Detroit (1202)

Tuesday, 28 February 2006 11:47

The IC-DISC

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Over the last few years, U.S. taxpayers who export have seen their U.S. tax benefits curtailed. First, Congress was required to repeal the Foreign Sales Corp. regime. Subsequently, they were required to repeal the legislation that created the Extraterritorial Income Exclusion (EIE).

However, U.S. exporters should be aware that the program Congress initially created to provide an export incentive, the Interest Charged Domestic International Sales Corporation (IC-DISC), is still in existence. The recent implementation of a 15 percent tax rate on corporate dividends makes the IC-DISC worth looking into.

An exporter is allowed a deduction for the commission paid to the IC-DISC at the exporter’s ordinary tax rate but the IC-DISC shareholder is taxed on the resulting dividend at the 15 percent rate. Assuming a maximum 35 percent corporate tax rate, the tax savings can reach approximately 20 percentage points.

A brief history of the IC-DISC
The DISC provisions were enacted into law in 1971. In 1984, the rules were modified to comply with a European Community request, and the IC-DISC was created. At the same time, the FSC provisions were added to the tax code. The FSC provisions allowed for an exemption from U.S. income tax, whereas the DISC provisions only allowed for a deferral of U.S. income tax, and interest was charged on the deferral. Thus, the FSC became the preferred export entity in most cases, and the IC-DISC was used in only limited circumstances.

What is an IC-DISC?
The IC-DISC, in most cases, is no more than a paper entity, a U.S. corporation that is paid a commission on export sales of the related supplier (i.e., the exporter). The commission paid to an IC-DISC is generally the greater of:

  • 50 percent of the net profits, or

  • 4 percent of the gross receipts (but not more than 100 percent of the net profits) on exports of products that are manufactured, grown or extracted in the United States.

The products must be manufactured, grown or extracted in the United States by a person other than an IC-DISC, and they must be held primarily for sale, lease or rental for direct use, consumption or disposition outside the United States. Up to 50 percent of the fair market value of the export property can be attributable to foreign content.

An IC-DISC must also meet the following requirements.

  • It must be a domestic corporation

  • At all times, it must have at least $2,500 in capital

  • It must have only a single class of stock

  • It must file timely elections

  • It must meet a 95 percent qualified export asset test and a 95 percent qualified gross receipts test

An IC-DISC is not subject to U.S. income tax. It is more like a partnership, LLC or s-corporation in that its shareholders are subject to U.S. income tax on their share of the IC-DISC’s income.

The exporter, its shareholders, its management, its employees, family members or any combination thereof can own the IC-DISC. The IC-DISC can be used to generate incentive bonuses for management or employees, or facilitate succession planning, for example. Alternatively, the funds accumulated in the IC-DISC can be distributed to the shareholders and loaned or contributed back to the exporter if the cash is needed.

The IC-DISC regime provides U.S.-based exporters an opportunity to decrease their U.S. taxes on export profits by up to twenty percentage points.

Max Koss, Certified Public Accountant, is a director of international tax with Moore Stephens Doeren Mayhew. Moore Stephens Doeren Mayhew is an independent member firm of Moore Stephens International Limited, one of the world’s leading consulting and accounting networks. Moore Stephens Doeren Mayhew, located in Troy, Michigan, is a regional accounting and consulting firm providing a complete range of international tax, accounting, financial, business and consulting services. Contact Koss at koss@moorestephensdm.com or (248) 244-3013.

Sunday, 26 February 2006 19:00

From setback to success

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Starting a business is scary enough, but it can be even more so after failing with another business.

Sharon Cannarsa was faced with that situation, but took the plunge and succeeded.

The president and CEO of Systrand Manufacturing Corp. and her husband, Tony, combined his engineering expertise with her administrative skills to form an oil coupling business in 1977.

“The oil business was booming at the time, and we enjoyed running a thriving operation until the bottom fell out of the industry and our company did not survive,” Cannarsa says.

After this experience, a secure job working for someone else would have appealed to most, but not to Cannarsa.

“I need the freedom that being a business owner allows,” she says. “Also, if you tell me something cannot be done, look out. I am going to show you it can.”

Cannarsa’s fighting spirit led her and Tony to begin Systrand, a machine supplier to the automobile industry, in 1982. She explains the business in simple terms: “If it has anything to do with the transmission or engine, we make it.”

With facilities in in Brownstown, Danville, Ill., and Busan, Korea, Systrand employs 330 people, generates annual revenue of $75 million and serves customers including Ford, GM, Chrysler and Volkswagen.

Smart Business spoke with Cannarsa about how she motivates her staff and how she plans to grow the company.

How do you keep your competitive edge?
We keep our finger on the pulse of customer satisfaction constantly. Our buyers are not shy about telling us if we miss the mark, and we encourage their candor. There is always somebody trying to do what we do faster, cheaper and better, so we challenge ourselves to stay on top of our game at all times.

You cannot rest on your laurels and become complacent in this business, or any other, for that matter. Our growth strategy revolves around areas in which we have the competitive advantage, so we are always capitalizing on what we do well rather than going in many different directions.

