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MiBiz 020413

  1. 1. Docs haveroom if State of WestMedicaid Michiganexpands PhilanthropyPAGE 16 PAGE 17 FEBRUARY 4, 2013 • VOL. 26/NO. 9 • $1.50 SERVING WESTERN MICHIGAN BUSINESS SINCE 1988 www.mibiz.com Breaking VC on the rise News State bucks national trend, sees investments increase By MARK SANCHEZ | MiBiz msanchez@mibiz.com MICHIGAN — Venture capital investing in Michigan had one of its best years ever in Dunlap Irwin 2012, setting the stage for what one venture investor sees as “another very big year” for Huntington gets further growth. new local leader Investors put $232.31 million into 47 deals in Michigan last year, surpassing Huntington Bank has a new pre-recession levels and easily exceeding lead executive over its West the $84.75 million invested in 36 deals in Michigan market. 2011, according to the quarterly MoneyTree As Regional President report from the National Venture Capital Jim Dunlap focuse s on t he Association and PricewaterhouseCoopers. Huntington’s statewide oper- The 2012 activity positions the state well ations, veteran banker John PHOTO: JOE BOOMGAARD for the future, said Dale Grogan, co-manag- Irwin steps into the role as West Michigan market leader. Irwin ing director of the $15.1 million Michigan has been in banking for 32 years, Accelerator Fund I in Grand Rapids. the last 11 years with Huntington. “There are several funds that have money REV UP! He most recently worked as With a pick up in pickups, to invest, which means that capital is avail- Huntington’s corporate regional able. There is some really great innovation banking manager. growth in the luxury segment, that is coming from all three sectors of pub- “Huntington’s proven support lic institutions, existing companies and for business to drive economic and the rebirth of an icon, startup companies. That trend should con- per formance, par ticularly in Michigan, makes taking on my Detroit is ready to tinue for 2013,” Grogan said. The 2012 totals represent the third best new role a welcome challenge,” Irwin said. “It is rewarding to rep- year for venture investing in Michigan since the quarterly MoneyTree report resent a bank that is so intensely dedicated to its customers and Read our comprehensive reports from the 2013 North American started in 1995. The year was exceeded only communities.” Irwin reports to Dunlap and International Auto Show and the Society of Automotive by the $356.44 million put into 55 deals in 2000 and, in terms of just dollar value, the will collaborate with his counter- Analysts annual outlook conference. $253.47 million invested in 44 deals in 1999. part in eastern Michigan, Steve More than half of the money invested Fezzey, to build the bank’s state- in Michigan last year went into three com- wide focus. He takes over operations of AUTO OUTLOOK: PAGES 4-5 ■ NAIAS OVERVIEW: PAGES 18-20 panies: $72.64 million for Protean Electric one of the leading banks in the See RISE IN VC on page 2 region, particularly in the Grand Rapids area, where the Columbus, Ohio-based Huntington ranked fourth out of 29 banks in the 2012 FDIC Summary of Deposits and has 22 offices. Metro sells cancer center to NYC-based REIT Statewide, Huntington ranks By MARK SANCHEZ | MiBiz of the cancer center, Triangle Associates Inc. and went for medical equipment. A 15-year lease on seventh out of 160 banks with msanchez@mibiz.com a group of physicians, said Mike Faas, CEO of the facility runs through June 2022 and will ini- $9.09 billion in deposits through Metro Health. tially generate $600,000 annually for the REIT, 140 offices and a 5.46 percent market share. WYOMING — One local health care system has “They kind of wanted to get out and we were according to a quarterly financial report filed “I have every confidence in opted to sell and lease back one of its key facilities fine with it,” Faas said. “We’re not in the mood with federal securities regulators. John’s abilities to continue the rather than continue to maintain the property itself. particularly to tie up our cash in real estate. The acquisition of the facility is the third in work that Huntington is doing American Realty Capital Healthcare Trust Whenever we can do this, we will.” Michigan for American Realty Capital, which in West Michigan, that he has Inc., a New York City-based real estate investment The deal is structured similarly to the sale since forming in 2011 has been buying medical already so significantly sup- trust (REIT), closed on the $6.2 million acquisi- years ago of Metro’s 13 outpatient centers in the office buildings, outpatient centers and senior ported,” Dunlap said. “I am look- tion last month of the Cancer Center at Metro Grand Rapids area that the health system leases housing facilities across the country and leasing ing forward to having even more Health Village as part of a much larger $214 mil- back. them back to care providers. The REIT owns 43 resources committed to Michigan lion deal for 14 medical facilities in