Crains Other Voices 03-28-11

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www.crainsdetroit.com Vol. 27, No. 13 M A R C H 2 8 A P R I L 3 , 2 0 1 1 $2 a copy; $59 a year

Entire contents copyright 2011 by Crain Communications Inc. All rights reserved

Valassis, others try to get

the scoop on Groupon

Young leaders roundtable

tackles BING challenges

Conference puts

the D in idea

mode, Page 7

Wild ride: Community banks

health, share prices

may take

different

paths,

Page 11

See This Just In, Page 2

Idea: Detroit

4 leases bring Brownstown

complex to 80% occupancyFour leases, representing

872,000 square feet of space,have been signed in the pasttwo months at the Brown-stown Business Center, a 4.5-million-square-foot industri-al complex in BrownstownTownship.

The largest of the deals wasDetroit-based MTU DetroitDiesel, which took 395,000square feet as part of a recenttax credit from the MichiganEconomic Development Corp.

Also signing a lease wasCabot Street LLC, a logisticscompany, which signed for364,000 square feet. FederatedGroup Services, a Taylor-basedsales and marketing compa-ny, leased 61,000 square feet.And Toledo-based Marketingand Industrial Solutions Corp., aconsulting company for sup-ply chains and manufactur-

This Just In

Finance Extra

Page 3

BYDUSTINWALSH

CRAINS DETROIT BUSINESS

Automotive suppliers continue to conducttriage on the crippled supply chain after thedisaster in Japan this month.

With Japans supply base nearly out of com-mission, the global operations of SoutheastMichigan-based suppliers are trying to pick upthe slack, despite limited plant capacity andlimited inventory space.

The supply base has slowed the bleeding fornow. But as ships pull into ports and parts in-ventories are assessed, the real-time logisticsproblems of the industry are expected toemerge, local analysts say.

When Japans supplier plants shut down af-

Supply chains real test lies ahead

BY NANCY KAFFER


Blank slate. Blank canvas. Wild West.Thats how many people see Detroit, and

last weeks release of the 2010 U.S. Censusnumbers showing that 25 percent of Detroits

population has moved out in the past decade,leaving the citys population at 713,777, arecertain to reinforce that perception.

But some Detroiters are pushing backagainst the idea.

Instead, they see it as something many peo-ple believe no longer exists a place to live.

Even at its diminished size, Detroit remainsthe largest city in the state, more than threetimes the size of its closest competitor: GrandRapids, population 188,040.

Ive really come to meetmany people who just livehere, said Matt Clayson,director of the Detroit Cre-ative Corridor Initiative and adrafter of the Detroit Declara-tion, a framework for build-ing a stronger city writtenand signed by a coalition ofyoung professionals.

And theyre not stuckhere, theres no real state-

ment (by) being here. They like their commu-nity, like their neighborhood, like their house,and they get frustrated with the challenges

sometimes but wouldnt live anywhere else.This is the untold story we forget about itskind of the silent middle class that still existsin the city.

In 2009, roughly 36 percent of Detroiterslived in poverty, said Kurt Metzger, directorofData Driven Detroit, a nonprofit data collec-

tion organization, a percentage he says hasprobably increased slightly.

Now flip that statistic around: 64 percent, orabout 456,000 people, arent.

For some Detroiters, the ideas of a blankslate or a vacant city just dont connect to real-

ity.The reason Im here are

the assets Detroit has. saidAustin Black II, founder ofCity Living Detroit and anoth-er drafter of the Detroit Dec-laration. Were here for areason. Detroit does have alot of problems, but it alsooffers a lot.

Theres a difference be-tween blank slate and

opportunity, said Francis Grunow, a Detroit

resident, Declare Detroit member and law stu-dent who owns Midtowns Bureau of Urban Liv-ing with wife Claire Nelson.

When you think of the word blank slate,you think of a nothing, an openness, a lack of,

Census push back:Forget blank slateThink opportunity, not nothingness

BY DANIEL DUGGAN


When Porsche AG pulled out of the North Amercan International Auto Show in 2007, the Germancompany justified the move as dedicating resources to parts of the country where therwere more customers.

