30 March 2010

Toyota, Nissan Boost February Production on Asia, U.S. Demand


Toyota Motor Corp., the world’s biggest automaker, Honda Motor Co. and Nissan Motor Co. increased global output in February on surging demand in Asia and amid a recovery the U.S.

Toyota’s production rose 83 percent to 655,180 vehicles from a year earlier, it said today in a statement. Output at Honda Motor Co., Japan’s second-largest carmaker, rose 49 percent to 284,711 units, and Nissan, the third-largest, built 270,366 vehicles, up 72 percent, the companies said separately.

Japanese automakers were buoyed by rising sales in China, Japan, and the U.S., where sales rose for a fourth month in February. Output plunged a year earlier amid a global recession.

Toyota increased production even as the company’s American sales dropped 8.7 percent in February, dragged down by recalls of more than 8 million vehicles since September for problems including unintended acceleration. Toyota’s U.S. production increased 70 percent to 84,184 for the month, it said.

This month, Toyota’s sales in the U.S., helped by an incentive campaign to counter the effects of the recalls, may report a 37 percent jump, according to Dave Cutting, senior manager of North American forecasting for J.D. Power & Associates.

The company is using no-interest loans and lease discounts in the U.S. to coax back buyers after sales dropped 12 percent in the first two months of this year.

China Production

Toyota more than doubled production in China, which surpassed the U.S. as the world’s biggest car market in 2009, to 56,397 in February, an increase of 136 percent. Industrywide sales of passenger cars, trucks and buses in the country rose 46 percent from a year earlier to 1.21 million vehicles.

It plans to increase capacity at a joint-venture plant with China FAW Group Corp. in Chengdu to 30,000 units from 13,000 units by June. The plant builds the Coaster and Land Cruiser Prado models.

The Toyota City, Japan-based carmaker also intends to build a second plant in Changchun, Jilin province, where it may make Corolla compact cars.

In Japan, sales at Toyota and other carmakers began recovering from a yearlong slide in August as government rebates and tax cuts for fuel-efficient vehicles helped rekindle demand. Toyota’s Prius hybrid was the best-selling car there in February for the ninth straight month.

Toyota shares fell 0.5 percent to 3,740 yen at the 3 p.m. close of trading in Tokyo.

U.S. Recovery

Honda’s U.S. production in February increased 62 percent to 76,646 as it benefited from the recovery in auto sales there. Edmunds.com estimates U.S. car sales will rise 31 percent in March from a year earlier, while Honda’s may gain 22 percent, the industry researcher said last week.

The Tokyo-based company increased China production 26 percent to 43,843 units. Honda’s local venture with Dongfeng Motor Group Co. said last month it will invest 1.15 billion yuan ($168 million) to build a second plant in China that will begin production in the second half of 2012. The factory’s target capacity for Honda-brand vehicles is 240,000 vehicles a year.

Honda will also increase production capacity at the venture’s existing plant in Hubei province to 240,000 vehicles this year, from 200,000.

Nissan increased February production in Japan by 121 percent to 97,109 vehicles, including a tripling of exports to 50,279 units, the Yokohama-based automaker said. Its sales in China rose 34 percent to 58,323 units.

Greenville Companies to Launch Plastic Caskets

The Detroit News

Thinking Outside the Pine Box

A Greenville auto parts supplier has found an interesting way to survive the economy. Clarion Technologies Inc., a company specializing in manufacturing plastics for cars and home appliances, is now building caskets.

Beginning in June, Commemorative Casket USA will begin production of its injection-molded thermoplastic caskets, becoming what's believed to be the first casket line in the world to offer exterior graphics combined with luxurious interiors. Both companies are based in the Clarion Technologies building in Greenville.

"As far as we know, we're the only ones doing this," said John Brownlow, chief operating officer for Clarion Technologies Inc. "This is definitely different. We're very excited."

W. Craig Dolby, vice president of marketing and sales at Commemorative Caskets, said metal, wood and granite currently make up most of the casket market.

The Commemorative Casket USA line was unveiled for the first time March 10-12 at the International Cemetery, Cremation and Funeral Association Convention in San Antonio. Dolby said many funeral home directors were intrigued by the plastic caskets, featuring top-of-the-line graphics that imitate the look of real wood, colorful granite, paint or even camouflage.

"Basically, all the caskets (at the funeral show) looked the same," Dolby said. "Baby boomers are coming along, and they want choices."

The graphics for Commemorative Caskets are made and applied with the same techniques used to make fake wood paneling in automobiles.

Dolby and Brownlow have spent the last year researching the market they intend to reach with their caskets. They already have some orders for their products.

Production of 12 to 16 different design models will begin in June.

Dolby said men have shown more interest in the wood and camouflage designs, while women appreciate the colorful granite options. Brownlow said plans are in the works to offer even more graphic options for caskets.

Jeff Marshall, director of Marshall Funeral Homes of Greenville, said he remembers when another casket company tried to sell plastic caskets more than a dozen years ago.

"We used to sell some of those before, but they got too fancy and they priced themselves out of the market," Marshall said. "They were nice-looking caskets, but they were more than the competition."

Marshall believes his customers would be interested in the thermoplastic caskets if they were available at "a reasonable rate."

"If the price is right on them, people will buy them," he said, adding that the 35 percent recyclable construction would reach the consumers who want to "go green."

Brownlow said customers should expect Commemorative Caskets to "be competitive" with today's common painted eight-gauge metal caskets, though customization options could vary the price. He said they would definitely be cheaper than solid wood or granite caskets.

Since the caskets are made with injection-molded plastic, they won't rust and will outlast wood or metal caskets.

The product line also will feature a wide variety of interior fabric and color options, which have been developed and supplied in collaboration with Tiedmann-Bevs Industries of Richmond, Ind. The luxurious interior options are normally offered in the most expensive casket lines, but Commemorative Caskets hopes to offer them at a price everyone can afford.

"It's all about presentation of the body," Dolby said. "And our warranty is forever -- the same as anyone else."

29 March 2010

Florida Woman gets Prison for Michigan Medicare Fraud

The Lansing State Journal

DETROIT - A Florida woman who stole millions of dollars from Medicare while running Detroit-area clinics expanded her scheme by setting up her daughter and son-in-law with their own fraud mill.

Profits came quickly: Over one year, Daisy Martinez [PICTURED] ripped off Medicare for $10.7 million at three clinics, and her daughter got $649,000 in just four months as they billed the government for sham drug treatments while luring desperate people off the street with cash, food and painkillers.

Martinez, 51, was sentenced Thursday to eight years in federal prison by U.S. District Judge Gerald Rosen, who said he was "just appalled" by the evidence. The case shows it's not hard for unscrupulous people to fleece Medicare in Michigan - and that's the problem.

Settlements, fines and restitution in fraud cases added up to $4 billion nationally in the 2009 fiscal year, "just the tip of the iceberg," Daniel Levinson, inspector general of the U.S. Department of Health and Human Services, told Congress this month.

Court records describe a seemingly simple scheme in which Martinez migrated from the Miami area to cash in on the government's rich reimbursements for certain drug treatments given to Medicare beneficiaries. She moved to Michigan after authorities cracked down on similar scams in Florida.

In 2006-07, Martinez co-owned two clinics in suburban Detroit, Sacred Hope and X-Press Center, and had a share of another, Dearborn Medical Rehab Center. She admits lining up a doctor and dispatching recruiters to offer $50 or more to people with Medicare cards, many of them homeless, to lure them to the clinics.

The clinics regularly billed Medicare for treatments involving cosyntropin, a drug to diagnose problems with the adrenal gland. In fact, however, the treatments were not needed or never provided. Some people simply got vitamin shots.
"Her conduct resulted in hundreds of medically unnecessary infusions to HIV and hepatitis C patients for worthless services. ... The purpose of these clinics was not to help sick patients but to steal money," Justice Department prosecutors said in a court filing.

Martinez and her partner, Jose Rosario, fled to their native country, the Dominican Republic, in 2007 after authorities became suspicious of the billings and froze their bank accounts. They returned to the U.S. after being indicted last year.

Martinez and Rosario pleaded guilty to conspiracy. Nine others, including a doctor and four Medicare recipients who got kickbacks to visit clinics, also pleaded guilty in the scam or were convicted at trial.

"She was a major player in a massive series of frauds," Justice Department lawyer John K. Neal said of Martinez.
$3.2 million recovered

The government has recovered $3.2 million. A "good deal" of the rest was likely hidden overseas, Neal said. Martinez's lawyer, Juan Gonzalez of Miami, said she only got $1 million.