nine states. Metro Health and its partners developed the health care properties in 16 states. that will continue to drive con- sistent positive outcomes across Metro Health will continue to provide radia- 21,502-square-foot radiation oncology center in In September 2012, the REIT acquired the two- the board in the state’s diverse tion therapy through a joint venture with the 2008 for $7.3 million, a good portion of which story, 100,321-square-foot, fully leased LakeView communities.” University of Michigan Health System at the cen- Outpatient Center in Paw Paw for $30.4 mil- — Mark Sanchez, MiBiz ter following the facility’s sale. RELATED STORY: Industrial firms seek sale- lion from Bronson Healthcare Group. Bronson The deal came together when the REIT leaseback agreements to free up capital. PAGE 11 acquired the outpatient center in 2007 when it approached the health system and the co-owners acquired LakeView Community Hospital.P E R I O D I C A L S Auto collapse spurs firm’s diversification GVSU expects PAGE 6 longer payback MADE IN on future green MICHIGAN projects Sponsored by: CHEMICAL BANK PAGE 15
  2. 2. RISE IN VC the $10 million range, basically B or C rounds Venture Capital Association’s 2011 annualContinued from page 1 of funding.” report. Another seven firms based elsewhere Hogg attributes that to “an increasingly have an office in Michigan. Michigan venture capital in Auburn Hills that’s developing drive sys- vibrant technology and talent landscape in In the life sciences sector alone, VC invest- Here’s a look at venture capital activity in tems for electric and hybrid vehicles; $32.5 Michigan that can be linked back to the state ments in Michigan totaled $107.1 million Michigan going back to 1995 million to EcoMotors Inc. in Allen Park; and really investing in technology businesses five, through 16 deals last year, which compares $16.44 million to medical device company 10 years ago via the 21st Century Jobs Fund.” to $30.8 million in 16 deals in 2011, accord- YEAR DEALS DOLLAR VALUE CertoPherx Inc. in Ann Arbor. “Every state wants a technology indus- ing to Cleveland-based BioEnterprise, a bio- 2012 47 $232.31 million West Michigan-based companies that try but few are willing to invest and wait the medical accelerator that tracks biotech and received venture funding in the fourth quar- length of time it takes for it to take shape. I health care venture investing in the Midwest. 2011 36 $84.75 million ter were: think we are seeing just that here in Michigan, In terms of dollar value, the amount was the 2010 31 $151.66 million • Tolera Therapeutics, a Kalamazoo drug so kudos to the folks that fought hard for those best year for VC investing in life sciences in 2009 36 $178.45 million development company that received $5.41 programs then,” Hogg said. Michigan since before the recession. 2008 44 $204.03 million million from Hopen Life Science Ventures Eight of the 47 deals in Michigan were for Most Midwest markets saw increases in in Grand Rapids, the Kalamazoo-based $9 million or more, including the $9.2 mil- VC investing in life sciences during the year, 2007 23 $109.70 million Southwest Michigan Life Science Venture lion that five investors put into Kalamazoo- a contrast to the sector nationally. 2006 24 $131.25 million Fund, and Cincinnati, Ohio-based Triathlon based Vestaron Corp., which has developed “As with the rest of the country, Midwest 2005 21 $93.32 million Medical Ventures. an insecticide using spider venom. health care investing fell dramatically in 2004 17 $134.25 million Despite the gains over the 2009 after strong years in 2007 and 2008, but 2003 18 $95.17 million years, VC investing in Michigan it appears investors are again optimistic remains in what Grogan calls about Midwest deals. 2013 should be an inter- 2002 27 $109.42 million“Every state wants a technology industry a “nascent” stage compared esting year to watch,” BioEnterprise interim 2001 22 $154.92 million but few are willing to invest and wait the to other states, especially on President Aram Nerpouni said. 2000 55 $356.44 million length of time it takes for it to take shape. the coasts, because “we simply Nationally, VC investing in life sciences 1999 44 $253.47 million don’t have as much money to declined to 466 deals for $4.1 billion, a 15-per- I think we are seeing just that here in put to work.” cent decline in dollar value and flat deal vol- 1998 30 $122.64 million Michigan, so kudos to the folks that Still, Grogan said, there is ume. Much of the decline occurred in first- 1997 28 $106.22 million more venture funding available time financings for young companies, an 1996 21 $79.39 million fought hard for those programs then.” in Michigan than ever before. area that saw the lowest activity since 1995, 1995 12 $65.70 million —SAM HOGG Investors have increased con- according to the MoneyTree report. Partner at Open Prairie Ventures SOURCE: MONEYTREE REPORT fidence in Michigan’s eco- Tracy Lefteroff, global managing part- nomic resilience, and “there is ner of the venture capital practice at an awaking of entrepreneurs PricewaterhouseCoopers, attributes the activity came as the venture capital industry and outside investors alike that decline to regulatory uncertainty, plus the overall declined nationally. • Intervention Insights Inc., a Grand now is a good time to nurture Michigan invest- heavy amount of capital and the decade or Across the U.S., venture capitalists Rapids company that provides genetic tests ments,” he said. more it takes to move a life science innovation invested $26.5 billion in 3,698 deals, a 10-per- that are designed to match cancer patients Grogan noted the growing number of ven- from concept to the marketplace. cent decline in dollar value and a 6-percent with drugs that will best treat their tumor. The ture funds from outside of Michigan, Open “All of these factors have been taking their decline in deals from 2011, according to the company, spun out of the Van Andel Institute, Prairie included, that now have offices in the toll on investing in this space, even though MoneyTree report. received $1.6 million from undisclosed inves- state. everybody acknowledges there’s still tremen- Venture investing nationally in the fourth tors, according to the MoneyTree report. “They are here for a simple reason: There dous opportunity,” Lefterhoff said. quarter alone declined 3 percent to 968 com- In reviewing the 2012 MoneyTree data, Sam are opportunities in Michigan that are attrac- Investing in the medical device industry panies, although the dollar value increased 5 Hogg, a partner at Open Prairie Ventures that tive,” Grogan said. alone declined 13 percent nationwide to $2.4 percent to $6.4 billion. manages the Southwest Michigan Life Science As of a year ago, Michigan was home to 20 billion through 313 deals, which was down 15 “General economic uncertainty continues to Venture Fund, noted a “very noticeable uptick venture capital firms, up from 15 just three percent from 2011. hinder capital investments, and venture capi- in the number and quality of investments in years earlier, according to the Michigan In Michigan, the increased investment talists are no different,” Lefteroff said.2 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
  3. 3. WHAT’S INSIDE Published since 1988 MiBiz® is a registered trademark of REVUE Holding Co., Inc. February 4, 2013 Editor & Publisher Brian Edwards / bedwards@mibiz.com Managing Editor Joe Boomgaard (auto, manufacturing) jboomgaard@mibiz.com 15 17 Senior Writers Mark Sanchez (finance, health care) msanchez@mibiz.com Mike Brennan (technology) mbrennan@mibiz.com Staff Writer Elijah Brumback (real estate, energy) ebrumback@mibiz.com Contributing Reporters Lindsay Patton-Carson, Nick Manes Minion Stephanie Allen Columnists Melissa Anderson, Karl Dehn, Ron Kitchens, Birgit Klohs, Randy Thelen Vice President of Sales Denise Schott / dschott@mibiz.com Senior Advertising Consultant Shelly Keel / skeel@mibiz.com Creative Director Kim Kibby / kkibby@mibiz.com MANUFACTURING ECONOMIC NONPROFIT Design Director Kristi Kortman / kkortman@mibiz.com 4 Stability returns to auto outlook DEVELOPMENT ORGANIZATIONS Ad Designer & Traffic Coordinator 6 Auto collapse gives Alliance CNC 14 Discussion in Lansing shifts to 17 Q&A: Dr. James Edwards Kellie Zaplitny / kzaplitny@mibiz.com a reason to branch out infrastructure Web Editor Jayson Bussa / jbussa@mibiz.com 8 Communication critical to global 14 Business Leaders for Michigan FOCUS: 2013 AUTO pushes for education funding Circulation auto industry SHOW RECAP For address corrections or subscriptions, please visit www.mibiz.com/subscribe 18 Good for Gearheads (And the REAL ESTATE & ENERGY planet, too) MiBiz DEVELOPMENT 15 GVSU stretches the energy 20 Consumers increasingly focus on ISSN 1085-4916 • USPS 017-099 Formerly MiBizWest • Established 1988 11 Industrial firms seek sale- efficiency dollar vehicle infotainment MiBiz is published every other week by REVUE Holding Co., Inc., 4927 Stariha Dr., leaseback agreements to free up Suite B, Muskegon, MI 49441. Telephone capital HEALTH BIZ (231) 798-4669. FAX (231) 798-8335. E- NOTABLE mail: info@mibiz.com. Subscription changes: 12 LEED v4: New LEED revision 16 Report: Michigan docs able to www.mibiz.com. Periodicals Postage is paid at slated as industry remains open 25 People & Datebook Muskegon, MI and additional mailing office. take on patients if Medicaid POSTMASTER: Send address changes to to alternative ratings expands 26 Q&A: Walter Monroe MiBiz, 4927 Stariha Dr., Suite B, Muskegon, MI 49441. Subscriptions are available without 26 In the News cost to qualified readers. Paid subscriptions are available to those not meeting qualified cir- culation requirements. Paid subscriptions are $46/year, $68/two years and $84/three years. Single copy and back issues (when available) are $1.50 each, plus first class postage. GRAND RAPIDS 65 Monroe Center, Suite 5 Grand Rapids, MI 49503 COMPANY INDEX Center for Healthcare Research ............ 