MiBiz April 13, 2020 print edition

Contractors brace for supply chain disruptions

Minority biz leaders face barriers to recovery

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APRIL 13, 2020 • VOL. 32/NO. 13 • $3.00

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

PREPARING FOR THE SURGE Hospitals look to add beds, meet staffing challenge in COVID pandemic

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

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line in Bronson Methodist Hospital’s emergency state filing to temporarily add 300 beds epitomizes the main challenge for boosting capacity for an expected surge in COVID-19 patients in the coming weeks.

The Kalamazoo hospital’s ability to put the added beds into operation “will be dependent on staffing,” according to a filing with the Michigan Department of Health and Human Services.

As with every hospital during the COVID-19 pandemic, Bronson has been planning for a patient surge by simultaneously looking at how to add capacity and then staff those beds, if needed.

“In order to care for an increased number of patients, Bronson plans to redeploy staff members who are not currently in clinical roles, but who are clinically licensed. We h a ve many RNs who work in education, quality and safety, management and other Neely departments who will return to a role of providing patient care,” Denise Neely, senior vice president for Bronson Healthcare and chief operating officer and chief nursing officer for Bronson Methodist Hospital, said in a statement to MiBiz. “We are currently identifying those staff members and will refresh them on current processes before they return to clinical care.

We are also calling on retirees who may be willing to return to the workforce,” Neely said.

See SURGE on page 17

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Business owners discuss reacting, coping and planning for the future in the era of coronavirus

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

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all it the six stages of COVID-19 coping: Experiencing shock. Assessing.

Recalibrating. Cash Flowing. Helping.

Imagining.

That seems to sum up an emotional and intellectual path many West Michigan business owners have travelled recently as their companies faced extraordinary circumstances brought on by the spread of coronavirus.

Over the last two weeks, MiBiz spoke with owners and executives in a variety of industries.

No matter what sector they work in, they all pretty much experienced the same rollercoaster of emotions.

First came the shock at how fast the virus was spreading throughout the United States, then panic when it became clear that all non-essential businesses in Michigan would need to close to help “flatten the curve” and give the state’s

hospitals a fighting chance against the highly contagious COVID-19.

Once they got past the chaos in which the rules seemingly changed by the hour, they all needed to take a step back, assess what their next steps would be and recalibrate their business strategy.

In many cases, that strategy focused on figuring out how best to take care of employees in the short term while also addressing the company’s viability in the long term as the crisis continues to play out without a realistic end date in sight.

To that end, business owners also thrust themselves into applying for government relief programs, finding novel ways to generate revenue, and — this being West Michigan — figuring out how they could use their platforms to help others in need.

Here are six stories of local executives dealing with the crisis, coping with the “new normal,” and looking ahead to how their companies and society could change as a result of the pandemic.

See BUSINESS OWNERS REACT on page 12

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State, local officials seek federal help as COVID-19 budget deficits loom

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

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hrinking revenue from sales, income and gasoline taxes could cost state and local governments billions of dollars in the coming months, potentially cutting already stretched services and leading to a prolonged recession without sufficient federal support.

State officials reported earlier this month that the fiscal year general fund and school aid budgets ending on Sept. 30 could see a $1 billion to $3 billion shortfall, a result of the public health measures taken to prevent the spread of the coronavirus. The higher range is a decline of more than 10 percent. Next fiscal year, Bartik the deficit could be up to $4 billion. Yet those are just estimates at this point, and it’s difficult to predict the ultimate effect of the pandemic on the budget.

“My own guess is it might be worse than that,” said Tim Bartik, senior economist with the Kalamazoo-based W.E. Upjohn Institute See STATE BUDGET on page 14

VC, PE firms steer companies through crisis

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

he COVID-19 pandemic that dismantled daily routines and hammered the economy has forced investors to pivot along with the companies they back financially.

Venture capital and private equity investors contacted by MiBiz say they’ve advised portfolio companies to stay safe, preserve cash, control expenses and capital spending, secure

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revenues, assess the effects, and continually revise projections based on the data they see.

Investment firms say they continue to scout for new deals, although some are generally doing so at a slower pace.

Their immediate priority is to focus on portfolio companies in which they have already invested to help them navigate the crisis, and in some cases provide an injection of capital.

“The crisis certainly caused a sudden change in the way we all work and live. Its impact jolted us and our

portfolio companies. We immediately shifted into crisis management mode and began working each step of the process in parallel,” Tim Parker, the president Parker of Grand Rapidsbased Grand Angels, wrote in an email to MiBiz. “One aspect of our role is to help companies deal with the current realities and at the same time help them

visualize how we will steer out of this fog,” Parker said. “Sometimes, it is difficult for a small company in the trenches to see the entire battlefield.

We can provide that vision and bring best practices, along with resources to help them develop and implement safe and smart strategies.”

Grand Angels has angel investor groups in West Michigan and affiliates in Kalamazoo, Detroit and Flint.

The investment firm closed in late December on $11.7 million raised See VC/PE on page 18

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Rural broadband access in focus as school, health care, work shift to homes

By ANDY BALASKOVITZ | MiBiz

Publisher Brian Edwards / bedwards@mibiz.com Associate Publisher Denise Montambo / denise@mibiz.com

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he widespread closure of schools, workplaces and in-person doctor visits has highlighted inequities in reliable internet access across Michigan, particularly among rural and lowincome residents.

With far more residents and students working and studying from home, advocates say a longterm strategy and perhaps alternative funding models are required to address the need.

“The current COVID-19 crisis and all of the related actions and impacts have certainly revealed the access inequity in Michigan when it comes to broadband,” said Travis Alden, director of business development for The Right Place Inc. in Grand Rapids. In some parts of rural West Michigan, more than a quarter of resiAlden dents don’t have access to broadband or a device for remote-learning, like a computer or tablet.

“This is staggering and a significant hurdle to overcome during the new normal we’re experiencing right now,” Alden said.

The Right Place has worked in multiple rural communities to expand this access, including Montcalm County, and some cities and school districts have stepped in with new broadband connections and devices for underserved students.

“We know that access to reliable, affordable broadband connectivity is a crucial competitive advantage for Michigan’s communities and for the state as a whole,” Alden said.

According to data compiled by the NCTA — The Internet & Television Association, 96.5 percent of Michigan residents have access to broadband. But that includes the entire state and urban areas, which offset the lower numbers found in rural counties.

Broadband refers to high-speed internet that’s always on, and includes fiber, wireless, satellite, digital subscriber line and cable.

Dan Manning, community technology adviser for Connect Michigan, said the state has about 250,000 children, or roughly 150,000 households, “that don’t really have any internet access at home today.”

“Then you throw in tele-health issues and people being able to access doctors — you need that kind of connection just to get access to information and exchange messages,” Manning said.

Moreover, physical access to broadband is just one component.

“If you look at all of the people who don’t have access, it’s not because they don’t have physical access and infrastructure,” Manning said. “A number of families don’t have access even in metropolitan areas, which tends to be more related to costs and access to equipment like computers, tablets and phones.”

Connect Michigan — the state chapter of a national group — has partnered with the Michigan Public Service Commission for nearly a decade to expand access to broadband internet in unserved areas. The MPSC oversees grant funding in the Connecting Michigan Communities program.

In 2018, the Michigan Consortium of Advanced Networks also issued a report outlining several goals over the next decade, including accomplishing 1 Gigabit per second connections for all Michigan residents by 2026. As of the 2018 report, Michigan ranked 30th among states for broadband availability.

Federal funding The Federal Communications Commission earlier this year launched the $20.4 billion Rural Visit www.mibiz.com

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Editor Joe Boomgaard / jboomgaard@mibiz.com Managing Editor Andy Balaskovitz / abalaskovitz@mibiz.com (energy, policy) Senior Writer Mark Sanchez / msanchez@mibiz.com (finance, health care, life sciences) Staff Writer Jessica Young / jyoung@mibiz.com (manufacturing, agribusiness, nonprofits) Contributing Reporters Jayson Bussa, Marla Miller, Jane Simons Copy Editor Claire Boomgaard VP of Production & Audience Development Kristi Kortman / kkortman@mibiz.com Senior Advertising Consultant Shelly Keel / skeel@mibiz.com

Digital Opportunity Fund to expand rural broad- Southwest Michigan that connected more than band, which follows previous programs aimed at 12,000 customers. private telecommunications companies. In 2018, In 2018, Portland-based HomeWorks Trithe U.S. Department of Agriculture also allocated County Electric Cooperative started a five-year, $600 million to target rural broadband efforts. $73 million fiber build-out project, hoping to “Certainly it’s been helping,” Manning said of reach all 26,000 of its members. (It’s about 10 the federal funding. “There’s still more out there percent there.) The co-op’s territory spans 13 that needs to be done.” counties through mid-Michigan, roughly from The federal stimulus bill signed into law on Mt. Pleasant to Lansing.

March 27 also allocates $200 million for the FCC With electric infrastructure reaching these to expand its Connected Care telehealth pro- rural residents, adding a broadband connection gram, $100 million for the USDA’s ReConnect is a natural fit. program, $50 million to improve library net“We heard again and again from our memworks, and $25 million bership about this deep for distance learning and need in rural areas for telemedicine grants. good and reliable interD a v i d Wa y m i r e , net service,” said Kacey spokesperson for Thelen, HomeWorks’ mart h e Michigan Cable keting manager. “We were Telecommunications kind of blown away by Association, said the “vast how much sense it made majority” of Michigan financially. Not only is it residents have physiproviding great service to cal access to high-speed underserved people, but it internet, while roughly wasn’t going to put us at 30 percent of people who risk to lose money.” do have physical access While its members are choose not to use it. serviced by telecom comWaymire, representpanies, the co-op has — TRAVIS ALDEN ing major telecommuniheard complaints about Director of Business Development at cations companies, said poor reliability and cusThe Right Place Inc. Comcast and Charter tomer service.

Communications have “We have that unique rolled out programs to ability to care about that connect low-income customers. Meanwhile, one house or five houses,” she said. it’s expensive for private companies to service Other options are coming straight from local secluded residents: It costs about $45,000 a governments, and public funding or public-primile to build high-speed internet infrastructure, vate partnerships may draw renewed attention.

Waymire said.

“This is a capitalist market. Private companies “If there’s only three people on the road in that are building it, and that’s worked well to get to 90 mile, it’s rather difficult,” he said. percent (of people),” Manning said. “Getting to that last 10 percent of households, we need to get a little creative to get that done. … A lot of people after Alternative models, going through this experience are looking at broadsuppliers band as more of a local utility like water, gas and electricity, and there ought to be some effort to proWhile federal funding has helped lower costs for vide that for free to everyone across the country.” private companies to expand broadband access, The need for reliable and high-quality interit’s generally not economical for them to do so for net access is just one lesson amid the coronavirelatively few customers in rural areas. rus fallout.

Within the past decade, cooperatives that pro“It really has gotten everyone’s attention that vide electricity to rural members have increas- broadband is a critical service and needs to be ingly stepped into the broadband space. provided to everyone,” Manning said. “I think Midwest Energy and Communications we’ll see a lot of repercussions on that with more recently completed a five-year fiber buildout in money, more focus and more attention.”

“We know that access to reliable, affordable broadband connectivity is a crucial competitive advantage for Michigan’s communities and for the state as a whole.”

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FOCUS: INDUSTRY 4.0

Automation providers see an opening during production pause

By JESSICA YOUNG | MiBiz jyoung@mibiz.com

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s businesses have been forced to pause operations in order to slow the spread of COVID-19, manufacturers are using the opportunity to explore and research new technologies that could change their future processes.

That’s according to Mark Ermatinger, CEO of Zeeland-based Industrial Control Service Inc., who said automation suppliers have a chance right now to educate clients to help them better understand emerging technologies in the sector.

“The tide is changing,” Ermatinger told MiBiz. “People have just gotten settled into working less or from home and the cleanup work is drying up. As that dries up, they’re going to be browsing and educating themselves and preparing for the future.”

Staff at Industrial Control have begun a video series to help manufacturers learn about emerging and maturing Industrial Internet of Things (IIoT) technologies like machine vision, robotic bin picking and flexible feeding systems.

While working from Ermatinger home, Jake Hall, senior account manager at Industrial Control, demonstrated in one video a wireless temperature and vibration monitor by attaching it to his smoker grill while he cooked pork shoulder for dinner.

“There’s no rocket science here anymore,” Ermatinger said. “That’s what we’re pushing the most.”

Wireless connectivity and monitoring products that connect remote assets with the people who

manage them could be one of the first products to be deployed quickly after manufacturers can get back to work, according to Ermatinger. Enabling real-time monitoring and management of equipment and conditions in difficult-to-access locations or where wired solutions are impractical will be especially important in the future, he said.

Data radios like the H10 Series MutiHop from Minneapolis-based Banner Engineering Corp. can be used to monitor multiple sensing points on equipment and assets spread out over long distances.

As more components on the factory floor become connected and remote access to those networks expands, increased cybersecurity also will come into play. I.T. and security departments have typically been the gatekeepers to the adoption of new technologies, and they’re not always enthusiastic about expanding virtual vulnerabilities, according to Ermatinger.

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“For years, we’ve been pushing the IIoT platform, and the I.T. people have been the main culprits for not doing it,” Ermatinger said. “Working from home has really disrupted that, and they’ve had to open their gate a little bit.”

Now, companies are being forced to adapt to cybersecurity “outside of their four walls,” he added.

The way the pandemic is changing how manufacturers work today will most certainly shift the industry moving forward, according to Ellen Boehm, senior director of IoT product management at Ohio-based Keyfactor.

“If you’re going to be a viable device business, your workforce must determine how they can maintain productive operations when they can’t be physically present in manufacturing facilities,” Boehm said in a statement to MiBiz. “This is the reality today, and companies will have to accept it as a long-term scenario.”

Collaborative robots, also known as cobots, which share a workspace and direct physical interaction with a human operator, are an example of a technology that can help manufacturers continue to produce goods while keeping workers safe, according to Mike Cotter, director of digital product at Grand Rapids-based Feyen Zylstra LLC. “Some manufacturers don’t know about the benefits of collaborative robots and COVID-19 will really change the game and local man- “For years, ufacturing as manwe’ve been ufacturers explore pushing the automation technologies like collaboraIIoT platform, tive robots,” Cotter and the I.T. told MiBiz. people have Cobots were already on the rise been the before the coronavimain culprits rus crisis. In 2019, revfor not doing enue from the sales of collaborative robots it. Working grew by more than 30 from home percent, according has really to a report from the market research firm disrupted that, Interact Analysis. and they’ve The cobot market is had to open projected to reach $5.6 billion in 2027 their gate a t h ro u g h f u r t h e r little bit.” development of new application scenarios and breakthroughs — MARK in technology bottleERMATINGER necks, according to CEO of Industrial the data.

Control Service Inc. Collaborative robots can work in close proximity to one another and their human counterparts while also helping to keep fewer workers more spread out on the factory floor.

“There’s no six-foot perimeter as with robots, so this is a great opportunity for manufacturers to make gains with collaborative robots,” Cotter said.

Manufacturers are also recognizing the need for their production lines to be more flexible and their customers to be more diverse. Many manufacturers throughout the state are rapidly changing their operations right now to address critical shortages of health care supplies. These redeployments call for flexible assets and the lessons learned today will help suppliers become more adaptable in the future, according to Cotter.

“That’s where artificial intelligence can really help because, with AI, it can adapt pretty quickly,” Cotter said.

Feyen Zylstra has already seen an overall uptick in activity from manufacturers that are ready to learn to survive in a post-crisis world, Cotter said.

“I’ve been impressed with manufacturers for not only fighting through this crisis but actually taking the time now to look ahead and figure out how to be less vulnerable in the future,’” he said.

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manufacturers improve their efficiency, enhance quality and drive profitability.

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FOCUS: INDUSTRY 4.0

Automation helps manufacturers adjust operations to serve health care needs

By JESSICA YOUNG | MiBiz jyoung@mibiz.com

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n late March, two days before Gov. Gretchen Whitmer issued a stay-home order for all state residents, General Motors Co. approached Esys Automation with a challenge.

The automaker wanted the division of Holland-based JR Automation to help build an assembly line capable of producing 50,000 face masks a day to provide to health care workers on the front lines of the COVID-19 outbreak.

Normally, such a project would take six months to develop, but General Motors’ timeline was much more aggressive: The line needed to be operational as soon as possible, said Esys Automation President Chris Marcus.

The teams at Esys and JR Automation worked with GM to develop the line in just six days.

More than 30 engineers, designers, buyers and manufacturing team members were asked to help with the development of the masks, which will be used as personal protective equipment.

As the highly contagious COVID-19 continues to spread exponentially from person to person, time is of the essence to deploy protective equipment. Health care workers locally and nationally are facing a massive shortage of vital medical equipment in the wake of the pandemic.

Esys Automation, a full-service automation and systems integrator located in Auburn Hills,

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works mostly within the automotive industry and has had a close relationship with GM for the past 20 years, Marcus told MiBiz. “It was not surprising that they reached out to us,” Marcus said. “They typically involve us in urgent projects. This was a little extreme and out of the ordinary, but we have a reputation for being able to deliver fast and on time.”

As the world continues to fight the spread of the outbreak, GM has become one of the many manufacturers rushing to shift their operations to produce the health care products that will be needed to save lives. Robots and automation are playing a critical role in building these products quickly and safely as humans shift to remote working.

“When we talk about these things, like medical masks are a great example, the volumes that are needed are so great that you can only do it with automation to really attack the problem,” Marcus said.

GM said it will produce an estimated 1.5 million masks per month at full capacity. The company also is preparing a line that will manufacture parts for at least 200,000 ventilators.

The Society of Critical Care Medicine has projected that 960,000 coronavirus patients in the U.S. may need to be put on ventilators at one point or another because of the deadly pandemic. However, the nation as a whole has only about 200,000 of the machines, according to the organization.

Esys Automation, a division of Holland-based JR Automation, worked with General Motors to deploy a manufacturing line to produce facemasks from start to finish in six days. COURTESY PHOTO

Overcoming obstacles JR Automation worked across multiple fronts to implement the production of the face masks, while GM cleared approximately 31,000 square feet of space at a plant in Warren to contain the mask production lines and crews installed new electrical service lines.