"I just want to apologize. ... I accept my responsibility but not for the other persons," said Martinez, speaking in Spanish.

As she spoke, jury selection began six floors below in a case against a doctor who worked at a sham clinic in Canton Township run by her daughter, Denisse Martinez and then-husband Jose Martinez. They have pleaded guilty to fraud and will be sentenced in April.

Like Daisy Martinez, the couple had no medical expertise. Denisse Martinez told investigators the fraud was "very obvious" because patients were driven to the clinic and there were no walk-ins, FBI agent Justin Shammot said in a court filing.

Jose Martinez said "he didn't want to hurt or kill any patients but ultimately only wanted to make lots of money," Shammot wrote.
Rules to be tightened

The director in charge of the Michigan Medicare program's integrity, Kimberly Brandt, said the new health care law will tighten rules on who can join the program, a move that should reduce the likelihood of fraud.

"Medicare was set up as a trust-based, any-willing-provider system," Brandt said in an interview. "The goal was to allow the widest possible array of providers and suppliers into the program so senior citizens would have as wide a choice as possible. ... Unfortunately, there are people who willfully take advantage of the system."

Obama to Name Chief for Medicare, Medicaid

WASHINGTON (AP) — An administration official says President Obama will nominate health care scholar Donald Berwick to oversee Medicare and Medicaid, the nation's health insurance programs for the elderly and the poor. CMS oversees Medicare in Michigan.

Berwick is a pediatrician and noted health policy expert who runs the nonprofit Institute for Healthcare Improvement in Massachusetts. He will be tapped as the administrator for the Centers for Medicare and Medicaid Services, a position subject to Senate confirmation.

The administration official spoke on condition of anonymity because the president has not made his decision public.

The agency is a unit of the Department of Health and Human Services.

The center's programs serve roughly 100 million people, or 1 in 3 Americans, including Medicare coverage in Southeast Michigan.

Stimulus Funding Spurs Advanced Battery R&D for Hybrid Electric Vehicles

Examiner Chicago

In order to accelerate the R&D, manufacturing and deployment of hybrid electric vehicles, batteries, and components in the United States and create tens of thousands of new jobs, President Barack Obama announced last August- 48 advanced battery and electric drive projects that will receive $2.4 billion in competitive Department of Energy (DOE) funding through the Recovery Act, which will be matched with another $2.4 billion in cost share from the award winners. This stimulus funding will facilitate the country in achieving President Obama’s goal of putting one million (grid) plug-in hybrid vehicles on the road by 2015 in order to lessen greenhouse gas emissions and smog effects.

The primary stimulus funding grant categories are as follows:

1. $1.5 billion for U.S.-based manufacturers to produce batteries and their components and to expand battery recycling capacity

2. $500 million for U.S.-based manufacturers to produce electric drive components for vehicles, including electric motors, power electronics, and other drive train components
3. $400 million to purchase thousands of plug-in hybrid and all-electric vehicles for test demonstrations; to deploy them and evaluate their performance; to install electric battery charger infrastructure; and to provide education and workforce training to support the transition to advanced electric transportation systems.

The state of Michigan, home to the Motor City, was the big winner, as they received $1 billion in grants to companies and universities- the most of any state. Two companies, A123 and Johnson Controls (which also has a facility in the Phoenix, AZ area) will receive a total of approximately $550 million to establish a manufacturing base in the state for advanced batteries, and two others, Compact Power and Dow Kokam, will receive a total of over $300 million for manufacturing battery cells and materials.

The U.S. government is now spreading the wealth of R&D dollars, as opposed to primarily funding only national labs, universities and domestic automakers. Of course, the DOE never had anywhere near this amount of funding previously to allocate, since the Stimulus spurred the nation’s largest single investment in hybrid electric vehicle technology ever. Moreover, the past two Obama Administration fiscal year budgets significantly reduced funding levels for hydrogen fuel cell alternatives set by the Bush Administration, while supporting increases for advanced batteries instead.

Lithium ion batteries are receiving the majority of the stimulus funding emphasis with respect to battery options for hybrid electric vehicles, since they are presumed to be the top candidate but are not ready for prime time. These types of batteries are rapidly penetrating into laptop and cell-phone markets because of their unique electrical characteristics, high energy-efficiency, high temperature performance, and low self-discharge. What’s more, components of lithium ion batteries can also be recycled. These features are also beneficial for hybrid electric vehicle applications. However, to make them commercially viable for electric autos, significant R&D is necessary, focused on calendar and cycle life, cell and battery safety, abuse tolerance under harsh conditions, and acceptable cost for consumers.

EnerDel, an electric car battery manufacturer with three Central Indiana plants, was awarded a $118.5 million stimulus grant yesterday to develop lithium ion batteries for hybrid electric cars. The grant will allow EnerDel to buy equipment to expand its production from 1,200 batteries a year to 60,000 annually and is expected to generate 1,400 green jobs. As part of the project, 100 electric cars will likely be on Indiana roads by the beginning of next year and a thousand by the middle of 2012.

In opposition to this momentum for hybrid electric vehicles, T. Boone Pickens has been ramping up his campaign supporting the transition of the nation’s auto fleet to readily abundant domestic natural gas. He helped formulate the Natural Gas Act, which is still being considered in Congress, along with cap-and-trade and other alternative energy legislation that has been delayed by the health care debate after many months.

28 March 2010

Geely Inks Deal with Ford Motor for Volvo

The Wall Street Journal

Zhejiang Geely Holding Group signed a binding deal Sunday to buy Sweden's Volvo Cars from Ford Motor Co. for $1.8 billion, in a landmark deal for China's burgeoning car industry that also poses serious challenges for Geely.

Volvo spokesman Per-Ake Froberg confirmed that the agreement was signed between the two auto makers in Gothenburg.

Under the deal, Geely will pay a $200 million note and $1.6 million in cash for Ford's unprofitable Volvo unit. Ford expects the deal to complete in the third quarter, once regulatory matters have been settled.

The U.S. car maker will continue to cooperate with Volvo Cars in several areas after the sale has been completed in order to ensure a smooth transition, but won't retain any ownership in the Volvo Cars business. Ford will continue to supply Volvo Cars with, for differing periods, powertrains, stampings and other vehicle components, and Volvo will also continue to supply Ford with stampings and components for a time.

Geely Chairman Li Shufu said Volvo will retain its Swedish identity and strategic independence. Volvo's management team will continue to be based in Gothenburg. But the Chinese car maker wants Volvo to boost its output, and will use Geely's experience and distribution network in China to help it achieve that aim.

Ford has been trying to sell Volvo since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands. Geely, an independent auto maker that has struggled to upgrade its image in overseas markets, has long coveted a stronger foothold in Europe.

The deal makes Volvo one of the most prominent foreign brands to be purchased by China, and marks the first time a Chinese company has acquired the full operations of a major foreign auto maker.

It also is the biggest step so far in a broader push by China to create a handful of globally competitive auto makers out of an industry that today is largely fragmented. That effort has had mixed success: Beijing Automotive Industry Holding Co. reached an agreement in December to acquire certain assets of General Motors Co.'s Saab unit, but another Chinese company, Sichuan Tengzhong Heavy Industrial Machinery, last month abandoned a planned purchase of GM's Hummer unit after failing to gain Chinese government approval.

Chinese car makers are gaining strength thanks in part to a home market that has boomed as the rest of the world has sputtered. Passenger-vehicle sales in the country rose nearly 50% last year, with total vehicle sales exceeding 13 million, putting China ahead of the U.S. as the world's biggest auto market.

Geely plans to build a new Volvo plant in China capable of producing 300,000 vehicles a year as it looks to draw on China's market potential and inexpensive labor to raise sales and cut costs.

Geely believes Volvo has the potential to sell 200,000 cars a year in China. The company wants to use Volvo's manufacturing capacity fully in Europe to sell 600,000 vehicles there and in North America.

27 March 2010

After 45 Years, Dick Purtan is Signing Off

The Detroit Free Press
26 March 2010 -- Just after 9 a.m. today, Dick Purtan signed off into retirement giving his “eternal thanks” while playing his favorite song, “Softly, As I Leave You” by Frank Sinatra.

The final broadcast on WOMC-FM (104.3) ends the hall of fame broadcasting career punctuated by a historic 45-year run on five different AM and FM stations over the Detroit airwaves.

In his Ferndale studio with many of his six daughters, including “Purtan’s People” cohost Jackie Purtan, his wife Gail, and some of his grandchildren, Purtan used the last few minutes to thank the many people who worked with him over his career, the media, and his listeners, who he said became family as they followed him from station to station “whether I was playing music you liked or didn’t.”

