HandyLab's shutdown in Ann Arbor: October campaign issue for Rick Snyder?
(Note: This story has been updated after the Michigan Democratic Party this morning issued a statement on HandyLab's closure.)
A New Jersey corporation's decision to slash its Ann Arbor operation stands to become an issue in the gubernatorial campaign between Ann Arbor venture capitalist and GOP candidate Rick Snyder and Lansing Mayor and Democratic candidate Virg Bernero.
The corporation, medical devices giant Becton, Dickinson and Co., said it would eliminate its Ann Arbor office, which it inherited in late 2009 after acquiring University of Michigan startup HandyLab for $275 million.
Republican gubernatorial candidate Rick Snyder (left) and Democratic gubernatorial candidate Virg Bernero
Snyder's venture capital firm Ardesta was one of several local VC firms that invested in HandyLab in its early days and reaped a portion of the profits when the company was sold to BD.
BD, a $7.4 billion company with some 29,000 employees, is completely leaving the Ann Arbor area by July 2011 and its 50 employees will no longer be working in Ann Arbor. Manufacturing of HandyLab's promising rapid detection-infection device will be consolidated at a Maryland facility. It's unclear whether HandyLab's workers will be laid off or offered the opportunity to transfer.
HandyLab becomes an issue as the gubernatorial candidates are jockeying to brand themselves as the candidate most qualified to resuscitate Michigan's economy and create jobs in the state.
Snyder left the company after the acquisition in 2009 and had nothing to do with BD's decision. Still, the elimination of HandyLab's local office provides political ammunition to Bernero's campaign.
"Snyder's whole campaign is based on the fact that he's a business man, but his businesses end up eliminating jobs, not creating them. He brags about Gateway and HandyLab, but each ended up laying people off while making him rich," Bernero campaign spokesman Cullen Schwarz said in an e-mail. "Somehow Mr. Snyder always manages to make himself money while leaving laid off and outsourced workers in his wake."
Snyder's campaign, which cites HandyLab as an example of Snyder's economic credentials on his campaign website, sought to portray HandyLab's demise as an example of Michigan's economic problems.
"The thing that shocked Rick the most was, had he still been an owner of this company, the company would still be here," Snyder campaign spokesman Bill Nowling said. "That said, this illustrates just how tough the economy is here in Michigan. We’re making it easy for businesses in other states to argue that the businesses should go elsewhere, and we need to change that."
Nowling said Snyder was unavailable to comment late Wednesday but said Snyder was caught off guard by BD's announcement. He suggested that Michigan's business tax structure made it difficult to keep companies like HandyLab.
"The reasons behind it are kind of the subtext of the whole campaign in terms of why we need to reinvent Michigan’s economy," Nowling said. "Unfortunately HandyLab is just the last in a long line of headlines where companies decided that there was a better place to do business than in Michigan."
In a statement released this morning, Michigan Democratic Party chairman Mark Brewer said HandyLab's departure shows that Snyder is a "jobs killer."
“It’s the same old story with Rick Snyder,” Brewer said. “He ran Gateway into the ground before selling it to the Chinese, and now he makes money selling HandyLab and then it closes and lays off Michigan workers. Snyder’s businesses have a history of making money for Snyder, laying off workers, closing their doors, and leaving Michigan. It’s déjà vu all over again.”
Snyder's supporters say he should not be held responsible for what BD decided to do after acquiring HandyLab.
Ted Dacko, a Snyder supporter and former CEO of software firm HealthMedia, said on Twitter that it was "ridiculous" to blame Snyder.
Snyder was a co-founder of HealthMedia, which was acquired by Johnson & Johnson in 2008 and still employs nearly 200 employees and contractors in Ann Arbor.
"When one company buys another company they control that asset. 100%," Dacko posted.
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
Milton Shift
Sat, Oct 9, 2010 : 11:53 p.m.
sbbuilder, that definition is such a gross simplification that it amounts to a total distortion. The ideas of socialism are not defined by Webster, they are defined by writers and ideologues who developed them. Read some primary sources, please. Being political means being concerned with the economics of power. It does not mean government. Again - primary sources are important!
