31 December 2009

Poor Economy, Budget Cuts Hurt Adult Day Care

Crain's Detroit Business

In October 2007, Jackie Smiertka took a big chance when she opened the Quality of Life Center, an adult day health care center in Auburn Hills.

A registered nurse for 30 years, working in hospital pediatrics and in a surgeon's office, Smiertka had never owned a business.

“I worked for a surgeon who performed bariatric surgery, and I followed patients for 12 years out of surgery,” Smiertka said. “My dream was to have my own office and help these patients recover.”

From a business standpoint, however, Smiertka said she struggles to make ends meet, especially with the poor economy.

The 4,000-square-foot center, which has a capacity of 20, charges seniors $50 per day. It uses two full-time employees and several part-time workers to care for the six to 10 mostly impaired older adults.

“These are older folks who should not be left alone,” Smiertka said. “I don't charge a lot because I want to make it accessible to patients.”

Located in the Oakland Technology Park at 3100 Cross Creek Parkway, Quality of Life offers adult day care, respite services for caregivers, medical care for overweight and obese patients and office space to physicians and health care professionals.

It is one of a few centers in that combines Michigan assisted living adult day care with health services, Smiertka said.

Because of the poor economy and reduced subsidies for the centers, Kerri Gentry, manager of Sheltering Arms Adult Day Center in Auburn Hills and Southfield, said most of the 27 adult day centers in Southeast Michigan have fewer seniors than they normally do.

Gentry said the Sheltering Arms centers are operating at about 65 percent of capacity, with Auburn Hills averaging about 10 seniors each day and Southfield about 17.

“Everybody is slightly down right now,” said Gentry, who also is vice president of planning and older adult services with Catholic Social Services of Oakland County, which sponsors Sheltering Arms.

“We break even and have tried to cut costs, but with the state budget crisis, we are caught in a perfect storm,” Gentry said. The centers operate on a $500,000 annual budget, she said.

Gentry said most of the adult day centers have had federal funding cut 15 percent this year from the Older Americans Act. To pick up some slack, United Way for Southeastern Michigan funding helps subsidize its operations, she said.

“We made some staffing adjustments. When staff retired, we didn't replace them,” said Gentry of the center's 21 employees. “Everybody is taking on more responsibility.”

Gentry said Sheltering Arms recently signed a contract with the Veterans Administration, which reimburses day centers for veterans' care.

In addition, the increasing numbers of seniors with long-term care insurance also have helped pay for the $80 average per day charges, Gentry said. Sheltering Arms charges $8 per hour for under 35 hours and $12 per hour for more than 35 hours per week.

As another health care service, Quality of Life also treats bariatric patients who are recovering from surgery, Smiertka said.

Most of the bariatric patients who use the center for post-discharge care are treated by Dr. Mustafa Hares, a general surgeon, who performs bariatric surgery at St. John Macomb-Oakland Hospital, Oakland Center in Madison Heights.

Daniela Scholl, St. John's director of corporate media relations, said St. John doesn't have a direct affiliation with the Quality of Life. She said Hares, who is on hospital's medical staff, refers patients there.

Scholl said St. John's Weight Loss Center is maintaining a busy schedule and has grown 34 percent annually since 2004, despite the poor economy. It was recently designated a center of excellence by the American Society for Metabolic and Bariatric Surgery, she said.

Smiertka said Hares performs about four to five duodenal switch surgeries each month at St. John and refers those patients to the center for post-discharge care.

“Patients come back for the support group and to run in the senior day care room,” she said.

Over the past several years, more than 500 patients have attended bariatric support group classes, Smiertka said.

“After surgery, support group is mandatory and goes on biweekly for the first two years,” she said. “Many continue indefinitely.”

Smiertka also rents office space to several doctors and other providers, who see patients at Quality of Life. The providers include a surgeon, internist, nutritionist and psychologist. She also offers patient education and massage therapy.

“It is very convenient for our seniors to see their doctors here at the center,” she said. “It saves them time, and their caregivers like it because they don't have to make another trip to the doctor's office.”

The practitioners include Dr. Ban Mechael, an internist, and Dr. Wendy Smith, a psychologist. Other providers include nutritionist Patrizia Jesue and therapeutic massager Karen Dermidoff.

Smiertka said the center has recruited two podiatrists and is looking for a dermatologist who specializes in elder care.

“The most difficult part of this job is marketing,” she said. “I don't feel like I should be begging people to come here. We offer great value, and our care is cost-effective and caring.”

Detroit: Something From Nothing

Some Weird and Wonderful Things Are Rising From the Ashes of the Motor City

Video from: The Economist

$3.8 Billion More In TARP Aid Makes U.S. Majority Owner Of GMAC

USA Today

WASHINGTON — The government on Wednesday provided a fresh $3.8 billion cash infusion to stabilize GMAC Financial Services as the financing company struggles with hefty losses in its home mortgage unit.

The Treasury Department said the new aid, which comes from a taxpayer-financed bailout fund, is less than the roughly $6 billion the government had earlier thought GMAC would need to stabilize the company.

The fresh infusion is on top of $12.5 billion in taxpayer money Detroit-based GMAC has already received from the government. The new agreement will boost the federal government's ownership in GMAC to 56%, from 35%.

Even with the government upping its stake, Treasury officials said the government intends to stick to its policy of leaving day-to-day business decisions about financing to GMAC management. Still, with the additional stake, the government will have the right to appoint two additional directors to the company's board, Treasury officials said.

GMAC will continue to be subject to executive pay restrictions imposed by the government's pay czar.

Shoring up GMAC has been a major component of the Obama administration's massive effort to rescue ailing automakers General Motors and Chrysler. The lender provides critical wholesale financing to thousands of GM and Chrysler auto dealers, allowing them to stock their showroom floors with vehicles.

But GMAC also operates a large residential mortgage business, ResCap, which was battered by the recent housing collapse. GMAC was obligated by the Treasury Department to raise $11.5 billion in additional capital earlier this year after failing the government's stress test for banks, largely because of ResCap's big losses.

The stress tests were to see whether banks had enough capital even if the economy worsens next year. However, GMAC had difficulty raising money because of its financial woes, making an extra government infusion necessary.

Michael Carpenter, who succeeded Alvaro De Molina as the company's CEO in November, has said the company would need no more than $5.6 billion in aid. Lawmakers estimated the company would receive between $2 billion and $5 billion in additional aid.

Any additional government money would come from the $700 billion Troubled Asset Relief Program that has been used to bail out troubled financial institutions and automakers.

Even after the latest capital infusion, the government will likely take steps to help GMAC as it tries to ensure the recovery of GM and Chrysler, said Kirk Ludtke, senior vice president at CRT Capital Group. That includes helping GMAC refinance its debt as it comes due, he said.

"The government has come this far, it is not going to destabilize GMAC at this point," he said.

GMAC still remains on shaky financial ground. Last month, it reported a quarterly loss of $767 million, though the results were an improvement over a giant loss a year ago. ResCap lost $747 million during the third quarter as homeowners continued to default on their mortgages in large numbers.

GMAC, which also provides financing to car buyers, has also been hurt by the rapid decline of the U.S. auto industry after sales crumbled due to the recession and financial woes of the big automakers. Sales of cars and trucks were down 24% through November compared with the same part of last year. The industry is expected to sell around 10 million cars this year, one of the worst performances for autos sales in decades.

Despite the drop in auto sales, GMAC's auto lending business has shown some signs of revival. The auto financing division earned a profit of $395 million during the third quarter. The company's online consumer banking unit, Ally Bank, has also been a bright spot by bringing in billions of dollars in new deposits by offering relatively high interest rates. It now accounts for about 29% of GMAC's assets.

Medigap Info Could Overwhelm

Blue Cross denies hiding its money-losing policy
Detroit Free Press

John and Rita Cox had to find another Medicare policy this fall after Blue Cross Blue Shield of Michigan eliminated their plan.

They wanted a Blue Cross Medigap plan for $112.12 a month each, just like Rita's cousin has. An independent insurance agent at the insurer's Southfield lobby gave them an application in October.

But back home, Cox, 81, a retired salaried Ford Motor Co. construction engineer, and his wife, 77, realized the policy the agent suggested was for Blue Care Network, a subsidiary of the insurer, a plan that would cost $203.33 a month for her and $254.49 for him.

