1. business and industrial

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®
www.crainsdetroit.com Vol. 31, No. 11
MARCH 16 – 22, 2015
$2 a copy; $59 a year
©Entire contents copyright 2015 by Crain Communications Inc. All rights reserved
Page 3
State to HealthPlus: Stop
bleeding on bottom line
Entrepreneurship: Where Michigan ranks vs. other states
21st
12th
31st
41st
49th
44th
2013
2008
SOURCE: MIQUEST
Entrepreneurial climate:
Measures the underlying
conditions, such as economy,
education and lending
Blake’s Orchard sees fresh
pickings from hard cider
DDOT asks number cruncher
to help improve service
Health Care
Consolidation of physician
practices expanding, Page 9
This Just In
Plans for Romulus outlet
center get initial OK
NEWSPAPER
Developers of a luxury outlet center planned for Romulus have gained initial approvals from the city and set
a groundbreaking for July,
pending final lease negotiations with retailers.
As planned, the $100 million, open-air concept will include 80-90 national retailers,
according to the site plan submitted to the city.
Newton, Mass.-based New
England Development and Baltimore-based Paragon Outlet
Partners LLC said the project
will create an estimated 300
construction jobs and 1,2001,500 retail jobs.
They are not seeking any
incentives from the city, said
Tim Keyes, economic development director for Romulus.
If everything goes as scheduled, the 366,000-square-foot
Outlets of Michigan is expected
to open at Vining Road and I94 by fall 2016, Kelvin Antill, development partner at Paragon, said late last week. He
declined to name any of the retailers that have committed or
say what percentage of space
has been leased so far.
The developers now must
submit a more detailed plan
to the city to secure a building permit for the 325,000square-foot project.
— Sherri Welch
Entrepreneurial change:
Measures direction of success
entrepreneurs are experiencing
relative to other states
Entrepreneurial vitality:
Measures state’s entrepreneurial
activity, including business
creation and capitalization
State’s biz climate
warming, study says
Entrepreneurial
vitality still needs
work, say experts
BY KIRK PINHO
CRAIN’S DETROIT BUSINESS
Michigan’s entrepreneurial economy continues to grow as new businesses open, smallbusiness lending improves and export-related
jobs grow, according to the Michigan Entrepreneurship Score Card, which is compiled by the
Lansing-based nonprofit MiQuest.
The report measures three index scores:
“change,” “vitality” and “climate.” The state
sits in the middle of the pack for climate and
vitality. But in terms of entrepreneurial
change, which MiQuest measures as the momentum of growth relative to other states,
Michigan has skyrocketed from 49th in 2008 to
12th today.
“The support we’ve given the entrepreneurial community through the (Michigan Economic
Development Corp.) and others has really seemed
to make a difference in how we are emerging
now that we’ve actually been investing in it
and encouraging entrepreneurship since 2009
or so,” said Diane Durance, president of
MiQuest.
See Biz climate, Page 18
O’Neal’s goal for
Delphi: Smaller
but stronger
BY DAVID SEDGWICK
CRAIN NEWS SERVICE
When Delphi Automotive took journalists for
rides in its driverless Audi SQ45 this winter
during the International CES, the retrofitted
crossover wasn’t restricted to the highway.
The vehicle ventured onto Las Vegas streets
for encounters with taxis, buses, limos and
pedestrians. It handled them all nicely.
Other major suppliers have rolled out driverless prototypes to showcase active safety technology. But Delphi is getting contracts. And it’s a
good example of CEO Rodney O’Neal’s core business strategy in his eight years at the helm: Shed
slow-growth businesses and invest in promising
high-margin technologies.
“We think (active safety) is the
future,” O’Neal said in a Feb. 27
interview. “I put my money
where my mouth was, and we
backed it up with investments.”
See Delphi, Page 17
Rodney O’Neal: “I loved being on
the factory floor. ... You knew
what had to be done that
day, and you either did
it or you didn’t.
Instant feedback.”
BLOOMBERG
Machinery ready to dig into Wings site
BY BILL SHEA
CRAIN’S DETROIT BUSINESS
H
eavy machinery has been placed at the
site of the new Detroit Red Wings arena in
anticipation of major construction beginning in the next few weeks.
A specific start date for earth-moving hasn’t
been disclosed by Olympia Development of Michigan, the real estate arm of team owners Mike
and Marian Ilitch’s business holdings.
The $535 million multiuse arena and events
center is scheduled to open in summer 2017.
“We have moved heavy equipment on-site to
prepare for the start of construction on the
new (arena) in the next several weeks and to
comply with local frost laws,” Doug Kuiper,
vice president of corporate communications
for Ilitch Holdings Inc., said in a statement.
Frost laws restrict weight limits on roads
and highways during the spring, when the
thaw can weaken the ground underneath the
See Wings, Page 19
Earth-moving
equipment
(above) is in
place to start
work at the site
of the new
multiuse arena for
the Detroit Red
Wings. In the
interim, a sign
reminds passersby of what’s to
come in the
summer of 2017.
LARRY PEPLIN
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March 16, 2015
CRAIN’S DETROIT BUSINESS
MICHIGAN BRIEFS
Bell’s founder defends actions
in trademark dispute with rival
Nearly a year after Galesburgbased Bell’s Brewing Inc. filed a federal trademark action against
North Carolina-based Innovation
Brewing, Bell’s suddenly faced a
negative social media storm and
accusations of bullying a much
smaller competitor.
Bell’s alleges that Innovation
Brewing’s name could damage
Bell’s advertising slogan, “bottling
innovation since 1985,” which is
unregistered but has been in use
since 2009. The filing also alleges
Innovation’s name is too similar to
Bell’s registered trademark, “inspired brewing.”
In an interview with MiBiz,
Bell’s founder Larry Bell said his
company made numerous attempts over the past year to settle
the dispute, but every offer was rebuffed. Bell said he offered Innovation Brewing a financial settlement to help cover the owners’
legal fees and the costs associated
with the trademark filing.
MICH-CELLANEOUS
The employee recruiting company Manpower Inc. said the Grand
Rapids-Wyoming metropolitan region has the No. 3 job outlook in the
nation out of the 100 largest metropolitan statistical areas. Of the employers surveyed, 30 percent plan
Mich. law schools slide in U.S. News national rankings
Michigan law schools slid in rank among their
peer institutions nationwide, reversing major gains
some had made in previous years, according to the
2016 Best Law Schools list published by U.S. News &
World Report.
The University of Michigan Law School was No. 11
this year out of 153 ranked schools in the new report, compared with a No. 10 rank last year and No.
9 the year prior. But the publication also changed its
ranking methodology this year, and UM also immediately follows a three-way tie at No. 8.
The Michigan State University College of Law, which
slid from No. 80 to No. 87 last year, now is in an
to increase their staff and roughly
66 percent expect to maintain it.
Statewide, 27 percent of employers
anticipate hiring more employees
during the second quarter, and 67
percent plan to maintain levels.
Steven Ingersoll, who founded
the Traverse City Academy, was convicted of tax evasion by a U.S. District Court jury in Bay City, The Associated Press reported. He had
been accused of taking large cash
advances from the charter school
and then trying to repay them with
construction loans.
Staff members at the Michigan
Department of Natural Resources recommended the approval of plans by
Graymont Inc. to develop a limestone
mine on about 10,360 acres in northern Mackinac County, The Associated Press reported. Graymont re-
eight-way tie at No. 94, just above where it ranked
four years ago. And the Wayne State University Law
School reversed a major surge in rank last year,
when it tied at No. 87 with MSU. The school is now
No. 105, just as it was two years ago.
The Western Michigan University Thomas M. Cooley Law
School — which has campuses in Auburn Hills, Lansing and Grand Rapids — and the University of Detroit
Mercy School of Law both are in a second-tier group of 45
schools with a “not published” rank, like last year.
Yale Law School remained the top-ranked law
school nationwide.
— Chad Halcom
vised the proposal to minimize impacts to wetlands and provide trail
easements for public use.
Former Stryker Corp. CEO John
Brown and his wife, Rosemary
Brown, donated $2 million to the
Kirk Newman Art School at the Kalamazoo Institute of Arts, MiBiz reported. Newman was the art school’s director for almost 30 years.
Midland-based Dow Chemical
Co. signed on to an amicus brief
filed in the U.S. Supreme Court petitioning the court to overturn a decision upholding state prohibitions against same-sex marriage,
the Midland Daily News reported.
Kettering University in Flint
was the top college in Michigan,
and 12th nationally, in terms of return on investment, according to
Payscale.com. Return on invest-
ment evaluates factors such as cost
to attend and the earning potential
of graduates, MLive reported.
Traverse City-based wildlife
control franchisor Critter Control Inc.
was acquired by Atlanta-based
Rollins Inc., MiBiz reported. Critter
Control, which offers “ecologically
sound and humane” wildlife control services, has 114 franchises in
40 states and two Canadian
provinces.
For the second consecutive
year and the fourth time since 2009,
the Battle Creek-based Kellogg Co.
made the National Association for Female Executives’ top 50 list of companies ranked according to the number of woman executives, the Grand
Rapids Business Journal reported.
Find business news from
around the state at crainsdetroit
.com/crainsmichiganbusiness.
Sign up for the Crain’s Michigan Morning e-newsletter at
crainsdetroit.com/emailsignup.
CORRECTIONS
A Page 1 story in the March 9 issue should have said Minoru Yamasaki moved to Detroit in 1945 to join what is now SmithGroup Inc.
and left the firm in 1949. He did not immediately form Minoru Yamasaki
and Associates Inc. but worked on his own for a while and then with
two other former SmithGroup principals at another company before
creating his eponymous firm in 1959.
In the Rumbling “WSU medical prof pens heart health e-book,” on
Page 38 of the March 9 issue, the year Imre Molnar died was incorrectly reported. Molnar, 61, former provost of the College for Creative Studies in Detroit, died Dec. 28, 2012.
A Rumblings item on Page 38 in the March 9 edition should have
said Motor City Comic Con’s convention dates this year are May 15-17.
An incorrect date was given.
Each year, the American Diabetes Association and the Father’s Day Council honor over 100 men from across the country
as outstanding fathers and community leaders through local Father of the Year Awards Gala.
Please join us in congratulating the 2015 honorees representing the Metro Detroit Area. The honorees will be recognized
on Thursday, June 11, 2015 at the MGM Grand Hotel.
Gary Edelson, M.D.
David Girodat
Ron Hall Sr.
Jimmy Settles
Creighton Weber
Associated Endocrinology
President & CEO
Fifth Third Bank
Council Chairman
President & CEO
Bridgewater Interiors
Vice President
UAW
Managing Director
Wells Fargo Bank
To reserve your corporate table or sponsor the Father of the Year Awards Gala,
visit www.diabetes.org/fotydetroit or call Stephanie Camalo at (248) 433-3830 ext. 6695.
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CRAIN’S DETROIT BUSINESS
March 16, 2015
Page 3
State tells HealthPlus: Get healthy
THE WHY AND THE RESPONSE
The cause: A negative surplus of
$4.8 million in 2014 lowered
HealthPlus’ reserves below the
required state minimum. A
negative surplus is reported
liabilities exceeding assets.
State response: The Michigan
Department of Insurance and
Financial Services placed staff at
HealthPlus offices to monitor
progress the company is making
on finding a financial partner and
with its financial turnaround.
HealthPlus also was ordered to
stop selling new or renewal
policies for its PPO. Its HMO can
renew policies but not write new
ones. The self-funded PPO and
HMO businesses are unaffected,
as is the Medicaid HMO.
Inside
Red ink prompts order to find financial partner
BY JAY GREENE
CRAIN’S DETROIT BUSINESS
Flint-based HealthPlus Insurance
Co., one of the state’s largest nonprofit health insurers, has lost
tens of millions of dollars the past
two years, prompting the state insurance department to order it to
make material progress in seeking
an outside financial partner within 60 days, Crain’s has learned.
On March 9, the Michigan Department of Financial and Insurance Services placed HealthPlus under state
financial supervision because of
losses in 2014 that lowered its reserves below the required state min-
imum, said Kathy Bilitzke, HealthPlus manager of public relations.
“We are looking at potential longterm strategic partnerships and
other affiliations that can improve
our financial position,” said Bilitzke, declining further comment
on the search for a new partner.
The company also is working
with advisers Ernst & Young, Milliman and the Wakely Consulting
Group, she said.
Andrea Miller, DIFS public information officer, said DIFS has placed
staff at HealthPlus offices to monitor progress the company is making
on finding a financial partner and
with its financial turnaround.
“HealthPlus has provided DIFS
with sufficient information to indicate there are several serious parties interested in partnering with
HealthPlus and willing to infuse
capital,” Miller said in an e-mail to
Crain’s. “The director has given
the companies 60 days to make material progress with another party
to consummate a transaction.”
Bilitzke confirmed HealthPlus
was ordered to stop selling new or
renewal policies for its preferred
provider organization business,
which it began seven years ago.
Its HMO, HealthPlus of Michigan
5811 Grayton before ...
... and after
Home from Detroit Land Bank
auction to set sale, Page 8
See HealthPlus, Page 20
Company index
Busing by
the numbers
These companies have significant mention in this
week’s Crain’s Detroit Business:
Arbor Investments Group . . . . . . . . . . . . . . . . . . . 20
Beaumont Health . . . . . . . . . . . . . . . . . . . . . . . . . 11
Blake’s Hard Cider . . . . . . . . . . . . . . . . . . . . . . . . . 3
Brooks Kushman . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Butzel Long . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Delphi Automotive . . . . . . . . . . . . . . . . . . . . . . 1, 17
DDOT turns to
analytics firm to
improve service
Detroit Department of Transportation . . . . . . . . 3, 21
Detroit Land Bank Authority . . . . . . . . . . . . . . . . . . 8
Detroit Red Wings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Domestic Uniform Rental . . . . . . . . . . . . . . . . . . . 18
Grekin Skin Institute . . . . . . . . . . . . . . . . . . . . 11, 12
HealthPlus Insurance . . . . . . . . . . . . . . . . . . . . . . . 3
Honigman Miller Schwartz and Cohn . . . . . . . . . . . . 5
Ilitch Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
BY BILL SHEA
Macomb Music Theatre . . . . . . . . . . . . . . . . . . . . 18
CRAIN’S DETROIT BUSINESS
Marwil & Associates . . . . . . . . . . . . . . . . . . . . . . . 20
Advanced metrics aren’t just for
baseball fans: The oft-maligned Detroit Department of Transportation is
using a pro bono analytics service
in an attempt to improve performance.
A Washington, D.C.-based startup called Transit Labs is preparing a
series of reports for the bus
agency, and measurable changes
— such as more buses running on
time — could happen by summer.
The initial analysis has shown
what everyone already knows:
DDOT buses struggle to arrive on
time, the routes are inefficient,
some stations are not where people
and jobs are located, and one-third
of city buses never leave the garage
because of maintenance problems.
The agency also struggles with
costs, staffing, maintenance and financial record-keeping breakdowns
that have drawn federal reproach.
Such problems have led to
DDOT users taking 11 million fewer trips on the system over
the past four years.
Michigan Association of Health Plans . . . . . . . . . . 20
See Transit, Page 21
Through his
Washington-based
startup, Transit Labs,
Dag Gogue offered to
provide analytics to help
the Detroit Department
of Transportation
improve bus
service.
Michigan Dept. of Financial and Insurance Services . . 3
Michigan Health and Hospital Association . . . . . . 11
Michigan Healthcare Professionals . . . . . . . . . . . . . 9
Miller’s Big Red Farms . . . . . . . . . . . . . . . . . . . . . 19
MiQuest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
New Economy Initiative . . . . . . . . . . . . . . . . . . . . . 18
Olympia Development of Michigan . . . . . . . . . . . . . 1
Olympic Medical Services . . . . . . . . . . . . . . . . . . . 12
LARRY PEPLIN
Andrew Blake (right) expects $3.5 million in revenue this year for Blake’s Hard Cider Co., which spun out of Blake’s
Orchard Inc. With him is David Blake, a cousin and head of sales and marketing for the hard cider operation.
A thirst for hard cider
has Blake’s sowing seeds
BY SHERRI WELCH
CRAIN’S DETROIT BUSINESS
A
year and a half after opening, Blake’s Hard
Cider Co. has secured statewide distribution
of its cider in Michigan and is negotiating to
branch into three other states.
The offshoot of Blake’s Orchard Inc. and its cider
mill and apple picking operations is investing $1.2
million to build a 12,000-square-foot production site
behind its Armada tasting room and equip it with 10
new stainless steel fermenting tanks from Italy and
a new canning line.
The new facility will increase efficiencies by enabling all aspects of production to be moved to the
new site and providing space to store truckloads of
cans. It will also increase Blake’s capacity for making hard cider to 500,000 gallons when
COURTESY OF
N STREET VILLAGE
THIS WEEK @
WWW.CRAINSDETROIT.COM
it’s completed in May or June,
co-founder Andrew Blake said
last week.