Purtan started the morning driving to work with his wife, who came to the studio for the very first time in his long broadcasting reign. They were escorted into the WOMC studio by police.

Old friends, regular guests, classic jingles and parodies, and best-of bits and memories filled Purtan’s final week, and today’s show was no different. The final hour included Bob Seger and debonair Channel 2 anchor Huel Perkins.

Purtan played clips from his first Detroit gig at WKNR (“Keener” 13) where the cranked-up verbal barrage was perhaps the only significant contrast to his signature style of today. After playing the clip, Purtan said he didn’t hear “much of a difference, maybe a little faster talking then, but I’m still as confused now as I was then,” he joked.

Purtan, who is credited for mastering the modern morning radio format through a variety of satire, put-on-calls, parodies, characters, and all sorts of improv fun, even spent some of his last minutes humming — horribly — to one of his new favorite musical acts, Celtic Thunder, and its cover of the classic Foreigner song “I Want to Know What Love Is.”

No official announcement has been made about Purtan’s replacement on WOMC, but earlier in the week he said that he expected an interim host to be on the airwaves on Monday.

Purtan made sure to remind fans that although he won’t be waking metro Detroiters up every morning anymore, he plans to stay connected with them. After some sleep and perhaps a vacation “longer than a week,” he said he’s eager to get busy on his Web site, DickPurtan.com where he will be blogging regularly and communicating with fans.

Purtan will also be writing a book about his radio career. Fans can stay up to date on its progress through the Web site. Information on cohosts (Big) Al Muskavito, Purtan’s daughter Jackie, Rebekah Rhodes and Larry Lawson and all of “Purtan’s People” will be available at the Web site, too.

It’s been an “amazing, wonderful journey” Purtan said right before playing Sinatra’s song.

25 March 2010

GM to Make Another Round of Loan Payments to Taxpayers

Detroit Free Press

General Motors plans to make another round of $1.19-billion loan payments to the U.S. and Canadian governments on Wednesday, the company said today.

Last December, the Detroit automaker made similar payments as part of its efforts to pay off the $6.7 billion U.S. and $1.4 billion Canadian government loans.

“Given the progress the company is making, GM has every confidence that the remainder of the loans will be paid in full by June 2010; five years ahead of schedule,” GM Chairman and CEO Ed Whitacre said in a statement.

Paying off the loans is only the first step for taxpayers to get their money back from helping GM stay alive last year. The next step will be launching GM as a public company again.

GM is expected to release its fourth quarter financial results from last year soon.

Today, industry analyst Eric Selle of J.P. Morgan Chase estimated in a note to investors that GM could post $2 billion in earnings before interest, taxes, depreciation and amortization for the fourth quarter.

He also said GM’s enterprise value in 2011 could be $67 billion.

GM Chief Financial Officer Chris Liddell earlier this month said it’s possible that GM could launch a public offering later this year if several factors were in place, such as an improved economy.

He also said there’s a reasonable chance GM could be profitable this year.

24 March 2010

Detroit City Officials Hopeful Vanguard-DMC Deal Will Bring Jobs

The Detroit Free Press

As details unfolded Friday about the potential sale of the Detroit Medical Center to Vanguard Health Systems, City of Detroit officials said they are eyeing the prospect of new jobs coming to the city.

"I think it will send a message around the country that we, as a city, are open for business," Mayor Dave Bing said at a news conference announcing the deal. "This is an $850-million investment in our city, in our neighborhoods and our future."

Later, Bing said he hopes the deal -- estimated to bring 10,000 jobs to the city over the next five years -- lures other investment to Detroit.

The Detroit City Council and the Wayne County Board of Commissioners will need to approve Renaissance Zone tax abatements for the medical center.

The Renaissance Zone designation grants 100% tax abatements on city and state taxes for 12 years. The tax break then drops to 75% in the 13th year; 50% in the 14th year; 25% in the 15th year, and full taxes due after that.

Bing administration officials said they have not determined the amount of taxes they would receive when the zone designation expires.

City Council President Charles Pugh said he was concerned about access for care and Detroiters having access to the jobs created. "As we proceed, we're going to work out the details," he said.

County Executive Robert Ficano said the challenge now is to get all the permits and designations approved, something he promised the region can do within 60 days.

The deal's first stop for approval will be the council's Planning and Economic Development Committee. Saunteel Jenkins, who chairs the committee, said she's still learning about the deal.

"We want to make sure that the investment remains in the city of Detroit," she said.

23 March 2010

Allegan County Residents can Tour Former Haworth Factory, Suggest Designs for Jail


Allegan County residents will be able to tour the old Haworth chair factory in Allegan and make suggestions on designs for converting it to a county jail.

The county plans is to locate a 400-bed jail and the sheriff's offices at the facility at 640 River St. It is holding a design or workshop, at the site next week and is inviting various stakeholders to provide input on the project.

The public and community members can tour the facility and learn about the design process between 1 and 5 p.m. Monday. Lead architectural firm RQAW, of Indianapolis, will give a summary at 5 p.m.

Information obtained through next week’s design charette process will be reviewed at the April 8 meeting of the Allegan County Board of Commissioners. There also will be another opportunity for public input before the board approves a design, officials say.

Haworth closed the 189,000-square-foot plant last year and the county bought it for $1,775,000. Plans call for demolishing some of the rear building to make space for the jail, while the sheriff's office will go in existing space in the front.

Discussions started in 1992 about replacing the 173-bed county jail in downtown Allegan, which has been criticized as unsafe for inmates and staff and has little room for rehabilitative programs or to classify inmates.

“We are excited about this collaborative process and moving forward with this project,” county board Chairman Larry “Casey” Jones said.

22 March 2010

Need for Elder Care Services Ready to Explode

Gaylord Herald Times
LANSING — At a press conference in Lansing on Tuesday, the Aging Services of Michigan will release its 2010 Annual Long Term Care report, “A Decade in Review,” focusing on long-term elder care issues.

The association is issuing a call for action on the state level to change public policies that are detrimental to the care of seniors, family caregivers and nonprofit care providers.
According to the Aging Services of Michigan, which represents nonprofit organizations providing community and home-based services for the elderly, there will be an explosion in the need for such services in the coming years.

Among the issues reported in the review is the estimation that Alzheimer’s disease will affect 180,000 Michigan elders in 2010, with an additional 200,000 people affected by from some form of dementia. The number of adults 65 and older will represent 20 percent of the population by 2030; the number of adults 85 and older, the fastest growing age group in the nation, will double by 2050. Michigan is not prepared for the increase in the aging population.

“Michigan’s long-term care system is under assault and has been for a long time,” said David Herbel, president and CEO of Aging Services of Michigan. “The need for Michigan senior care is increasing, while funding and state support is eroding.”

Women have traditionally been the caregivers of aging relatives, but economic factors over the last few decades have forced more and more women into the workforce as a necessity for family survival. The decreased funding and increasing need  for care providers as the aging population grows will put an additional burden on middle class families already struggling.

The report was initially released in the first of a series of regional meetings with Aging Services of Michigan’s nonprofit member organizations. It was held at the Otsego Memorial Hospital (OMH) in Gaylord March 4. OMH’s McReynolds Hall skilled nursing facility, which provides short and long-term care, is a member.

For a copy of the 2010 Annual Long Term Care Report, visit the Aging Services of Michigan’s Web site at www.AgingMI.org.

Vanguard to Buy Eight-Hospital Detroit Medical Center for $417 Million

Becker's Hospital Review

Vanguard Health Systems plans to buy eight-hospital Detroit Medical Center, Michigan's largest healthcare system, for $417 million and spend $850 million more in improvements over 15 years, according to a joint release from both parties in the deal.

Nashville, Tenn.-based Vanguard is a for-profit healthcare system that typically takes bankrupt or near-bankrupt hospitals and turns them into for-profit facilities, the Detroit Free Press reports. It operates 15 hospitals in Illinois, Arizona, Texas and Massachusetts and had $3.2 billion in reserves as of 2009.

The letter of intent between the two parties, which must be approved by city, county and state authorities, stipulates:

• All of the medical center's hospitals would stay open and maintain their charity obligations for at least 10 years.

• Vanguard would retire all of the medical center's outstanding bonds and other long-term debts, including pension contributions.
• Vanguard would spend $75.1 million for a new Detroit heart treatment institute.
• Vanguard would apply to create an economic zone around the medical center campus to gain federal funding.
• A regional advisory board made up of four members from Vanguard and three from the medical center will oversee the operation.
Detroit Medical Center Chair Steve D'Arcy and the DMC board will remain.
• The agreement would be voided on June 1 if the two parties cannot agree on the provisions.