Speechless
Fri, Oct 8, 2010 : 12:18 p.m.
"...Why is it intrinsically bad to rely on the hunches of millionaires and billionaires?..." To build a healthy, sustainable economy that reliably meets people's needs, we'll have to do a lot more than rely on hunches made inside gilded cages. In order to spike a capitalist economy with elements of rationality and compassion, it is necessary to consciously direct investment toward democratically-determined social priorities. Adam Smith, in his time so long ago, well understood just how amoral marketplace demand could become when left strictly to its own devices, without social direction and intervention. ------------ "... If we let government choose who gets the funding, then you are in essence letting the government choose the winners and the losers. There is absolutely nothing democratic about that. Will I get a vote as to who gets start up monies?..." Well, there's this thing called representative democracy (which also allows for occasional direct voting on referenda) that relies on a practice called elections. It provides a considerable democratic influence on investments chosen by government. By contrast, a reliance on the hunches of country clubbers is only a modern, mercantile tweaking on feudal-era decision-making by high lords. ------------ "... the mid to late Seventies was a low water mark.... Carter, was a wishy washy president who had a great deal of trouble making tough decisions. You call this time 'brighter and more optimistic'?... Interest rates were through the roof. Our economy was stagnant...." Economically (although not culturally) 1970s was a far, far better era than today. Back then, working class people commonly held jobs, and they even saved money while enjoying limited discretionary spending — unlike today. Ideas for a more democratic economy (i.e., workplace democracy) were slowly coming into discussion. Jimmy Carter, though, was a lousy, center-right president who did his part to dampen the optimism of that moment. The implied message, however, that Reagan's time in the 1980s marked an improvement does speak volumes. Even Reagan's budget point-person, David Stockman, felt compelled to bail out of that administration early on.
sbbuilder
Fri, Oct 8, 2010 : 11:54 a.m.
Milton Shift Where did you learn your History? Or your Government? For a quick definition of Socialism from Merriam Webster: "1: Any of various theories or social and political movements advocating or aiming at collective ownership and administration of the means of production and control of the distribution of goods." Please note the word 'political'. So, to contend that it "cannot involve the government ordering us around" is ludicrous. That is exactly what socialism is. Perhaps the only pure example of Socialism in practice would be in monasteries or convents, where everything is shared (collective ownership), production is controlled by the members (control of the distribution), and everbody is on an equal footing.
Milton Shift
Fri, Oct 8, 2010 : 9:28 a.m.
Behind every great fortune lies a great crime. The person who amassed it may be decent, but the logic of capital forces their hand to do things with drastic and dire consequences for the whole of society. If they don't, they lose capital. The choice to do the right thing does not even exist. On the subject of socialism: it requires true, direct democracy and as such, cannot involve the government ordering us around. The Stalinist model you refer to was the replacement of one self-appointed exploitive bureaucratic caste (the capitalists) for another (government tyrants.)
A2K
Fri, Oct 8, 2010 : 6:49 a.m.
Lack of brain power isn't why companies leave Ann Arbor/Michigan...Ann Arbor was just written up as the 2nd city in the nation having the highest percentage of educated/degreed people per capita. It's likely that company headquarters are located elsewhere with an added incentive of lower taxes...then again, Michigan has been struggling so long that companies can really squeeeeeeze employees here and pay 1/3 to 1/2 what they'd pay anywhere else. *SIGH*
sbbuilder
Fri, Oct 8, 2010 : 4:28 a.m.
Speechless Why is it intrinsically bad to rely on the hunches of millionairs and billionaires? Are these evil people just because they have amassed wealth? Are their decisions faulty because they have large bank accounts? Case in point: Mr Snyder et al bankrolled a startup that eventually became so attractive that another company bought them out. I'd say that was a pretty good hunch. If we let government choose who gets the funding, then you are in essence letting the government choose the winners and the losers. There is absolutely nothing democratic about that. Will I get a vote as to who gets start up monies? Do you really want the government involved in deciding which business will survive and which will fail? That is socialism, my friend, and I want no part of that. Also, the mid to late Seventies was a low water mark in self esteem in our country. Interest rates were through the roof. Our economy was stagnant. Carter, dear Carter, was a wishy washy president who had a great deal of trouble making tough decisions. You call this time 'brighter and more optimistic'? There was a dark cloud hovering over our nation around that time. Again, how's all those start ups doing? You know, the ones you helped get started? How's all those jobs you helped to create?