16 IHS Automotive ...................................... 4, 20 People’s Health Center ............................. 22 616.726.6909 phone • 231.798.8335 fax Denso Manufacturing Michigan Inc. ... 22 Intervention Insights Inc............................. 2 Perrigo Co. .................................................... 22 LAKESHORE 4927 Stariha Drive, Suite BAIA Grand Rapids ...................................... 12 Dykema.......................................................... 22 Leitz Tooling Systems................................ 22 Priority Health .............................................. 22 Muskegon, MI 49441Alliance Cutter Grinding Service Inc...... 6 Fair Oaks Farms Brands Inc. ................... 22 LMC Automotive .......................................... 4 Progressive AE ............................................ 12 231.798.4669 phone • 231.798.8335 faxAssociated Rack Corp. ............................... 4 Fox Motors ............................................. 18,22 Lott3Metz Architecture ........................... 12 Quantum Sail Design Group ................... 22 COPYRIGHT ©2013. All Rights Reserved.BCBS of Michigan ...................................... 22 Friedman Real Estate Solution Inc. ....... 22 Mecosta County Medical Center .......... 22 Saint Mary’s Health Care ......................... 22 Reproduction or use of any portion withoutBlackford Capital ........................................ 22 Gartner Group ............................................. 20 Metro Health.............................................1,22 SW Mich. Life Science Venture Fund .... 2 permission of the publisher is prohibited.Breath Arrest LLC ...................................... 22 Globe of Michigan Inc................................. 4 Michigan Accelerator Fund I .................... 1 Spartan Stores Inc. .................................... 22Bronson Healthcare Group ....................... 1 Grand Rapids Chamber ............................ 14 Michigan Health Connect........................ 22 Three Oaks Group LLC............................. 22Business Leaders For Michigan ............ 14 Grand Valley Metro Council .................... 14 Michigan Venture Capital Association. . 2 Tolera Therapeutics ..................................... 2Cancer Center at Metro Health Village . 1 GVSU ......................................................... 11,17 Neogen Corp. .............................................. 22 Triangle Associates ...................................... 1Citi Research.................................................. 5 Honigman LLP ............................................. 22 North American Int’l Auto Show ........... 18 U of M Health System ............................... 22Cohen Financial .......................................... 11 Hope Network ............................................. 22 North Ottawa Comm. Health System .. 22 Van Andel Institute....................................... 2Colliers International ................................. 11 Hopen Life Science Ventures ................... 2 Open Prairie Ventures ................................. 2 Vestaron Corp ............................................... 2Consumers Energy..................................... 15 Huntington Bank........................................... 1 Owen-Ames-Kimball Co. ......................... 12 Warner Norcross & Judd LLP ................ 22Visit www.mibiz.com MiBiz / FEBRUARY 4, 2013 3
  4. 4. MANUFACTURING IN BRIEF Stability returns to auto outlook By JOE BOOMGAARD | MiBiz Associated Rack jboomgaard@mibiz.com continues GR A fter a half-decade on the roller expansion coaster, U.S. automakers are pre- paring for a slow, steady ride GRAND RAPIDS — Although that could yield strong profits for Associated Rack just moved carmakers and their suppliers to Grand Rapids in October, throughout the rest of the decade. t he c o mp any ha s alr e ad y The automotive industry could be settling expanded locally with a strate- into a sustainable period for the foreseeable gic acquisition. future, a period perhaps defined by its stabil- ity rather than any dramatic peaks and valleys. The Chicago-based Associ- Auto sales beat most analysts’ expectations ated Rack Corp., a man- last year by about 1 million units. U.S. light ufacturer primarily of racks vehicle sales rose 13.4 percent in 2012 to nearly and equipment for the materi- 14.5 million units, compared to about 12.8 mil- als coating industry, acquired lion units in the prior year. The Detroit Three Globe of Michigan Inc., a automakers, the main customers for many auto Grand Rapids-based metal suppliers in West Michigan, had a market share fabricator and manufacturer of of 44.8 percent last year, an erosion of 2.3 per- materials handling equipment. cent from the prior year. Although analysts expect light vehicle sales A report in MiBiz about the to grow this year, they say that growth will be expansion actually served as much more contained. That’s good news for a a catalyst behind this