Confused, they called their son, Mike, who happens to be Michigan's attorney general.

Mike Cox successfully fought to hold down a recent rate increase in Blue Cross Medigap policies. He has also accused the insurer several times in the past year of failing to adequately promote the money-losing Medigap policies.

Blue Cross spokesman Andy Hetzel said the insurer loses $1,000 on every Medigap policy.

Cox advised his parents to get the exact name of the policy from the cousin, then go back to the Southfield office and request an application. "And don't take no for an answer," Rita said her son told her.

They went back and left with an application for Legacy Medigap, the new name Blue Cross has given its Medigap policy. They also bought a separate Part D plan to pay for prescription drugs, as most seniors do because Medigap policies don't have drug coverage.

"They are hiding it," Rita Cox said of Blue Cross. "The ones being hurt are seniors."

The Coxes' experience underscores problems seniors have in trying to find out about Blue Cross Medigap policies.

Blue Cross denies it has hidden its Medigap policy or steered customers to its subsidiary. Some 2,200 seniors enrolled in the Legacy plan in the last month alone, a sign that "clearly there isn't a widespread issue with regard to accessing the application, filling it out or getting enrolled," Hetzel said. The insurer has made improvements to more prominently list Legacy Blue applications and information on its Web site.

Hetzel attributed confusion to the dozens of Michigan Medicare plans sold. "The Coxes' family experience unfortunately is what a lot of families go through right now," he said.

Some of the confusion stems from a new Medigap policy, MyBlue, offered by Blue Care Network, a subsidiary of Blue Cross.

MyBlue policies cost more because administrators can charge higher rates based on a person's age, gender, health status, weight and county of residence.

Blue Cross can't charge higher rates because it is required by state law, as Michigan's nonprofit insurer of last resort, to offer one price for its Medigap policies.

Insurance brokers also get no commission to sell Legacy Blue plans as they do for a Blue Care Network policy. The commission typically is 20% of a plan's monthly premium.

As a result, some brokers don't tell seniors about the Blue Cross Medicare products, according to several local insurance brokers. The ones that do, like Barbara Plecas, an insurance broker in Walled Lake, tell seniors about Legacy Blue because "it's the right thing to do," Plecas said.

Louis Isabell, general manager of the Wixom-based Allchoice insurance firm, said some of his clients who requested Legacy Blue applications in October still had not gotten them, so they bought plans from other insurers.

29 December 2009

Consumers Energy, Environmental Groups React To Bay City Coal Plant News


Consumers Energy is applauding approval of an air permit for a new coal plant in Bay County, while environmental groups are criticizing the decision by the "Granholm-Cherry administration."

“The issuance of the air permit for our new clean coal plant is good news for Michigan," John Russell, Consumers Energy’s president and chief operating officer, said in a statement.

"This permit moves our project a step closer to creating badly needed jobs and boosting the state’s economy. It also provides best-in-class protection for the environment with an offset for carbon dioxide emissions from the new plant and a substantial net reduction in overall emissions from our coal-fired generating fleet."

The air permit includes a commitment from Consumers Energy to retire up to seven of its older, less efficient coal units after the new unit begins operating at the company’s Karn-Weadock complex in Bay County's Hampton Township

The $2 billion-plus, 830-megawatt plant is expected to create 1,800 construction jobs, about 2,500 indirect jobs and more than 100 permanent jobs after it begins operating in 2017, Russell said. Overall, the plant is projected to provide a $1.2 billion economic boost to Michigan, he said.

But environmental groups say the DEQ's decision "strikes a blow to clean energy investments and jobs in Michigan."

“We are disappointed by the failure of Governor Granholm to keep her promise to move Michigan toward a clean energy economy," said Sierra Club Michigan Chapter Director Anne Woiwode.

"Thousands committed to Michigan’s future are rallying to fight this badly flawed decision at every step to get Michigan back on track toward a clean energy economy."

Russell said the company plans to file a certificate of necessity application with the Michigan Public Service Commission in 2010.

The air permit includes a commitment from Consumers Energy to retire up to seven of its older, less efficient coal units after the new unit begins operating at the company’s Karn-Weadock complex in Bay County's Hampton Township.

Five of the older units will be retired following operation of the new unit, with retirement of the additional two older units depending on customer need, he said.

The Sierra Club and other groups counter that the shut-down requirement does nothing to push Consumers Energy toward clean energy alternatives.

“Michigan is heading in the wrong direction with this unfortunate decision,” Clean Water Action Michigan Director Cyndi Roper said.

“The federal government has declared coal pollutants a threat to human health. Every other state is investing in clean energy, creating jobs and turning away from coal. Michigan, on the other hand, is looking to the past and this decision threatens to keep us in the energy Dark Ages."

Air Permit OK'd For Bay City Power Plant

Detroit Free Press

LANSING — State regulators have approved a key permit that could clear the way for Consumers Energy to build an 830-megawatt coal-fired power plant near Bay City.

The Department of Environmental Quality’s decision to approve an air permit was announced today after months of debate and challenges from environmental groups opposed to the project.

The air permit was approved with conditions. Consumers Energy will be required to retire up to 958 megawatts of coal-fired generating capacity from seven of its oldest existing Michigan plants.

The new Consumers generator would be built in Bay County’s Hampton Township. The utility hopes to have the facility online by 2017.

Consumers applied for the air permit more than two years ago.

28 December 2009

Time To Pick Your Annual Drug Plan

The Wall Street Journal

As the year comes to a close, so does the open-enrollment period for Medicare prescription-drug plans.

The deadline to make changes to Medicare drug plans is Dec. 31, except for people who qualify for a special enrollment period like those in a low-income subsidy program.

Generally, there are two types of drug plans to choose from: a stand-alone prescription-drug plan if you are part of traditional Michigan Medicare or drug coverage that's attached to a private Medicare health plan.

You should review all of the drug-plan options, even if you are happy with your current plan, says Paul Precht, spokesman for the advocacy group Medicare Rights Center. "These plans change," he says. "There's no guarantee that if it worked for you this year, it will work just as well for you next year."

To compare plan costs, go to Medicare.gov, click on the "Compare Drug Plans" link and enter personal information, including which medications you take.

"It will show you which plan is going to be the cheapest for you over the course of the year, from the combination of premiums, deductibles, co-payments, as well as what drugs the plan covers," he says.

Focus Is On Detroit In Probe Of Medicare Fraud

Detroit Free Press

Now-shuttered Ritecare Urgent Care at 16904 Warren Ave. in Detroit was closed Oct. 28 as part of an FBI probe into fraudulent billing practices. Patients still inquire at a neighboring insurer about the clinic.

Detroit is part of expanded federal scrutiny of Medicare fraud.

Since 2007, a joint task force from the U.S. Justice and Health and Human Services departments has indicted more than 460 people  nationwide on charges of bilking the federal program out of more than $1 billion in fraudulent claims, particularly unnecessary medical tests.

The investigations started in Miami and Los Angeles and were expanded this year to Detroit, Houston and Brooklyn.

Some of the cases, including one against Ritecare LLC, a Livonia-based company with urgent care centers in Detroit and Westland, involve unnecessary medical testing and services, as well as alleged kickbacks some centers gave to staff and patients to increase business.

In Detroit, the Ritecare owners hired patient recruiters to drum up business for the company's clinic in Detroit, according to the Dec. 15 indictment brought by the U.S. Attorney's Office, Eastern District. In return, the recruiters paid people money to fake symptoms and undergo unnecessary tests, according to the indictment.

Attorneys listed in court records for Alejandro, Emilio and Maria Haber, the clinic's owners, could not be reached for comment Wednesday.

Ritecare's administrator and two patient recruiters also were indicted, as were two patient recruiters and the owner of a third clinic who referred patients to Ritecare, the U.S. Attorney's Office said in a statement. The cases are pending in Detroit's U.S. District Court, with two of the patient recruiters scheduled for a jury trial Feb. 16.

No one answered phones this week at Ritecare Inc.'s Livonia headquarters, at its Detroit center or a new urgent care center it opened in Westland at 769 S. Wayne Road. Ritecare was created in 2008 through a merger of Ritecare LLC and CompleteHealth LLC of Livonia, the indictment said.

