Brewed Fresh Daily

Hours after United Auto Workers members reached an unprecedented split decision on whether to ratify a new contract with Chrysler, UAW president Bob King told PBS NewsHour there was no conflict within his ranks.

Asked about frustration following the split vote, he told host Jeffrey Brown, “You want to make – I’m sorry, but you seem like you want to make a rift where I don’t think there’s a rift.”

Earlier Wednesday, the UAW reported that 54.8 percent of hourly workers had voted in favor of ratifying a new contract with Chrysler, but that 55.6 percent of skilled-trade workers had voted against it, resulting in a split decision for the first time ever.

Nonetheless, UAW leaders met following the final tabulations and declared the contract had been ratified.

If skilled-trade workers had voted against the contract because of changes that specifically affected only their work, the UAW would have tried to renegotiate that portion, King told the Detroit Free Press. But “it was overwhelmingly clear that the issues were economic issues and not skilled-trade issues,” he said.

That final decision ostensibly concluded perhaps the most bizarre labor negotiations in memory, which started with Chrysler CEO Sergio Marchionne publicly rebuking King in a written letter at the outset of negotiations.

And they included an unusual priority. In the past, the UAW has placed a priority in negotiating for higher pay and better benefits. But this year, the UAW’s priority was gaining jobs. Toward that end, King secured contractual commitments from the Big Three that will add 20,400 jobs by 2015.

“The number one priority in this was to create jobs in America,” King told NewsHour. “So there will be a lot of people in a lot of communities around America that are hired into middle-class jobs because of what we did in this contract.”

From the automobile industry to agricultural products, Michigan and the global economy are inextricably intertwined. On Wednesday night, Robin Young, the host of Here and Now, joined Changing Gears and our partner Michigan Radio in Ann Arbor for a town hall meeting to look at issues facing the state and the world.

Robin Young of Here and Now with Michigan Radio listeners. Photo by Micki Maynard

The topics ranged from Chinese investment in the United States to whether Right to Work laws would make Michigan and other Midwest states more attractive to international investment.

Panelists included Linda Y.C. Lim, professor of strategy at the Ross School of Business at the University of Michigan, and Changing Gears senior editor Micki Maynard, a frequent guest on Here and Now.

Young also dropped by Michigan Radio this morning to meet listeners and speak with newsroom staff. Here and Now airs daily on Michigan Radio at 1 pm ET.

Here’s a link to video from the panel discussion from Wednesday evening, courtesy of the Ross School of Business.

From the automobile industry to agricultural products, Michigan and the global economy are inextricably intertwined. On Wednesday night, Robin Young, the host of Here and Now, joined Changing Gears and our partner Michigan Radio in Ann Arbor for a town hall meeting to look at issues facing the state and the world.

Robin Young of Here and Now with Michigan Radio listeners. Photo by Micki Maynard

The topics ranged from Chinese investment in the United States to whether Right to Work laws would make Michigan and other Midwest states more attractive to international investment.

Panelists included Linda Y.C. Lim, professor of strategy at the Ross School of Business at the University of Michigan, and Changing Gears senior editor Micki Maynard, a frequent guest on Here and Now.

Young also dropped by Michigan Radio this morning to meet listeners and speak with newsroom staff. Here and Now airs daily on Michigan Radio at 1 pm ET.

Here’s a link to video from the panel discussion from Wednesday evening, courtesy of the Ross School of Business.

Three stories making news across the Midwest today:

1. Michigan governor wants infrastructure investment. In a speech to the state Legislature today, Gov. Rick Snyder said Michigan can no longer delay investment in its transportation infrastructure. He proposed a $120 registration fee hike per year on passenger vehicles that would generate $1 billion in annual revenue. Snyder also wants to replace the state’s 19-cents-per-gallon tax on gasoline with a wholesale tax on fuel, according to our partner station Michigan Radio. “By investing in the means to move people and products with speed and efficiency, we can compete with other states and countries for business and jobs – and we can win,” Snyder said in written remarks.