new- supply chain that’s been struggling to keep up e s t a c q ui s i t i o n , s ai d D o n with double-digit growth in the last couple of Bauer, engineering manager at years. Associated Rack. After reading But the forecast for slow, steady growth fails about Associated Rack’s expan- to tell the whole story, analysts said. sion into West Michigan, Globe While automakers have focused on the of Michigan President Dennis growth of smaller, more fuel-efficient cars dur- Velie reached out to the manu- ing the past few years, most analysts agree the facturer to discuss a potential automotive market will soon see resurgence in partnership. a somewhat unlikely segment: full-size pickup trucks, which are being bolstered by an improv- “Dennis saw the article in MiBiz ing housing market. These high-volume, highly and was looking to align with profitable models, coupled with growth in the another company to improve his premium vehicle segment, should help buoy product line,” Bauer said. automakers’ balance sheets even consider- Analysts believe the U.S. full-size pickup truck market is poised for a resurgence over the next Associated Rack and Globe of ing that overall sales are expected to flatten three to five years. That should translate into good news for many West Michigan automotive Michigan finalized the deal over through 2019. suppliers, which have long had strong concentrations in the full-size pickup segment, including the holidays. “I think 2013 could be characterized as the on the Ram 1500. The Ram was selected by automotive journalists as the North American Truck/ year of pickup trucks and the rebounding pre- Utility of the Year before the 2013 North American International Auto Show in Detroit. Operations for Globe of mium market, and I don’t think many of us PHOTO: JOE BOOMGAARD Michigan were moved from its would have thought that just a couple short facility at 1731 Michigan Street years ago,” said Jeff Schuster, senior vice pres- and rental buyers come back. All this starts to to Associated Rack’s newly ident of forecasting at LMC Automotive, in a build a healthier outlook,” Wall said. acquired plant at 4910 Kraft speech at the Society of Automotive Analysts SOCIETY OF AUTOMOTIVE LMC Automotive’s Schuster said improve- Avenue SE, near the Gerald Ford annual outlook conference in Detroit on Jan. 13. ANALYSTS 2013 OUTLOOK, ments in the general economy should continue What’s more, the local automotive supply to drive growth this year, as should the avail- International Airport. chain has another potential source of opti- AT A GLANCE ability of credit for vehicle buyers. While the idea of getting into mism: Automakers are continuing to increase ■ Industry growth will be more manage- Schuster said the long-term trends are look- materials handling equipment production in North America, which is lead- able through the end of the decade. ing favorable for the U.S. market. was not foreign to Associated ing to more import substitution as models that LMC projects U.S. light vehicle sales to sta- Rack, Bauer said the company ■ Any housing rebound should jumpstart had been imported to North America get pro- bilize and reach about 17 million units by 2018, never had enough experience the lucrative pickup truck market. duced here. Analysts say every gain for North although Schuster notes there is “more upside in the field to effectively expand America opens up new sourcing opportunities, ■ North America has become a preferred potential than there is downside risk.” into that industry. which translates into more potential business place to manufacture vehicles, includ- Another positive factor: Myriad new prod- and jobs in the supply chain. ing for export. ucts will bring more people into the show- “We kind of dabbled in mate- rooms. While 40 new or redesigned vehicles hit rials handling equipment, but the market in 2012, that number is expected to we wanted to par tner with CONTROLLED GROWTH top out at around 83 million units, said LMC jump to 61 in 2013, Schuster said. someone with experience,” Speakers at the SAA conference, held on the Automotive’s Schuster. “That’s a pretty pronounced increase in Bauer said. “Our goal is to eve of the North American International Auto “I would dare use the word stable,” Schuster model activity,” he said. expand our base and get more Show in Detroit, generally expected 2013 U.S. said of the global automotive forecast. While North America and Asia remain the involved in the materials han- light vehicle sales to reach about 15 million In North America, where both sales and pro- bright spots for the global automotive indus- dling and transport aspect of units, with a range of 14.9 million to 15.3 mil- duction have been climbing since 2009, IHS try, Europe is projected to continue to be a drag, our business.” lion units. Automotive has already revised its production with sales expected to fall 2 percent next year. All Globe of Michigan employ- That slow growth of about 4 percent comes forecast for the year to 15.9 