My sons, Anthony and Michael, serve as VPs. They ... brought fresh and new ideas to the business. We hire people who challenge the status quo and look for better ways to get the job done.

How do you keep your staff motivated?
I am a firm believer in promoting from within. I only go outside the company to hire talent when absolutely necessary. It gives employees good self-worth and commitment to the organization when they can see opportunities to grow.

I strive to give back to the employees as much as possible, in both big and little ways, because both are important. For example, I host special lunches to show my appreciation to staff.

We have newsletters that spotlight birthdays and other special occasions. We have a tradition of an annual holiday party, including half a day off with pay.

How will you continue to grow your business?
My strategy has not been focused on growth only. Manageable and profitable growth is what I strive for at all times. In fact, I am proud of the restraint we have shown in passing on projects that would not be advantageous on a long-term basis.

Our biggest challenge right now is the threat of low-cost global suppliers. Our Korea facility, which has been in operation for six years, was, in part, a response to this threat. We were getting our castings shipped from Korea to Michigan and found we could save significant shipping costs by machining the items in Korea.

This global expansion has proved to be a wise decision, and I would not rule out future decisions along these lines.

There are two areas that interest me in terms of expansion. First, I want to get more involved with our customers on the design aspect of the business. I believe we have much to offer in this area, and our customers have shown interest in this sort of partnership, as well.

Second, I want to increase our efforts manufacturing high-value-added machinery in modular assembly.

How do you keep your life balanced and productive?
I take one day at a time. There is stress in any business, but I have found the best antidote is a positive attitude. Looking on the bright side, keeping your priorities straight and knowing that if today is horrible, tomorrow is bound to be a winner.

Those are the things that keep me balanced and productive. My business is important to me, but family and service to the community can never be neglected.

How to reach: Systrand Manufacturing Corp., (734-479-8100), www.systrand.com

Monday, 30 January 2006 19:00

Brand muscle

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Some of the world’s greatest bodybuilders sport the Powerhouse Gym logo. Serious fitness enthusiasts —those with muscles bulging from their bodies like mountain ranges and those featured on the pages of Shape, Muscle & Fitness and Ironman magazines — have been spotted wearing Powerhouse gear.

“If my father, Will, made buddies with athletes at the gym, he’d send them Powerhouse clothing, and they wore it at photo shoots,” says Henry Dabish, CEO of the business that his father and uncle, William and Norman Dabish, started in 1975.

At the time, bodybuilding was reserved for competitive athletes. Today, even harried professionals squeeze in a workout between hectic travel schedules and corporate commitments. Fitness is one of the hottest categories among franchise chains and was named one of the top growing industries in Entrepreneur magazine last year. Powerhouse Gym, a $244-million organization, is riding this trend with 320 facilities in 39 states and 15 countries.

With a branding effort that started out with free T-shirts, Powerhouse Gym has become one of the most recognized brands in the health and fitness industry — seven out of 10 Americans know the name, according to a report by the International Health Racquetball Sports Association.

The branding efforts have expanded to include gym equipment, an annual magazine and commercials on its own MTV-like television station broadcast in the gyms, invaluable PR for a corporation that depends on selling its reputation — and its label — to gym owners for a flat monthly fee.

“The more people who see the Powerhouse brand, the more who will want to be involved with the company and either choose to work out here or open up a Powerhouse Gym,” Dabish says.

Dabish, along with his brothers J.R. and Victor, must uphold the company’s customer-focused culture and maintain equipment and service standards as they focus on conscientious, steady growth. This means toning up current facilities and tuning into a world market interested in wearing the Powerhouse logo.

Birth of a brand
Powerhouse Gym grew in tandem with the fitness boom, starting in the early 1980s when the Dabishes began licensing the name.

They were in the right place at the right time.

“When it became (popular) to get involved with fitness, we rode that wave — we evolved with the market,” Dabish says. “Powerhouse was born at a time when market demand for fitness centers exceeded the number of facilities open to the exercising public beyond serious athletes.”

William and Norman Dabish set up a makeshift gym in the back of their father’s Highland Park, Mich., grocery store. The success of that initial effort led to a second location in the suburbs.

“As soon as the sign went up, there was a demand for it that no one was aware of at the time,” Dabish says.

Before long, customers were asking why there were no Powerhouse locations outside of Michigan and expressing interest in opening new locations, which sparked the Licensing Division in 1984. Powerhouse began tapping into an underserved, national market at a time when William Dabish’s American Cup Champion bodybuilder title and connections with Joe and Ben Weider, among other fitness gurus, had won recognition for the Powerhouse Gym name.

The Powerhouse brand was rapidly building its muscle power, introducing more and more people to the brand and to the fitness and strength it represents. But building that brand wasn’t easy. In fact, it meant losing money as the company focused on getting the Powerhouse name out and stamping its trademark on new locations across several markets.

“The license fee (to purchase the Powerhouse Gym name) was minimal, just enough to cover travel expenses, because Will went to each location to set up the equipment, pricing structure and systems,” Dabish says. “After hotel and airfare costs, we lost money on the first few locations. But we had to get that brand out there.”

Though Powerhouse took an initial loss, the gyms became profitable soon after opening, and today, Powerhouse Gym is the world’s fastest-growing gym licensing organization.

