Instability remains for several of Ann Arbor area's top employers as Thomson Reuters preps sale
Call it the first gut check for Gov. Rick Snyder’s new economic development strategy.
In an unsettling announcement, information services giant Thomson Reuters said last week that it would sell off its Ann Arbor-based health care and science division, which employs about 800 workers at the former 777 building on Eisenhower Parkway.
Thomson Reuters employs about 800 workers at its Ann Arbor-based health care and science division, which will be sold.
File photo | AnnArbor.com
Borders occupies only about 25 percent of its Ann Arbor-based headquarters, and the company is considering a move to western Wayne County or elsewhere.
Melanie Maxwell | AnnArbor.com
Automotive Components Holdings LLC recently reached an agreement to sell the fuel tank business housed at its Milan plant.
File photo | AnnArbor.com
CitiMortgage recently announced plans to cut 108 jobs from its Pittsfield Township office.
File photo | AnnArbor.com
General Dynamics employs about 450 workers at its Advanced Information Systems division in Ypsilanti Township. In 2010, the company reported its lowest sales increase in 15 years.
File photo | AnnArbor.com
Terumo Cardiovascular Systems recently agreed to pay $35 million in fines after admitting to FDA violations tied to its Scio Township medical devices operation.
File photo | AnnArbor.com
Although the company’s health care division is profitable, Thomson Reuters’ decision to unload the $450 million operation is cause for concern. There’s no guarantee that the buyer will choose to keep the operation here.
Calvin Mitchell, a Thomson Reuters spokesman, said it was too early to say how the local operation would be affected by a sale. “I wouldn’t want to speculate on that,” he said.
Meanwhile, instability at several of the Ann Arbor region’s biggest private sector employers provides reason for concern that the recovery in the jobs market won’t be as swift as economists are projecting.
If Thomson Reuters exited Ann Arbor, that would equal the largest blow to the region’s economy since Pfizer Inc. announced in January 2007 that it would close its Ann Arbor research campus, displacing more than 2,100 jobs by the end of 2008.
In the past, the Michigan Economic Development Corp. might have thrown a pot of incentives at Thomson Reuters’ suitor to convince the company not to leave. But Snyder and the Michigan Legislature eliminated the Michigan Economic Growth Authority tax credits and replaced them with a capped pool of incentives to be managed by the MEDC.
Now, Snyder is arguing that the state’s reduced business tax rate, a flat 6 percent tax on corporate profits, should be sufficient to help most companies grow.
Paul Krutko, the new CEO of economic development group Ann Arbor SPARK, is meeting with Thomson Reuters within a week to ascertain how we might be able to convince the company to stay. He’ll have to try to convince the company’s suitor to stay in Michigan without MEGA tax credits, unless MEDC sees fit to distribute some of its limited incentives to the acquirer.
But Krutko said he’s accepted that the realities of government budget mean that economic development firms have to get creative to help businesses grow.
“I’m a realist,” he said in an email. “The changed incentive environment is a reality. The new corporate tax structure in effect has given Thomson Reuters and any potential suitor a very different taxing environment for all current operations and any growth that might occur here. We need to communicate that to TR as they talk to potential acquirers and to the executives who ultimately purchase the division.”
Other sources of concern for the local economy:
— Borders Group Inc. is considering a move of its corporate headquarters to western Wayne County, which would affect nearly 400 employees at the company’s office on Phoenix Drive on Ann Arbor’s south side. And there are serious questions about whether the company will survive at all in the long term.
— Automotive Components Holdings LLC, an entity controlled by Ford Motor Co., is selling the fuel tank business at its 1.28-million-square-foot Milan plant to French auto supplier Inergy Automotive Systems, which plans to build a new plant elsewhere in southeast Michigan within two years. That means the Milan plant will be vacant if ACH fails to find a buyer. Meanwhile, ACH’s Saline plant continues to operate at full capacity with some 2,000 employees. But ACH’s ultimate objective is to sell or shut down all of its plants.
— St. Louis, Mo.-based CitiMortgage, which manages most of Citigroup Inc.’s $170 billion mortgage portfolio, is cutting 108 positions at its 255,000-square-foot office in Avis Farms South off of State Road. That division continues to employ more than 850 workers, but the cuts come as the industry is bracing for a dip in new mortgage originations and refinancing.
