20150316-NEWS--0001-NAT-CCI-CD_-- 3/13/2015 5:16 PM Page 1 ® 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 20150316-NEWS--0002-NAT-CCI-CD_-- 3/13/2015 4:24 PM Page 1 Page 2 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. 20150316-NEWS--0003-NAT-CCI-CD_-- 3/13/2015 5:11 PM Page 1 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 20150316-NEWS--0004-NAT-CCI-CD_-- 3/13/2015 4:24 PM Page 1 Page 4 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 [email protected] 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 ADDED BONUS: Upload your resume firm in the country, according to seasoned professional, into the ESD Job Bank, jobs.esd.org, a recent graduate or an free of charge. The Job Bank provides The American Lawyer, with revin-between careers job conﬁdential resume posting and is enue of $1.77 billion in 2013. It’s by seeker, you’ll ﬁnd your easy to use. far the largest firm to have an ofnext position at The fice in Detroit. The next-largest Cost to Attend: Engineering Society firm with an office in the city is ESD Members : Free of Detroit (ESD) Milwaukee-based Foley & Lardner Non ESD Members: $15 if registered by Engineering and LLP, which ranks 47th on the AmerMarch 31, 2015: $20 if registered 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 premier list. 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 [email protected] 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 20150316-NEWS--0005-NAT-CCI-CD_-- 3/13/2015 4:25 PM Page 1 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, [email protected] Twitter: @dustinpwalsh APRIL 13 HAVE A PROFOUND OUT-OF-THE-OFFICE EXPERIENCE. Fuel: Detroit SM SM Presented by 4/13/15, 8 am to 5 pm SOUND BOARD AT MOTORCITY CASINO In one exciting, power-packed business day, companies like yours will be inspired by the leadership ideas of Magic Johnson. Jessica Alba and Brian Lee (The Honest Co.). Seth Godin. Mark Fields (Ford Motor Co.). And other rock-star leaders. Don’t miss one of the biggest business events ever in Detroit. Seating is limited. Register today. FuelLeadership.com/register. 20150316-NEWS--0006,0007-NAT-CCI-CD_-- 3/13/2015 4:26 PM Page 1 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 [email protected] 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: [email protected] 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_-- 3/13/2015 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 objectives. As your goals change over time, we help you review your plan to make any necessary revisions. And we keep you involved every step of the way. ® 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 [email protected]untington.com HUNTINGTON PRIVATE CLIENT GROUP The Huntington Private Client Group is a team of professionals that includes Private Bankers and Personal Trust Administrators and Portfolio Managers from The Huntington National Bank and licensed investment representatives of The Huntington Investment Company, who work together to deliver a full range of wealth and financial services. Member FDIC. ®, and Huntington® and Listen, Plan, Advise ® are federally registered service marks of Huntington Bancshares Incorporated. Huntington ® Welcome.™ is a service mark of Huntington Bancshares Incorporated. ©2014 Huntington Bancshares Incorporated. 20150316-NEWS--0008-NAT-CCI-CD_-- 3/13/2015 4:32 PM Page 1 Page 8 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 DBpageAD_DBpageAD.qxd 3/10/2015 2:44 PM Page 1 Don’t buy this phone. The math is so simple. 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May not be combined with other offers. Other Terms: Offers and coverage not available everywhere or for all devices/networks. May not be combined with other offers. Restrictions apply. See sprint.com for details ©2015 Sprint. All rights reserved. Sprint and the logo are trademarks of Sprint. 