Muscling into the mainstream
With interest from workout enthusiasts and entrepreneurs who wanted a piece of the Powerhouse name, the Dabishes realized their business was much more than a gym. Theirs was a branding machine — a stamp of approval for gym owners who wanted independent facilities. But how do you distribute the brand in a way that will help the company grow?

Licensing seemed a logical way to provide the Powerhouse name and networking opportunities to gym owners at a reasonable cost. Basically, licensing is much less restrictive, less expensive and less risky legally than franchising.

Franchise organizations provide exact formulas for facilities and set royalty fees on memberships, and Dabish says that approach wouldn’t work for Powerhouse.

“A gym membership is not a tangible item, so it is difficult to control memberships sold and royalty percentages would be too high,” Dabish says. “We saw that happen with the competition — they tried to turn into franchise companies and lost their franchisees.”

A licensing model suited Powerhouse’s goal to expand the brand in the United States and internationally, and fewer restrictions on licensees appealed to entrepreneurs and athletes interested in owning their own businesses.

“Licensing is better for them because it gives them more freedom to add their own personalities to each location,” Dabish says.

Licensees can choose the equipment and the color scheme and tailor amenities such as day care or physical therapy service to fit market demand. The licensing model works hand-in-hand with the branding strategy.

The more people that recognize the name, the more likely they are to ask, “Where can I find a Powerhouse near me?” The more they visit a Powerhouse, the more likely they are to support the brand by wearing its merchandise, further spreading the name when others ask about the logo.

And inquiries are coming from across the globe. International expansion is mostly responsible for Powerhouse’s 9.4-percent growth rate from 2003 to 2004. Master licensees in South America, Europe, Asia — especially China — and now India, are spreading the Powerhouse brand in markets where the American fitness brand is especially attractive.

“International growth has come quickly because we have other owners (in other countries) doing what we do here in the States,” Dabish says. “Locations crop up quickly because we have other partners, in essence. We can offer them prenegotiated pricing on equipment and other amenities they need, and they want to carry U.S.-branded materials.

“In their eyes, they want to be associated with ‘Powerhouse Gym U.S.A. since 1975,’ and they brand that way.”

Maintaining brand consistency
Elaborate facilities complete with day care and physical therapy services provide a much different fitness experience than the one that Powerhouse’s first hardcore customers sought. Today’s casual athletes work out with results in mind, but they also want the club feel, Dabish says.

Customer care is essential in order to compete in one of the fastest-growing franchise businesses. Older facilities with outdated equipment struggle to fight brand-new branches of the corporate chains that plant facilities in the same markets Powerhouse serves.

To maintain brand consistency, everyone has to live up to what the brand represents, even if it means sacrificing short-term growth.

“We’ve been steady,” Dabish says of the company’s 2005 growth in the U.S. division. “Growth hasn’t been as quick as it could be in the U.S. if we had maintained all current licenses.”

Instead, the Dabishes pulled the Powerhouse logo from 15 locations while opening 18 new gyms.

“If a Powerhouse isn’t reinvesting in its equipment and doesn’t have a good reputation, that facility will go under review,” Dabish says, describing one instance in which a gym lost its affiliation. “The facility was tired and run-down. Equipment was not maintained, and there was down equipment. There was negativity associated with the facility.”

The Dabishes look for clean locker rooms, upgraded equipment, helpful personnel and overall upkeep of facilities to determine whether a Powerhouse Gym is helping or hurting the brand.

“Corporate officers check up on facilities, and we have owners who travel and check up on other owners in different regions,” Dabish says. “We try to get to each gym once a year. We look at everything from signage to the quantity of group exercise classes offered. Probation periods for facilities that are not up to par can last from 60 to 90 days.”

If facilities don’t make the grade, Powerhouse strips its name from the gym. This doesn’t mean the gym owner won’t continue operations, but he or she will not reap the benefits of an international trademark. This type of monitoring is critical for upholding the long-standing brand.

“We will continue to grow in a controlled manner,” Dabish says, adding that by creating more corporate-owned facilities in the U.S., Powerhouse can more readily upgrade outdated gyms, especially those close to the corporate headquarters in Michigan.

“Many licensees travel to Michigan when they want to open a Powerhouse Gym,” he says. “Many of the facilities in this state have been here for 10 to 12 years or longer. I want to upgrade those, open more impressive facilities.”

Meanwhile, the type of person who chooses to open a Powerhouse location is also changing as the fitness industry evolves from heavyweight champions to well-versed entrepreneurs interested in a lucrative venture with a trusted brand.

“Initially, the people who opened Powerhouses liked to train, so they opened a gym,” Dabish says. “I always thought that was funny at the time. It’s like, ‘If I like to eat, I’ll open a restaurant.’ A gym is still a business to operate and maintain.

“The major change in the industry is that there is a lot of professionalism, and it is much more of a business now.”

Today’s Powerhouse Gym owners don’t necessarily need a fitness training background, Dabish says.

“More so, people are interested in investing in a successful company — they have corporate interest in the Powerhouse brand.

“Even today when I go back and visit the original location, I’m amazed at how we started from that single location. While we grow the brand, we still want to maintain our roots.”