19 March 2010

Apple Director, Ex-Auto Executive Jerry York Dies

USA Today

DETROIT — Jerome York, a board member at Apple, and a financial wizard who is credited with turning around Chrysler and IBM, died Thursday at the age of 71.

York, who lived in suburban Detroit, was taken to POH Regional Medical Center in Pontiac, Mich., on Tuesday night. The Wall Street Journal reported he suffered from a brain aneurysm.

Apple CEO Steve Jobs said in a statement that York was a pillar of financial and business expertise and insight on the board for more than a dozen years.

York worked for all three Detroit automakers starting in the 1960s. He helped Chrysler survive its first government bailout in 1980 and later rose to chief financial officer and helped oversee cost cuts and a return to profitability. He made similar moves as IBM Corp.'s chief financial officer in the 1990s.

He also advised investor Kirk Kerkorian in a later takeover attempt of Chrysler and in efforts to reform General Motors.

York joined Apple's board in 1997 when most people doubted the company's future, Jobs' statement said.

"It's been a privilege to know and work with Jerry, and I'm going to miss him a lot," he said.

As Chrysler's CFO, York helped restore the No. 3 U.S. automaker to profitability with cuts and asset sales and was considered a potential successor to then-chairman Lee Iacocca. He left Chrysler to become IBM's CFO in 1993.

An IBM senior manager described him as "the pit bull who came to sell everything and not approve anything," according to a Harvard Business School case study about IBM's turnaround.

York left IBM in 1995 to become vice chairman of Tracinda, billionaire Kirk Kerkorian's investment company. Kerkorian teamed up with Iacocca and made an offer to buy Chrysler that same year. Kerkorian retreated the following year after winning a board seat at the company.

After Kerkorian bought up GM shares in 2006, York was named to the automaker's board. York supported an alliance with Nissan Motor and Renault as well as ditching some GM brands. He resigned shortly after GM ended talks with Renault and Nissan.

"I have grave reservations concerning the ability of the company's current business model to successfully compete in the marketplace with those of the Asian producers," York wrote in his resignation letter.

Three years later, GM entered bankruptcy protection and shed four of its eight brands.

York also was chief executive officer of Harwinton Capital LLC, a private investment company he controleds

He was born in Memphis in 1938 and graduated from the U.S. Military Academy. He earned a master of science degree from the Massachusetts Institute of Technology and a master of business administration degree from the University of Michigan.

18 March 2010

Granholm's Meatless Day Proclamation Grinds Farm Bureau

The Detroit News

Lansing -- Gov. Jennifer Granholm proclaimed Saturday a meatless day, and the Michigan Farm Bureau is having a cow.

Wayne Wood, president of the Farm Bureau, in a tersely worded statement, called the governor's proclamation for Michigan Meatout Day "unconscionable" and "an insensitive slap in the face to Michigan's livestock and dairy farmers, not to mention Michigan's meat-eating residents."

Liz Boyd, Granholm's press secretary, countered that "people may be taking this too seriously."

Boyd explained the governor receives many requests to make proclamations and she tries to accommodate as many as she can. This request came from the Michigan director of the Great American Meatout, she said.

"We've had an agriculture tourism month and an egg farmers' day," Boyd said. "And next month is Michigan Wine Month, although I'm sure some people might find that objectionable."

But Wood is not amused.

"It's inconceivable to us that the governor could stoop to this level of telling people what they should and shouldn't eat based on the philosophies of 'food elitists,' " he said.

"It'd be one thing if Granholm proclaimed a day to promote increased consumption of vegetables, fruits and whole grains. But the governor clearly crossed the line in recklessly singling out meat products for nonconsumption and belittling this wholesome source of protein."

Boyd noted that Saturday marks the first weekend of college basketball's March Madness.

"Not to worry. I'm sure a lot of chicken wings and burgers will be consumed on Saturday," she said.

17 March 2010

A123 Systems to Make Batteries for Navistar Electric Trucks

Mass High Tech

Battery technology company A123 Systems Inc. will be making its lithium ion battery systems for electric vehicles for truck company Navistar International Corp. under a new deal that will provide the batteries to a joint venture between Illinois-based Navistar and Japanese company Modec Inc.

Financial details of the deal were not disclosed, but the companies did state that the automotive battery for the joint venture — called the Navistar Modec Electric Vehicle Alliance — will be made in A123’s new facility in Livonia, Mich., planned to open this month.

Watertown’s A123 will create and manufacture the battery systems for Navistar’s EV, which will be a completely new truck design, instead of converting an existing, conventional fossil fuel powered truck. Alliance officials say the Navistar EV can possibly cut greenhouse gas emissions by as much as 10 tons annually, when compared to an equivalent diesel-powered truck. The new electric truck is scheduled for launch in mid-2010. Using A123’s battery pack, the truck will be able to run approximately 100 miles on electricity before needing to be recharged.

In August of 2009, A123 Systems landed $249.1 million in U.S. Department of Energy funding to construct the Michigan manufacturing plant to build and package car batteries for electric vehicles.  In September, the company went public in a $378 million IPO, at an offering price of $13.50 per share, well above the initial projection of a range of $9 to $9.50.  In December, A123 finalized a deal with the U.S. Department of Energy for another $250 million, this time a construction loan, for the new plant.

With nearly 1,700 employees, A123 Systems lost $22.8 million on the third quarter of 2009, on revenue of $23.6 million.

Saab to Locate North American HQ in Royal Oak

ROYAL OAK, Mich. (AP) — Saab Cars North America plans to locate its headquarters in the Detroit suburb of Royal Oak.

Company spokeswoman Michele Tinson tells The Associated Press the automaker will bring about 60 employees to the site after the Michigan Economic Growth Authority on Tuesday approved a tax incentive worth more than $1 million.

Tinson said Royal Oak also approved a tax break for the project. She said work moving in employees should begin Wednesday.

General Motors sold Saab Automobile AB to Dutch carmaker Spyker Cars NV in a $74 million deal in January. Tinson says most of the employees formerly were based at GM's downtown Detroit headquarters in the Renaissance Center.

Spyker Cars now is the parent company of Saab Automobile and Saab Cars North America.

As Patients Flock to Medicaid, Doctors Drop Them

NY Times
With Medicaid Cuts, Doctors and Patients Drop Out

 Rebecca and Jeoffrey Curtis searched for care for their son. In the process, they felt like “second-class citizens,” Ms. Curtis said.

FLINT, Mich. — Carol Y. Vliet’s cancer returned with a fury last summer, the tumors metastasizing to her brain, liver, kidneys and throat.

As she began a punishing regimen of chemotherapy and radiation, Mrs. Vliet found a measure of comfort in her monthly appointments with her primary care physician, Dr. Saed J. Sahouri, who had been monitoring her health for nearly two years.

She was devastated, therefore, when Dr. Sahouri informed her a few months later that he could no longer see her because, like a growing number of doctors, he had stopped taking patients with Medicaid.

Dr. Sahouri said that his reimbursements from Medicaid were so low — often no more than $25 per office visit — that he was losing money every time a patient walked in his exam room.

The final insult, he said, came when Michigan cut those payments by 8 percent last year to help close a gaping budget shortfall.

New doctors, with their mountains of medical school debt, are fleeing Michigan because of payment cuts and proposed taxes. Dr. Kiet A. Doan, a surgeon in Flint, said that of 72 residents he had trained at local hospitals only two had stayed in the area, and both are natives.

“My office manager was telling me to do this for a long time, and I resisted,” Dr. Sahouri said. “But after a while you realize that we’re really losing money on seeing those patients, not even breaking even. We were starting to lose more and more money, month after month.”

It has not taken long for communities like Flint to feel the downstream effects of a nationwide torrent of state cuts to Medicaid, the government insurance program for the poor and disabled. With states squeezing payments to providers even as the economy fuels explosive growth in enrollment, patients are finding it increasingly difficult to locate doctors and dentists who will accept their coverage. Inevitably, many defer care or wind up in hospital emergency rooms, which are required to take anyone in an urgent condition.

Mrs. Vliet, 53, who lives just outside Flint, has yet to find a replacement for Dr. Sahouri. “When you build a relationship, you want to stay with that doctor,” she said recently, her face gaunt from disease, and her head wrapped in a floral bandanna. “You don’t want to go from doctor to doctor to doctor and have strangers looking at you that don’t have a clue who you are.”