The firm’s engineering and build teams in Nashville and Holland provided input and shared their expertise on this type of system with Esys Automation. As well, JR Automation’s in-house machining and fabrication department designed and built customized machinery to assemble the masks. Controls and mechanical engineering teams worked in parallel with the supply chain team throughout JR Automation to secure all components, despite many supply chains being disrupted or paused by the crisis.

“We involved heavily our division in Nashville as well as our division in Holland, so all three came

together to make it happen in various levels, some types of technical aspects and very much in a supply chain aspect,” Marcus said. “Pulling that thing together so fast while the supply chain was shutting down was probably the biggest challenge.”

Builders at Esys Automation worked around the clock to assemble components. On March 27, GM produced its first mask in response to the COVID-19 crisis using the line that JR Automation built in six days.

Even with new robotics, the line will take about 20 employees to run initially — people who would otherwise be considered “non-essential” and face layoffs — but it could still be fully automated eventually, Marcus said.

Streamlining the process Wyoming-based Die-Tech and Engineering Inc. utilized automation in a process to rapidly build a die that was urgently needed for making

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ventilator components. The company typically builds die-casts and plastic injection molds for products in the automotive and furniture industries.

Usually, the company quotes 10 to 12 weeks for a full design and build of a new tool, according to Adam Berry, a manufacturing engineer at Die-Tech.

“We understood the opportunity we had to use our expertise and hopefully make a difference in this crisis somehow and immediately got suppliers and service providers on the phone and on board to help us build these tools as fast as possible,” Berry told MiBiz. The company uses more than a dozen linear 5-axis CNC machining centers with automated tool changing and workpiece measuring, as well as automated robots that change workpieces in the machine and keep track of graphite electrodes, according to Berry.

The company also uses 3-D scanning to verify the dimensional accuracy of many of the machined components.

“The nature of die and mold building is more one-off projects than it is mass production, so the Industry 4.0 automation most people think of is not necessarily always applicable to us, but in as many of the areas that we can, we have streamlined and automated much of the process,” he said.

The technology helped Die-Tech build and deliver the die for ventilator parts in just five days.

“This is certainly the shortest lead time we’ve accomplished on a project of this size,” Berry said.

Since the initial project, Die-Tech has designed, built and shipped five more diecast tools that produce nine different ventilator components.

Quick solutions Additive manufacturing is another tool that has been heavily expanded in the current crisis.

For example, the same 3-D printers that are used to produce automotive or airplane parts are now used to produce facemasks and respiratory ventilators.

Zeeland-based office furniture manufacturer Herman Miller Inc. worked with Holland Hospital to use 3-D printing to engineer special paper masks for frontline health care workers. The company is also changing its manufacturing lines to make hospital mattresses.

Typically, robotics and automation equipment for reconfigurations take weeks to build, according to Mark Ermatinger, CEO of Zeeland-based Industrial Control Service Inc. However, Industrial Control has been offering the robots that the company typically stocks in its own lab for demonstrations and research to companies that are rapidly changing their lines.

“We’ve had some of those ‘pants on fire’ projects that we’ve been scrambling to get equipment for because it takes so long to get equipment from Japan or from Europe,” Ermatinger told MiBiz. “Two weeks would be super, super fast for our industry, but the stuff I’ve got on my floor we can even deploy today.”

Among the solutions that are ready for immediate use are 3-D vision systems that can help robots learn to pick up new parts from conveyors, self-driving floor robots, laser marking solutions that can mark directly on test kits or ventilators, and flexible part feeding systems for robot pick-up and assembly on indexing tables.

Industrial Control also can help manufacturers through a network of other demo machines at other distributors nationally through the Association of High-Tech Distributors, according to Ermatinger.

“We can help anybody that is trying to fight that battle with the coronavirus,” he said.

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Recession could spur manufacturers’ investments in automation

By JESSICA YOUNG | MiBiz jyoung@mibiz.com

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he fallout from the coronavirus pandemic may prompt a new spike in the adoption of automation among the region’s manufacturers and have a lasting effect on an already shifting labor market.

In the wake of COVID-19, manufacturers may decrease capex spending overall as a result of lost revenue caused by a nearly complete shutdown of operations, according to Paul Isely, associate dean and a professor of economics at the Grand Valley State University Seidman College of Business.

However, firms that have the cash to spend will put investments in automation at the top of the list, he said.

“I think that firms have no choice but to push more Isely automation,” Isely told MiBiz. Throughout the economic expansion of the past decade, manufacturers were already automating more of their operations and gearing up for the fourth industrial revolution, known as Industry 4.0. Now, an economic recession will force companies to move faster into the new age of manufacturing.

“We expect that during the course of the next downturn, firms will deploy the automation that they have started on and have been testing, but didn’t go full in on,” Isely said. “This is what has happened in all the last sets of recessions.”

After the recession of 2008, manufacturers deployed technologies and automation to the extent that it contributed to a longer period of high unemployment, according to Isely.

“That really bad recession happened, and then they didn’t have to hire people back because they could just deploy the things they were already working on,” he said. “That’s why looking at this recession, the longer it goes, the more likely it is that firms will be able to do that as opposed to just hiring people straight back.”

In a recent survey of executives by the auditing firm EY, 41 percent of respondents said they were investing in accelerating automation.

Almost no occupation will be unaffected by new technologies in automation and artificial intelligence, according to a 2019 analysis by The Brookings Institution. Nearly 60 percent of jobs in the manufacturing sector have the potential to be automated, according to the data. In addition, more than half a million jobs in the Grand Rapids metro area are “susceptible” to automation.

“For those who think that manufacturing is as automated as it can be, we still see very high exposures there,” Mark Muro, senior fellow and policy director at The Brookings Institution, said in an interview with Vox last month.

Additionally, Muro said the coronaviruscaused recession could offer the perfect opportunity for companies to invest in new labor-saving technologies.

“It might seem that in hard times, in a downturn, human labor would be cheaper and therefore automation would go down. But in fact, it’s the opposite. What happens is that, because of the crisis of the bottom line and a crash in revenue, humans become relatively more expensive compared to automation,” Muro said in the report.

Shifts ahead As opposed to strictly replacing jobs, this surge in automation and other Industry 4.0 technologies will further the structural shift in the labor market and its demand for skills, according to John Walsh, president of the Michigan Manufacturers Association.

“Automat ion w i l l be looked at more closely as we go forward. It’s improving in its

application and functionality, but you’ll always need humans to help with the certain functions that can’t be done by a machine,” Walsh told MiBiz. “Our role as an industry will be to work on how to incorporate the machinery — this equipment, this automation — and at the same time, still work on the human element. There will always be that role.”

North American orders for robots continue to post year-over-year growth, according to The Robotic Industries Association (RIA), part of the Association for Advancing Automation (A3). Nearly 30,000 robotic units were ordered in 2019, up 1.6 percent from orders the previous year. However, the fourth quarter of 2019 was the weakest quarter of the year, down more than 10 percent from the same period the year before.

The largest driver of the growth was a 50.5-percent increase in orders from automotive OEMs and a 16.6-percent increase from the plastics and rubber industry, according to the data.

However, orders to automotive component markets were down, and all other non-automotive industries including food and consumer goods, life sciences, metals, and electronics also contracted in 2019.

Eye-opening possibilities Last month, Gov. Gretchen Whitmer ordered most businesses in the state to close in an effort to protect workers and slow the spread of the highly contagious COVID-19. Many manufacturers were forced to idle or slow production at that time.

However, manufacturers that still remain open to produce critical medical gear or essential supplies have already begun to deploy more

robots and other technologies to help efficiency amid the crisis.

Grand Rapids-based Feyen Zylstra LLC is working with local manufacturers that are still up and running to implement technology that will help keep people safe while still producing essential goods, according to Mike Cotter, the company’s director of digital products.

“Even though these manufacturers are deemed essential, it doesn’t mean all the employees feel comfortable showing up for work,” Cotter told MiBiz. “What we’ve been discussing is how we can help them with remote monitoring and various types of automation to be able to handle capacity without having those workers physically be there.”

One example of technology that is being deployed right now is remote monitoring that can provide real-time machine data to staff about impending issues and allow access to equipment remotely.

In the long term, the COVID-19 crisis will expose the risk of relying on human labor in manufacturing, an industry that was already facing labor issues before this crisis hit.

“It’s going to open their eyes a little bit about maybe the vulnerabilities of depending on that workforce,” Cotter said. “For a while, labor has been the primary thing keeping these leaders up at night.”

While much uncertainty remains, the lessons manufacturing executives learn now could help prepare their companies for future crises.

“It’s good that people are starting to get more curious about Industry 4.0,” Cotter said.

“It’s going to be key, especially in times like this, to keeping plant floors lean and addressing the labor shortage issues.”

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ENERGY

Court challenges to follow Trump administration’s vehicle fuel economy rollback

By ANDY BALASKOVITZ | MiBiz abalaskovitz@mibiz.com

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early two years after announcing its initial plan, the Trump administration issued a final rule on March 31 that rolls back Obama-era automobile fuel economy standards and requires modest fuel efficiency increases in forthcoming internal combustion models.

While the rollback has angered environmental groups and will prompt additional lawsuits from states, the most certainty around the ruling may come after the November presidential election when Trump is likely to face Obama’s Vice President, Joe Biden.

“Ironically that will be the next big decision point in all of this,” said Mike Wall, director of automotive analysis in Grand Rapids for IHS Markit. “We’re not expecting any broad resolution between now and November.”

The Obama administration rule, known as corporate average fuel economy (CAFE) standards, called for ramping up fuel efficiency by about 5 percent each year through 2026. The Trump administration’s rule scales it back to 1.5 percent each year.

The Department ofTransportation and Environmental Protection Agency’s rule will result in roughly 2 billion additional barrels of oil being consumed and roughly 900 million metric tons of additional carbon dioxide emissions, according to the administration’s estimates, while increasing average fuel costs by $1,000 per vehicle. Administration officials say the rule will cut average vehicle prices by roughly $1,000 and cause fewer traffic deaths, although critics dispute the claims.

Meanwhile, California’s Zero-Emission Vehicle program calls for vehicles to have an average fuel efficiency of about 50 miles per gallon by 2026. Fourteen other states have adopted California’s model. Notably, Ford Motor Co. says it’s committed to meeting emission reductions in line with California’s framework.

Less certainty, more dynamics Prior to Trump’s rule, there was a “meeting of the minds” between the states and federal government on uniform vehicle emissions standards, according to Wall.

“There’s not that meeting of the minds anymore,” he said.

The administration’s move and states’ reactions create more uncertainty for automakers and suppliers, but it’s unlikely to derail plans around both internal combustion and electric vehicle deployment.

Automakers including Ford and General Motors have announced hundreds of millions of dollars in investments in new electric vehicle models, largely to stay competitive with European and Chinese companies and comply with regulations there. Bigger factors affecting that sector involve the coronavirus-related recession and, to an extent, declining oil prices, Wall said.

The Alliance for Automotive Innovation, a trade group representing automakers, said it is “carefully reviewing the full breadth of this final rule” to determine how well it supports a “customer-friendly shift” toward electrification and high-efficiency vehicles.

Wall said automakers will continue down a “dual path approach” of internal combustion and electric models, and a new ruling on CAFE standards won’t significantly affect automakers and their suppliers on that path.

The administration’s own analysis shows that the new rule could end up costing consumers more with additional fuel costs.

Outside of oil producers, there appears to be no clear winners under the new rule, while adding uncertainty to an already convoluted legal and regulatory environment.

“The loss in one sense is we don’t have a meeting of the minds across the state and federal side,” Wall said. “What that could have afforded us — and it’s cliche — is more certainty around the regulations and just knowing what the rules of the road are. But automakers and suppliers are still executing a strategy and work doesn’t stop because there’s a lawsuit between states and the federal government.”

John DeCicco, research professor at the University of Michigan’s Energy Institute, said the administration’s final rule came “barely in time” for the 2022 model year timetable. He has watched the fuel economy debate span nearly three decades, and automakers’ public statements fluctuate based on which party controls the White House.

“We’ve seen this situation again where (automakers) take advantage of the changes with who’s in charge in Washington,” he said. “In that regard, we’re seeing that up-and-down again.”

Climate rollback, industry disagreement Meanwhile, environmental groups are gearing up to join states in a lawsuit defending the Obama-era regulations.

Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center, said his group and other allies will file suit in federal appeals court “soon.” It will likely be joined with the states’ case.

“The Trump administration acknowledges its change in sensible clean car standards will cause more public health harms, including worse morbidity and mortality rates, and will cost consumers more money at the gas pump,” Learner said. “It plainly trumps ideology over common sense during the midst of a public health crisis, and it is legally flawed.”

The Obama-era standards were seen as a key component of a nationwide climate change strategy. As the U.S. power sector has steadily reduced greenhouse gas emissions by retiring coal plants, the transportation sector has emerged as the leading source of emissions.

Learner added the clean car standards have been “driving innovation” in the Midwest auto industry, including the move to electric models.

“GM and Ford in particular are making large investments in retooling their manufacturing process to build innovative cleaner cars of the future,” Learner said. “The Trump administration’s misguided rollback … will constrain that innovation and put the American domestic auto industry behind as European and Asian automakers are stepping up.”

DeCicco and Learner agree that the fuel-economy rollback produces one clear winner.

“If Americans are driving more fuel-inefficient cars and having to fill up more,” Learner said, “the winner is the oil industry.”

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REAL ESTATE & DEVELOPMENT

Idled construction firms brace for continued supply chain disruptions

By JAYSON BUSSA | MiBiz jbussa@mibiz.com

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s an executive of a construction and property management company licensed in 45 different states, Jennifer Boezwinkle of Rockford Construction Co. Inc. knows well the disruptions her nationwide counterparts face in the middle of the COVID-19 pandemic.

In fact, the hardships are perhaps the toughest in her company’s home state.

“Michigan has one of the most stringent stayat-home orders than anyone across the country,” said Boezwinkle, executive vice president of construction for Rockford. “These orders are really tied to the number of COVID-19 cases. Not surprising, Michigan is toward the top so their orders are some of the more stringent.”

Like most other industries, construction slowly ground to a near halt statewide after Gov. Gretchen Whitmer issued an executive order to shut down what were deemed as Boezwinkle “non-essential businesses.”

Any construction project not deemed essential was forced to stop, while projects like health care, grocery or those that pertain to state infrastructure and safety can continue forward. “ Wi t h o u r w o rk i n Michigan, much of it has Lennon been deemed non-essential and that has stopped,” Boezwinkle said. “But construction doesn’t just stop on a dime. We need to make sure those projects are safe before we close them.

“When the stay is lifted, we’ll start moving to get them up and running again. Right now, we have most projects Bell buttoned up and our work is now shifting for when the stay is lifted, and we’re looking at how do we get them moving again.”

The paralyzing conditions for the Michigan construction industry parallel the obstacles that construction firms across the country are facing. Many of those challenges were outlined in a report released by the Associated General Contractors of America (AGC) in late March, which chronicled the slew of project cancellations and delays.

According to an AGC survey, 39 percent of contractors nationwide said that project owners stopped or canceled their construction projects, stifling what had been a thriving industry. To that end, 42 states added construction jobs through the month of February before the COVID-19 pandemic ramped up in the U.S. In the survey, only 18 percent of respondents reported that elected officials mandated cancellations or delays, which is a reality for all Michigan-based construction firms.

Some of the other reasons for delays included shortages of materials, parts and equipment, including vital personal protective equipment for workers (23 percent); shortage of crafts workers (18 percent); and a shortage of government workers to conduct inspections, issue permits and take other essential actions (16 percent).

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Delivery of materials also remains a major issue, and could be a crippling factor even when projects again get the green light. Of respondents to the survey, Portion of 35 percent said that supplicontractors ers notified them that shipnationwide ments of certain materials who’ve had would either be delayed or owners stop or canceled all together. cancel projects, This survey highlights according to an the fact that Michigan conAGC survey struction companies would not necessarily enjoy smooth sailing even if they could move forward with their projects.

“There are a number of reasons for delays — materials delays being the first one,” Boezwinkle said. “We live in a global economy and materials coming from places like China were starting to impact us even before COVID hit the United States.

“When the stay-at-home order came, the next challenge was city inspectors and permitting.We saw a delay with some of those things in cities we worked in. I will say this: The city of Grand Rapids has been fantastic in trying to work with us to move essential construction forward. They’ve been a shining spot.”

39%

The first domino to fall For Patrick Lennon, partner in Kalamazoo at law firm Honigman LLP, a delayed or canceled project is the first in a long line of dominoes to fall. In his role focusing on real estate development, real estate transactions, zoning and land use, Lennon gets the larger picture by working with construction companies, landlords, tenants and others that are tied together through a single project.

“Obviously, it came as a surprise to all of us that this pandemic would have such dramatic impact,” Lennon told MiBiz. “The effects of those impacts are really just now manifesting themselves in these construction projects.

“Those impacts include a lot of uncertainty and anxiety. I would say that derives from the

The state’s stay-home order shut down most construction projects in an effort to contain the spread of the coronavirus. Only essential projects like health care are allowed to move forward.

MIBIZ PHOTO: KRISTI KORTMAN

territories and all anyone can do is guess where timelines that so many of these projects are on it will ultimately lead. from the onset. A cost is put on (a project) based “First of all, this is not like a typical receson conditions. When those conditions change, sion or typical natural disaster where it hits all the parties to the contract are put in a posiand moves on and you assess the damage tion where they have to work together to plan the and continue on,” said Rex Bell, president at best path forward while minimizing excess cost.”