How to reach: Powerhouse Gym, www.powerhousegym.com

Tuesday, 31 January 2006 06:51

Choosing partners

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In the past, only larger companies used external service providers (ESP) to provide temporary staff with specialized skills, develop custom software or assume responsibility for functions or departments, such as payroll or information technology (IT).

Times have changed. As competition heats up and firms in many industries consolidate, small- and mid-sized companies must compete with larger organizations, and must cut costs and streamline operations to remain competitive. Outsourcing certain business processes (i.e., application development and maintenance) allows mid-sized companies to gain the economies of scale — and cost savings and efficiencies — formerly available only to large firms.

How do you select an external service provider? What are the critical success factors and potential pitfalls of outsourcing?

Relationships, not transactions
A company’s approach toward outsourcing ultimately determines the engagement’s success or failure. If approached as a finite transaction, the engagement will experience difficulty. This situation occurs because firms rush to hire someone to solve a problem, or because price is given too much attention, at the expense of a clear understanding of needs, expectations, abilities, and roles and responsibilities. As a result, the outsourcing relationship is fraught with misunderstanding and contention.

In contrast, when approached as long-term relationships, outsourcing engagements are more successful. Taking this approach, firms not only evaluate vendor bids, but they examine and understand the entire problem, from beginning to end. They determine specifically what they need from the engagement and what abilities and value the vendor can contribute (beyond technical skills). They document roles, responsibilities, critical success factors and metrics first, and they evaluate price last.

Know yourself first
Early on, examine your needs. You must clearly understand what you need before you can explain it to prospective ESPs. What is the desired end result — a new software application? A three-year agreement to have some or all IT functions handled by an ESP?

Next, how will you measure success? By dollar reduction in costs? By percentage increase in processing capacity? What metrics are most important? Be specific.

What is your organization’s tolerance for risk? How critical, visible and time-sensitive is the project?

What roles and responsibilities do you see for the engagement? Which roles and deliverables will your firm manage? Which roles and deliverables do you expect the ESP to manage?

Once you clearly understand your needs, document the desired results, measures of success, responsibilities, and expectations. Use that as the basis for evaluating ESPs.

Evaluate on many factors
For each prospective ESP, document its strengths and weaknesses. Often a firm’s particular weakness may not be an issue if your firm is strong in that area, or if that weakness is not relevant to your needs. Knowing each ESP’s strengths and weaknesses will help you objectively evaluate vendors, and will help you understand and prepare for potential pitfalls or risks.

Ask the ESP for the names of other clients in your industry, or clients who had a project similar to yours. Contact those clients to discuss the ESP’s work, weaknesses, strengths, flexibility and results.

Evaluate the entire package of abilities and value the vendor can bring to the engagement. Outsourcing involves many different skills and expertise, not just technical skills.

Involve your IT department
Be sure to involve your IT department. IT departments have significant experience negotiating maintenance contracts, and can ask pertinent questions you may have overlooked.

Regardless of the ESP you select, remember that long after the project is complete, you will forget about $10,000 saved. Instead, you will remember the overall experience — the vendor’s skills (or lack thereof), capabilities, responsiveness, attention to detail, ability to deal with unexpected problems, flexibility and — most important — results.

Prepare for outsourcing success by understanding your needs, evaluating vendors objectively, and considering the entire value proposition.

Dave Miles is director of IT Solutions for CIBER in Michigan and Wisconsin, and can be reached at (248) 352-8650 or at dmiles@ciber.com. CIBER Inc., founded in Detroit in 1974, is a global IT consulting firm which builds, integrates and supports critical business applications in custom and enterprise resource planning environments. Visit www.ciber.com.

Monday, 30 January 2006 19:00

Community banking

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Banks are no different from other businesses — open to acquisitions and consolidations. Big entities are getting larger, and mid- and small-sized outfits are suddenly wearing new colors and being called different names.

This isn’t all bad.

Consolidation clears room for new startups — niche banks that are smaller in scope, target specific regions and cater to small and growing businesses, says Craig Johnson, president and CEO of Franklin Bank in Southfield, Mich. “There are a number of startup banks over the years that have taken a fair amount of market share away from bigger players by nibbling at their heels,” he says.

Smart Business spoke with Johnson for insight on community banking and what factors business owners should consider before opening accounts or applying for loans with any bank.

How does consolidation affect the customer — the business owner?
The perfect example in our market here is Standard Federal Bank, which was a very large bank and changed its name to LaSalle. Bank One is in the process of changing its name to Chase. Along with the name changes come policy, procedural and people changes.

Some customers decide the new organization isn’t the route they want to go, and as a result, many small business owners look for a community banking environment to do business.

How do consolidations affect business owners?
The general feeling is that as banks get bigger, they become less customer-focused. Certain functions get centralized outside the area. You hear it often — the ability to talk to someone becomes more difficult.

Business owners like to be able to go into their branches or call branches directly, and as banks get bigger they have centralized call centers. They almost discourage customers from calling branches directly. Thumb through the Yellow Pages and see how many banks have direct dial lines to branches. Many of them list 800 numbers instead.