The company hopes to begin
distribution in Indiana, Ohio
and Wisconsin by fall. But between now and then, Blake
said the plan is to focus on
marketing in Michigan.
“Before we move into another
state, we want to be known as
Michigan’s hard cider. ... Hopefully, that will carry us
into the next states.”
He is projecting $3.5 million in revenue from the
hard cider this year as the company expands distribution statewide, up from $2 million in 2014 from
ProCare Systems . . . . . . . . . . . . . . . . . . . . . . . . . 11
Providence Hospital and Medical Center . . . . . . . . 11
St. John Providence Health System . . . . . . . . . . . . 11
Sterling Insurance Group . . . . . . . . . . . . . . . . . . . 11
Suburban Mobility Authority Regional Transportation . 21
United Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Department index
BANKRUPTCIES . . . . . . . . . . . . . . . . . 18
BUSINESS DIARY . . . . . . . . . . . . . . . . 16
CALENDAR . . . . . . . . . . . . . . . . . . . . 15
CLASSIFIED ADS . . . . . . . . . . . . . . . . 17
KEITH CRAIN . . . . . . . . . . . . . . . . . . . . 6
See Blake’s, Page 19
LETTERS . . . . . . . . . . . . . . . . . . . . . . . 6
OPINION . . . . . . . . . . . . . . . . . . . . . . . 6
A grasp of current events
CrainsDetroit.com has a new look, one that makes
it easier to read and share stories on your mobile
device.
OTHER VOICES . . . . . . . . . . . . . . . . . . 7
PEOPLE . . . . . . . . . . . . . . . . . . . . . . 16
RUMBLINGS . . . . . . . . . . . . . . . . . . . 22
WEEK ON THE WEB . . . . . . . . . . . . . . 22
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March 16, 2015
CRAIN’S DETROIT BUSINESS
After backing Detroit in bankruptcy,
Jones Day to open law office in city
the bankruptcy and what that
three offices.
“In some instances, our clients meant for the city — the city is sigin those jurisdictions will look to nificantly less burdened by debt
Global law firm Jones Day be- us more whether it’s managing, and a much more vital place —
lieves Southeast Michigan is an expanding or divesting investment makes investments like ours much
underserved legal market.
simply because we’re on the more sensible,” Melton said. “We
The Cleveland-based firm,
came into that bankruptcy, being
ground here,” he said.
which served as the lead in DeJones Day’s Detroit operation very clear this wasn’t an attempt
troit’s Chapter 9 bankruptcy prowill be a full-service office con- at a hit and run, despite many
ceeding,
annected to more headlines to the contrary, and this
nounced
last
than 2,400 lawyers is further evidence of that.”
week it will open
David Rutkowski, currently
in 19 countries
a Detroit office
serving clients as based in Northern California and a
this summer.
one firm world- partner in the firm’s business and
The office, set
wide, the firm tort litigation practice, will serve
to open in July,
as the administrative partner for
said.
will mark Jones
the Detroit office. Jeff Jones, a
The
firm
helped
Day’s 17th office
guide
Detroit partner based in the firm’s Columand 42nd in the
through
bank- bus office, will become the head of
world. It’s expectruptcy along with litigation for the Detroit office.
ed to initially em“Detroit has always been and
Kevyn Orr, the
ploy about a halfformer Jones Day will continue to be one of the great
dozen
lawyers
corporate bank- cities of the United States,” said
plus
support
ruptcy attorney Steve Brogan, managing partner of
staff.
Timothy Melton, Jones Day
who served as the Jones Day, in a statement last
The law firm
city’s emergency week.
said it planned to
“Together with the state of
manager, a job he
locate the office in downtown DeMichigan, which has been critical
held until December.
troit but hasn’t selected a location.
Melton said the bankruptcy al- to Detroit’s emergence from bankTimothy Melton, a 1987 graduate
lowed Jones Day to familiarize it- ruptcy, the city has an exciting
of Wayne State University Law
self with the Detroit market and its and promising future.”
School and former law clerk to
Dustin Walsh: (313) 446-6042,
move to the city is representative
Judge Richard F. Suhrheinrich
dwalsh@crain.com.
Twitter:
of its resurgence.
when Suhrheinrich served as a
“Frankly, our involvement in @dustinpwalsh
district court judge for the Eastern
District of Michigan in Detroit, will
serve as partner-in-charge of the
Detroit office. Melton is based in
Chicago and is a partner in the
firm’s capital markets practice. He
joined Jones Day in 1989.
Monday, April 13, 2015
Melton said the Detroit location
2:00 – 7:00 p.m.
will primarily focus on mergers
Suburban Collection Showplace, Novi
and acquisitions as well as other
corporate governance functions.
He said of the roughly 1,300
M&A deals in the region over the
past 18 months, 88 percent were led
by out-of-state lawyers.
“That’s part of the opportunity
for us; there’s been so much focus
on buying products local, but with
this particular band of services,
there hasn’t been as much interest
in buying local,” Melton said.
“Don’t get me wrong, we have to be
great lawyers and offer great service — which apparently many
Michigan-based companies don’t
see available to them from existing
law firms.”
Jones Day is the seventh-largest
hether you’re a
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Technology Job Fair.
ican Lawyer list.
The ESD job fair is your best opportuni- thereafter. Registration includes a
The largest local firm, Detroitty to meet one-on-one with representa- one-year membership to ESD. (Offer
good for new, first-time members only.)
based Honigman Miller Schwartz and
tives from leading engineering and
Cohn LLP, which has a large M&A
technology companies.
To Register: Visit www.esd.org to
practice, is ranked 146th on the
register online, or call 248-353-0735 to
Known
for
being
the
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register by phone.
recruitment event, the job fair will
Honigman CEO David Foltyn
feature more than 50 of Michigan’s
was unavailable for comment last
top engineering, technology and
week. Melton said Jones Day also
management companies hiring for
plans to capitalize on local deals
full or part-time positions, internships
from existing clients abroad, such
or co-op opportunities.
as Germany, where the firm has
BY DUSTIN WALSH
CRAIN’S DETROIT BUSINESS
involvement
“inOur
the bankruptcy
and what that
meant for the city ...
makes investments
like ours more
sensible.
”
Richard Tool & Die Corporation
is pleased to announce
the appointment of
Steven Rowe as President.
ATTENDEES:
BUILD A BETTER CAREER >
FIND THE RIGHT JOB
Richard Tool & Die Corporation | 29700 W.K. Smith Drive
New Hudson, MI 48165 | www.rtdcorp.com
MCMANUS
DISTINGUISHED BUSINESS LECTURE
Entrepreneurial Ventures
for the Senior Market
Featuring:
ROGER L. MYERS
President and CEO
Presbyterian Villages of Michigan
TUESDAY, APRIL 14, 2015
7 p.m. Lecture
Madonna University Kresge Hall
4DIPPMDSBGU3PBEt-JWPOJB.*
Lecture is open to the public at no charge
Seating is limited
R.S.V.P. to Lori by April 7
734-432-5589 or lgatt@madonna.edu
INSPIRING ENTREPRENEURS SINCE 1989
Presented by the Aging Studies Department and the School of Business
madonna.edu
JOB FAIR
Steven Rowe has been
with Richard Tool & Die
Corporation for 20 years
and has played a major role
in the company’s growth.
W
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CRAIN’S DETROIT BUSINESS
March 16, 2015
Page 5
30 years later, a noncompete ruling has been forged into law
BY DUSTIN WALSH
CRAIN’S DETROIT BUSINESS
Protecting a company’s trade secrets, including client information, from former employees is
paramount in today’s competitive
business climate.
The use of noncompete and
nondisclosure agreements is nearly standard in most professional
practices today, thanks to a 30-yearold Michigan Supreme Court ruling
that set the stage for modern employer protections across the United States.
In 1985, the state high court
unanimously ruled in favor of two
employers seeking relief from former employees who walked away
from the firms, law and accounting,
with sensitive client information —
including detailed financial data
and other sensitive client information — to start their own firms.
Language from the cases —
Follmer, Rudzewicz & Co. v. Kosco
and Nolta-Quail-Sauer and Associates v. Roche — laid the groundwork
for a provision to include noncompete clauses in the Michigan Antitrust
Reform Act in 1987, protections in
Michigan Uniform Trade Secrets Act in
1998 and federal rules as well.
“These were two of the most important cases to the adoption of
trade secret protections,” said
Carey DeWitt, a partner at Detroitbased Butzel Long PC. “They devel-
LOOKING BACK
On March 18,
1985, Crain’s
reported on a
landmark
Michigan
Supreme
Court ruling that firms can spell out
in contracts that they are entitled
to compensation from former
employees who lure old clients to
new practices. Read the full story
from the archives at
crainsdetroit.com/30
oped the common law in the use of
customer information as trade secret theft at a time when a train of
thought in the country believed
customer information was the
equivalent to the milkman remembering his route. That was a dangerous notion because this information is valuable.”
In the Follmer case, in 1978, the
then-Southfield-based accounting
firm — now part of UHY LLP — sued
former employee Robert Kosco,
who worked for the firm for seven
years before leaving to start his
own firm.
When Kosco joined Follmer, he
signed a contract stipulating he’d
pay compensation for any clients
he took to another firm within
three years of leaving, which was
common practice during that time.
Kosco said the contract violated
a Michigan statute protecting
against employment limitations
by former employers.
The court ruled the contract was
reasonable and legal.
Writing for the Supreme Court
in the 1985 ruling, Justice Charles
Levin said, “An employee who possesses confidential information is
in a position to exploit that information for the purpose of obtaining the patronage of the client after leaving his employment.”
Before the 1985 ruling, court injunctions to prevent former employees from using privileged information to go after clients resulted
in expensive legal battles, Crain’s
reported on March 18, 1985.
Now, firms are protected by legally binding contracts, such as noncompetes and nondisclosures. Those
legal protections have since been expanded to include contractors.
Sean Crotty, a partner at Detroitbased Honigman
Miller Schwartz
and Cohn LLP,
said the Follmer
case “turned out
to be a pillar” for
maintaining a
firm’s rights and
those of the former employee.
“The
court
Crotty
struck a balance
by stopping a former employee
from gaining an unfair advantage
while maintaining these contracts
must be reasonable to be enforceable,” Crotty said.
“I think every legal brief ever
written on this topic includes a reference to Follmer. Whether you’re
defending or prosecuting, it has language both sides are going to use.”
While the 1985 ruling protected
firms, courts have been active in
recent years protecting employee
rights in an era of companies’ trying to retain and recruit top talent.
On Feb. 13, 2006, Steve Jobs, the
co-founder of Apple Inc. who died in
2011, sent an email to Eric Schmidt,
then Google Inc. CEO, asking Google
not to recruit his employees.
That email served as evidence in
a class-action lawsuit against both
tech giants as well as Intel Corp.
and Adobe Systems Inc. It resulted
in a $324.5 million fine for breaking U.S. antitrust laws. In August
2014, the federal judge on the case
ruled that the amount is too low
and that the companies will pay a
more substantial fine.
Secret agreements between competitors not to hire each other’s
employees are illegal, as California’s tech sector found out, even if
it’s an attempt to prevent sensitive
information leaving with the employee. The crux of that issue is
whether an employer is inhibiting
an employee’s ability to move from
one employer to another without
his or her knowledge.
And as the proliferation of technology continues, the cases and
subsequent laws, don’t answer
every question, said Kevin Heinl,
an attorney and
counselor at the
intellectual
property firm
Brooks Kushman
PC in Southfield.
“Confidential
information,
such as client
names, is now
becoming more
Heinl
widely disseminated, or shared, on social media,”
Heinl said. “A salesman may be encouraged to list customer names, so
is that private information? With
accessibility at an all-time high
through the Internet, that info
doesn’t seem private to me.”
Crotty said technology also poses
new threats, such as the ease of access to sensitive information. But
companies with proper protocols in
place can protect themselves before
a dispute reaches a courtroom.
“An employee no longer would
have to copy folders of information; they can just email it to themselves,” Crotty said. “It’s much
easier to take company secrets out
the door, but it’s also easier to get
caught.”
Dustin Walsh: (313) 446-6042,
dwalsh@crain.com.
Twitter:
@dustinpwalsh
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20150316-NEWS--0006,0007-NAT-CCI-CD_--
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Page 6
March 16, 2015
CRAIN’S DETROIT BUSINESS
OPINION
MARY KRAMER
State needs to build
on sunny biz report
What if PE gave more here?
e’re No. 12! We’re No. 12!
The chant doesn’t exactly roll off the tongue, but
it’s part of Michigan’s changing narrative.
As Kirk Pinho reports on Page 1, Michigan’s
ranking on the Entrepreneurship Score Card has leaped from
42 just 10 years ago to 12th in entrepreneurial direction and
growth in a benchmarking analysis of states’ entrepreneurial
climates.
Michigan scores well in important areas — growth in new
business owners, high-performance firms, export growth and
private lending to small business.
Other measures: R&D within industry and in universities
and the growth of high-tech and technical workers.
The scorecard is the work of MiQuest, a Lansing-based
nonprofit that is the new entity created by a merger of the
Great Lakes Entrepreneur’s Quest and the Small Business Association of Michigan Foundation. It’s the 11th year for the
scorecard, which was created by the foundation.
The state still has progress to make in some areas of business climate for entrepreneurship, but progress is progress.
The next step is to keep building on it.
W
Transit help is a true win-win
The city of Detroit is getting some pro bono transit assessment services that might help it do a better job of delivering
bus services to its residents.
As Bill Shea reports on
Page 3, a Washington, D.C.based startup called Transit
Lab is providing some advanced metrics services to
the city on things such as location of bus stops, whether
routes are correctly drawn
and other factors that affect
route efficiency.
The services come for free
NATHAN SKID
because Transit Lab is building a client roster and was The Detroit Department of
Transportation hopes that better
aware that cash-starved De- metrics will help buses stay on
troit might well be interested. schedule.
Not included in the project is suburban system SMART, which declined to be part of
the project.
Nonetheless, the opportunities are promising. If Transit
Labs is able to help Detroit improve its bus services, that not
only will help city residents, it will be a strong resume bullet
for a young company.
A couple of noteworthy headlines caught
my eye in recent weeks:
First, The Wall Street
Journal reported on
Feb. 28 that Stephen
Schwarzman’s
2014
payday was $690 million. In fact, compensation for Schwarzman,
co-founder and CEO of
New York’s Blackstone
Group LP, was nearly
50 percent over the
year before, the Journal reported,
and was the “highest annual payout ever notched by a founder of a
publicly traded private equity
firm.”
Second headline: Our sister publication, Crain’s Chicago Business,
reported last week that Blackstone
was in talks to buy Chicago’s
tallest building, the Willis Tower.
And that the sale price could be
$1.5 billion. If it closes, it would be
only the fourth time outside of
New York that such a price was
reached in the United States.
Clearly, Blackstone is on a roll.
And so are a lot of other private equity firms that buy and sell companies in metro Detroit as well as
around the world. Carlyle Group, Cerberus
Capital Management,
Elliott
Management
Corp. and Wynnchurch
Capital are among the
funds that have bought,
managed or sold Michigan companies. They
have billions of dollars
under
management.
Lately, auto suppliers
seem to be among the
targets for acquisition.
Most of the PE firms have foundations and giving programs. But
where do the philanthropic dollars
go? A cursory look at their websites yields a clue: New York,
where the partners live, or programs that support entrepreneurship or MBA scholarships. Actually, in checking with some experts
in philanthropy, there’s not a lot of
data on the philanthropy patterns
of private equity firms.
But what if private equity contributed philanthropic dollars to
regions where it makes its profits?
Companies in the so-called “flyover” states (i.e., Michigan and
Midwest) have helped to create
wealth for dozens of financial ti-
tans.
Blackstone has made a big commitment to training and hiring
military veterans. And it made a
sizable gift when its Vanguard
Health bought the Detroit Medical
Center in 2010 when it funded student entrepreneurship programs
at Wayne State University and
Walsh College. But that interest
has waned since Vanguard sold
the DMC to the publicly traded
Tenet Healthcare Corp. in 2013.
In metro Detroit, private philanthropy has led the way on many
critical, game-changing investments, from the remaking of Detroit’s riverfront to the M-1 Rail to
the creation of the “grand bargain” that liberated the Detroit Institute of Arts.
The “usual suspects” may be
feeling tapped out. Imagine if new
sources of philanthropy were
found.
Mary Kramer is publisher of
Crain's Detroit Business. Catch her
take on business news at 6:10 a.m.
Mondays on the Paul W. Smith show
on WJR AM 760 and in her blog at
www.crainsdetroit.com/kramer.
E-mail her at mkramer@crain.com.
LETTERS
Prevailing wage is a jobs killer
Editor:
Thank you for tackling the important issue of prevailing-wage
repeal in your March 9 column
(“Prevailing-wage battle could
hurt jobs initiatives”).
We need to point out, however,
that you overlooked a number of
key facts and inaccurately seemed
to imply it’s a West Michigan versus Southeast Michigan issue.