Meanwhile, several other firms in the Ann Arbor area that have not resorted to layoffs are, nonetheless, facing industry troubles:
— Masco Cabinetry, which consolidated divisions into a new operation in Ann Arbor Township in late 2010, is facing a major drop in sales over the last few years. The company moved some 350 workers to the former Flint Ink building with plans to eventually add another 100.
— Edwards Brothers, which employs about 450 workers at it’s Ann Arbor book printing headquarters, is fighting for market share in a declining industry that also affects several other book printers in the area.
— General Dynamics’ Advanced Information Systems division in Ypsilanti Township employs about 450 workers. But in 2010, General Dynamics reported its lowest sales increase in 15 years as defense spending comes under greater scrutiny in Washington.
— Terumo Cardiovascular Systems recently agreed to pay $35 million to the U.S. Food and Drug Administration after the company failed to comply with numerous FDA regulations over quality procedures and reporting requirements. The company has said that it won’t have to cut from its 450-person workforce on Jackson Road in Scio Township, but further squabbles with the FDA could spell concern.
In March, University of Michigan economists projected that Washtenaw County would add 8,840 jobs from 2011 through 2013 as the region’s unemployment rate declines from an average of 8.6 percent in 2010 to 7.2 percent in 2011, 7.0 percent in 2012 and 6.7 percent in 2013.
A recovery in the manufacturing sector and a strong health care industry can be partially credited with fueling the turnaround.
But the projections show that a total recovery is still far off. If the U-M forecast is accurate, the Ann Arbor area will still have 500 fewer jobs in 2013 than it had in 2005.
Jobs categorized as "management of companies and enterprises" are not fueling growth. In fact, the number of jobs in this category fell by 958 from 2005 to 2010 and they’re not coming back. That figure is expected to rise from 1,358 in 2010 to 1,472 in 2013 — basically flat.
Indeed, job growth is likely to occur mostly at the region’s health care industry and its mid-sized, entrepreneurial companies. Look for job growth at firms like Ann Arbor-based online customer satisfaction measurement firm ForeSee Results, which is adding 70 workers this year, and Ann Arbor-based battery firm Sakti3, which is expanding its capacity to produce pilot-stage battery materials.
Krutko, who started his job as SPARK’s new CEO in April, said he’s asked his staff to deliver a list of “the 150 leading companies in the Ann Arbor region” so that he can meet with them within his first six months on the job.
Will taxes sway the company’s decision? That’s impossible to say. Thomson Reuters recently declined to say how Snyder’s tax changes would affect its local operation.
But Krutko is convinced that the cost of doing business in Michigan is competitive with the rest of the country.
“We need to be sure we are communicating why this is a good location for business with a high quality of life and relatively low operating costs when compared to other locations around the nation,” Krutko said.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
janeqdoe
Tue, Jun 14, 2011 : 4:26 p.m.
"Unsettling" seems like a premature analysis, but it makes for a catchy headline!
WillBcool
Mon, Jun 13, 2011 : 6:12 p.m.
Edwards Brothers has laid-off over 150 people since 2008. Also, rumors are a move to Kentucky may be in the works.
Hornet
Sun, Jun 12, 2011 : 5:24 p.m.
This has absolutely no relation to anything the State of Michigan is doing . Michigan state tax policy has absolutely nothing to do with this decision as TR like many multinational companies uses tax loopholes to get around paying income taxes to the US. The two healthcare operations that make up Thomson Reuters Healthcare in Ann Arbor were once private companies (Medstat & Solucient) that were acquired by Thomson before Thomson acquired Reuters - and Thomson Reuters has kept those operations in Ann Arbor, although they have offshored a number of positions. The reason they are selling off healthcare is that with the Reuters acquisition, their focus is global and Healthcare's focus really only applies to the US today. There is no reason to conclude that a potential buyer will move Healthcare operations out of Ann Arbor (or Evanston, IL, Greenwood Village, CO or Durham, NC) where their other acquisitions are still located. It might happen, but then again it might not. It really depends on who the buyer is. At this point, I think this article is purely speculation.
grye
Sun, Jun 12, 2011 : 5:03 p.m.
General Dynamics last employed 450 in 2006. Since then they have steadily decreased in the number of employees. They are currently just over 200. It would be interesting to have annarbor.com look into what happened with a great organization (former ERIM/Veridian) after GD took control.
Townie
Sun, Jun 12, 2011 : 4:59 p.m.