Speechless
Thu, Oct 7, 2010 : 9:56 p.m.
"...Without the rescources that people like Mr Snyder provide, there wouldn't be much in the way of start-ups...." To the extent that's true, it's a very unhealthy circumstance and bodes poorly for the future of our economy. We have to do better than to rely on the hunches of millionaires and billionaires. Not very democratic, either. Alternative investment sources may include state-run banks which can help direct investment toward depressed regions and desired industries. Other national governments, such as in Korea and the UK, look to provide healthy investment funding and support for their start-ups in a variety of industries. In addition, public seed money for local, employee-owned enterprises should be a social priority. (I recall this being discussed nationally in the mid-to-late 1970s, in the brighter, more optimistic days before Reagan.) It's much more difficult to relocate an office or facility far away when local workers run it. Private credit unions could assist here, as well, once they have been motivated to do so by their memberships. ------------ "... Perhaps Becton Dickson didn't like the outrageous MBT... or maybe it was the fact that our property taxes seem to be twice as high as most other states.... Or could it be the fact the unlike other states, we have a sales tax, AND a property tax AND the MBT tax AND bad weather? I'm inclined to prefer Rick Haglund's initial take on the relocation of start-ups: "...Tech companies are started, become successful and are sold, which is how venture capital investors earn a return on their investment. But the new owners, often located in other states, move the operations out of Ann Arbor to be closer to the parent companies...."
Milton Shift
Thu, Oct 7, 2010 : 8:38 p.m.
Jobs are not "created" by the formation of a successful new company, they are indirectly relocated by pushing competitors out of the market (resulting in cuts elsewhere). More or less this is the end effect and while we're giving them blank check subsidies and tax breaks to "create jobs," we, overall, get nowhere. You can't just create wealth out of thin air with managerial magic. It's on the level of perpetual motion machines: physics professors show students proposed designs, and ask to figure out where energy is being lost. It may appear to work from a subjective perspective, but objectively, it's another story.
johnnya2
Thu, Oct 7, 2010 : 8:31 p.m.
People need to realize most businesses do not make business decisions based on tax policy. Do you think Google is base din California for its wonderful tax policy? Why is Microsoft based in Washington state (another not so low tax state)? Why is Chase Bank based in New York City? Boeing is in Chicago. The main reason is where their assets are. An oil company will need to locate in an oil producing stare. I doubt you will ever see Shell based on Michigan, EVEN with zero sales, property, income and business tax. Apple and Google choose California for the asset they have. BRAIN POWER. Intelligent people like that area. They want that culture. and they want to live in specific cites (San Francisco, Seattle). Michigan's opportunity will be to take advantage of green industries, the water, and health care. Regardless of economic cycles these industries will always succeed. I think people should look back to days when oil was dirt cheap. Houston was a dying city. A foreign cartel rigged the prices of oil and now the city has a better economy. US policy on "free" trade has made manufacturing that same problem. I wonder how many know that many cars cold in this country under US name plates are manufactured in Canada (a very high tax area). The main reason being HEALTH CARE COSTS. The Canadian system provides for health care. I have proposed many times that Michigans economy could change overnight with three things. End sales tax PERIOD. It is a regressive tax unduly paid by the poor. Offer free college education to ANYBODY who graduates from a Michigan high school. Offer free health care to any person who lives or works in the state. Here is where the fun starts. Companies would flock to Michigan. More people would have jobs. As more people moved here, more demand for houses. More demand leads to higher prices, which meeans higher property taxes, which mena more money for the local communities which in turn brings a more educated work force, which brings new businesses, which start the cycle over again. Workers would DEMAND to live in a state where they could have their kids college paid for. People from all over the country would buy from retail outlets in Michigan, AND people would choose to visit Michigan due to no sales tax. This can all be paid for with a graduated tax rate on business and a graduated income tax for people working or living in the state.
gsorter
Thu, Oct 7, 2010 : 2:59 p.m.