The Detroit clinic, which opened in April, was authorized to bill Michigan Medicare and Medicaid for its services. "That was one busy place," said Katrina Daniels, a member of the State Farm office operating next door to the clinic. "The parking lot always seemed to be full," she said. The office doesn't know what to tell people who come daily to inquire about the clinic, she said.

Teri Chamberlain, Medicaid enrollment supervisor with the Michigan Department of Community Health, said the center was approved as a Medicaid provider because the clinic and its owners had no prior record of problems. Dr. Richard Chesbrough, a Bingham Farms radiologist who reads tests for Ritecare, has 20 ultrasound tests for patients he didn't know how to reach. He said he believes the incident underscores the need to better regulate diagnostic testing that occurs in doctor's offices and urgent care centers.

Too often, the work is substandard or unnecessary but no one regulates these tests, except for mammograms, the way they are in hospitals, he said. He called the quality of tests he got from Ritecare to read marginal.

Records with a second state agency, the state Department of Labor and Economic Growth, show that the clinic had incorporated as a limited liability company, which requires only cursory information. Owners and medical doctors are not required to be listed on the forms, said Ann Baker, deputy director of Commercial Services for the Michigan Department of Labor and Economic Growth.

Baker said it was up to the Department of Community Health to determine whether patients were harmed.

Persistence, Loans Rescue Ypsilanti's Realkidz Inc.

Detroit Free Press

This Christmas is extra sweet for Merrill Guerra. In August, the first-time entrepreneur wasn't sure her business would make it to the end of the year.

"We're still alive! Yeah!" the CEO of RealKidz Inc. declared earlier this month in her brightly decorated Ypsilanti office located around the corner from Depot Town.

Staying alive is no small feat for this start-up company, which sells average-size and plus-size clothes for young girls. Though RealKidz added a fashionable new line of fall and winter apparel, sales have gone nowhere because of a major blunder.

Guerra had hoped to quickly create a strong network of independent sales representatives to sell RealKidz's clothes at private home parties, similar to how Tupperware and Avon products are purchased. The company attracted slightly more than a dozen sales representatives, but none of them were able to generate significant sales.

"We could sign them up but just didn't have the support they needed and the knowledge to help them grow their businesses," Guerra said in late October.

The representatives lost interest in RealKidz, and Guerra now has to rebuild her network, missing the crucial Christmas shopping season. This time around, she has enlisted an experienced direct-sales veteran that she believes will help RealKidz avoid further pitfalls.

Though this kind of mistake could have killed RealKidz, the start-up gained some additional time to make its business plan work, thanks to financing from the state. In May, the company obtained $142,000 from the Michigan Pre-Seed Capital Fund in exchange for a small equity stake in the business. And this month, RealKidz received approval for a $50,000 loan from the Michigan Microloan Fund Program.

The loan couldn't have arrived at a better time because RealKidz was starting to run out of money. "The loan was extremely important," said Guerra, who plans to use a large chunk of it to make more clothes in the spring.

After 20 months in business, RealKidz offers a larger variety of clothes than when it first started out, including blue jeans, skirts, shorts leggings and kids shoes. Each new line the company brings out is more sophisticated than the last. For example, its sweatshirt hoodies come with rhinestone zippers.

Now the company has to find people who can sell.

"It wasn't until August that I really started feeling the weight of being an entrepreneur," said Guerra, who's trying to meet the expectations of RealKidz's investors and small staff. "I'm so far into it now. It's about so much more than me. The pressure is greater."

But like other die-hard entrepreneurs, Guerra refuses to let her company's daunting challenges overwhelm her. "It's been a roller coaster," she said. "But we're getting all these different pieces figured out."

27 December 2009

Citidel Broadcasting, Parent Firm Of WJR-AM, Files For Bankruptcy

Detroit Free Press

The parent firm for three metro Detroit radio stations, WJR-AM (760), WDRQ-FM (93.1) and WDVD-FM (96.3), filed for Chapter 11 bankruptcy protection today to restructure its debt load.

In documents filed in U.S. Bankruptcy Court for the Southern District of New York, Citadel Broadcasting Corp., the nation’s third-largest radio broadcasting company, listed total assets of $1.4 billion and total debt of $2.46 billion.

The presidents of WJR, WDRQ and WDVD did not return calls today to explain the impact in Detroit.

Citadel owns and operates 224 radio stations and produces news and talk radio programming for 4,000 station affiliates and 8,500 program affiliates. In Michigan, Citadel also owns 22 stations in the Grand Rapids, Lansing, Flint, Saginaw and Muskegon areas, according to its Web site.

24 December 2009

State Population Now Below 10 Million

Michigan Messenger

With the continuing reduction of the manufacturing base in Michigan, the state’s population has now dropped below 10 million according to new data released by the U.S. Census Bureau. The Detroit News reports:

The July 1, 2009, population estimate shows the state lost an estimated 32,759 people, the fourth consecutive year the population fell. Only Maine and Rhode Island saw their population go down in the last year.

Michigan has been bleeding people since 2005, and at the heart of the decline has been the growing exodus of people moving out looking for work. The current estimate puts Michigan’s population at 9,969,727, down from 10,002,486 in 2008. The state has seen a net loss of more than a half-million people to other states since 2001 — a number that swamps the natural increase from a greater number of births than deaths.

Last year’s decline was actually slower than in previous years, probably because the recession reduced opportunities in other states that might prompt residents to leave Michigan. As the recession lifts and Michigan lags behind the rest of the country in terms of jobs, the rate of decline in Michigan’s population may well speed up.

This has a real impact on the state in a number of ways. Declining population means dropping state revenue through income, property and sales taxes. It also means losing a good deal of federal aid and, after the 2010 census, will almost certainly cost the state one or two seats in the U.S. House of Representatives.

23 December 2009

Ford Motor Nearing A Deal To Sell Volvo To Geely


Ford Motor Co (F.N) said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry.

The deal, which Ford said it expects to sign in the first quarter and close in the second quarter of 2010, would be the largest acquisition of an auto brand by a Chinese company.

It comes at the end of a year that has seen China overtake the United States as the world's biggest auto market in a reversal of fortune that would have been unthinkable only a few years ago.

Traditional Ford rival General Motors Co, meanwhile, is moving to abandon its own Swedish brand, Saab, after selling some assets to another Chinese automaker, Beijing Automotive Industry Holding Corp or BAIC, for $200 million.

Geely Automobile Holdings Ltd is China's largest private automaker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means "lucky" in Chinese.

As U.S. automakers have faced deepening distress over the past two years, Chinese automakers have had preliminary talks about buying a range of assets, but those deals have been small in scope and difficult to close until now.


Dearborn, Michigan-based Ford Motor said it had agreed on all substantial terms in a deal to sell Volvo to China's Zhejiang Geely Holding Group, parent of Geely Auto.

The unusual update on negotiations from Ford and Geely was seen as a signal to China's government, which must approve the sale. Such approval is needed for Geely to be able to borrow $1 billion or more from Chinese banks.

"While some work still remains to be completed before signing ... Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010," Ford said in a statement on Wednesday.

The value of the deal has been estimated at $1.8 billion -- far short of the $6.45 billion Ford paid for Volvo in 1999.

But for Ford, closing the sale would give it cash at a time when it is looking to repay debt faster, as the No. 2 U.S. automaker strives to return to profitability by 2011.

Should Ford close on Volvo's sale as expected, it will have succeeded in divesting all three of its luxury brands. It sold Jaguar and Land Rover to India's Tata Motors Ltd in 2008 and sold British-based Aston Martin in 2007.

Shares in Ford topped $10 on Wednesday for the first time since 2005. The stock has more than tripled since the start of the year as Ford has gained market share and steered clear of the government-directed bankruptcies that remade Chrysler Group LLC and GM.

In contrast with Ford, GM has struggled to unload brands in the downturn. A deal to sell Saturn collapsed, GM pulled plans to sell Opel, its sale of Hummer has been delayed, and Saab would shut without an eleventh-hour deal.

BAIC, China's fifth-largest automaker, bought rights to older Saab models from GM. It said on Wednesday that it would launch an aggressive campaign to develop its brand both at home and overseas based on the deal.