Implying that prevailing-wage
repeal is only being pushed by people outside Southeast Michigan is
incorrect. A review of Senate Bill
1, which repeals Michigan’s Prevailing Wage Act, dispels that notion entirely. Of the 15 senators
who co-sponsored the legislation,
five are from West Michigan, three
from Mid-Michigan, one from
Crain’s Detroit Business
welcomes letters to the editor.
All letters will be considered for
publication, provided they are
signed and do not defame
individuals or organizations.
Letters may be edited for length
and clarity.
Write: Editor, Crain’s Detroit
Business, 1155 Gratiot Ave.,
Detroit, MI 48207-2997.
Email: cgoodaker@crain.com
Northern Michigan, and topping
the list, six from Southeast Michigan.
Suggesting that Michigan’s prevailing-wage law puts our state on
par with other states just because
32 other states have enacted a con-
struction wage mandate is also inaccurate. Michigan is one of only
six states with a “prevailing”
wage that copies union agreements verbatim and allows them
to supersede the competitive practices of the other 80 percent of
Michigan’s construction workforce that is not affiliated with a
union. Forty-four other states either don’t have prevailing wage
or they use more accurate calculations reflecting what actually
“prevails” industrywide.
Finally, your suggestion that
prevailing wage attracts workers
to the construction industry is, unfortunately, not true. Prevailing
wage actually has the opposite efSee Letters, Page 7
KEITH CRAIN: Roads tax hike: What’s a person to do?
In early May, we’ll be asked to
go to the polls and vote as to
whether we want our sales tax increased from 6 cents to 7 cents on
the dollar.
Somehow — through magic,
smoke and mirrors — this increase will fund the millions of dollars necessary to repair our roads
and overpasses. How it all happens
is a mystery to just about everybody.
Sadly, the obvious and best
choice to fund road repair is a tax
on gasoline dedicated to road repair and maintenance. (And sorry
to all the trucking companies, but get those 80ton trucks off our
roads.)
For some reason, the
Michigan Legislature
has been unable to pass
legislation to make it
simple and straightforward to repair the
roads, which may be the
worst in the nation. So
lawmakers last year,
with the governor, came up with
this sales tax plan.
I have read all the reports and
the wording of the ballot proposal for May 5. I
don’t understand a bit
of the legislative mumbo jumbo.
Now we’re starting
to see thousands of dollars of television commercials that are doing
their best to scare the
heck out of us to get us
to vote yes on this ballot proposal. A very
nasty and bad idea for selling this
proposal to the residents of
Michigan.
Now I know that our governor
has done a great job in managing
our state for more than four years.
But I have to tell him that he has
messed up completely on this ballot proposal. Not only has he
avoided the obvious user tax by
raising the gas tax by, say, 20
cents, but the entire process has
been botched severely.
If this fails, I must conclude that
any political aspirations of our
governor will be greatly hindered.
Win or lose, he and his Legislature
are bound to lose lots of points
with the residents of Michigan. It’s
a perfect example of how not to
raise money for a project.
Most folks I talk to think that
this proposal stinks. But if they
must, they will vote for it while
holding their nose.
I am not only very disappointed
in all of the folks from Lansing,
from both parties, but I must admit I am very confused. It is a
lousy proposal. But no one likes
the alternative. Too bad the Legislature didn’t have the gumption to
just pass a 20-cent gas tax increase.
I haven’t decided how I will vote.
Maybe I’ll flip a coin.
20150316-NEWS--0006,0007-NAT-CCI-CD_--
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4:26 PM
Page 2
CRAIN’S DETROIT BUSINESS
March 16, 2015
Page 7
OTHER VOICES: Snyder needs help pushing energy goals
Gov. Rick Snyder unmothballing or killing renewable and efficiency
veiled his long-awaited enstandards because they’re
ergy policy goals Friday,
“mandates,”
therefore,
and they are good ones.
bad; and substituting a
But with the most conser“clean energy standard”
vative Republicans in
that counts burning naturLansing pointed in a difal gas as “clean.”
ferent direction, success
Senate Republicans are
requires party moderates
contemplating many of
to work with Democrats,
the same things. Sen.
who back a platform reJim Dulzo
Mike Nofs may unveil
sembling the governor’s.
Snyder wants Michigan to get 30 bills less onerous than Nesbitt’s
percent to 40 percent of its power but likely not nearly what Snyder
from clean renewables and energy suggested, which would make
efficiency by 2025. This reflects his Michigan a clean-energy leader.
So, with the most conservative
administration’s 2013 findings on
just how much Michigan can clean legislators resisting an unambiguup and modernize its energy supply and is fired by the spectacular
success of the state’s 2008 law setting a 10 percent renewables standard, which pauses Dec. 31, and an
ongoing 1 percent efficiency standard.
With $2.9 billion in investments,
sharply falling renewables costs,
thousands of good jobs, cuts in
health- and climate-threatening
power plant emissions, Snyder
clearly sees the huge opportunity
that more clean development can
bring to our manufacturers, workers, businesses and families.
It’s disappointing that he made
no firm proposals and only said
“goals,” not “standards” or “mandates.” Only firm numbers can get
additional, spectacular future results.
But even with Michigan’s past
results, Snyder faces a tough
House.
Last week, state Rep. Aric Nesbitt proposed calling trash and tire
burning “renewable energy”;
ous path toward additional, dollarsaving efficiency and true renewables because they dislike telling
utilities what to do, Snyder stuck
with “goals.” He needn’t be so shy.
Our electric monopolies daily
manage hundreds of standards or
mandates; that’s how regulators
make sure they behave like they
have to compete for customers.
Most of those customers, according to in-state polls — including several by conservative
groups — want more renewables
and would pay a bit more for
them. Happily, that’s largely unnecessary: As Snyder said, renewables are very competitive
with new gas plants, and efficiency is downright cheap.
Efficiency, renewables and something he skipped — power management that shuffles some electricity
use from demand peaks to valleys
— can meet much of the alleged capacity shortfall utilities are suddenly so upset about. They prefer
building more gas plants because it
gets a better return on investment,
but that’s a far cry from giving
ratepayers a better deal, especially
given the volatility of gas prices,
which Snyder acknowledged is an
important consideration.
With wind and solar employing
more people than mining, Michi-
gan’s manufacturers ready to become leaders in the world’s most
crucial endeavor, some Republicans who supported the 2008 law
now in the Senate, and Democrats
supporting something close to
Snyder’s goals, Michigan could get
a new, rational, 10-year energy policy.
Snyder should push hard. Many
businesses, unions, health professionals, investors, churches, and
conservatives will back him, helping him fashion a guaranteed, noregrets legacy-builder.
Jim Dulzo is the Michigan Land
Use Institute’s senior energy policy
specialist.
WE BELIEVE
PERSONAL ATTENTION
IS BEST GIVEN IN PERSON.
When you work with the Huntington Private Client Group, we meet with you face-to-face.
Using our Listen, Plan, Advise approach, we work with you to create a clear plan that fits
your needs, giving you meaningful advice about the options available for meeting your
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®
LETTERS CONTINUED
■ From Page 6
fect. Over the past decade, Michigan taxpayers were overcharged
more than $2 billion on educational construction alone under Michigan’s prevailing-wage law, according to a 2013 nonpartisan
Anderson Economic Group study.
Put into perspective, the money
wasted could have built 317 new elementary schools, resulting in
thousands of construction jobs and
new opportunities to recruit
skilled workers.
Those jobs would have reflected
the average annual construction
salary in the private sector (which
is what government-sector levels
would be if prevailing wage was
repealed) of nearly $50,000. Instead, this isn’t happening. The
true irony is that prevailing wage
is killing well-paying jobs and creating a troublesome barrier to entry for construction skilled trades
that other skilled trades jobs don’t
face.
Senators from across Michigan
are right. It’s time to repeal prevailing-wage to create more skilled
trades jobs and deliver financial
accountability to taxpayers.
Chris Fisher
President, Associated Builders and Contractors
of Michigan
Eric W. Dietz
Senior Vice President and Regional Manager
Private Client Group
Huntington National Bank
220 Park Street
Birmingham, MI 48009
248.637.8206 phone
248.824.4441 cell
eric.dietz@huntington.com
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20150316-NEWS--0008-NAT-CCI-CD_--
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March 16, 2015
CRAIN’S DETROIT BUSINESS
House from Land Bank
auction is first to set sale
GET IN ON THE CONVERSATION
Jay covers health care, insurance, energy, utilities and the environment.
JAY
GREENE
Keep up with Jay at crainsdetroit.com/blogs
TWEET @JAYBGREENE
There is something special
about 5811 Grayton St. in Detroit.
It’s not the 1,300 square feet or
the three bedrooms. It’s not the
staging in the photos on Zillow.com.
It’s not even the $86,499 listing
price, though that does make it the
most expensive house on the market in East English Village.
No, what makes 5811 Grayton St.
special is that it’s the first house
purchased through the Detroit Land
Bank Authority auctions that has
been fully rehabbed and is up for
sale.
Clint Jeffery Bowen placed the
winning bid last June, buying the
home, built in 1929, for $10,500. He
said he then spent three months
and $35,000 rehabbing the property, installing everything new from
electrical, plumbing and heating
to cabinets and appliances.
“It’s just been appraised at
$86,900,” Bowen said. “I don’t know
of any other investment where you
make that return.”
The house at
5811 Grayton St.
got an exterior
makeover from
drab (above left)
to darling (above
right) and an
attractive interior
rehab (left).
Just 4 finished homes
When Mayor Mike Duggan announced the BuildingDetroit.org
auctions last May, he said: “We are
moving aggressively to take these
abandoned homes and get families
living in them again.”
The amount of interest in the
auctions trumped officials’ wildest
expectations. More than 1,000 people showed up for the first weekend
of open houses, touring a dozen
properties in East English Village.
“The whole thing has been surprising,” Dekonti Mends-Cole,
deputy director of the Land Bank,
said later in May. “A lot of the people who are bidding are either Detroiters or individuals living in inner-ring suburbs.”
The new owners would have six
months — nine months in historic
neighborhoods — to fix up their
new homes or risk forfeiting the
property.
But of the approximately 300
homes sold at auction last year, just
half of the sales actually closed. Of
those, 37 should have been completed and occupied by now.
Just four have. And of those
four, investors own three.
“We will see more (finished) as
the weather improves,” Land
Bank Authority spokesman Craig
Fahle wrote in an email.
In fact, owners of 29 properties
have been given extensions on their
six- or nine-month deadlines because of the snow and cold. Meanwhile, an additional eight owners
could lose their properties for missing the construction deadlines.
“That said,” Fahle explained,
“the DLBA is supporting them in
getting back on schedule, and if
they can meet agreed key targets,
we will consider a reasonable extension for them to complete their renovations.”
The accidental investor
Bowen is the accidental Detroit
investor.
The 49-year-old, who hails from
Plano, Texas, was looking online
for potential investments. He wanted cheap homes he could buy, fix
MATTHEW PACZAS
and flip or
turn
into
rentals. A former Deloitte
executive, he
had
money
set aside and
was looking
toward
his
next career.
He stumbled across
BuildingDeAmy Haimerl
troit.org, saw
the home on
Grayton Street and put in a bid.
“It was ridiculously low; I
thought it would never be accepted,” Bowen said. But later that day
he got an email congratulating
him on his purchase. He deleted it,
thinking it was a scam.
“A few days later, I got an email
saying, ‘Hey, you’ve got to pay.’
And I realized it was real.”
When Bowen got to Detroit in
July, he said, he found a property
where everything had been
stripped: the electrical, the plumbing, the kitchen cabinets. Even
parts of the ceiling and floors were
buckling. The one saving grace: The
roof was in good shape.
Within 90 days, he had the home
rebuilt.
What makes Bowen’s story different from that of most auction buyers is a matter of the Benjamins.
Bowen had money on hand; most
auction buyers require mortgages
or loans to rehab the properties.
A lack of mortgages or financing
is one of the primary reasons that
half the homes auctioned through
the Land Bank failed to close last
year. The underlying problem is
called the loan-to-value ratio,
which is just a fancy way of saying
that the cost of the purchase and
rehab outstrips what the house is
actually valued at when it’s done.
Banks are not inclined to lend —
even to well-qualified buyers — on
a home that is worth less than what
it costs to fix it up. And appraisal
values don’t inch up until higherpriced sales start happening.
Duggan looks to solve that prob-
Detroit
2.0
lem, knowing he can’t meet his
stated goal of increasing Detroit’s
population if he can’t find ways for
people to actually purchase and rebuild homes.
The mayor is asking investors to
fund a lending program that could
help alleviate some of the challenges. Additionally, on March 24,
the city will begin accepting applications for zero-percent-interest
home repair loans.
Lookers, but no buyers
Bowen’s house in East English
Village is generating a lot of interest, said Keller Williams listing
agent Chris Staneff. So far, 10 people have looked at it.
“What you’re finding so far is
that many people are going in
there, and every one says it shows
immaculately,” Staneff said.
Still, it’s at the high end of the
East English Village market, where
homes are typically priced around
$50,000 rather than nearly $90,000.
The city’s median home-sale
price in January was $17,500, according to Farmington Hills-based
Realcomp II Ltd. — and that is up
47 percent over last January. Simultaneously, inventory continues
to shrink — especially inventory of
homes that are move-in-ready.
Still, most real estate agents caution against trying to fix and flip a
house in Detroit unless you have
the money to invest. Even then,
few contractors think a $35,000 rehab cost is normal.
“We typically ballpark $75 to $100
per square foot as a back-of-thenapkin estimate,” said Calvin
Garfield, owner of Detroit-based
Maxwell Construction LLC.
Bowen said he was careful with
his expenses — and a little lucky.
“I ran into a gentleman called Al
Barrow at Riverfront Hardware.
... I really leaned heavily on him.
He really acted as a general contractor. I got some fantastic deals
on everything.”
This story originally appeared
as an Amy Haimerl blog at
crainsdetroit.com.
20150316-NEWS--0009-NAT-CCI-CD_--
3/13/2015
12:08 PM
Page 1
CRAIN’S DETROIT BUSINESS
March 16, 2015
People
Leichtman
MAXED OUT
ON MANAGING
Steven Grekin,
D.O., recently sold
his Southfieldbased Grekin Skin
Institute to
Advanced
Dermatology &
Cosmetic Surgery, a
Florida-based
national
dermatology group.
He explains his
reasoning, Page 12
Larin
䡲 Alan Leichtman, M.D., has joined the
Arbor Research Collaborative for
Health as a senior research scientist.
䡲 Linda Larin, chief administrative
officer of the University of Michigan
Frankel Cardiovascular Center, was
recently named Healthcare Executive of
the Year and has received the
Chairman’s Vanguard Award from the
American Academy of Medical
Administrators.
䡲 Lewis
Morgenstern, M.D.,
director of the stroke
program at the
University of
Michigan Health
System, received
the William Feinberg
Award for Excellence
in Clinical Stroke
during the American
Morgenstern
Stroke
Association’s International Stroke
Conference 2015.
䡲 Robert Cahill,
president and CEO
of Hospice of
Michigan, has been
appointed to the
Harper University
Hospital board of
directors.
䡲 Vincent Groppi
has been named
director of the
Cahill
University of
Michigan’s Center for the Discovery of
New Medicines. He had been vice
president and chief scientific officer of
Ann Arbor-based Essen BioScience Inc.
LARRY PEPLIN
Benefits of belonging
Physician practice consolidation picking up in Michigan
BY JAY GREENE
CRAIN’S DETROIT BUSINESS
T
Brownlee
Ramachandran
䡲 Sarah Jo Brownlee, an assistant
professor of geology at Wayne State
University, has been awarded the
Faculty Early Career Development
Award from the National Science
Foundation.
䡲 Virginia Ramachandran, an
audiologist at Henry Ford Hospital in
Detroit, has been elected to the board
of directors of the American Academy
of Audiology starting July 1.
䡲 The Barbara Ann Karmanos Cancer
Institute has named Philip A. Philip the
first endowed chair of the Kathryn E.
Cramer, M.D., Endowed Chair for
Cancer Research.
Page 9
he national trend of solo- or
small-practice physicians
moving into employment with
medical groups or hospitals
for economies of scale and managed
care contracting is starting to pick up
in Michigan, several experts told
Crain’s.
“The complexities of practice today,
especially the substantial shifts in payment
methodology, militate
against small offices,”
said Jeff Margolis, M.D.,
president of Michigan
Healthcare Professionals
PC, the area’s youngest
multi-specialty medical
group with 360 physicians in more than 100 practice locations.
For some physicians, hospital em-
Margolis
WHERE DOCTORS WORK
The size of the office where active Michigan
physicians practice
42%
28%
20%
10%
Group practice with six
or more doctors
Solo practice
Work at
hospital
Group practice
of two to five physicians
Source: Michigan Department of Community Health,
2012 survey
ployment is more appealing because
management takes over administrative
duties, leaving clinical decisions mostly
to doctors, Margolis said.
On the other hand, doctors who want
more say over how they practice will
seek employment with medical groups,
he said.