Kalamazoo-based Miller-Davis Co., a conLennon also pointed to the stringent orders struction management and general contracthanded down by the state government as a signifing firm. icant hardship that has stymied Michigan-based “This is different. For most of us in the companies. Construction companies would ideconstruction and design and build industry, ally deploy supplies, labor and their subcontracthe business was very good, the markets were tors to other projects in unaffected areas. very good,” Bell told MiBiz. “Most of us have a Still, early into this process, Lennon said that backlog of work, with work in the pipeline. We he has been inspired with the level of collaborahaven’t had any be canceled or go away; there tion among all parties tied into projects. is a lot of pent-up demand there. We’re already “I’ve been inspired by how the contractors, owngradually working to get those jobs going.” ers, architects and lenders have been working Bell said that Miller-Davis has yet together,” he said. “I think they’ll be able to to lay off any workers and does not come up with a bridge through the next 90 intend to do so. However, he did days. Following that, things could change. highlight the fact that “your “It will depend on how quickly cash reserves don’t last forever. things return to normal, which we It’s not an infinite thing. There hope will be sooner rather than REAL ESTATE is a finite amount of time.” later. The longer it goes on, the + DEVELOPMENT He also added that if projects more stressed those relationships Sponsored by ROCKFORD could resume in the next two to will become because someone is CONSTRUCTION CO. four weeks, his company would expecting something to be delivstill be in good shape. But Bell ered and is paying for it.” still acknowledged the unknowns lurking at Lennon remains bullish on how quickly the large in the industry. industry will snap back, nodding to a pent-up “The wild card right now is the supply demand that could lead to what he called an chain,” he said. “The work is here; we have work “exciting rebound.” and we have the folks to do that work. Is there some plant that was shut down somewhere in Not a ‘typical recession’ the world that might delay things that we don’t One theme was common in speaking with area know about right now? Those are the quesconstruction professionals: These are uncharted tions.”

MiBiz / APRIL 13, 2020

9

ECONOMIC DEVELOPMENT

Quick rollout of remote work during pandemic opens companies to cyber threats

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

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he millions of employees now working at home during the COVID-19 pandemic heighten the need for employers to remain vigilant and make sure they’re protecting their data from cyber threats.

A reminder of that need comes via a new report by the Traverse City-based Ponemon Institute and Minneapolis, Minn.-based nCipher Security LLC that again shows employee mistakes are the biggest vulnerability businesses have in cyber threats to sensitive or confidential data.

That vulnerability and risk grows with employees now working at home, especially “if you didn’t have a good setup in the first place, and if you had to very rapidly deploy a set of tools” to allow people to work remotely, said John Grimm, vice president of strategy and business development at nCipher Security.

“This creates another place for sensitive data to flow,” said Grimm, who cites as an example financial staff that are now working at home and accessing data remotely.

“What’s the strategy for that? There are a lot of potential exposures that can be created if you don’t have a good setup to apply the same level of security you had in the previous setup

if you had to scramble to enable remote work,” he said. “The proliferation of sensitive data has really increased in the last few years with all of the mobile tools. This rapid enablement of remote work that a lot of people have had to go through recently is probably one of the things that’s causing a new set of potential exposures for sensitive data as it may be living now in additional places in order to enable remote work.”

The heightened need for employers to make sure they have the right cybersecurity tools in place for employees working from home comes as “everybody’s in a disrupted environment and a changed environment,” Grimm said, noting there’s a higher chance of phishing attacks

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succeeding as employees adjust to their new workstyle.

“I’ve heard a lot of people saying they think people’s guard can be down further than usual at a time like this because of the type of environment they’re working in,” he said. “Things are disrupted or hurried or rushed (which) can make you vulnerable.”

Identifying threats In the global survey by the Ponemon Institute and nCipher Security, 54 percent of respondents rated “employee mistakes” at the top “most salient threat” to sensitive and confidential data as the use of encryption has more than doubled in seven years, according to the report.

The survey from nCipher Security and the Ponemon Institute primarily focuses on trends in the use of encryption to protect data. The organizations also include questions that ask respondents to rank their top two threats annually.

System or process malfunction was the second-most salient threat respondents identified, followed by hackers.

Employee mistakes can often occur when “well-intentioned” people get fooled by a wellcrafted phishing email, or misconfigure an application for cloud computing thinking they have turned on encryption or “a proper level of data protection and just by mistake or by lack of familiarity not getting that level of encryption or security turned on,” Grimm said.

Network administrators today need to manage numerous tools. The Ponemon Institute and nCipher Security survey shows companies on average have eight or more products that perform encryption, “so having enough people around with the expertise to manage all that, to apply consistent policy when you’re dealing with so many different products, is a very challenging thing, especially when resources are scare,” Grimm said.

Grimm advises companies to use cybersecurity products that work both in the cloud and on their premises, creating less of a burden for I.T. teams.

Companies also should identify their own data as well as clients’ data, “figuring out where it resides and applying your protections accordingly,” he said.

“A lot of it is about the fundamentals,” Grimm said.

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APRIL 13, 2020 / MiBiz

Experts in cybersecurity have been warning about elevated threats as many employers affected by the state’s stay-home order have employees working remotely.

As employers and employees adjust to the COVID-19 pandemic and stay-at-home orders, scammers and sophisticated cyber thieves have been stepping up their assaults.

“Hackers are viewing this as an opportunity to get past I.T. departments that may be distracted by simply setting up teleworking capabilities and are less focused on defensive practices,” said Mark Maki, senior counsel at Miller, Canfield, Paddock & Stone PLC in Kalamazoo.

Maki “The COVID pandemic has increased the number of cyberattacks worldwide, part of that being that these attackers have more time and part of that being the confusion and disruption created by tele-working. There are more opportunities to play upon the confusion and get through an employee’s natural defenses,” Maki said. “At work, they have a comfort level and a security level, and once you get home, everything’s disrupted. Now the best practices they use at work they might be slacking on when they’re at home.”

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Those attacks that seek to exploit the crisis include phishing “clickbait” or social media posts that look like they were created by the U.S. Centers for Disease Control and Prevention or the World Health Organization “or other wellknown organizations seeking donations or offering information,” according to Miller Canfield.

Other attackers are using bogus websites that offer “free” coronavirus vaccines, treatments, or at-home test kits “for a modest shipping fee.”

Always verify There also are so-called “social engineering attacks” that use personal information obtained from social media postings to get someone to click on an attachment or link in a phishing email. Maki has heard of instances in which people receive an email that claims someone they know has COVID19 or is seriously ill to get them to click on a link.

Michigan Attorney General Dana Nessel also has warned about “Zoombombing,” in which cyber attackers hijack virtual meetings held on the Zoom video conferencing platform.

Maki, who’s been working at home, said the pandemic heightens the need for employers to reinforce cybersecurity best practices to employees working remotely and for workers to “be extremely careful.” Employees working remotely are generally using their own laptop or device that may not have the same level of security as they’re accustomed to at work, he said.

“You’re relying on your employees’ best practices and that in many cases is not the same as the higher level of security implemented by businesses,” Maki said. “It is so easy to get hooked by one of these phishing or these social-engineering attacks against your employees that you have to emphasize the importance of having zero trust with anything that you see and making sure you verify.”

CYBER ADVICE The law firm Miller Canfield’s advice on best practices to secure systems as employees work remotely includes: n Use a secure and encrypted method to access the network such as a virtual private network, a secure digital workspace, remote desktop access, or application-specific access through application portals or direct application access. n Authorization and authentication for remote employee access should use more than just a username and password, such as with two-factor authentication or hardware authentication tokens. n Monitor employee access to identify anomalies that indicate improper access from unexpected geographic areas, unusual behavior such as accessing unauthorized data and files, or simultaneous access by a single user ID. n Apply appropriate access controls to networks and applications to ensure only authorized employees can access critical data and systems. n Implement organizational controls over teleworking devices such as personal computers and mobile phones to ensure security on those devices.

For employees, Miller Canfield offers these suggestions: n Be wary of things that seem too good to be true. n Don’t click on links in unexpected emails or open attachments before verifying the source. n Do research before making donations online. n Pick up the phone and call friends, relatives or colleagues if you receive an unexpected communication asking for an unusual favor. n Alert the I.T. department or the appropriate authorities to potential attacks. n Be particularly careful when using personal devices to access work networks. n Keep web meetings private or restrict attendees’ sharing abilities.

SOURCE: MILLER, CANFIELD, PADDOCK & STONE PLC

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4/8/2020 MiBiz / APRIL 13,10:16:37 2020AM 11

BUSINESS OWNERS DISCUSS REACTING, COPING AND PLANNIN

By Joe Boomgard, Editor

ERIN DRESSANDER

ROB MCCARTY

KURTIS TREVAN

Co-owner of E+L Salon LLC, Grand Rapids

CEO of The Image Shoppe Ltd., Grand Rapids

CEO of Gun Lake Investments, Grand Rapids

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ven before Gov. Gretchen Whitmer issued the stayhome order and shut down all non-essential businesses in the state, the owners of E+L Salon LLC in Grand Rapids opted to close their doors.

Co-owner Erin Dressander said the company took the drastic measure out of concern for the safety of “our staff, ourselves, our guests and our families.”

“We just work so closely with people,” Dressander said. “We have people come in sick all the time — believe it or not — because they want to get their hair done.”

Dressander and her business partner Lauren Glowacki discussed the options with salon staff members, who were “on board and supportive” with temporarily closing the doors.

They immediately helped their staff members file for unemployment to help during the closure.

While the promise of expanded unemployment benefits helped ease the decision, the move came with its share of uneasiness for Dressander and Glowacki because at the time it wasn’t clear whether business owners would qualify for similar benefits.

That uneasiness continued as the owners and staff members grappled with an overtaxed state filing system.

At the time of this interview, about 90 percent of the staff still had not received unemployment benefits or had their claims denied. Dressander was the lucky one: “I got in right away and already have my unemployment check, but my coowner got denied and hasn’t seen anything or gotten any answers yet. … Yes, my money is in the bank, but there’s still a lot of uncertainty. I get it: It’s obviously unknown territory, but I don’t know how everyone can sit tight without any money coming in.”

Despite those challenges and the waiting game with the salon’s bank to submit a Paycheck Protection Program application, Dressander says she’s trying to remain positive about her situation, noting “this has to end at some point.” As well, the company is lucky to have an understanding landlord in Pure Real Estate Management “who wants to keep our business and work with us.”

In the meantime, the company is trying to stay connected with customers via social media updates, as well as eke out new ways of generating revenue, including by selling gift cards and beauty products online.

E+L Salon also wanted to find a way to give back during the shutdown and partnered with Eastown restaurant Terra GR and other small businesses — Chasing Vanity Salon, The Barre Code and Motive Training GR — to feed medical staff at Spectrum Health.

While she expects E+L Salon will reopen “when we can,” Dressander worries about local restaurants and retailers who might be forced to close their doors for good as a result of the shutdown.

“Leaning and depending on each other in the community as small business owners is key, especially from an emotional standpoint,” she said. “Our philosophy in the salon is that it’s community over competition.”

“I got in right away and already have my unemployment check, but my co-owner got denied and hasn’t seen anything or gotten any answers yet.”

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APRIL 13, 2020 / MiBiz

fter the initial chaos of the state’s shelter in place order subsided, clients of Grand Rapids-based marketing and branding firm The Image Shoppe faced distinctly different realities.

While the essential businesses were allowed to remain open, others “were just wiped out” and forced to close their doors “for the foreseeable future.”

CEO Rob McCarty said his firm made sure to contact clients in both camps.

“We’re just trying to be sensitive to what’s going on and trying to be there for (our clients),” McCarty said.

While The Image Shoppe was considered one of the nonessential businesses, his team of creative professionals quickly made the transition to work remotely, leveraging technology to stay in touch with one another and the company’s clients.

McCarty thinks the sudden shift in how his team works may have accelerated a long anticipated transformation.

“Look at how long people have said, ‘Hey, you’re going to have to get used to this because it’s eventually going to happen,’ and now we’ve just been thrown into it,” McCarty said of remote working. “The horizon seemed maybe years out a month ago and now it’s becoming the new norm. If you’re not on four Zoom calls a day, it’s weird.”

As a B Corp, a designation that certifies the company incorporates broad social considerations into its mission, The Image Shoppe focused on being transparent with employees about how the organization is handling the shutdown and a corresponding dip in business.

“We’ve been able to be real transparent about where we are and how it could affect them and give weekly updates on where we’re at and what we’re doing beyond the obvious,” McCarty said. “Everyone is looking for business, but beyond the obvious, what else are you doing? Are you looking at grants, are you looking at SBA loans, PPP and on and on?”

McCarty aims to take a page out of his customers’ strategies and find ways to adapt to the ever-changing situation.

“For us, the change is going to be looking at our model at a time when we have to balance every dollar that comes in and hour that goes out,” he said, noting the current market forces the company to “become very hawkish and have to manage our labor that way.”

“Those changes may drive staffing levels over the long haul — what we need and what we don’t, based on how the market’s changing,” McCarty said.

From a client perspective, McCarty remains concerned about the fate of many retail and service businesses, in part because he expects consumers “are going to be very different” once the pandemic subsides.

“It’s going to take a while for people to trust the built world that we’re in, knowing all the things that they’re going to know by the time this is over,” he said. “We’re going to have to work really hard as businesses, services or whatever to create environments that people will feel safe in. You name it, where there’s a gathering, you’re going to have ramifications that last longer than three months.”

Still, McCarty believes businesses in West Michigan and beyond will be resilient and find silver linings in the middle of the crisis.

“I’ve seen a lot of people adapt really quickly to what the opportunity is and what’s available for them to do. I’ve seen businesses completely reorganize themselves to be able to support and participate in this environment,” he said. “If you look back four weeks ago or three weeks ago even, they would have been, ‘How could I possibly change my business like that, that fast?’ Yet they have. Really, it’s pretty impressive.”

mid all the turmoil that’s beset the business community in recent weeks, Kurtis Trevan has noticed people becoming more interested in one another as individuals.

Business leaders are finding themselves bonding over “this huge unknown” and how it’s affecting one another, he said.

“A lot of the conversations have started with: ‘How are you?

How’s your family? Are you healthy?’ And then relating on a personal note: ‘How is your isolation going?’” Trevan said.

“That’s been the part that’s been very different from a typical Monday through Friday business week.”

Trevan said the personal bonding “has been nice to see” and offers a distinct contrast to the “chaos” executives are grappling with in their businesses.

“It feels almost daily that we’re getting hit by a semi truck with something unexpected,” he said. “You felt like you were under attack, so you’re constantly looking for where we are going to get hit next.”

Gun Lake Investments is the economic development entity of the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, commonly known as the Gun Lake Tribe. Across the board with the organization’s portfolio companies, revenues dropped off “50 percent plus or minus” in the short term, Trevan said. That includes for businesses with exposure to the health care industry, which is singularly focused on combating the coronavirus, not new projects or installations, he added.

Tribally owned Commercial Sanitation Management LLC (CSM), a Hudsonville-based commercial custodial services provider, also was directly affected by Gov. Gretchen Whitmer’s closure of all public schools for the rest of the year.

“A common example across many businesses is, one, your revenue is reducing if you don’t have clients that are critical or essential and, two, businesses are wanting to conserve cash so they’re pushing out accounts receivables much further,” Trevan said. “In many cases, there just hasn’t been a person who could physically provide payment.”

Despite the challenges, GLI has leveraged its strong balance sheet to maintain employment levels throughout the shutdown, “but that’s not to suggest that we can operate in that way forever.” The company has focused on constant communication with employees and stakeholders as the situation continues to unfold.

“We’re just reserving enough cash in our operations to be sure that we are able to get through these things and support our existing portfolio, but we also want to find some opportunities to help. It’s a delicate balance,” Trevan said.

GLI is letting organizations it has relationships with know that it’s ready to help “otherwise good companies” that are being hurt because of the pandemic.

“We’re not out aggressively seeking that as we’re focused on the portfolio, but it is still important for us to get that word out,” Trevan said.

Additionally, Trevan wonders how business development activities could change in the future as a result of the current widespread adoption of technology like Zoom and video conferencing.

“I think people are going to be hesitant for a long period of time to get into dense environments,” he said. “That will include large weddings, fundraisers, concerts, airlines, casinos — anything where you’re sitting right next to somebody else.

“The worry is if this does become a new norm, the relationship building which you need for business is going to be a challenge. We’re going to have to find new ways to get in front of new people.”

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NG FOR THE FUTURE IN THE ERA OF CORONAVIRUS

RAQUEL GUZMAN

AARON ZEIGLER

AMY SPARKS

Co-founder of Avanti Law PLLC, Wyoming

President of Zeigler Automotive Group, Kalamazoo

President and CEO of Nuvar Inc., Holland

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hen Gov. Gretchen Whitmer took executive action to close restaurants to in-person dining in an attempt to slow the spread of the highly contagious coronavirus, attorney Raquel Guzman knew her practice would be affected.

“I immediately realized that at some point I was going to get hit as a business,” said Guzman, the co-founder of Wyoming-based Avanti Law PLLC who represents a handful of businesses in West Michigan’s burgeoning restaurant industry.

The hit became a double-whammy when Whitmer issued the stay-home order that forced the closure of all non-essential businesses, including law firms like Avanti Law. “While we continue working from home in the legal services industry, we were faced with a bigger issue: I still have work that I need to get out for clients,” Guzman said. “I had to put 18 employees to work full-time, continue getting the work out while the office is closed and not generating the normal income stream that we had.”

Immediately, Guzman started to dive into the various state and federal relief programs aimed at helping small businesses survive through the disruptions caused by the pandemic. The problem: The amount of information was overwhelming.

She started to reach out to va r ious loca l business g roups a nd advisers, including her accountant at Morgan & Associates CPAs PC, who helped her apply for the Paycheck Protection Prog ra m f rom t he U.S. Sma l l Bu si ness Administration.

Guzman empathizes with other fellow entrepreneurs given all the chaos and gut-wrenching situations they’re facing in the current crisis.

“From the business perspective, it’s like, who’s going to come to help and give me a net?” she said. “You cannot ask a business to close the doors without then putting a net for helping that business fulfill their obligations. What is happening was not created by my business or someone else’s lack of business acumen.

It was not a mistake in how they manage their funds or having the bad business idea or having bad finances. This that is happening is just the result of something that is outside of our control.”

She remains thankful for the glimmer of bipartisanship in helping small businesses weather the storm.

“I know everybody is very nervous, I know everybody is scared,” she said. “I know we’re going through very difficult times, but I have seen how the community has risen together. … I’m so glad to see people working together and coming to an understanding that this is time to just get our economy back together and get people back to do what they need to do.”