2. Cleveland school board makes cuts. Over the protests of residents and teachers who packed a high school auditorium, Cleveland’s school board voted to make $13.1 million in budget cuts Tuesday in order to comply with a state requirement to balance its budget. Among the cuts: preschool, spring sports and busing for high school students. Board members said the cuts came as a result of a decrease in state aid and the rehiring of 300 teachers this fall. “Do we have the ability to print money? I don’t think we do,” board member Eric Wobser told The Plain Dealer.

3.Groupon overhauls sales staff. On Wednesday, Groupon CEO Andrew Mason told investors the Chicago-based company is replacing the bottom 10 percent of its sales staff of 4,800 employees. The goal is to win stronger deals from merchants and ensure continued growth, according to the Chicago Tribune. The move comes as Groupon readies for an initial public offering expected to raise $10 to $11.4 billion. Analysts have grown concerned that the company has failed to win enough repeat customers. Repeat customers increased in the second quarter, but numbered 16 million among 143 million subscribers, according to a regulatory filing with the Securities and Exchange Commission.

Three stories making news across the Midwest today:

1. Michigan governor wants infrastructure investment. In a speech to the state Legislature today, Gov. Rick Snyder said Michigan can no longer delay investment in its transportation infrastructure. He proposed a $120 registration fee hike per year on passenger vehicles that would generate $1 billion in annual revenue. Snyder also wants to replace the state’s 19-cents-per-gallon tax on gasoline with a wholesale tax on fuel, according to our partner station Michigan Radio. “By investing in the means to move people and products with speed and efficiency, we can compete with other states and countries for business and jobs – and we can win,” Snyder said in written remarks.

2. Cleveland school board makes cuts. Over the protests of residents and teachers who packed a high school auditorium, Cleveland’s school board voted to make $13.1 million in budget cuts Tuesday in order to comply with a state requirement to balance its budget. Among the cuts: preschool, spring sports and busing for high school students. Board members said the cuts came as a result of a decrease in state aid and the rehiring of 300 teachers this fall. “Do we have the ability to print money? I don’t think we do,” board member Eric Wobser told The Plain Dealer.

3.Groupon overhauls sales staff. On Wednesday, Groupon CEO Andrew Mason told investors the Chicago-based company is replacing the bottom 10 percent of its sales staff of 4,800 employees. The goal is to win stronger deals from merchants and ensure continued growth, according to the Chicago Tribune. The move comes as Groupon readies for an initial public offering expected to raise $10 to $11.4 billion. Analysts have grown concerned that the company has failed to win enough repeat customers. Repeat customers increased in the second quarter, but numbered 16 million among 143 million subscribers, according to a regulatory filing with the Securities and Exchange Commission.

Chrysler workers have reached a split decision.

A majority of United Auto Worker production members have voted to ratify a new contract with the automaker. But UAW skilled trade members rejected the deal on Wednesday afternoon.

UAW leaders discussed the vote on a 1 p.m. conference call and have not yet announced how they intend to proceed, according to the Detroit Free Press, which broke news of the split vote. No precedent exists for resolving a split vote.

“I don’t remember this ever happening,” Art Schwartz, a former GM labor negotiator, tells the newspaper. “It’s never happened in my memory in a national agreement.”

Precise results from the votes have yet to be released. CBS-TV has also reported that the tally is split.

The Soldiers of Solidarity, a splinter group within the UAW that has traditionally opposed concessions, published a laundry list of complaints about the tentative Chrysler contract on its website.

Among their complaints: No reparations are included for past concessions, no cost-of-living allowances, and no parity with the already-ratified Ford and General Motors contracts.

Chrysler’s financial position is more precarious than its fellow automakers. It lost $254 million in the first half of 2011, while GM earned a profit of $5.7 billion and Ford earned $4.9 billion.

What comes next? That’s unknown. Under terms of the federal bailout, Chrysler workers cannot strike, so it seems two options would constitute either a return to the bargaining table or binding arbitration.

