarterly losses in Q2 2020 • Investment in electrification will continue, while autonomous L4/5 driving investment will slow • Other powertrain choices likely to be de-emphasized • More partnerships for level 4 or 5 to share financial risk; L1-3 to continue

Low

• Strong financial situation and can take advantage of situation • Will expand portfolio and vertically integrate

High-Buyer

LOW-RISK 45-60%

• Will need to trade-off between opportunities to acquire cheap targets vs. preserving liquidity

MEDIUM & HIGH-RISK 30-45%

• Not in position for acquisitions but in survival mode • Seeking carve-out opportunities or investors for entire company

Low

HighDivestor

SOURCE: PRICEWATERHOUSECOOPERS

didn’t sell when they should have sold and someone comes around and offers them an out now,” she added. “You’re going to see a lot of people take that. If they don’t, they should.” Still, a segment of owners might be willing to tough it out to avoid selling at a discount. Max Friar, managing partner at Grand Local suppliers to follow suit? Rapids-based M&A firm Calder Capital LLC, This same high-level assessment is likely to ring recently worked with a couple clients in that true for local Tier 1 and Tier 2 suppliers, in addiexact situation. tion to manufacturers that support the autoThese clients included a trucking company motive industry, according to Laurie Harbour, with primarily Tier 1 suppliers as customers and president and CEO of a metal stamping comSouthfield-based manupany with significant facturing consulting firm automotive customers. Harbour Results Inc. With the recent mar“I think there will ket downturn levying be a lot of consolidasignificant blows to the tion and I think there valuations of these busiwill be a lot of people in nesses, their respective the private equity and management teams financial spaces buysimply pulled their ing up companies,” she companies off the marsaid. “COVID didn’t kill ket instead of selling at a those companies and so discount. they’re all still out there “(Buyers) are facing a and they’re going to be lot of sellers, just like they looking for people that did in 2009 and 2010, can buy and acquire at a that are thinking ‘I don’t fair price.” — LAURIE HARBOUR want to take a discount At the CAR President and CEO of Harbour Results Inc. on the value of my busiManagement Briefing ness,’” Friar said. “‘I’d Seminars, however, rather wait it out and see Ostermann laid out that if I can hunker down and the automotive industry was one of the hardest see if I can get through this.’” hit by the current downturn, which is reflected The number of distressed suppliers and manin lower valuations and multiples that have sigufacturers could be far worse, as Ostermann nificantly declined since the first quarter of 2019. pointed to government assistance and forgivLow valuations, paired with aging company owning banks as two effective lifelines for ailing ers, don’t exactly lend much bargaining power. businesses. “Unfortunately, (those companies) that are Friar agreed. not in a good position can’t command a high “The difference in this market downtown is price. These are owners that thought someday the government response,” Friar said. “While peothey would go out on top with a lot of money ple might debate how effective negotiations are in their pockets and unfortunately I’m not sure right now, I thought initially it was ridiculously that’s going to happen,” Harbour said. fast and appropriate. Nothing like that happened “Imagine a 60- or 70-year-old person who in 2009 — not that quick or effective.” The number of deals could reach around 216 by the end of 2020 and then eclipse 250 deals in 2021, according to Ostermann. “There is pretty significant activity ahead,” he said.

“Imagine a 60- or 70-year-old person who didn’t sell when they should have sold and someone comes around and offers them an out now. You’re going to see a lot of people take that. If they don’t, they should.”

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AUTOMOTIVE PLAYERS

AUTOMOTIVE SUPPLIERS

Market downturn could spur M&A activity among global auto suppliers

SITUATION AND EXPECTED M&A ACTIVITY FROM AUTOMOTIVE PLAYERS

AUGUST 17, 2020 / MiBiz

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Average age of U.S. vehicles creeps up, creates opportunities for aftermarket suppliers By JAYSON BUSSA | MiBiz jbussa@mibiz.com

ver the last decade and a half, the average age of light vehicles on United States roads has slowly risen. That trend only continued this year, per a recent study by market research and consulting firm IHS Markit, and could accelerate because of the effects of the COVID-19 pandemic. According to IHS, the average age of light vehicles in operation in the United States saw a slight uptick to 11.9 years. This was one month older on average than in 2019, a small step that will likely lead to an even more aged fleet in the years to come, as well as provide manufacturing and sales opportunities for businesses that operate in the aftermarket space.

“With unemployment where it’s at and household income falling and the uncertainty surrounding all of the economy, what we’re seeing is people choosing to repair their current car instead of replace it with a new car.” — PHILIP ATKINS Director of Strategic Research and Planning for the Automotive Aftermarket Suppliers Association

A slow creep up Regardless of whether it moves up or down, the average age of vehicles in operation will only trudge slowly along given the size of America’s f leet, which eclipsed 280 million units this year. “Any time you have a fleet size like that, first and foremost, you don’t typically see major changes in the average age of vehicles because it’s like turning a battleship with an oar,” said Mike Wall, director of automotive analysis for IHS Markit. “You might see some subtle shifting and indeed that’s what we saw: We saw it creep up a bit.” The average age of vehicles climbed despite the fact that vehicle scrappage rates have increased, which would presumably drive the average age down. In fact, 2019’s scrappage rate — a measure of vehicles leaving the active population — sat at 5.1 percent, which compares to 4.6 percent in 2016. However, this increase in scrappage was balanced out by a vehicle sales plateau combined with drivers holding on to their cars longer and modern vehicles lasting longer. “Coming out of the last recession, we were kind of under trend in terms of scrapping vehicles,” Wall said. “We saw the vehicle population growing but we weren’t necessarily venting many vehicles. The one exception was the Cash for Clunkers program.” “We are getting close to what I would call a trendWall level scrap rate,” he added. “Does that slow that average vehicle age growth? I think you can make an argument for that, but it’s not going to slow it by much. (Vehicle age) will remain pretty elevated for a bit longer due to the complexities of the fleet.” According to the IHS Markit report, the COVID-19 pandemic is certainly one of those “complexities” and has played a role in accelerating the age of vehicles on the road and will continue for the coming years. The report cited rising vehicle prices as one reason drivers aren’t necessarily enthusiastic about ditching their older rides. As well, Wall noted many people are able to hunker down with their current vehicles because the pandemic has cut down on many forms of travel, including work commutes. Before the pandemic, new vehicle sales in the U.S. were already on a downward trend, representing 6.1 percent of vehicles in operation in Visit www.mibiz.com

2019 compared to 6.7 percent in 2016, which was a record-setting sales year. In 2020, new vehicles sales are poised to represent only 5 percent or less of all the vehicles on the road.

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Good news for aftermarket players IHS Markit reported that the segment of vehicles six to 11 years in age is expected to expand, which is considered a sweet spot of sorts for the aftermarket space because warranties and dealer service plans begin to expire. The aftermarket players that can potentially seize on this influx of customers include both dealership and independent mechanics in addition to aftermarket parts suppliers and retailers. “When you see the O’Reilly (Auto Parts) and Pep Boys of the world, a lot of time when you go through a recession, you tend to see their stock pop a bit because of the demand,” Wall said. “You start to see a sort of trend with those component groups.” Philip Atkins, director of strategic research and planning for North Carolina-based Automotive Aftermarket Suppliers Association (AASA), agreed that this trend signifies opportunity for suppliers and other aftermarket businesses. “Many cars come off of warranty and that’s when car owners stop taking their car back to the dealer,” Atkins said of vehicles that range from six to 11 years old. “(Owners) have their favorite repair place. The car is in good enough shape, it’s got enough value that the owner wants to get good quality parts and that’s all to the benefit of the aftermarket.” This is an opportunity that will only expand as COVID-19 limits new vehicle sales and prompts drivers to hold on to their vehicles. The situation essentially mimics how the age of vehicles accelerated upward on the heels of the Great Recession. To that end, the average age of vehicles jumped 0.3 years each year from 2009 to 2011. The IHS report indicated that the average age could balloon by four to six months in the coming years. “The pandemic has really been an economic jolt,” Atkins said. “With unemployment where it’s at and household income falling and the uncertainty surrounding all of the economy, what we’re seeing is people choosing to repair their current car instead of replace it with a new car.”

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MiBiz / AUGUST 17, 2020

FOCUS: AUTOMOTIVE SUPPLY CHAIN

Automakers look to reshore work in the face of COVID-19; suppliers scramble to vie for it By JAYSON BUSSA | MiBiz jbussa@mibiz.com

any domestic manufacturers, including automakers, had started reevaluating their supply chains even before the COVID19 pandemic hit, but the international health crisis has only accelerated those conversations. “We continue to hear from a lot of members that they already were evaluating the supply chain pre-COVID given the trade war over the last year or so — companies were already starting to think about that,” National Association of Manufacturers’ Chief Economist Chad Moutray said during a discussion at the recent Center for Automotive Research (CAR) Management Briefing Seminars. “The USMCA (United States-Mexico-Canada Agreement) … was also forcing that conversation, especially in the auto sector,” Moutray said. “But I think all of those have been exacerbated post-COVID and finding ways we can encourage that supply chain to relocate to the U.S. is a huge priority for us.” Moutray was one of the panelists at a breakout session entitled “Reshoring and

O U R

R E A C H B U T

C O U L D N ’ T

Diversification,” which highlighted the reshoring opportunities becoming available to auto suppliers and how they can best compete to land new business. While a number of factors have led manufacturers in various sectors to take a hard look at their international supply chains, the many disruptions brought on by COVID-19 have been a catalyst in forcing these businesses to reckon with risks and inefficiencies. COVID-19 was also understandably the topic de jour at the CAR Briefings as automakers and suppliers address the many industry-specific challenges that this prolonged pandemic has imposed. Moutray revealed information from a survey of NAM’s members that chronicled the business effects of COVID-19. Among respondents, 59.5 percent reported disruptions in their supply chains. “These are pretty sizable disruptions — and about half our members said they had unplanned production stops, about 40 percent of our members had to furlough workers,” Moutray said. “Those numbers were actually larger for larger companies. The larger companies tended to be the most pessimistic in their outlook overall, and that would include the auto sector as well.”

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O U R B E

B E

M O R E

Being a part of West Michigan for over 50 years has not only shaped who we are as a company, it’s profoundly impacted us as individuals. Its work ethic and passion for innovation are infused in our DNA. We are known throughout the world for our excellence in developing automotive décor components, and we attribute much of our success to the place we call home.

AUGUST 17, 2020 / MiBiz

G L O B A L ,

H E A R T S L O C A L .

COVID-19 has forced manufacturers to reckon with risks and uncertainties while experts are encouraging companies to explore relocating supply chains to the U.S. MIBIZ FILE PHOTO: KATY BATDORFF

U.S. at a disadvantage? Harry Moser, an industry veteran and founder of the Reshoring Initiative, appeared with Moutray at the CAR session and highlighted reasons manufacturers initially brought their supply chains offshore and how domestic manufacturers can work to reel it back. The primary issue was no surprise: Price. “They don’t go there because of the weather and they typically don’t go there because of the technology,” Moser said during the panel. “They go there because of price. If you look at the other categories, it’s mostly driven because of price.” Moser pointed out that price in the U.S. is about 20-percent higher than in developed countries such as Germany and 40-percent higher than in developing countries like China. But price is also an area in which the United States is beginning to close the gap as countries like China see rising labor costs. The United States also has fallen behind because of a failure to invest in automation and technology. “For example, we have about a third as many robots per thousand manufacturing workers as does Korea,” Moser said. “We spend about a third as much on CNC machine tools as China. So these other countries with lower wage rates, who presumably would have less need to automate, are automating much more rapidly than we are.” The other major issue is a lack of talent and how most promising high school students opt for higher education rather than apprenticeship programs. Moser and Moutray pondered whether domestic manufacturers would have the workforce capacity if floods of industrial work came back to the U.S. “The capital will be there,” Moutray said. “The issue would be the workforce. We need to make sure we have a workforce that is ready for the jobs that are coming here. Companies have struggled with that over the last year, especially with Baby Boomer retirements that will exacerbate that skills challenge.”

Local suppliers find opportunity

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Pat Greene, president of Grand Rapids-based Cascade Die Casting Group Inc., said that his aluminum and zinc die casting business, which is utilized heavily by Tier 1 suppliers, has encountered new opportunities because of reshoring. “We’ve actually had a number of opportunities to take over work that is currently sourced overseas,” Greene said. “I will say that we’re really becoming more competitive with automation

and process improvement, so that’s made us more competitive.” Just as foretold by Moser and Moutray, price has proven to be the sticking point as Greene’s company works to achieve a price point that is more akin to what Tier 1 suppliers are finding in lower cost countries. The reshoring opportunities have led to a number of conversations, but Greene admitted that his team has yet to see any work move. Greene “Many of these exercises are primarily just that — they’re exercises to know where (the customer) stands if they do need to turn around and move the work if there is another wave of the pandemic or another disruption because of transportation issues or some of those things,” he said. Still, Greene agreed that the COVID-19 pandemic certainly has automakers and manufacturers rethinking their supply chains. “I think they recognize they’re at risk when they have a longer supply chain — the risk of disruption and interruption that we saw over the last few months,” he said. “It does seem to be something that they’re looking at seriously and in some cases having dual sources — one source over there and one source here. I believe that they are considering those factors, but it’s been our experience that price is still a very important aspect of it.”

“We’ve actually had a number of opportunities to take over work that is currently sourced overseas. I will say that we’re really becoming more competitive with automation and process improvement, so that’s made us more competitive.” — PAT GREENE President of Cascade Die Casting Group Inc.