What are advantages to working with a large bank, a national name?
Larger banks do bring a breadth of products and services to the market that many smaller banks economically can’t provide unless they enter a partnership agreement, typically with a larger bank. They may have a corresponding relationship with a larger financial institution that allows them to do such things as international banking.

What does community banking mean, then?
Typically, (community banks) are banks with assets up to $1 billion. You might call super-community banks those with assets up to $10 billion.

The argument many community bankers make is that they know their communities better than regional banks. Their decision-making for loans or other services is are local. The bigger regional banks have localized a lot of that, too. But some will say that in smaller, community banks, if a customer has an issue, he or she can walk into the president’s office and talk with the ultimate decision-maker. That is difficult to do in a large, regional bank, as decision-makers tend to be insulated within the field.

When are community banks best for business owners? And when should customers think big?
At a certain point, a business owner may outgrow community banks. But in a business’s infancy and as it grows, it is probably better served by starting out with a community bank because the owner can be closer to the decision-makers.

How can a business owner choose a bank?
Talk to two or three banks and get a feel for their philosophies. Talking with them in person will give you a good sense of their customer orientation. Can you talk to someone quickly who is knowledgeable about the products you are inquiring about?

Take time to research this decision, and take a look at convenience. Where is the bank located? What hours are they open? Do they offer niche services like courier? Do they have an Internet product that makes sense for you?

Then get down to fees on accounts. What are they charging on their deposit accounts, and what are their loan rates? Cheapest is not always best. You really need to pick a bank that will fit your needs today and as you grow, and that may not be the one with the least expensive fees.

Craig Johnson is president and CEO of Franklin Bank in Southfield, Mich. Reach him at (248) 386-9860.

Friday, 27 January 2006 09:40

Webb Co. promotes Stewart to COO

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Brian C. Stewart was promoted to chief operating officer and senior vice president of Jervis B. Webb Co., a material handling solutions company.

He is responsible for all aspects of engineering, sales and marketing, purchasing, manufacturing, information services and project management for the Webb Group of companies, including U.S. operations in Michigan and South Carolina and operations in Canada, the United Kingdom, Germany, Spain, France, India and China.

Stewart has worked for the Webb Co. for more than 24 years and has held executive positions for the past 14 years. Most recently, he was senior vice president of corporate operations. He has also worked as vice president of engineering, and vice president and general manager of Webb Electric Co., a former subsidiary of Jervis B. Webb Co. He oversaw corporate research and development, as well as the company’s intellectual property rights for integrated material handling systems on a global basis.

Stewart earned his bachelor of science degree in electrical engineering from the University of Michigan and has completed numerous continuing education courses at Eastern Michigan University’s Center for Quality and Michigan State University’s Graduate School of Business Administration and Lifelong Education Programs.

He served as president of the Materials Handling and Management Society from 1994 to 1995 and is a member of the Engineering Society of Detroit and the Society of Mechanical Engineers.

DAIMLERCHRYSLER
Karenann Terrell
received the 2005 Women’s Corporate Technology Award.

Terrell is chief information officer of Chrysler Group and Mercedes-Benz North America, responsible for all aspects of the company’s information technology management in North America.

The award is conferred annually by the American Friends of the Jerusalem College of Technology in association with Women in Technology International. Terrell received the honor “for her outstanding accomplishments in the information technology industry and her strong support for WITI and its service to professional women in technology.”

DaimlerChrysler Services North America LLC has appointed Tracy L. Hackman vice president, general counsel and secretary.

She joined the company in 1987 as a staff counsel and has held increasingly responsible positions with DaimlerChrysler Services and DaimlerChrysler Insurance Co.

Hackman is the first female executive in the company’s 41-year history to lead the office of the general counsel. She earned a bachelor of arts degree in finance and an MBA in advanced management from Michigan State University. She earned a J.D. degree from the University of Detroit Law School.

ARCADIA RESOURCES INC.
Arcadia Resources Inc. appointed Jim Haifley to the newly created position of executive vice president. He oversees the strategic direction of the company’s two divisions.

Haifley joined the company in 2004 as director of business development. From 2000 to 2004, he worked as divisional director of operations for Rotech Healthcare Inc.

JOHNSON CONTROLS
Charles Baker
joined Johnson Controls as vice president and general manager of engineering, North America, for the firm’s interior experience business.

Previously, he worked as vice president for Honda R&D Americas. He has also worked in engineering leadership positions at Saturn Corp., Gantron Corp. and the Pontiac Motor division of General Motors.

Baker earned a bachelor of science degree in mechanical engineering from General Motors Institute.

DTE ENERGY
DTE Energy’s board of directors elected Peter Oleksiak to controller and Daniel Brudzynski to vice president, regulatory affairs.

Oleksiak joined the company in 1998 and was named assistant controller last year. Prior to DTE, he held a variety of financial analyst and supervisory positions at Chrysler Corp.

Brudzynski joined DTE in 1997 as assistant controller. He has served as controller since 1999 and vice president since 2001. Previously, he worked for Chrysler Corp.’s controller’s office.

AMERICAN AXLE & MANUFACTURING HOLDINGS INC.
American Axle & Manufacturing Holdings Inc. appointed Michael K. Simonte vice president and chief financial officer. He previously worked as vice president and treasurer. He joined AAM in 1998 as director, corporate finance.