The inadequacy of Medicaid payments is severe enough that it has become a rare point of agreement in the health care debate between President Obama and Congressional Republicans. In a letter to Congress after their February health care meeting, Mr. Obama wrote that rates might need to rise if Democrats achieved their goal of extending Medicaid eligibility to 15 million uninsured Americans.

In 2008, Medicaid reimbursements averaged only 72 percent of the rates paid by Medicare, which are themselves typically well below those of commercial insurers, according to the Urban Institute, a research group. At 63 percent, Michigan had the sixth-lowest rate in the country, even before the recent cuts.

In Flint, Dr. Nita M. Kulkarni, an obstetrician, receives $29.42 from Medicaid for a visit that would bill $69.63 from Blue Cross Blue Shield of Michigan. She receives $842.16 from Medicaid for a Caesarean delivery, compared with $1,393.31 from Blue Cross.

If she takes too many Medicaid patients, she said, she cannot afford overhead expenses like staff salaries, the office mortgage and malpractice insurance that will run $42,800 this year. She also said she feared being sued by Medicaid patients because they might be at higher risk for problem pregnancies, because of underlying health problems.

As a result, she takes new Medicaid patients only if they are relatives or friends of existing patients. But her guilt is assuaged somewhat, she said, because her husband, who is also her office mate, Dr. Bobby B. Mukkamala, an ear, nose and throat specialist, is able to take Medicaid. She said he is able to do so because only a modest share of his patients have it.

The states and the federal government share the cost of Medicaid, which saw a record enrollment increase of 3.3 million people last year. The program now benefits 47 million people, primarily children, pregnant women, disabled adults and nursing home residents. It falls to the states to control spending by setting limits on eligibility, benefits and provider payments within broad federal guidelines.

Michigan, like many other states, did just that last year, packaging the 8 percent reimbursement cut with the elimination of dental, vision, podiatry, hearing and chiropractic services for adults.

When Randy C. Smith showed up recently at a Hamilton Community Health Network clinic near Flint, complaining of a throbbing molar, Dr. Miriam L. Parker had to inform him that Medicaid no longer covered the root canal and crown he needed.

A landscaper who has been without work and without a Michigan health insurance company for 15 months, Mr. Smith, 46, said he could not afford the $2,000 cost. “I guess I’ll just take Tylenol or Motrin,” he said before leaving.

This year, Gov. Jennifer M. Granholm, a Democrat, has revived a proposal to impose a 3 percent tax on physician revenues. Without the tax, she has warned, the state may have to reduce payments to health care providers by 11 percent.

In Flint, the birthplace of General Motors, the collapse of automobile manufacturing has melded with the recession to drive unemployment to a staggering 27 percent. About one in four non-elderly residents of Genesee County are uninsured, and one in five depends on Medicaid. The county’s Medicaid rolls have grown by 37 percent since 2001, and the program now pays for half of all childbirths.

But surveys show the share of doctors accepting new Medicaid patients is declining. Waits for an appointment at the city’s federally subsidized health clinic, where most patients have Medicaid, have lengthened to four months from six weeks in 2008. Parents like Rebecca and Jeoffrey Curtis, who had brought their 2-year-old son, Brian, to the clinic, say they have struggled to find a pediatrician.

“I called four or five doctors and asked if they accepted our Medicaid plan,” said Ms. Curtis, a 21-year-old waitress. “It would always be, ‘No, I’m sorry.’ It kind of makes us feel like second-class citizens.”

As physicians limit their Medicaid practices, emergency rooms are seeing more patients who do not need acute care.

At Genesys Regional Medical Center, one of three area hospitals, Medicaid volume is up 14 percent over last year. At Hurley Medical Center, the city’s safety net hospital, Dr. Michael Jaggi detects the difference when advising emergency room patients to seek follow-up treatment.

“We get met with the blank stare of ‘Where do I go from here?’ ” said Dr. Jaggi, the chief of emergency medicine.

New doctors, with their mountains of medical school debt, are fleeing the state because of payment cuts and proposed taxes. Dr. Kiet A. Doan, a surgeon in Flint, said that of 72 residents he had trained at local hospitals only two had stayed in the area, and both are natives.

Access to care can be even more challenging in remote parts of the state. The MidMichigan Medical Center in Clare, about 90 miles northwest of Flint, closed its obstetrics unit last year because Medicaid reimbursements covered only 65 percent of actual costs. Two other hospitals in the region might follow suit, potentially leaving 16 contiguous counties without obstetrics.

Michigan Medicare and Medicaid enrollees in the state's midsection have grown accustomed to long journeys for care. This month, Shannon M. Brown of Winn skipped work to drive her 8-year-old son more than two hours for a five-minute consultation with Dr. Mukkamala. Her pediatrician could not find a specialist any closer who would take Medicaid, she said.

Later this month, she will take the predawn drive again so Dr. Mukkamala can remove her son’s tonsils and adenoids. “He’s going to have to sit in the car for three hours after his surgery,” Mrs. Brown said. “I’m not looking forward to that one.”

15 March 2010

The Humbling of Toyota

Business Week

A combination of high-speed global growth and ambitious cost cuts led to the quality lapses that have tarnished the once-mighty brand. How it all went wrong

Toyota Motor has always been fanatical about frugality, and for many years that was good for both the company and its customers. This is a Japanese carmaker that routinely turned down the heat at its employee dormitories during working hours and labeled photocopy machines with the cost per copy to discourage overuse. Its engineers collaborated with suppliers to extract cost-savings without compromising quality. Yet by the middle of the last decade Toyota's virtue had become a vice.

So say current and former auto executives who are trying to grasp how Toyota, with its gold-plated reputation for engineering excellence, slipped up on such a scale, with 8 million cars recalled due to mechanical failures linked by U.S. regulators to 51 deaths. Before company officials knew that runaway acceleration was causing crashes, one of these executives says, a simple manufacturing process would sometimes ignite small fires in a component as a direct result of corner-cutting. It was just one early sign that the focus on cost reduction had gone too far.

Those production mishaps occurred in 2006, a year after company President Katsuaki Watanabe boasted about having squeezed more than $10 billion from global operating costs in the previous six years—this despite an impressive run of profit growth and global market share gains in the middle of the last decade. Then Toyota pushed even harder for more cuts. It asked suppliers to design parts for its Camry midsize sedan that were 10% cheaper and 10% lighter. The company's top U.S. executive, Jim Press, warned his bosses in Japan that vehicle quality was slipping, according to a slide presentation U.S. Senate investigators unearthed in their sudden-acceleration probe. But his warning had no apparent effect.

The redesigned Camry brought out in 2006 had an embarrassing flaw in its headliner, the fabric and composite lining that covers the inside roof of the car. Under pressure to cut costs, the lead Camry supplier, Toyota-affiliated Toyota Boshoku, chose a carbon fiber material that hadn't been approved by Toyota engineers, according to an executive who worked on the redesign. The headliner is made by compressing layers of materials together using a certain amount of heat to mold it. In this case, the carbon fiber required so much heat that the headliner would catch fire.

Toyota fixed that problem, but when a North American parts supplier interested in working with the automaker did a teardown of a 2007 Camry, its engineers were surprised by how much the traditional Toyota craftsmanship had been watered down by years of nips and tucks. The padding in the ceiling of the car, though compliant with safety regulations, had been thinned out to save money. A tray for sunglasses used a flimsier type of plastic than previous models. "It was a bare-bones car at that point," says one executive who declined to be identified for fear of harming business ties with Toyota.

Toyota insists its focus on cost hasn't hurt consumers. "It's not true that by reducing cost you automatically reduce quality," said Jim Wiseman, Toyota's vice-president for North American corporate communications. "Every automaker has to stay competitive relative to price."

True, but probably not with the intensity Toyota brought to cost-cutting and rapid expansion under three successive presidents: Hiroshi Okuda (1995-1999), Fujio Cho (1999-2005), and Watanabe (2005 to 2009). Toyota executives will spend years mopping up after their mess.

At last count, the company faced 109 class actions and 32 individual cases filed in courts in the U.S. and Canada. (In a well-publicized incident on Mar. 8, the owner of a 2008 Prius lost control of his car on a California interstate highway and had to be rescued by police.)

As grave as the current troubles are, they are symptomatic of a larger problem at Toyota: It got carried away chasing high-speed growth, market share, and productivity gains year in and year out. All that slowly dulled the commitment to quality embedded in Toyota's corporate culture.

"The root cause of their problems is that the company was hijacked, some years ago, by anti-[Toyoda] family, financially oriented pirates," Press charged in a recent interview with Bloomberg News. Once the highest-ranking American at the company, with a seat on the board of directors, Press left in 2007 to join Chrysler as vice-chairman and president, but departed from there after last year's bankruptcy. The financial pirates, he said, "didn't have the character necessary to maintain a customer-first focus."