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FINANCE

Consumers CU plans further growth in GR, lakeshore markets West Michigan Community Bank also adds branch in GR Township By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he opening of a new branch in Wyoming and construction of another office in Walker are part of a broader regional growth plan for Consumers Credit Union. In addition to the new Grand Rapids-area locations, the Kalamazoo-based credit union has acquired property along U.S. 31 for a branch in Grand Haven and expects to buy sites in Muskegon and Lansing within 12 months for future offices. Each of the areas are in new markets for Consumers Credit Union, which looks to grow from 22 branches to 30 locations by the end of 2023, President and CEO Kit Snyder told MiBiz. “We want to continue to grow,” Snyder said. “We’ll continue to grow in West Snyder Michigan. We decided that we’re not going to go to the east side of Michigan in the near future, so the other option is to continue that circle around Kalamazoo and Grand Rapids.” Consumers Credit Union targets the new Walker location to open in early 2021, Koning with the Grand Haven branch to follow later in the year. The credit union also intends to open a second Grand Haven office at a leased location, according to Snyder. Consumers Credit Union also may consider growing through a merger or acquisition “if it benefited our memKaminski bers,” Snyder said. Although he prefers to have Consumers grow organically and through new office development, Snyder would consider a deal if the right opportunity arises with a credit union that’s financially fit, has the right geographic mix of locations, and has a membership that needs additional services. “We would absolutely take a look,” Snyder said. “If it’s a good fit I’ll do it, but I like organic growth.”

Leveraging technology Over 35 years, Consumers Credit Union has averaged annual growth of 18 percent. In the 12 months from June 2019 to June 2020, the credit union grew total assets by more than 25 percent to $1.45 billion, according to a quarterly financial statement filed with the National Credit Union Administration. Total deposits during the same 12-month period grew nearly 27 percent to $1.15 billion, and total loans increased 18.3 percent to $1.18 billion as of June 30. Commercial loans alone grew even faster at 20.3 percent to $146.3 million, according to the NCUA filing. Consumers Credit Union had $6.8 million in net income at midyear, down from the $7.1 million through the first six months of 2019, which Snyder attributes to lower fee income from debit and credit card transactions as consumers shopped less during the pandemic and Visit www.mibiz.com

stay-at-home order. Historically low interest rates also resulted in lower yields on loans, he said. The credit union’s membership as of June 30 stood at 104,111. The credit union’s expansion comes as customers today use digital options far more often, yet still prefer to open an account in person to handle complex transactions, Snyder said. That keeps the branch network an integral part of driving membership growth and entering new markets, even as digital banking continues to grow rapidly, he said. “They want to open an account with a human, they want to see you, they want to touch you. Then they’ll bank with me virtually, so I have to continue to offer that face time for that person who has a complex transaction and wants that hand-holding,” Snyder said. All of the new branches, including a 54th Street office in Wyoming that opened in July and the planned Walker location on Wilson Avenue that opens in January, will use interactive teller machines in which customers conduct their transactions with a teller via videoconferencing, a format many banks and credits unions have been deploying. About half of the Consumers’ offices now use interactive teller machines. The interactive tellers enable Consumers Credit Union to develop new offices and extend its footprint further at an affordable cost, Snyder said.

Investing in greater Grand Rapids As Consumers Credit Union plans for growth across the region, a local community bank also has extended deeper into the Grand Rapids-area market and looks to do more in the year ahead. A new location that opened this month on Cascade Road in Grand Rapids Charter Township marks Hudsonville-based West Michigan Community Bank’s newest retail banking office. The office, which also offers commercial lending and wealth management services, sits along a high-traffic corridor with high visibility as the bank continues to grow in the greater Grand Rapids market. “It’s a statement for us in Grand Rapids,” said bank President Phil Koning. “It’s a big investment in that community.”

Consumers Credit Union’s new branch office on 54th Street in Wyoming is part of the company’s expansion in the Grand Rapids and lakeshore areas. COURTESY PHOTO West Michigan Community Bank, with $702.9 million in total assets as of June 30, now has seven offices in Ottawa and Kent counties: two in Holland and one each in Zeeland, Hudsonville, Jenison and downtown Grand Rapids, in addition to the newest location. The bank first entered the Grand Rapids market with the opening of a downtown branch office in early 2012. A “good share” of the bank’s growth today comes from the Grand Rapids market, Koning said. It’s considering additional locations in Kent County, particularly the Byron Center/ Wyoming area, although any additional office is at least two years away, he added. “That’s in our sights, and then we would look at other locations as well on a longer term basis,” Koning said. While the company has no immediate plans for further expansion in the Grand Rapids area, the bank recently paid $2.7 million for a building on Ionia Avenue SW, according to city property records. The facility, which is adjacent to Van Andel Arena, currently houses an office of TCF Bank, formerly Chemical Bank and the Bank of Holland, which Chemical acquired in 2015. West Michigan Community Bank could open an office at the location in 2022, Koning said.

Digital tools speed consolidation The footprint expansions contrast with the approach of some financial institutions that have

moved lately to reduce branch networks by consolidating nearby locations as consumers in the digital age increasingly adopt mobile apps and online banking. Grand Rapids-based Independent Bank Corp. (Nasdaq: IBCP) closed two offices in late June and six more on July 31 as part of an “ongoing branch optimization and a digital transformation,” CEO Brad Kessel said in a recent conference call to discuss quarterly results. The accounts at those branches were consolidated into nearby Independent Bank offices. The closings reduced Independent Bank’s branch network to 60 offices in the Lower Peninsula. Mercantile Bank (Nasdaq: MBWM), also based in Grand Rapids, closed three offices in the second quarter and consolidated them into nearby locations. “Since the beginning of 2016, with the ongoing deployment of technology as an alternative delivery channel, Mercantile has been able to reduce its number of locations from 53 to what will be 37, once these locations are closed later this year,” Mercantile President and CEO Robert Kaminski said in the bank’s July conference call to discuss quarterly results. “We continue to engage our customers so we can fully understand their needs, and how patterns and preferences of interaction with us are evolving, especially in view of the challenges brought up by COVID-19.”

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NEXT…

For Grand Valley students, next is opportunity and innovation. Next is global, connecting and uniting us. It’s local, shaping the spaces in which we work and live. It’s a commitment to progress. Next is where minds are free to imagine what could be. At GVSU, next is now. And whatever’s next for you, we will help you get there.

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MiBiz / AUGUST 17, 2020

EDUCATION BACK TO SCHOOL Continued from page 1

While virtual learning or a hybrid model that includes at-home and in-person instruction will limit students’ exposure to and transmission of the virus, it brings a host of challenges involving students’ mental health, education attainment and the workforce — all of which health experts say are difficult to quantify yet crucial to resolve. “It’s easy to get very focused on the COVID risk alone and thinking about that in isolation,” said Nicki Britten, health officer of the Berrien County Health Department who served on Gov. Gretchen Whitmer’s Return to School Advisory Council. “But when we think about what comprises child health and well being, there is much more: mental health, educational attainment, understanding home and family dynamics and the need to be with other important adults in your life.” The question remains: How should school boards and administrators strike that balance? “If I knew the answer to that question, I’d be a very popular person right now,” Britten said. “It’s really hard to know. All of those other parts of that cost-benefit ratio that are non-COVID are really hard to quantify, and they’re happening out of sight.” Parents’ work situations, particularly if there’s lost income, and the potential for accrued housing debt also change the family dynamic. “That puts strain on the family,” Britten said. “When we don’t have those daily routines (with school) in place, a lot of mental health issues can happen with children. The same with adults — parents get a lot of support from schools. In terms of keeping the economy open and keeping people working, a lot of parents depend on schools for childcare.” Don Wotruba, executive director of the Michigan Association of School Boards, said striking that balance has been weighing heavily on school board members across the state. “They’re thinking: If we make this decision, what’s it mean for our businesses in the community that will have employees needing help to juggle their schedules, or how many people will suffer job losses because of the district’s decision,” said Wotruba, who has a fifth-grader and a sophomore in Grand Ledge Public Schools near Lansing. Wotruba and his wife preferred to send both children back for in-person learning, although the district has opted against it for now. “That’s why a lot of districts are telling parents these are initial decisions that are subject to change depending on what the COVID numbers do,” he said.

“When we don’t have those daily routines (with school) in place, a lot of mental health issues can happen with children. The same with adults — parents get a lot of support from schools. In terms of keeping the economy open and keeping people working, a lot of parents depend on schools for childcare.” — NICKI BRITTEN Health Officer at Berrien County Health Department

AUGUST 17, 2020 / MiBiz

Sam Gregoire started a Grand Rapids-based tutoring service ahead of many school districts returning virtually: “It’s really on us as a community, parents or me as a tutor who facilitates children learning to make sure we’re helping through this adaptation as best we can,” she said. MIBIZ PHOTO: SETH THOMPSON, GREEN FROG PHOTO

Employers’ role Emerging from this complex scenario is a clear link to the advocacy some Michigan business groups have been doing around expanding childcare and ensuring educational attainment as a precursor to productive workforce development. One such group is the Grand Rapids Area Chamber of Commerce. Recently the Chamber has had internal meetings with member companies and school administrators about the role employers should be playing in this year’s convoluted return to school. “It’s i m p o r t a n t f o r employers to hear what’s going on so they’re up to date to make informed decisions, too,” said Alexa Kramer, the Kramer Grand Rapids Chamber’s director of government affairs. “If anything, the pandemic has just highlighted how important childcare is and how much businesses are needed to lean in to solve this issue — even more so now with the uncertainty of the upcoming school year.” Under Whitmer’s Return to School Roadmap, districts were required to file a formal plan by Aug. 15. While the plan details safety protocols and gave broad parameters based on which pandemic phase a region of the state was in, Whitmer largely left the decision about virtual, in-person or hybrid models to individual districts. Grand Rapids Public Schools, for example, announced on July 27 that it would do virtual learning for the first nine weeks, a plan that was approved by the school board on Aug. 10. The district plans to ensure each student is equipped with a computer or tablet as well as Wi-Fi internet access, while each student will be supplied two meals a day each week. However, return-to-school plans have varied by district across the state. “I don’t think there’s a superintendent or board out there that can make a decision that will make everyone happy,” Wotruba said. He added that districts’ decisions to start virtually “give them a little time” to avoid COVID-19 exposure and transmission within schools. “They’re weighing that against what do you do if you have a two-parent household if they can’t miss work and their third-grader can’t be alone,” Wotruba said. “Boards and superintendents are in a tough if not untenable position.” As districts mulled plans through early

licensed childcare supply. Meanwhile, nearly August, Kramer said it became clear to some of two-thirds of parents reported in April having the Chamber’s members that employers have a difficulty finding childcare while less than a role to play. quarter of essential workers were able to use “What I’m hearing locally from employers is their previous care arrangement during the it’s hard for their employees to show up because pandemic. there’s not reliable childcare for them,” Kramer “To see an increased demand on that system said. is definitely a challenge,” Britten said. “On the Kramer said companies should work directly flip side, people are thinking really creatively — with childcare providers to ensure students’ eduforming co-ops with neighbors and friends — to cational attainment if a parent needs to work. rotate times of that childcare and share that load. “Childcare providers are the experts — let’s But a lot of that depends on the social capital boost that capacity as much as we can,” Kramer you have and flexibility with a job. That could said. continue to drive a difference between the haves Britten encourages employers to remain and have-nots but we will start to see creative flexible. solutions emerge.” “It’s great anytime an employer can make accommodations to help their staff out and help them balance their family and work needs,” Britten said. “If an employer has the ability to allow for flexible schedules, remote work or perhaps even a brief leave of absence — whatever it might be that an employee needs to ensure children are fully engaged — that’s wonderful.” For occupations that don’t have such flexibility, Britten shares “a lot of empathy and concern for — ALEXA KRAMER those families. That’s part of us Director of Government Affairs at the Grand Rapids Area trying to think collectively to get Chamber of Commerce through this pandemic wherever we can make accommodations. Balancing family life and work is really important.” Indeed, these options can be expensive and may also contribute to inequities in accessing Equity concerns resources like wireless internet and computers. Without in-person learning, the reduced risk Even disparities in internet access among from COVID-19 is countered by potentially exacrural or “near suburban” districts have the potenerbating inequities based on income level and tial to “create a huge equity gap,” Wotruba said. learning resources. There’s also a potential emotional toll some Parents and entrepreneurs are explorstudents may face if their district sees a spike in ing tutoring as one of several tools to repCOVID-19 cases and a nearby district doesn’t, he licate the in-person experience. Others are added. also considering pod-learning, or assem“There are huge equity problems that exist bling a group of students outside of school, in districts and between districts,” Wotruba said. as another option. To Gregoire, it will take a community-wide Britten said these may be promising alternaeffort to overcome each of these challenges — a tives to childcare services, which also are being necessary battle if it means limiting students’ and strained during the pandemic. According to the teachers’ exposure to COVID-19. state’s Early Childhood Investment Corp.’s “It’s really on us as a community, parents or most recent quarterly report, the pandemic me as a tutor who facilitates children learning to could lead to the permanent loss of 121,000 make sure we’re helping through this adaptation childcare slots, or 41 percent of the state’s as best we can,” Gregoire said.

“If anything, the pandemic has just highlighted how important childcare is and how much businesses are needed to lean in to solve this issue — even more so now with the uncertainty of the upcoming school year.”