The rest of Saab faces closure unless a last-gasp offer by Dutch-listed luxury car maker Spyker Cars NV is accepted by GM, which said last week it would begin winding down the brand it has controlled for 20 years.

BAIC, which does not have its own car brand, said the acquisition of Saab tooling has cut four to five years from its vehicle development plans.


BAIC plans to immediately start integrating Saab technology into its vehicles, with an aim to sell 100,000 vehicles based on its own development in 2011.

Tan Kunyuan, an analyst at Changjiang Securities, said that target for BAIC would be aggressive. "It will take at least a year for the market to recognize the brand, and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

The Beijing-based automaker is in a production partnership with Daimler AG and Hyundai Motor Co, with most of their joint output for sale in the domestic market.

BAIC's Saab acquisition includes the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment to make them.

The rise of China's auto market and the collapse in the U.S. market have both been more dramatic than analysts and industry planners had expected.

Auto sales in China, including commercial sales, have more than doubled since 2005, rising near 13 million units this year from 5.76 million just four years ago.

By contrast, the U.S. market has plunged from 16.95 million vehicles in 2005 to near 10.4 million this year.

Ford Motor Offers Buyout Incentives To Production Workers

Associated Press

Ford Motor Co. has offered buyout or retirement incentive packages to all of its 41,000 U.S. hourly workers as it tries to further reduce its factory work force.

Ford, the healthiest of Detroit's three automakers and the only one to avoid government aid and bankruptcy protection, still has more workers than it needs to produce cars and trucks at current sales levels, said company spokesman Mark Truby.

He would not say how many workers Ford expects to take the packages, which include cash payments and other incentives such as vouchers to buy cars and short-term health insurance coverage.

"We're just going to try to right-size our manned capacity and align it with demand," Truby said.

Ford currently has 634 blue-collar workers on layoff in the U.S.

Under the terms of a new contract with the United Auto Workers union, the employees get most of their pay for a year depending on seniority, and a portion of their wages for another year before they are removed from the company payroll.

In the past, laid-off workers went into the "jobs bank" and were paid indefinitely even if their factory had been shut down. But the union agreed to scrap the jobs bank earlier this year when all three Detroit automakers ran into financial troubles.

The buyout package, offered to workers with at least a year of service, includes $50,000 cash and the choice of a $25,000 voucher to buy a vehicle or $20,000 more in cash. The deal also includes basic health care coverage for six months, Ford said. Retirement-eligible workers can take the buyout but must wait up to 18 months before retiring.

The retirement package includes $40,000 for skilled trades workers and $20,000 for nonskilled employees. To be eligible, workers have to have either 30 or more years of service, be age 55 or older with 10 or more years of work, or they can be 65 with at least one year of service, the company said.

Earlier this year, only 1,000 workers took similar packages, the company said in July.

Ford started 2009 with 89,000 employees in North America but reduced that number to 80,200 as of Sept. 30 through attrition, buyouts and layoffs.

Truby said the additional offer has nothing to do with the UAW membership rejecting a second round of contract concessions earlier this year. Workers at General Motors Co. and Chrysler Group LLC approved the concessions, so Ford is operating at a small cost disadvantage.

Ford sales were down 19 percent through November when compared with the same time last year. But the company has fared better than the U.S. auto market as a whole, which is down 24 percent for the year. GM and Chrysler sales are both off more than 30 percent.

In 2006, Ford had 75,000 unionized workers in the U.S., but since then it has closed 12 factories and reduced its work force with buyout and early retirement offers as part of a massive restructuring plan. The company plans to close four more factories by the end of 2011.

Study: 750,000 In State May Get Health Insurance

Detroit Free Press

As the Senate debates landmark health insurance reforms, an advocacy organization released a report Wednesday saying 776,000 Michigan residents will gain coverage by 2019 if Congress approves the changes.

If the legislation does not pass, at least 200,000 more Michigan residents will lose health insurance by 2019, according to FamiliesUSA, a Washington health research organization that supports federal reforms. Now, about 1.3 million people in the state are without health insurance or Michigan Medicare, according to the Michigan Department of Community Health. The numbers grow monthly as more people lose jobs and workplace health benefits.

"The consequences of inaction are very severe for people across the country," said Ron Pollack, executive director of the organization, in a news media briefing Wednesday.

Pollack said pending Senate legislation would require insurers to take people with pre-existing conditions; expand eligibility for Medicaid, and give tax credits, a type of subsidy, for others slightly above federal poverty guidelines, so they can buy Michigan health insurance. He expects monthly premiums paid by those who now are insured may drop because reforms would end cost-shifting to care for the uninsured by charging insured patients more.

22 December 2009

Senate Passes Bill To Benefit Michigan Companies, Jobless

Detroit News

Washington -- The Senate passed the $636 billion Department of Defense appropriations bill this morning that includes millions of dollars for military-related projects by Michigan companies, plus an extension of unemployment benefits and COBRA health insurance subsidies for laid-off workers.

The Senate passed the bill, passed 88-10, with Sens. Carl Levin, D-Detroit, and Debbie Stabenow, D-Lansing, voting for it. The bill goes to President Barack Obama, who is expected to sign it.

"It was a little bit of struggle to get here, but we got here," said Sen. Majority Leader Harry Reid, referring to the massive snowfall that began Friday night and is blanketing Washington.

The Senate squeezed in the vote to fund the Fiscal Year 2010 military in its ongoing debate on overhauling the nation's health care system. Senate Democrats hope to get to a final vote before the Christmas holiday next Friday.

The DoD bill also includes $128 billion to fund the wars in Iraq and Afghanistan.

The precise dollar amount that Michigan companies will receive in the Defense bill isn't known because companies must compete for the contracts. The amount will easily top $100 million, however, because much of the funding goes to projects already under way in Michigan.

The bill also sets aside $320 million for the Warren-based Army Tank Automotive Research, Development and Engineering Center and its National Automotive Center.

That money will support such research into protecting Army vehicles against rocket propelled grenades and other explosives, strengthening combat and tactical vehicle armor, and developing fuel cell and hybrid electric vehicles.

The legislation also funds programs of the Army's TACOM Life Cycle Management Command in Warren, including the Abrams main battle tank, the Bradley Fighting Vehicle and the Stryker Armored Vehicle.

Michigan lawmakers requested funds for projects in which Michigan companies will be leading contenders for the contracts, including:

• $1.2 million to develop rooftop photovoltaic systems for military housing by United Solar Ovonic in Auburn Hills.

• $219 million to continue work on the lightweight 155mm howitzer, which Howmet Castings of Whitehall has worked on.

• $6.4 million for a program that Peckham Industries of Lansing has been part of to create multi-climate clothing for soldiers.

• $2 million for laser scanning technology that NVision of Wixom is developing.

• $1.2 million to continue work by Cybernet Systems Corp. of Ann Arbor on a shipboard wireless device for Navy ships.

• $1.6 million to continue development by Dexter Research Center in Dexter on a security sensor to protect military intallations from chemical and biological attacks.

"This bill ensures that Michigan's factories and research centers will continue their cutting-edge work that has helped make our military the strongest the world has ever seen," said Levin, the chairman of the Senate Armed Services Committee.

Stabenow said the funds will help create jobs in the state.

"I am very pleased that this legislation not only provides critical funding to support our troops, including a 3.4 percent increase in military pay, but also invests in my priorities for alternative energy research and more energy-efficient combat vehicle technology," Stabenow said.

The bill also extends a federal subsidy that helps laid-off workers pay for health care from nine months to 15 months.

Under the program, the federal government picks up 65 percent of the cost of an individual's health insurance with their former employer.

The subsidy, initially offered for nine months, began in March, meaning some laid-off workers got kicked out of the program Dec. 1. They'll be allowed to continue for six months, and be reimbursed for the subsidy they didn't receive for December, once the bill becomes law.

Eligibility to tap into the COBRA program for Michigan health insurance was set to expire Dec. 31, but the DoD bill extends it through Feb. 28. The bill also extended the expiration date of expanded unemployment benefits from Dec. 31 to Feb. 28.

Without the extension of the jobless benefits program, 70,000 Michiganians will cash their last unemployment checks by mid-February.