Three stories making news across the Midwest today:

1. Sales up at Ford, forecast down. Ford’s third-quarter sales rose 14.1 percent year over year to $33.1 billion, the company said Wednesday morning. But the automaker’s global production plan of 1.37 million vehicles is below the 1.44 million anticipated by analysts, and investors had sold off Ford shares in morning trading, according to the Detroit Free Press. The gap came as a result of “a lower outlook in South America, Asia Pacific and Europe,” Morgan Stanley analyst Adam Jonas wrote.

2. Cook County plans layoffs. Cook County executives unveiled a budget that called for more than 1,000 layoffs to help narrow a projected $315 million deficit, according to our partner station WBEZ. Saying “there’s been nothing easy about this,” board president Toni Preckwinkle said hospital funding and the county’s jail population would be reduced in additional savings measures. She is also trying to convince the county’s union workers to accept furloughs to save $40 million instead of layoffs.

3. Wisconsin public employee pay freeze ahead? Wisconsin state employees may face a pay freeze over the next two years if lawmakers support a proposal from Gov. Scott Walker. The new proposal comes months after Walker required public workers to pay more for their pensions and health insurance while also eliminating almost all collective bargaining. The Milwaukee Journal Sentinel reports another change in the proposed legislation would award overtime only for actual hours worked, after a newspaper investigation revealed how prison guards gamed the overtime system to boost their pay.

CHICAGO – Ask people who run business incubators what they do, and the strange thing is, a lot of them don’t want their organizations to be referred to as “incubators”. That’s what I found out while researching a story I just did about what it takes to be a successful business incubator. I went to the National Association of Business Incubation to select incubators in the Illinois, Michigan and Ohio to speak with. I spoke to eight of them – and got basically eight different responses as to how they measure success. Here’s what they said:

ILLINOIS

Psylotech's Alex Arzoumanidis at The Incubator (photo courtesy of The Incubator)

The Incubator

Where: Evanston, Illinois

Started: 1986

The Incubator is one of the Midwest’s oldest business incubators. Since it started, the nonprofit has helped more than 350 companies. It has graduated 23 companies that employ more than 450 people in Evanston, and said a “fair number of graduates” overall is 135. Currently, it has 39 companies in the incubation stage which employ 80 people. Director Tim Lavengood said what they promote is innovation.

“We’ve been in the first 36 months of building a business for 25 years,” he said. “The best thing an incubator can be is the institutional memory of the startup process.”

TechNexus LLC doesn't like the term incubator - it prefers social collaborative (Photo Courtesy of TechNexus)

TechNexus LLC

Where: Chicago, IL

Started: 2007

TechNexus is one of those that says it doesn’t like to be called an incubator. Co-founder Terry Howerton said they never liked the term, saying that they “set out to create a colloboration center where a very wide percentage of people would hang out.” According to Howerton, 110 companies have grown inside of TechNexus, with those companies raising more than $60 million in capital and created 380 jobs. About 90 have graduated. Another 20 companies are in the incubator now. Howerton described their approach as a business-minded social collaboration.

“At the end of the day, we have a for-profit motive,” he said. “We’re not subsidized by the government, academia or the Illinois Technology Association.”

University Technology Park at IIT has both wet and dry lab space for rent. (Photo courtesy University Technology Park)

University Technology Park at IIT

Where: Chicago, IL

Started: 2006

University Technology Park describes itself as an incubator embedded within a technology park at the Illinois Institute of Technology. The nonprofit has helped 39 companies since it started, and graduated 19. Currently, it has 20 tenants.

“We built this to be the sparkplug to try to get companies to grow to bigger spaces but stay in the city,” said David Baker, its executive director.

MICHIGAN

The Southwest Michigan Innovation Center focuses on bioscience companies. (Photo courtesy of SMIC)

Southwest Michigan Innovation Center

Where: Kalamazoo, MI

Started: 2003

The Southwest Michigan Innovation Center focuses on incubating and accelerating bioscience businesses. It has served 44 companies since it started, graduating five startup companies. Its President and CEO Rob DeWit said the nonprofit thinks of its success holistically – not just in terms of graduates, but in terms of “the scientific churn that we’re able to create”.

The SMIC said its aware of at least 35 patents that have come out of the center, at least eight new investigational drug applications as well four companies that have reached the clinical trial phase of work.