The real question should be what can Michigan do to keep companies like HandyLab here, not if the founding investors are responsible for a move after they sold it. Perhaps Becton Dickson didn't like the outrageous MBT (based primarily on sales, not profit), or maybe it was the fact that our property taxes seem to be twice as high as most other states (>2% vs 1%). Or could it be the fact the unlike other states, we have a sales tax, AND a property tax AND the MBT tax AND bad weather?
sbbuilder
Thu, Oct 7, 2010 : 1:56 p.m.
Speechless At least Mr Snyder helped to start a company here in Michigan. He could have just started it up somewhere else. At least for a number of years there were people gainfully employed here in Michigan. Without the rescources that people like Mr Snyder provide, there wouldn't be much in the way of start-ups. And, don't forget, he's putting his money on the line, with no guarantee of making a plug nickel. How many businesses have you started? How many people's employment are you responsible for? How many jobs here in Michigan have you created? Wipe the spittle off of your clenched teeth the next time you mention the words 'capitalism' or 'corporation', and you might be pleasantly surprised that they're not the evil entities you always make them out to be.
Speechless
Thu, Oct 7, 2010 : 12:22 p.m.
"... Start a company, create products and servcies people want, and sell the business profitably. Snyder cannot be responsible for what the acquiring company does. Many times they are buying the technology and/or the customers. The rest of business is not needed...." Thank you very much for reminding all of us, yet again, that venture capital investments have little practical relationship with long-term development a stable economy that provides numerous, worthwhile employment opportunities for those who actually need to work for a living. And to restate this concept once more, with pleasure: "... Once they had the technology, they didn't need the extra people, building, etc. It's called integration folks, creating synergy, etc. Corporations doing what their shareholders want them to do -- create value for them." Well, since that sounded so good, here's a special encore performance: "... How many times have you heard of a Michigan based company buying an out-of-state company, and moving the manufacturing here? I'm sure there are just gobs and gobs of examples." A future economy driven primarily by venture capital investment sounds so spectacular that I can barely endure the breathless anticipation in advance. To survive comfortably in the venturous world, all anyone really needs to do is acquire independent wealth ahead of time. Snyder makes it look simple.
81wolverine
Thu, Oct 7, 2010 : 12:05 p.m.
Peregrine: What's more dishonest? Snyder's campaign using the Handylab exodus as an example of why their position that Michigan's economy needs reinventing or Bernero's spin-doctors using it as another opportunity to make misleading, innaccurate, and non-constructive comments about Snyder's business record? I say the latter. Every business situation is different, so to draw conclusions on one specific case of a business leaving Michigan (Handylab) is not a good way to judge anyone or anything. But, I think every one CAN agree that Michigan as a state has done a poor job over the last 20 years diversifying its economy, nurturing new businesses, and attracting ones from outside to relocate here. Bernero offers no plan on how he's going to change this situation. At lease Snyder has given some concrete ideas and obviously understands the business creation process.
JSA
Thu, Oct 7, 2010 : 11:49 a.m.
What is absurd is anyone, Republican or Democrat, trying to spin this story in the first place. BD bought a company and they are moving it. End of story.
Nathan Bomey
Thu, Oct 7, 2010 : 11:09 a.m.
Stories now from the Detroit News: http://www.detnews.com/article/20101007/POLITICS02/10070437/Democrats-attack-Snyder-over-planned-closure-of-Pittsfield-Twp.%E2%80%99s-HandyLab and Crain's: http://www.crainsdetroit.com/article/20101007/FREE/101009910
Technojunkie
Thu, Oct 7, 2010 : 10:35 a.m.
Republican Snyder creates a company with high-paying jobs. He sells it to a Democrat company and moves on. Democrat company screws Michigan. This is a reason to vote for Democrats? Yes, things like the insane MBT really do discourage multistate companies from keeping operations in Michigan. The compliance costs and aggravation are huge. Who needs the aggravation of Michigan's paperwork? Paying the tax is bad enough, but torturing people with figuring out how to comply with the tax is cruel and unusual punishment.
demistify
Thu, Oct 7, 2010 : 9:59 a.m.