Patrick J. Spohn was named vice president and controller. He previously served as corporate controller. He joined the company in 1997 as manager, corporate finance.

Shannon J. Curry was named treasurer. Prior to this, she served as assistant treasurer.

ORIGINAL EQUIPMENT SUPPLIERS ASSOCIATION
Original Equipment Suppliers Association elected Sylvia B. Vogt chair of the OESA Foreign Subsidiaries Council. She is responsible for overseeing the direction of council activities and updating OESA management on the status of the council.

Vogt is vice president, corporate affairs Americas for the Robert Bosch Corp. She has been with Bosch since 1994 in various legal counsel and contract management positions.

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Wednesday, 28 December 2005 05:01

Stand ready

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A business can be struck by earthquakes, vandalism, floods, tornadoes or fire at anytime. Unfortunately, most small businesses around the country are not prepared to recover from such disasters. According to the U.S. Department of Labor Statistics, more than 40 percent of all companies that experience a disaster never reopen and more than 25 percent of the remaining companies close within two years.

Businesses that do reopen are often crippled by staff turnover, increased debt or an economic downturn. As big businesses have the resources to support backup computers, extra offices and elaborate disaster recovery plans, they tend to be the survivors when disaster strikes.

Yet small businesses are the key to economic recovery after disasters. They create two-thirds of new private sector jobs in America, employ more than half of all workers and account for more than half of the output of our economy.

Small businesses stimulate employment and diversification of the economy. Small firms produce the items that line the shelves in stores and keep intact the heritage of ingenuity and enterprise.

Disaster preparedness for small businesses

  • Back up vital information. Losing vital information such as accounts payable, accounts receivable or inventory management can be a devastating blow. The easiest and safest way to prepare for catastrophe is to back up the data stored on computer systems.

Record backups include ownership documents, account numbers, banking and financial information, insurance policies, product lists, employee databases, customer databases, supplier databases and personnel files. Back up copies should be stored off premises.

  • Safeguard equipment. Store equipment off site or elevate it above flood level, move it away from windows and doors, and protect it with covering. Protecting your equipment will save time and aggravation in the event of a disaster.

  • Know disaster resources. For example, the IRS allows business owners to amend their previous year’s taxes to claim disaster-related casualty losses if the president declares a disaster. The Small Business Administration may be able to provide low-interest loans, and your state or local Economic Development Agency may be able to help. Identify these organizations ahead of time.

  • Review your insurance. Premiums and deductibles increase for businesses in the wake of natural disasters, so you’ll need to review your property/casualty insurance carefully with your insurance agent or financial adviser, and review it annually thereafter.

The Small Business Administration suggests that business owners have three types of coverage: Property insurance to protect against losses from fire and theft, liability insurance to protect against lawsuits and business-interruption insurance to cover revenue loss. A prepackaged policy generally includes all three, and is more affordable than purchasing coverage separately.

  • Develop a specific disaster plan. Map out precisely who will do what if disaster occurs. Who will be in charge of evacuation or of making certain that important documents and data are safely secured? Designate a meeting spot outside of your business. Share the plan with your employees and keep it up to date.
  • Keep a business savings. The key to a successful disaster recovery is money. You won’t be able to wait weeks or months for insurance adjusters and settlement checks, so prepare by saving.

  • Keep strong communication. An important part of disaster recovery is to make sure that the correct information is communicated to employees, customers, media and the general public. Someone must be assigned the responsibility for deciding when it is appropriate to make public statements and for creating appropriate answers to the questions that will be asked by each of these groups.

Disaster can strike any time. It does not have to be a catastrophic event such as Hurricanes Katrina or Rita — it can be as simple as a broken waterline that destroys your company records, a fire, the loss of a key employee or any other significant disruption to your company’s operations. The key to recovery is planning. Communicate the plan to your employees so they know what is expected of them during a time of crisis. Most of all, be prepared.

Tuesday, 27 December 2005 06:53

Healthy returns

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With more than 20 years of IT experience — mostly at Fortune 500 companies — James Giordano is no stranger to the information technology industry.

And for the past seven years, he has used that expertise to grow CareTech Solutions, a leader in health care IT and health information management solutions, to more than $100 million in revenue.

When Giordano joined CareTech Solutions in 1999, the company had about 20 employees and operated regionally level. Today, its 700 employees serve health care organizations across the nation.

Giordano believes the key to his success is doing whatever it takes to satisfy customers, because if your customers are completely satisfied, they will never leave your company.

“It’s the focus on the customer and the focus on making a better health care system,” says Giordano.

Smart Business spoke with Giordano about how he grew CareTech Solutions and the strategies he uses to manage more than 700 employees.

How did you double revenue between 1999 and 2002?
What we were able to do was use health care IT as a differentiator for updating health care systems. Our value proposition was that we would help them attract physicians and have a better patient experience, and also assist with their administration relative to IT and business systems.

We were successful. We were recognized by our clients and by the hospitals that we were doing business with. They have been a great source of advertising for us. We have been able to use our IT offerings and our health information management offerings as a competitive advantage for them.

They’ve been able to use that in a way to make the hospital a better place for both physicians and patients.