million units, up Sales in Japan are also expected to drop 11 per- ees will retain their positions after a string of years that saw the industry grow about 440,000 units from its previous forecast cent, according to LMC. with Associated Rack. Velie will at a break-neck pace since 2008 and the depths at the end of last year. The European crisis has the potential to also stay on with the company, of the recession. “What’s baked into that is a rosier sales out- affect West Michigan suppliers, sources said. “It’s a great [respite] after three years of look,” Mike Wall, automotive analyst at IHS Many suppliers have plants or joint ventures Bauer said. double-digit sales growth,” said Ellen Hughes Automotive based in Grand Rapids, told MiBiz. in Europe to service the European market, or — Carl Dunker, MiBiz Cromwick, chief economist at Ford Motor Co., “We’ve been plodding along in this slow-but- ship product from the U.S. to be installed at who presented at the SAA conference. steady recovery, but we’re starting to see us European facilities. Meanwhile, global vehicle sales should tick finally make that pivot.” For example, Zeeland-based Gentex Corp. up a “very modest” 3 percent this year and “Leasing has come back. We’ve seen the fleet said in its earnings report on Jan. 29 that it4 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
  5. 5. NORTH AMERICAN PRODUCTION AND CAPACITY NA Production Underutilized Capacity Utilization 25M 100% 20M 80% 1.6 1.5 1.4 1.4 BAUER 1.4 3.6 3.8 3.7 1.5 2.2 1.8 6.0 15M 5.3 4.3 60% 10M 9.2 40% sheet metal & fabricating 17.4 17.9 18.3 18.4 18.4 15.7 15.2 15.9 16.6 15.0 15.4 12.6 11.8 13.1 5M 20% EST. 1932 8.5 0 0% 5 6 07 8 9 10 11 12 13 14 15 16 17 18 19 0 0 0 0 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 SOURCE: LMC AUTOMOTIVEexpects sales to decline between 5 and 10 per- “I think we could get even a little bit higher decade, Schuster expects to see an increase ofcent in its first quarter of 2013. That’s because than (our forecast),” Wall said. “I think we around 4 million units in production capac-“unstable macroeconomic factors continue have the capacity, and as housing starts to ity in North America, resulting in a 76 per-to be a concern, especially the sovereign debt come back, I think we could see that pick up a cent rise in North American productioncrisis in Europe, as it is the company’s largest bit further. But more importantly, I think we across non-domestic automakers includingshipping destination,” Gentex reported. could see some sustainability in the 2.1 (mil- Daimler, Honda, Hyundai, Nissan, Toyota and Schuster said the recovery in Western lion) to 2.2 (million) threshold for a while.” Volkswagen.Europe could take longer than a decade, Wall said growth in the pickup truck seg- Secondly, North America is increas-which compares to the five-year recovery ment coupled with recent (Dodge) or very ingly becoming an export hub. Some of thefrom the recession that occurred there in the near-term (GM and Ford) truck redesigns European automakers are looking to sourceearly 1990s. By 2020, LMC expects Europeansales to cross the 14-million-unit mark —“still 500,000 units below the level it was at in2007,” Schuster said. He expects production Where is pent-up demand more apparent?in Europe to have declined about 6 percent in2012 and to continue to dip another 4.2 per-cent for 2013. Estimated production levels for Europe areabout 18.5 million units for 2013, which com- ■ Average age: less than 11 years ■ Average age: less than 13 yearspares to 22 million in 2007. ■ Population down since 2007 ■ Population up since 2007 ■ Scrap rate higher than trend ■ Scrap rate less than trend (light trucks)RETURN OF PICKUPS ■ Solid used vehicle values ■ Solid/better used vehicle valuesAmong the new vehicles set to launch this ■ Product cycles mostly complete ■ GM has 41% of full-size pickups on roadyear are the 2014 Chevrolet Silverado and ■ Varied segment loyalty ■ Highest segment loyaltyGMC Sierra full-size pickup trucks. And,according to Itay Michaeli, vice president at ■ Prone to declining density ■ Geographically advantagedCiti Investment Research and Analysis, they SOURCE: CITI RESEARCHcouldn’t be hitting the market at a better time. Michaeli, speaking at the SAA conference,said he believes the U.S. market is “on the cuspof a major unlocking of pent-up demand” forfull-size pickup trucks over the next three to could have “huge implications” for the supply chain in West Michigan. “For a lot of suppliers on this side of the vehicles for the global market from just one plant. BMW sees its North American plants as its one global source for crossovers, for 68 years offive years. state, a healthy chunk of their business is com- example, while Honda plans to “grow exports “What’s astonishing is that every pent-updemand indicator we look at — and I meanevery one — screens much more positively for prised of that full-size truck and SUV lineup,” he said. “The beauty of all this is that the hous- ing market is starting