Most independent or smaller physician offices have already joined one of
the dozen or more physician organizations in metro Detroit to gain back-office
advantages, said Mike Williams, M.D.,
CEO of Bingham-based United Physicians
Inc., the region’s largest physician organization with 3,400 physicians.
Some of the dozen physician organizations in Southeast Michigan include
Oakland Physician Network Services, United Outstanding Physicians and MedNetOne
Health Solutions.
In 2014, Crain’s list of top physician
organizations showed more than 21,000
physicians. However, physicians sometimes participate in multiple organizations. There are approximately 44,717
physicians licensed in Michigan.
Joining a physician organization allows physicians the option of remaining
independent, but still enjoy some backoffice support services, information
technology assistance and managed
care contracting, Williams said.
See Practice, Page 11
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20150316-NEWS--0011-NAT-CCI-CD_--
March 16, 2015
3/13/2015
12:07 PM
Page 1
CRAIN’S DETROIT BUSINESS
Page 11
Health Care
Practice: Docs see strength in numbers
■ From Page 9
Williams also said he believes
there has been an increase in independent physicians choosing employment opportunities at hospitals or medical groups because of
rising practice costs and flat reimbursement increases from payers.
“Clearly there are economies of
scale with smaller practices joining
together,” said Williams, adding:
“You put five doctors together and
they have five different ideas. Sometimes (the governance) makes it difficult to merge into a larger group.”
Dermatologist Steven Grekin,
D.O., founder of Southfield-based
Grekin Skin Institute, said many
physicians he knows in Southeast
Michigan are choosing employment
in a medical group as opposed to
joining forces with hospitals.
“We (physician practices) don’t
tell them how to treat the patient.
We allow doctors to make medical
decisions,” Grekin said. “If you
are in a hospital group, it represents all specialties and they come
at it from different directions.”
Grekin Skin Institute was recently acquired by Maitland, Fla.-based
Advanced Dermatology & Cosmetic
Surgery, a national group with 190
owned or managed practices.
Matt Leavitt, M.D., CEO of Advanced Dermatology, said Michigan is much less consolidated into
medical groups, especially dermatology, than most other states.
For example, states with higher
concentrations of dermatology
practice consolidation include
Florida, Texas, Wisconsin, Pennsylvania, New Jersey, Nevada, Arizona, Kansas and Colorado, Leavitt
said. States with more independent
dermatology practices than Michigan include Illinois, Kentucky, Connecticut, North Carolina and South
Carolina, he said.
“Some hospitals are trying to dip
their toe in acquiring dermatology
practices,” Leavitt said. “Dermatology doesn’t bring a lot of value (return on investment) to hospitals.”
Driving forces are changing
Margolis said hospitals will continue to employ physicians “as long
as the economics favor them with
higher fees, even though private
groups can offer the same or better
quality and services at a lower
cost,” Margolis said.
But one of the main drivers of
hospital employment — the ability
to charge higher fees for employed
physicians working in outpatient
clinics— may be coming to an end.
In 2013, the Medicare Payment Advisory Commission urged Medicare to
eliminate the pay differential between doctors’ offices and hospital
outpatient departments.
For example, Medpac said Medicare pays $58 for a 15-minute visit
to a doctor’s office, but $98.70, or 70
percent more, for the same type of
visit to a hospital outpatient department. With a typical 20 percent coinsurance, patients pay more out of
pocket — $19.74 versus $11.60.
Last month, the Obama administration submitted its 2016 budget
that recommended eliminating
much of that difference by encouraging “efficient care by improving incentives to provide care in the most
appropriate ambulatory setting.”
U.S. TRENDS
In 2012, 54 percent of physicians
practiced in groups of five or more, up
from about 40 percent in 2002,
according to the American Medical
Association. But the AMA said full or
partial hospital employment of
physicians increased to 29 percent in
2012 from about 16 percent in 2007.
Medicare would save $29.5 billion over 10 years if Congress approves the payment change.
“Hospitals can charge substantially higher fees for many services than the same doctors could
charge for the same services,
sometimes even in the same location, before becoming hospital employed,” Margolis said.
For some services the billing
rate is higher for the same service.
For other services, a hospital can
charge a facility fee that a private
doctor’s office cannot charge.
Laura Appel, senior vice president of strategic initiatives at the
Michigan Health and Hospital Association, said the
MHA and the
American Hospital
Association are
opposed to the
Obama budget
proposal
to
equalize
payment rates between physician
offices and hospiAppel
tal outpatient departments.
“Medicare margins are already
negative 11 percent for outpatient
services (Medpac report), so we
think the focus should be on adequate payment,” Appel said.
Michael Wiemann, M.D., president of Providence Hospital and Medical
Center in Southfield, said outpatient
departments have much higher
costs than private physician offices.
“We are open 24-7, and we get more
complicated cases with patients who
are more acutely ill and have multiple problems,” he said. “This contributes to a high level of cost.”
Andrew Turnbull, senior vice
president and head of health care
practice group with Sterling
Heights-based Sterling Insurance
Group Inc., said hospital acquisition of physician practices has
slowed for several reasons.
First, some hospitals are preoccupied with mergers, forming accountable-care organizations with
physicians and other post-acute
care providers, and complying with
new managed care contracts that
demand quality improvement to
generate additional reimbursement, Turnbull said.
In the past year, Beaumont Health
System, Oakwood Healthcare and Botsford Hospital have merged to become
Beaumont Health. While not a merger, Ascension Health and Trinity Health
have formed a clinically integrated
company called Together Health Network for physician-hospital managed care contracting.
“Physicians are joining multi-specialty groups more because of the
consolidation efforts going on” and
fewer hospitals offering physicians
employment contracts, Turnbull
said. “Doctors don’t know what
these hospital systems will become.”
Brian Connolly, formerly Oakwood’s CEO and president of network development and future initiatives at Beaumont Health, said
physicians still want to be employed by hospitals, but the pace of
employment overall has slowed.
“There are not as many private
practice physicians who want to be
employed,” said Connolly, adding
that some doctors are looking at offers from competing systems.
“Now that their contract term is
up, they are looking to strike a deal
with another system,” he said.
Overall, Connolly said Oakwood
has become more effective in aligning incentives and working closely
on quality and value with physicians. “We have access to results
and outcomes, almost instantaneously,” he said.
Because medical student debt
that averages $180,000 and the higher practice costs, young physicians
are seeking employment in greater
numbers than veteran doctors, Connolly said.
“We are hiring just about every
family medicine or internal medicine resident who is not going into
fellowship,” Connolly said. “We
have been hiring most of our own
‘star’ residents who decided not to
pursue a fellowship. These young
men and women have had positive
experiences at Oakwood and have
chosen to stay in the area.”
Wiemann said the pace of physician employment at St. John Providence Health System also has remained steady.
“We are very focused on providing a coordinating continuum of
care with a focus on population
health management,” said Wiemann, who also is senior vice president at St. John Providence. “These
trends strongly support a smooth
continuum of providers with a variety of sites for provision of care.”
Appel said physician employment by hospitals or medical groups
is driven by many factors. The association doesn’t have trend data.
“We’ve known there’s a demand
by payers for coordinated care …
with the most consistent reason being a focus on patient care,” she said.
Fred Davis, M.D., president of
Grand Rapids-based ProCare Systems, said there is a huge trend of
independent physicians seeking to
reduce costs, seek capital for office
improvements and seeking some
kind of organizational partnership.
But Davis said recent discussions he has had with veteran
physicians lead him to believe
more are moving away from the
idea of hospital employment.
“Primary care physician or specialists have different needs,” he
said. “All doctors are thinking twice
about renewing their contracts. The
ones who are finding the renewals
aren’t as lucrative as before, they
are looking at alternatives.”
ProCare manages six physician
practices, mostly single specialty
groups related to pain medicine
and also behavioral health and
neurosurgery, Davis said.
“There is a trend toward physician organizations, but the jury is
still out,” he said.
Jay Greene: (313) 446-0325,
jgreene@crain.com.
Twitter:
@jaybgreene
20150316-NEWS--0012,0013-NAT-CCI-CD_--
3/13/2015
12:06 PM
Page 1
Page 12
March 16, 2015
CRAIN’S DETROIT BUSINESS
Health Care
Being acquired helps skin institute expand in Michigan
BY JAY GREENE
CRAIN’S DETROIT BUSINESS
Steven Grekin, D.O., owner and
founder of Southfield-based Grekin
Skin Institute knew he needed help
in back office administration to
continue his steady growth in
Michigan.
With five practice locations,
130,000 active patients, 19 dermatologists, physician assistants and
nurse practitioners and 85 total employees, Grekin said his management infrastructure had maxed out.
(Grekin Skin Institute)was paying
“
$1.69 per suture. We got the same thing
for 69 cents.
”
Matt Leavitt, M.D., Advanced Dermatology & Cosmetic Surgery
“Our trajectory of growth has
been astonishing,” said Grekin, a
third-generation physician in
Southeast Michigan. “People call us
weekly to get us to acquire them. I
didn’t have the back office to support the level of acquisitions we
were looking at.”
Last July, Grekin said he sold his
practice for more than $10 million to
Maitland, Fla.-based Advanced Dermatology & Cosmetic Surgery and his
friend of 25 years, CEO Matt Leavitt,
M.D.
“They are the biggest player in
the dermatology place with a 300employee central office,” said
Grekin, who now is ADCS’ regional Midwest director and chief
business development officer.
“Matt felt my skill set at patient
services, customer services and
my patient-centric approach fits
well with their company.”
Leavitt said one reason he want-
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ed to expand in Michigan is because
it is his home state and he graduated from the University of Michigan.
“We are expanding nationally,
and I am comfortable with the practice styles (in Michigan),” Leavitt
said.
Founded by Leavitt in 1989,
ADCS owns 107 offices and manages
another 90 with more than 1,000 employees in Florida, Ohio, Nevada,
South Carolina and now Michigan
that provides clinical, cosmetic,
surgical and pathology services.
Medical practices such as Grekin
Skin, a single-specialty practice, are
finding it difficult to go it alone — or
expand — with expenses rising
faster than reimbursement and insurance contracts moving toward
value-based or pay-for-performance
payments, said Randy Bickle, D.O.,
See Next Page
CON Report
The following are selected certificate of need filings for Jan. 18March 9.
Letters of intent
BCA StoneCrest Center, Detroit:
Add 39 adult psychiatric beds under the high-occupancy provision;
$7.7 million.
Tendercare Health and Rehabilitation Center of Taylor, Taylor: Acquire 150-bed nursing home from
Taylor 2 Opco LLC, operating under
a 10-year lease; $17.8 million.
Oakwood Hospital-Dearborn, Dearborn: Expand cardiac catheterization service by adding one lab; $2.3
million.
Applications received
St. Mary’s Nursing & Rehabilitation Center, St. Clair Shores: Replace 101-bed nursing home and
change capacity by relocating 45
beds from St. Anthony Nursing
Healthcare Center; $16 million.
Alpha Manor Nursing Home, Detroit: Replace 80-bed nursing home
and change capacity by relocating
20 beds from Regency Heights-Detroit; $11.9 million.
Livingston Care Center II, Howell: Begin operation of a 61-bed
nursing home; $6.1 million.
MediLodge of Richmond, Richmond: Replace all 126 nursing home
beds by moving them into a newly
constructed, leased addition to the
existing nursing home; $26.1 million.
Henry Ford Macomb Hospital,
Clinton Township: Construct
shelled space in an expansion to
the existing first and second floors
of the northwest wing; $8 million.
Start saving today, visit:
dteenergy.com/savenow
Decisions
St. Mary Mercy Livonia Outpatient Surgery Center, Livonia: Initiate a new, freestanding surgical
outpatient facility with three operating rooms; $11 million. Approved.
Children’s Hospital of Michigan,
Detroit: Replace 48 hospital beds,
45 NICU beds and four operating
rooms and move into a newly constructed six-floor tower connected
to the main hospital; $145.6 million. Approved.
20150316-NEWS--0012,0013-NAT-CCI-CD_--
March 16, 2015
3/13/2015
12:07 PM
Page 2
CRAIN’S DETROIT BUSINESS
Page 13
Health Care
“How to Stop Unpaid ConsulƟng”
Net income lower for metro Detroit
hospitals than rest of state, report says
BY JAY GREENE
CRAIN’S DETROIT BUSINESS
Hospitals in metro Detroit suffered declining income and patients in 2013, while HMO enrollment surged and profits dipped
during the first half of 2014, according to the 2014 Michigan
Health Market Review.
On the other hand, hospitals
outside of Southeast Michigan
posted stronger profit numbers,
said Minneapolis-based consultant Allan Baumgarten in his annual report.
“Detroit-area hospitals are combining to compete for shares of a
shrinking pie as their key metrics
fell in 2013,” said Baumgarten in his
Michigan Market Report. “However,
hospitals in other parts of the state
improved their profitability and
their inpatient volume in 2013. And
health insurers saw an influx of new
Medicaid and individual insurance
enrollees in the first half of 2014.”
Here are the key findings in the
report:
䡲 Hospitals in the Detroit area
had net income of $286.1 million in
2013, or 2.7 percent of net patient
revenue of $10.6 billion. That is
down from 2012 net income of
$367.9 million, which was 3.4 percent of net patient revenue.
Baumgarten said lower income
totals are primarily due to fewer
inpatient admissions, partially related to declining population, but
also on efforts by the Affordable
Care Act policies to save money
on unnecessary readmissions.
Detroit Medical Center, owned by
for-profit Tenet Healthcare Corp.,
broke even in 2013, after reporting
steadily increasing from 2009 to
2012, the report said.
However, St. John Providence
Health System, which operates five
hospitals in Southeast Michigan,
had the biggest improvement in financial results and posted an average margin of 6 percent, the report
said.
䡲 Some 41 hospitals in other
parts of the state improved their
combined net income from $554.7
million in 2012 to $847.1 million.
Collectively, the hospitals lost $800
From Previous Page
president and medical director of
Livonia-based Olympia Medical Services PLLC.
“I am seeing more doctors forming single specialty groups and
eventually forming multispecialty
organizations,” Bickle said. “Derms
(dermatologists) are really unique.
Not a lot go into multispecialty
groups unless they are involved in
cancer care.”
While a number of physicians
have banded together locally to
form larger medical practices in
recent years, Bickle said the only
other specialty group that he can
recall joining an out-of-state company was Porretta Center for Orthopaedic Surgery.
In 2013, Porretta joined Phoenixbased The Core Institute when it was
renamed the Core Institute at Porretta. Core has offices in Novi and
Grand Blanc, with a new clinic
opening this month in Brighton.
Leavitt said he talks with many
physician practice leaders, and
many are looking to band together either in large single specialty groups
or multispecialty organizations.
“The potential for medical
groups to have density and scale to
work more closely with payers has
huge advantages,” Leavitt said.
“Size gives us the opportunity to go
directly to payers” in managed care
negotiations.
Besides revenue growth, Leavitt
said larger practices can affect
cost savings that vary depending
on each group.
For example, back office support
— that includes a national call center for appointment scheduling,
billing and collections, insurance
verification and claims resolution
— helps reduce local office overhead costs, Leavitt said.
“We have a group purchasing organization that gets the best prices”
SKIN IN THE GAME
The seller
Grekin Skin Institute
Location: Southfield
Founder: Steven Grekin, D.O.
Offices: five
Number of patients: 130,000
Employees: 19 dermatologists,
physician assistants and nurse
practitioners and 85 total
employees.
The buyer
Advanced Dermatology &
Cosmetic Surgery
Location: Maitland, Fla.
CEO: Matt Leavitt, M.D.
Offices: Owns 107, manages 90
Employees: 1,000 in four states in
addition to Michigan.
on medical supplies, health insurance and medical malpractice liability insurance, Leavitt said.
“Steven (Grekin) thought he
was saving money on supplies
with his size,” Leavitt said. “He
was paying $1.69 per suture. We
got the same thing for 69 cents.”
The economies of scale can lead
to higher margins. A dermatology
market overview published by investment bank HarrisWilliams & Co.
in 2013 predicted the then $10.1 billion market will grow to $13.1 billion by 2017; margins topped 20
percent in 2012.
Grekin’s growth trajectory
As a third-generation physician
in Southeast Michigan, Grekin’s
grandfather, Samuel, was chief of
surgery at the former Hutzel
Women’s Hospital more than 75
years ago. Retiring 13 years ago, his
father, James, also practiced internal medicine for more than 40
years in Detroit.
million on operations, but generated $1.63 billion in other revenues.
However, eight those hospitals
recorded margins of 10 percent or
more, including Borgess Health in
Kalamazoo, McLaren Health Care
hospitals in Bay City, Flint and
Petoskey,
Spectrum Health Butterworth and
Trinity Health St. Mary’s, both in
Grand Rapids.
On the HMO side, enrollment increased by 16 percent in the first
half of 2014, driven mostly by
265,000 new Medicaid recipients
added by the Healthy Michigan Medicaid program, an Obamacare-related project.