“What we’re interested in, particularly the early startup companies, is how many ideas there are and how much we can help with the service of those ideas,” said DeWit.

TechTown

Where: Detroit, MI

Started: 2000

Techtown, a nonprofit incubator at Wayne State University, was incorporated in 2000 and opened its doors in 2004. It said it does not have a count for the number of businesses that have been there since it first began, but said they have provided training to 2,200 entrepreneurs. There are 250 companies at Techtown now.  Marketing Director Allison Guilliom said the organization does not provide graduation rates because it doesn’t graduate companies in the “traditional incubator sense”.

“We have had quite a few companies grow and expand out into other facilities, but we do not require companies to leave after they reach a certain maturation point,” she said in an email.

OHIO

The Cleveland Clinic's Global Cardiovascular Innovation Center (Photo courtesy of GCIC)

Cleveland Clinic Innovations

Where: Cleveland, OH

Started: 2000

Cleveland Clinic Innovations is the technology commercialization arm of the Cleveland Clinic, and includes the Global Cardiovascular Innovation Center. Each of the 35 companies within the organization are created as its own spinoff the moment it launches, with the Cleveland Clinic diluting its ownership stake as others invest. Of those 35 companies, one has gone public, two have been acquired and three to four are on permanent hold, said Executive Director Chris Coburn, who said the key thing for incubators is to “understand your place”.

“An incubator is typically a nonprofit entity seeking to address a market void,” Coburn said. “Understand what your special place on the spectrum represents and what it doesn’t.”

ShakerLaunchHouse, one of Ohio's newest business incubators (Photo courtesy of ShakerLaunchouse)

ShakerLaunchHouse

Where: Shaker Heights, OH

Started: 2008

Launched mostly in the past 18 months, the ShakerLaunchHouse considers itself as much a seed capital fund as it does a business incubator and accelerator. “Ideally, we focus on entrepeneurs or technology that can provide proof of concept in 90 to 180 days,” said co-founder Todd Goldstein. So far, ShakerLaunchhouse has 60 companies, 29 of which it has invested in.

“On any given day, to have 60 entrepreneurs working together is a huge boost for Northeastern Ohio,” Goldstein said. “We have truly developed a community around entrepreneurship that didn’t exist prior to starting LaunchHouse.”

Turning Technologies, which started at the Youngstown Business Incubator, is now a $50 million company. (Photo courtesy of Turning Technologies)

Youngstown Business Incubator

Where: Youngstown, OH

Started: 2001

“I’m not really a big fan of incubators,” CEO and Chief Evangelist Jim Cossler told me when I called to ask him about the Youngstown Business Incubator. When the nonprofit started, Cossler said it thought of itself a “traditional” incubator, providing free copies, rent and utilities. Then they realized they had to focus on a specific industry, and they choose software companies.

Cossler said they don’t believe in graduating companies but instead keep them around on their campus and transition to paying tenants. YBI has nine companies that pay rent, including Turning Technologies, a $50 million company that employs 200 people. Another 24 to 30 are still in incubation.

“We just felt firmly we would never have the resources, never have the financing, and more importantly, never have the expertise to be good at everything,” Cossler said. “And so rather than being mediocre at doing everything and saying yes to everyone to comes to our door, we decided let’s be world class at one thing and one thing that makes sense for Youngstown, Ohio.”

Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a  “fair number” of overall graduates from the incubator is 135.

Business incubators are designed to turn an idea or concept into a successful company. The goal is for these new companies to bring jobs and revenue. Across the Midwest, some have been around for decades, while new ones are just starting up. But many tend to produce few companies. Last week, we did a series of stories looking at the so-called Magic Bullets to save our economy. In that style, here, I report on what principles incubators need to focus on to create successful offspring.

Ann Arbor's informal business community the Tech Brewery (photo courtesy of Dug Song)

Each Friday, inside the old Northern Brewery building in Ann Arbor, 4:30 p.m. is known as “beer thirty”. That’s when the self-described tech geeks who are part of this informal business community gather for drinks.

The Tech Brewery houses three dozen start-ups – but don’t call it business incubator.