Last month, Congress passed an extra six weeks of unemployment benefits for hard-hit states such as Michigan. But because there were too few weeks left on the calendar before the cut-off date of Dec. 31, virtually no one in Michigan would have qualified for the six extra weeks.

Michigan provides a maximum of $362 per week in unemployment benefits to previously full-time workers, plus an additional $25 per week provided by the Recovery and Reinvestment Act, for a total of $387 per week. The weekly $25 bonus was also in the DoD bill.

Levin said the steps will "soften the blow of unemployment."

About 470,000 Michiganians are receiving unemployment benefits.

21 December 2009

GM To Shut Down Saab

The Wall Street Journal

General Motors Co. said it would wind down its Saab business, marking the near-certain death of one of Sweden's most storied companies and a car brand with a small but devoted following.

GM had given itself a final chance to complete a sale of the quirky 62-year-old luxury auto maker by year's end. But it said unsolvable issues arose in late-stage negotiations Friday to sell the company to Spyker Cars NV, a Dutch maker of ultraluxury sports cars.

It is the second time this year that GM's plans to sell an ailing brand have collapsed. Its efforts to sell Saturn also failed, and the company reversed itself on plans to sell its European car maker, Opel.

While bidders could still emerge for Saab's remaining assets, including two yet-to-be-launched models, GM's announcement ushers the car manufacturer spawned from a Swedish plane maker to the junkyard along with Saturn and Pontiac.

In the end, Saab proved to have too small a following to attract large auto makers looking for scale in a global recession.

The potential buyers it did attract, such as Swedish boutique car maker Koenigsegg Group AB, ran into trouble financing the acquisition.

Few of the car brands that have met their demise this year stirred the passions among car lovers that Saab did.

Saab's offbeat Scandinavian style and unique features, such as an ignition placed between the front seats, won it a small but loyal following in the U.S., where it has been a favorite among the academic set.

"It's a sad news day for Saab owners," said Chris McPherson of Cumming, Ga., who has owned a Saab on and off since he bought his first one, a 1967 Saab 96 sedan, right out of high school in 1973.

GM's announcement also means that little is left of Sweden's once venerable car industry, and what remains may soon be acquired by Chinese car makers. Ford Motor Co. remains in talks to sell its Volvo unit to China's Zhejiang Geely Holdings Group.

GM executives said Friday that their decision to shutter Saab's operations wouldn't affect plans to sell some intellectual property and equipment for old Saab models to Beijing Automotive Industry Holding Co.

Disposing of Saab is part of a broader GM strategy to slim down the company and focus on the four brands -- Chevrolet, Cadillac, GMC and Buick -- it believes are its strongest.

But GM's decision drew a sharp response from Swedish government officials who had been involved in the last-ditch talks to save Saab.

Most of the 3,400 people Saab employs world-wide work at its main plant in Trollhattan, Sweden.

"GM could have done much more to help Saab," Swedish Enterprise Minister Maud Olofsson told reporters.

Spyker's chief executive, Victor Muller, said GM had declined to extend its self-imposed deadline, contending that his company had lined up most of the required financing, though it was still awaiting approval for a [euro ]400 million ($572 million) loan from the European Investment Bank.

But GM Vice President John Smith, who led the Saab negotiations, said that GM concluded that extending the deadline wouldn't have resolved the snags, which weren't identified.

"Like everybody we would have preferred a different outcome," he said.

GM's European chief, Nick Reilly, said Saab, which has roughly 1,100 dealers, would continue to pay its debts, such as payments to suppliers. It will also honor warranties and provide service and parts to current Saab owners.

Though GM wouldn't elaborate on a timetable for winding down the operations, it said the process would start in January.

GM bought a 50% stake in Saab -- founded in 1937 to build planes for the Swedish Air Force -- 20 years ago and took full ownership in 2000.

But Saab's earlier models and their design and engineering idiosyncracies -- such as their outsized rear hatches and the ignition locks -- are what attracted legions of Saabophiles.

So did Saab's reputation as a safety pioneer: Its cars were the first to be fitted with safety belts and impact absorbing bumpers.

"You could have fun with the car, and it handled better than most," said Mr. McPherson, 54, who drives a 1990 red Saab 900 convertible and recycles old Saabs as a business. Plus, he said, "it didn't look like everyone else's car."

Many analysts say GM's takeover of Saab led to better produced cars. But it also dulled the brand's distinct luxury image, and the American parent failed to freshen up Saab's model lineup in recent years.

Saab hasn't made a profit since 2001. It had a loss estimated at three billion Swedish crowns ($413 million) in 2008 and is expected to lose a similar amount this year. The number of Saab cars sold is expected to dwindle to fewer than 50,000 this year, less than 1% of GM's total production.

GM began the search for a buyer for Saab in January as it teetered on the brink of bankruptcy and decided to shed four of its eight brands.

Last month, though, the company reversed plans to sell its European car brand Opel to a group led by Canadian auto supplier Magna International Inc.

A deal to sell its Saturn brand to racing mogul Roger Penske also fell through.

20 December 2009

Can Detroit Be Saved?

An Interview With Dave Bing
The Wall Street Journal

Dave Bing has just signed on to four years of maybe the most futile and thankless job in America: mayor of Detroit. What in the world was he thinking?

"I wouldn't have taken this job if this wasn't doable," he tells me. "I finished basketball in 1978, then went into my own business in 1980 and did it for 29 years. . . . Now I get to the end of that career and probably should have retired. But there was a calling greater than anything that I ever envisioned, and that was to help bring this city back."

In November, 57% of the Detroit voters bought into his tough-love reform agenda. Mr. Bing replaced the disgraced Kwame Kilpatrick, who went to jail earlier this year for spending city funds on his girlfriends—just the publicity boost the city already flat on its back didn't need.

The mayor's office is in the heart of downtown Detroit, which has shrunk to about an eight-block radius of high rise office towers, upscale restaurants and stores. Yet everything in Mr. Bing's office, including the furniture, is, in the words of his press secretary, "spartan." There's no money to be wasted on redecorating, the mayor tells me. He's not taking a salary. At 66, with his horn-rimmed glasses, graying hair and tailored business suits, Dave Bing looks ready for business.

His highest priority is balancing a budget that is swimming in red ink. "We have a $325 million deficit, and 2010 doesn't look any better. Right now revenue growth is still negative. We're taking in less money each year. We can't rebuild this city by constantly cutting, but in the short term, we don't have an option," he says.

How much has to be chopped? The major says that at its peak Detroit had a $3.6 billion budget. He hopes to get it down to $2.9 billion, almost a 20% real cut.

Dave Bing is no Milton Friedman when it comes to economic solutions. He's praying for lots of federal aid to help the city pull out of its ditch, he wants to borrow against future tax revenues, and he hasn't ruled out tax increases "if they have a sunset" to pay the city's bills. He believes it's a core responsibility of government to help people.

Yet Mr. Bing is a realist, something Detroit hasn't had at the helm for a long time. "We've been paralyzed by a culture in the city of Detroit, and maybe the state of Michigan, of entitlement," by which he means ever-rising union wages. "Our people, I don't believe, truly understand how dire the situation is. There are ugly decisions that need to be made and I'm surely not going to be popular for making them. But I didn't take this job based on popularity."

One group that surely isn't a fan is the public employee unions. He grumbles that there are 17 unions with over 50 separate bargaining units. "I can give you a data sheet that will show you we've got several of those bargaining units with less than 100 people, and each one of them has a president that's paid by the city to negotiate against the city," he says. "Coming from the private sector, I find that insane."

Mr. Bing's gladiator-like brawls with the union bosses have drawn national attention. Earlier this year, he forced nonunionized city workers to take a 10% pay cut and unpaid furloughs. Now he's demanding the same pay concession from the unions. At one point the union got so fed up with Mr. Bing's refusal to buckle to their demands that they asked the courts to toss him in jail for violating their contracts. That didn't happen, but the unions did win a court challenge when the mayor refused to collect union dues out of city paychecks.

"Today in the city of Detroit," he tells me, "our union employee benefits cost 68% of what their base wage is. I don't think that happens in any other place in the country." To give a sense of how excessive those pay packages are, he adds: "When you look at one of the most dominant labor unions in the world, the UAW, they're nowhere close to what we give our city workers."