What were some of the specific issues you faced during that time and how did you deal with them?
It’s a difficult marketplace out there. We faced all of the challenges of rapid growth, including increasing the size of our building and infrastructure.

We decided early on to size all of our systems to be able to triple the size of the company in two years. Once we overcame that challenge and prepared the company to accommodate that kind of growth, things became a lot easier.

You don’t have this kind of growth without some problems. The assimilation of staff members into our organization was a bit of a challenge; however, we successfully overcame that. As we got a little bit larger and technology became more complex, we were able to offer more, which caused a faster growth rate, which caused us to have to assimilate even more people.

How did you maintain your corporate culture as you added new employees?
The first thing we do is have a full day of orientation to talk about our vision and our values. Ultimately, I think any company’s values are how they act and how they treat their people.

We have a full day of training. We started with the management of the organization and we made sure that they understood what CareTech was all about and how customer service is our focus.

We [instructed] all the new employees coming in to do whatever it takes to serve the customer. And that has become our CareTech motto — ‘We do whatever it takes.’ And then we provided the tools and the training, so that even at the individual performance level, they can effectively do that.

We have a policy here called the open door. If (employees) see something where the customer is not being satisfied, then they are authorized to go to any level of the organization to get that problem solved —including my office.

How do you manage and guide more than 700 employees?
It all centers around communication. We make sure that the senior leaders of the organization get out there and talk to them, and we really do try to focus them on customer service. In today’s economy, we all know the bar on customer service gets continually raised.

Most people (know someone) who has been downsized out of an organization. My challenge to our folks is, let’s not let that ever happen to us. Let’s make sure our customers are so happy, so satisfied with our service and that we are bringing value to the health care organization that they don’t even think of looking anywhere else.

To put our money where our mouth is, we measured that. We measure and survey our customers to ensure that we are delivering on our promise of customer service. Again, it goes back to doing whatever it takes to make sure our customers are satisfied.

How do you do that?
Early on, we were having a lot of successes with our customers, and it was a real challenge to be able to communicate effectively back to our clients exactly what we were doing for them. Many times, we found that we were doing these things and they were very ho-hum to the staff, but they were really extraordinary achievements for the health care organization.

It was a challenge to capture those ideas and go back to the organization and make sure that they were using that as a marketing tool to attract more patients and to attract the kind of caliber of physicians that they were looking to find.

The way we have overcome those challenges and the way we have been able to keep the organization together is the belief that we are in the services business. The mindset that we try to impart to everyone is we are CareTech.

There is not a product you can point to. There is nothing tangible you can point to. At CareTech, we are the sum total of everything we say and do at the end of every given day.

We have client executives at the site that are the chief of information officers for the health care systems. We started to hold monthly meetings where they would point out from a business perspective the successes that they were having with the clients.

We were able to share this across the different health care organizations. We found that not only did the communication become effective, but we were able to leverage some really good ideas across different health care systems.

How do you get employees to buy into your vision of customer service?
I talk to them personally. I talk to every new person that comes into the company. It starts with me.

When they are introduced to the firm, I like to spend some time with them and share our vision with them. I am a big believer that a corporation’s values are how it acts. I ensure that our top level leaders buy in and [that we] continually refocus and educate ourselves on what our customers’ wants and needs are.

We work very hard to satisfy them.

HOW TO REACH: CareTech Solutions, (248) 233-3000 or www.caretechsolutions.com

Tuesday, 29 November 2005 05:32

Exporting and the war on terror

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In an increasingly global marketplace, exports have taken on greater importance for companies throughout the world and, for many, have become a routine part of business.

But exporters are sometimes surprised to learn that the U.S. government regulates and, in certain cases, flatly prohibits many export transactions. This has been true throughout U.S. history, during both wartime and peacetime.

With the increased focus on terrorism prevention, however, these regulations have come to the forefront as the United States and its allies look to them as a critical weapon in the war on terror.

Few would be surprised to learn that U.S. export restrictions applied in the case of a U.S. citizen who attempted to export a thermal imaging camera through Detroit’s Metropolitan Airport, intended for use by Hizballah in Lebanon.

But other situations are less obvious. Consider the Michigan company that agreed to a $64,000 civil penalty to settle allegations that the company illegally exported optical sighting devices for firearms to Argentina and South Africa, without obtaining the required export licenses.

Many dual use products that have ordinary commercial and consumer uses are, nonetheless, covered by the regulations because they can be used for other more nefarious purposes. Metal alloys, pipes, valves and bearings, computers and software, robots, shotgun shells, chemical compounds, electronics and telecommunications equipment are all regulated dual-use products.

While virtually all exports are prohibited to some countries, such as Cuba, most exports need to be evaluated against the following criteria.

  • What is the product? For export control purposes, the critical first step is to find out whether the product fits any of the regulated classifications. Parts, components and related technology may be covered as well.

  • Where is it going? The exporter will need to identify the country of ultimate destination to determine whether the product is subject to licensing requirements. Exports to close U.S. allies tend to be subject to fewer restrictions.

  • Who will receive it? The ultimate end-user of the product cannot be a bad end-user.

  • What will they do with it? The ultimate end-use cannot be a bad end-use.