“You cannot ask a business to close the doors without then putting a net for helping that business fulfill their obligations. … It was not a mistake in how they manage their funds or having the bad business idea or having bad finances.”

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eigler Automotive Group started the year with brisk business, culminating in the first two weeks of March, which suggested the company was on pace for a record month.

Then as the state of Michigan began taking action to curb the spread of the coronavirus by limiting gatherings and closing restaurants to in-person dining, sales got progressively weaker until car dealerships also were forced to close their doors as part of Gov. Gretchen Whitmer’s stay-home order.

All new and used car sales ceased on March 23, leaving dealerships open with limited staff in the service and parts departments.

“It’s the governor’s call on something like that. They make the rules and we play by the rules,” said Aaron Zeigler, president of Zeigler Automotive Group. “Obviously, we’re doing things a little different than what we would normally do.”

He stayed in touch with employees, prioritizing “over-communication” with his teams, which are spread across Michigan, Indiana and Illinois. As the crisis unfolded, he sent as many as two video messages a day to keep them up to speed with how the company was reacting, its strategy and what it meant for them.

“We’ve just stayed calm,” Zeigler said. “That over-communication was really, really good for everybody and calmed everybody down when they realized, ‘Hey, we’re going to be fine. We’ll get through this and we’ll come out the other side stronger.’”

Without the ability to sell cars in Michigan, Zeigler Automotive had to get creative with its sales staff, who are working from home.

(An updated executive order issued April 9 as this report went to press allowed dealerships to conduct limited online sales.)

“Even though you can’t sell a car, you can’t do a test drive, the showrooms are closed, we still connect with customers online with emails back and forth, text messages, phone calls, stuff like that,” Zeigler said. “We can still connect with customers and get ready to deliver them a car when the state opens back up for business.”

Zeigler Automotive also adapted its service practices to the new realities of the coronavirus pandemic. All of the service personnel now wear gloves, and dealerships started picking up cars for maintenance right from customers’ homes and then dropping them off. As well, the company implemented new cleaning procedures to disinfect every car before it gets returned to the customer.

To keep leadership engaged even while they’re unable to work from the showroom floors, Zeigler brought in various speakers for conference calls, including Jim Craig, the gold medal winning goaltender for the 1980 U.S. Olympic hockey team, to talk about leading through adversity.

“We talked about how in every situation you can make it a positive. In situations like these and with our leadership team, what is it going to look like 30 or 60 or 90 days from now? The cool thing with our business is if somebody doesn’t buy a car today or doesn’t get it serviced today, they still need to buy a car, they still need to get their car serviced,” Zeigler said. “Over the course of the year, whatever we don’t sell now, we’re going to make up in subsequent months.

“The way that I look at it, there’s never been a better time to buy a car now or probably in the next three, four months.

The government package is helping out small businesses and helping out individuals with stimulus checks. That puts a lot of money in play, and right now there’s not a lot of stuff to spend money on. Everybody’s spring break plans got canceled, and nobody’s going to the movie theater, nobody’s flying anywhere.

That’s why we think there’s going to be a lot of pent-up demand on the other side of this.”

hen companies operate in crisis mode, it can be difficult to find any certainty on which to base decisions.

In the early days of the coronavirus pandemic, state officials said Michigan had no plans to shut down, so Nuvar Inc. President and CEO Amy Sparks felt prepared to weather what initially looked like a slowdown in business.

“We’re going to live through this thing. It’s going to be like an ’08, ’09, and I remember how we operated in that. We can do this. There’s a little bit of a familiarity and a playbook,” she said of her thinking in early March. “And then, right in an instant, it was we are shut and closed for business. … This is a work stop. It’s not a slowdown. There’s no playbook for this one.”

As a contract finished goods manufacturer for the office furniture industry, Nuvar had to plan on the fly as critical information “was literally changing by the hour.”

Sparks pulled the management team together to try to develop a plan for what seemed unthinkable.

“What do you do when orders just literally stop overnight?”

Sparks said. “We were running financials, figuring out what we can do to protect our employees and our team members.

What’s the best route for them in terms of being able to get the most financial help? How does the company come out of this stronger, and how do we still service our customers who are servicing the critical health care needs?”

From a leadership perspective, Sparks had to get “really comfortable with the complete unknown,” which is an end date for the virus and a return to normal.

“I’ll tell you, if it wasn’t for my faith, I don’t know where I would be right now,” she said. “The first week and a half, I don’t know that I got two hours of sleep. … You just have to stop for a minute and breathe and then look at what can I control, what don’t I have control over, and that’s probably the hardest thing to accept. From a leadership position, your job is to remove barriers and fix things and you can’t fix this. That’s out of our control.”

What’s also helped Sparks to cope is setting small goals within the company just to be able to feel some level of control and accomplishment. She’s learned to simplify, compartmentalize and remove as much emotion as possible from her business decision making.

“We all have a heart and so many of us have never had to lay anybody off or go through anything like this ever, and it just hurts,” Sparks said. “I keep telling our team, we want to get the family back together as quickly as we can.”

Sparks also prioritized finding a way for Nuvar to help out with critical needs in the health care community, which kept some people on the job. The company quickly repurposed a team of industrial sewers and upholsterers to make personal protective equipment like facemasks for health care workers.

Nuvar worked with Holland Hospital to design, prototype and begin production of masks within 24 hours.

“We’re not the huge mega corporations, but we’re agile and we’ve shown we can move fast,” Sparks said. “That’s what I think is wonderful about the small business community that does support so many jobs in this country. From a bright side standpoint, we’ve always been an agile and innovative company. This has pushed us to do it even more.”

MiBiz / APRIL 13, 2020

13

ECONOMIC DEVELOPMENT

Continued from page 1

for Employment Research. He noted not just the parts of the economy shut down because of the virus, but the effect it will have on small business bankruptcies and investing confidence among businesses and consumers.

The state’s estimates are based on “initial modeling” and “various scenarios, showing the wide range and uncertainty of the situation and we can state our hope that federal dollars will ultimately be allowed for replacing lost revenue,” said Michigan Department of Treasury spokesperson Ron Leix.

He said on April 7 that data were not yet available to determine how the revenue shortfalls would be broken down, and that the estimates are subject to change: “There are a lot of unknowns right now.”

Based on state estimates in January, sales and income tax revenue was expected to total $19.2 billion this year. The state also has $1.2 billion in its rainy day fund, and Gov. Gretchen Whitmer and top GOP lawmakers agreed on $80 million in cuts to the current fiscal year budget.

“This could be a very prolonged recession that lasts a few years. I think it’s unlikely it’ll be a V-shaped recovery.”

Quick recovery ‘unlikely’ While the $2.2 trillion federal CARES Act signed

by President Trump on March 27 directs $150 billion to states, the funding is limited to new COVID-19 related costs that weren’t already budgeted. Michigan’s share is $3.87 billion.

It’s unclear whether and how much funding may be directed to states in an anticipated next stimulus phase, but local officials and economists say it should help governments recoup inevitable budget shortfalls.

— TIM BARTIK Senior Economist at the W.E. Upjohn Institute for Employment Research

In an April 6 op-ed for The Hill, Bartik and two other Upjohn Institute researchers noted that the general fund revenue among all U.S. state and local governments totals $2.4 trillion.

A 10-percent decline would mean at least $240

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STATE BUDGET

billion is needed from the federal government.

The $150 billion given to states in the latest stimulus that was limited to new COVID-19 funding “does nothing to fill this revenue hole,” Bartik said, adding that aid for U.S. states should be at least $250 billion.

The Upjohn Institute researchers say recovery over the next few years will be “seriously harmed” if states and local governments are forced to cut spending, lay off teachers and other workers, which will cascade through the economy and lower consumer and business confidence.

“You go on and on. The economy is interconnected,” Bartik said, anticipating “very large effects” on state and local budgets. “So far the federal government has really not come close to adequately responding to that. If every state and local government is making spending cutbacks, that in turn changes spending and will depress the U.S. economy.”

Meanwhile, the full effect of the coronavirus remains unknown. Bartik said a “V-shaped” economic recovery with a quick decline and quick rebound is increasingly unlikely due to the ongoing health concerns. Additionally, the $350 billion federal small business loan program included in the CARES Act is “too convoluted, too slow and too small,” he added.

“This could be a very prolonged recession that lasts a few years,” he said. “I think it’s unlikely it’ll be a V-shaped recovery.”

Doug Rothwell, president and CEO of Business Leaders for Michigan, said potential shortfalls would hit state and local budgets when there’s already “not a lot” of room to cut.

“We’ve known for a long time the General Fund doesn’t have a lot of elasticity to it,” he said. “This is going to make that even more severe. … The federal funds should help in the short run, but the question is just how Rothwell long the recovery will take.”

Local governments It’s difficult for state and local officials to give precise estimates since revenues were hit in the second Hackbarth half of March, said Chris Hackbarth, director of state and federal affairs for the Michigan Municipal League.

But the next two months should offer a clearer picture. The state’s revenue estimating conference is next month, and constitutional revenue sharing from the state sales tax — which makes up local governments’ second-largest revenue stream behind property taxes — is distributed to municipalities in June.

Twenty-four Michigan cities also have a local income tax, yet unemployment income is not taxable at the city level, Hackbarth said.

The MML is backing efforts by the National League of Cities in pushing for the next stimulus package to include “direct aid” to communities that could provide budget relief. The organization also is calling for a stabilization fund for municipalities, converting federal loans to grants and a prioritization on infrastructure projects, among other provisions.

But potential business closures and falling tax revenue will cause “major ripple effects,” Hackbarth said, adding that local governments have yet to recover fully from the 2008 recession.

“That’s where you’re going to see if we have an extended slowdown of the economy,” Hackbarth said. “If we end up in another situation with property values falling and no ability to grow, you’re going to see a major issue with local governments in Michigan being able to stay solvent.”

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Michigan coronavirus prevention measures could mean fewer fish in years ahead

By JOE BOOMGAARD | MiBiz jboomgaard@mibiz.com

A

series of measures intended to curb the spread of the coronavirus could have implications for Michigan’s recreational fishery in the coming years.

As a result of Gov. Gretchen Whitmer’s stay-home order and general social distancing guidelines, the Department of Natural Resources had to cancel its spring egg-take operations that supply stock for its fish hatcheries. In particular, the move affects hatcheries that raise prized game fish species including walleye, muskellunge and steelhead, a variety of rainbow trout that provides a sport fishery in both the Great Lakes and many tributaries across the state.

As a result, the DNR hatcheries will be left without a hatchery year class of those species, said Jay Wesley, the agency’s Lake Michigan Basin Coordinator.

That lack of a year class could affect the quality of Michigan’s $2.3 billion recreational fishing industry over the next two to three years or so.

“As much as I’m distraught that this had to occur, I don’t believe that the ecosystem is going to crash as a result,” said Dennis Eade, executive director of the 6,000-member Michigan Steelhead and Salmon Fishermen’s Association, commonly known as the Michigan Steelheaders. “It will reduce the size of the runs coming back to rivers in 2-3 years, but I don’t think we’re going to be dramatically harmed by the decisions that were made.”

Wesley said about two-thirds of the DNR’s staff are working from home, with only hatchery personnel considered as essential under the state’s stayhome order. That limited personnel, coupled with social distancing guidelines that recommend people remain 6 feet apart at all times, led the DNR to call off egg-take operations for steelhead at the Little Manistee River Weir near Manistee, as well as for walleye on the Muskegon River near Newaygo and on Little Bay De Noc in the Upper Peninsula.

In the case of the Little Manistee River, the weir — a low-head dam where grates are lowered in place to block the passage of fish — was reopened on March 30 to allow all steelhead to migrate up the river.

Sections of the river opened to fishing April 1.

“Having those fish go upriver and spawn is important because that’s our future broodstock,” Wesley said.

Nearly all hatchery steelhead stocked in Michigan waters originate from eggs harvested from the Little

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Manistee River. The remainder are a strain of steelhead called Skamania that are planted in the Manistee River near Wellston. The Skamania strain, which run up the Manistee River in the summer as opposed to the fall or winter for most Michigan steelhead, are sourced in a trade with Indiana’s fisheries division.

Wesley said that trade was cancelled this year, meaning the Manistee River will not get a plant of Skamania steelhead. He said the DNR adjusted its stocking by planting additional Michigan hatchery steelhead in the St. Joseph River, which flows through Southwestern Michigan and into Indiana.

While the DNR’s actions with steelhead are “certainly not desirable (and) likely to be felt negatively in some places in the future,” Michigan Trout Unlimited Executive Director Bryan Burroughs hopes the state “can learn something valuable from it.”

“Perhaps the upside, long term, is a better understanding of where we are at with wild fisheries, their capacity, and better understanding of just how important it is to stock certain ones,” Burroughs said in an email to MiBiz. “While the downsides are real, perhaps in 5 years or so, maybe this along with other research might help focus steelhead management further.

I can only hope for the upsides of them having to do this.”

Mitigation efforts Currently, the DNR has no backup plan to source eggs or hatchery stock from another location.

“We’ll have to figure out if we can do something like that,” Wesley said.

“On Lake Michigan, we have predator caps, and we mix and match species to stay within that cap, so we could stock extra chinook salmon. There are ways we could mitigate (the lack of a year class of steelhead).

“One thing with steelhead is that some of our rivers are not stocked and get 100-percent wild runs, and where we do stock, about 30 percent of the runs are a result of natural reproduction. Every run also has fish from age 2-6, so there will still be some year classes available. … We often see yearclass failure because of lake conditions or river conditions. Yes, this is widespread, but a lot of these rivers have poor year classes anyway. Nature adjusts and we might not even notice a missing year class.”

Other fish stocking adjustments took place at the federal level, Wesley said. In recent years, the U.S. Fish & Wildlife Service has had good results stocking native lake trout at various mid-lake reefs in Lake Michigan by

The Michigan Department of Natural Resources suspended all egg-take operations for prized game fish like steelhead, walleye and muskellunge, which means hatcheries will go without a year class of the species. Above, angler Chris Schnell of Portage shows off a steelhead. MIBIZ PHOTO: JOE BOOMGAARD using its vessel, the Spencer F. Baird, to transport the fish for planting. Given the coronavirus mitigation measures, using the Baird was not an option this year, so the USFWS instead opted to stock the lake trout plants at the port closest to the reefs, albeit miles away from their intended locations.

The DNR also has had to put on hold its annual survey efforts during the course of the stay-home order, Wesley said. Typically, the agency starts conducting creel surveys in April that help estimate fish harvest and catch rates on the Great Lakes, as well as conducts a spring lake trout population survey. It also called off various inland lake studies across the state.

Michigan United Conservation Clubs, the state’s largest conservation organization, said it was “disappointed” in the cancellation of the spring egg-take operations while “we simultaneously understand the challenges that come with a mandated stay at home order for non-essential business,” Ian FitzGerald, policy and special events assistant at MUCC, said in an email to MiBiz. “Ultimately, it is the department’s responsibility, and in their best interest, to protect the health of their employees,” FitzGerald said.

According to Wesley, reactions to the DNR’s efforts have been a study in “polar opposites.”

“Some people are really accepting and appreciate what we’re trying to do given the circumstances, and then you have some people saying ridiculous things like the DNR doesn’t like steelhead or it was done to save money or that they’d volunteer to do the egg take and get it done,” Wesley said. “Some people are throwing out all kinds of nasty stuff, and it’s been tough on certain members of our staff.”

Get outdoors One silver lining resulting from the recent crisis has been the number of people across the state who are getting out fishing, Wesley said. The stay-home order allows only essential people to leave home to go to work, but makes an exception for people to leave for recreational purposes, including fishing.

powers in a supplemental budget bill “It’s crazy: We have more people to direct $150 million to the coronavifishing right now than we’ve had in rus response. That included an $8 milyears,” he said. “We just need people lion budget item to support a beefed to remember to spread out.” up barrier to block Asian carp at the That lack of adherence to social Brandon Road Lock and Dam near distancing guidelines led the state to Joliet, Ill., as MiBiz previously reported. shut down the popular Tippy Dam The funds would have gone toward Recreation Area on the Manistee River, Illinois’ share of state matching funds where anglers flock every spring to try needed for the U.S. Army Corps of for steelhead on their spawning run.

Engineers to conduct a preliminary The site is closed until further notice, analysis and scoping of the project. with violations resulting in civil infracIllinois had budgeted $2.5 million for tions and fines up to $500. its portion of the match.

Wesley said DNR conservation offiMUCC’s FitzGerald warned that cers continue to monitor heavy-use additional budget cuts as a result of sites around the state and give warnthe coronavirus response and loss ings when people are not practicing of state revenue were likely to affect proper social distancing, although every state department. He called they often “bunch back up” soon on the DNR to “reassess the top priafterward. orities within divisions of the depart“Then you get people taking picment” along with groups like MUCC tures of all these people not following “to determine what the guidelines and they method will be best for send it to politicians tellthe resource moving ing them to do someforward.” thing about it. And then While acknowledgwe get political presing that the Great Lakes sure to stop all fishing,” and tributary fisheries Wesley said. will not be decimated by Other states that have the hatchery reductions, instituted stay-home Eade at the Michigan orders have restricted Steelheaders said he was sport fishing. For examworried about the effect ple, Washington banned — DENNIS EADE fewer fish could have on all fishing activity during Executive Director of fishermen who rely on its order, and the state of Michigan Steelheaders harvesting a part of their Illinois closed all of its catch, as well as charter Department of Natural fishing operations’ abilResources access points ity to attract customers. to fishing.

He’s also concerned what could Wesley said the goal is to avoid happen if the current social distancing having those scenarios play out in guidelines and stay-home order remain Michigan, but keeping fishing open in effect during this year’s Lake Michigan requires people to comply with state fishing tournament season, which often orders. helps fuel tourism travel to various ports “We’re doing our best to get people up and down the lakeshore. to spread out, but it’s really a waste of “These measures may require first responder resources,” Wesley said. those tournaments to be closed, restricted or in some other way Pain ahead? impacted. This is where our local Another step taken as a result of the chapters make their revenue,” Eade coronavirus also affected a key project said, noting the Grand Rapids chapter that aims to protect the Great Lakes “took a serious financial hit” with the from the spread of invasive species. cancellation of the Ultimate Fishing In a move supported by a bipartiShow in Grand Rapids last month. san coalition of state Legislative lead“The economic impact of this is yet ers, Whitmer also used line-item veto to be understood.”