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UPCOMING ISSUES

PREPARING FOR THE SURGE Hospitals look to add beds, meet staffing challenge in COVID pandemic By MARK SANCHEZ | MiBiz msanchez@mibiz.com

line in Bronson Methodist Hospital’s emergency state filing to temporarily add 300 beds epitomizes the main challenge for boosting capacity for an expected surge in COVID-19

West Michigan will work differently post COVID-19

patients in the coming weeks. How The Kalamazoo hospital’s employers ability to put the added beds into operation “will be depencan help with dent on staffing,” according mental health to a filing with the Michigan Department of Health and PAGE 13

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SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

SBA races to provide relief to small businesses, but some hiccups remain By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he sheer volume of small businesses that have sought federal relief loans illustrates the depth and scope of the economic pain brought on by the COVID-19 pandemic. The U.S. Small Business Administration quickly blew through $349 billion in just 14 days and approved loans for 1.6 million small businesses nationwide before halting new applications April 16 for the Paycheck Protection Program. That’s as many loans as the SBA processed in the previous 14 years combined. Congress last week allocated another $320 billion for the PPP, $30 billion of which will go to federally designated community development financial institutions, plus banks and credit unions with less than $10 billion in assets. Banks and credit unions with assets between $10 billion and $50 billion will get another $30 billion. The legislation also directed $60 billion in funding to the SBA’s Economic Injury Disaster Loan program Congress set up earlier in the pandemic. Before running out of money for the first round of the PPP, the SBA approved relief loans totaling $10.38 billion for nearly 43,500 small businesses in Michigan. Executives at banks and credit unions say applications for the PPP came from across the economy, including Main Street-type businesses, companies up to the 500-employee threshold, the hospitality sector, restaurants, manufacturers and retailers that have been hurt by the pandemic and resulting stay-at-home orders. “If you connect enough dots, and some you have to connect more dots than others, you can almost see where every single human being and every

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11.9.2020

Family Business

Food Economy

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Contract Deadline: 10.28.2020

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11.23.2020

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Industry 4.0

12.7.2020

Contract Deadline: 9.30.2020

Construction Wrap-up

all it the six stages of COVID-19 cop-

By MARLA MILLER | MiBiz mmiller@mibiz.com

the region’s busiest tourist towns, as Main Streets across the state are bearing the brunt of COVID19 closures. While some restaurants and breweries have pivoted to takeout and delivery, retailers deemed nonessential fall into more of a gray area. Some have shut down entirely, while others are transitioning online to remain at least partially open for e-commerce. Under a new executive order issued April 24, those stores now have more clarity: Retailers selling non-essential items can open for curbside pick-up and for delivery. See LAKESHORE RETAILERS on page 10

s the owner of longtime downtown Grand Haven retailer Down To Earth, Sholeh Veiseh has turned to hosting virtual fashion shows and offering sales on social media to bring in some revenue during the coronavirus closure. Gov. Gretchen Whitmer’s initial executive order closing non-essential businesses through April 30 shuttered most storefronts on Washington Avenue, an established shopping district in one of

How should marketing change in the wake of COVID-19? PAGE 9

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Remote working Aerospace puts broadband suppliers accessbrace in for continued spotlight turbulence PAGE 5

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

After unbridled growth, Michigan craft Experts warn of beverage companies possible mental gird for devastating lows By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

ichigan’s craft beverage industry is facing a challenge with the economic fallout from the coronavirus pandemic that is unlike any other in its history. Many companies have been completely closed for weeks as a result of state-mandated orders to end all

health ‘aftershock’ from COVID-19

in-person dining and drinking in their establishments in an effort to curb the spread of COVID-19. For the first time in many of their histories, the owners of breweries, By MARK SANCHEZ | MiBiz distilleries, wineries and cideries have msanchez@mibiz.com been forced to lay off staff members — theirf the companies’ direct connecSARS outbreak 17 years tions with consumers in their inditapago in Asia is an accurate rooms cator, and bars. behavioral health care Theproviders craft beverage companies that could see a patient remain are coming leveraging skeleton surgeopen in the weeks and months as the COVID-19 pandemic takes an emotional toll on people. One-third of the people in Asia were unable to return to work full time after the SARS pandemic, six in 10 experienced fatigue, and half had difficulty sleeping. In Hong Kong, the suicide rate spiked nearly 32 percent for two years after SARS. Hong Kong also experienced “increases in persistent PAGE 12 depression, anxiety, panic attacks, psychomotor agitation, psychotic symptoms, delirium, and suicidality,” according to a white paper from Pine Rest Christian Mental Health Services on the potential mental health effects Eastburg of the COVID-19 pandemic. The white report pulls data from a number of sources to issue a call to action for care providers to prepare for the “aftershocks” from the pandemic and “minimize the fallout of COVID-19 on mental health in our communities.” “ The wa r n in g sig n s a re there right now that we could in Michigan experience a significant surge in behavioral health needs that emerge out of this COVID crisis,” Pine Rest CEO Mark Eastburg told MiBiz. “We ought to be prepared as a state and a community for that in case that happens.” T he s t r e s s, a n x iet y a nd depression the pandemic triggers can come from the loss of a job or income, grief, and uncertainty about the future. At Pine Rest, “we’re experiencing a rise in many of the stressors that are known to increase risk for suicide,” Eastburg said.

crews for to-go orders, curbside pickup or home delivery of beverages and food. Meanwhile, distilleries have repurposed their stills to produce ethanol in an effort to answer the call to boost critical supplies of hand sanitizer. These scrappy and resilient companies are finding revenue wherever they can, but few could have prepared for such an abrupt sea change that’s been brought on by the pandemic.

hrinking revenue from sales, income and gasoline taxes could cost state and local governments billions of dollars in the coming months, potentially cutting already stretched services and leading to a prolonged recession without sufficient federal support. State officials reported earlier this month that the fiscal year general fund and school aid budgets ending on Sept. 30 could see a $1 billion to $3 billion shortfall, a result of the public health measures taken to prevent the spread of the coronavirus. The higher range is a decline of more than 10 percent. Next fiscal year, Bartik the deficit could be up to $4 billion. Yet those are just estimates at this point, and it’s difficult to predict the ultimate effect of the pandemic on the budget. “My own guess is it might be worse than that,” said Tim Bartik, senior economist with the Kalamazoo-based W.E. Upjohn Institute See STATE BUDGET on page 14

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visualize how we will steer out of this fog,” Parker said. “Sometimes, it is difficult for a small company in the trenches to see the entire battlefield. We can provide that vision and bring best practices, along with resources to help them develop and implement safe and smart strategies.” Grand Angels has angel investor groups in West Michigan and affiliates in Kalamazoo, Detroit and Flint. The investment firm closed in late December on $11.7 million raised See VC/PE on page 18

INSIDE:

Industry 4.0 SEE PAGE 4

EXPLORING WHAT’S NEXT

In a survey compiled by Boulder, Colo.-based Brewers Association in early April, 14.1 percent of respondents indicated their business could sustain for four weeks or less if the current conditions persisted. An additional 45.8 percent of respondents said their businesses could only sustain for one to three months if the social distancing measures and restrictions on sit-down service remain in place. See CRAFT BEVERAGE on page 14

Experts preview workplace changes as economy slowly re-emerges By MARK SANCHEZ | MiBiz msanchez@mibiz.com

COPING WITH Drinking economy COVID-19

Foodservice disruptions cause crisis for farmers

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

VC, PE firms steer companies through crisis

LAKESHORE RETAILERS ADAPT, MOVE ONLINE AS SOME SCRAMBLE TO STAY AFLOAT

hospitals a fighting chance against the highly contagious COVID-19. Once they got past the chaos in which the rules seemingly changed by the hour, they all needed to take a step back, assess what their next steps would be and recalibrate their business strategy. In many cases, that strategy focused on figuring out how best to take care of employees in the short term while also addressing the company’s viability in the long term as the crisis continues to play out without a realistic end date in sight. To that end, business owners also thrust themselves into applying for government relief programs, finding novel ways to generate revenue, and — this being West Michigan — figuring out how they could use their platforms to help others in need. Here are six stories of local executives dealing with the crisis, coping with the “new normal,” and looking ahead to how their companies and society could change as a result of the pandemic.

INSIDE:

SEE PAGE 14

Small businesses around West Michigan have been affected in many ways by the ongoing pandemic. While some are seeing increased business, most companies are being forced to deal with the fallout by getting creative, managing cash and finding new ways to stay engaged with customers and clients. In this Coping with COVID-19 special report, MiBiz speaks with two dozen West Michigan companies to hear how they’re navigating the current uncharted waters. SEE PAGES 12-19

eople who have been working from home for weeks because of the COVID-19 pandemic will return to a decidedly different workplace than they had previously once the economy gets going again. Changes will span a range of workplace environments, including offices, shop floors, breakrooms and conference rooms. Wearing face masks and having more distance between workers will become the norm, along with routine temperature checks and continually cleaning and sanitizing the workplace, tools, equipment and workstations. Those and other practices are all part of the proverbial “new normal” for employers working to navigate the deadly pandemic that has disrupted daily routines, thrown the economy into recession and may linger for many months until a Kennedy vaccine is developed. “As business leaders, you have to make sure you’re taking the responsibility for your employees,” Kentwood-based Autocam Medical Devices LLC CEO John Kennedy said during a recent back-to-work webinar hosted by Advantage Benefits Group Inc. “It’s incumbent on us as businesses to make sure See WHAT’S NEXT on page 8

COVID-19 highlights structural changes needed for unemployment system, researchers say By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

s some employers express concern about retaining workers who are earning more income through unemployment benefits than their normal paychecks, researchers say long-term structural fixes are needed to state and federal programs. The $2.2 trillion CARES Act passed in late March included provisions to add $600 in weekly unemployment

benefits for people active in their state’s system. In Michigan, this means workers unemployed as a result of the pandemic could receive up to $962 a week. The federal benefits are available for up to 39 weeks, while state benefits were expanded to more workers and extended for 26 weeks. Media reports have shown concern among employers who pay less than the amount of benefits workers are receiving. In at least one case in Washington state, a company that received a Paycheck Protection

Program loan — which requires 75 percent of the loan to be used for payroll in order to be forgiven — faced backlash from employees, since Presta the loan effectively means workers would be paid their typical wages. Kelly Presta, vice president at Sturgis Molded Products Co., shared these concerns during an April 22 conference

call hosted by the West Michigan Policy Forum. As of early May, Sturgis Molded Products was running at about 10 percent capacity involving transportation and medical devices. The company has about 200 employees. “I’ve called people and there has been communication that said, ‘I make more by not coming in,’” Presta told MiBiz. “That’s out there.” Sturgis Molded Products’ operators and first-line positions make less than the maximum amount See UNEMPLOYMENT on page 5

Construction industry adapts to new safety protocols PAGE 11

Contract Deadline: 11.25,2020

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

www.mibiz.com

State, local officials seek federal help as COVID-19 budget deficits loom

Human Services. ing: Experiencing shock. Assessing. As with every hospital durRecalibrating. Cash Flowing. Helping. www.mibiz.com ing the COVID-19 pandemic, Imagining. Bronson has been planning That seems to sum up an emotional and intelfor a patient surge by simultalectual path many West Michigan business ownneously looking at how to add ers have travelled recently as their companies capacity and then staff those faced extraordinary circumstances brought on beds, if needed. by the spread of coronavirus. “In order to care for an Over the last two weeks, MiBiz spoke with increased number of patients, owners and executives in a variety of industries. Bronson plans to redeploy staff No matter what sector they work in, they all members who are not curpretty much experienced the same rollercoaster rently in clinical roles, but who of emotions. are clinically First came the shock at how fast the virus was licensed. We spreading throughout the United States, then h a ve ma n y panic when it became clear that all non-essenRNs who tial businesses in Michigan would need to close work in eduto help “flatten the curve” and give the state’s See BUSINESS OWNERS REACT on page 12 cation, quality and safety, By MARK SANCHEZ | MiBiz management msanchez@mibiz.com and other Neely departments n normal who will return totimes, a roleTrinity of pro- Health’s seven vidinghospitals patient across care,”Michigan Denise generate comincome Neely, bined senioroperating vice president forof $9 million to $10Healthcare million a month. By MARK SANCHEZ | MiBiz revenues, assess the effects, and conportfolio compaBronson and chief But the current operating msanchez@mibiz.com tinually revise projections based on nies. We immediately operating officer and chief environment is far from normal, and the COVID-19 panthe data they see. shifted into crisis nursing officer for Bronson demic has pushed said the Catholic health sys-he COVID-19 pandemic that Investment firms say they continue management mode Methodist Hospital, in a tem’s financial to scout for new deals, although some and began working statement to MiBiz.performance deep into thedismantled daily routines red. and hammered the economy are generally doing so at a slower pace. each step of the pro“We are currently identifyThestaff Michigan for Trinityhas forced investors to pivot Their immediate priority is to focus cess in parallel,” Tim ing those membersoperations and will Health, the parent corporation along with the companies they back on portfolio companies in which they Parker, the president refresh them onLivonia-based current processes Parker of Mercy Health West care. Michigan and Saint financially. have already invested to help them of Grand Rapidsbefore they return to in clinical Joseph Venture capital and private equity navigate the crisis, and in some cases based Grand Angels, We are also calling on retirees whoMercy Health System investors contacted by MiBiz say provide an injection of capital. wrote in an email to MiBiz. may be willing to return to the in Southeast a $50advised portfolio companies they’ve “The crisis certainly caused a sud“One aspect of our role is to help workforce,” Neely said. Michigan, recorded million operating loss for to stay safe, preserve cash, control den change in the way we all work companies deal with the current realiSee SURGE on page 17 March, “and remember expenses and capital spending, secure and live. Its impact jolted us and our ties and at the same time help them in March half the month was a normal month,” President and CEO E R I O D I C A L said S Rob Casalou. The operating loss Casalou stems from the lost revenue from canceling non-essential surgeries and procedures, combined with ramped up spending to test and care for COVID-19 patients. See FINANCIAL CRISIS on page 6 PAGE 3

Downtown Grand Haven. MIBIZ PHOTO: MARLA MILLER

See MENTAL HEALTH on page 6

10.12.2020

Business owners discuss reacting, coping and planning for the future in the era of coronavirus

Health systems face financial crisis brought on by pandemic

TRIAL BY FIRE:

Small Business

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SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

APRIL 13, 2020 • VOL. 32/NO. 13 • $3.00

PAGE 2

8.31.2020

Minority biz leaders face barriers to recovery

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sales@mibiz.com | editor@mibiz.com | 616-608-6170 MiBiz / AUGUST 17, 2020