However, profit margins for
Michigan HMOs dropped again in
the first half of 2014. HMOs recorded net income of $80.8 million with
margins that averaged only 1.2
percent, down from 1.8 percent the
previous year.
Priority Health recorded a 4 percent total margin; Humana Medical
Plan had 10.4 percent; and Blue
Care Network recorded a 0.7 percent margin.
Grekin opened his first practice
in Warren in 1994 with Don Collier,
D.O., who is retiring March 30 after
48 years of practice. Since then,
Grekin has expanded by merging
practices, buying practices and
opening locations in Warren,
Southfield, Lathrup Village, Wyandotte and Shelby Township.
With the backing of ADCS,
Grekin has expanded in Michigan
last month to Petoskey with the acquisition of Dermatology Associates of
North Michigan P.C. This month,
Michael Redmond’s dermatology
practice in Livonia is expected to
join Grekin. Over the next several
months, Grekin expects to add clinics in Lansing and Grand Rapids.
By the end of this year, Grekin
said his goal in Michigan is to expand into 15 offices and by 2017
grow to about 30 practice locations.
Grekin said physicians of all
ages are selling practices to get help
on the business end of medicine.
“You can negotiate higher rates
(with insurers) when you are bigger,” he said. “Nobody knows how
much more, but (one practice) negotiated 120 percent of Medicare
rates.”
Not included in the sale to ADCS
is Bloomfield Hills-based Grekin Laboratories Inc., which employs three
and contracts with chemists and
consultants around the world to
conduct research.
The lab also develops and sells
skin repair cream and antibiotic
products to pharmaceutical companies around the world, he said.
“My lab didn’t fold in neatly” to
the practice sale, Grekin said. “It
really is my hobby.” For example,
Grekin has sold a scar cream to
SkinMedica Inc., and an anti-acne
cream to RegimA Skin Treatments in
South Africa, he said.
Jay Greene: (313) 446-0325,
jgreene@crain.com. Twitter: @jaybgreene
Stop QuoƟng and Hoping…
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20150316-NEWS--0014-NAT-CCI-CD_--
3/13/2015
12:33 PM
Page 1
Page 14
March 16, 2015
CRAIN’S DETROIT BUSINESS
CRAIN'S LIST: LARGEST MICHIGAN WOMAN-OWNED BUSINESSES
Ranked by 2014 revenue
Company
Address
Rank Phone; website
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Majority owner(s)
Revenue
Revenue
($000,000) ($000,000)
2014
2013
Percent
change
Michigan
employees
Jan. 2015
Michigan
employees
Jan. 2014
Percent
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2
Revenue of top 25
613% higher than
the top 25 in 1987
There have been many changes
on the Largest Woman-Owned Businesses list since it first published
Oct. 16, 1987. Revenue of the top
25 has increased 613 percent, companies have fallen off, and new
companies have appeared.
It took a lot less money to make
the list back in 1987. The No. 1
company back then, ranked by revenue, was Crain Communications
Inc. at $120 million. It was the only
company on the list that had more
than $100 million in revenue. Today’s list has 11 that are over that
amount. And the total revenue of the
top 25 firms in 1987 was $629 million, now it is $4.4 billion.
But a lot can happen in 28 years.
Below are some of the changes.
Out with the old
A number of companies were
sold, including Hubert Distributors
Inc., Pontiac; Vic Wertz Distributing Co., Mt. Clemens; and General
Television Network, Oak Park. Others went out of business, including
clothing retailer Van Horn Inc.,
Troy, 1997; and McKenna Industries
Inc., an engineering company in
Troy, 1997. Detroit clothing manufacturer SMS Inc. went out of business in 1990 and its owner, Ilene
Moses, was eventually convicted of
52 counts related to a long-term
fraudulent enterprise in 2007.
Some companies fell off the list
because an ownership change made
them ineligible for the womanowned list. Among those were Crain
Communications, when Gertrude
Crain was succeeded by son Keith
Crain after her death in 1996; and
Elder Ford’s CEO, Irma Elder, was
succeeded by son Tony after her
death in 2014.
And, finally, some companies
were part of mergers and acquisitions, including Acorn Building
Components Inc., merged with ABC
Investments Inc. in 1991; Michigan
Rivet Corp. was bought by MRC Industrial Group Inc. in 2003; and
Detroit Coil was acquired by Ross
Controls in 2012.
The new, the stalwarts
$%.'%./*"2*()*2)! 0.%)!..!.%.)++-*3%(/!*(+%'/%*)*"/$!'-#!./.0$0.%)!..!.$! ,0-/!-! %)%$%#)
!-!)/#!*"/$!*(+)4/$/%.2*()*2)! (4)*/!
.*'!'4$!' 4/$!'! %)#.$-!$*' !-/%.)*/*(+'!/!'%./%)#0//$!(*./*(+-!$!).%1!1%''! Crain's !./%(/!.-!.! *)%) 0./-4)'4.!.) !)$(-&.)!2.-!+*-/.)
2% !-)#!*"*/$!-.*0-!.)'!..*/$!-2%.!)*/! %)"*-(/%*)2.+-*1% ! 4/$!*(+)%!./0'-!1!)0!5#0-!.(41-4)*/1%''!
B *%)/1!)/0-!!/2!!)0-!%*-/$(!-%) 0.$-*0+"*-(! 0)!
C *(+)4!./%(/!
6
Woman-owned
Two companies that were on the
list in 1987 are on today’s list:
䡲 Mars Advertising was 24, now
(The Mars Agency) is No. 17
䡲 The WW Group Inc. was No.
10, now is No. 24.
Nine companies on the current
list were not in existence in 1986:
䡲 Strategic Staffing Solutions
Inc., founded in 1990
䡲 Gongos Inc., found 1991
䡲 Rodgers Chevrolet Inc., founded 1993
䡲 Millennium Software Inc.,
founded 1996
䡲 MotorCity Casino Hotel,
founded 1999
䡲 Dakkota Integrated Systems
LLC, founded 2001
䡲 Alliance Technology Solutions
LLC, founded 2002
䡲 ARC Supply Chain Solutions
Inc., founded 2008
䡲 Detroit Manufacturing Systems LLC, founded 2012
— Sonya Hil
20150316-NEWS--0015-NAT-CCI-CD_--
March 16, 2015
3/13/2015
11:41 AM
Page 1
CRAIN’S DETROIT BUSINESS
Page 15
Online Real Estate Auction
Tuesday, March 24th ± 8am-2pm
CALENDAR
WEDNESDAY
MARCH 18
Executive Business Round Table Breakfast Meeting, 8:30-10:30 a.m. . German
American Chamber of Commerce.
Guest speakers are J.D. Bindenagel,
U.S. ambassador (retired), and Tim
Bennett, director-general CEO of
Trans-Atlantic Business Council, who
will speak on the Transatlantic Trade
and Investment Partnership, jobs and
growth, tariffs and standards, and political challenges. The Townsend Hotel, Birmingham. $35; registration required by end of day March 17; no
walk-ins. Contact: Janina Luomala,
(248) 826-8806; email: info@gaccmi.org;
website: gaccmi.org.
THURSDAY
MARCH 19
address by L. Brooks Patterson, presentation of “Leader of Leaders” awards, a
silent auction, strolling hors d’oeuvres
and a cash bar. Troy Marriott, Troy. $25
members, $40 nonmembers. Reservations accepted through March 18; payment at the door is accepted. Contact:
(248) 952.6880; email:
info@lead
ershipoakland.com; website: lead
ershipoakland.com.
FRIDAY
MARCH 20
Women’s Entrepreneur Conference. 8
a.m.-2 p.m. JoAnne Purtan, host of
WXYZ-TV’s noon report, emcees, and Alison Vaughn, founder and CEO of Jackets for Jobs Inc., is the keynote speaker. Walsh College, Troy. $45. Contact:
Jan Hubbard, (248) 823-1392; email:
jhubbard@walshcollege.edu; website:
walshcollege.edu/eyouconference.
Creative Convergence 2015. 8 a.m.-3:30
p.m. The Arts Alliance. Issues-based
conference focuses on hot topics affecting and driving the creative sector.
Speakers include Christopher Farah,
filmmaker, director, writer, producer
and journalist; Mike Farah, president of
production Funny or Die; Alice Carle,
program director, The Kresge Foundation; Sarah Triplett, director of public
policy, Creative Many Michigan;
Michael Finney, senior advisor, economic growth, state of Michigan; and
Ben Forta, senior director, education
initiatives, Adobe Systems. Eastern
Michigan University Student Center,
Ypsilanti. $60 for all-day attendance; $40
for lunch and afternoon session; $25 student. Walk-ins accepted. Contact: (734)
213-2733; email: info@A3Arts.org; website: MICreativeCon2015.eventbrite.com.
Taste of Leadership Oakland. 4:30-7 p.m.
Leadership Oakland. Event features an
UPCOMING EVENTS
DEC Presents. 11:30 a.m.-1:30 p.m.
March 24. Detroit Economic Club.
Stuart Hoffman, senior vice president
and chief economist, PNC Financial
Services Group, is the featured speaker. Westin Book Cadillac, Detroit. $45
DEC members, $55 guests of members,
$75 nonmembers. Ticket sales end at
noon March 23. Contact: (313) 963-8547;
email: info@econclub.org; website:
econclub.org.
Inside the CEO Mind. 3 p.m. March 25.
Detroit Regional Chamber. Frank
Venegas Jr. of The Ideal Group will
speak; a tour follows the presentation
and question-and-answer session. The
Ideal Group Inc., Detroit. $25 chamber
members, $50 nonmembers (cost goes
toward membership). Contact: Maggie
Oldenburg, (313) 596-0482; email:
22 properties selling in Michigan & Florida! All selling from one bank at
public online auction! Bidding starts at 8am and will begin closing at 2pm
the same day. All online bidding!
NASCAR DRIVES DETROIT
ECONOMIC CLUB EVENT
NASCAR Chairman and CEO
Brian France will speak at the
Detroit Economic Club’s
luncheon. It takes place 11:30
a.m.-1:30 p.m. Thursday.
Original equipment
manufacturers are some of
NASCAR’s most important
stakeholders, and in “The
Importance of Stakeholder
Collaboration,” France will
address the importance of
working with these companies.
He’ll also give guests an inside
look into NASCAR’s world.
Dutch Mandel, publisher of
Autoweek Media Group, is the
moderator.
The luncheon will be at the
Dearborn Inn Marriott, 20301
Oakwood Blvd., Dearborn.
Tickets are $45 for DEC
members, $55 for guests of
members and $75 for
nonmembers. Ticket sales end
at noon Wednesday.
For more information or to
register, call (313) 963-8547 or
visit econclub.org.
moldenburg@detroitchamber.com; website: detroitchamber.com/events.
RAM: Redefining a Brand. 6-8 p.m.
March 25. Marketing and Sales Executives of Detroit. Joe Benson, head
of Ram brand, Fiat Chrysler Automobiles, speaks. Golling Chrysler Dodge
Jeep Ram, Bloomfield Hills. $45 MSED
members, $60 nonmembers. Contact:
(248) 643-6590; website: msedetroit.org.
Business Leaders for Michigan Leadership Summit. 8 a.m.-noon March 26.
Business Leaders for Michigan.
Speakers and panelists include Doug
Rothwell, president and CEO, Business Leaders for Michigan; HansWerner Kaas, senior partner and director, McKinsey & Co.; Ray Leach,
CEO, JumpStart Inc.; Brian Hicks,
president and CEO, Hicks Partners,
and chief architect of Ohio Third Frontier; Steve Arwood, CEO, Michigan
Economic
Development
Corp.;
Michael Jandernoa, board of directors,
Perrigo Co.; Charles “Chip” McClure,
managing director, Michigan Capital
Partners LLC; and Sandra Pierce,
chairman and CEO, FirstMerit Michigan. Lansing Center, Lansing. Free.
Contact: Jennifer Hayes, (313) 2595400,
email:
jenniferh@busi
nessleadersformichigan.com; website: businessleadersformichigan.com/
events.
2015 Great Lakes Business Intelligence and Big Data Summit . 8 a.m.-5
p.m. March 26 . WIT Inc. Summit is a
cross-industry educational and networking event for IT and business executives interested in big data topics
and trends. Keynote speakers include
Boris Evelson , vice president at Forrester Research , and Don Farmer ,
vice president of innovation and design at Qlik . Somerset Inn Hotel,
Troy. $149. Contact: Amanda Mansour, bisummit@witinc.com or (248)
641-5900, ext. 244; website: greatlakes
bisummit.com.
Business Leaders of the Year. 6-9 p.m.
March 26. Harvard Business School
Club of Michigan. Dinner and awards
ceremony honoring Gordon Krater,
managing partner, Plante Moran, and
Sandra Pierce, chairman and CEO,
FirstMerit Michigan. MSU Management Education Center, Troy. Private
reception for sponsors, 5:30 p.m. Tickets $150 and up, available at www.hbs
mi.org/store.html?event_id=258. Contact: Amanda Schubeck, (248) 930-4614
or amanda.schubeck@gmail.com.
Michigan Properties
Curran: 2,700 sqft Lake Front Home with Guest House on McCollum Lake
Curran: 14 Vacant Wooded Acres Near McCollum Lake
Curran: Vacant 1.29 Acre Lot on McCollum Lake
Burtchville Twp: .29 Acres of Vacant Land on Lake Huron with Beach Frontage
Kimball Twp: 3,000 sqft Residential Rental Property on 5.43 Acres
Port Huron: 10,680 sqft Medical Office Building
Port Huron: 2,475 sqft Medical Office Building
Port Huron: 8,869 sqft Commercial/Retail Building on .82 Acres
Port Huron Twp: 11.80 Acres of Vacant Commercial Land with I-69 Frontage
Dearborn: 15,237 sqft Industrial Building
Romulus: (3) Industrial Buildings Totaling 15,700 sqft
Romulus: 1,169 sqft Residential Home on .30 Acres
Marysville: (3) Light Industrial Buildings
Lapeer: 10.1 Acres of Vacant Land
Lapeer: 1,200 sqft Residential Home on 8 Acres
Harbor Beach: 1,815 sqft Residential Home with Attached Garage
Kinde: 2,100 sqft Manufactured Residential Home
St. Clair: 4.59 Acres of Commercial Land with Frontage on 2 Roads
Brown City: 3,514 sqft Commercial Building with Warehouse
Otter Lake: 10.5 Vacant Acres
22 Properties
Selling
1-800-527-8243
For detailed information on the
properties selling and to bid visit
LASTBIDrealestate.com
www.LASTBIDrealestate.com
20150316-NEWS--0016-NAT-CCI-CD_--
3/13/2015
11:42 AM
Page 1
Page 16
March 16, 2015
CRAIN’S DETROIT BUSINESS
PEOPLE
ENTERTAINMENT
Jennifer
Lord to
partner, Pitt McGehee Palmer & Rivers
PC, Royal Oak,
from senior attorney, Sterling Attorneys at Law PC,
Bloomfield Hills.
David Nay to shareholder, Quinn Law
Group PLLC, Novi,
from associate.
ling
Heights,
from vice president, sales and
marketing, Michi-
gan International
Speedway, Brooklyn, Mich.
MANUFACTURING
LAW
Michael Sydlowski, to general
manager,
Freedom Hill Amphitheatre, Ster-
Sydlowski
Lord
Sandra Bouckley to vice president,
manufacturing
engineering, GKN
Driveline Americas, Auburn Hills,
from vice president operations,
electrical systems
and
services
group,
Eaton
Corp., Pittsburgh.
Roger Hendriksen
to director investor relations, Bouckley
Cooper-Standard
Holdings Inc., Novi, from president
IN THE SPOTLIGHT
Process Development Corp. has named Bill Whalen
executive vice president and CFO.
Whalen most recently was CFO of Nexteer Automotive
Corp. and before that CFO of Intermet Corp. He also
held senior leadership roles at Magna International
Inc. and United Technologies Corp.
With his promotion, Whalen steps into a new role at
Canton Township-based Process Development.
Whalen, 54, has an MBA from the University of Virginia
Whalen
and a bachelor of science degree in business
administration from Duquesne University. He is also a CPA and certified
management accountant.
and principal, IRonStreet Consulting,
Midlothian, Va.
REAL ESTATE
BUSINESS DIARY
Mark Lockwood to
vice president, development, Lockwood Cos., Southfield, from asset
manager.
ACQUISITIONS & MERGERS
Hubbell, Roth & Clark Inc. , Bloom-
SERVICES
Jim
Cowper to
Contract Profession- Lockwood
als Inc., Waterford Township, from
president,
vice president.
field Hills, a professional engineering
services firm, announced that Mickalich Engineering Inc. will merge
with HRC. MEI was located in Clarkston and provided engineering
and surveying services to private development
projects.
Websites:
hrc-engr.com, mickalich.com.
TECHNOLOGY
Mike Arndt to business development
manager, Tebis America Inc., Troy, from
COO, C2 Machining LLC, Kentwood.
Bill Frohriep Jr. to senior sales director, Online Tech Inc., Westland, from
area vice president, Midwest region,
CenturyLink Inc., Southfield.