TR has been shopping the old Medstat unit for a while but put it on the back burner until the economy started to improve and it appears that they decided to bundle all the healthcare businesses they bought over the last 10 years into what they believe is a better package. Thomson has a history of making large strategic moves (it was in the oil, travel, newspaper businesses over the years) and this is just another. Looks like GE may be the buyer and at least it's a US company (even though it doesn't pay much in taxes here) for a change. In order to finance the purchase they'll probably pursue the usual 'consolidation' path which means job cuts.
Ralph
Sun, Jun 12, 2011 : 3:45 p.m.
Since we lost our manufacturing capacity there's no more mass production, no more mass consumption, therefore we don't need all these jobs. I'm afraid this is the new normal.
Ralph
Sun, Jun 12, 2011 : 3:41 p.m.
Inergy Automotive is planning on opening a new plant in Huron Township, which is located in Wayne County. Got lots of tax incentives through the LDFA.
Mike K
Sun, Jun 12, 2011 : 1:51 p.m.
Jennifer, the democrats and the unions have left this state in such a mess, it will take years to change the momentum. Though Rick is on the right track. King Rick will turn around this train wreck we call home. We individuals need to stand up and do our best for Michigan by teaching our children that earning success is the key to happiness.
Mike K
Tue, Jun 14, 2011 : 1:24 a.m.
Sorry Bill - the historical record of Jenny's 8 years is in tact. Michigan was once a jobs destination - I know, I relocated here in 1992. Now people are fleeing for jobs in other states. How does that happen? You might like her as a democrat, a "champion of the middle class", but the numbers speak for themselves. Speaking of education, albeit, I'm all in, but in my case, the investment my community made in me only left them with one less education individual. Educated individuals are free to find the BEST jobs in the BEST states not visa versa. It is noble to "preserve and expand" k-12 education, but buyer beware - there is no guarentee that these individuals will stay.
Wolf's Bane
Sun, Jun 12, 2011 : 6:18 p.m.
The Democrats and the Unions have left our state such a mess? Are you for real? Do you realize that without former Governor Granholm things would have been far worse and let many more of us in despair. Gov. Granholm realized early on the attracting companies to invest in Michigan was hugly important for our state as well as preserving and expanding (k-12) education in our state. It is really sad having to read your revisionist finger pointing.
Richard Lake
Sun, Jun 12, 2011 : 1:18 p.m.
So the elected critters attack the workers and educators and we see the results. Legal recall petitions are circulating to recall Michigan Gov. Rick Snyder. Petitions are or will be circulating very soon to recall these members of the Michigan Legislature as well as others: John R. Moolenaar James "Jase" Bolger Joel Johnson Howard Walker Tom Casperson Their support of the Emergency Financial Manager Bill proves that they are unsuitable for public office. The law strips local officials and leaders of the power granted to them by local voters, undermines the enforceability of binding contracts, and fails to consider the long-term economic and social impact on the state of Michigan. The Official website for the recall efforts is <a href="http://firericksnyder.org/" rel='nofollow'>http://firericksnyder.org/</a>
fjord
Sun, Jun 12, 2011 : 1:04 p.m.
As much as I'd like to blame this on the Governerd, the decision by Thomson Reuters to sell its healthcare unit has nothing to do with Michigan's evolving corporate tax structure. For one thing, TR Health Care has operations in numerous states, including Michigan, Illinois, North Carolina, Georgia, Colorado, Tennessee, Massachusetts, California, and Wisconsin. The entire healthcare unit is being sold, not just the Michigan component. Also, the announced reasons for the sale have nothing to do with cost savings. TR has a history of shedding units that it no longer deems to be a good fit with its overall objectives, regardless of how well they perform. I despise the Governerd's policies as much as anyone, but even I can't blame him for this development.
SonnyDog09
Sun, Jun 12, 2011 : 1:38 p.m.
The family needs cash to fund their purchase of the Atlanta Thrashers, which they will move to Winnipeg. To a Canadian, owning a hockey team is more important than owning a healthcare research unit. There is nothing that the Governor of Michigan can do to change that.
InsideTheHall
Sun, Jun 12, 2011 : 1:01 p.m.
Think about it, Obama econ policy that is a disaster, a state laden with a union culture, a major city (Detroit) that you cannot even compare to other major cities, and here in Washtenaw County a bunch of whining liberals in charge of Ann Arbor. Is any of this surprising???????