SMALL BIZ: COPING WITH COVID-19

Collaboration of Holland businesses yields innovation in hand sanitizer dispensers By JAYSON BUSSA | MiBiz jbussa@mibiz.com

Isabel’s Market + Eatery under construction in Douglas. MIBIZ PHOTO: KATE CARLSON

Year-round market, bakery, event space opening despite construction delays By KATE CARLSON | MiBiz kcarlson@mibiz.com DOUGLAS — About 15 people were hard at work on Aug. 7 hammering, sanding and painting away to construct what will become Isabel’s Market + Eatery — a specialty market, street food eatery and event space in Douglas. The pandemic delayed the construction schedule of Isabel’s by about five weeks, said co-owner Elizabeth Estes, but they are pushing along with the project and hope to open at the end of August. The primary partners of the business are Estes and Mary Fechtig — who together also own Coast 236 Restaurant & Bar — as well as retired chemist Vicky Cobb and Saugatuck City Council member Garnet Lewis. Despite COVID-19 slowing down construction, Estes said the team hasn’t cut corners. They have likely invested a little more than the $1.5 million they originally budgeted — which includes the $480,000 spent to buy the property and building — because of added costs such as purchasing plexiglass shields. The European market concept is located at 310 Blue Star Highway, which formerly housed Zing Eat/Drink and Blue Moon Bar & Grille. The new market has generated buzz and positive feedback, Estes said: Nearly 700 people completed an online survey about what food options they want to see at the market. “My biggest fear of opening is managing people from a COVID-19 perspective,” Estes said. “You can only have so many people inside and it’s generated a lot of interest.” Having a multi-use space makes following Gov. Gretchen Whitmer’s executive orders a little complicated, Estes said, but the owners are going to err on the side of caution. “We’re grateful for the rules and we understand them, and will abide by them without question,” Estes said. “It’s just one more level of (uncertainty).” The facility will host a year-round market with fresh seafood, meat and produce, as well as a bakery, full bar and international street food grill. Because of the pandemic, a bigger focus will be on takeaway meals that can be cooked at home, Estes said. Isabel’s Market has hired Mike Borraccio as its executive chef, who was previously the head chef at the former Grove restaurant in Grand Rapids. The pandemic and related gathering restrictions have made plans for the 1,400-square-foot event space that was constructed onto the existing building a little up in the air, Estes said. The company had planned to host events and cooking classes with about 75 people in the new space pre-COVID-19. “The business model has multiple revenue streams and two apartments above that will be rented out,” Estes said. If Isabel’s was just an event space or just a restaurant, it might be an issue, Estes said, but it helps that the space also will include a market and bakery that are considered essential businesses. The owners also invested in high-definition camera equipment so people can hold small cooking classes and limited events including weddings that can be broadcasted to a broader audience to limit in-person gatherings. Isabel’s has an on- and off-site liquor license and has booked a catering job for the fall, Estes said. The company plans to hire 20-25 employees to work catering events and at the market, which is planned to be open every day year-round. “The hardest part is the unknown from the event space and how that will play out,” Estes said. “We made a decision and investment and we’ll see it through to the end, but I think people are going to appreciate what this is because it’s all about fresh food. This town has been so supportive of all business owners.”

AUGUST 17, 2020 / MiBiz

community in ways that (other dispensers can’t),” said Eric Stoike, marketing manager at GP HOLLAND — GP Reeves Inc. Reeves, which hired around 30 put to use its nearly 50-year hisemployees as part of the project. tory and expertise in precision Up until the hand sanitizer dispensing to make innovations product, GP Reeves had specialto what has become a staple of ized in dispensing grease, oils, the COVID-19 pandemic era. adhesives and sealants while The Holland-based manserving the automotive, life ufacturer recently unveiled sciences, aerospace, furniture, Defense Dispense, a line of consumer goods, electronics, hand sanitizer dispensers that industrial manufacturing and was created out of a collaboother industries. ration with a few other local At first blush, Defense businesses. The product was Dispense might seem like the not a hard pivot for the comrun-of-the-mill touchless hand pany, which designs sanitizer dispenser that and builds a complete has popped up seemline of ambient applied ingly everywhere durand heated material ing the pandemic. dispensing equipHowever, GP Reeves ment and dispense has introduced a few automation. innovative wrinkles to “Some of this stuff the product, namely we had experience in, the fact that it uses a so we created a prodbulk supply of hand Stoike uct that we feel has sanitizer rather than some differentiating factors refillable bags or cartridges about it and that helps out the that all but disappeared when

GP Reeves Inc.’s new line of hand sanitizer dispensers comes in a variety of models. COURTESY PHOTO the pandemic descended on America. Defense Dispense also comes in a variety of models to fit the needs of wide-ranging clientele. These products range from free-standing models like the Fortress and Fortress XL to tabletop or customer mounted versions. While Defense Dispense has a solution for essentially any need, the company is targeting clients with large properties and heavy foot traffic such as universities and manufacturing facilities, which is where the bulk supply of hand sanitizer truly comes in handy, Stoike said. “We do target a larger, highvolume kind of area that your average competitor (might not),” he said. “Our standard

one-gallon container is about three times the size of most competitors out there.” The Defense Dispense line of dispensers can hold a supply of sanitizer ranging from eight ounces all the way up to five gallons. Defense Dispense also is equipped with measures to secure the supply of liquid or gel sanitizer. On top of those design and performance features, Defense Dispense provides custom branding for its machines. For instance, GP Reeves recently shipped off units to Wayne State University that featured the school’s colors and logo. For bulk sanitizer, GP Reeves turned to New Holland Story continued on next page

Los Amigos restaurant surviving pandemic despite funding obstacles By KATE CARLSON | MiBiz kcarlson@mibiz.com MUSKEGON — Despite initially struggling to access COVID-19 relief funding, Ana Olson has kept Los Amigos Mexican Bar & Grill open with takeout orders throughout the entire pandemic. The Muskegon restaurant’s dine-in service shut down on March 16 because of Gov. Gretchen Whitmer’s shelter in place mandate and reopened June 8. The restaurant at 1848 E. Sherman Blvd. pivoted to a family-style takeout menu and started serving up its popular margaritas to-go. And while Olson had to temporarily lay off most of her staff when dine-in services were closed — a reduction from 33 employees to four — most have been called back as limited dinein services resumed. “We created a menu to do community-style meals so you’re not breaking the bank,” Olson said. “It helps us keep people coming back. If they want to take a break from cooking, they can get tacos from Los Amigos and it is still affordable.” While her business has survived the pandemic, Olson said accessing small business loan and grant funding programs has been a challenge. Additionally, while Muskegon’s city manager purchased nearly $200,000 worth of gift cards from local restaurants to support them during the pandemic, the initiative did not include outreach to Olson or two Chinese restaurants. The city’s attorney is in the process of investigating the gift card purchase with use of government funds, according to Muskegon City Commission meeting minutes. “It’s been difficult to not get overwhelmed,” Olson said. “(The city) left me out and they left out two other minority-owned businesses.” Despite this, Olson has partnered with the West Michigan Hispanic Chamber of Commerce to get help filling out loan and grant applications. Los Amigos was also able to secure a $10,000 loan from Grand Rapids Opportunities for Women (GROW), which has been working with the Community Foundation for Muskegon County to provide business owners recovery and working capital loans. “As someone who had never dealt with applying for a loan before, it was scary to first look at the application, but GROW addressed all of my worries,” Olson said. “Being both a female and a minority, it’s so reassuring to know there’s a group like GROW to help us. Because of them, I was able to secure funding and improve my business in these uncertain times.”

Staff at Muskegon-based Los Amigos Mexican Bar & Grill. COURTESY PHOTO

The GROW funds are “critical” to help businesses like Los Amigos, said GROW CEO Bonnie Nawara. Even when businesses had to close because of the executive order, expenses like rent, insurance and other items continue to rack up, Nawara said. Olson was born and raised in Mexico, and came to the United States in 2006. She came to Muskegon in 2012 when she started helping her brother manage Los Amigos, an authentic from-scratch Mexican restaurant. They were able to buy the restaurant in 2015. Olson also serves on the board of directors for Latinos Working For the Future, a nonprofit organization seeking to unify and organize the growing Latinx population in the greater Muskegon area. Los Amigos frequently partners with local nonprofits for fundraisers and supports local groups, Olson said. When the pandemic hit, Olson said the restaurant wanted to make sure area children were still getting enough food as many families faced difficult financial times. “There were a lot of families that weren’t able to get any help because they didn’t qualify for unemployment or weren’t able to get CARES Act money from the federal government,” Olson said. Los Amigos was giving out free kids meals to families at the beginning of the pandemic, and the business now donates to Kids’ Food Basket. “We have a for-profit business, I’m here to make money, but I’m always looking for ways to help our community, especially the ones that rarely get help,” Olson said. “If someone comes and spends money with us, they’ll get delicious food. But at the same time, we’re involved in our community.” With dine-in now back open at 50-percent capacity, Olson has been able to call back her staff. About 10 employees chose not to return because they were taking care of a loved one or were in a high-risk group for getting COVID-19, Olson said, so she is now hiring new employees. “Business is down from where it should be, but we are able to make the bills and we are not in the red,” Olson said. “We are very grateful.” Visit www.mibiz.com

SMALL BIZ Continued from previous page Brewery Co. LLC, which made a pivot of its own to start producing the coveted substance. “I think it’s kind of a cool story because it’s two West Michigan-based companies that are partnering up and adapting their business strategies to meet the needs of consumers during COVID-19,” said Layne Hayes, manager of e-commerce and fulfillment for New Holland Brewery, who also spearheaded the company’s hand sanitizer efforts. “We were both switching up, doing things differently. We thought: ‘How can we partner up and make the most of it?’” New Holland, which also operates a distillery, utilized its existing infrastructure to produce hand sanitizer when it was forced to shut down its restaurants. The move was not intended to be a long-term play, but has been thanks to the lingering pandemic. “We just thought this is an opportunity where we can step in and really help our community,” Hayes said. “We never thought we’d be this far along and still be producing hand sanitizer.” New Holland Brewery wasn’t the only Holland-based collaborator on the product. GP Reeves also tapped Cusack Music LLC, a company that specializes in developing and manufacturing guitar effects pedals. GP Reeves worked with the company’s Cusack Manufacturing division to program the circuit board to make Defense Dispense more sophisticated than traditional dispensers. Jon Cusack, owner and chief technology officer of Cusack Music, said at the time he was approached with the opportunity, his business was half staffed and backlogged with work. “Under normal circumstances, I would have turned this project down,” Cusack said. “But because it was related to COVID, it was like ‘OK, here’s a local company doing something that has to do with what the entire world is dealing with right now. We’ll figure out how to squeeze this thing into our schedule.’” GP Reeves also worked with Primera Plastics Inc. of Zeeland to produce the plastic housing for the units. Stoike said that initial interest in Defense Dispense has been positive, whether through the company’s sales channels in Holland, Flint, Columbus, Ohio and Toronto, or through its website. GP Reeves has shipped units to Florida, Texas, California and other states. GP Reeves also looks to add both a weather-resistant and solar-powered model to its arsenal in the future, according to Stoike.

New business applications in Michigan skyrocket during pandemic SBAM scorecard shows state slipping in entrepreneurial rankings By MARK SANCHEZ | MiBiz said SBAM President Brian Calley. A survey SBAM msanchez@mibiz.com conducted this spring found that one in seven respondents were unsure their businesses would s the COVID-19 pandemic battered survive the pandemic. Michigan’s economy through the Whether the growth in new business applicaspring and early summer, the number tions is the direct result of “activity out of desperaof people forming their own businesses tion that we often see in down times” or another grew exponentially. reason, the finding heightens the need for economic Business applications in the state increased development policies that lead to even greater supmore than 123 percent from the 31st week of 2019 port and nurturing of entrepreneurs, Calley said. through the same point in 2020, or the week end“Sometimes entrepreneurism is borne out of ing Aug. 1, according to U.S. Census Bureau data. desperation. People don’t have any other options The author of the annual Small Business and less to lose, so they’re going to go for it right Association of Michigan scorecard on the state’s now. But, still out of it comes opportunity,” Calley entrepreneurial economy attributes the triplesaid. “When I look at the number of business applidigit growth rate to the economic downturn that cations that have happened here in the beginning the COVID-19 pandemic triggered. of summer and then compare it to the work that Graham Toft, the owner of Sarasota, Fla.-based needs to be done to create a stronger environment GrowthEconomics Inc., sees new business formafor entrepreneurs to do well, it tells me this work has tion in the present recession beginning to play out never been more urgent than right now because the similarly to the financial crisis of 2008, when many more success we have with this cohort of people, people resorted to forming their own businesses the better that our long-term prospects will be.” after losing a job. The major increase in new business filings The scenario creates the need for greater support comes as nobody knows for sure how Michigan will for entrepreneurs who for whatever reason decided fare economically in the months and even years to set out on their own during a perilous time, said ahead as a result of the fallout from the pandemic, Toft, who highlighted the data last said SBAM CEO Rob Fowler. week during a briefing on the 2020 The scorecard does not indicate SBAM entrepreneurship scorecard. whether people filing a business appliThe spike began in late June, Toft said. cation did so out of desperation, or “We recall back to the churning in “how many of them just got the entreSponsored by: our thinking that went on and what we preneurial nudge that they needed to SMALL BUSINESS saw that during the last major recesactually take a dive,” Fowler said. ASSOCIATION OF MICHIGAN sion, there was a lot of small business “In either case, Michigan is going activity in Michigan, and we suddenly to have to be prepared to really help realized that, ‘Hey, this is what happeople with ideas get them started, to pens in a downturn.’ What I’m thinking right now help those that are already started and get them off is it’s happening again,” Toft said. “What I’m thinkof the ground, and help those who have real potening right now is this is the time where we need to tial to grow,” he said. “If we do that better than other be thinking ahead as to how we help those small states, I like our chances, but that’s the work ahead businesses position themselves for growth. of us.” “We have opportunities ahead of ourselves Michigan is not alone in experiencing a spike of here.” new business applications. That growth rate sharply contrasts to the subNationally, applications grew 82 percent yearstantially smaller increases in new business appliover-year for the same 12-month period, after cations in prior years and the 1.1-percent decline declining 6.3 percent in the prior 12 months, in the same measure from 2018 to 2019. according to the U.S. Census Bureau data. The business applications are for new compaCalley cited the data to advocate for “entreprenies “with planned wages,” meaning “it’s not just neurship-led” economic development policies by some paper application” but a business coming the Michigan Economic Development Corp. and together that will generate a salary and income for Michigan Strategic Fund “where you add (small the owner, Toft said. businesses) in as a formal priority and part of the mission” and “that you don’t just be open to having a good environment for them, but that becomes Support systems needed part of the core mission of the organizations.” The growth rate also comes as data show that some “What we’d love to see happen out of this is that small businesses have closed for good or may not we look at the environment around starting and survive the economic fallout from the pandemic, growing a business as being the main objective of

SMALL BIZ NEWS

economic development (and) that attraction (of businesses to Michigan) is a good outcome of having a good environment, but really it’s about building around the people who are already here,” he said. “There are so many different aspects outside of just the core business that you have, and having an entrepreneurship-led economic development is really about the wrap-around services of the entrepreneur, and that the system itself helps with the implementation of all of those things that have to be done to be successful in business.”