Zac MacVoy to CEO, GreenLancer Energy Inc., Detroit, from vice president,
sales, United Lighting Standards Inc.,
Warren.
CONTRACTS
Consumers Energy Co. , Jackson, has
named Duffey Petrosky & Co. , Farmington Hills, as its advertising and
marketing services agency of record
for creative and media production,
and research and analytics. Websites:
duffeypetrosky.com,
consumers
energy.com.
Henkel Corp., Madison Heights, a subsidiary of Germany-based Henkel AG
Health Care Experience
In Your Corner.
®
Ŷ Focused on health care law for systems,
physicians and payors in all market segments.
Ŷ Third party reimbursement, public and
private health care provider financing,
and commercialization of physician
inventions and ideas.
& Co. KGaA, announced Henkel Adhesive Technologies and Novelis Inc., Atlanta, a supplier of rolled aluminum to
the automotive industry, signed a
long-term agreement to collaborate on
the development of advanced bonding
technologies for the use of aluminum
in high-volume vehicles. The first
product to launch as a result of this
agreement is Bonderite M-NT 8453,
the latest evolution in aluminum
surface pre-treatments. Websites:
henkelna.com, novelis.com.
EXPANSIONS
Energy Power Systems LLC, Troy, an
advanced battery technology company, announced that it is leasing and
establishing a manufacturing facility
in 150,000 square feet of the former
General Motors Pontiac Centerpoint
Central building from Industrial Realty Group LLC, Los Angeles. The new facility is expected to begin commercial
scale production in early 2016 and initially create 300 jobs. Website:
energypowersystems.com.
Karma Yoga, Bloomfield Township,
has opened another yoga studio, Karma West Bloomfield, 6710 Orchard
Lake Road, West Bloomfield Township. Telephone: (248) 862-2015. Website: karma-yoga.net.
Tim Hortons Café & Bake Shop, part of
Restaurant Brands International Inc.,
Oakville, Ontario, has opened at
2258 Crooks Road, Rochester Hills.
Telephone: (248) 564-3000. Website:
timhortons.com.
The Word Network, Southfield, a
Christian television programming
satellite network, is now available to
an additional 100,000 viewers in Israel
with its launch on Amos-3. Website:
thewordnetwork.org.
NEW PRODUCTS
Detroit Radiator Corp., Romulus, a
manufacturer and distributor of aftermarket cooling product solutions serving the heavy duty transportation,
commercial, industrial and agricultural industries, has created Powercool, a
more durable and sustainable, bolt-on
style radiator to replace the plastic
and aluminum radiator. It will be
available beginning March 30. Website: detroitradiatorcorp.com.
Hino Trucks, Novi, a Toyota Group company, announced the addition of a
Class 4 155 model to its light-duty lineup. The 155 model has a gross vehicle
weight rating of 14,500 pounds and is
powered by Hino’s award-winning
J05E-TP engine rated at 210 HP. Hino
will also offer a double cab version,
marketed as the 155-DC model. Website: hino.com.
STARTUPS
Wrapped in Love , Sterling Heights, a
First Tier Ranking
in Health Care Law
Ŷ
Metro Detroit
Ŷ
Grand Rapids
Ŷ
Kalamazoo
Ŷ
Grand Haven
Ŷ
Lansing
Contact Scott Alfree at sdalfree@varnumlaw.com
fashion accessory line founded by
Karen MacDonald, features poncho
wraps, head wraps and scarves. The
line, which is manufactured at Michigan Fashion Pronto , Lansing, is
available online and later this year in
boutiques and hospital gift shops.
Website: wrappedinlove.com.
20150316-NEWS--0017-NAT-CCI-CD_--
3/13/2015
4:34 PM
Page 1
CRAIN’S DETROIT BUSINESS
March 16, 2015
Delphi: Goal is smaller, but stronger
■ From Page 1
Radical surgery
That strategy had its risks.
O’Neal, who retired on March 1,
had to perform radical surgery to
eliminate Troy-based Delphi’s underperforming divisions. During
his stints as COO and CEO, Delphi
shut or sold 45 plants.
Last year, sales totaled $17.02
billion, compared with $26.95 billion in 2005.
For years, O’Neal has been placing his bets on promising technology. Just after Delphi emerged
from bankruptcy in 2009, for example, O’Neal sold Delphi’s airbag
and seatbelt operation but kept
radar. Today, radar is the centerpiece of Delphi’s active safety portfolio, which is growing rapidly.
Delphi has become solidly profitable since bankruptcy. Net income totaled $1.35 billion last
year, and Delphi’s stock is trading
at almost $80 per share — nearly
four times its price in November
2011, when the company went
public.
Now Delphi has just three divisions: wire harnesses and connectors, powertrain components, and
electronics and safety.
The list of more traditional
products that O’Neal has shed is
long. The most recent example was
a long-term bread-and-butter product line at Delphi, the operations
that produced heating, ventilation
and air conditioning, or HVAC,
products. Last year, that unit generated sales of $1.56 billion — 9 percent of Delphi’s revenues.
Other product lines that Delphi
has sold or closed since 2005 include cockpits, steering systems,
chassis components, door panels,
brakes, airbags, seatbelts, instrument panels, spark plugs and compressors.
GM lifer
There was nothing flashy about
O’Neal’s steady march to transform Delphi into a smaller but better supplier.
O’Neal is a GM lifer, but his in-
DATA ON DELPHI
When Rodney O’Neal became
COO in 2005, Delphi was a
$27 billion company with a vast
line of products, high labor costs
and a dependence on General
Motors contracts. Here’s a
timeline of Delphi’s transformation
to a leaner company:
1994: General Motors
consolidates in-house parts
operations as the Automotive
Components Group, later
renamed Delphi.
1999: GM spins off Delphi as an
independent company with
200,000 workers and $29 billion
in annual sales.
2005: Delphi admits it had
improperly reported rebates from
suppliers. In January, O’Neal is
named COO. In February, CEO
J.T. Battenberg III says he will
retire. In June, Steve Miller is
named CEO. On Oct. 8, Delphi
files for bankruptcy.
2006: Company says it will sell
or close 21 U.S. plants. Delphi
sells or shuts 45 plants
worldwide from 2005 through
2013.
2007: O’Neal is named CEO.
2009: Delphi emerges from
bankruptcy on Oct. 6.
2011: In the first quarter, Delphi
repurchases GM’s $3.8 billion
stake. In November, Delphi
launches an initial public offering,
raises $530 million.
2012: In May, Delphi announces
it will buy FCI Group’s motorized
vehicles division, a maker of
electrical connectors, for nearly
$1 billion.
2015: In February, Delphi
announces it will sell its thermal
division to Mahle for $727
million. In March, O’Neal retires;
Kevin Clark, a former private
equity investor, is named CEO.
volvement in the auto industry was
almost an afterthought. As a high
school student in Dayton, Ohio, he
wanted to study computer science,
but his school counselor advised
him to enter General Motors Institute, now called Kettering University.
After he graduated, he joined
GM in 1976 as a production engineer in a steering wheel factory.
“I loved being on the factory
floor,” O’Neal said. “It was vibrantly alive. Every day was different. You knew what had to be
done that day, and you either did
it or you didn’t. Instant feedback.”
He worked his way up through
GM’s in-house parts operation,
and stayed with Delphi when it
was spun off in 1999. By the time
he was named Delphi’s COO in
2005, O’Neal had an insider’s
knowledge of the company’s products, factories and technology.
When Delphi went into Chapter
11 bankruptcy in 2005, O’Neal used
that knowledge to figure out which
products to keep and which to
shed. As its portfolio shrank, the
company closed dozens of plants
and eliminated thousands of jobs.
In 2007, the UAW accepted wages
as low as $14 an hour, down from
$27. But most jobs disappeared anyway. Today, Delphi has five plants
and 5,000 employees in the U.S.
Meanwhile, 94 percent of Delphi’s hourly workforce is in socalled low-cost countries such as
Mexico, China and Poland.
The company’s remaining product lines have strong growth
prospects, O’Neal said.
Delphi’s biggest division is electrical components, an $8.27 billion
operation that includes traditional
products such as wire harnesses,
connectors and other components
of a vehicle’s nervous system.
But the company’s fastest growing product line is active safety —
the array of radar, cameras, control units and software that make
up collision avoidance systems.
That portfolio generated $160
million in revenue last year, and
annual sales are expected to grow
50 percent this year.
In Europe, automakers need collision avoidance technology because it’s required for a five-star
crash rating, notes Scott Pagington, Delphi’s global product manager for electronics and safety.
In November, Delphi signed a
deal with Ottomatika Inc., a Pitts-
Delphi Automotive’s strategy focuses
on smart technology, lots of software
BY DAVID SEDGWICK
CRAIN NEWS SERVICE
Delphi Automotive’s brain trust
thinks it has a winning business
strategy — smart technology with
a heavy dose of software — and it’s
likely to stick with that plan under
its new CEO.
Kevin Clark, who became CEO
on March 1, is a finance guy with a
background in private equity.
Clark, 52, joined Delphi in 2010 after he helped launch Liberty Lane
Partners, a private equity firm in
Hampton, N.H.
His background in finance and
private equity has proved useful.
In recent years, Delphi has
added several of what former CEO
Rodney O’Neal called “bolt-ons,” or
acquisitions that beef up the Troy-
based supplier’s existing products
without transforming the company.
Clark “was a key driver” in those
acquisitions, and he helped
arrange the sale last month of Delphi’s thermal division to Mahle
GmbH, according to company
spokeswoman Andrea Knapp.
The biggest deal came in 2012,
when Delphi acquired FCI Group’s
motorized vehicles division, a maker of electrical connectors, for nearly $1 billion. Delphi now is the
world’s second-largest supplier of
automotive connectors, Knapp
said.
But a smaller deal, Delphi’s partnership with Ottomatika Inc. in November, hints at the company’s future. Ottomatika, a Pittsburgh
startup, develops software for auto-
mated driving.
During a Feb. 5 conference call
with industry analysts, Clark predicted that Delphi’s active safety
revenue will rise 50 percent annually for the next five years.
Delphi enjoys strong demand for
radar, cameras and computer chips
that control multiple sensors.
“That’s where we’ll continue to see
tremendous growth,” Clark said.
To feed that growth, Clark said
there may be opportunities for
“relatively small technology investments” in software developers,
as well as more traditional acquisitions.
Clark said, “Software is becoming a bigger component of our
product portfolio, without a
doubt.”
From Automotive News
Page 17
LEANER AND MEANER
Over the past decade, Delphi has become smaller, profitable and far less
reliant on General Motors.
2005
2014
Net sales
$26.95 billion
$17.02 billion
Net profit (loss)
($2.36 billion)
$1.35 billion
Employees
185,200
127,000
R&D
$2.2 billion
$1.3 billion
Plants, R&D centers
303
144
GM share of sales
48%
17%
Source: Delphi
burgh startup that develops software for automated driving. That
collaboration bore fruit in January when Delphi unveiled its driverless vehicle.
Software will be a key differentiator for other smart technologies such as fuel injectors, which
require sophisticated control
units to produce low emissions.
In the auto industry, hardware
is a commodity with declining
prices. Software is where the profits are.
“We began the conversion to
smart products over a decade
ago,” O’Neal recalled. “We wanted
to sell sophisticated black boxes
— ‘thinking’ products. We’ve
done a great job adding intelligence to our products.”
From Automotive News
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20150316-NEWS--0018-NAT-CCI-CD_--
3/13/2015
5:12 PM
Page 1
Page 18
March 16, 2015
CRAIN’S DETROIT BUSINESS
Biz climate: Entrepreneurial ‘transformation is underway’
■ From Page 1
“That’s why we are really seeing
over the last few years many of the
improvements in the rankings we
developed.”
Among the areas where Michigan ranks in the top 10 nationally
are growth in new business owners (No. 2); private lending to small
business (No. 2); increase in highperformance firms (No. 5); exportrelated jobs (No. 6); and export in-
tensity growth (No. 7).
It also ranked well nationally in
high-tech manufacturing employment (No. 2); physical science and
engineering workers (No. 4); industry research and development
(No. 5); the number of workers
with bachelor’s, graduate or professional degrees or related certificates in fields relevant to techbased economic development (No.
5); and university R&D (No. 8).
The 150-page report, which has
137 different metrics from 20032013, generally gives a positive outlook for entrepreneurs in the coming decade but does say there are
challenges that inhibit entrepreneurial success.
“Entrepreneurial vitality is a
difficult index to impact,” said
Graham Toft, president of Floridabased GrowthEconomics Inc., who
developed the methodology used
in the report and authors it every
year.
“The state’s high level of large
industrial and corporate activity
overwhelms the activity in the entrepreneurial sector. Although improving, it will take many years
for Michigan to build its Entrepreneurial Vitality to match its standing 100 years ago. Fortunately, for
Michigan, the positive Entrepreneurial Change Index suggests
this transformation is underway.”
As the president and CEO of the
New Economy Initiative, Dave Egner
invested more than $100 million in
Southeast Michigan entrepreneurship since 2007, so he’s not surprised to see the stronger showing.
“It’s terrific to see the uptick in
entrepreneurial output, and I’m
not surprised about it,” Egner
said. “It started basically at the
bottom of the auto bust, and you
had a lot of folks starting to understand that they had to look for options outside of what had been the
state’s core industry for the last 70
years.”
But, as he
looks forward,
Egner sees the
need for investment to be made
in things like
quality-of-life issues, placemaking and “grassroots” startups,
Durance
such as neighborhood businesses like restaurants and dry cleaners.
“We shouldn’t confuse progress
with success,” he said. “We have to
get a longer-term funding horizon.
We have to focus on those things.”
It’s important that Michigan not
take a victory lap just yet, said
Kurt Metzger, the retired founder
of Data Driven Detroit who spent
nearly 40 years doing information
and statistical analysis locally.
He is pleased and impressed
with the report’s findings, but says
the state’s foundation for entrepreneurial activity is only sustainable
for the short term. He sees a shortage of investment in second-stage
business investment.
“We are big on getting people
starting, but do we have the
monies to help companies grow?”
he asked. “Second-stage is critical.
I don’t think we are at a point
where we can say we are ready to
take off and that this is going to
sustain us yet.”
The report reflects some of his
concerns. Michigan ranked 33rd
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nationally in access to second- and
third-stage venture capital, a fiveslot decline since 2003; whereas the
state showed a 12-spot improvement, to 22nd, in terms of seed and
early-stage venture capital.
Still, continued improvement in
all three indexes is positive, said
Ned Staebler, vice president for
economic development and Wayne
State University and newly appointed president and CEO of TechTown
Detroit, a nonprofit incubator and
accelerator.
“I don’t think you need to be a
rocket scientist to know this is
good,” he said. “It’s a real positive
step for Michigan.”
The report is sponsored by Clark
Hill PLC, Crain’s Detroit Business,
Consumers Energy, the DTE Energy
Foundation, Michigan Municipal
League, Michigan State Housing Development Authority, Presidents Council –
State Universities of Michigan, the
Small Business Association of Michigan and Varnum LLP.
MiQuest has 13,000 members, including more than 5,000 secondstage businesses. It was formed in
2014 as a merger between Ann Arbor-based Great Lakes Entrepreneur’s
Quest and Lansing-based Small Business Foundation of Michigan, which
previously created the report.
Access the report on MiQuest’s
website: miquest.org.
Kirk Pinho: (313) 446-0412,
kpinho@crain.com.
Twitter:
@kirkpinhoCDB
BANKRUPTCIES
Macomb Music Theatre
owners file Chapter 11
The Macomb Music Theatre in
Mt. Clemens has filed for Chapter
11 reorganization.
The 94-year-old theater, owned
since 2012 by Wally Mona and
Marc Beginin, was put in receivership Feb. 4 in a lawsuit by Domestic
Uniform Rental Inc., Farmington
Hills, that led to a $40,000 judgment.
But the receiver, Paul Nine of
Paul L. Nine & Associates PC, Bloomfield Hills, said that ended when
companies owned by Beginin and
Mona — M&W Holdings LLC, Macomb Development Group LLC, Macomb Entertainment Group Inc. and
Emerald Entertainment Group Inc. —
filed for bankruptcy last week. The
companies own the theater and the
former Johnny G’s Bar and Grill next
door along Walnut Street, along
with their liquor licenses.
The companies claim they owe
between $500,000 and $1 million to
creditors — including $561,826 to
Revere Capital LLC for working capital. Revere has assigned that debt
to Caixa Preta LLC, listed as the
largest creditor. Gratiot Manchester Development LLC is second
largest at $100,000.
Also filing for protection in U.S.
Bankruptcy Court last week was FNH
LLC, 40900 Woodward Ave., Bloomfield Hills, voluntary Chapter 7.
Assets:
zero;
liabilities:
$16,573,102.22.