The mayor is quick to remind me that he is not antiunion. He joined the NBA players association in the late 1960s and hired a mostly unionized workforce at his firm, Bing Steel. But for months he has been locked in tedious negotiations and the aggravation is starting to show.

"The problem for the most part," he argues, "is poor union leadership. I think the rank-and-file aren't being told the truth. And I'm not going to B.S. anybody. I'm going to tell them the truth. They can't continue to ride this gravy train forever."

He poses this question to the city workforce: "Are you better off having a job and making 90% of what you're at today or having no job at all? To me, you don't have to be a brain surgeon to say I'll take that 90%."

Could Detroit be the first major city in America to actually declare bankruptcy, I ask hesitantly. His honesty surprises me: "I hope not, but I wouldn't rule it out if we don't get concessions from the unions." He may be using the threat of bankruptcy, which is a poison pill for unions, as a bargaining chip. "This would void all the city contracts," he insists. "That means workers have to make a decision: Do you want to start with zero, or do you want to start from where you are and give up just a little bit? Under bankruptcy you start with zero." Mr. Bing is a hardliner.

After he retired from the NBA, Mr. Bing started a steel company with $250,000 of his own money. He lost half of it in his first year, 1980, the worst steel recession of the 20th century. Bing Steel eventually grew into a $60 million enterprise.

How important is his business experience in running Detroit? "A city is a business," he replies. "It's a $3 billion plus business. The past administrations didn't understand that, and I think that's got us where we are." Voters realize that private "businesses create jobs," he says. "That's where wealth is come from, and for too long we've treated them like enemies."

He wants to make the city "more business friendly," but how? "Take the licensing and permitting process that people have to go through," he explains. "I've heard nothing but war stories. So I'm focusing on how we can help businesses cut through the red tape in city government. As an entrepreneur, if you have to spend all of your time trying to get licensing and permits . . . guess what you do? You're going somewhere else. We've got to make Detroit a place where businesses can make a profit again," he says hopefully.

Mr. Bing is brimming with other ideas to make Detroit more livable. One challenge he faces is how to successfully downsize. "We have a city that still has a footprint from when we had almost two million people. In the 2010 census, we'll be lucky if we've got half of that population with the same footprint and infrastructure."

He wants to tear down buildings and dilapidated homes and convert thousands of acres to "parks and greenspace." He also wants to privatize public services to save money and create a new cosmopolitan environment that will attract middle-class and affluent families that have fled to the suburbs.

"We have to be honest with ourselves and say we're no longer going to be the motor capital or the manufacturing capital of the world," Mr. Bing says. "But I think we can be the entertainment capital of the Midwest. We have casinos, great hotel accommodations, great restaurants, we're one of the few cities that has every professional sports team.

"We're one of the only cities in the country that has an international waterway—so there's Detroit and then across the river, there's Windsor, Canada," he says pointing out the window to the tall buildings across the border. "We're losing a lot of our young talent who graduate from our top universities, because they don't see the opportunity for jobs in the future here. That's got to change."

He has a clear prescription of how to bring the middle class back: "I think public safety is number one. A productive school system is number two. Because without either one of those being effective and efficient, you can forget everything else." It sounds like a plan right out of the Rudy Giuliani playbook. He has brought in a new police chief and early results look encouraging.

Still, Detroit has one of the highest murder rates in the nation. The public schools are disastrous, with almost two of three inner city Detroit teenagers failing to earn a high school degree.

Mr. Bing believes the solution lies in improving public schools, but also investing in parochial and charter schools. "I'm for more choices. Getting families into the best educational system for their young people is critical." Schools aren't under his command; they are run by a school board that is dominated by the teacher's unions. "One of my goals is to have mayoral control" of the school system, he says.

Mr. Bing also feels passionately about the value of sports in the lives of young people. Before he became mayor, he donated and helped raise money to keep high school sports programs in Detroit.

"I think sports are critical," he says. "I don't care whether it's in the inner city or not, if the only thing that we prepare young folks today for is classroom activities they lose a lot. There's so much you can learn in sports that you don't learn from academics. It's understanding how to get along and communicate with people. Being part of a team. Sports gives you a sense of what it's like to win, and how you handle losing and setbacks, which life is full of."

Many people don't know that Dave Bing faced—and improbably overcame—major adversity of his own on the road to stardom. "When I was a five-year-old kid," he retells the story, "I had a nail stuck in my eye. So I had poor vision. The injury affected my depth and peripheral vision."

It is nothing short of a miracle that a man could become a world-class shooter with that kind of disability. And then in his fifth year in the NBA he was poked in the eye, which caused a detached retina. The doctors said he was done with basketball. "I played another seven years after that." Then he becomes philosophical: "So you know, it's easy for people to have problems and feel sorry for themselves, and quit. That just wasn't in my nature."

I can't resist asking Mr. Bing about one of the few decorations in his office: a large photo of 50 of the greatest NBA players of all time. There gathered are Oscar Robertson, Bill Russell, Elgin Baylor, Elvin Hayes and, yes, Dave Bing. "I was and still am friends with many of those guys," he says. How would they have done against the current crop of players? "Oh there's no doubt that today's players are far superior athletes and leapers. But now it's an individual sport. Back then we played together as a team. That's why we might have beaten them," he chuckles.

Mr. Bing reminds me that he was the No. 2 player taken in the 1968 NBA draft, after starring at Syracuse. His first salary was just $15,000. Today, the No. 2 pick in the draft earns close to $15 million.

So what made Dave Bing so great at basketball? He's not that tall—6'3"—though he does have big hands, the trademark of a great hoops star. "I think one of my best attributes was intelligence," he explains. "In a lot of cases that is what truly separates the superstars from the rest. That and I had a good work ethic."

Then he seems to be thinking back to the glory days and adds: "I also had good jumping ability, I mean I didn't seem to fall. I could slash to the basket and score. And I wasn't afraid to take the winning shot."

17 December 2009

Honey-Baked Ham Struggling Through Tough Holiday Season

USA Today

LOVELAND, Ohio — At first blush, this would not seem the perfect holiday for HoneyBaked Ham.

For one, it's got that darned word "ham" in its name, which, amid swine flu phobia, is a potential buzz kill.

For another, in a tough economy HoneyBaked sells spiral-sliced premium hams that can fetch $100 for a whole or $50 for a half. By comparison, Wal-Mart is selling spiral-cut half hams, about 10 pounds, for less than $16.

Tradition is taking a hit at HoneyBaked this Christmas, its biggest sales holiday. Despite selling one of the nation's most familiar comfort foods, few are comfortable in HoneyBaked Ham land, says Craig Kurz, CEO and grandson of the company's founder.

"These are unprecedented times," offers Kurz, 47, as he looks around a less-than-bustling HoneyBaked Ham store and cafe just down the road from the company's headquarters. "We have not seen conditions of the past 12 months at any other time in our company's history."

The economy has nudged the chain to open fewer company-owned stores and sell more franchises.

HoneyBaked also is working to break out of the box of being a once-, twice- or three-times-a-year stop. About 50% of its annual business is tied to Christmas (including New Year's) and another 30% to Thanksgiving and Easter.

So, it is adding restaurants to stores. It's trying to grow its catering and corporate gift businesses — but both fell double digits last year and single digits this year. It's opening kiosks in supermarkets. It's rolling out seasonal desserts. It's pondering partnerships, perhaps with an ice cream chain, to grow beyond ham.

"We're a center-of-the-plate brand," says Kurz, and they're trying hard to be more.

Yet ham is from whence it came. In 1957, Harry J. Hoenselaar, Kurz's grandfather, took a $500 loan on his Detroit home, where he figured out in his basement a special way to cook, slice and glaze ham.

Things went well for years. With regional offices linked to the founder's four daughters — living in Cincinnati, Detroit, Atlanta and Boston — it grew from the original Detroit location to 458 now in 41 states. It became the industry icon. It expanded into other meats, including turkey — now 10% of sales. But after the patent on its spiral cut expired in 1981, others jumped in.

Yet when asked to name a brand they associate with the word "ham," 65% of consumers volunteer "HoneyBaked," Kurz says. And 22% of folks who buy other brands of ham — often to save money — say their real favorite brand is HoneyBaked, he says.