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, [email protected] 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- “CAN DTE ENERGY HELP MY BUSINESS SAVE MONEY?” DTE Energy wants to help your business manage your energy usage to save money. We offer all kinds of energy efﬁciency information and tools, plus easy tips to help you be more efﬁcient. For instance, you’ll cut heating and cooling costs by simply adding insulation where there isn’t any, especially along piping and ductwork. Install a programmable thermostat to automatically lower heating and raise air conditioning temperatures during off hours. Seal doors and windows to prevent air leaks. You’ll ﬁnd even more ways to save using our Interactive Business tool. And you can ﬁnd a certiﬁed contractor with our Energy Efﬁciency Directory. It’s easy. Just go to dteenergy.com/savenow and start saving today. 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, [email protected] Twitter: @jaybgreene Stop QuoƟng and Hoping… Start Qualifying and Closing! Learn More At Our ExecuƟve Workshop On: March 26th www.gerryweinberg.sandler.com or Call 248-353-4030 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 womanowned ##(2&2.28/2%/ =5$4-=/ C+4=5$ $&4*++ 0-: 7<83B ;3B2 77" ,B8 2.("2&525."&8/2%/ B .<7B.-=:$)-=&)&+#C:4-&:"<<; 0;.;1<";%B7BB6*5%+3 -* =5$4-=/&*&: C+4=5$ $&4*++ 1'- ,;3 .73. 7<. 7.B ;2.($5%(/-&- @C)4:& -?+4 :1-' 8.;3 %.73" C 7 .BB (2(."28/"&((2$ 4&+)&: $ -?+4 -: " "3; %<3. .,; .," .BB 7(&&.5#&2.&2"(&$&- [email protected]))+$:5 -=+4 3:-: ;.B3" .<3 B "; B 2.2"2&($52"(&/&- @+:$&5(@ /45&+:+ 41-: <;3B ..3; .B ,". B .978&- <7..3=*:3C4&+",<<.%B7", 0 .71<8 %<.<[email protected] -* & (*+*&)@9 :/$+&& (*+ [email protected] /45&+:+ )- . 73. .73 " < 8 5 $& 6.($2 [email protected]$)+ /45&+: )3-' .8<3 .;3B .; .<B .BB /("$(.*- 4'[email protected]/5:&+ $&4*+ &))&+/5:&+:-:)+ #+4)*+#4 +/5:&+ #+4)*+#4 )-4 .""3 73< .<B .7; 8B 5/ .5#"&(.*- C+4=5$ -=+4+$&4*+ )30-0 ...3B <"3B ; B <,7 .(($5**$8(- 4$4&+ -)+ )4:-: ,73B <;37 8 ,8 .BB &"$."&"&&-+"$($, -4&)(4 -?+4/45&+:+ )):-: ..3 %73< ;BB C C ($6."&.5#$/&- @[email protected] /45&+: '-4 37 C ."38 .<" ..; .BB (./ 6.($2&- *)-#45 /45&+: 0-) 873; .B3< C C (2(."282%*"&/&- =&:$= [email protected] +! 13- ,3; 738 C <, . 8/2.&&525."&(.*- $4-+++45 /45&+:+ 14- 8;3< %.3B C <;" .BB ./;&8 4&)@+4+:: /45&+:+ $&4*+ '- ",38 <B37 ; 8 ; < !.6"/&- 4)+&+5$4& -4/-4: -=+5) '-: 83< 3B " B .BB .(52"(&/$5/! $&2 (* 4#[email protected]>5(@ -' .3B ,38 B "8 .BB ;5**$8 "&($52"(&/&- 4:))&-:: /45&+: 3-1 ";3 <;3" ; ; 7 "$$&&"5%(27.&- C+=C++ /45&+: 3-: "B3 ;.3B ; < ;B< .BB <--"(&/2.52"(&(- )4&&# /45&+: 4-4 <73 <37 ., <; 87 #((.$7"2.("2 [email protected]:)-?+4 41-1 <;3, ..3 C <B . .(5*&-+" 22 ./, !)-4&+4( /45&+:+ $&4*+ 41-: <83B B3B C 8 B 8B (7"&&5/2."/&- 3$4&5:&+-?&+# ::5 4-1 <<38 .;3. ."; .;< .7 -))[email protected]&>-):""< 0 .718,"%8 BB6???3((-:[email protected]:*53 -* <;"B& (--*=)=5".7" 07;"1,"8%<.,,6???34(/:4-)=*3 -* <,B.4+&>4C>3:4-&:"<B. 08817 <%,8<<6???3*-:-4 &:@ 5&+-3 -* ;"BB))[email protected]+5&+#",.. 0BB1;" %.B7B6???3:?-*++:4= (3 -* 8" 4&5?-):3=&:<,BB:4-&:"<<8 0;.;1 ,8%8,BB6???35:4:#& 5:3 -* "B"" [email protected](C>3:4)&+#&#$:5";.; 0 81,;,%7;BB6???3=?$)+3 -* .8B 3.<&)--=:$)"B78 0<"1 7%.8BB6???3>5 -%-&)3 -* ; .8B3& $&#+C>[email protected]+"." 0BB1 <8%77"6???34=5$:4= (&+#3 -* ..<&))&*5:3#&+?"8B 0,,17,,% ;B6*$4:--)3 -* ;,B;3*)&+-- $5:4&))5";B, 0<"1 ;% B6???3::&%#)-)3 -* ; [email protected]*&+#C>34-4+".<B 0;.;1",%BBB6???3?-)>4&+:4= (#4-=/3 -* <;7 C))+---$>+".; 07;"1878%,8BB6???34-#45 $>4-):3 -* "77;34:&-:C>3$5:4)-?+5$&/"B . 0 81,",%"<B6???3* 5:*/3 -* .,B BC))+-4-?+5:-?+-?+5$&/".; 07;"1"7,%[email protected]:4+3 -* < <BB)#4/$-!&:$!)--4-=:$) "B;;%7",8 0<"1,;8%<<BB6???3:$*45#+ @3 -* .7.B.& $&#+C>34-4+".<8 0;.;1"".%;8BB6???3#-#: $3 -* ;B8BB)#4/$-=&:<. 8&+#$*!4*5 "B< 0<"18""% 886???3/4-= :&-+5%/)=53 -* .;<<.+(5:[email protected])-4".B 0771<7<%; <;6???34 %5 53 -* <BBB-?++:4=&:;BB-=:$)"B7 0<"1<.;%.BB6???3?*5&3 -* .88 B [email protected])-4".B 07;"1<;%;BB<6???3'5> -* [email protected]/455-*=)=5".7" 07;"18".%<.BB6???35(-)-#&5:& 53 -*9:4-&: < 4 $4(-!4*&+#:-+&))5";;" 0<"1 ;% 6???3;!-4&+3 -* ???3!-4&+-+)&+3 -* "",4&)&+:3:-+/&5"<7 0 .7188;% " 6???3-?