— Chad Halcom, Natalie Broda
20150316-NEWS--0019-NAT-CCI-CD_--
3/13/2015
4:48 PM
Page 1
CRAIN’S DETROIT BUSINESS
March 16, 2015
Page 19
Blake’s: Seeds of cider
Wings: Ready to dig into arena site
■ From Page 3
■ From Page 1
sales in Macomb, Oakland and
Wayne counties during its first
full year of operation.
Growth was faster than expected, he said, with the company producing 65,000 gallons of hard cider
— well above the 15,000 it had projected for its first year.
“We were lucky to come in at the
right time,” Blake said.
Hard cider has been growing in
popularity over the past four years
as a few big national hard cider
brands, including Woodchuck and
Angry Orchard, started to invest
more heavily in marketing, he
said. “That really left (an opening)
for us smaller to medium-size guys
to try to capture that craft, qualitybased market.”
At the same time, there’s been a
big push from people looking for
gluten-free drinks, and cider
counts among them, Blake said.
And people in Michigan are so
familiar with cider mill traditions
that “it was just a powder keg waiting to go off,” he said.
Blake, 25, founded the company
with his father, Paul, and uncle
Pete, the owners of Blake’s Orchard Inc.
After growing up in and around
the family’s apple orchards, he attended Michigan State University
and earned a bachelor’s degree in
pre-law and economics. While in
college, he’d come home during
summers and on weekends in the
fall to help at the family farm. He
began experimenting with hard
cider through batches in his
garage as he finished college. In
fall 2011, he returned to the family
business and spent a year and a
half learning the business.
During that time, he worked to
persuade his father and uncle to
help fund the launch of the cider
house and winery. The need to diversify to a year-round source of
revenue following a tough season
in 2012 — when about 90 percent of
Michigan’s apple crop was lost —
helped.
But the two were finally convinced, Blake said, when he pointed out a cider house and winery
would be a way to keep families
whose children had grown up coming back to the Armada cider mill
property that had been welcoming
visitors since 1946.
The hard cider company and its
10,000-square-foot cider house and
winery opened in October 2013,
with Mike Beck, co-owner and
cider maker at Uncle John’s Cider
Mill in St. Johns, mentoring him,
Blake said.
It started out distributing cider
in bars, chain stores, independent
grocers, convenience stores and
drugstores initially in Macomb,
Oakland and Wayne counties,
Blake said. By last fall, it was distributing in Lansing, Bay City,
Traverse City and Ann Arbor.
A YouTube video helped, as did
its first television commercial, a
30-second clip that aired in the fall
on cable stations.
The company has hired 40 employees since opening a year and a
half ago, and it expects to add at
least another 12 by May in sales
and marketing, cider making and
production, Blake said. The operation, which Blake expects will produce 120,000-150,000 gallons of hard
cider this year, has reinvigorated
the family business, creating a
symbiotic relationship, he said.
Last year, the Blake’s cider mill
and cider house property saw
500,000 visitors, up an estimated
10-15 percent from 2013, he said.
Three quarters of those people
came in August through October,
Blake said.
At the same time, “hard cider
has given us a year-round product
we can produce and sell,” he said.
New orchards
Since launching, Blake’s Hard
Cider has used the dessert apples
the family grows for picking and
non-alcoholic cider production, varieties like McIntosh, Honey Crisp
and Golden Delicious, Blake said.
From them, the company has produced four year-round ciders, three
seasonal varieties and a signature
series of limited release ciders.
Dessert apples make really good
hard cider, but there are other varieties that yield a more tannic
and astringent cider akin to European cider, which appeals to
purists, he said. This spring,
Blake’s Orchard is planting new
heirloom varieties of apples on 15
acres, and an additional 7 acres of
dessert apples.
The company plans to continue
to make the hard cider made from
dessert apples available in cans,
kegs and 22-ounce bombers and to
market the heirloom cider or “artisan line” in champagne-style bottles, he said.
To attract patrons to its cider
house, which is admittedly “out in
the country,” Blake said the company began hosting folk musicians
on Friday nights in January. And
in May, it plans to begin offering
popcorn and 35 mm movies like
“Casablanca” on its patio.
Other Michigan apple and cider
operations also see opportunity in
hard cider.
Spicer’s Carriage House Cellars
opened in 2009 inside the farm
market at Spicer Orchards in Fenton.
And Miller’s Big Red Farms in
Washington Township is also moving into the hard cider market. After
pushing the project back a year, it
expects to have its licensing to produce hard cider and open a tasting
room in its renovated cider mill in
June, said partner Jeff Mulholland.
It will do small production of
cider and hand bottle that in winestyle bottles from the northern
Macomb County site. But the bulk
of its production will be done at
Brew Detroit in Detroit, he said.
He plans to begin distributing
in the tri-county area in mid-June
and to expand statewide within
the coming year.
Hard cider has always been a
fairly good seller, said Mulholland,
who sold his Commerce Townshipbased Craft Distributors Inc. in 2004,
seven years after founding it in his
last year at Hope College.
And that demand has picked up
in recent years, he said. “It’s a
pretty significant trend and a
growing trend.”
And as Blake noted, it’s a yearround revenue generator, Mulholland said.
Sherri Welch: (313) 446-1694,
swelch@crain.com.
Twitter:
@sherriwelch
pavement — meaning heavy equipment must be moved while the
ground still is frozen.
The arena will be built on about
12 acres of mostly vacant or derelict
land west of Woodward Avenue and
north of the Fisher Freeway. About
$50 million was spent by Olympia to
buy the land, along with adjacent
parcels for ancillary development.
A ceremonial groundbreaking
was staged in September amid an
elaborate temporary arena-like area
built from shipping containers at
the site of the facility.
The 20,000-seat, eight-story arena
with a lower bowl that will sit 40 feet
below ground will replace cityowned Joe Louis Arena, which
opened in 1979 at a cost of $30.3 million. It will be razed after the Red
Wings depart.
Planned next to the new arena are
a public piazza, residential units
and a 1,200-space, five-story garage
that has one level underground.
The arena is a “deconstructed”
design that pulls the glass-roofed
concourse, offices and other elements into separate buildings connected but outside the arena bowl to
make its restaurants and retail
available when the venue isn’t being used for hockey or events.
The roof will be LED-lit and can
change colors or display images.
Work on the new arena will happen concurrently with the M-1 Rail
streetcar project that’s been underway since July, creating one of the
busiest major new construction periods for Detroit in recent memory.
The arena project is being financed through a mix of public and
private money and is the centerpiece of a 45-block mixed-used urban
revitalization plan that includes
$200 million in additional new housing, offices, retail and bar/restaurant space.
Detroit’s Downtown Development
Authority will own the arena, and
Olympia will operate it under a
35-year concession management
agreement that allows for 12 subsequent renewal options of five years
each. Olympia keeps all revenue
from the arena, a provision that has
fueled some public grumbling.
The $200 million effort to create
five neighborhoods around the arena will happen concurrently with
construction of the arena, Olympia
has said, and is privately funded.
The company still is sorting out
the approvals for the arena work,
and continues to seek investors for
the ancillary development.
Specifically, Olympia needs the
city to rezone the site from general
business to a developer-friendly designation called planned development. The change was put off in November while Olympia and the city
council negotiated details such as
the number of parking spaces.
A rezoning vote is expected within the next month.
“We continue to work with City
Council on zoning approvals so we
can bring 8,300 construction and
construction-related jobs online and
begin to hire Detroiters and others
— as well as local, regional and state
companies — to build this transformative project,” Kuiper said.
Some work, such as demolition of
the Temple Motel, was done last fall,
along with ongoing utility relocation and other site prep work.
Rezoning isn’t required to begin
the major earth-moving, such as ex-
cavation and site prep work.
Southfield-based Barton Malow Co.,
Detroit-based White Construction and
Indianapolis-based Hunt Construction
Group are jointly managing construction of the arena.
The subcontractors that will do
the upcoming earth-moving haven’t
been disclosed by Olympia, but will
be in coming weeks, Kuiper said.
Detroit-based civil engineering
firm Giffels Webster has been hired
as a design consultant, and the Detroit office of Parson-Brinckerhoff is
the traffic engineer.
Ann Arbor-based SmithGroup JJR
is handling the landscape design.
White Plains, N.Y.-based StreetWorks leads the urban planning and
design for the project. It specializes
in mixed-use and commercial development, planning and financing.
Also working on the project is Heritage Development Services LLC, a unit
of Detroit-based economic development consultant The Diggs Group Inc.
President and CEO of The Diggs
Group is Douglass Diggs, director of
the Detroit Planning and Development
Department under Mayor Kwame
Kilpatrick and former director of
community and economic development for Detroit Renaissance Inc.
The original designer of the arena
was Kansas City-based 360 Architecture, which last year was acquired
by architectural and engineering giant HOK.
The same design team continues
to work on the arena under the HOK
name. HOK designed Comerica
Park, the home of the Ilitch-owned
Detroit Tigers, which opened in 2000.
Bill
Shea:
(313)
446-1626,
bshea@crain.com.
Twitter:
@bill_shea19
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20150316-NEWS--0020-NAT-CCI-CD_--
3/13/2015
4:36 PM
Page 1
Page 20
March 16, 2015
CRAIN’S DETROIT BUSINESS
HealthPlus: Red ink prompts order to find financial partner
■ From Page 3
Inc., is allowed to renew policies but
not write new ones, she said. The
state also is allowing HealthPlus to
operate its self-funded PPO and
HMO business without restrictions.
HealthPlus Partners, a Medicaid
HMO, is doing well financially and
is unaffected by the state order.
“We knew that 2014 would be
challenging. We obviously weren’t
able to forecast the numbers too
good and price our products,” Bilitzke said. “We are a $1 billion
company with 35 years of providing health benefits. We had 33
great years. We just hit a bump in
the road (last two years).”
Bilitzke said what led to actuari-
al miscalculations were the new
rules mandated by the Affordable
Care Act that require plans to offer
10 essential health benefits and
limit its medical underwriting to
age, smoking and geography.
“We took on 20,000 new individual PPO members in 2014. We got
very high users (of medical services) and lost money on them,”
Bilitzke said. Total number of PPO
members for HealthPlus was
33,162 as of last week.
In 2014, HealthPlus Insurance
Co. posted a negative surplus of
$4.8 million, which prompted the
state action, according to Miller. A
negative surplus is reported liabil-
ities exceeding assets.
HealthPlus of Michigan HMO
lost $17.7 million in 2014 and $6.95
million in 2013, according to financial reports the company filed with
the state. Total managed care revenue increased 2.4 percent to
$502.3 million last year from $490.4
million in 2013. PPO losses and
revenue were unavailable.
“We are paying claims, paying
commissions and meeting our
provider obligations,” Bilitzke said.
In an e-mail to Crain’s, Rick
Murdock, executive director of the
Michigan Association of Health Plans,
said some commercial HMOs have
experienced a downturn in mar-
gins the past
year. He said he
couldn’t point
solely to the Affordable Care
Act.
“There continues to be great
uncertainty due
to ACA enrollment and the seMurdock
quence of developing rates and filing prior to
understanding the complete dynamic of your enrollment, and the
limitation on underwriting limits
the ability to finesse these concerns,” he said.
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Murdock said HealthPlus has an
outstanding record of prudent operations over the years. “We are confident that HealthPlus is taking
steps to improve its financial situation and understand the situation
should have no impact on existing
members or providers,” he said.
Over the past two months, Bilitzke said, HealthPlus has begun to
cut costs and restructure operations to improve efficiencies.
“We are reorganizing teams, our
formularies (terminated its Medicaid formulary), working on better
disease management (savings already about $1.8 million) and improved care coordination” to reduce costs, Bilitzke said.
But Bilitzke said, at this time,
HealthPlus is not considering layoffs, a hiring freeze or wage cuts.
However, last October, CEO
Bruce Hill left for unspecified reasons. The company board appointed
Nancy Jenkins, former vice president of community programs and
customer experience, to replace Hill.
Last week, HealthPlus also
shared information on PPO and
HMO policy writing restrictions
with its agents, physician providers
and employer groups.
Bruce Marwil, president of Marwil & Associates, a Farmington
Hills-based agency, said HealthPlus has been easy to work with
product prices to customers and
compensation was always fair.
“I am hoping that they can
right the ship, find a partner and
stay as a carrier in this marketplace,” Marwil said.
Jay Greene: (313) 446-0325,
jgreene@crain.com.
Twitter:
@jaybgreene
Arbor names Pamela Applebaum
to succeed father as president
Bloomfield Hills-based Arbor Investments Group LLC has appointed
Pamela Applebaum as president,
replacing her father, Eugene, who
in 1974 co-founded the drugstore
chain that gave the investment
group its name.
Eugene Applebaum will continue
at the investment firm as CEO.
Pamela Applebaum
has
worked at Arbor
Investments for
more than a
decade, most recently as vice
president. She
also serves on
the boards of the
Beaumont FoundaApplebaum
tion, is a trustee
of Cranbrook Schools and is an officer
of the United Jewish Foundation of Metropolitan Detroit.
Arbor Investments is a holding
company that oversees the family’s financial ventures, including
real estate, private and philanthropic investments. The company was formed in 1998 after Arbor
Drugs was sold for $1.5 billion to
Woonsocket, R.I.-based CVS Corp.
Arbor Drugs was co-founded by
Applebaum and Bruni Manni. It
went public on the Nasdaq exchange in 1986 and at the time of
its sale was the eighth-largest drug
chain in the country.
— Tom Henderson
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4:36 PM
Page 1
CRAIN’S DETROIT BUSINESS
March 16, 2015
Page 21
Transit: DDOT turns to data to improve service
■ From Page 3
The hope is that a deep dive into
fresh data can fuel some fixes as
Mayor Mike Duggan’s administrator labors to meet a pledge to have
the buses running on time by the
end of 2015.
Unsurprisingly, the city’s effort
to use data to create a more efficient city bus system isn’t a regional effort — the suburban bus
system that links to DDOT chose
not to participate in the analytics
effort, opting instead to rely on inhouse metrics. But Transit Labs
hopes it can eventually segue the
Detroit work into data that can
help drive suburban-linkage improvements.
How it started
Transit Labs founder Dag Gogue
pitched the analytics idea in September to DDOT Deputy Director
Paul Toliver at the annual Intelligent Transport Systems World Congress, which was held in Detroit.
A deal was struck that month
that calls for the city to get the analytics for free.
Why free? Simple: Detroit is
broke and Transit Labs, as a startup, needs résumé fodder to secure
transit agency contracts.
How does it work? Transit Labs
uses data, mapping, predictive
modeling and game theory to create analytics. The company is using DDOT’s own data, collecting
new information, and it overlays
all of it with the latest census and
economic activity data.
Numbers are crunched on issues such as wait times at stops,
availability of functioning buses,
and drivers.
“We want to look at the raw data
to see if there is any pattern,”
Gogue said.
The intent is to create a more efficient system that serves users
and businesses — getting people to
their jobs on time — by using datadriven analysis that tells transit
planners where critical problems
exist. An example: Flagging where
bus stations are misaligned, an issue that can be quickly fixed.
“At the end, we hope to help develop a brand-new system,” Gogue
said. “The changes are not going to
be overnight.”
Transit Labs has its own proprietary software and services, and it
uses mapping software from geographic information systems giant
Esri. The analytics and data are
stored for the city on Azure, Microsoft’s cloud storage infrastructure for government.
DDOT Director Dan Dirks said
via email that he’s not yet seen recommendations from Transit Labs.
He is a Detroit native who was
manager of SMART from 1998 to
2007.
New thinking, new buses
DDOT has struggled for a long
time.
“The network needed a lot of
help. Over the years, the ways
DDOT and the city have tried to
improve performance was hiring
more drivers, buying more buses.
That’s a pretty costly activity,”
Gogue said.
Instead, the agency must focus
on placement of stops in relation to
where people live and where jobs
Transit officials keep watch on record-keeping
Getting buses to run on time isn’t the only issue Detroit Department of Transportation Director
Dan Dirks has to sort out.
The Federal Transit Administration’s fiscal-year 2012 triennial review, begun in 2011 and delivered
to the agency in January 2013, revealed that that DDOT failed to
maintain written records for tens
of millions of dollars in contracts
and changes to work orders. It
also said the agency has too many
buses — an issue that has been
rectified by DDOT retiring older
coaches.
Crain’s broke the news about
the report in January 2014. Dirks
acknowledged he became aware
of the federal report before taking
the DDOT post and said he’s been
working to create solutions, and
establish training, to rectify the
problems.
DDOT has submitted responses
to what the FTA said were deficiencies in how the bus agency
handles its affairs governed by
federal grant dollars.
“We are still working with FTA
and are moving toward complete
compliance with the issues that
were cited,” Dirks said.
The FTA has not responded to a
request for an update. Last year,
it declined to discuss the review
because it was ongoing. It did acknowledge that DDOT had submitted corrective responses to the
deficiencies and that it is working
with DDOT on the issues.
The FTA review is required by
law for any transit agency receiving transit grants from Washington. Failure to fix problems can
result in funding being withheld.
The findings repeatedly outline
a lack of record-keeping.