But the company has changedits tune, launching its new hy-

brid at the 2011 show and creat-ing a fourth dealership here.

And local dealers are followingthe companys lead, with two newshowrooms under constructionand two dealership renovationsrecently completed.

We have a lot of confidence in Detroit, saiTony Fouladpour, business communicationmanager for Porsche. Theres a lot of optimismabout Detroit and its future with Porsche.

Eitel Dahm agrees.Hes expanding his network from three deal

erships to four with the opening of a newPorsche showroom in Eastpointe.

After every rain, the sun shines, saidDahm, president of the Shelby Township-baseEitel Dahm Motor Group, which also sells AudBMW and Mini brands.

I see the economy coming back, and now i

the time to make an investment.He has spent $2 million on the build-out of th

Porsche finds

it can move

metal hereDealerships signal

U-turn on Detroit

JOHN SOBCZA

Work is under way on this new Porsche showroom in

Eastpointe, part of Eitel Dahm Motor Group. Now is

the time to make an investment, Dahm says.

ter the 8.9-magnitude earthquake and result-ing tsunami, effects began to ripple throughthe supply chain, causing isolated shutdowns

at automakers fromGermany to the U.S.

General Motors Co.

halted production atits Shreveport, La.,and Buffalo, N.Y., as-sembly plants lastweek because of partsshortages. Several oth-er automakers havesuspended overtime orcanceled shifts ahead of the shortages to pre-vent a total shutdown.

However, more shutdowns remain imminentbecause the true test for the supply base re-mains two to three weeks out, said John Taylor,director of supply-chain programs at WayneState University. Parts are still in transit on ships,and suppliers still have inventories to pull fromto keep automaker plants operational, he said.

Weve got a little breathing room now, butits going to come to a head, he said. Capaci-

Its going

to come to a

head.

John Taylor,

Wayne State University

See Census, Page 20

See Porsche, Page 1See Japan, Page 20

Logistics may be kink in earthquake response

Clayson

Black

DEALERS

Whos who:Four inSoutheastMichigan,Page 19


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arch 28, 2011 CRAINS DETROIT BUSINESS Page 9

power grid more efficient,stable and secure. In con-trast, electric transmis-sion accounts for only 7percent of the average elec-tric bill (just 4 percent herein Michigan), yet providestremendous value by al-lowing access to competi-tive markets and lowering

prices for electricity gener-ation.

Michigans large utilities natu-rally oppose a recently approvedregional transmission cost-shar-ing proposal because it will allow aregional transmission grid to bebuilt, resulting in a competitive in-

terstate energy market that willprovide access to a variety of low-er-cost generation sources thatMichigan cannot provide. Criticswill also have you believe thatMichigan consumers would pay anunfair portion of the cost of this re-gional transmission investment.But each consumer in Michiganwould pay the exact same amount

per kilowatt-hour as any otherconsumer in the Midwest region.Consumers pay based only on thepower they consume.

The methodology was vetted foralmost two years by the Carmel,Ind.-based Midwest IndependentSystem Operator, the nations first

regional transmission organiza-tion, created in 2001. Stakeholdersincluding Michigans utilities,transmission owners, customersand state public service commis-sions participated in this transpar-ent process.

The Midwest ISO is responsiblefor the planning and operation ofthe transmission grid and whole-

sale energy market. Membershipin the Midwest ISO or any otherregional transmission organiza-tion is voluntary. In this debate,Michigans big utilities that be-long to the Midwest ISO want thebenefit of participating in themarket by buying and selling en-

ergy, but they dont want a regional, robust transmission grid thawould bring liquidity to the marketplace.

Our electricity grid is old anstrained. This congested and inadequate grid forces customers topay for increasingly expensivpower while keeping cleaner andcheaper alternatives out of th

market. A robust transmissiongrid will deliver increased reliability and long-term energy savings.

Linda Blair is executive vice president and chief business officer o

ITC Holdings Corp. in Novi.