to turn. There is a very significantly” by sourcing several Honda and Acura vehicles exclusively from North America. sheet metalpickup trucks than it does for cars,” Michaeli solid correlation between housing starts and “This is using a lot of that capacity that’ssaid. “I think it’s analytically almost impos-sible to be very optimistic or bullish on autosales, but to be pessimistic or not equally as pickup truck sales.” come in,” Schuster said. That increase in North American produc- tion volume from non-domestic companies and steelbullish — if not more — on the pickup truck IMPORT SUBSTITUTION that used to import vehicles or that are start-segment.” The same improved economy that’s buoying ing up new products also creates an opportu- The root of that optimism starts with hous-ing. The U.S. Census Bureau reported that pickup truck sales should also translate into better sales in the premium vehicle and lux- nity for suppliers, he said. In addition to the volume increases, many of the non-domestic fabricationabout 1 million new households were formed ury segment, the analysts said. automakers that build cars in North Americalast year, and analysts reported the housing Improved higher-end sales also bode well have less than 50 percent of the content oninventory stands at about 4.7 months, which isinsufficient to meet increased demand. for the North American supply chain since these days, those brands — especially BMW, those vehicles sourced from suppliers in North America. expertise “We’re starting to see a little more nor- Audi and Mercedes-Benz — are building more Last year, the North American marketmal re-synching up of housing and autos, products in North America instead of import- imported about 3.9 million units, while auto-in particular, pickups, which are so impor- ing them, what the analysts term import sub- makers exported about 1.3 million units thattant to the housing recovery,” said Ford’s stitution. And the luxury segment isn’t alone, were produced in North America, accordingHughes-Cromwick. as Honda, Toyota, and Hyundai-Kia all shift to IHS Automotive data. Other contributing factors, according to production to North America from Asia. Wall from IHS Automotive said import www.bauersheetmetal.comCiti’s Michaeli: The average age of U.S. pickup “We’re entering into a period that we have substitution should really become noticeabletrucks is about 13 years old, fewer trucks are not seen in several decades where production in 2014 and 2015 as automakers bring onlinegetting scrapped, used trucks have held their volume outpaces demand in the U.S.,” said new facilities in Mexico.values, and full-size trucks are just at the start LMC’s Schuster. “Import substitution is huge and … it’sof the new product cycle. That’s because of two different kinds of going to heat up even further,” Wall said. “As IHS forecasts sales this year of 2.2 million investment, Schuster said. that heats up, all they do there is basicallyfull-size pickups, not including some of the One, automakers have already expanded build vehicles here that they formerly hadSUVs that share platforms with those vehicles. capacity by about 600,000 units in the U.S. imported. In many cases, it’s just moving thatThat compares to 2009, when pickup truck on top of new capacity of about 1.9 mil- production here. And I think there’s more tosales hit just 1.3 million units, Wall said. lion units in Mexico. Through the end of the come, too.”Visit www.mibiz.com MiBiz / FEBRUARY 4, 2013 5
  6. 6. MANUFACTURINGBOUNCE BACKAuto collapse gives Alliance CNCa reason to branch outBy CARL DUNKER | MiBizcdunker@mibiz.comW hile it took a big hit from the economic downturn and near-collapse of the American auto industry, Alliance CNC bounced back through equal doses of reinvention and diversification. Alliance Cutter Grinding Service Inc., commonlyknown as Alliance CNC, started life primarily as a supplier to theautomotive industry. But when a key customer moved operationssouth and the auto industry collapsed, the small manufacturingcompany was forced to look to other industry segments for survival. Dick Czarniecki, Alliance CNC’s president, said that while COURTESY PHOTOSthe company came from humble roots, it hit its stride when itbegan doing business with Diesel Tech, an auto supplier that Industry-wide, sales for many of Alliance CNC’s peerswas formerly owned by Penske Corp. However, when Diesel stayed flat in 2012 despite starting the year strong, accordingTech was sold and “90 percent of their operations” moved to the Precision Machined Products Association 2012 busi-south, Alliance lost a significant amount of business and ness trends report released in January. Sales were negativelyneeded to make some deep cuts. affected by the “brinksmanship leading up to the election,” “We lost about half of our business,” Czarniecki said. Miles Free, director of industry research and technology at The company took a second big hit when the domestic auto PMPA, stated in the report.industry nosedived. Two