Measuring up The SBAM scorecard, prepared in partnership with Michigan Celebrates Small Business, uses dozens of data points to offer a look at the state’s entrepreneurial climate, change and vitality. The 2020 scorecard ranked Michigan 22nd as of 2018 for entrepreneurial climate, defined as factors that support the entrepreneurial economy. The ranking declined from 17th and 19th in 2018 and 2017, respectively, but remains much better than a decade ago when the state ranked 41st. In entrepreneurial change, Michigan ranked 26th nationally in 2018, down three spots from 2017, but also well above the ranking of 47th a decade earlier. Entrepreneurial change metrics gauge the “direction and momentum of growth in the entrepreneurial economy,” according to the scorecard. The state was 36th for entrepreneurial vitality in 2018, or the “level of entrepreneurial/small business activity as a share of a state’s total business economy.” That’s down one spot from 2017, but seven places above 2008. By other measures, Michigan ranked well compared to other states and in the top 10 in some areas, including: • First for physical science and engineering workers; • Second in worker’s compensation premiums and business tax burden; • Fourth in high-tech manufacturing employment, industry research and development, and patents per innovation worker; • Sixth in business liability costs; and • Seventh in university R&D and top graduate programs. Michigan also remained a top performer in several metrics compared to other Midwestern states. “While we have seen some progress in Michigan, we know that if you’re standing still, you’re falling behind and the risks of complacency have never been greater for entrepreneurs,” Calley said. The areas where Michigan lagged and ranked in the bottom 10 nationally as of 2018 include malpractice costs (40th), bridge quality (41st), public high school graduation rates (42nd), unemployment insurance costs (47th), and unemployment insurance tax structure (49th).

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MiBiz / AUGUST 17, 2020

REAL ESTATE & DEVELOPMENT

NU AV E LD F IE A IN PL

GR A ND RI V ER

PLYMOUTH AVENUE

MICHIGAN STREET

— JON O’CONNOR Grand Rapids First Ward City Commissioner

FULTON STREET

201 MARKET AVENUE SW

served on the selection committee for the original 201 Market proposal. “It’s a critical site for the redevelopment of the river and bringing the rapids back. We need that site to remain public.” The transaction for the 1500 Scribner Ave. NW property — which is about 2 miles north of 201 Market — would allow the city to gain control of river frontage in that area along with public parking nearby, according to DeLong. The Road Commission property includes more than 130,000 square feet of building space and was identified as one of 15 “priority riverfront sites” in GR Forward, a 10-year community master plan and investment strategy for downtown Grand Rapids and the Grand River corridor. The GR Forward plan accounts for a mixeduse site on the property with high loft and office space, while allowing for pedestrian access to the riverfront. If Grand Rapids ends up buying the location, O’Connor hopes the city can avoid

BU T

T ER

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making significant investments into the existing Road Commission facility, which he views as a short-term transitional site that could eventually be opened for reuse as envisioned in the GR Forward plan. That would be possible once the city ultimately transitions the services to a long-term home that makes more sense for operations, he said. “It’s good for the city to be thinking strategically about how it invests in real property assets,” O’Connor said. “Knowing that site, it’s of significant importance to the river redevelopment. This is our one chance to make sure we control our own destiny. There’s only one time we’ll be able to buy and hold that site at a rational cost, and we should take advantage of it while we can.” Both sites are unique locations with close proximity to the river and infrastructure on them that complicates future redevelopment, O’Connor said.

Complex infrastructure Meanwhile, hidden infrastructure at the 15-acre 201 Market property adds layers of complexity to any potential deal. Redevelopment has been slowed there by a massive 138-inch sewer line underneath the property that likely will need to be relocated for any future development to take place economically. The city originally planned for the project developer to relocate the city services and the sewer line on the 201 Market site, but this caused a “financial gap” that was difficult to overcome, DeLong said. Building over the trunk sewer would not be wise and a developer could attempt to build around it, but it would likely cause site layout issues, he said. “We’re looking at other ways to pay for (relocating city services) that may reduce the development financial gap,” DeLong said. “If we’re in the process of moving or if we’ve moved, there are more opportunities for redevelopment.” The city could end up footing the bill for relocating services and have a private developer or brownfield tax increment financing reimburse the city for at least part of it, DeLong said. The city also is pursuing grants that could help pay for the relocation of services, which could include U.S. Economic Development Administration grants, DeLong said. For EDA grants to be used, the city has to identify a definitive investor for the site, DeLong said. The sewer line itself was originally constructed with the use of EDA funding because it created jobs in the area, he added.

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The city now plans to evaluate relocating city services from 201 Market to the Kent County Road Commission’s Central Complex at 1500 Scribner Ave. NW, a major shift that highlights the complex nature of any potential deal, as well as the city’s desire to maintain valuable publicly owned property along the Grand River. City officials believe relocating the services off the 201 Market site would make the location more viable for redevelopment and possibly more lucrative for the city. “I’m happy that the city is exploring the Road Commission site, and it’s important that we secure that site for the future,” said First Ward City Commissioner Jon O’Connor, who also

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city terminated the company’s exclusive development agreement on July 23. Prince said original financial pro formas for the plan showed the project “would need incentives to make it economically viable. … After some time it became apparent that this project would not meet that designation” for the state’s transformational brownfield credits. The incentive program was approved by the state in 2017 and is meant for major projects with a community revitalization component. “The city and F&C tried for a long time to find a way to make the program more economically viable without chopping the overall program, there were many public non revenue generating uses at the site and there was just no way to cover those costs and (have) the project make economic sense,” Prince said in an email to MiBiz.

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“This is our one chance to make sure we control our own destiny. There’s only one time we’ll be able to buy and hold that (Road Commission) site at a rational cost, and we should take advantage of it while we can.”

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201 MARKET

The 201 Market property currently houses the city’s Office of Special Events and street maintenance operations, refuse and recycling, and a gas and diesel fueling station. The city recently hired Bergmann, a Rochester, N.Y.-based architecture firm, as part

“Economic development is a long game and you’ve got to have tenacity and you’ve got to be resilient. The fact that we’ve pivoted to going to relocation is a learning process that will benefit us long term.” — ERIC DELONG Grand Rapids Deputy City Manager

of a contract not to exceed $78,100 to study the city’s possible relocation from 201 Market to the Road Commission property. The firm, which has an office in the city, expects to present the relocation feasibility report and design plan to the city of Grand Rapids in the fall. “It’s hard for the developer to visualize the development opportunity if it’s encumbered,” DeLong said of the 201 Market site. The Kent County Road Commission board approved a one-year option in January for Grand Rapids to purchase its Central Complex location on Scribner Avenue. The city will perform due diligence on the property and must close the deal for the 14.2-acre site for a negotiated price of $7.75 million no later than September 2022. The city initiated discussions with the Road Commission after officials decided to shift the focus at 201 Market to relocating city services, as opposed to moving forward with a redevelopment plan, DeLong said. The building on the Road Commission site is larger than the 201 Market building, creating potential to move additional city services to the site, according to DeLong. This could potentially free up more property for development throughout the city, he added. “It could be a lever for other redevelopment,” DeLong said. “It’s a long term goal of the city to accomplish this, and it takes the right mixture of economic and site conditions because it’s a large urban site and a very difficult site, so it’s not unusual to take two or three opportunities to find the right use and that’s the process we’re going through.” Despite the Flaherty & Collins plan being off the table, DeLong says city officials have learned lessons and gained valuable information from the three-year RFP process that can still be used going forward. “Economic development is a long game and you’ve got to have tenacity and you’ve got to be resilient,” DeLong said. “The fact that we’ve pivoted to going to relocation is a learning process that will benefit us long term.” Visit www.mibiz.com

West Michigan industrial market stays healthy during pandemic By KATE CARLSON | MiBiz kcarlson@mibiz.com

he industrial sector in West Michigan has been the quickest in the real estate market to bounce back from the pandemic, nearly returning to where it was pre-COVID-19. That’s according to industry experts who cite the industrial market’s solid position going into the pandemic as contributing to its current relatively healthy status. As well, they note many manufacturing businesses were considered essential throughout the governor’s shutdown order and allowed to remain open. In yet other cases, the overseas supply chain disruptions caused by the pandemic could also be creating more of a pull for U.S. companies to reshore production to domestic facilities, experts said. Stu Kingma, associate broker for NAI Wisinski of West Michigan, said there’s no question the industrial Kingma market is the most healthy commercial real estate sector currently. Retail stores are struggling and business that can be done remotely has largely transitioned away from in-person operations, he said. However, most manufacturing work still needs to Abraham be done in a large industrial space. “You can’t build a car in your basement,” Kingma said. “From that perspective, the demand for space is going to remain healthy in the industrial sector.” Matt Abraham, a senior real estate adviser at Grand Rapids-based First Companies, said the uncertainty stemming from the election year is affecting the industrial real estate market right now more than the pandemic. Every election year brings about a “wait and see” mentality for many operators, he said. “We will probably see some long-term effects more operationally because of the pandemic,” Abraham said. “The way companies set up their internal workflow and how they manage people in their buildings themselves will change, but I don’t think it’s going to lessen the demand for industrial space.”

Kingma said. “Immediately, the demand was here, so people pivoted and manufactured face masks, face shields and hand sanitizer almost overnight.” Especially during a pandemic, West Michigan remained a desirable location for a company to expand, given its close proximity to major markets and a good quality of life without the congestion and crowded conditions of places like New York City or Chicago, Abraham said. “There are a lot of good fundamental reasons companies decide to relocate here,” he said. “We have public transportation, but it’s not a necessity to use that to get around. It’s not a major metropolitan area so we have a much better ability to social distance.”

Limited space However, future growth in West Michigan’s industrial market could face some challenges because of a lack of quality facilities that’s persisted in recent years coming out of the Great Recession. To that end, much of the industrial market is currently occupied, with a second quarter research report from Colliers International noting a region-wide vacancy rate of just 2.25 percent. Meanwhile, construction of industrial facilities remained flat, a trend that’s expected to continue throughout the third quarter as well. Average lease sizes also fell to just 5,000 square feet in the second quarter.

“Tenants are looking for space with a loading capacity under 10,000 square feet, as well as short- and long-term warehousing,” according to the Colliers report. Bailey at Rockford Construction specifically noted West Michigan has limited options for industrial and warehouse facilities. This means companies in West Michigan have the option to build new facilities — which involves a higher cost — or they can look at retrofitting existing facilities with the aid of automation and robotic technology, Bailey said. “Companies are looking at it both ways and they kind of have to because there is limited space available,” Bailey said. “We did not have a lot of capacity before the pandemic.”

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Relocating operations to U.S. COVID-19 also is causing some manufacturers to consider relocating foreign or far-flung production closer to home, increasing local demand in industrial spaces. “We’ll start to see some supply chains migrate back to the States,” Kingma said. “This has been a real eye opener for some manufacturers with supply chains overseas.” With the limited industrial space in the West Michigan market, more companies are renewing long-term leases, as well as planning ahead for future expansion, said Dan Bailey, vice president and market leader at Grand Rapids-based Rockford Construction Co. Inc. “Because of the actual market trending today and not having full clarity on what global trade looks like in the future, (companies) are making it very flexible to expand here in the future as needed,” Bailey said. An early example of companies reshoring production happened early on in the pandemic when local companies jumped to manufacture personal protection equipment that was in high demand and typically came from overseas sources. “We saw adaptations in local companies that had never built face masks before,” Visit www.mibiz.com

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HEALTH BIZ

Growing shift to telehealth raises questions about access in rural communities By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he COVID-19 pandemic created what Kelly Hirko calls a “massive shift” in health care. As physicians were unable to see patients in the spring, they urged people to transition to telehealth or virtual visits. Hospitals and health insurers offered similar encouragement. That resulted in huge spikes in the use of telehealth services and has generated heightened awareness of disparities in rural health care, including access to broadband internet service that some rural communities lack. “The rapid implementation of telehealth programs in rural areas in response to the COVID-19 pandemic holds tremendous potential for addressing rural health disparities,” Hirko wrote in a recent commentary published in the Journal of American Medical Informatics Association. “Overcoming issues in broadband access in rural settings, which limit the reach and effectiveness of telehealth initiatives, must be prioritized,” according to Hirko, an assistant professor of epidemiology and biostatistics at Michigan State University’s College of Human Medicine. The commentary cited how 40 percent of Michigan residents live in rural areas that lack high-speed internet access, versus just 3 percent in urban areas. That’s problematic because rural areas tend to have lower access Hirko to care, older populations, and higher incidence rates of chronic illness such as diabetes, hypertension and obesity, Hirko said. “It’s a double burden. The people in general who have the lowest connectivity have the higher health care needs. So, if anything, it’s just going to exacerbate these disparities if we continue to develop these solutions that are not reaching widespread, especially to these targeted populations that could benefit the Frederick most from having that access,” Hirko said. Hirko’s research focuses on rural health disparities. That led to her interest in rural broadband access, which she considers a “super determinant of health” that also affects education, employment and other factors such as social disconnections that influence health and have been magnified during the pandemic. Among the conclusions in Hirko’s commentary, written with colleagues at Munson Healthcare in Traverse City, is a need for health systems to craft “a comprehensive strategy to ensure sustainability of telehealth programs following the COVID-19 pandemic.” “Many lessons will inevitably be learned from the COVID-19 crisis. Already, the pandemic has exposed underlying health disparities while also fostering innovative solutions to address health needs in these trying times,” she and her colleagues wrote in their commentary. “Thus, it is our hope that through this crisis, we may be able to envision and work toward a more equitable world.”