“The economic impact of this is yet to be understood.”

MiBiz / APRIL 13, 2020

15

ECONOMIC DEVELOPMENT

Minority-owned businesses face structural barriers as they seek COVID-19 recovery

By ANDY BALASKOVITZ | MiBiz

Jones, who represents the Second Ward on the Grand Rapids eaders of Asian, Latino and African City Commission, American business groups say their pointed to “a system members face distinct challenges that’s been historiwhile recovering economically from cally inequitable.” An the coronavirus, including a historical increased focus will lack of access to capital, discrimination, immibe needed to help Jones gration status and language barriers. marginalized popuTaken together, minority business leaders lations and neighborare concerned about the ability to access bilhoods, he added, which includes changes to purlions of dollars in small business relief from chasing procedures that target minority-owned the federal stimulus package and are calling for businesses. more targeted and localized investment in their The Urban League’s priorities include partcommunities. nering with other community groups to promote “As has been said, historically, when America buying local and “making it all the more easier gets a cold, black and brown folks get the flu,” for black- and brown-owned businesses to prossaid Joe Jones, president and CEO of the Urban per,” he said.

Bing Goei, chairman of the Asian Pacific American Chamber of Commerce board, said “access to the decision makers” was among the top challenges for his members.

“We’ve historically been left out of the equation when it comes to participation,” said Goei, who is also CEO of Eastern Floral in Grand Rapids.

The Urban League, Asian Pacific American Chamber and the West Michigan Hispanic Chamber of Commerce are among the partners of the West — BING GOEI Michigan COVID-19 Business Chairman of the Asian Pacific American Chamber of Commerce Coalition, formed last month to coordinate resources in West Michigan.

abalaskovitz@mibiz.com

L

“It would be in the best interest of our city, state and country to take a look at the growing number of minority-owned businesses simply because the demographics are going in that direction. It would be wise of us to invest sufficient dollars right now rather than when the crisis gets even worse.”

League of West Michigan. “Now the question becomes: When America gets the coronavirus, what’s that mean for black and brown folks, especially as it pertains to a surviving business.”

Michigan Chief Medical Executive Dr. Joneigh Khaldun also told Bridge Magazine this month that there is “no question” the coronavirus outbreak is having a “more significant effect” on lowincome and marginalized communities, “particularly communities of color.”

Goei

Robinson

Cisneros

in recent years. He cited the Madison/Hall corridor on Grand Rapids’ south side, as well as areas across the city’s Third Ward.

“Everyone is in a very rushed process to just be able to get relief out there. If we’re not intentional about all facets of our community being able to recover equally, we’re definitely going to be setting ourselves up for a longer challenge,” Robinson said. “Some communities and neighborhoods are just getting their legs under them.”

The CARES Act stimulus package signed

by President Trump on March 27 includes $10 million in grants for the Minority Business Development Agency. Multiple sources for this story said they were not aware of the funding, while Goei said it’s “probably not enough.”

The House Democrats’ stimulus proposal in late March included a provision from Texas Congresswoman Sylvia Garcia for $3 billion in grants through the Minority Business Development Agency.

“It would be in the best interest of our city, state and country to take a look at the growing number of minority-owned businesses simply because the demographics are going in that direction,” Goei said. “It would be wise of us to invest sufficient dollars right now rather than when the crisis gets even worse.”

‘Verbally abused’

Federal funding

Access to capital

Jamiel Robinson, founder of Grand Rapids Area Black Businesses, said a localized response to the challenges for minority-owned businesses will be crucial to make sure companies that may not qualify for federal loans “don’t fall through the cracks.”

He also raised concerns for up-and-coming business districts that have seen new investment

Among the top concerns for minority business groups in accessing stimulus funds is the historical lack of access to capital.

“To begin with, the Latino business community has been hurt with access to capital in West Michigan,” said Guillermo Cisneros, executive director of the West Michigan Hispanic Chamber of Commerce. “With lack of access to capital

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APRIL 13, 2020 / MiBiz

comes a lack of financial resources to fight this crisis. If the Latino business community was at a disadvantage even before the crisis, it’s getting worse when we’re going through these difficult times.”

A “high percentage” of the Hispanic Chamber’s members are in the food industry. A few days after the federal loan program opened, about 20 Hispanic Chamber members had applied among more than 400 businesses.

Cisneros noted that Latino businesses’ economic impact in Kent County in 2016 totaled $1.1 billion.

Challenges in accessing capital often stem from a lack of credit history or the ability to open bank accounts based on immigration status, Cisneros said, and “financial systems in Latin America are completely different” than in the U.S. Cisneros also cited language and technology barriers for some owners while navigating the U.S. Small Business Administration’s loan process available under the CARES Act. The Hispanic and Asian American chambers have launched workshops to help members through the loan application process.

Cisneros also pointed to Minneapolis, which created a $5 million forgivable loan program to help renters and small businesses regardless of their immigration status, and hopes something similar can be done in Grand Rapids.

“If we don’t take action, a high percentage of the Latino business community will disappear in the next few months,” Cisneros said. “That’s very concerning. We definitely need to see if philanthropy would be able to support these efforts.

It’s the only way for our Latino economy to survive here.”

Supporters:

On top of historical barriers for minorities, Asians in particular have faced racism and discrimination amid the fallout of COVID-19. The spread of the virus originated in the Chinese city of Wuhan last year, and critics say leaders — including President Trump — have fanned racial tension by referring to it as the “Chinese virus.”

Goei said the reports of discrimination toward Asian-American business owners is “very true,” noting business owners and residents in West Michigan have been “verbally abused.”

“We have incidents, but there are also those incidents that are not reported,” Goei said, citing cultural norms to avoid reporting incidents to law enforcement. “It is certainly not unexpected when some of us have received those types of verbal abuse and racist behaviors against us because we are Asian.”

Meanwhile, Goei is working his way through the federal loan application process for the Small Business Administration’s Paycheck Protection Program included in the CARES Act. He feels a distinct disadvantage compared to larger corporations with lobbying power and, for some, a history of financial support.

“For many of us who are small businesses, we haven’t received those types of government support,” he said. “I don’t know what impact that will have. My deep concern is the policies that are being implemented now are such that small businesses are going to be the losers and the big businesses are going to be the winners.”

Yet winners and losers may also play out along racial lines, as has historically been the case, said Jones of the Urban League.

“Understanding that whenever you have a significant disruption and a recession, the communities that are most impacted in a very devastating manner have been those historically marginalized,” he said. “If we’re not proactive, COVID-19 could create the same outcome.”

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HEALTH BIZ SURGE

Continued from page 1 The temporary beds that Bronson wants to add in Kalamazoo, plus 43 beds at Bronson Battle Creek Hospital, are among more than 1,400 planned by West Michigan hospitals in response to the COVID19 pandemic, according to a review of emergency state filings. Hospitals in Southeast Michigan also are planning to add hundreds of additional beds.

To adequately staff those beds, hospitals are pursuing tactics such as shifting doctors and nurses to where they are needed most and urging retirees to return temporarily or to volunteer to care for COVID-19 patients and non-COVID-19 patients.

Two executive orders by Gov. Gretchen Whitmer have sought to give hospitals a greater ability to ramp up capacity and prepare to staff additional temporary beds.

An order issued March 20 required hospitals, outpatient surgery centers and state-operated facilities to postpone all “non-essential” procedures as soon as possible and for as long as a state of emergency remains in effect from the COVID-19 pandemic. Many providers Bulson had already done so prior to the order.

The cancellation of elective surgeries and procedures gives hospitals greater flexibility to adjust and move care providers, said Julie Bulson, director of emergency preparedness at Grand Rapids-based Spectrum Health, which has 15 hospitals Kim across West Michigan.

“So we have a full team that is looking at how we can effectively redeploy our workforce to be able to care for patients, both in the hospital and maybe in some non-traditional locations,” Bulson said.

Mercy Health Saint Mary’s in Grand Rapids also plans to redeploy staff as needed from Hahn non-clinical duties in administration and leadership roles, and from reporting data to insurers and regulators “that we just think can wait,” said President Dr. Hyung Kim. Mercy Health Saint Mary’s, as well as Mercy Health Muskegon, also can bring in staff from sister hospitals across Allore the country owned by parent corporation Trinity Health, Kim said.

According to a state regulatory filing, Mercy Health Saint Mary’s would add 200 beds in Grand Rapids to handle the expected patient surge.

The hospital has been closely tracking equipment needs and exactly how to use additional beds, from critical care for patients who require a ventilator and a higher level of care, to regular medical/ surgical beds and low-acuity convalescent units.

“We’re going to need to be adaptable, because as the need for additional beds goes up, then we’re going to need to keep a close eye on what are the types of beds that are needed,” Kim said. “That’s going to really affect the number and the types of clinical staff that we need to do it, so we’re trying to stay adaptable.”

Metro Health-University of Michigan also is planning to add beds to meet a pending patient surge, as well as identify alternative care sites, “including a collaboration on a central downtown facility if needed,” CEO Peter Hahn said.

“We are closely following predictive modeling and are in regular communication with our fellow West Michigan health care systems. We have devised surge plans that will optimize patient care and best utilize our resources. We have multiple plans being operationalized in parallel,” Hahn said in a statement to MiBiz. Visit www.mibiz.com

Finding alternatives An executive order the governor issued also enabled regulators to waive regulations for hospitals to add beds or locations so they can “construct, acquire, or operate a temporary or mobile facility for any health care purpose, regardless of where the facility is located.” Many hospitals soon afterward began filing emergency applications with the state to add beds.

The Department of Health and Human Services has been quickly approving the emergency requests.

The need for additional hospital beds, locations and staff depends on the accuracy of modeling used to predict the pandemic’s spread and peak, and how well people adhere to the governor’s stay-home order and social distancing, Bulson said.

Spectrum Health already has prepared the Grand Valley State University Cook-DeVos Center for Health Sciences across Michigan Street from Butterworth Hospital with 250 temporary beds as an overflow location to care for non-COVID-19 patients.

If needed, Spectrum also would add 36 beds and convert 55 medical and surgical beds into ICU beds at Blodgett Hospital in East Grand Rapids.

“As we look at some of these alternative care sites, we’re going to have to use them as a community resource because all of the hospitals are going to surge,” Bulson said. “We certainly are going to have to rely on some of the other health care organizations in the community as well as volunteers to step up and be able to help fill in staffing in some of these non-traditional locations, and just to ensure that we have that backup in case some of our staff gets sick.”

Muskegon Community College has an agreement with Mercy Health and the state to use the on-campus Health and Wellness Center as a site for 50 hospital beds for overflow and lower-acuity patients.

Mercy Health Muskegon would use the MCC Wellness Center “if we really got a significant surge,” said President Gary Allore.

“At this point, we’ve been pretty stable, but we have it available to us, which is a really nice opportunity,” Allore said last week.

Mercy Health Muskegon would add beds at the Mercy hospital campus on Sherman Boulevard, where it opened a new patient tower a year ago.

Space is available on floors that were not previously scheduled to go into operation until the fall, Allore said.

Additionally, Norm Beauchamp, Michigan State University’s executive vice president for health sciences, said the College of Human Medicine has talked about offering the Secchia Center in downtown Grand Rapids as a temporary care location.

In Southeast Michigan for example, the state and the Federal Emergency Management Agency have converted the TCF Center in downtown Detroit into a temporary care location with 1,000 beds. The state also has chosen the Suburban Collection Showplace in Novi as an alternate care facility for up to 1,000 beds.

Plan ahead Bulson said hospitals for years have crafted emergency plans for mass outbreaks that could strain their capacity. A coalition across a 13-county region in West Michigan that’s leveraged federal grant funding has looked at possible scenarios and planned accordingly, she said.

The 23 hospitals in the region also have in place an agreement through a memorandum of understanding to share staff and equipment in emergencies “and we would support each other in situations like this,” Bulson said.

“So we might be able to utilize staff or equipment from a location that’s not hit as hard as maybe another organization. We can share staff back and forth,” she said. “We feel like we are prepared for this. We have been preparing for a very long time.”

Another executive order Gov. Whitmer issued March 29 temporarily suspended scope-of-practice provisions in the state’s Public Health Code for licensed, registered or certified health care professionals. The order allows hospitals and other care facilities to use physician assistants, nurses and other qualified professionals to work without supervision from a licensed physician where they are employed or contracted to work.

“Responding effectively to the urgent and steep demands created by the COVID-19 pandemic will require the help of as many health care professionals as possible, working in whatever capacities are appropriate to their respective education, training, and experience,” according to the executive order.

The state has set up a website for medical professionals and students to volunteer at care providers.

Students step up The governor’s executive order also allows students enrolled in programs to become a licensed, registered or certified health care professional to volunteer or work in a facility “in whatever roles that are necessary to support the facility’s response to the COVID-19 pandemic and are appropriate to the student’s education, training, and experience.”

The order specifically allows medical students, physical therapists and emergency medical technicians to volunteer or work under the supervision of physicians, respiratory therapists or advanced practice registered nurses as “respiratory therapist extenders” assisting to operate ventilators and other medical devices.

Faculty members at Grand Rapids Community College’s nursing program have volunteered locally at Spectrum Health and other care providers. So have students at MSU’s College of Human Medicine, staffing hotlines for information on COVID-19 and screening staff as they enter hospitals, Beauchamp said.

Hospitals also can expedite credentialing for licensed care providers so they can move “from one location to the next pretty quickly,” Bulson said.

EMERGENCY BED PLANS,

BY THE NUMBERS Here’s a county-by-county look at how hospitals in the region plan to temporarily add beds and increase capacity for an expected surge in COVID-19 patients.

ALLEGAN COUNTY

• Allegan General Hospital: 30 beds

BERRIEN COUNTY

• Spectrum Health Lakeland: 45 beds

CALHOUN COUNTY

• Bronson Battle Creek: 43 beds “placed in existing vacant patient rooms as well as converting spaces.”

CASS COUNTY

• Ascension Borgess Lee Hospital, Dowagiac: 45 beds

INGHAM COUNTY

• Ingham County Medical Care Facility: 48 beds in private rooms for a COVID-19 care unit to isolate patients • Edward W. Sparrow Hospital: 50 beds • Sparrow Health System St. Lawrence Campus: 50 beds

KALAMAZOO COUNTY

Watching Detroit Spectrum Health has been closely watching the COVID-19 pandemic’s spread in the hard-hit Detroit area to learn and better prepare for an expected patient surge in West Michigan that modeling shows will come in early May. “We really need to watch what is happening over in the Detroit area and the east side of the state, and understand that we had the benefit of time on the west side of the state to more dramatically impact or put into effect some of those processes that are going to help decrease the spread of the disease,” Bulson said, emphasizing the need for people to stay home and maintain social distancing.

“Detroit is looking like Detroit right now because they didn’t have the ability to put into place stay-athome processes like we have been able to do over on the west side,” she said. “We need to take advantage of that and learn from some of the other locations that didn’t have the insight from those other responses to be able to make a difference.”

Mercy Health in West Michigan has been in daily communication with sister hospitals in the Detroit area who have provided valuable advice.

“From a West Michigan perspective, we’re learning a lot from the surge experience they’re seeing,” Allore said. “We’re learning about how we can better prepare for what’s coming to West Michigan.”

The advice from Trinity sister hospitals in Southeast Michigan ranges from better gauging how much personal protection equipment is getting used to care tactics in treating COVID-19 patients.

Mercy Health’s colleagues in the Detroit area also are “helping us to stay focused on taking seriously what our models are telling us about the volumes that we can expect and the trajectory that we can expect,” Kim said.

“The numbers on the west side of the state do continue to be lower and so it’s easy to see the number here and feel like, ‘Oh, maybe it’s going to be OK,’ but being on the calls reminds us that it used to be like that on the east side of the state, too. It keeps us focused to make sure we’re prepared for the surge here,” he said.

Models as of last week show that the coming patient surge “is going to be lower and it’s going to occur later than the initial models suggested that they might be, so that’s a really good change,” Kim said.

That change reflects the effectiveness of social distancing and staying home, Kim said.

“It seems like it’s making a real big difference, so we hope that everyone will continue to do that,” he said.

• Ascension Borgess: 105 beds.

Eleven would go for intensive care, and 44 beds at the Stryker Center are for non-ICU COVID-19 inpatients. Another 50 beds will go in at the Lawrence Education Center now used for medical education, according to a state filing.

• Bronson Methodist Hospital: 300 beds by moving patients’ rooms from single to double occupancy “as well as converting other spaces,” such as suites at the Medical Office Pavilion, according to a state filing.

KENT COUNTY

• Mary Free Bed Rehabilitation Hospital: 83 beds to accept rehab patients transferred from other hospitals, freeing up their beds • Mercy Health Saint Mary’s: 200 beds. Of those beds, 176 would go in at the main hospital on Jefferson Avenue and 24 beds at an ambulatory surgery center on 64th Street.

• Pine Rest Christian Mental Health: 40 additional psychiatric beds at its 68th Street campus. The beds would accommodate “hospital partners who are wishing to transfer psychiatric patients to (Pine Rest) during the peak of the COVID-19 crisis,” freeing up acute care beds at the hospitals, according to Pine Rest’s filing with the state.

• Spectrum Health Butterworth Campus: 250 beds at the GVSU Cook-DeVos Center for Health Sciences to “only be used when all other beds are full.”

• Spectrum Health Blodgett Campus: 36 beds, plus converting 55 existing beds to ICU beds • Spectrum Health Renucci Hospitality House: 37 hospice/ end of life rooms

MUSKEGON COUNTY

• Mercy Health Muskegon: 72 beds at the Sherman Boulevard Mercy Hospital campus SOURCE: MICHIGAN DEPARTMENT OF HEALTH AND HUMAN SERVICES EMERGENCY FILINGS

MiBiz / APRIL 13, 2020

17

FINANCE VC/PE

Continued from page 1 from nearly 100 investors for a new venture capital fund, Grand Angels Venture Fund III LLC. “This means we have capital available and we will continue to invest in early-stage Michigan companies, although more selectively and cautiously. Some of our members may become more cautious, although we expect to see companies needing capital who have solutions to solve our country’s newest needs,” Parker said. “Our intention is to continue leaning forward with due diligence and investment. While overall deal flow may slow for a while, we are already beginning to see some exciting projects.”