of Alliance’s biggest customers, General Free’s outlook for 2013 was “gently optimistic” based onMotors and Chrysler, went from being among the largest manu- the strength of the auto industry, a resurgence in housing,facturers of automobiles in the world to getting bailed out by the increased aerospace sales, and strong performance in theU.S. taxpayers in 2009. medical device industry. The GM and Chrysler bankruptcy and the “We are guardedly optimistic about our indus-coinciding loss in sales came at an inopportune try sales for 2013 if Washington can stop para-time for Alliance CNC: The company had just lyzing the markets we serve,” Free stated in thepurchased $1.5 million in new equipment to report. “Our data suggest that the precisionhelp improve operations at its Grand Rapids machining industry is well positioned to takeplant. advantage of growth in demand that can be This lost business caused Czarniecki to reasonably foreseen in automotive, housing, MADE IN MICHIGANthink creatively about where Alliance CNC MADE IN aerospace and medical devices, if — and thisneeded to go next. “That gave us the reason to diversify and MICHIGAN is a strong if — the pols in D.C. can get the heck out of the way and let our small business job- A lliance Cutter Grinding Service Inc, known as Alliance CNC, is a Grand Rapids-based manufacturer of custom cutting tools for the automotive, medical device and steelmove out into other industries,” Czarniecki Sponsored by: creator entrepreneurs — and our customers — industries. What began as a one-man shop in 1995 grew oversaid. “We worked with the machines and CHEMICAL BANK have confidence in the year ahead. If not, the the past 18 years into a company that did $4 million in salestechnology to develop a greater variety of opportunity for growth that is 2013 will go to last year and employed 20 in its 10,000-square-foot facility.product offerings.” waste just like it did in 2012.” The small batches that Alliance CNC works with allow the Alliance is a manufacturer of custom cutting tools primar- At Alliance CNC, Czarniecki said the company continues to company to reduce lead time and allow for customizationsily for the auto industry, although its product line also includes develop its manufacturing process over years of working with such as the addition of coatings or laser etching and a varietytools for the medical device and steel markets. Founded in clients to identify the specific needs and how best to serve them. of other edge preparation options.1995, the Grand Rapids-based company grew from a one-man “We work with the customer to develop the tools and developshop and now employs 20 workers in its 10,000-square-foot the process we use to manufacture those tools,” Czarniecki said.facility just south of 44th Street. Alliance CNC works in small batches to better serve its cus- The company branched out into serving other industries tomers by reducing lead times. Working in small production skilled labor to fill open positions.including other second-tier automotive suppliers, medi- batches also allows for a greater variety of product offerings “I guess our biggest challenge is getting the talent, gettingcal device companies and steel manufacturers. For exam- and customization including special coatings and laser etch- those jobs that aren’t necessarily college jobs,” Czarniecki said.ple, it picked up work with Kentwood-based Autocam Corp., ing as well as multiple options for edge preparation. The challenge with the candidates Alliance CNC does findCzarniecki said. Additionally, Czarniecki told MiBiz that the company’s is that they are often inexperienced and lack the self-motiva- This diversification allowed Alliance CNC to survive as the designers use their combined 75 years of experience to develop tion and initiative to be effective workers. Czarniecki hopes toeconomy plodded along and helped it bounce back as the econ- the tools best suited to clients’ needs. Quality is assured remedy the problem by working with local colleges to developomy rebounded, he said. throughout the manufacturing process though a quality con- the kinds of employees manufacturers need today. Currently, Czarniecki said he is running two, 50-hour shifts trol department that maintains its objectivity by being inde- “Nobody’s going to be babysitting you. Nobody’s going toat the 20-person operation. Sales grew by 20 percent in both pendent of the manufacturing department. be handholding. So we need self-motivated, hard-working2011 and 2012 to reach $4 million, up almost $3 million from As with many West Michigan manufacturers, one of the people who can show up every day and produce,” Czarnieckithe depth of the recession, Czarniecki told MiBiz. greatest obstacles to growth for Alliance CNC is the lack of said.6 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
  7. 7. Monday, March 11, 2013 Radisson Hotel, Lansing 8:00 am - 1:00 pmVisit www.mibiz.com MiBiz / FEBRUARY 4, 2013 7

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