Growing use Care providers have touted the promise of telehealth to improve access in rural markets, including for primary care, connecting virtually with medical specialists, or monitoring and connecting more with patients who have chronic medical conditions. When the pandemic hit this spring and stay-at-home orders were issued, they closed medical practices for non-essential inperson patient visits, and care providers moved quickly to direct people to use telehealth platforms. That caused a large spike in the use of telehealth. Care providers see the rise of telehealth during the pandemic as a permanent sea change for the health care industry. Prior to the pandemic, 1 percent to 2 percent of Metro HealthUniversity of Michigan Health’s patients had used telehealth to connect with a doctor, Dr. Ronald Grifka, the health system’s chief medical officer, said last week in a panel discussion at the Grand Rapids Area Chamber of Commerce’s annual Health Care Summit. The use ballooned to 50 percent to 60 percent as stay-home orders were in effect and physicians had to forgo non-essential office visits through mid-June, when offices could reopen for routine patient visits.

AUGUST 17, 2020 / MiBiz

Telehealth use by patients has waned since, although at about 30 percent now, it remains much higher than the pre-COVID period, Grifka said. Patients weren’t the only drivers behind the greater use of telehealth. Many more doctors who were reluctant to do so previously have signed on to see patients virtually. Prior to the pandemic, about 10 percent of the doctors in Blue Cross Blue Shield of Michigan’s care network offered virtual visits. That quickly grew to 82 percent during the pandemic and as Blue Cross Blue Shield offered up to $5 million in incentives to physician groups to assist in launching or expanding a telehealth service and providing virtual visits. “COVID really has changed the landscape,” said Dr. George Kipa, deputy chief medical officer at Blue Cross Blue Shield of Michigan, which now is looking at the role the technology plays in future care delivery. “Telehealth and telemedicine, online visits, virtual visits, whatever you call them, over time were something that very few people utilized. During COVID, it became really a lifeline for patients and for doctors, and going forward it transforms the expectations,” Kipa said. “We’re looking at what the future of telemedicine is going to look like and how best we can assure access to mid-level and chronic care issues along these lines.”

Lacking access

40 percent of Michigan residents live in rural areas that lack high-speed internet access compared to just 3 percent in urban areas, a disparity researchers say must be addressed as telehealth expands. COURTESY PHOTO Frederick said. He hopes the growth in telehealth will drive broadband development and “improvements in infrastructure in rural areas that need to happen.” “It involves bringing the public and the private sector together to really hash out these issues, being honest about what the needs of the community are, being honest about what infrastructure can or can’t be expanded to certain parts of the area, and then working on a solution,” he said. “COVID is really bringing it to the forefront of importance.”

Telehealth’s move into the broader public consciousness and a far Adding incentives larger role in care delivery brings a heightened need to address issues with rural broadband access, said Eric Frederick, Michigan Health insurers also pushed the growth of telehealth during the director for Connected Nation, an organization that advocates for pandemic, agreeing to pay doctors the same rate for a virtual visit as they did for an in-person visit. The previous reimbursement great broadband access. Hospitals and health systems have a role in advocating for rate for virtual visits had been one of the barriers holding back greater rural broadband access that accommodates telehealth telehealth, Hirko said. Grand Rapids-based Priority Health will reimburse virtual visand in generating awareness and understanding about the issue, its at the same rate as in-person office visits until the end of 2020. Frederick said. Among the findings, a study Connected Nation Michigan As well, the insurer implemented zero member cost share for both released in March found that many households in five rural coun- medical and behavioral telehealth visits to encourage physician ties — Gladwin, Sanilac, Roscommon, Osceola and Dickinson — and consumer adoption of the technology. A decision remains pending on whether to continue those polisimply lack broadband connectivity. Part of the problem is that what makes economic sense for high- cies beyond 2020, said Curtis Gritters, director of Priority Health’s speed internet service providers in urban markets does not work ancillary provider network. “At this point, with as much as things are in flux, we’ve not taken for rural areas with low population density, Frederick said. “Obviously, where household density falls off, so too does any options off the table,” Gritters said. To illustrate telehealth’s growth during the panbroadband connections, and that’s from an demic, Gritters cited data that show one in 1,000 availability standpoint,” Frederick said. “It’s “During COVID, doctor visits by members in April 2019 occurred going to be tough to get those types of services (telehealth) virtually. In April 2020, one out of every five visits to rural areas.” became really were via telehealth, Gritters said. Other barriers that persist include the affordIn May and June, telehealth visits waned to 50 ability of broadband in rural areas where it is availa lifeline for to 100 per 1,000 physician visits by members, “but I able, often because of a lack of competition; worpatients and like to think telehealth is here to stay as a convenient, ries about the safety of medical data online; and for doctors, and safe way to access necessary care,” Gritters said. concerns that a doctor can actually diagnose a “Telehealth is a fantastic option for members,” medical condition virtually, he said. going forward it he said. As health care providers step up and look to transforms the Despite the large growth in telehealth, Priority expand telehealth services for virtual visits at expectations.” Health has not noticed a variance between medical patients’ homes, “We’re going to have trouble rollclaims for virtual visits in rural markets compared ing those out into rural areas because of the lack to urban markets, Gritters said. In other words, a of connectivity and affordability of connections, if — DR. GEORGE KIPA lack of access to high-speed internet service in they’re there,” Frederick said. Deputy Chief Medical Officer rural markets has not shown up in the health plan’s at Blue Cross Blue Shield of internal data, based on medical claims. Michigan Partner up “It’s Priority Health’s observation based on that The gaps in high-speed internet service are priinternal data that, in general, telehealth is accessed marily in the central northern Lower Peninsula from Michigan’s rural counties at approximately and Upper Peninsula, plus counties in southern Michigan, accord- the same rate as from metropolitan counties,” said Gritters, noting to Connected Nation Michigan. ing that it’s too early to draw any definitive conclusions from the Resolving the barrier requires municipal and local leaders in early data about access to broadband and telehealth in rural areas. rural markets who understand the problem to come together with “But we have our eye on it, too,” he said. internet service providers “who are willing to come to the table and Priority Health recognizes that reliable internet access “may find a solution, and be honest about why that can’t expand to all of be a limitation to health care access,” leading to a decision early the community. It’s simple economics,” Frederick said. in the pandemic to pay for telephone access to care, Gritters said. “And then we start forming partnerships,” he said. The health plan also has been contracting with more care providFrederick cites rural Lyndon Township in Washtenaw County ers who do telehealth “so that our rural members have access to where local officials worked with private internet service provid- the depth and breadth of specialty care, for example, that might ers on a plan to provide high-speed service. By a two-to-one mar- be physically concentrated in metro areas,” he said. gin, voters passed a millage in 2017 to build a fiber optic system When Blue Cross Blue Shield added telehealth four years ago, it a private ISP uses to provide broadband through a partnership acknowledged that access to high-speed internet was an issue for with the township. some people, so the insurer also paid for telephone-only access, Other similar partnerships have been formed all over the state, Kipa said. Visit www.mibiz.com

GRAM

Continued from page 1 southwest of downtown tripled the company’s production capacity. For a potential COVID-19 vaccine, the company would work with a publicly undisclosed “leading pharmaceutical company,” Ross said.

Prepared for expansion The contract came from the Biomedical Advanced Research and Development Authority (BARDA), which is a part of the HHS Office of the Assistant Secretary for Preparedness and Response, and through the Defense Department’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense, and the Army Contracting Command. Becoming part of Operation Warp Speed potentially opens up new business opportunities for GRAM, Ross said. “Over the next year, we need to be in a state of readiness to be able to support the government’s effort through BARDA and work with whatever Grand Rapids-based Grand River Aseptic Manufacturing Inc.’s $160 million contract with the federal government to produce a COVID-19 vaccine vaccine company wants us to work with them, when it’s ready “really takes GRAM to the next level,” says CEO Tom Ross. COURTESY PHOTO and that should bode well for the future,” Ross said. “We’re working with some of the largto know that we have that kind of expertise and Local investors led by Charter Capital est pharmaceutical companies in the world to ‘A great testament’ technological capabilities that can be leveraged Partners in Grand Rapids acquired GRAM’s accomplish some great things. This gives us the Operation Warp Speed’s contract with GRAM so quickly toward a very acute problem,” said assets in late 2010 and put $5 million into the visibility and the opportunity to do substantially as well represents “a great testament to their Rapundalo, who calls the GRAM contract “just company. The investment group — which more than what we had prior.” capabilities” and “a testament to the strengths the latest example” of the capabilities of pharma includes VAI, GVSU, individual members of GRAM employs about 210 people at five faciliand the capacity that our industry has here in companies in the state that date back the mid Grand Rapids-based Grand Angels, and the ties in Grand Rapids and will need to hire 75 to Michigan if you look at them (and) you look at 1860s. Municipal Employment Retirement System of 100 new employees within the next few months, Pfizer,” said Steve Rapundalo, CEO of the life sci“Our pharma industry’s been around a long, Michigan — formed a new corporate entity and ranging from entry-level positions to “highly ence trade association MichBio in Ann Arbor. long time,” he said. “So I’d say we know a thing recruited a new management team that put the technical” managerial positions, Ross said. “It’s quite remarkable and it’s very satisfying or two about pharma.” company on the right track with a strong growth The company also will purchase additional trajectory after years of problems. equipment for the new facility, which was built In 2017, local investors then sold a majority of to accommodate further production expansions. the company to Arlington “We can add more Capital Partners, a Chevy clean rooms, more fill“If you can draw up an Chase, Md.-based private ers and more equipeconomic development equity firm. Some of the ment and accelerate the local investors retained process of expansion in plan for the kind of jobs minority stakes in GRAM, that building,” Ross said. you want to have in your which has gone on to “We’re instantly a much community, this is it. record strong annual bigger company. It’s just These are skilled positions, growth rates. an incredible opportuArlington Capital nity for us. The ability highly compensated, Partners and local investo work on a life-saving stable jobs and the tors provided a “signifidrug like this is somefacility itself is really cant amount” of capithing that’s beyond our tal to support GRAM’s wildest dreams, to be important. You can’t pick growth and recent expanable to help and contribthis thing up and move it sion, said John Kerschen, ute in that way.” somewhere else.” president and managing BA R DA ident i f ied partner at Charter Capital GRAM and reached out a provider of commercial debt collection services and more Partners. to the company as a — JOHN KERSCHEN for clients around the world “For those of us that possible participant in President and Managing Partner of Charter Capital Partners have invested in techOperation Warp Speed has acquired a new website: nology companies, life that could bring added s c ie n c e c om p a n ie s , capacity to the partnerrsdcollects.com small development-stage businesses around ship, Ross said. BARDA representatives toured West Michigan, this is a poster child for how the company’s facilities in Grand Rapids, it’s supposed to work out and how you hope including the recent expansion that has “the The undersigned served as exclusive web development adviser they work out,” said Kerschen, who specifilatest technology and the most sophisticated to Ross, Stuart & Dawson, Inc. cally touts GRAM’s job growth and the new equipment,” and later awarded the contract, positions created through the Operation Warp he said. Speed contract. Operation Warp Speed has signed deals with “These are definitely top-shelf kinds of posia number of pharmaceutical companies such as tions for our community,” he said. “If you can Pfizer Inc. and GlaxoSmithKline plc that are in draw up an economic development plan for the clinical trials with vaccine candidates. The initiakind of jobs you want to have in your commutive in July signed a $1.95 billion contract with nity, this is it. These are skilled positions, highly Pfizer for the production and distribution of 100 compensated, stable jobs and the facility itself is million vaccine doses in the U.S. really important. You can’t pick this thing up and Pfizer, which has said production of a COVIDmove it somewhere else.” 19 vaccine will include a facility in Kalamazoo, Birgit Klohs, president and CEO of the ecostarted a Phase 3 clinical trial July 27 on a vacAffordable, common-sense websites. nomic development organization The Right cine candidate. Place Inc., said GRAM is a success story resulting from the spinoff benefits from development Poster child of the Medical Mile biomedical research and Originally founded in the mid 2000s as a joint health care cluster in Grand Rapids over more venture between the Van Andel Institute and than two decades. Grand Valley State University, GRAM got off to “To see them succeed in such a way is fabua slow start. lous,” Klohs said. Visit www.mibiz.com

MiBiz / AUGUST 17, 2020

FOOD BIZ

GR company broadens food processing sanitization to help stop COVID-19 spread By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

Grand Rapids-based startup is applying sanitization techniques long used in the food processing industry to a broader range of facilities in an effort to stop the spread of COVID-19 in workplaces. Safe Science, a new facility health service that launched in May with experts from major national food companies, combines advanced sanitization techniques with direct communications that inform property owners or employers when facilities are safe to use. T houg h resea rch is g row i ng about COV ID-19’s primarily airborne transmission, workers and the general public still seek assura nces about clea n, d isi n fected facilities. “We saw a gap in the market where people were turning to basically janitorial services or sometimes building remediation services,” said Safe Science General Manager Jeremy Lehman. “They didn’t have t he scient if ic basis or grounding for what they were doing.” Lehman said the 16-employee company formed a team with former food chemists at Kellogg Co. and Sara Lee Corp., to name a few, who are also state-licensed sanitarians. According to the Michigan Depa r t ment of L icensi ng a nd Regulatory Affairs, Michigan has 294 licensed sanitarians. The company has amassed about 40 customers since launching in May, including several restaurants a rou nd Gra nd Rapids, assisted liv ing facilities and commercial properties. Safe Science uses a “triple sanitizing protocol” to help stop the spread of COV ID-19, wh i le t he

company’s scientists have experience remediating other pathogens like listeria, e. coli and norovirus. “The techniques have been used for years at these sophisticated food processors,” Lehman said. “That’s an industry that’s had to face these challenges forever.” The process uses a combination of biomisting and electrostatic fogging to attack high-touch surfaces. Next, the company uses ultraviolet light called pulsed xenon. Unlike decades-old UV technology, pulsed xenon is “a lot more intense and replicates a broader range of sun radiation,” Lehman said. St ud ies have show n pu lsed xenon to be effective at deactivating viruses and bacteria and can complement other sanitization efforts. The Metropolitan Transit Authority is piloting the UV technology to disinfect subways and buses in New York City, while the Gerald R. Ford International Airport announced recently that it’s testing various UV light devices to disinfect items during the traveler screening process.