Meanwhile, Grand Angels has paused the formation of new affiliate angel groups. Most recently, Grand Angels formed Flint Angels under the Michigan Capital Network umbrella, which also includes Kalamazoo-based Ka-Zoo Angels and Detroit-based Woodward Angels.

“If there is one way we will slow over the next several months, it will be in regard to adding new angel groups,” Parker said. “We will still embrace adding new groups, but will use this time to raise the bar, focusing on excellence and execution.”

Support the portfolio At Wakestream Ventures LLC in Grand Rapids, “we’re pretty much following the playbook” of a lot of venture capital funds, said Finance Director Joe Lampen, who’s involved in portfolio company management.

Once it became apparent that the pandemic would create major economic disruptions, Wakestream advised portfolio companies to evaluate “where they thought the impact was going to hit them,” formulate near-term revenue projections, plan for a worst-case scenario and “understand where that left them from a cash position,” Lampen said.

“Most of the startups that we’re working with obviously are intentionally high-growth businesses, and high-growth businesses burn cash.

The unit economics work out, which is why we’re investing in them, but they’re intentionally trying to grow quickly so their expenditures exceed revenues,” he said.

Wakestream has more than 50 portfolio companies across four funds.

A handful of Wakestream’s portfolio companies recently raised capital, “so they’re probably sitting pretty well,” Lampen said.

The startups that were in the process of raising new capital and were “at the end of their cash runway” are getting first consideration for further investment from Wakestream to “make sure they have cash to be in survival mode,” Lampen said. The venture capital firm wants its startups to have enough cash on hand or earmarked to get through the next 12 to 18 months, he said.

“Some companies, we’re working with them very closely to figure out how to get them cash or how to preserve cash,” Lampen said. “In all scenarios, we’re (working) with companies to make sure we’re making prudent decisions on how to preserve cash. In some cases, we’re investing in companies to make sure they have the cash to weather this at least for the foreseeable future.”

Some of Wakestream’s portfolio companies are thriving right now because they offer products or services “that really help or assist companies or organizations and individuals to continue with life” through remote activities, Lampen said. He cited MaxOne LLC, which offers an app to allow high school and college coaches to stay connected to athletes with training and workouts.

Beyond supporting existing portfolio companies and proceeding with deals already in the pipeline, Wakestream has been limiting new investments.

“We are being pretty frank with founders who are coming to us for new capital that we’re focused on our current portfolio. We’re

18

APRIL 13, 2020 / MiBiz

Lampen

Pollock

Stein

interested in learning for when we come out of this, but we’re making very few new investments,” Lampen said.

‘Uncharted territory’ A quarterly report expected this week from the National Venture Capital Association and Pitchbook could provide an indication of the COVID-19 pandemic’s effect on the industry.

Worldwide, the London-based data analytics and consulting firm GlobalData plc reported that VC deal flow for the week that ended March 29 was down 22.5 percent from the prior week.

Private equity firms also are looking at how they can assist their portfolio companies as they still look for new investment opportunities.

At Ada-based LV2 Equity Partners LLC, “our attention has certainly turned inward to our portfolio companies. Guiding them through this uncharted territory is without a doubt our number-one priority,” Managing Director John Pollock told MiBiz. “That said, we haven’t stopped looking at opportunities, but the incoming flow of those has slowed,” Pollock said. “The reality of the matter is that it’s tough to underwrite and value

Helminski

transactions right now with the lack of clarity at play, combined with its unknown duration. As such, our entire new deal process has slowed, but we have not shut it off.”

Private equity investors in the U.S. put $309 billion in 4,788 businesses last year, according to the American Investment Council, a national trade group for private equity.

In a recent paper about the effects of the COVID-19 pandemic on private capital markets, Pitchbook said “capital is likely to be deployed, albeit more slowly and perhaps more prudently than in the last few years.”

Pitchbook noted that “as consumer spending and business investment are set to decline, we believe we will undoubtedly see a slowdown in PE transaction volume to follow the expected economic contraction.”

Long-lasting consequences Grand Rapids-based Blackford Capital has advised portfolio companies to “get prepared” for the harsh toll the pandemic is taking on the U.S. and global economies.

“This is a unique, historic event. We think it’s going to be pretty deep and we are telling our

Investors remain vigilant for innovations coming out of pandemic Startups need to watch cash, adjust plans

By MARK SANCHEZ | MiBiz msanchez@mibiz.com

ut of the COVID-19 pandemic crisis could come new opportunities for investors as major disruptions imposed on people and businesses fuel new levels of innovation.

Managers at Wakestream Ventures LLC, for instance, have been watching to understand how the pandemic changes consumer and business behavior and how that could give rise to new and emerging technologies, said Finance Director Joe Lampen.

Lampen cites apps and services that can support remote working or remote learning for schools as innovations that venture capital investors can support. The same goes for apps that play into what he sees as heightened awareness of health and wellness that will come out of the pandemic.

“We all believe this is going to change behavior, just like other crises have changed consumer behavior and corporate behavior. It may not feel like it’s a radical change once we get back to normalcy, but there will be … technologies and services that we’ll continue to use,” Lampen told MiBiz. “How this accelerates certain businesses and certain opportunities, we want to be cognizant so that when we start feeling like it’s time to put fuel into new things, it helps us identify new opportunities. We’re also figuring out and making sure we’re paying attention to what’s not working.”

In a recent report on the pandemic’s effect on private capital markets, Pitchbook noted that in education alone “the need for public and private school systems to ensure remote capabilities will likely drive significant investments in digital learning platforms in coming years.”

Digital health and telemedicine platforms also could draw increased investor attention, according to Pitchbook. The report also pointed to how food delivery services have seen demand spikes.

The effect of the pandemic could hit startups backed by venture capital particularly hard as they tend to spend heavily and burn cash quickly to commercialize their products or services.

O

Kolodny

portfolio companies to prepare,” said Blackford Capital founder and Managing Director Martin Stein. “It is going to have economic consequences that will last a long time.”

In an updated U.S. economic outlook issued last week, Comerica Inc. projected Real GDP to decline 29.1 percent for the second quarter alone, following a 4.1-percent decline for the first quarter.

“The coronavirus pandemic has rapidly evolved into a profound economic event. We expect second quarter real GDP in the U.S. to contract at the fastest rate recorded since World War II,” Comerica economists wrote in the outlook, which presumes the pandemic will fade with the warmer temperatures of summer.

Given that assumption, Comerica projects Real GDP to grow 6.3 percent in the third quarter and 12.4 percent in the fourth. Unemployment nationally will surge from 3.8 percent to 10.8 percent for the second quarter and to 14.7 percent by the fourth quarter, according to Comerica.

Blackford Capital has 12 portfolio companies.

The firm has three companies under a letter of intent “that have absolutely been impacted by what’s transpired,” Stein said. Other companies are doing well, and some are going through refinancing or proceeding toward an exit. The crisis has clear complications for those deals, although Blackford Capital intends to proceed, Stein said.

“It is really hard to underwrite at this level of uncertainty. You don’t know if you’re underwriting for two months of losses or two years of losses,” he said. “We’re still planning on being creative and still planning on pushing ahead.

We have not killed our letters of intent, but we have said, ‘Let’s stay connected, let’s develop the relationship and let’s find a way to do it.’”

Despite the expected depth of the crisis and its harsh economic effects, Doug Neal of Ann Arbor-based eLab Ventures remains optimistic for the future of venture capital because of the potential for innovations to emerge.

“We are in the business of innovation,” Neal said during a recent webinar hosted by the Michigan Venture Capital Association. “There are some really exciting things coming.”

Venture capital firms say they’re working with portfolio startups to get them through the crisis and in some cases providing capital.

Any other capital is generally unavailable, according to attorneys from Grand Rapids law firm Varnum LLP. In a recent advisory emailed to clients, the firm suggested that early-stage companies needing a capital infusion should look to their present financial backers for bridge financing to navigate the crisis.

Finding new investors right now “is not an option for most startups and early stage companies. But we are seeing companies quietly raise smaller mini-bridge rounds from their existing investors to get through the crisis,” according to Varnum.

“A silver lining for early-stage companies is that they have a long investment horizon,” according to the Varnum advisory. “Your investors invested for the long term and still have an incentive to protect and grow that investment.”

Jan Garfinkle, founder and managing partner at Ann Arbor-based Arboretum Ventures, encourages venture capital-backed startups to adjust their plans to determine what inflection points and thresholds they can reach in their existing capital rounds.

Companies should find “one or two things you can still get done, given the situation that we’re in right now, and really focus on getting those done as well as possible,” Garfinkle said. That can position a startup for after the crisis ends and when they are able to then pursue a follow-up capital round, Garfinkle said.

“What you’re trying to do is set the company up so that it can be successful again once the air lifts and we can all go rise up again,” she said during the MVCA webinar. “You want to have everything lined up to go out and successfully fundraise at that point.”

The thresholds a young company seeks to meet in its early stages of development will have to get placed on hold, and entrepreneurs behind startups need to make the “really hard decisions” on how they proceed, Garfinkle said. Startups should identify key dates for those decisions, complete scenario planning for the next “three months, six months and a year for COVID,” Garfinkle said.

“The cash they have on hand now and whatever bridge the insiders are willing to do is going to be the money that the companies have to survive on,” she said.

Visit www.mibiz.com

“This is a unique, historic event. We think it’s going to be pretty deep and we are telling our portfolio companies to prepare. It is going to have economic consequences that will last a long time.”

— MARTIN STEIN Managing Director of Blackford Capital

Metered approach Grand Rapids-based Auxo Investment Partners also continues to “look for opportunities in this turmoil” while making sure portfolio companies are positioned to weather the storm, according to Managing Partner Jeff Helminski.

“We’re in a strong financial position and we’re hopeful that it will lead to opportunities, whether that’s organic growth or acquisitive growth at the existing companies we have,” Helminski said.

“But at the same time, we’re still looking for new platforms; we’re active. From a big picture perspective, we’re still aggressive in the market pushing forward.”

Auxo presently holds six portfolio companies across four platforms. The private equity firm just signed a fourth letter of intent to go with three that were in place before the pandemic hit. The firm is taking a “little different approach to each one of those” to gauge the pandemic’s effect on them, Helminski said.

One prospect “is not at all impacted by coronavirus, so that one is full steam ahead,” he said.

Another prospect may be affected by the pandemic and the decline in oil prices. That deal “is essentially on hold until we get some more visibility on what that really means for them,” Helminski said.

In the two other companies under letters of intent, “we’re pushing diligence forward at a little more metered pace than we might normally, and we obviously have a number of new considerations in the diligence category that we have to

navigate now that we have to understand,” he said. “But they are both very good, long-term businesses that we’d like to be the owners of.

We’re continuing diligence to get the ball to the two-yard line so that when the smoke clears on the coronavirus impact, it’s a short putt to get it across the goal line.”

Keep communicating Portfolio companies are planning and developing scenarios to figure out the effect the pandemic could have on their businesses and what actions are needed, said Chris Merendino, a vice president at Auxo who focuses on operations and management of portfolio companies.

Auxo holds regular meetings with portfolio companies, which allows them to share information and best practices for employee safety, cleaning facilities, and ensuring “the messages are getting down to the operators so that everybody understands what’s going on with the company, with the world, and with the policies,” Merendino said.

“The key is to not get into a situation that you hadn’t thought about at some level and to make sure you have accounted for every scenario you could possibly think of,” he said.

Auxo also maintains regular contact with lenders so they understand what steps have been put into place at portfolio companies, their status, performance and cashflow, Helminski said.

As firms work through the pandemic and guide their portfolio companies, constant communication has taken on greater importance, particularly at a time when people are working with heightened anxiety about their safety and uncertainty about the future, said Jack Kolodny, a managing partner at Auxo.

Maintaining open lines of communications also brings an occasional bright spot.

Kolodny tells of an Auxo portfolio company that makes cutting tools and got a “really terrific note from one of their customers that said, ‘Hey, do you guys know that you’re helping us make these test kits for coronavirus and all of the PPE being used out there?’”

“That is a huge morale booster in difficult times to know that somebody who is operating a mill understands that they are actually having an impact on the safety and welfare of people,” Kolodny said.

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reporter’s NOTEBOOK Mark Sanchez writes about finance, health biz and life sciences.

616-608-6170 • msanchez@mibiz.com

Sports training app developer soars during shutdown

J

ason Mejeur sees his business as one of the outliers right now in the economic carnage from the COVID-19 pandemic.

In just two weeks during March, the app MaxOne LLC developed recorded about 1,000 downloads from sports teams across the country. Grand Rapidsbased MaxOne on average gets about 20 downloads a month for its app, which virtually connects high school and college coaches with athletes.

Coaches can buy and use the MaxOne app to deliver customized videos for off-season drills and training and strength and conditioning workouts.

Now that schools in many states are closed and sports seasons are cancelled, business has been thriving for MaxOne, especially after Mejeur decided a few weeks ago to allow downloads for free until May 31. The app otherwise costs $8.99 a month.

“There’s a bunch of hungry athletes and good, leading coaches out there that are looking for tools and to stay connected and stay in shape,” Mejeur said during a recent phone conversation. “Our business has accelerated 10 years. The demand and the adoption and engagement has accelerated to where we thought we’d be 10 years from now, and it happened in two weeks.”

A second app the company launched in December, SmartCoach, uses artificial intelligence and computer vision to analyze an athlete’s form and offers suggestions for improvements in shooting a basketball, for example. The app, now selling for a discounted price of $8.99 a month to make it more accessible, quickly moved into the top 15 apps on the Apple App Store in recent weeks.

“Again, I don’t know if that would have happened if people weren’t at home looking for ways to stay active and do things,” Mejeur said.

That large push that MaxOne has experienced sharply contrasts with the overall blow the pandemic has delivered to the economy, especially for small businesses.

However, MaxOne has not been immune from the economic shock or uncertainty about the future from the COVID-19 pandemic, despite the surge in downloads. All of the company’s 15 employees are working at home and putting in 12-hour days, and for half of their prior pay. As a young startup company backed by private capital, MaxOne saw The MaxOne app allows coaches to the need to conserve cash and reduce its burn rate. remotely provide training and condi“Until we know what the certainty is on the other tioning workouts to athletes. side of this, or until we get a big round of funding, COURTESY IMAGES which I think we’re actually going to be pretty close to in the next month based on some of the new things that are transpiring, we’re the oddballs. We’re an outlier,” Mejeur said.

One of the focuses now for MaxOne is to retain those users who downloaded the app for free and transition them into paying customers.

“We continue to engage those users by providing daily workouts customized to their age and stage of development. This makes our product really sticky,” said Mejeur, a former basketball coach at Holland Christian High School who believes that virtual coaching will “become a part of our everyday lives” for people who participate in sports.

“While we meet in person for practice and games, we will be able to take a trainer home with us to supplement our experience, track our data and progress, and ultimately make individualized SmartCoach recommendations for how to improve as an athlete,” he said.

MaxOne not only has garnered far greater market interest recently but also has been getting inquiries from potential new distribution partners and new investors.

As word about MaxOne spread via social media, tech bloggers and sports bloggers (who have little else to write about right now), Mejeur has received inquiries from possible new partners and from venture capital investors interested in the company. MaxOne has been supported by venture capital and angel investors in West Michigan and Mejeur hopes those new inquiries can eventually translate into a capital round to support growth.

“There’s a bunch of opportunities for us to have relationships with other people on the club side of youth and amateur sports,” Mejeur said. “We’re getting a lot of interest from national funds saying, ‘What are the terms? Let’s talk. How can we make this stuff happen?’”

MiBiz / APRIL 13, 2020

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NONPROFIT ORGANIZATIONS

PANDEMIC COOLS FUNDRAISING OUTLOOK FOR MICHIGAN NONPROFITS

By JANE SIMONS | MiBiz jsimons@mibiz.com

T

he fallout from the coronavirus pandemic proves how quickly sentiment can change among philanthropic donors.

In early March, Michael Mo n t g o m e r y o f Mo n tgo m e r y Consulting Inc. released his annual Michigan Fundraising Climate Survey that showed while fundraising performance had not necessarily improved, fundraisers in the state were “feeling a little more optimistic than last year.”

At the time of the Montgomery survey’s release, the spread of the coronavirus was just beginning to affect events in Michigan, he said, noting people expected events to be put off for a couple of weeks or downsized as a result. But as Williams the pandemic began to accelerate, it became clear that the effects on philanthropic fundraising would be much more acute.

That led Montgomery to revisit the sentiment question with survey respondents. The second time around, only 5 percent of respondents thought the climate for fundraising would improve, while 87 percent said they thought it would be worse than 2019. To Montgomery, the results proved the philanthropic sector would not be immune to the fallout from the coronavirus.

“I was trained in this stuff more than 30 years ago … and I have never seen as dramatic a change as that,” said Montgomery, an adjunct faculty member at the University of Michigan-Dearborn.

As a result, he is expecting to see organizations experience different scenarios depending on their size and financial health. Some nonprofits likely will close their doors and never reopen again, while others that are “savvy enough” will look for ways to consolidate or participate in a voluntary merger. Even so, Montgomery does not expect to see much consolidation activity as a result of the pandemic.

“After the initial blast is over and the whole crisis is over, some corporate foundations and other foundations will be encouraging mergers and consolidations. There is posturing in private foundations, but they’re not in the business of picking winners and losers,” Montgomery said. “This will be such a severe shock to the system that some funders will be more comfortable encouraging merger and consolidation with relatively gentle encouragement. There won’t be a whole lot of overt coercion.”

Secure operations first In a report released last week, researchers at Grand Valley State University’s Dorothy A. Johnson Center for Philanthropy said nonprofits can expect to contend with various trends as the pandemic evolves.