Michigan has some ofhe highest energy pricesn the Midwest its the

ate ranked highest orecond highest 95 percentf the time in the past 22

months. This makes it dif-cult to attract new manu-

acturers and other elec-icity-intensive

usinesses to our state.Investment in power

ansmission benefits Michigan.

s a critical link to accessing

ompetitive wholesale energy

markets across state boundaries

nd leveling these costs for the

enefit of Michigan consumers.

ur transmission grid is only as

rong as its weakest intercon-

ected link, as demonstrated by

he 2003 blackout.

The electric energy industry is

ebating what new transmission

hould be built and how it should

e funded. The larger considera-

on is this: If we want Michigan to

e competitive, we need to level

he playing field for energy prices.

Michigan depends on regional en-

rgy markets, and investment

eeds to happen outside the state

r Michigan to benefit from the

wer cost of energy available in

he wholesale market.

A recent U.S. Chamber of Com-

merce report revealed that more

han 350 energy projects nation-

ide are stalled due to regulatory

ed tape, including 21 transmis-

on projects. This delay has cost

he U.S. economy $1.1 trillion and

as prevented the creation of 1.9

million jobs, according to the re-

ort. This logjam is a direct result

f an outdated patchwork of local,

ate and federal regulations.

When you want to control costs,ou look for areas of greatest ex-ense. Electric generation by utili-es makes up about two-thirds of a

ypical electric bill the portionhat a competitive wholesale mar-et will shrink while making the

Italian Food enjoys an excellent reputation in kitchens worldwide. New York based Raos Specialty Foods, Inc.

has shaped the face of Italian Cuisine in the USA and is now poised to conquer the international markets.

Congratulations to Raos Specialty

Foods, Inc, from the Small Business

ommerce Association for being

elected for the 2009 Best of Business

Award in the Grocery Category.

Raos is recognized as one of the

est small businesses throughout

the country by demonstrating what

makes small businesses a vital part

f the American Economy.

Raos Specialty Foods, Inc.

17 Battery Place, Suite 610New York, New York, 10004

Tel: 212-269-0151Fax: 212-344-8708

www.raos.com

A D V E R T I S E M E N T

Michigan needs regional electricity gridOTHER VOICES:

Linda Blair

LETTERS CONTINUEDFrom Page 8

rains would support piracy ven if it is being conducted by a

media darling like Shawn Santo.What Shawn/Pure Detroit did

as no better than selling bogusDs or DVDs of Eminem albums.Could you editorialize in favor

f that?

Without brands, proprietary

esign and proprietary R&D, the

usiness community would be a

Wild West free-for-all of infringe-

ment. Intellectual property is the

ornerstone of American busi-

ess because it protects con-

umers, investment in new ideas

nd jobs.

I think Crains should come

own on the side of business, not

iracy even if the pirates stand

n line next to us at Avalon in the

morning.

Robert Stanzler

Detroit ManufacturingDetroit


3/3

come would indicate. Ford Motor Co.

reported net income of $190 million,down from $886 million in the

fourth quarter of 2009. But the re-

cent results included a one-timecharge of $960 million for the com-

pletion of a debt-conversion offer.General Motors Co., once again a

public company, reported net in-

come of $500 million, compared toa net loss by its predecessor entity

of $3.4 billion in the fourth quarter

of 2009.

Marsh also pointed to a turnaround at Kelly Services Inc. as hav

ing more significance than thnumbers involve might indicate

The company had net income o

$14.6 million, compared to a loss o$8.2 million in the fourth quarte

of 2009.

Temporary labor is a leadinindicator of a recovery, so its en

couraging that Kelly did so well,he said.

Most companies are now making money, but its not a boom

without having housing and con

struction participating, saiDana Johnson, chief economist foComerica Bank, referring to ongoing troubles at Masco Corp. and PuteGroup Inc.

Masco, which supplies a widrange of products for hom

builders, was one of the outlieramong local public companies

posting a net loss of just over $1 bil

lion in the fourth quarter aftebreaking even in the fourth quar

ter of 2009, a loss that exceeded an

alyst expectations. Pulte posted net loss of $165.4 million, com

pared to a loss of $116.9 million fothe same quarter last year.

Its an economy thats got morparts doing better than worse, by

two to one ratio, but its still an

economy that faces challenges,Johnson said.