For example, the report said
DDOT has no written record of
procurement history for an order
of 46 buses bought from Hayward,
Calif.-based Gillig Corp. with $18.9
million of federal stimulus money
awarded in March 2010.
FTA wanted an explanation of
how a 1999 DDOT contract with
the San Francisco-based transit
consultant URS Corp. went
through several change orders
without evidence of a paper trail.
DDOT in January 2004 boosted
the contract to $3.1 million, then
to $10 million in June 2005. In September 2009, it increased the value to $40 million, the FTA said,
without written explanation.
Dirks said plans are already in
place to ensure such record-less
spending doesn’t occur again.
“For an example, all procurements of $50,000 or more with
FTA funds must be preapproved
by FTA from RFP development
through purchase and acceptance,” he said.
Dirks also said backup procedural manuals are being completed to rectify many of the problems from the report.
“No funds are in jeopardy of being lost or deprogrammed,” he
said.
— Bill Shea
are, he said.
There have been massive
changes in population and jobs,
but DDOT has done little evolving,
Gogue said.
“Cities are changing very rapidly. People are moving around a lot
more,” he said. “We can no longer
afford to rely on planning every
five years.”
To its credit, DDOT hasn’t been
idle. It has ordered 80 new buses to
replace its aging fleet, and has
launched an app to help users
track buses in real time.
A $13 million federal air quality
program grant is paying for 31 buses, and another 49 buses are via $25
million from the Federal Transit Administration. The Michigan Department of Transportation is providing
the required 20 percent local
matching funds, DDOT said.
Seventy of the new buses are
standard 40-foot coaches. The other 10 are 60-foot articulated buses,
for use on the city’s most heavily
traveled routes. Those are scheduled to arrive in September.
To expedite delivery, DDOT said
it piggybacked bus orders already
in production for the Connecticut
Department of Transportation and for
Pittsburgh and Rochester, N.Y.
Once the new buses are in service, DDOT will have a fleet of 294.
The agency in January rolled
out the “Detroit Bus” app for Android and Apple mobile devices
that allows users to track buses in
real time and plan their trips. Android data shows it has been installed between 1,500 and 5,000
times, and Apple data wasn’t immediately available.
Getting DDOT to run on time
has been a priority for Duggan
since he took office last year.
He told reporters during a
DDOT press conference in January that his goal is a first-class bus
system — a tall order, given the
systemic problems that have fueled public complaint for decades.
“We’re not close to that goal yet,
but we’re heading in the right direction. And 2015 is going to be the
year that DDOT actually runs bus
service according to its published
schedules,” Duggan said.
DDOT has experienced a drastic
reduction in its ridership statistics: In 2014, the bus system provided 25 million rides, a decline
from 31 million in 2013. It provided
36 million bus trips in 2011.
The decline should be attributed
to DDOT’s inability to get enough
buses on the streets, Dirks told
Crain’s last year.
Duggan, who ran SMART in the
early 1990s, and Dirks have
promised improvements not only
in timely bus service but also improved safety with the installation
of security cameras on buses.
The city will spend $3 million for
the cameras, which are from Canada-based Seon. Sixty now have
cameras, and the entire fleet will
have them by the end of August,
according to DDOT.
DDOT relies on a $51.8 million
subsidy from the city to balance its
$138.2 million fiscal-year 2014-15
budget. It has 917 employees.
is the public believes we operate a
good system, and that is evidenced
by the 66 percent approval of the
SMART millage last year.”
The historic lack of departmental cooperation, dating back
decades and rooted largely in suburbs-vs.-city funding worries, has
fueled embarrassment about local
public transportation — culminating in a Detroit Free Press story
last month about Detroiter James
Robertson and his commute to
Rochester Hills that includes 21
miles of walking. The story got international attention.
In September, Gogue rode buses
from Detroit’s downtown Rosa
Parks Transit Center to Dearborn.
It took hours.
“In the course of that trip, I met
at least six James Robertsons,”
Gogue said. “They have at least a
four-hour
commute
because
SMART and DDOT don’t talk to
each other. That creates a lot of inefficiencies with routes and stops.”
DDOT’s woes run far more
deeply than SMART, so tackling
the city system is a good start,
Gogue said.
“I’m still optimistic, as we release more and more tools for
DDOT, that will there will an interest (from SMART),” he said.
An old issue
While using 21st century data
analysis is promising, the situation is imperfect. That’s because
the analytics are solely for DDOT
and don’t include the region’s suburban bus system, which, in theory, is supposed to work in conjunction with DDOT to move people
around the region.
The Suburban Mobility Authority for
Regional Transportation balked at
being part of a joint pilot project,
Gogue said.
“I hadn’t appreciated the political dynamics between SMART and
DDOT,” he said.
John Hertel, SMART’s general
manager, said via email that the
bus system he oversees now has its
own data, thanks to a recently installed Automatic Vehicle Location system, and will do its own
number crunching.
“We did not need to duplicate
the effort and simply choose to utilize our resources and time in another way,” Hertel said, “The fact
New technology
Use of cutting-edge analytics in
fixed-route transit planning isn’t
common, Gogue said.
The Detroit work is to bolster
Transit Lab’s work roster; for
most clients, pricing is based on
fleet size, and contracts are
arranged so departments pay only
when they use analytics services.
Trying to fix a bus system is a
business for Gogue, but he also
gets enjoyment from it.
“This is a lot of fun for us. We get
to come into a system that hasn’t
changed much and has so much potential. The before-and-after picture
for DDOT can be amazing,” he said.
Bill Shea: (313) 446-1626,
bshea@crain.com.
Twitter:
@bill_shea19
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20150316-NEWS--0022-NAT-CCI-CD_--
3/13/2015
4:43 PM
Page 22
Page 1
March 16, 2015
CRAIN’S DETROIT BUSINESS
RUMBLINGS
WEEK ON THE WEB
FROM WWW.CRAINSDETROIT.COM, WEEK OF MARCH 7-13
Varvatos’ new
store recalls his
fashion roots
enswear designer
and Detroit native
John Varvatos is a
global brand, with 20 stores
dotting the globe from Hong
Kong to New York City.
Last week, Detroit became
the 21st city
to feature
one of Varvatos’ outposts of
rock ’n’ roll
cool.
The 4,600square-foot
store opens
Varvatos
onto Woodward Avenue from the first
floor of the former
Schwankovsky Temple of Music, which is better known
today as the home of hot
restaurant Wright & Co. on
the second floor.
The musical connection is
serendipitous for Varvatos,
who is a connoisseur of rock
and punk, from Motown to
MC5. He has his own record
label and regularly features
artists in his campaigns, including Ziggy and Stephen
Marley for the spring/summer 2015 collection.
But he got more than his
taste in music on the streets
of Detroit. This is also
where Varvatos got his early fashion inspiration.
“When I was a kid, I would
ride the bus downtown to my
dentist and my mom would
say, ‘Don’t go any further
than that building,’ ” Varvatos told Crain’s. “But of
course, me, I would wander
around and I would go by
Henry the Hatter and watch
these guys in these purple
hats. And I loved it. It was
probably my first entry to
fashion was walking around
on Woodward Avenue.”
Now he hopes to be a part
of inspiring others to return
to Woodward Avenue.
“People want the city to
win,” he said. “If we can be
a little spark to help ignite
that, I’d be thrilled.”
The price point in the
store is higher than what
Detroit has seen in the recent past — $200 T-shirts,
$2,000 leather jackets — but
Varvatos believes his luxury retail can thrive downtown. The state, after all,
has the country’s fifthlargest concentration of ultra-wealthy individuals, according to private wealth
consultancy Wealth-X.
“I look at it like there is
an opportunity to bring people from the ’burbs downtown, which you desperately need, and to bring a lot of
M
Sources: Legoland
coming to Great
Lakes Crossing
T
tourists,” Varvatos said.
“It’s aspirational.”
Sources: Gilbert to add
another Detroit building
The sale of One Detroit Center to Dan Gilbert is all but a
done deal and expected to
close by the end of the month
for about $100 million.
Sources told Crain’s last
week that estoppel certificates have been sent to the
tenants of the 957,000square-foot skyscraper at
500 Woodward Ave. with a
very distinct name included
in them: 500 Webward LLC.
In commercial real estate, an estoppel certificate
is sent to tenants of a building that is being purchased
using commercial debt (as
opposed to cash) to confirm
things like major lease
terms such as duration and
rate. They are typically sent
to tenants in the late stages
of the purchase process,
sources said.
Having “Webward” listed
in the estoppel certificate is
significant because it almost certainly means the
purchaser is Gilbert, the
founder and chairman of
Quicken Loans Inc. and Rock
Ventures LLC who has
bought more than 70 properties — buildings and
parking decks — in greater
downtown Detroit in the
last four years.
The term is sometimes
used on title work for
Gilbert-owned buildings on
Woodward Avenue.
(Interesting history:
Gilbert may have been contemplating buying the 45story building for quite
some time. Jim Ketai, CEO
and managing partner of
Gilbert’s Bedrock Real Estate
Services LLC, registered 500
Webward Avenue LLC in June
2012 but dissolved it in
March last year.)
As Crain’s reported three
weeks ago, Gilbert was one
of three finalists in what’s
known as the “best and final” offer stage to buy the
building and an attached
2,070-space parking garage.
The other two local bidders were Southfield-based
Redico LLC and Troy-based
The Hayman Co.
New York City-based iStar
Financial Inc. has a 90 percent ownership stake in the
building and parking
garage, and when a sale
closes is expected to maintain a ground lease of the
land on which the building
he same U.K. company that brought the
Sea Life Michigan
aquarium to Great Lakes
Crossing Outlets in Auburn
Hills has another attraction
planned for the site, sources
told Crain’s. London-based
Merlin Entertainment plc
plans to bring one of its indoor Legoland attractions inside the outlet center, according to sources.
Merlin Entertainment operates Legoland resorts/
theme parks in California,
Florida and Windsor, and
Legoland Discovery Centers
in Chicago, Dallas, Atlanta,
Kansas City and Boston.
COURTESY OF COSTAR GROUP
One Detroit Center is likely
Dan Gilbert’s next building.
and parking garage sit.
The buyer would receive
all revenue from the building and parking deck and
pay iStar and the retirement system annual rent on
a long-term ground lease.
One Detroit Center currently is about 67 percent
occupied, according to
sources. Major tenants include Clark Hill PLC, Dickinson Wright PLLC, PricewaterhouseCoopers LLP, Quicken
and the General Services Administration of the Internal
Revenue Service, according
to CoStar Group Inc., a Washington, D.C.-based real estate information service.
Truscott Rossman hires
Detroit office chief
Longtime public relations veteran Shaun Wilson
has been hired to run the
Detroit office of Lansingbased public relations and
nonpartisan political consulting firm Truscott Rossman LLC as a senior vice
president.
Wilson most recently was
vice president, director of
client and community relations for PNC Financial Services Group in Troy. He shuttered his Detroit-based
public relations firm, Wilson
PR, in 2007 to join PNC predecessor National City Bank
as a vice president.
Before that, he was vice
president at John Bailey & Associates Public Relations.
Bailey,
who sold his
firm in 2009,
came out of
retirement
last year to
become Truscott Rossman’s first
business
Wilson
strategist,
and works in the Detroit office in the Renaissance Center.
The Detroit office has five
employees. Its client list includes DTE Energy, Detroit
Medical Center and the city
of Detroit.
Wilson, 40, was a Crain’s
40 under 40 honoree in 2002.
He begins his new job
March 23.
ON THE MOVE
Gene Michalski, found-
ing CEO of Beaumont Health,
and Brian Connolly, former
CEO of Oakwood Healthcare
Inc. and president of Beaumont’s network development and future initiatives,
have opted to leave their
jobs to become consultants/
advisers at least through the
second quarter of 2015. New
Beaumont Health CEO John
Fox is set to assume full duties this week.
Detroit-based nonprofit Pewabic named Steve
McBride, Interlochen Center
for the Arts’ annual giving
director, as executive director. McBride, 54, succeeds
Christina Devlin, interim
chief administrative officer, and Heather Simmet, interim COO, at the historic
pottery organization.
Vernice Davis Anthony retired as health officer of the
Detroit Department of Health
and Wellness Promotion after
nearly three years. Deborah
Whiting, deputy health officer, is interim director.
COMPANY NEWS
Chassix Holdings Inc.,
the Southfield company that
raised concerns within the
automotive supply chain recently for missed bond payments and lawsuits against
underpaid vendors, filed for
Chapter 11 bankruptcy reorganization in New York.
Chassix is owned by Tom
Gores’ Platinum Equity LLC;
the bankruptcy petition is
believed to be the first filed
by a company owned by
Gores, who also owns the
Detroit Pistons.
Rochester Hills-based
Coastal Automotive LLC said
it signed a licensing agreement with the automotive
division of Midland-based
Dow Chemical Co. for automotive foam technology.
Coastal will manufacture
the technology, which
dampens external roach
and engine noise, and supply it to its auto customers.
Focus: Hope’s “Investing in Hope” fundraising
campaign ended with more
than $102 million committed
to the Detroit-based education-and-training nonprofit,
AP reported. The campaign
began in 2005 but was on
hold for three years amid
global economic troubles before resuming in 2011.
Bethesda, Md.-based
RLJ Lodging Trust sold five
Michigan hotels, including
three in Pontiac, as part of
a $240 million divestiture of
24 hotels nationally. The
company did not immediately say to whom the
Michigan hotels were sold
or their sale prices. The
Pontiac hotels sold were
the Marriott Auburn Hills Pontiac Centerpoint, Residence
Inn Detroit Pontiac Auburn
Hills and Courtyard Detroit
Pontiac Bloomfield.
After testing the waters
with a three-year partnership arrangement, Troybased Dynamic Rehabilitation
has sold its company to Pure
HealthyBack, an Orlando,
Fla.-based rehabilitation
equipment manufacturer
and treatment provider.
Terms were not disclosed.
The 8,000 square feet
in Midtown that housed
former gourmet grocer Ye
Olde Butcher Shoppe is expected to be turned into
restaurant space and open
this summer after its purchase by Detroit-based
American Community Developers Inc.
Grand opening festivities for Michigan’s first Field
& Stream outdoor store will
begin March 26 in Troy,
though the store held a soft
opening last week. The
store, in the chain owned by
Pittsburgh-based Dick’s
Sporting Goods, is on the site
next to Oakland Mall.
Ambassador Bridge
owner Manuel Moroun’s real
estate subsidiary plans to
develop a 400,000-squarefoot building on an approximately 40-acre parcel in the
I-94 Industrial Park. The
Detroit Economic Development Corp. board agreed to
sell the land to Warrenbased Crown Enterprises Inc.
for $2.24 million, and plans
a joint venture with a Detroit 3 automaker and its
supplier, said a memo to
the EDC board.
Troy-based HMS Manufacturing Co. will be among
six companies prominently
featured in Wal-Mart stores
and on its website as the
chain rolls out “womenowned” labeling during
Women’s History Month.
After five months of
preparation, Rochester Tap
Room celebrated its grand
opening. The Rochester
Hills speak-easy-style
restaurant will feature 60
craft beers on tap —more
than any bar in Oakland
County, says its owners.
The closing on the $20
million purchase of a 382unit senior living complex
in Southfield marked one of
the final deals to sell off a
local investor’s real estate
portfolio for around $60
million. A group of unidentified, primarily Israeli, investors purchased Bruce
Becker’s Solaire Active Adult
Community and will keep it
as a senior living community for people 55 and older.
Operations at the Jewish Community Center in
Oak Park could cease this
summer unless a funding
source is found to close a
$1.3 million budget shortfall, AP reported.
OTHER NEWS
Former U.S. Sen. Carl
Levin will chair the new Levin
Center at Wayne Law at
Wayne State University.
Levin,
whose 36
years in the
Senate ended in January, will
join the faculty at the
law school.
Officials
Levin
said the center will have an initial focus
on the legislative process
and oversight authority.
The aggregate revenue
for Detroit’s casinos rose in
February to $114.4 million,
up 3 percent from January
and 3.5 percent ahead of revenue for the same month
last year, said the Michigan
Gaming Control Board.
Detroit Public Schools’
third emergency manager,
Jack Martin, left his 18month job in January with
bonuses from the state totaling $50,000.
Wayne County Executive Warren Evans announced a spending freeze
for county government,
struggling with a budget
deficit of around $70 million, AP reported.
The Detroit Institute of
Arts was to open its “Diego
Rivera and Frida Kahlo in Detroit” exhibit Sunday. It
runs through July 12.
Gov. Rick Snyder,
speaking in Warren at the
Detroit Joint Electrical Apprenticeship Training Center,
said he favors potentially
increasing Michigan’s renewable energy portfolio
standard for utilities up to
24 percent by 2025, depending on the cost of natural
gas, as part of a comprehensive energy plan. State law
requires utilities to produce 10 percent of their
electricity sales by 2015
through renewable energy.
The Michigan House approved a bill cutting off the
state’s film incentives effective Oct. 1, AP reported.
The bill goes to the Senate.
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