Nonprofits are facing three distinct financial threats at the moment, each of which will affect different organizations in different ways. Those threats, according to Jeff Williams, research lead and director of the Johnson Center’s Community Data and Research Lab, include: decreasing revenue from annual campaigns and gifts, dropping demand for services and/or changes to contracts, and decreasing value in investments as a result of stock market fluctuations.

Most nonprofits, for example, receive very little investment income,

so stock market fluctuations will not be their primary concern.

Williams said a clear understanding of the different types of revenue declines is important because nonprofits are businesses that pay salaries and rent, and purchase supplies and equipment just like any other company.

“However, in the big picture, nonprofits serve a broader public mission and they should remember to secure their operations first, much like the instructions given to passengers on airliners about oxygen masks: Always secure your own mask before assisting others,” Williams said in a statement.

Fundamental shift As part of his follow-up survey, Montgomery asked what nonprofits were doing in response to COVID-19. In addition to having staff work remotely, closing their facilities and programs to the public or providing very limited services, almost 54 percent of respondents said they had canceled one or more fundraising events, while another 36.5 percent said they were considering it.

“I bet some of these are close to 100 percent now. That’s the world we’re going to live in for a while,” Montgomery said.

The survey also found that while almost 43 percent of respondents said they were stepping up work with major donors and institutional funders specifically because of disruptions resulting from COVID-19, nearly 21 percent

addressing the current challenges will said they were deferring work for the find success, Montgomery said. Still, same reason. he doesn’t know if they’ll reap any Although none of these measures additional financial benefits because were unexpected, what did come the current downturn presents ecoas a surprise to Montgomery is that nomic challenges for even those with almost 32 percent of respondents indilots of money. cated they lacked a clear strategy for “This will be a shock to their welladdressing how COVID-19 could affect being,” he said. their organization.

Montgomery expects “the pie will “This survey is not going out to be smaller in the short run” even for junior staff, it’s going to the leaderorganizations “that are doing critically ship of these organizations,” he said. needed work and doing it well and Williams at the GVSU Johnson making a case for additional funding.”

Center said nonprofits currently are Montgomery added that there focused on immediate needs, like likely will be some “culling of the herd” health care and direct emergency as a result of an inability to stay afloat assistance, especially for food. financially. Yet at the “Howe v e r, ov e r same time, nonprofit time, as the situation organizations also stabilizes, the nonhave an opportunity profit sector will need Sponsored by: to make a “great leap to shift to education, GRAND RAPIDS forward … in terms of housing and human COMMUNITY how they can do more services,” he said.

FOUNDATION of their work using “Once the virus is well technology,” he added. contained, job train“I think the organizations that pass ing, workforce development and other through this successfully will be much economic and productivity concerns stronger because there will be fewer will come back to the forefront. organizational mouths needing to be “Finally, when people feel confed,” Montgomery said. fident making longer-term plans to For his part, Williams said nonreturn to normal life, nonprofit operaprofit leaders can expect to see the tions will also return to a more normal situation “get weird.” activity level.”

“Adopting a mental posture of flexibility is key,” he said. “Being open Challenges ahead about the impending storm in comIn the meantime, well-managed nonmunications with service beneficiaprofits that come up with creative ways ries, clients and staff is essential for to operate that are directly relevant to maintaining staff morale, too.”

NONPROFIT SECTOR NEWS

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Federal stimulus funding available as nonprofits face unique business challenges

By MARLA MILLER | MiBiz mmiller@mibiz.com

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s the economic effects of the coronavirus deepen, the nonprofit sector faces unique organizational and financial challenges as it seeks relief and recovery.

Many nonprofits rely on federal and state grants and contracts; donations from individuals and corporations; community philanthropy and foundation support; and revenue from services, ticket sales and fundraisers. The sector is diverse, and some organizations are fragile.

Like many small businesses, nonprofits that have been forced to close because of the coronavirus are reviewing their finances and wondering how long they can survive. The $2.2 trillion CARES Act signed into law on March 27 is designed to offer a broad range of economic incentives to shuttered businesses and unemployed workers.

One of the law’s biggest provisions includes the Paycheck Protection Program, which offers loans designed to help nonprofits cover payroll, rent, mortgage interest and utility expenses that may be forgiven if certain requirements are met.

“Everyone is focused on the Paycheck Protection loans because of the time urgency of it — they are afraid of missing out,” said Dale Rietberg, an attorney who serves corporate and nonprofit clients at Varnum LLP in Grand Rapids.

Organizations that provide essential services — such as homeless shelters, food banks and nonprofit health clinics — are seeing increased demand for services and reduced financial and human resources, said Salvatore Alaimo, associate professor at Grand Valley State University’s School of Public, Nonprofit and Health Administration.

Nonprofits that rely on volunteers to reduce costs and deliver services also are under pressure. Many organizations have told those volunteers to stay at home, requiring staff to step into those roles or adjust services. For instance, Mel Trotter Ministries in Grand Rapids has suspended volunteers who normally work in the shelter’s kitchen and lead devotions.

Others continue to rely on volunteers to provide essential services, including Meals on Wheels Western Michigan to deliver meals to seniors and American Red Cross for blood donations.

“They (Meals on Wheels) still need volunteers to package and deliver the meals to homes,” Alaimo said. “The ripple effects and tentacles go far and deep. Many of them are losing volunteers, and so many rely on volunteers. If you removed the volunteers, they’d go out of business in five seconds.”

Specific details of the CARES Act continue to change or need clarification, but MNA officials encourage nonprofit leaders to apply for the PPP as soon as possible in case the funds run out.

They recommend nonprofit executive directors consult their board chair and finance committee, and review the organization’s finances to determine if the loan makes sense.

Another benefit under the CARES Act is the employee retention tax credit, but organizations that receive a PPP loan are not eligible for the credit, Varnum’s Rietberg said. The credit is available to nonprofits that have seen a 50 percent or greater decline in gross receipts as a result of the COVID-19 crisis, or whose operations have been fully or partially suspended as a result of Gov. Gretchen Whitmer’s stay-at-home order.

Eligible organizations may qualify for a 50 percent refundable credit for qualified wages paid during the crisis, up to $10,000 paid to each employee or $5,000 in actual credit per employee.

“This benefit may be of particular value to those nonprofits that rely on earned income and have had to close their doors due to the current crisis,” Rietberg said.

In addition, nonprofits that are especially strapped for cash also can apply for Economic Injury Disaster Loans online through the SBA, but there is no loan forgiveness. EIDL loans exclude religious organizations unless they operate child care centers or food banks. Nonprofits can apply for up to $2 million through Dec. 31.

The loan application is based on credit score, but it waives personal guarantees up to $200,000.

recommends nonprofit leaders refrain from Alaimo said human services nonprofits typically making drastic, across-the-board cuts. only have one to three months in cash reserves, “Pause and see if it’s possible to make cuts which makes them fragile. He believes it will benat the margins,” he said. “See where you can cut efit nonprofits in the long run to take advantage of one area 2 or 3 percent and another one 15 perthe Paycheck Protection Program and keep people cent. The (budget) items employed if possible. closely related to your mis“Keeping your staff is sion and operations, they going to help you when you embody who you are and ramp up again,” he said. what you do.”

Benefits to keeping Many nonprofits also staff on include consishave endowment funds, tency, quality, sustainabilwhich are considered ity and reduced opera“rainy day” funds and tional costs compared to include restrictions. It may hiring and training new be necessary to tap into people. In addition, nonthem or go back to donors profits that are closed and foundations and see if should stay connected restrictions can be tempoto clients, patrons and rarily relaxed, Alaimo said. donors and use online Typically, foundations tools and platforms to and private funders have remain visible. specific grant requirements “Don’t go silent, don’t that dedicate resources to go dark,” Alaimo said.

— SALVATORE ALAIMO programs rather than oper“Communicate with your Associate Professor at GVSU ating costs. people. You don’t want to “What I am hoping is lose those relationships. government assistance is That social capital is the available, but I really hope the funding world currency you’re operating on, and you don’t want steps up,” Alaimo said. “Now is the time. Shake to get detached from your people.” those assets free, stop penny pitching. Double Besides applying for grants, forgivable your funding if you need to, triple it.” loans and other federal assistance, Alaimo

“What I am hoping is government assistance is available, but I really hope the funding world steps up. Now is the time.

Shake those assets free, stop penny pitching. Double your funding if you need to, triple it.”

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‘Don’t go silent, don’t go dark’ While economists advise businesses and nonprofits to have six to 12 months of operating expenses in reserve to help weather a crisis like this, many nonprofits have much leaner savings accounts.

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Loan eligibility The Michigan Nonprofit Association hosted the first of several Tele-Town Halls on April 3 to explain the CARES Act and how it can benefit nonprofits. SBA lenders, nonprofit leaders, attorneys, and others are still getting up to speed on the massive legislation that is funneling federal dollars to individual states in an effort to keep businesses and nonprofits afloat.

The Paycheck Protection Program provides incentives for small businesses and nonprofits to keep workers on their payroll. Loans are available through SBA-approved lending institutions, and can be awarded to 501(c)(3) organizations with fewer than 500 employees, including faith-based organizations and churches. Applications opened on April 3, and loan forgiveness is available if all employees are kept on the payroll for eight weeks.

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Q&A John Walsh President of Michigan Manufacturers Association Just barely three months into John Walsh’s role as president of the Michigan Manufacturers Association (MMA), the COVID-19 crisis hit the industry with a nearly complete shutdown of the state. MMA, which serves as the lobbying arm for the automotive industry and other manufacturing companies, has pivoted to communicate and advocate in Lansing for members while also connecting manufacturers that can address the shortage of medical supplies with the health systems that need them most. Walsh spoke with MiBiz about his vision for MMA and what the organization can do to help companies make it through the current crisis.

Why do you think you were chosen for this position?

I think it’s a combination of my background. Over the years, I’ve worked in the private sector as an attorney and worked closely with manufacturers primarily in transactional work, contract work between manufacturers and mergers and acquisitions. Four of my eight years in academia, I worked closely with training programs for manufacturers and other businesses. I’ve spent time in both the local and state-level government. I’ve always had a focus on manufacturing, and what the association was looking for was for somebody that could speak not only to members but to work with legislators and stakeholders. When you put it all together, I think I met their needs and they clearly met what I was hoping for in a position.

What were you hoping for?

I missed public policy work. The MMA has an operational aspect to be sure, but it also has a heavy impact on public policy. It certainly affects our manufacturers and their employees, but it can have a broader societal impact as well. I wanted that. I wanted an organization that had some history to it, and the MMA has over 100 years of history. Also, I wanted a good staff. I have a fantastic and very, very supportive board and a staff that knows what they’re doing and they’re willing to work hard. It’s all there.

You started in January, which was only a couple of months before the COVID-19 crisis that we’re facing now came to light. What has that experience been like?

We were well on the way to working with my board and my staff and how to move forward.

We have those plans in place, but we’ve had to set them aside while we focus exclusively on the coronavirus and the state and federal response to it. We’ve pivoted because it is required.

We filter through the information aggressively and then distill it into pieces that we think our members want, and from their response, I think we’re hitting the mark. We keep them up to date on the changes at the state level. It comes fast and furious, every single day, and we try to make it as simple as possible.

What role does advocacy play at this time?

The governor and her staff worked very closely with us in terms of helping define what impact an executive order might have. They give us a heads up. They ask us for our opinion. That’s not just the MMA — they’re asking the chamber and other business groups. What might this mean?

How do we mitigate damages? How do we promote health and safety? It’s been a fantastic opportunity to work with the Whitmer administration and the legislative leadership moving forward.

Some of your members are rapidly shifting their operations to produce needed health care supplies. Describe what you’re seeing.

It’s dynamic, but we are making progress with matching manufacturers that are not in the health care space to provide personal protection equipment or even more sophisticated equipment like ventilators. For our largest members, they’re able to team up and work with manufacturers already there. Ford and GM, for instance, are working with manufacturers of ventilators. That makes the process go a little faster.

For the smaller members, it’s trying to match them with either the State Emergency Operations Center or the health care system so that they can directly provide these products.

One of the most gratifying things in this position, just in general, is when you put a call out and ask for help in this country, people just respond. I don’t care who they are, they stand up.

We asked our manufacturers if they thought they could do something to help, and 300 of them out of our 1,600 members wrote immediately. Some admitted that they make parts for the automotive industry and weren’t sure that anything they do can even come close to a medical device. But they have the manpower available. They have trucks and can deliver things. Just the overwhelming response was fantastic. I don’t care how big the company is, small and large.

It seems like manufacturers want to help and they also don’t want to stay idle during the shutdown. Is it good for business to quickly transition to the health care space right now?

The immediate response was really heartfelt, but certainly, there’s a business aspect to it. They have the capacity. They have people that are trained and there’s a need. When you put that all together, I think there’s an emotional and logical argument.

Interview conducted and condensed by Jessica Young. COURTESY PHOTO

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APRIL 13, 2020 / MiBiz

IN THE NEWS M&A

n Grand Rapids-based public relations and investor relations firm Lambert & Co. has acquired ad agency Fairly Painless Advertising Inc. of Holland.

The deal gives Lambert & Co. added complementary capabilities in creative services and advertising. Fairly Painless will continue to maintain its current brand.

Founded in 1992, Fairly Painless serves regional and national clients in the automotive and manufacturing, consumer products, education, financial services, nonprofit and retail sectors. The firm employs 12 people. Terms of the deal, which closed in early March, were not disclosed. n Jackson-based Melling Engine Parts acquired Performance Springs UK Ltd. of Blackpool, England.

The company was renamed Melling Performance Springs Ltd., and management and sales staff are staying on under the new ownership, according to a statement. Performance Springs is a designer and manufacturer of automotive and industrial springs.

Family-owned Melling Engine Parts is a supplier to the original equipment and performance aftermarket segments. Terms of the deal were not disclosed. n An affiliate of Grand Rapids-based Universal Forest Products Inc. (Nasdaq: UFPI) has acquired the operating assets of Quest Design & Fabrication and Quest Architectural Millwork, collectively known as Quest. Based near Houston, Texas, Quest designs, fabricates and installs millwork and casegoods for a variety of commercial uses, including builder’s sales centers, design studios, hospitality, corporate offices and health care, according to a statement. The company had approximately $22 million in sales in 2019. Quest will join Universal Forest Products’ commercial construction business unit. n Pallet management firm Kamps Inc., based in Grand Rapids, has acquired wood products wholesaler D&H Bark Inc. of Manton in Wexford County.

D&H Bark has been in operation for more than three decades and specializes in wood products ranging from hardwood, red pine, and cedar barks; animal bedding; colored mulches; and landscape chips. For Kamps, the acquisition will allow the company to capitalize on ongoing growth nationally in its pallet and recycling divisions. The addition will allow Kamps to produce bark and mulch at a higher volume, as well as expand its customer base. Terms of the deal were not disclosed. n Ada-based design and development firm 2B Studio Inc. has been acquired by Innovation Studios LLC, which is based in Plymouth in Southeast Michigan. 2B Studio’s founder Bruce Sienkowski will remain as president of the company, which currently has eight employees. Innovation Studios is led by Herman Grewal, who ventured into the design business after owning and operating restaurant franchises. Sienkowski worked with Grand Rapidsbased Small Business Deal Advisors LLC. The Business Law Group served as legal adviser to 2B Studio, while Rhoades McKee PC advised Innovation Studios. Additionally, Small Business Deal Advisors represented Dickey’s Barbecue Pit of Novi in its sale to an individual investor in a deal financed by The Huntington National Bank. n Lansing-based food and animal safety products manufacturer Neogen Corp. (Nasdaq: NEOG) completed its fifth international deal of 2020 with the acquisition of Chile-based Magiar Chilena, a distributor of food, animal and plant diagnostics. Terms of the deal, which closed March 31, were not disclosed. Neogen will plug Magiar’s assets into its wholly owned subsidiary, Neogen Chile SpA, according to a statement. The Magiar deal complements Neogen’s previous acquisitions of similar businesses in Argentina and Uruguay and gives the company a physical presence throughout the “Southern Cone” of South America, a large agricultural producing region. Terms of the deal were not disclosed. n Kalamazoo-based National Flavors LLC was acquired by Cleveland-based private equity firm The Riverside Co., according to a statement. National

Flavors is a producer of flavors used in beverages, frozen desserts, baked goods, confections and processed fruits. The company will become part of the specialty ingredients portfolio for Riverside, which typically invests in lower middle market companies.

Terms of the deal were not disclosed.

CAPITAL RAISE

n Grand Rapids-based Blackford Capital closed in March on a $700,000 raise for Grand Havenbased Grand Power Systems Inc. that involved four investors, according to a filing with the U.S. Securities and Exchange Commission. The filing indicated the private equity firm wants to raise another $50,000 for Grand Power. Blackford Capital plans to match the investment with debt to provide growth capital for Grand Power. The growth capital will go toward new engineering technologies.

CONTRACT

n Grand Rapids-based Alliant Healthcare Products was awarded a $43.7 million, five-year Laboratory ECAT contract by the Defense Logistics Agency. The ECAT contract is an online electronic catalog for laboratory-specific medical research products, and acts as one of the preferred purchasing sources for the Department of Defense and the Veterans Affairs health care system. Alliant Healthcare will work with Olympus Life Sciences to provide ECAT customers with microscopes, accessories and other laboratory products. Alliant Healthcare is a service-disabled veteran-owned small business specializing in federal government sales, contracting and distribution.

INSURANCE

n The Insurance Alliance of Michigan named Erin McDonough as its new executive director.

McDonough, who most recently served as president and CEO of the Michigan Oil and Gas Association, succeeds Tricia Kinley, who retired April 3. McDonough has 17 years of public policy experience and 11 years of executive association management experience, including past service as executive director of the Michigan United Conservation Clubs.

MEDICAL DEVICE

n Kalamazoo-based Stryker Corp. developed a low-cost, limited-release emergency response bed for health care providers to use during the COVID19 pandemic. In developing the bed, Stryker focused “on meeting the supply needs of our customers so they can focus on taking care of patients right now,” said Brad Saar, president of Stryker’s Medical division. Stryker expects to make 10,000 beds a week.