Waterdipper
Sun, Jun 12, 2011 : 1:39 p.m.
Well, you can WHINE all you want about Obama, Unions, Detroit, , and "whining liberals", but there's no real basis (except speculation) given for why T-R decided to sell-off its health care and science division. How off topic is that??
clownfish
Sun, Jun 12, 2011 : 1:27 p.m.
A2.com, you should not have removed that post from another commentator, it was not abusive or offensive in ANY WAY.
clownfish
Sun, Jun 12, 2011 : 1:26 p.m.
INSIDE, what are YOU doing to help our economy? How many jobs have you created? Are you helping to balance our budget by sharing some sacrifice? TR built this branch of it's business under Granholm and "lib" government, in A2, now they are selling it at a profit. How does that fit into your whining?
clownfish
Sun, Jun 12, 2011 : 1:20 p.m.
I woud have thought that with ACORN gone, our economy would have taken off! Trickle down economics says that as the wealthy grow wealthier they pass that on to the lower classes. Well, the wealthy are wealthier than they have ever been, but it does not seem to be trickling down. What gives?
clownfish
Sun, Jun 12, 2011 : 1:10 p.m.
Exactly what would you have the federal government do? Taxes have been cut to there lowest level in 60 years. Oil and gas production is at a high. Regulation of the banking and investment banks is stalled. What do you want? Most of the people whining are from "the right" of politics. They got just about everything they asked for from the feds, low taxes, lax regulation, Free Trade agreements, less unions, union concessions, public employee concessions etc. But now that the economy is still stalled they continue to whine and moan. If The Plan of low taxes, more free trade and fewer unions works, why are we bogged down? Do you think taxing the consumers of Michigan is going o create more jobs? Ann Arbor is the economic engine of SE Michigan, i guess libs have some clues. (see also :Boulder Colo, San Francisco CAL, Austin TX)
fjord
Sun, Jun 12, 2011 : 1:05 p.m.
Even if you had a point here, it would be utterly irrelevant to this situation.
clownfish
Sun, Jun 12, 2011 : 12:53 p.m.
WOW, things other than government policy effects jobs? Who woulda thunk it? We shall see if taxing consumers helps to boost the MI economy.
Wolf's Bane
Mon, Jun 13, 2011 : 11:54 a.m.
Gee, taxes would really help out here. I have no problem anting up.
Wolf's Bane
Sun, Jun 12, 2011 : 12:42 p.m.
Reuters was bound to slash some of its divisions and has already sold Gale, among its other holdings. However, the ongoing hemorrhaging of jobs in Michigan and the whole Film tax credit snafu, clearly illustrate that King Snyder's plans are not working and that we're actually dialing the clock of progress back, instead of forward. Maybe in the future, King Snyder will consider not fixing things that are NOT broken? Leave it along Rick, this is not Gateway, but our State!!!
Monica R-W
Sun, Jun 12, 2011 : 11:08 a.m.
So King Rick ends the MEGA Tax Credits and one of the larger employers in Washtenaw County, his home base, decide to take their puppies and pull under stakes. How is that "Shared Sacrifice" working out for ya! Film industry, which were creating jobs, are/have pulled up stakes and cancelled film projects in wake of ending the Film Incentive Credits. Thomson-Reuters is one of the first of many who decided that King Rick business tax cut is NOT ENOUGH for them to stay, probably without tax credits too. Brownfield credits are gone the way of the dinosaur. thanks to Rick, so wonder who will want to develop them urban areas and others now? Probably not many business....ya think! King Snyder, looks as if your tax credits is only helping your campaign donors so far. It sure will not help those 800 workers of Washtenaw County that will be on, what 20 instead of 26 weeks of state unemployment benefits, if the worse happens with Thomson-Reuters. Hope they remember, while they might have lost their job by truly no fault of their own....you and your state Republican House and Senate representatives gave them 6 less weeks to find another job....in a tough economy.
tom swift jr.
Sun, Jun 12, 2011 : 10:48 a.m.
Hey, Rick.... Nice job.
grye
Sun, Jun 12, 2011 : 5:05 p.m.
You sound as if Rick put an ad in the paper and sold the business. Get real. This is the normal course of all business. Buy and sell. Nothing different with a new governor. Find something else to pick on.
Peter Jameson
Sun, Jun 12, 2011 : 2:52 p.m.
You only see whats on the surface.