“We saw a gap in the market where people were turning to basically janitorial services or sometimes building remediation services. They didn’t have the scientific basis or grounding for what they were doing.” — JEREMY LEHMAN General Manager at Safe Science

Grand Rapids-based Safe Science was formed in May with former scientists from major food companies to apply food processing sanitization practices across more sectors. COURTESY PHOTO Safe Science uses the same technology from Colorado-based Puro Lighting as is being used in the New York City study. Safe Science’s three-step process of misting, chlorine-based cleaning solutions and UV light “complement each other and are really lethal” to the virus, Lehman said. The process is completed with a mobile app that provides traceability and results to building owners, which benefits companies like assisted living facilities that are subject to audits, Lehman added. The company can also test facilities for the presence of COVID-19.

Airborne transmission While disinfecting can remove the virus from surfaces and offer a sense of security, health experts maintain that social distancing and maskwearing are most effective at stopping COVID-19 transmission. “Wit h d roplet t ra nsm ission, we are mostly concerned about person-to-person transmission,” said Nicki Britten, health officer with the Berrien County Health Department. While “surfaces do play a role” if people touch a contaminated area and make contact with their eyes or mouth, she added, timing is also important. As of early August, Lehman said the company was working on proposals with school districts. Under

Gov. Gretchen Whitmer’s Return to contracted with Safe Science to perSchool Roadmap, districts that opt form deep cleaning the restaurant for in-person instruction this fall couldn’t do in house. The company must follow a variety of sanitation comes in for a couple of hours while protocols, including regular cleanthe restaurant is closed to do a more ing and disinfecting of surfaces, thorough disinfecting that the resdevices and school buses. taurant can’t do while operating, “We really need to be focused on explained Spea kEZ Partner and person-to-person transmission,” General Manager Calin Skidmore. Britten said. “We do need to do “We’re working really hard in cleaning, but sometimes it doesn’t house on just surface sanitization align in a way that’s meaningful. and spraying down high-contact If someone hasn’t been in a facilsurfaces, but during regular serity in a week, there’s probably limvice, we can’t do a full-on deep ited value in doing cleaning at that clean,” Sk idmore said. “They’re point. Some of it is happening to able to come in and do a full foghelp demonstrate that ging and sanitization a workplace, employer that gets pretty much or business is trying to every square inch of the make every effort they place in a more detailed Sponsored by: can to make people feel way than we’re able to.” DAN VOS safe. Sometimes from a Skidmore said CONSTRUCTION PR standpoint it’s what Safe Science comes in COMPANY organizations need to roug h l y e ver y ot her do, but really it’s about week. The restaurant social distancing.” has mentioned the deep cleaning Lehman responded that “you on social media and with signs in still have to kill (the virus) wherever the restaurant, he added. it is,” and he doesn’t see disinfect“We’ve all certainly learned a ing and social distancing as binary lot more about disinfecting and options. A lso, while offices and sanitizing over the past six months schools are similarly organized and than we knew previously,” Skidmore “tend to be a little safer, the food sersaid. “Everyone’s more sensitive to vice component raises risk. That’s it these days. It makes sense busiwhere we tackle it hard on that side nesses like Safe Science are out there of the equation,” he said. to provide services that maybe even Shortly after being allowed to six months ago people didn’t think reopen for dine-in service in June, they needed or thought were a luxSpeakEZ Lounge in Grand Rapids ury.”

FOOD BIZ

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SPORTS

Indoor sports facilities, organizations remain at a standstill throughout West Michigan By JAYSON BUSSA | MiBiz jbussa@mibiz.com

usband and wife duo Chris and Stephanie Keenan have spent more than two decades building a sports business outfitted with multiple revenue streams. Thanks to the COVID-19 pandemic and subsequent statewide shutdown of certain industries, all of those streams have run dry. “We closed on March 13 and the only thing we’ve been able to do since then is run summer camps, but the numbers were way down for them because parents were concerned about COVID,” Stephanie Keenan said. “Right now, we are looking at maybe doing one or two sessions of classes and then we probably won’t be able to do anything else for the year.” The Keenans own Kingdom Sports in Portage, a business with three primary revenue streams.

“I want to help; this is a public health crisis and an economic crisis. When I look at the strategy out there, some of these strategies I don’t believe are going to work because it’s so inconsistent across the board. If you have an inconsistent strategy across the board with something like a virus, and if it’s not going to work, then what are we doing?” — CHRIS KEENAN Co-owner of Kingdom Sports

Kingdom Sports organizes two large outdoor soccer tournaments each year and also operates the Kingdom Soccer Club, tailored to high-level male and female soccer players that range in age from nine to 18. King Indoor Center (KIC), a 60,000-squarefoot facility located at 8151 Merchant Place in Portage, forms the other crucial component of the company’s business model. KIC features two boarded fields and one non-boarded field, complete with 2.5-inch, grass-like fibers. This makes it a primary destination for everything from soccer and baseball to softball and lacrosse. The Keenans utilize KIC in a variety of ways, from holding camps and classes to renting out the space. Chris Keenan said that the facility is in heavy demand and generally quite busy from October through March. However, these diverse revenue streams have been all for naught during the pandemic, as the state-mandated shutdown of certain businesses including indoor sports facilities persists. Visit www.mibiz.com

“Kingdom Indoor Center is closed,” Chris Keenan explained. “We’ve been waiting to see what the state is going to allow, if gyms and indoor sports facilities can open, but at this point, they have not. There has been nothing that has run at Kingdom Indoor Center since March 15. We’re staring down the barrel of potentially, if they don’t change some things around, we could potentially not be open during the winter, either.” On top of that shutdown order, competitive soccer is still not permitted, ensuring that Kingdom Soccer Club cannot move forward with scrimmages or games, only limited training. Kingdom’s two yearly soccer tournaments also hang in the balance. The limitations are understandably confusing for the Keenans, who routinely see public parks filled with adults playing pick-up soccer games and high schools around the state firing up boys soccer tryouts and practices for the season. Meanwhile, the Keenans can’t hold any of those same activities inside the walls of their facility. “The consistency of the (governor’s) strategy is one that kind of gets me,” Chris Keenan said. “I want to help; this is a public health crisis and an economic crisis. When I look at the strategy out there, some of these strategies I don’t believe are going to work because it’s so inconsistent across the board. If you have an inconsistent strategy across the board with something like a virus, and if it’s not going to work, then what are we doing? Are we shutting everything down or are we letting everything run?” Luckily for the Keenans, Kingdom Sports is an established business, increasing its chances that it will be able to weather this storm, but not without its share of sacrifices, like having to let go all five of its staff members. “We have a long-standing relationship with our bank, which is Comerica. They have been great partners and really good to work with,” Chris Keenan said. “And also, too, we have a lot of equity in the building. For us, if this had happened to us in the fifth year of the business, it would have been absolutely devastating. But where we sit right now, we can take a holding pattern with the building and the bank is working with us.” The Keenans have found a lifeline of sorts by opening up KidFit Daycare next to KIC. They broke ground in February on the facility, which will eventually accept more than 80 kids, and just finished it off despite construction delays due to COVID-19. The Keenans will operate that business separately and are planning to open it at the end of this month.

From top: Kingdom Sports’ 60,000-square-foot King Indoor Center in Portage has seen revenue streams dry up from a lack of indoor sports activity during the pandemic. Kingdom owners Chris and Stephanie Keenan opened KidFit Daycare next to the center to bring in more income. COURTESY PHOTOS

sports facilities, MiBiz reached out to the governor’s office and received the following response from press secretary Tiffany Brown: “Guidelines for athletics and other activities are detailed in accordance with which phase of the MI Safe Start Plan that area is in. Per Executive Order 2020-160 Section 4(e), indoor services or facilities, or outdoor services or facilities involving close contact of persons, for amusement or other recreational or entertainment purposes, such as amusement parks, arcades, bingo halls, bowling alleys, indoor climbing facilities, indoor dance areas, skating rinks, trampoline parks, carnival or amusement rides as defined by MCL 408.652(2), water parks, and other similar recreational or entertainment facilities are closed to entry, use and occupancy by members of the public.” “The mandate is out there so you should be following it,” said Manoj Shah, co-owner of Tri-City

Sports Complex located in Auburn, near Saginaw. “Whether facilities are following it or not, I can’t answer that. I can only tell you what we’re doing.” Shah faces the same dilemma as West Michigan facilities with his 73,500-square-foot multi-use sports complex. Shah has been shut down since March with little reason for him to be optimistic. “We heard from the Governor that (we might be able to reopen) close to August 12, and that’s here and we haven’t heard much since then. We’re kind of in a holding pattern right now.” Shah also stated that, under the order, he could potentially host groups of 10 or fewer patrons at a time, but has not had any requests or desires to do so. “We’re trying to follow the rules,” he said. “We want our patrons to be healthy. We’re doing the best we can to make it work.”

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Indoor sports complexes mum The Keenans were one of the very few exceptions among West Michigan indoor sports facility owners, who mainly were uninterested in talking to MiBiz about their businesses. From sports-specific training facilities to ice rinks, more than a half dozen facility operators refused to comment to MiBiz for this report. Their concerns ranged from not feeling confident enough to speak on their industry’s restrictions to the fact that many are holding activities that do not comply with the Governor’s orders. For clarification on what sort of indoor training, activity or competition was allowed at indoor

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Museums face key challenges given capacity limits, loss of revenue By JANE PARIKH | MiBiz jparikh@mibiz.com

according to results of a June study conducted by the American Alliance of Museums. uskegon’s Lakeshore In July, the Alliance released findMuseum Center had ings of a study that found “one out of big plans for the 2020 every three museums may shutter season. forever as funding sources and finanT h e m u s e u m’s cial reserves run dry.” The organizahistoric Hackley and Hume homes tion put out a call for government as well as the City Barn historic sites assistance and private donors to step were among 33 stops for the up to four up, given that “hundreds of directors different cruise ships that planned to reported their museums may not suroperate on the Great Lakes this sumvive the financial crisis brought on by mer, with planned visits to Muskegon. the pandemic.” Lakeshore Museum Center Vice The survey findings from a samPresident Melissa Horton said the ple of 750 museum directors conmuseum planned to hire more staff firmed early estimates of the dire and open seven days a week. economic harm to museums caused “We were thinking this was going by the COVID-19 closures, which are to be our busiest year expected to continue ever,” Horton said. in reaction to recent Then the COVID-19 outbreaks across the pandemic happened. country. Sponsored by: Now, Lakeshore “Museum revenue GRAND RAPIDS Museum Center is disappeared overnight COMMUNITY finding itself in the when the pandemic FOUNDATION same boat as other closed all cultural museums who may be institutions, and sadly, able to ride out short-term financial many will never recover,” Laura Lott, losses, but aren’t sure what they’ll do president and CEO of AAM, said in a if the effects of the pandemic carry statement. “Even with a partial reopeninto next year. That’s particularly true ing in the coming months, costs will because of the Lakeshore Museum outweigh revenue and there is no Center’s reliance on admissions and financial safety net for many museincome from programs. ums. The distress museums are facMuseums typically generate reveing will not happen in isolation. The nue from admission fees or spending permanent closure of 12,000 museums on food or gift shop items, all of which will be devastating for communities, stopped when they closed their doors economies, education systems, and to the general public in March to comour cultural history.” ply with state-mandated orders resulting from the COVID-19 pandemic. Seeking efficiencies This forced many museums to retool Among the museums grappling with to offer virtual access, enabling them this dire forecast are more than 600 to maintain connections with their in the state of Michigan, said Nathan patrons until they could safely reopen. Kemler, president of the CheboyganHowever, t his stopgap meabased Michigan Museums Association sure may not prevent the closure and director of galleries and collecof as many as one-third of musetions at Grand Valley State University. ums throughout the United States,

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Kemler said many Michigan museums have had to lay off staff members, who may never be brought back or choose not to come back because they’ve found another job. “We’re expecting some museums to close and not reopen,” Kemler said. “We’re not expecting it to be at the same level indicated in the AAM survey in part because a lot of museums in Michigan are volunteer-run or have a part-time staff member.” Kemler said some museum content can be easily translated into a digital format to give more people access without an in-person visit. The GVSU galleries and collections he oversees have the benefit of being attached to a larger institution, which has its own challenges, including changes to enrollment and costs associated with providing safe, clean spaces throughout its campus. Kemler and his staff will be much more efficient and not host exhibits that include activities focusing on the sense of smell or touch. Instead, his team is focusing on core concepts and how those can be translated across a digital platform. “We’re trying to find cost-saving measures where we’re not investing a lot of money into things that are not useful for the vast majority of our community,” Kemler said.