DEVELOPMENT

n The U.S. Department of Housing and Urban Development awarded nearly $2 million in grants to Michigan fair housing organizations. The funds were disbursed to confront violations of the U.S. Fair Housing Act and combat housing discrimination. The Grand Rapids-based Fair Housing Center of West Michigan received $425,000 total from HUD, while the Kalamazoo-based Fair Housing Center of Southwest Michigan was given a total of $423,605 for enforcement and education and outreach-related services. n Michigan’s 12 federally recognized Native American tribes have been awarded $4.5 million in block grants for affordable housing activities to protect the health and safety of their tribal citizens during the COVID-19 pandemic. The funds, issued

by HUD, are part of $200 million in Indian Housing Block Grants included in the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Under the funding, tribes can use the grants for housing development, maintenance, modernization and housing-related services for tribal members. West Michigan tribes that received funding include the Dowagiac-based Pokagon Band of Potawatomi Indians ($652,952), Manistee-based Little River Band of Ottawa Indians ($91,607), the Fultonbased Nottawaseppi Huron Band of Potawatomi ($130,894), and the Dorr-based Match-E-BeNash-She-Wish Band of Pottawatomi Indians, known as the Gun Lake Tribe ($58,700).

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West Michigan is at the center of the Laker Effect.

Here, you’ll find Lakers contributing their skills and drive to its considerable growth — as analysts and engineers, biochemists and health professionals, leaders of business and community. Every day your support for Grand Valley demonstrates the power of what can be.

a nonprofit organization dedicated to maintaining West Michigan’s competitive edge in the global marketplace has acquired a new website: wmwta.org The undersigned served as exclusive web development adviser to the West Michigan World Trade Association.

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Drinking Economy Real Estate Spotlight: Mason County Contract Deadline: 4.15.2020

5.11.2020

Deep Dive: Immigration Contract Deadline: 4.29.2020

6.22.2020

By SYDNEY SMITH | MiBiz ssmith@mibiz.com GRAND RAPIDS — The opportunity to lease brand new office space in the heart of downtown Grand Rapids offered Van Wyk Risk Solutions the chance to grow into a new location.

This month, Van Wyk will be the first tenant to move into the new Warner Building, located at 150 Ottawa Ave. NW in downtown Grand Rapids. After outgrowing its space on Wealthy Street in East Grand Rapids, the insurance agency will occupy 17,500 square feet on the 10th floor of the Warner Building.

Although the company viewed about 20 different potential office locations, the Warner Building came out on top because of its location, quality and amenities, and because it offered the firm the chance to move into new Class A office space, said Max Van Wyk, chairman and CEO of Van Wyk Risk Solutions.

“When you’re starting from scratch in a space, I think it’s always easier and more convenient to have new space, because you can build it out the way you want it to be,” Van Wyk told MiBiz. “We needed to look at spaces where we could accommodate everyone in a central location and provide the amenities our employees deserve.”

The vacancy rate for office space in the central business district and suburban market in Grand Rapids remained below 10 percent for the first time in 30 years, according to a report from the Grand Rapids office of Colliers International.

The report highlighted the need for more new construction or renovations in older buildings, as companies continue to seek out amenity-rich offices to attract and retain their employees.

NAIAS Report/Auto Industry Forecast Real Estate Spotlight: Kalamazoo County Contract Deadline: 6.10.2020

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West Michigan’s Tribal Economy Contract Deadline: 6.24.2020

Education & Talent Development Deep Dive: Immigration Part 2 Real Estate Spotlight: Berrien County

7.20.2020

Industry 4.0 Real Estate Spotlight: Ionia County Contract Deadline: 7.8.2020

Contract Deadline: 5.13.2020

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8.3.2020

Commercial Lending Report Deep Dive: Immigration Part 3

9 West Michigan Industries Being Distrupted by AI

Court ruling dashes plans for new AHPs

Amenity-rich Class A office space still in demand in GR, suburban markets

See CLASS A OFFICE on page 9

5.26.2020

SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

‘FLIGHT TO QUALITY’

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Race to add hospital capacity keeps West Michigan manufacturers on the job

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Arsenal of health:

‘CAN YOU HURRY UP?’

rdinarily, our next print issue would have arrived in your mailboxes today. But because we are living in extraordinary times, the paper isn’t there.

Instead, we produced an enhanced digital edition and a downloadable PDF version of the March 30 edition that was emailed to our 21,000+ print and e-newsletter subPAGE 11 scribers. We’re also posting the digital versions on our www.mibiz.com

By JOE BOOMGAARD | MiBiz website to make it available jboomgaard@mibiz.com to the tens of thousands of non-subscribers that visit ZEELAND — As Brad Davis tracked news about the our website and social media spread of the coronavirus in early March, he cauchannels. tioned his production team at MedViron LLC that We also lowered our paythe company might need to shut down to do its part wall on March 16 to make all with social distancing. of our coverage of the coroAt the time, his thinking was navirus pandemic free to that the maker of medical furreaders.

And our hope newsroom Groups still to form health nishings had no need to keep has stepped up its coverplans if appeal proves successful production running. The best age of business news, policy thing for the company and the updates and what all this

By MARK | MiBiz employees was for them all to do means for SANCHEZ West Michigan msanchez@mibiz.com their part in helping “flatten the companies and the region’s curve” and curb the spread of the economy. f a remedy ever comes, pandemic.

The print version of The Employers’ Davis Association still wants to offer members “If we have to shut down, we MiBiz will be back. Over the employee have to shut down, that is what it is,” said Davis, the next an twooption weeks,for we’ll be giv- health coverage.

Thesubscribers association the was all set this past and president of MedViron. “I don’t give a shit founder ing print springtotohave launch an mailed association health plan. about making money — it’s bloody serious; it’s scary.” option MiBiz with Health, The toPartnering their homes orinsurer offices,Priority or Employers’ Association planned to offer HMO to receive a digital edition in and point-of-service products to member their email inbox. If you’re a employers, according to a filing with state regular print subscriber, look regulators who approved the coverage last fall. for an email from us on how Then came a March 28 federal court ruling to do this. that struck down a 2017 executive order by The net of it: We aren’t President Trump and subsequent rules issued

By ANDY BALASKOVITZ | MiBiz printing right now, but we’re by the U.S. Department of Labor that broadabalaskovitz@mibiz.com still publishing. ened the ability of small Thanks for your conbusinesses to join together or Michigan companies scaling back but not tinued readership and to form association health completely shutting down as the state tightpartnership. plans. ens restrictions to stop the spread of the “We ended up pullcoronavirus, a little-used program is drawBe well. ing that off the table after ing new attention as an alternative to layoffs. that result from the court,” Michigan’s voluntary Work Share program, oversaid Jason Reep, presiseen by the Unemployment Insurance Agency, dent for The Employers’ Brian Edwards, Publisher avoids layoffs by reducing hours across more employReep Association, based in bedwards@mibiz.com ees. Instead of some being fully unemployed while Grand Rapids.

The Employers’ Association standsothers amongmaintain full employment, more workers

Could better commuter transit aid talent attraction?

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SERVING WESTERN MICHIGAN BUSINESS SINCE 1988

Manufacturers shift operations to meet needs during pandemic

By JESSICA YOUNG | MiBiz jyoung@mibiz.com

D Zeeland-based MedViron has received numerous orders for its overbed tables from health systems across the country that are ramping up capacity to deal with COVID-19 patients. COURTESY PHOTO But then the company started getting emails and phone calls from large health systems across the country inquiring about MedViron’s overbed tables and the lead times to get orders filled. One order led to another and all of a sudden, the company’s strategy had to change.

“I have big hospital systems that are contacting us in a panic needing overbed tables in order to get rooms open,” Davis said. “All of a sudden, it was like boom: In 24 hours, we had an order and we’re told that there’s going to be another order coming for another 30 units, and then we got another order from (an existing customer) who’s all of a sudden moving forward on a project. I think it’s just the start.”

Davis said Wednesday the company had an order backlog of nearly 300 units, with a realistic expectation that it would grow to nearly 900 units by the end of the week. One customer from New York asked if they could get the tables within two weeks as the hospital races to increase its bed space.

See MEDICAL FURNITURE on page 5

emand for the mobile computer workstations produced by Walkerbased health care furniture manufacturer Altus Industries Inc. had already begun to spike as hospitals started setting up quarantine and triage areas in preparation for an influx of COVID-19 patients.

Then as Gov. Gretchen Whitmer issued a stay-at-home executive order on March 23, Altus began getting requests for a product not yet in the company’s wheelhouse: mobile ventilator carts.

“We had a customer using one of our carts already as a ventilator cart — it was close enough,” Altus co-owner Eric Kahkonen told MiBiz. The engineering team at Altus got to work using the company’s standard components to configure Kahkonen a cart designed to support ventilators, which mechanically “breathe” for patients unable to do so on their own. The COVID-19 virus attacks the lungs and, in severe cases, makes breathing difficult and requires medical ventilators.

After just a few days, the first ventilator carts were already in production. Altus has begun taking orders for ventilator carts as well as telemedicine carts, which allow doctors and See RETROFITTING on page 4

Work-sharing draws new attention as a ‘win-win’ alternative to layoffs

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WATERLOGGED WONDERLAND Former Muskegon coal

Unseasonably rainy weather plantcoupled to get with near record-high Great Lakes water levels have many West Michigan business newleft owners owners hoping the region will PAGE 12 dry out in time to salvage the season for visitors and tourists. SEE PAGE 12 MARCH 16, 2020 • VOL. 32/NO. 11 • $3.00

STORY AND PHOTO BY MARLA MILLER

STATUS QUO

GR debates increasing sites for marijuana businesses; equity, localenforcement ownership actions and agency’s concerns revisions to stateremain liquor code enacted

Spectrum Health prioritizes buying local

a handful of organizations in Michigan that had their plans scrapped by the federal court ruling. Reep still holds out hope for launching

By JOE BOOMGAARD | MiBiz GRAND RAPIDS — Tensions between Michigan craft beverage producers and the state regulatory agency appear to be ratcheting up with the filing of a new federal lawsuit, MiBiz has learned.

In the case filed last week in the U.S. District Court for the Western District of Michigan, Sawyer-based Greenbush Brewing Co., Hudsonvillebased Farmhaus Cider Co., the Michigan Cider Association and Grand Rapids-based Vander Mill LLC are suing the Michigan Liquor Control Commission. The parties allege the

last fall are unconstitutional, and that

By SYDNEY SMITH | MiBiz the state laws are preempted by federal lawsssmith@mibiz.com regarding the production and sale of alcohol, particularly cider, which is GRAND RAPIDS — Following classified as wine. mixed messages Grand Plaintiffs, who sayfrom theirthe businesses Rapids City Commission last are being financially harmedlate because month, of the actions,marijuana also allegeadvocates the new law hope city officials will ultimately is unconstitutionally vague, leaving openproducers more properties for“arbitrary medibeverage open to cal and recreational facilities. and capricious” enforcement actions.

On Feb.stems 25, thefrom commission The lawsuit the MLCC went back and forth on applienforcement division’s finding on June cations for bothwhich types holds of facili19 that Greenbush, both ties. The city approved 24 microbrewer andhas small winemaker licenses for medical marijuana businesses, while another 14 are waiting for approval. The city hasn’t finalized recreational marijuana zoning regulations and won’t start accepting applications until April 20.

Hours after voting to delay recreational and pause medical applications, the City Commission reversed course PAGE 4 after the six commissioners could not agree on how to move forward. A last-minute dispute among commissioners also involved equity and local ownership.

Commissioners were considering zoning amendments recommended by the Planning Commission that would have eliminated a waiver process for sensitive land uses like religious institutions and opened more properties for cannabis development.

Marijuana advocates have sought to relax distance requirements in order to expand the number of properties qualified for marijuana business use, which they say could also help address concerns over a lack of local ownership.

Joe Neller, co-founder and chief government affairs officer at Dimondale-based Green Peak Innovations LLC, said the Planning Commission rejected a provisioning center proposed by his company because of the site’s proximity to a church, even though the company had a waiver from the church.

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Manufacturers prepare ahead for cyber threats

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By MARK SANCHEZ | MiBiz msanchez@mibiz.com

Automotive analysts see shifting dynamics amid coronavirus spread INSIDE: jyoung@mibiz.com

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licenses, was in violation of state law Regardless of the federal question over its bonded transfers of cider, regarding the state law, Greenbush which it purchased from Vander Mill. owner Scott Sullivan said the comIn the court documents, Greenbush pany met the requirements in the said the enforcement division told the revised Michigan Liquor Control company it “was required to ferment Code that would allow it to particievery drop of wine that it sold,” seized pate in the bonded transfer of wine. all of its cider inventory and told the Greenbush produces some of its own company to stop using its small winewine and cider under the new definimaker license, effectively barring the tions, thereby qualifying it under state producer from selling all cider and wine. law to be eligible for bonded transfers.

The lawsuit challenges the consti“This has happened to a number tutionality of the seizure, which was of breweries before us, and for whateffected without a search warrant. The ever reason, no one has been willVisitcurrently mibiz.com for ongoing the of COVID-19 in West Michigan. state is holding aboutcoverage $7,200 of ing tobusiness stand upimplications and take MLCC head in Greenbush’s property, according to on,” Sullivan told MiBiz. “If I think See LAWSUIT on page 3 court filings.

he automotive industry is scrambling to strike a balance between near-term execution and unsteady industry disruption from the novel SEE PAGE 16 coronavirus outbreak.

That’s according to industry experts who say the effect of the virus, which has been spreading around the globe since late December and shut down production in specific regions, has shifted forecasts for global automotive production and U.S. sales downward.

Indeed, Gov. Gretchen Whitmer announced the state’s first two presumptive positive cases in Oakland and Wayne counties on March 10, followed by a state of emergency declaration.

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Virus concerns Planning drive additional due diligence in M&A transactions

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“In many ways, this is an ideal downturn to use work sharing — we don’t think there’s a great need for restructuring the economy,” Houseman said. “In those circumstances, it’s really beneficial if possible to maintain those employment relationships.”

Work sharing, or “short-time compensation,” also allows employees to maintain health insurance benefits. Research has shown that fully severing the employment tie increases the likelihood of “persistent adverse effects to their employment and earnings for many years,” Houseman said.

See WORK SHARING on page 10

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an AHP if an appeal turns out successfully.

West Michigan Coronavirus That could occur if the Department of SERVING MICHIGAN SINCE 1988 LaborWESTERN prevails in appealing the rulingBUSINESS

by U.S. execs talk concerns District Court Judge John Bates of the District leadership sideline West of Columbia. As well, Congress could enact strategies — C O R O N A VSee IAHPsRon page U 7S I NMichigan MICHIG amid sports teams PAGE 14 pandemic

Craft beverage producers sue MLCC, allege unconstitutional state laws, enforcement jboomgaard@mibiz.com

qualify for a percentage of unemployment benefits based on their reduction in hours.

In the unique circumstances brought on by the coronavirus, in which businesses have been ordered to shut down for a certain time period, work sharing can be beneficial by keeping trained workers on staff without having to go through a new round of hiring.

“It’s potentially beneficial to both workers and businesses when the downturn is expected to be temporary,” said Susan Houseman, vice president and director of research at the Kalamazoo-based W.E. Upjohn Institute for Employment Research.

Ea rlier t his mont h at t he West Michiga n Automotive Suppliers Symposium in Grand Rapids, Mike Wall, director of automotive analysis in Grand Rapids at IHS Markit, forecasted light vehicle sales of 16.8 million units in the U.S. this year, in the segment that includes cars, utility vehicles and pickup trucks.

Already, that outlook is changing as COVID-19 continues to develop across the country, he told MiBiz. As of this report, IHS Markit was still finalizing a revised sales projection, but Wall expects the new forecast to drop to 16.5 million units.

“Everything is happening so quickly and there is so much volatility that given the circumstances, 16.5 (million) will still be a very good year,” Wall said.

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he coronavirus outbreak that’s battered Wall Street and caused supply chain disruptions for some manufacturers has yet to interrupt transactions, although more conversations are occurring as part of due diligence, according to M&A professionals.

Deals that are in process involve a deeper dive into due diligence in situations where one company is acquiring another that sources raw materials or components from China. Buyers are asking for more information about supply chains, backup plans and the capabilities of replacement suppliers.

Brown “It’s still very new.

Everyone’s trying to figure it out on the fly, but if clients were selling source parts from China, you’re going to have to make sure they have a backup supply-chain plan in case there is a major disruption,” said Mike Brown, who leads the M&A practice at investment bank Charter Capital Partners LLC in Grand Rapids.

See DUE DILIGENCE on page 9

Michigan Chamber prepares for ‘war’ over graduated income tax proposal

By ANDY BALASKOVITZ | MiBiz abalaskovitz@gmail.com

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s progressive political advocates seek lower state income tax rates for most Michigan residents while higher earners pay more for infrastructure needs, the state’s leading business group is bracing for a highly contentious political campaign.

Organizers behind the Fair Tax Michigan campaign, which was announced in late February, are

seeking a constitutional amendment to change Michigan’s flat 4.25 percent income tax to a graduated structure based on income. The Board of State Canvassers is expected to decide in the coming weeks whether organizers can collect signatures in hopes of putting the question to voters in November.

“If this qualifies for the ballot, frankly, it would be war,” said Rich Studley, president and CEO of the Michigan Chamber of Commerce.

For years, the Chamber has opposed efforts in the state Legislature for a

graduated, or progressive, income tax.

The Democratic-backed proposals have failed to gain traction in the Republicanheld state House and Senate.

In t he late 1960s a nd 1970s, Michigan voters by wide margins rejected ballot proposals for a graduated income tax. Such a change would require a constitutional amendment.

However, supporters say growing income disparities and declining public services have shifted public opinion.

The Fair Tax Michigan plan would raise $1.5 billion in additional revenue for

schools and road and water infrastructure starting in 2022. The plan would reduce the state income tax rate for individuals with income of $175,000 or less and joint filers with income at or below $350,000. According to organizers, 95 percent of Michigan residents would pay a lower state income tax rate than they do now.

Of the 41 states with income taxes, 33 have a progressive structure. Federal income tax also follows a graduated model.

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Leaders push for action to raise wages PAGE 21

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