&+#&+=5:4&53 -* 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: [email protected]; 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: [email protected] 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: [email protected]; 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: [email protected]; 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: [email protected]; 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. [email protected]; 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: [email protected] 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, [email protected] 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 [email protected] 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 [email protected] 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 REAL ESTATE MARKET PLACE COMMERCIAL PROPERTIES BUSINESS OPPORTUNITIES THERAPY / CENTER Dynamic Rehabilitation is moving to Larger Space. Existing 6,000 Sq. Ft. Available for Sublease. Was $22 Sq. Ft, Now $18 Sq. Ft. On Hayes / S. of 19 Mile Rd. û BLOOMFIELD HILLS MONEY MANAGER û BILL McMACHEN Looking for Established Brokers/Advisors Ready for Independence, Higher Payouts and a Great Work Environment. Send Message or Resume to: (586) 915-4441 ~ [email protected] [email protected] Call or email today for information on a custom advertising plan! 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Walls, HR Manager [email protected] 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 Are you moving in the right direction? Let Rehmann help steer your practice toward success. Our team of dedicated professionals can go beyond traditional tax and accounting services to help you navigate changes successfully. Services such as practice valuation, revenue cycle management and practice assessment provide the support you need to keep your practice on course ... and your focus on what really matters: your patients. Contact me today to learn more. Tom Mulvihill, CPA, CGMA Principal [email protected] | 248.579.1100 Detroit, Ann Arbor, Farmington Hills, Troy rehmann.com | 866.799.9580 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, [email protected] 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, [email protected] 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, [email protected] Twitter: @bill_shea19 Want to become one of the healthiest workplaces in Michigan and improve your bottom line as well? Join us for breakfast at metro Detroit’s most unique hospital WED.| APRIL 22 Henry Ford West Bloomfield Hospital 7:30 - 9:30 a.m. Hear from a panel of 2015 Healthiest Employers who are using wellness as a strategy to drive workplace productivity, employee health and community well-being. Panelists will share their success strategies so your business (of any size) can create these same programs and turn your employees into happier and healthier individuals – resulting in stronger bottom lines and increased productivity. HAP’s wellness experts will be on hand to share tips for your success. To register, visit crainsdetroit.com/events or call (313) 446-0300 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. TOP FIVE SIGNS YOUR EMPLOYEES MIGHT HAVE INFERIOR DENTAL COVERAGE: THEIR NETWORK INCLUDES ONLY TWO DENTISTS. CLEANINGS CAN ONLY BE SCHEDULED ON THE LAST TUESDAY OF THE MONTH. ONLY THE TOP FRONT TEETH ARE COVERED. CAVITIES ARE NOT TREATED BECAUSE THEY ARE CONSIDERED “CHARACTER BUILDING.” THEY DON’T HAVE DELTA DENTAL. Give your employees access to two large networks of contracted dentists and award-winning customer service. Learn more at deltadentalmi.com/dentaldonebetter. 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, [email protected] 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 20150316-NEWS--0021-NAT-CCI-CD_-- 3/13/2015 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, [email protected] Twitter: @bill_shea19 www.crainsdetroit.com EDITOR-IN-CHIEF Keith E. 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Reproduction or use of editorial content in any manner without permission is strictly prohibited. 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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