The embodiment of character at Toyota, as any new engineering hire there learns, is a man named Taiichi Ohno, the innovator widely credited as the genius behind the Toyota Production System. With a handful of other executives during the 1950s, Ohno developed a set of in-house precepts on carmaking efficiency that later evolved into such concepts as lean manufacturing and just-in-time inventory management. Ohno's ideas not only changed the auto industry, they changed late-20th-century manufacturing. At their core was an attention to detail and a noble frugality that shunned waste of every kind. As Ohno's concepts were handed down to successive generations of Toyota executives, however, the purity of the message appears to have been slowly lost.

The traditions of the company began to change in 1995 when family elders, led by then-Chairman Shoichiro Toyoda, tapped Okuda to take over the company from 68-year-old Tatsuro Toyoda, who had been waylaid by a stroke. The company was widely thought to have lost its edge, and Okuda (a black belt in judo) was just the sort of hard-charger to help get it back.

In jobs ranging from accounting and purchasing to international and domestic sales, he was a nonstop manager who liked to test-drive every Toyota under development. He also could be impolitic. In 1995, Okuda called his Detroit rivals "stupid" for trying to import bulky cars ill suited to Japan's narrow side streets.

Toyota needed Okuda's in-your-face approach. Glacial decision-making and poor execution were resulting in major mistakes. Toyota stuck with conservatively styled sedans when everybody in the U.S. and Japan wanted the more daring, off-road stuff. It also botched some key product launches. It introduced the T100 truck in the U.S. with an underpowered engine, and a 1995 redesign of the Corolla for the Japanese market fell flat.

Okuda and his team started turning things around on the product front while embarking on one of the most aggressive overseas expansions in automotive history. Between 1995 and the end of 2009, Toyota roughly doubled, to 50, the number of overseas plants and manufacturing facilities in North America, Asia, and Europe in a bid to improve its market responsiveness and sidestep potential trade disputes about car exports from Japan. This coincided with a massive product rollout that penetrated new categories ranging from the boxy Scion xB to the one-ton Tundra pickup to the hybrid Prius compact. In the U.S., Toyota gained market share at "a kind of speed no other carmaker has ever experienced in the past," said Koji Endo, an analyst with Advanced Research Japan in Tokyo.

By the late 1990s the Corolla sedan and the 4Runner and RAV4 sport-utility offerings were all selling well, and plans were under way to invade Detroit's cash-cow minivan and large pickup truck categories. In the all-important North American market, Okuda spent big to double total vehicle capacity, to 1.2 million units, by 1998. To launch the Sienna minivan, he expanded capacity at Toyota's Georgetown (Ky.) plant, already the production base for its Camry and Avalon sedans.

Early in Okuda's tenure as president there was a lot of talk about grabbing a 10% share of the global auto market. By the time he moved up to the chairman's job in 1999 to make way for Cho, the goal was 15%. Cho was less flamboyant than Okuda and studied law at the prestigious University of Tokyo. Yet early in his career Cho became fascinated with the Toyota Production System and mastered its best practices. (He put that knowledge to use in 1988, supervising the launch of the Georgetown plant.) Cho often talked about the "criticality of speed" in product development cycles and the importance of responding to changes in the marketplace. Ohno's precepts were beginning to morph into something he might not have recognized.

By 2003 a lot of things were going right at Toyota. Profits were booming, and in November of that year it enjoyed a market capitalization of $110 billion—more than that of GM, Ford, and DaimlerChrysler combined. (Today, despite its troubles, Toyota is valued at $132 billion.) In the U.S. it had finally pieced together a strong lineup of high-margin SUVs, once the profit sanctuary of U.S. automakers, ranging from the $19,000 RAV4 to the $65,000 Lexus LX470. Meanwhile, the Prius was starting to take off, creating mass market interest in eco-friendly cars.

At the same time, Cho, Okuda, and other top executives were pushing ahead with a program dubbed CCC21 ("Construction of Cost Competitiveness for the 21st Century") that had been started in 1998. In implementing CCC21, no detail was too small. For instance, Toyota designers took a close look at the grip handles mounted above the door inside most cars. By working with suppliers they managed to cut the number of parts to five from 34, which helped cut procurement costs by 40%. The change slashed the time needed for installation by 75%—to three seconds. "The pressure is on to cut costs at every stage," Takashi Araki, a project manager at parts maker and Toyota affiliate Aisin Seiki, told BusinessWeek at the time.

By mid-decade, when Watanabe, a trained economist, became president, Toyota had incredible numbers to share with Wall Street analysts. On the job as Toyota's chief executive for less than three months, Watanabe told New York's financial community at a Sept. 12, 2005, meeting in Manhattan that CCC21 had wrung out more than $10 billion in savings over six years. "Under CCC21 activities, which I led, Toyota realized cost reductions of more than 200 billion yen ($2.2 billion) a year on a consolidated basis," he said.

It wasn't enough. Next up was what he called an "aggressive version of CCC21," dubbed Value Innovation, which promised more savings by making the entire development process cheaper and faster, further trimming parts, production costs, and time to market. Toyota had managed to slash the time it took to bring models into production once a design was final to about 12 months, compared with an industry average of between 24 and 36 months.

A credit bubble and soaring home prices in the U.S. had Americans buying Camrys and Lexus SUVs in droves. Toyota raked in $55 billion in operating income during its fiscal years running from 2006 to 2008. Shares traded in Tokyo (Toyota also has stock listed in New York and London) shot up 112% from mid-2005 to February of 2007.

Yet during these hyperspeed growth years there were signs of trouble. That's when Press, Toyota Motor's top U.S. executive, warned his bosses that quality was slipping and that regulators were stepping up scrutiny.

Reports of more serious problems started to get the attention of U.S. regulators far earlier in the decade. The National Highway Traffic Safety Administration opened eight investigations of unintended acceleration of Toyota vehicles from 2003 to 2010, according to Safety Research & Strategies, a Rehoboth (Mass.) group that gathers data from NHTSA and other sources for plaintiff's attorneys and consumers, though the carmaker's problems only became widely known to the public this year.

Toyota's fortunes, and that of the entire industry, took a nasty turn starting in late 2007 as the financial crisis hit and oil prices spiked to $145 per barrel in July of 2008—a combination that brought on the global recession that later pushed GM and Chrysler into bankruptcy. Last September, at a meeting with Toyota investors in Tokyo, Akio Toyoda, who succeeded Watanabe in June 2009, said an annual goal had been to boost global sales by as many as 700,000 vehicles a year, more than three times the previous increase, according to a former executive who attended the gathering. The accelerated production had outstripped the abilities of company engineers and led Toyota to outsource more development work to suppliers.

On Feb. 24 of this year, the grandson of company founder Kiichiro Toyoda said during testimony before a congressional committee: "I fear the pace at which we have grown may have been too quick....Priorities became confused, and we were not able to stop, think, and make improvements as much as we were able to before."

Toyoda and other top executives have vowed to fix the sudden-acceleration problems and other quality lapses that have surfaced in so many of its models. In a bid to win back customers, Toyota is offering incentives such as no-interest loans and discounted leases, which may reignite sales. Still, Toyoda and his team will be spending many months trying to absorb a painful lesson about what happens to a great company when ambition gets too far ahead of tradition.

11 March 2010

Tax Services to Fund Schools? NO

The Detroit Free Press / Robert D. Fowler
State should live within its means, help to grow, promote thriving economy

First, let me say that I agree that the State of Michigan, and in particular our schools, need revenue. We have differences of opinion over priorities and precise levels of funding, but in the end we must have some amount of revenue every year to fund vital services like educating our children.

The question is how to generate that revenue. I disagree with the proposal that the best way to meet the revenue needs of state government and public education is by imposing a sales tax on services. That's a tax hike, plain and simple, and it increases the overall tax burden on struggling Michigan citizens.

We need to get away from the tired old prescription of addressing revenue shortfalls by automatically seeking additional taxes. Part of the solution involves structural reform of state spending that makes state government operate more efficiently and live within its means. That makes perfect sense to small business owners. These entrepreneurs across Michigan have worked ceaselessly, and made tremendous sacrifices, to find ways to live within their means. They expect state government to do no less and are very impatient with the business-as-usual attitude they perceive in Lansing.

But you may be surprised to hear me suggest that another important part of the solution is growing government revenues, but growing them the right way -- not by expanding the tax burden but by fostering a vigorous and prosperous state economy, an economy that provides an appropriate level of tax revenue that meets the needs of public services and schools, without levying an undue tax burden on the private sector.