Tom Henderson: (313) [email protected]

BY TOMHENDERSON


Public companies in Southeast

Michigan generally had a strongurth quarter last year, with two-

hirds of them reporting higheret earnings than in the fourth

uarter of 2009.

Auto suppli-rs continued a

ring of stronguarters, with

chnology

ocks and utili-es showing sol-

d improve-ments.

It was anoth-

r solid A-minusuarter for

Michigan stocks, said Davidowerby, chief market strategist

n the Bloomfield Hills office ofoomis, Sayles & Co. LP. Sowerby

covers 75 publicly traded compa-

nies statewide and said his gradefor their performance was driven

largely by the median increase inearnings, 27 percent year over

year.

By Friday, 61 of the public com-panies tracked by Crains had re-

ported earnings, and 40 showed

improved results over the samequarter a year earlier. The quarter

was nearly a mirror image of thethird quarter, which Sowerby also

rated an A-minus, when 42 of 60companies that reported by

Crains deadline had improved

earnings.The 61 companies in the fourth

quarter had combined net incomeof nearly $557.9 million, compared

to a combined net loss of

$474.6 million in the fourth quarterof 2009.

Tech companies combined fornet income of $69.5 million, up

from $8.05 million the year before,

led by Compuware Corp., which sawnet income go from $24.4 million to

$34 million.The three utilities went from

$159.6 million in net income to

$213.8 million. CMS Energy Corp.

went from $6 million to $25 mil-

lion, ITC Holdings Corp. from

$33.6 million to $36.8 million, andDTE Energy Corp. from $120 million

to $152 million.You still have pockets of the

economy that have not come back.Banking continues to lag, but gen-

erally job and income growth show

strong improvement, said Sower-by. What we need now is a follow-

through on capital spending andmore hiring.

Nine of 11 area public banks

have reported earnings. Six hadimproved results, quarter over

quarter. Four reported profits,compared to two a year ago.

While the smaller community

banks generally came in at or nearbreak-even levels BirminghamBloomfield Bancshares Inc. went

from a loss of $2 million to net in-come of $240,000 and Oxford Bank

Corp. went from net income of$758,000 to $638,000, for example Citizens Republic Bancorp Inc. andFlagstar Bancorp Inc. continued to

wrestle with their loan portfolios,

reporting quarterly losses of$106.2 million and $192.1 million,

respectively.In aggregate, it was a very posi-

tive fourth quarter. I expected a

big improvement, but what is alsoencouraging is the outlook for a

continued improvement in thecoming year,

said Kevin

Marsh, a part-ner in the Birm-

ingham-basedinvestment

banking firm ofAngle Advisors-In-

vestment Banking

LLC.Marsh said

that auto suppli-

ers continued to be a driving forcein the states rebound. BorgWarn-

er had record earnings and recordsales in the fourth quarter, and

TRW had its best fourth quarter

since becoming independent, hesaid.

BorgWarner Inc.s earnings wentfrom $52.7 million to $111.7 mil-

lion, and TRW Automotive Holdings

Inc. went from $141 million to$204 million. Ten publicly traded

auto suppliers combined for netincome in the fourth quarter that

ended Dec. 31 of $953.7 million,

compared to combined income of$2.1 billion in the fourth quarter of

2009.But that comparison is decep-

tive. Lear Corp. reported net income

of $1.2 billion in the fourth quarterof 2009, but that was the result of a

restructuring credit of $1.5 billionthat allowed the company to avert

a net loss. Lear had net income in

the recent fourth quarter of$117.1 million.

Discounting that one-time cred-it for Lear in 2009, the auto sector

had better aggregate net income

in fourth quarter of 2010 than in

2009.Another one-time charge madeaggregate fourth quarter earnings

appear weaker than operating in-

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Public companies keep A-minus grade for 4th quarter4TH QUARTER EARNINGSWithout General Motors Co. andFord Motor Co. (59 companiesreporting):

Sowerby

Marsh

Including GM and Ford (61companies reporting):

2009 2010

2009 2010

$2.1billion

-$132.1million

-$474.6million

$557.9million

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Crains Other Voices 03-28-11