A start-up that Rick Snyder financed and of which he was Chairman was sold to a large out-of-state company, which is now closing it. Snyder supporters are jumping in to defend him from being blamed for the loss of jobs. Fair enough. What is outrageous is Snyder's campaign manager spinning the loss of jobs as a reason to vote for Snyder.
Nathan Bomey
Thu, Oct 7, 2010 : 9:34 a.m.
Former HealthMedia CEO Ted Dacko, a Snyder supporter, weighs in on Twitter: http://twitter.com/tdacko/status/26649247662 "It is ridiculous to try to pin the HandyLabs (sic) situation on Rick Snyder. When one company buys another company they control that asset. 100%."
Peregrine
Thu, Oct 7, 2010 : 9:31 a.m.
Rick Snyder's focus on HandyLab was never to create jobs. It was to make money. The jobs, temporary as they turned out to be, were simply a means to his monetary ends. If his focus were jobs then he'd work at starting a business and building it up here in Michigan. But jobs have never been his focus. It's therefore always been disingenuous for Snyder's campaign to tout jobs and HandyLab or elsewhere. Look at Rick Snyder's history; it's always been the same. He waits for the big payoff and then walks away. There's nothing inherently wrong with it. But it's dishonest when the campaign tries to spin it as though he's been focused on or has some deep expertise in creating jobs. As for Snyder's spokesman, he, along with the rest of Snyder's well-paid political consultants, is just trying to spin the situation into something beneficial for Snyder. As many in this thread have pointed out, BD consolidated operations. BD's Diagnostic Systems division is headquartered in Sparks, MD. For him to claim this exemplifies the problem in Michigan and that he as governor will fix it is, yet again, disingenuous.
Rizzle
Thu, Oct 7, 2010 : 9:11 a.m.
It's easy to figure out what happened. BD, a huge company, bought handylab for the technology. Once they had the technology, they didn't need the extra people, building, etc. It's called integration folks, creating synergy, etc. Corporations doing what their shareholders want them to do - create value for them.
sbbuilder
Thu, Oct 7, 2010 : 9:03 a.m.
How many times have you heard of a Michigan based company buying an out-of-state company, and moving the manufacturing here? I'm sure there are just gobs and gobs of examples.
InsideTheHall
Thu, Oct 7, 2010 : 8:56 a.m.
Rick: You are spot on. This is part of the American Dream. Start a company, create products and servcies people want, and sell the business profitably. Snyder cannot be responsible for what the acquiring company does. Many times they are buying the technology and/or the customers. The rest of business is not needed...admin, HR,sales, etc.
Technojunkie
Thu, Oct 7, 2010 : 8 a.m.
It seems that BD's chairman is a Democrat: www.opensecrets.org/usearch/index.php?q=becton+dickinson&sa=Search&cx=010677907462955562473:nlldkv0jvam&cof=FORID:11 who gave $3,000 to the Democrats. Another executive gave $1,000 to a Democrat candidate. A BD manager did give a total of $501 to the RNC but he's in a different state and I will presume that he's a much lower on the totem poll. So, to me this is another example of how Democrat descriptions of evil Big Business merely describe how they run their businesses. If I were conspiracy minded I'd say that BD is moving HandyLab to help out their Democrat comrades, what with the medical industry cooperating with Obama on health care reform in the usual corporate socialist manner.
clownfish
Thu, Oct 7, 2010 : 7:32 a.m.
Funny, same tax laws existed when Rick took his off the top. Yes, he creates jobs, temporary jobs. While the top shareholders reap huge benefits the people that actually do the work take the real risks. Heckuva job Nerdy!
Rick Haglund
Thu, Oct 7, 2010 : 6:56 a.m.
This has been a problem in Ann Arbor for a long time. Tech companies are started, become successful and are sold, which is how venture capital investors earn a return on their investment. But the new owners, often located in other states, move the operations out of Ann Arbor to be closer to the parent companies. I'm not sure it has anything to to with the underlying economy of Michigan.