A thriving economy begins with entrepreneurial business growth that energizes job creation and boosts incomes. That in turn generates revenue for government. But a sales tax on services hurts consumers and hurts small businesses by taking dollars out of their pockets, and away from business growth in the private economy, and transferring an even higher percentage of private resources to the public sector. That's exactly the wrong formula for solving our economic woes.

We're at a tipping point in Michigan's economy. We can either add taxes, in the form of a sales tax on services that further burdens our struggling consumers, or we can take down barriers to business and income growth. Meeting Michigan's revenue needs begins with expanding Michigan's economy, continues with real structural spending reforms and concludes with a higher level of prosperity that benefits everyone in our state.

Robert D. Fowler, is president and CEO of Small Business Association of Michigan

Tax Services to Fund Schools? YES

The Detroit Free Press / Robert J. Kleine

Modernize the State's System to Stabilize Funding, Transform Economy

Education is the key to transforming Michigan's economy. We must act to properly fund Michigan schools. Otherwise, we risk further cuts to education and damage to our economic diversification and job-creation efforts.

Inadequate funding already has forced a $165-per-pupil cut for schools this fiscal year. If changes are not made to Michigan's tax system, schools could face an additional $255 per pupil cut in the 2011 fiscal year.

A major revenue source for schools is the state sales tax, which is levied on goods and a few services. But the sales tax base is shrinking because consumer spending has changed. In 1950, consumer spending was 60% on goods. Today, more than 66% of consumer spending is on services. As the percentage of spending on goods declines, the base for funding Michigan schools decreases.

Gov. Jennifer Granholm has proposed fixing this structural problem by lowering the existing sales-and-use tax rate from 6% to 5.5%, while broadening the base to include other services. Michigan now taxes only 27 of 168 transactions it classifies as services, which ranks 39th lowest in the nation, according to the Federation of Tax Administrators. At 5.5%, Michigan would have one of the lowest sales tax rates in the nation. Only five states would have a lower rate.

The governor also wants to cut the Michigan Business Tax (MBT) surcharge in half in 2011 and completely eliminate it in 2012. Phasing out the surcharge, together with additional stepped reductions in the MBT gross receipts tax rate, will help Michigan businesses invest and create jobs.

The net revenue impact of the changes to the sales-and-use tax and the Michigan Business Tax is $554 million for the 2011 fiscal year. That $554 million will go directly to the School Aid Fund. By the end of the 2013 fiscal year, the changes to the sales and use tax and MBT will be revenue neutral.

Some argue that, before considering any tax changes, there must be further cuts in state spending along with government reforms. Governor Granholm has cut more state spending than any governor in Michigan history, resolving more than $10 billion in deficits. The governor is recommending another $566 million in spending reductions for the 2011 fiscal year.

Also, in January the governor outlined her 29 reforms for Michigan government, including significant changes to public employee pensions and health care. These reforms will save $7.8 billion over the next decade.

But Michigan will not be more attractive to businesses simply by reforming government and cutting spending. We must invest in the things most critical to attracting business investment.

Education tops that list. By modernizing the state's tax system, we can stabilize school funding in Michigan. Children will receive the world-class education they need to compete in a global economy. And business will get the educated workforce it seeks and requires.

Robert J. Kleine is Michigan state treasurer.

08 March 2010

Ambassador Bridge Committed to Second Span


Detroit -- As the company that owns the Ambassador Bridge announced a deck replacement Friday afternoon, it remained committed to building a second span after it failed to receive an essential permit this week.

"A request for bids for the deck replacement will go out within the next two weeks," said Detroit International Bridge Company president Dan Stamper.

"We expect construction to begin in May and take two years to complete because we will minimize the impact on traffic using this most vital international crossing."

The announcement of the replacement project on the 80-year-old span that connects Detroit and Windsor came late Friday afternoon.

The DIBC said there should be "little or no disruption to traffic" with the majority of the work being done one lane at a time during off-peak hours.

Stamper also said the DIBC is still fully committed to building its proposed Ambassador Bridge Enhancement Project, a privately funded six-lane replacement.

According to Stamper, the DIBC's commitment to the new span stands despite the U.S. Coast Guard's return of permit paperwork earlier this week that could indefinitely delay the start of the bridge. The Coast Guard said it returned the permit due to unresolved land acquisition issues between the DIBC and the city of Detroit.

The Ambassador Bridge remains the No. 1 international crossing in North America, carrying more than 25 percent of the trade between the U.S. and Canada.

According to the DIBC, the bridge carried 4.2 million cars and 2.3 million trucks in 2009, down from 8.9 million cars and 3.4 million trucks in 1999.

06 March 2010

State Drug Use on the Rise Among Teens

Battle Creek Enquirer

Michigan teens are following the national trend of increasing pot, alcohol and prescription drug abuse, but Calhoun County’s abuse rates won’t be clear until late summer, officials said today.

The Associated Press reported that the Partnership for a Drug-Free America released a study on Monday showing teen alcohol use rose to 39 percent in 2009 from 35 percent in 2008 and marijuana use jumped to 25 percent from 19 percent. Before last year, those statistics had been on a steady decline since 1998.

Monitoring the Future, a survey of teen drug use sponsored by the National Institute on Drug Abuse and the University of Michigan, showed Michigan’s teens followed those trends, according Suzanne Horsfall, executive director of the Michigan Substance Abuse Council of Calhoun County. In a release, Horsfall said she found troubling the increasing acceptance of drug use, which climbed about 4 percentage points from 2008 to 2009.

Horsfall said most local schools are participating in a Michigan Department of Education survey on drug abuse, which was untrue in past years, and that more detailed local data, previously unavailable, should be ready by late summer.

05 March 2010

General Motors to Reinstate 661 Dealerships

LA Times
In a move that could provide economic relief for hundreds of communities nationwide, General Motors Co. said it would reinstate nearly 700 dealerships that it had planned to drop from its sales network.

The automaker sought to shed what it considered excess dealers as part of a bankruptcy reorganization last year, an effort to bring its franchise network into better balance with its declining car sales. Closing unprofitable and poorly performing franchises was expected to channel business to the stronger dealers.

But 1,160 dealers took the automaker to arbitration, and on Friday GM said it planned to let 661of them keep their franchises as long as they meet "standard" performance criteria for their facilities and financial status, among other factors.

Bill Hatfield, owner of Hatfield Buick GMC in Redlands, hopes he is on the list.

His dealership has been selling cars since 1913 but received a letter back in May saying the franchise would not be renewed.

On Friday, Hatfield said his phones were "ringing off the hook" as local customers eagerly hoped that the dealership would be saved.

"We're kind of in a waiting situation. We'll either get the letter or we won't, but I'm sitting here on eggshells just waiting to see what they do," Hatfield said of his dealership. "We're still profitable, and we've worked all along with the idea that we'll get the franchise back."

GM, which did not provide a list of the dealers or locations that would be reinstated, said it planned to call the franchise owners it will keep next week and to follow up with formal letters.

"We are eager to restore relationships with our dealers and get back to doing what we do best -- selling cars and taking care of customers," said Mark Reuss, president of GM North America. "The arbitration process creates uncertainty in the market. We believe issuing these letters of intent is good for our customers, our dealers and GM."

It also might help defuse a thorny public relations issue. After GM and Chrysler Group, which also went through a bankruptcy restructuring last year, disclosed plans to close a combined 3,000 franchises, dealers and their supporters complained, arguing that such businesses were important to the economies of their local communities.

The average dealer employs close to 50 people and pumps $16.5 million a year into the local economy, including payroll, taxes, payments to vendors, advertising and charitable giving, said Paul Taylor, chief economist of the National Automobile Dealers Assn.

Congress stepped in and passed legislation requiring the automakers to set up an arbitration process that would be completed by July 15.

That deadline created a certain expediency to reinstating the hundreds of dealers, GM officials said.

"It would have been virtually impossible to arbitrate 1,100 cases in a 120-day period," Susan Docherty, GM's U.S. marketing chief, said in a conference call announcing the decision.

GM has not come anywhere close to its goal of dramatically slashing its dealer network. The company had about 5,500 dealership locations as of Jan. 31 -- just 700 fewer than at the end of 2008, prior to the auto industry's sales plunge.

But maintaining hundreds of dealers more than it expected is unlikely to hurt GM's financial performance, said Jeremy Anwyl, chief executive of auto information company Edmunds.com.

GM is likely to make a profit this year after years of massive losses, its CEO, Edward J. Whitacre Jr., predicted in January.