“We don’t call ourselves an incubator,” founder Dug Song said. “If anything we call ourselves a start-up coop.

Song has his own start-up – Duo Security. He began the TechBrewery after being frustrated by traditional business incubators. In his opinion, they provide little more than cheap rent for lots of start-ups – instead of what it takes to get a company up and running.

“A lot of folks get to a point where they don’t want to be in a hoteling kind of environment, which is a lot of what these incubators tend to be,” he said. “They’re a little bit more isolated.”

The lack of a hotel environment drew Victor Volkman to the Tech Brewery. He had been involved in other incubators where he says his business ideas went nowhere.

“You have a biotech company next to a software company next to a something of completely different origin and we really didn’t talk to each other,” he said, adding the value in the Tech Brewery is running into someone in the hallway who can immediately help solve a problem.

The biggest cost for start-ups is office space. That’s why most incubators provide free or reduced rent. But it’s not just about office space. Having the same type of companies together helps everyone grow – something Volkman said he has found at the Tech Brewery.

Volkman left the traditional incubator environment because it didn’t work for him. That turns out to be a common sentiment.

The University of New Hampshire at Manchester’s Kelly Kilcrease studied incubators across the country. Out of the almost 500 entrepreneurs he surveyed, Kilcrease found that their opinion of incubators was “lukewarm – at best”.

Based on Kilcrease’s research, the happiest – and most successful clients – came from a specific type of incubator:

“Those that stress a certain type of clientele, deliver high quality services and those who have professional managers are more apt to be successful than those that do not,” he said.

Kilcrease thinks an incubator’s true measure of success is its graduation rate – the companies that actually make it on their own, apart from the incubator.

Psylotech's Alex Arzoumanidis at The Incubator in Evanston (Courtesy of The Incubator)

Often, incubators – like TechTown in Detroit – don’t publish graduation rates. The Incubator in Evanston, Illinois is one of the oldest in the Midwest – it celebrates its 25th anniversary this year. They’ve helped more than 350 companies and have graduated 23 companies that remain in Evanston. Director Tim Lavengood said a “fair number of graduates” overall is 135.

(Ask an incubator about how they define success and each one answers differently. Check out these profiles of eight business incubators across the Midwest.)

Jim Cossler is the CEO and Chief Evangelist of the Youngstown Business Incubator. It started out in 1995 in what Cossler describes as a typical incubator:

“You know – here’s some cheap office space, here’s a photocopier, here’s a fax machine,” he said, adding: “We don’t really care what you’re doing, but please turn yourself into a globally successful corporation.”

They quickly realized that approach wasn’t going to work. In 2001, they began to focus on software technology firms.

Today, the organization has a network of more than 1,000 people virtually through a private LinkedIn group, as well as four buildings full of clients – including nine companies that no longer need the incubator’s help. In fact, these companies pay rent which makes up about a third of the nonprofit’s $750,000 total budget. (A rent, by the way, that Cossler says is a premium on other commercial office space in Youngstown.)

Turning Technologies began as a Youngstown Business Incubator company a decade ago. Its estimates this year's annual revenue at $50 million. (Photo courtesy of Turning Technologies)

Ten years ago this month, Turning Technologies walked into the Youngstown Incubator with its idea – adapt audience response technology to be used in classrooms.

Today, it’s a $50 million company that employs 200 people. One of the YBI’s paying tenants, the company takes up an entire building.

Co-founder Mike Broderick says the YBI is “fairly rare” in its level of success, which he attributes to their focus.

“What we really needed the most was expertise,” he said. “The introduction to potential clients, to people who had been through the type of thing we had done before, who could provide advice.”

Broderick told me something academic research backs up – he thinks the company would have succeeded even without the incubator. But the YBI’s network accelerated his company’s progress. And he thinks that’s the best an incubator can do – accelerate a potential company’s growth.

This story was informed by the Public Insight Network.

Correction: An earlier version of this story did not fully elaborate how many companies “graduated” from Evanston’s incubator program, as the original number included only graduates that remained in Evanston. The director says a  “fair number” of overall graduates from the incubator is 135.