Adapting to changes Figuring out how best to meet the community’s needs while adhering to social distancing guidelines in the reopening process forms a key challenge for the Lakeshore Museum Center in Muskegon. The Museum Center reopened on July 6 with limited capacity and its Historic Sites opened up on July 9. The center has one of its three handson galleries open at half capacity. “We’re testing now to see how we can keep it clean,” Horton said. “We’ve

During the shutdown that closed museums across the state, the Muskegon Museum of Art was forced to present its annual student art exhibition virtually on its website. The virtual exhibit includes information about the artist and the artist’s statement about the piece. COURTESY IMAGE Visit www.mibiz.com

The Grand Rapids Public Museum reopened to the public with special precautions on July 6. Visitors are required to maintain their distance, wear a mask and purchase tickets in advance. PHOTO: GRAND RAPIDS PUBLIC MUSEUM got multiple items so we can take the participants to videos done by the staff. ones that have been touched out and The museum also offered a virtual put clean ones in. Before COVID, the approach for people who wanted to push was to go more immersive and tour the historic Hackley and Hume we had to take the immersive out.” homes as well as the City Barn. The Grand Rapids Public Museum In-person tours of each of these sites was able to quickly adapt and move have resumed with limited numbers its high touch-point pieces, said Katie of people in each group. Kocienski, the museum’s vice president of marketing and public relations. Cultural concerns “Museums that are more hands-on While the financial concerns are top of might not be able to adapt as quickly mind for museum officials, they say they as us,” she said. “We are lucky that we are just as concerned about the hole that have the ability to adapt like that.” As was the case with so many other museums, the Public Museum also began offering virtual opportunities to maintain engagement with the community. This included virtual summer camps, which sparked several new partnerships, including one with D.A. Blodgett St. John’s that used content from these camps with its students. “The museum was — NATHAN KEMLER able to convert the in-person experience President of the Michigan Museums Association into digital programs and continue to be a resource to schools,” will be left in their communities if their Kocienski said. “We’re continuing to museums or others cease to exist. evaluate what’s happening and making “Museums and arts and cultural adjustments as we go. We’re looking at institutions are the places that hold new ways to bring in revenue that will our collective stories and our identity, supplement the decline in attendance.” which is what makes our communiThe Public Museum reopened on ties unique and gives us a context of July 6 and is tracking at a little over understanding,” Kemler said. “If we 30 percent of its usual attendance, remove those from our communities, Kocienski said. there will be a massive void.” Admission at the Lakeshore Museum In addition to a void, Kocienski Center is about 3 percent of normal. said she thinks museums really conIn March, the Muskegon-based nect people to their community and museum began offering virtual school provide a space for community contours, which it plans to continue this versations. She said a lot of it is about fall. The organization also offered a placemaking and quality of life. Museum Camp-In-A-Box to take the “Museums in general all have their place of canceled in-person camps. place in making a community desirThe boxes included camp activities able,” she said. with a code for a link that connects

“Museums and arts and cultural institutions are the places that hold our collective stories and our identity, which is what makes our communities unique and gives us a context of understanding. If we remove those from our communities, there will be a massive void.”

MiBiz / AUGUST 17, 2020

Q&A Birgit Klohs President and CEO, The Right Place Inc.

Birgit Klohs plans to retire Jan. 31, 2021 after more than three decades of leading The Right Place Inc. Klohs, whose tenure at The Right Place started in 1987 and covered the terms of five Michigan governors, has been at the table for several major economic development initiatives and projects in the Grand Rapids area, often working to drive collaboration and partnerships among various parties that included private and public interests. As she prepares to depart and as The Right Place searches for a new leader, Klohs spoke with MiBiz about her role and how economic development has changed.

What makes this the right point in time for a transition? It feels right for me. My husband and I talked about this a long time, starting many months ago. ‘When is a good time?’ And somebody said to me, ‘You will know it. Don’t force it.’ I was not ready a year ago. I surely wasn’t ready two years ago. I do want to enjoy life without the responsibility of this very complex organization, and so this is the right time for me to get off of the stage knowing that the organization is in great shape, the staff is fabulous, and I’m leaving behind a thriving organization.

What has been the biggest change in economic development over the years? The pace of change, the pace at which we do business today, has accelerated with the pace of change in technology. It’s been an amazing change. Site consultants know about your community long before you even know they’re looking, so your marketing techniques had to change, but you also had to really, really speed up your response time to companies. It used to be you had some time to think about it. You don’t have that anymore with all of the technology we have now. You get a question or you get a request, they want answers today. That has all changed, which also required that we change the way we do business and become much more sophisticated. Your website today and all of your social media is really how you present yourself. It’s a lot less than it used to be in terms of the written documents you have. It’s a much more sophisticated profession than it was when I started.

What has not changed? It’s a relationship business, and even more in West Michigan. Obviously, you want the transaction and we want the deal, and we will fight for the deal. But to get that deal, you have to have the relationships in the community. In other words, this is a team sport, and while I’m leading the economic development organization, we don’t do this work alone. We need our municipal partners. We need our business partners. We need our attorneys and accountants and all of our energy companies. All of these resources need to be coordinated and that requires a relationship of trust with all of those resources. That, in my opinion, has not changed, to be able to pick up the phone and say, ‘I need your help with this.’ They know who we are, they know we don’t ask frivolously.

What’s the next frontier in economic development? The frontier is really how do economic development organizations much more robustly embrace diversity and inclusive growth strategies. That’s where economic development needs to play a much more robust role in the kind of projects we do, the kind of talent we help find, the kind of connections that we make. We need to play a much more central role in economic diversity and inclusion.

What’s the biggest project you ever worked on? The most impactful one that I didn’t lead but was part of the collaborative was all of what happened in our health and life sciences (industry) and to bring Michigan State’s medical school here. That impact of health and life sciences on this community, the talent that it’s drawing, the footprint that it has, the power that it brings in a totally new industry, was one of the most impactful things that happened in the community in a long, long time. If you ask an economic developer what do you want to do, everybody will often say, ‘Well, we need to diversify.’ Diversifying is very difficult, unless you have the seedling of some kind. In Austin (Texas) it was Dell Computers, but that was all it was. Here it was the creation of Van Andel Institute that brought on all of this other growth. To be part of all of that thinking process and see all of it come to fruition, and seeing health sciences and life sciences grow into a real robust cluster here, to me is the most positive forward trajectory for the community.

What project was the most fun? The most fun one was my first one because it was my first. That was the German company Behr that we located here very early in my tenure. It was the first big win and everybody said, ‘Oh, we can do this. Leave her alone.’

What advice do you have for whoever is chosen as The Right Place’s next leader? You need to get to know this community. This is a community that is incredibly collaborative. And you have to be a collaborator in the business to be successful. As I said, it’s a team sport. Get to know as many people as you can very quickly to establish your credentials and the team that you have will back you up.

Interview conducted and condensed by Mark Sanchez. COURTESY PHOTO.

AUGUST 17, 2020 / MiBiz

IN THE NEWS M&A

n Greenville-based FabX Industries Inc. acquired Elite Tooling LLC in Kalamazoo. Shane Smith, who founded Elite Tooling in 1996 at the age of 18, remains with the company as president. Elite Tooling serves pharmaceutical, medical and aerospace manufacturers in the Kalamazoo area with a focus on low-volume, high-precision and fast turnaround work. The acquisition enables FabX Industries to expand its reach into high-precision machining and makes Kalamazoo a “strategic location to service our customers in Northern Indiana,” owner Gopi Ganta said. A machining and fabrication service provider, FabX Industries is the parent company of Aquest Machining & Assembly and LaserTec. Terms of the deal were undisclosed. Grand Rapidsbased Calder Capital LLC advised Elite Tooling in the transaction, the firm’s 20th of the year. n Covington, Ky.-based manufacturer ProMach Inc. looks to enhance its packaging machinery capabilities with the purchase of Holland-based Fogg Filler Co. LLC, a third-generation familyowned company. Over six decades, Fogg Filler has grown to become a leader in rotary filling systems for the food and beverage industry. Owner Ben Fogg will continue to lead the team of more than 170 employees at the company’s 107,000-square-foot location in Holland. A platform company backed by Los Angeles-based private equity firm Leonard Green & Partners LP, ProMach is a provider of complete packaging machinery solutions, engineering and integration services for food, beverage and pharmaceutical companies. Terms of the deal were not disclosed. n Grand Rapids-based VNN Inc., a high school sports communication platform, carved out a foothold in Washington state with its acquisition of Washington Prep Athletics Network, based in Lynden, Wash. Similar to VNN, WPA Network has become the largest provider of data management tools for athletic directors throughout Washington. VNN has partnerships with roughly 10 percent of the high school sports programs in the U.S., but was only connected with three schools in Washington. With the deal, VNN is now connected with 35 athletic conferences in the state, or roughly 85 percent of the schools in Washington. Terms of the deal were not disclosed. n Flint-based Patriot Supply Inc., which does business as Capitol Supply and Service and has locations in Grand Rapids and Lansing, was acquired by Fremont, Ohio-based Style Crest Inc. Capitol Supply is a building products distribution and HVAC installation and servicing business for the manufactured housing industry. The company had completed several rounds of shareholder buyouts over the years and was ready to find a long-term strategic partner to grow the business, according to a statement. For Style Crest, a provider of HVAC and manufactured home products and services, the deal allows the company to expand its installation and servicing capabilities to a new state. Southfieldbased investment banking and private investment firm Cascade Partners LLC advised Capitol Supply on the deal. n Perrigo Co. plc intends to buy three skin care and hair loss brands from French pharmaceutical company Sanofi. The company signed a definitive agreement with Paris-based Sanofi to acquire the three treatments, which in the 12 months leading up to June 30 generated combined sales of $23 million. Perrigo, which is based in Dublin, Ireland and operated from Allegan, expects the deal to close in the fourth quarter. Terms of the deal were undisclosed. n A wholly owned subsidiary of Kalamazoo-based Midwest Fastener Corp. acquired almost all the assets of Hy-Ko Products Co., a manufacturer of numbers, letters, signs, keys and accessories based in Northfield, Ohio, according to a statement. The new company, Hy-Ko Products Company LLC, retained all previous employees. A manufacturer of nuts, bolts, anchors, deck and drywall screws and specialty fasteners, Midwest Fastener expands its product capabilities and enters a new North American market in the deal. The buyers were

represented by Grand Rapids-based law firm Rhoades McKee PC. n Grand Rapids-based Surge Cardiovascular has been acquired by Sycamore, Ill.-based MED Michigan Holdings LLC, an affiliate of medical device specialty distributor MED Alliance Solutions, according to a statement. Surge Cardiovascular is a medical device company that designs, develops and manufactures cardiopulmonary bypass cannula and cardioplegia delivery systems as well as blood management, organization and temperature management products. MED Alliance had been the exclusive distributor of Surge Cardiovascular’s products since 2012. n Brown & Brown of Michigan Inc., a subsidiary of Daytona, Fla.-based Brown & Brown Inc., acquired substantially all of the assets of Grand Rapids-based insurance agency Buiten & Associates LLC, according to a statement. The Buiten & Associates team will continue operating its office in Grand Rapids under the leadership of Paul Buiten. n Traverse City-based High Street Insurance Partners acquired Capital Insurance Group, based in Bloomfield Hills. The acquisition was High Street’s third deal this month and sixth of 2020, according to a statement. Backed by Detroit private equity firm Huron Capital, High Street this month also acquired two agencies in upstate New York. n Muskegon marketing and advertising firm Ignite merged with New School, an agency also based in Muskegon. The merger expands New School’s marketing capabilities and capacity. The merged agency maintained its office in Muskegon and all existing staff. Justin Young joined the organization as senior program manager, and Ignite founder Larry Young serves as senior marketing specialist. n M. J. Van Damme Inc., a construction firm based in Gwinn, Mich. about 20 miles south of Marquette in the Upper Peninsula, was acquired by Scottsdale, Ariz.-based private equity firm Eberhart Capital LLC, according to a statement. The $20 million to $50 million deal adds trucking and quarry expertise to Eberhart’s existing construction portfolio. M. J. Van Damme Inc. employs 130 people and provides specialized construction support services to the mining, farming and civil construction industries. The firm also repurposes various wastes into materials used on construction projects.

FEDERAL CONTRACT

n ATLAS Space Operations Inc., a Traverse City-based satellite communications company, was awarded a Small Business Innovation Research contract from NASA. The firm helps companies process and analyze data from space using a global antennae network. ATLAS was contracted to develop a satellite constellation management schedule tool for commercial and government use. The Northern Michigan firm was one of 124 small businesses in 31 states selected for the Phase II award. NASA handed out a combined $104 million. Under the initiative, NASA has asked ATLAS to develop a machine-to-machine scheduler that defines clear customer goals and allows the customer to prioritize communications tasks.

FINANCIAL SERVICES

n Former Chemical Bank offices statewide now carry the TCF National Bank name. The Detroitbased TCF Financial on Aug. 10 completed the integration of the two banks after closing a year ago on the $3.6 billion merger with the former Chemical Financial Corp. The name change affected about 200 Chemical Bank offices in Michigan and Ohio. n Grand River Bank named Stephen Grey as vice president and Ada/Cascade market executive. Grey will lead the planned fourth quarter opening of the bank’s new regional headquarters on Crahen Avenue. Grey joined Grand River Bank in 2016 and is a senior member of the commercial banking team. An Ada resident, he previously worked as a commercial banker with the former Founders Bank & Trust. Visit www.mibiz.com

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