  • What else do they do? Regulations may bar dealings with someone if, for example, they engage in financing or freight forwarding activities that support weapons proliferation.

Although the regulations primarily affect exports in the traditional sense, they do cover other related transactions and activities. For example, disclosure of technology to a foreign national in the U.S. may be regulated. Sales in the United States or exports to a permitted destination with knowledge that the buyer intends to re-export to a prohibited destination will also be a problem.

Because many requirements of the regulations are based on knowledge of the end-use, end-user, ultimate destination and other facts related to a transaction or activity, exporters must know their customer and be alert for red flags.

Red flags include a customer that is reluctant to offer information about the product’s end-use or is evasive about whether the product is for domestic use, export or re-export; an order for a product that is inconsistent with the needs of the purchaser; a buyer that declines routine installation, training or maintenance services; or a request for equipment configurations that are incompatible with the stated destination, such as 220 volt equipment for a 120 volt country.

When red flags are present, the exporter has a duty to check out the suspicious circumstances and to inquire about the end-use, end-user, ultimate country of destination and other relevant facts. A policy of avoiding bad information will not provide insulation from liability, and would usually be considered an aggravating factor in an enforcement proceeding.

If inquiries do not resolve all concerns, then the exporter should either refrain from the transaction or apply for the appropriate export license. Penalties for violations include substantial fines and penalties of both a civil and criminal nature and, in some cases, a denial of export privileges.

Bruce C. Thelen focuses on international business and trade as a member in Dickinson Wright’s Detroit office. For further information, visit www.dickinsonwright.com.

Wednesday, 02 November 2005 05:35

Building better schools

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Novelist and poet Victor Hugo wisely observed that "He who opens a school door, closes a prison."

As founder and managing partner of the Michigan Studio of SHW's, a firm based in Berkley that specializes in educational facility design, Margie Simmons (no relation to the writer) has certainly done her part in this regard.

Simmons, a CPA and certified management accountant, earned her bachelor of arts degree in accounting from Michigan State University. But she quickly realized that poring over balance sheets was not her idea of career utopia and that she craved more interaction with people.

In 1998, taking her career in a new direction, Simmons started DSA Architects, a firm focusing on higher education facilities, with her partner, Tony Duce, and three employees. In 2003, the firm merged with SHW, a Texas-based company working predominately on K-12 facilities.

It was the perfect match -- SHW was seeking a geographical presence in the Midwest, while DSA wanted to expand its penetration to include K-12 facilities.

DSA, a member of SHW Group, now has 52 employees and is one of the most well-known designers in Michigan. Simmons proudly points to the company's workmanship at the Law School at Wayne State University, the School of Education at Oakland University and the science and classroom building additions at Oakland Community College.

Smart Business spoke with Simmons about her management style and how to bring out the best in your employees.

What is the most rewarding part of your job?

Two things come to mind: Employee development and grand openings of our facilities.

We have many talented employees. It's been an honor to observe their progress over the past eight years. Seeing them mature and reach their professional goals has made me so proud.

This gratification is only matched by the sense of satisfaction we all experience during the grand openings of our buildings. Seeing the physical result of all of our hard work and effort is truly an indescribable feeling.

What is the most painful professional lesson you've ever learned?

We pursued a design competition five years ago. We all really wanted this business so bad we could taste it. So we poured our hearts and souls into the creative process and recommended a dynamic concept.

For political reasons, we were not awarded the business, which was heartbreaking, to say the least. The time invested over many weekends and late hours seemed to be all for naught, but it taught me not to put all my marbles in one basket.

When bidding on jobs now, we plan conservatively and recognize there are many factors totally outside our control.

How would you describe your management style?

I am a people-pleaser by nature, which has presented personal challenges in my role as manager. I have accepted my limitations and realized that, although I would love to do so, I cannot make everyone happy.

My goal is to be a high-energy, direct and fair leader. I constantly communicate with my employees and seek out advice from peers and mentors.

Of course, it helps to have employees who are a pleasure to manage. They are a culturally diverse group of people, which makes for an interesting and creative dynamic.

They are passionate about what they do, committed to a common goal and enjoy one another's company outside of work hours.

What management book are you reading now and what have you learned from it?

"Winning," by Jack Welch -- it's the best. I wish I would have read this when I first got out of school.

One thing I learned from this book is the importance of staff differentiation. You have to recognize your top 20 percent performers -- these are your go-getters who must be kept happy or they will go somewhere else.

Then you have the 70 percent B players who are solid, consistent performers, the backbone of your work force. As a manager, you must develop those with the potential to move to the top 20 percent and make sure the others remain productive and know they are appreciated.

The remaining 10 percent are your bottom performers, who you need gently to lead to other, more suitable career options.

What does the future hold for DSA/SHW Group?

We have admittedly lofty goals. In the next 30 years, we want to be one of the most sought-after educational facility design companies in the world.

With so many countries converting to capitalistic societies, we see endless opportunities for what we can offer in terms of advancing education.

Our more short-term goals are to continue the penetration of K-12 schools in Michigan and higher education facilities in Texas and the East Coast.

How to reach: DSA Architects, www.dsaarchitects.com