"It doesn't really cost GM that much to have a dealer that is not very successful," Anwyl said.

Incidentally, the impetus for closing dealerships came from the example of Toyota Motor Corp., which because of its millions of recalls in recent months is now losing sales to GM and other U.S. automakers.

"Everybody looked at how Toyota has only 1,500 dealers and that those dealers are more profitable," Anwyl said. "Ideally, that allows those dealers to invest in nicer facilities and hire better salespeople because they sell more cars per store," he said.

But, Anwyl said, terminating hundreds of dealers doesn't automatically produce those advantages and may actually create some disadvantages.

"A large number of dealers gives you coverage in rural America," he said. "Where are those people supposed to buy vehicles?"

Changing Fortunes Within VW

Auto Week

Each year on the eve of the Geneva motor show, the Volkswagen Group stages a preview, showing vehicles that will debut at the show the following day. The event takes place in a large, specially built building in the middle of the city. It is a chance for VW Group execs, board members and brand leaders to get up and talk about their latest projects.

[Photo: Porsche 918 Spyder Hybrid]
Journalists are invited to see the new cars and drink in the prowess of the ever-growing VW empire, not to mention bottles of fine German beer. And it's a pretty impressive lineup--the cars, that is: Audi, Bentley, Lamborghini, Bugatti, Seat, Skoda, Scania, along with Volkswagen, including VW's commercial-truck division. VW has a partnership with Suzuki in Japan that began last year. And, oh, I left one out: Porsche.

After Porsche's failed attempt to take over the VW Group a little more than a year ago--think guppy trying to eat a whale--well, the whale swallowed the guppy, and Porsche is now a VW brand.

At this year's VW Night, the big news was a Porsche concept, the 918. A 500-hp hybrid that veteran rally ace Walter Rohrl said is faster around the Nordschleife than the vaunted Porsche Carerra GT, the 918 rolled on stage and stole the show.

But what struck me was how quickly things change in the auto world. Certainly no one needs to remind Toyota of how one's fortune can turn in a heartbeat. But no more than two years ago, Porsche was held up as the shining example of how to make money in the car business. Porsche was touted as the most profitable car company in the world and its leader, Wendelin Wiedeking, the kind of guy you'd want leading your company--any company, not just an automaker. Wiedeking left Porsche this past July and helped speed up the VW takeover.
But on Monday night in Geneva, Porsche took the stage at VW Night as just another brand in the ever-growing VW stable, right there along with Seat and Skoda. Granted, the Porsche 918 received a bit more attention than the Seat IB-E electric car or the Skoda Fabia RS, but nonetheless, it was clear--Porsche is now one of the VW brands.
No mention was made as to how profitable Porsche was, and it received no more special attention than any of the other VW brands.

Porsche's future is now part of VW's future, and as a group, VW brands will launch 70 new vehicles this year. VW boss Martin Winterkorn said that by 2018 VW will be the No. 1 automaker in the world, both "economically and environmentally." Porsche hybrids will certainly be a part of that.

And here's something to remember if the 918 concept strikes your fancy: Porsche has never produced a concept vehicle that it didn't ultimately build.

03 March 2010

Ford Beats GM in Sales for First Time Since 1998


Ford Motor Co., buoyed by redesigned cars and a rebound in truck demand, posted a 43 percent jump in U.S. sales in February to beat General Motors Co. in monthly deliveries for the first time since 1998.

Ford’s tally was 142,285 compared with 141,951 for GM, the automakers said today. The Dearborn, Michigan-based automaker hadn’t topped GM in domestic sales since a strike idled the biggest U.S. automaker almost 12 years ago, and the last time before that was during a 1970 walkout, based on Ford data.

“This is huge because it’s the classic rivalry like Pepsi and Coke, the Red Sox and the Yankees,” said John Wolkonowicz, an analyst at IHS Global Insight in Lexington, Massachusetts. “They’re doing it with the stuff that matters -- quality, products and reputation. It could be a turning point.”

Three hours after announcing February sales, GM created separate arms for North American sales and marketing in its second such shuffle since December. Ford’s results topped analysts’ estimates while GM’s 12 percent gain trailed projections as snowstorms damped showroom traffic.

Toyota Motor Corp. sales fell 8.7 percent to 100,027 as it struggled with global recalls that halted sales of some models. Chrysler Group LLC rose less than 1 percent to 84,449, exceeding estimates and posting its first increase since December 2007. Honda Motor Co. and Nissan Motor Co. reported gains that lagged behind a projection from industry researcher Edmunds.com.

Ford Gains

Ford said sales of its Fusion more than doubled, passing the Focus for the top spot among the automaker’s cars, and Taurus sales almost doubled. Both sedans were redesigned in the past year. Pickup and sport-utility vehicle deliveries rose.

North American production for the second quarter will increase 32 percent from a year earlier to 595,000 vehicles, Ford said. Chief Executive Officer Alan Mulally has slashed costs, developed new models and kept Ford out of bankruptcy last year.

“Ford is certainly riding momentum right now,” said Jeff Schuster of J.D. Power & Associates in Troy, Michigan. “GM is still in a state of flux, trying to settle on an image for the brands that remain and shuffling the management team.”

GM Shuffle

Today’s executive changes at GM include shifting Susan Docherty, vice president for sales, service and marketing, to handle only marketing. Steve Carlisle, most recently executive director of Southeast Asia operations, was named vice president of U.S. sales operations, the company said.

Docherty was given her previous duties on Dec. 4 when CEO Ed Whitacre shook up the leadership ranks, including the naming of engineering chief Mark Reuss as president of North American operations. Carlisle and Docherty will report to Reuss, GM said.

GM’s sales trailed the 20 percent average of 5 analysts’ estimates. The results showed the effect of GM’s plans to sell or shut four U.S. brands -- Saab, Hummer, Saturn and Pontiac -- as part of its government-backed bankruptcy last year. Those four vehicle lines plunged 86 percent to 3,102, GM said.

Deliveries for the four brands being kept, Chevrolet, Cadillac, Buick and GMC, rose 32 percent from a year earlier, GM said. Volumes more than doubled for the Buick LaCrosse sedan and Chevrolet Equinox SUV.

Chrysler, based in Auburn Hills, Michigan, beat analysts’ average projection for a decline of 18 percent, based on 5 estimates.

Asian Automakers

Deliveries for Tokyo-based Honda Motor Co. rose 13 percent to 80,671 vehicles. Nissan Motor Co. sales climbed 29 percent to 70,189, Al Castignetti, vice president of the Yokohama, Japan- based company’s U.S. sales unit, said in an interview.

Industry researcher Edmunds.com projected Honda would rise 24 percent and Nissan would climb 38 percent. Santa Monica, California-based Edmunds.com estimated a 10 percent drop for Toyota. Seoul-based Hyundai Motor Co. probably will show a 25 percent increase, according to Edmunds.com.

The seasonally adjusted annual sales rate for cars and light trucks may have reached 10.3 million, the average of 8 estimates compiled by Bloomberg. That would be a fourth straight gain from a year earlier. February 2009’s pace was 9.1 million, the lowest since 1981.

Manufacturers, dealers and investors use the annualized rate to compare monthly totals by taking into account seasonal buying patterns. February is typically among the lowest sales months of the year, while June is one of the highest. Annual U.S. sales averaged 16.8 million last decade through 2007.

Fleet Sales

Business and government buyers drove growth at GM and Ford.

While Chevrolet had a 32 percent gain, deliveries through dealers were up only 1 percent, said Detroit-based GM, which gets 70 percent of U.S. volume from Chevrolet. Ford said fleet sales rose 74 percent. Those transactions are less profitable than retail sales because of discounts for bulk purchases.

The drop for Toyota City, Japan-based Toyota was the second in a row for the world’s largest automaker, which recalled about 8 million vehicles for flaws tied to unintended acceleration and suspended U.S. sales of 8 models, including Camry and Corolla sedans, starting Jan. 26. Dealers resumed sales once repairs were made.

Snow in the eastern U.S. paralyzed car dealers and other businesses last month in cities such as Washington and Philadelphia, while Dallas had its biggest one-day accumulation in a storm that moved across Texas and the South.

“The entire market could be softer than what people thought,” said Michael Robinet, chief forecaster for CSM Worldwide Inc. in Northville, Michigan. “The weather may have had a deep impact. When you are buried in snow, buying a car is not top of mind.”

February economic data may be disrupted by the storms, making it difficult to gauge the extent of the U.S. recovery. The Conference Board’s consumer confidence index fell to the lowest level in 10 months in February, a sign that Americans may limit spending on concern that the job market remains weak.