Kurz refuses to allow a reporter to see the famous spiral slicing machinery or watch the even more secret glazing process — which is done at the stores. The recipe for that sweet, crunchy glaze, he says, is stored in a vault.

Layoffs, falling sales

But this holiday season, some of that glaze may be peeling off the company's image. Over the past year there have been layoffs, reduced store hours and store closings, though Kurz won't say how many at the privately held company. Same-store sales that fell in the high single digits last year have continued to fall in 2009.

With the unemployment rate hovering stubbornly around 10%, a pricey, honey-glazed holiday ham may seem optional — if not impossible — to many cash-strapped consumers.

"If somebody's going to buy a ham this holiday, they just might step past the premium-priced spiral ham and buy something more modest," says Steve Meyer, president of Paragon Economics, a livestock industry consulting firm. "I'd think HoneyBaked might feel the deal more than others."

Even so, HoneyBaked won't cut costly ingredients or processing, Kurz vows. Each ham spends 22 hours in the smokehouse and is cured for days.

That leaves HoneyBaked little choice but to use coupons and discounting like never before. HoneyBaked's traditional Christmastime marketing portrait of itself has been Norman Rockwell-like in its imagery. No longer. Now the holiday message is value, value and value.

"In the past, all we needed to do was to remind people that we were here," says Ken Caldwell, who oversees the company's growing franchising division. "Now, we're stressing value."

To try to keep folks from trading down, it's pushing $10-off coupons with unprecedented vigor on its website and in print ads. Before the holidays, it blasted hundreds of thousands of e-mail coupons.

Instead of pushing whole hams, it's promoting halves and quarters. The marketing message, for the first time, reminds folks that when they buy half a ham with a coupon, they can feed the family for less than $4 each.

"It's like a Christmas bonus for your budget," says a print ad. A website promotion boasts that at less than $4 per person, "There's no excuse for not inviting the in-laws."

Even the company's holiday catalog, which traditionally focuses on beauty shots of the food, comes this year with this big value burst on the cover: Save $10 on five fantastic ham meals.

Inside, its $157.95 "Grand Event" gift package of ham, turkey, cheese and creamy mustard is now promoted at $147.95. The "Ultimate Smokehouse Collection" of meats has been reduced from $155.95 to $145.95. And the price of the HoneyBaked "Ham & Dessert Duo" gift box is down from $111.95 to $101.95.

Is discounting the answer?

Marketing gurus are of mixed mind on this discounting strategy for the Rolex of hams.

"High-end brands cannot do much except wait for the economy to improve," says consultant Al Ries. "Keep HoneyBaked as a high-end product and it will come back stronger than ever when the economy gets better."

But Jez Frampton, CEO of consulting firm InterBrand, says HoneyBaked has no choice but to discount in this economy. "Any brand perceived to be a luxury brand is at risk of losing consumers who feel less rich than they did a year ago. HoneyBaked doesn't want to take the risk of letting people feel they can still have a great holiday dinner without one of their hams."

Side-stepping swine flu fears

A sick economy is not the only illness that HoneyBaked is battling this season. There's also the matter of that nasty swine flu virus.

HoneyBaked planned for the worst but so far has managed to avoid it.

Days after news broke of the virus' spread last spring, HoneyBaked executives fretted that the company's first real crisis was brewing. For years, executives have kept a crisis-management firm on retainer — in the event of an unexpected disaster — but had never had to meet with them over a specific crisis.

Executives quickly called a teleconference with the firm, which Kurz declines to name, and plans were made in the event of an escalation of the flu.

HoneyBaked quickly posted information on its website that explained that there is no connection between the virus and pork.

The timing of the swine flu scare could have been far worse. HoneyBaked had just wrapped-up its big Easter season before H1N1 fears took off in the U.S. By the time Thanksgiving and Christmas shopping began, most folks seemed to have gotten the message that pork was safe. "We haven't seen a large drop-off in sales because of H1N1," Kurz says. "It was largely below the radar."

But Christmas brings other challenges. The part-time workforce at the typical HoneyBaked store swells from six to 60, and the total workforce nationwide balloons from 2,400 to 12,000.

Some stores, even in these tough times, will see lines out the door as Christmas gets closer.

Offseason marketing

But when the holiday rush fades, HoneyBaked has marketing catch-up to do to expand its base.

Among other things, the company is a social-media dinosaur. HoneyBaked Ham is unlikely to show up in anyone's text message, Facebook page or tweet. The company is looking into social media for 2010, but Kurz says it also is being realistic.

"We're not looking for 16-year-olds," he says. "Our audience is women over 25."

In truth, many of its most devoted customers are two or even three times that age. Kurz winces when a reporter points out the number of customers in their 70s — and even 80s — in its Loveland store and cafe, which offers free Wi-Fi.

Then, 16-year-old Angela Nieder of nearby Maineville walks in with her mom, Leslie. Angela has a cold, and only HoneyBaked makes her feel better. "It's my comfort food," she says.

Kurz is elated to hear this.

But he also knows the roadblocks his brand has hit in the name of growth. Several years ago, some HoneyBaked stores tried sharing space with a bakery chain and a coffeehouse chain.

Both were a bust. "Consumers found it to be a real disconnect," he says.

At one time it even tried its glaze on chicken breasts, which bombed.

A ham by any other name ...

Then, there's the name.

Marketing mavens seem to think a name change is an immediate need. The high-calorie connotation of "honey" and the fat connotation of "ham" are turnoffs to today's diet-conscious buyers, says InterBrand's Frampton. Perhaps, à la Kentucky Fried Chicken's evolution into KFC, maybe HoneyBaked Ham should call itself HBH, he ponders.

Or maybe, suggests consultant Pam Murtaugh, the brand could focus on baked goods and shorten its name to Honey Baked! (Yes, with an exclamation mark, as in: "Look what my honey baked!")

Ain't gonna happen.

Gathered at day's end in a HoneyBaked headquarters conference room with Kurz and his parents — Jo Ann Kurz, the founder's daughter, and George Kurz Sr., the chairman of the board — there's an audible gasp when the name-change issue is broached.

"No!" both parents utter in astonished — if not angry — unison, under the gaze from a black-and-white photo of Jo Ann's founding father.

In a world rife with sleight-of-hand image changes for change's sake, that response says it all.

HoneyBaked Ham is HoneyBaked Ham — any way you slice it.

GM's New Head Of North American Operations A Company Lifer

Business Week

Mark Reuss, a GM lifer who's now head of North American operations, has to figure out how to boost sales without discounts

General Motors Chairman and CEO Ed Whitacre Jr. wants to shake things up. So who did he promote to run the automaker's all-important North American business? Mark Reuss, a GM lifer who had a key role in birthing the infamously garish Pontiac Aztek SUV.

If that's not enough irony, the last time the GM board fired its CEO, Reuss' father was part of the ouster. In 1992, Lloyd Reuss was GM's president and he was dispatched along with CEO Robert Stempel.

So come again? How does promoting a company veteran, and a true-blue GM legacy to boot, change things?

For one thing, Reuss, 46, doesn't exactly fit the mold of top GM execs. As a professed gearhead and career engineer, he's a turnabout from several decades of tradition in which top management was plucked from the finance ranks of the company's New York treasurer's office. While the Aztek is on his résumé, he also ran GM's Australian Holden unit that engineered hits like the Pontiac G8 and Chevrolet Camaro. "Reuss' promotion could be a good thing for GM," says IHS Global Insight (IHS) analyst John Wolkonowicz. "Whitacre is promoting the creative people."

Growth Goals

Whitacre says Reuss is proof that there is plenty of talent inside GM. "He's a good leader and a motivator," Whitacre said in a roundtable interview with the press. "People will follow him. He knows the business inside and out."

Whitacre has given Reuss the daunting task of breaking the GM cycle of buying market share with profit-killing rebates. The tough, impatient chairman has told Reuss he has to grow sales, market share, and profits at the same time. "The way I get market share will have to be done right," Reuss said in an interview.

It will be a big job. GM's share of the U.S. market has fallen from 22% through November 2008 to 19.7% so far this year. It stabilized at around 20% in recent months thanks in part to outsize incentives of $4,300 per car in November, according to auto shopping Web site Edmunds.com. That's $1,000 more per vehicle than the nearest rival, Chrysler.

"The market share has to be profitable," Reuss says. "Ed knows that. We talked about it."

GM is still losing money in North America. In the third quarter, GM lost $651 million at home while earning $238 million in its international operations.

Success at Holden

Reuss has shown results in his recent posts. In July, he returned from a two-year run as president of Holden, which is known for turning out some of GM's most sporty cars. He was vice-president of GM's global engineering unit in the four intervening months.

At Holden, Reuss stabilized market share and got the unit back in the black last summer even as the economy continued its long slump. He even moved GM's flagship Holden Commodore sedan into the top sales spot in the Aussie market.

While Reuss ran Holden, the company developed two successful cars, the Pontiac G8 and Chevrolet Camaro. The G8 was killed off along with the Pontiac brand, but not before it became a cult hit with sports-car buffs. In its brief existence, the G8 went toe-to-toe in sales performance with sports sedans like the Lexus IS, Infiniti G35 sedan, and Acura TL. The Camaro has outsold the rival Ford Mustang, by 6,867 cars to 3,627 in November.

All of that suggests Reuss knows what he's doing. Bob Lutz, GM's vice-chairman, says Reuss speaks his mind openly and he has a real passion for cars: "I see him as more like me than anyone I have come across in my career."

Aztek Experience

Still, there is the Aztek. GM had the right idea when it planned the car. The company wanted to build an SUV with a car-like ride—a preview of today's popular "crossover" vehicles, such as Honda's CR-V. Had it not been so poorly executed, GM could have beaten the pack and had a hit.

Looking back, Reuss admits the Aztek was the result of a product development system that was dysfunctional. GM pushed its designers to take risks on half of their new models. But the company also forced them to use parts from existing models to save money. The disaster was created by committee. Before Reuss took the lead on the program, GM decided to use the minivan platform and set in place the car's design proportions. The result: GM took an aggressive design and tried to wrap it around the frame of its boxy minivan.

Designers also started the project without a brand in mind. Once the Aztek was destined for Pontiac, the styling was doomed. At the time, GM's strategy for Pontiac was to take models that other divisions sold and adorn them with plastic trim and cladding. The result was a garish bread box on wheels. The Aztek, with meager sales, was killed in 2005. "Never again," Reuss says.

In his new job, Reuss has larger problems to fix. To boost sales and market share, Reuss will have to pick up where Lutz left off in getting more consumers to look at GM brands. GM's 60-day money-back guarantee has made strides in accomplishing that, according to data from Edmunds.com. So did the "May the Best Car Win" campaign, which compared GM's newest cars to foreign nameplates sold by Honda (HMC) and Toyota (TM). Reuss says he will work closely with Lutz on future marketing.

Product Planning

He will also have a big hand in the product plan. Reuss will help figure out what cars GM should offer next, using vehicles engineered by the company's global product portfolio if needed.

Next, Reuss plans to meet with dealers, suppliers, and the UAW to build better relations. Just a week into the job he dropped in on three dealers unannounced, said David E. Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., who is advising him.

"He's got the right attitude," Cole says. "He understands that going to somebody else's turf is very important when you're building a relationship."

Reuss will have Whitacre sitting on his shoulder. After the company offered its 60-day money-back guarantee on car purchases in September, Whitacre asked him to reach out to the nearly 200 people, at that time, who had returned their cars. Reuss and his engineering staff called them all to find out why.

On his own, Reuss started taking his engineers on so-called knothole drives, during which they drive GM cars and competing models on the rural roads west of Detroit. Wearing headsets while driving, they discuss where their cars fall short and how to leapfrog rivals.

That bodes well for future product. But as head of GM's troubled North American business, he has to win over car buyers now and prove he is the man for the job. If Reuss succeeds, it might well be a bit of redemption for his father.

About half an hour after Whitacre promoted him on Dec. 4, his father called to tell him a friend of the family had taken ill. When Reuss broke the news of his promotion to his father, "there was silence," Reuss says. "Then he said, 'I am so proud. Me and Mom are so thrilled. It will be nice that the company will have an engineer (in upper management) again.' "

Now Reuss has to make Whitacre proud, too. That means making quick work of a tough task. "We have to do it over the long view," he says. But adds, "Ed is impatient. So am I."

15 December 2009

Another $13 Million From EPA To Fight Asian Carp

Detroit Free Press

The Environmental Protection Agency announced $13 million in funding late today for measures that would help keep Asian carp out of the Great Lakes.

The funding will come from $475 million already approved by Congress this fall to help restore the Great Lakes.

The EPA said the money would go to efforts that would keep Asian carp in the Des Plaines and other rivers and canals from washing into the Chicago Sanitary and Ship Canal during floods.

That fear was raised in the past six months by environmental groups and others concerned about spread of the voracious invasive species of carp.

The money will also go to pay for more DNA testing to determine where Asian carp are in the Chicago waterways that lead to Lake Michigan. So far, that testing has shown the presence of flying silver carp seven miles from Lake Michigan.

Michigan members of Congress have been pushing hard in the last two weeks to make sure that various federal agencies dealing with the carp problem get the funding they need.

14 December 2009

How The MEDC Is Tackling Jobs In Michigan

Business Week

By backing loans to small manufacturers, the Michigan Economic Development Corp. is helping companies diversify—if they add workers

Wolverine Metal Stamping in St. Joseph, Mich., has long been trying to diversify beyond automotive clients. To do so, Wolverine needs capital. That's been increasingly hard for small manufacturers to come by as their assets, used as collateral for bank loans, have depreciated during the recession and, in many cases, the auto industry's collapse. Now, a fund sponsored by the Michigan Economic Development Corp. (MEDC) is providing collateral so companies can get loans to shift away from autos. "Existing programs try to help the health of the lender," says Ned Staebler, vice-president for capital access at MEDC, citing the bank bailouts. "The commercial businesses need to be healthier too."

The depreciation of collateral has been severe. A company that had collateral valued at $6 million three years ago could now see those same assets appraised for $2 million, says Ed Mounce, commercial services manager at OMNI Community Credit Union in Battle Creek, Mich., because of the glut of real estate and equipment.

To buy the robots, steel, and presses it needs to diversify, Wolverine had lined up a $2.5 million loan from GE Capital (GE) as of September 2008. While a spokesperson says GE doesn't comment on individual credit decisions, Wolverine's chief financial officer, Bruce Weber, says GE backed out the day after Lehman Brothers collapsed. For over a year, he says, "we've been trying to get the exact same financing done"—but during that time Wolverine's machinery had depreciated by 20%. Meanwhile, the company booked $10 million in new business with such appliance makers as Whirlpool (WHR).

With help from the MEDC-sponsored Michigan Supplier Diversification Fund, the 65-person, $15 million Wolverine is finally getting its loan. OMNI is lending $2.5 million, while getting $1 million in so-called collateral support from the fund. To provide this backing, the fund makes deposits to lending institutions of up to 50% of a loan's value, to a maximum of $2.4 million. That money acts as cash collateral for the business, bolstering the bank's balance sheet and decreasing as the loan is paid down. In return, businesses pledge to create jobs. Weber says Wolverine has brought back almost half the 30 workers laid off this year and plans to rehire the rest by summer. MEDC's Staebler estimates that every $5,000 spent by the fund creates or saves a job. The fund expects a 5% to 6% default rate.

MEDC ran through its $13.2 million fund by making nine loans in four months. About 700 to 1,000 of the state's small manufacturers need funds to diversify. Trade organizations say Michigan companies could use $1 billion in such support, and Staebler says a $10 billion national program could save or create up to 2 million jobs.

Mark One was starting to diversify when it hit funding snags. The Gaylord (Mich.) company, with $10 million in sales, makes machinery used to clean and prep metal surfaces. In 2006, Mark One began developing a more efficient, chemical-free process, drawing interest from a large industrial packager that makes steel drums. Carmakers made up all of Mark One's sales four years ago, but contributed just 10% this year, leaving CEO Frank Kestler to rely on packagers and metal processors. "The banks were retreating from Michigan because of the decline in the automotive industry," Kestler says. With a $3 million loan from Huntington National Bank, backed by $1.2 million in collateral support, Mark One plans to double its staff of 50 in three years. That may do little to dent Michigan's 15.1% jobless rate, but it's a start.