Analysis: Instability remains for several of Ann Arbor area's top employers as Thomson Reuters preps sale

Thomson Reuters, which also employs nearly 1,000 workers at its tax and accounting division in Dexter and Pittsfield Township, is the second largest for-profit private sector employer in Washtenaw County.

Although the company’s health care division is profitable, Thomson Reuters’ decision to unload the $450 million operation is cause for concern. There’s no guarantee that the buyer will choose to keep the operation here.

Calvin Mitchell, a Thomson Reuters spokesman, said it was too early to say how the local operation would be affected by a sale. “I wouldn’t want to speculate on that,” he said.

Meanwhile, instability at several of the Ann Arbor region’s biggest private sector employers provides reason for concern that the recovery in the jobs market won’t be as swift as economists are projecting.

If Thomson Reuters exited Ann Arbor, that would equal the largest blow to the region’s economy since Pfizer Inc. announced in January 2007 that it would close its Ann Arbor research campus, displacing more than 2,100 jobs by the end of 2008.

In the past, the Michigan Economic Development Corp. might have thrown a pot of incentives at Thomson Reuters’ suitor to convince the company not to leave. But Snyder and the Michigan Legislature eliminated the Michigan Economic Growth Authority tax credits and replaced them with a capped pool of incentives to be managed by the MEDC.

Now, Snyder is arguing that the state’s reduced business tax rate, a flat 6 percent tax on corporate profits, should be sufficient to help most companies grow.

Paul Krutko, the new CEO of economic development group Ann Arbor SPARK, is meeting with Thomson Reuters within a week to ascertain how we might be able to convince the company to stay. He’ll have to try to convince the company’s suitor to stay in Michigan without MEGA tax credits, unless MEDC sees fit to distribute some of its limited incentives to the acquirer.

But Krutko said he’s accepted that the realities of government budget mean that economic development firms have to get creative to help businesses grow.

“I’m a realist,” he said in an email. “The changed incentive environment is a reality. The new corporate tax structure in effect has given Thomson Reuters and any potential suitor a very different taxing environment for all current operations and any growth that might occur here. We need to communicate that to TR as they talk to potential acquirers and to the executives who ultimately purchase the division.”

Other sources of concern for the local economy:

— Borders Group Inc. is considering a move of its corporate headquarters to western Wayne County, which would affect nearly 400 employees at the company’s office on Phoenix Drive on Ann Arbor’s south side. And there are serious questions about whether the company will survive at all in the long term.

— Automotive Components Holdings LLC, an entity controlled by Ford Motor Co., is selling the fuel tank business at its 1.28-million-square-foot Milan plant to French auto supplier Inergy Automotive Systems, which plans to build a new plant elsewhere in southeast Michigan within two years. That means the Milan plant will be vacant if ACH fails to find a buyer. Meanwhile, ACH’s Saline plant continues to operate at full capacity with some 2,000 employees. But ACH’s ultimate objective is to sell or shut down all of its plants.

— St. Louis, Mo.-based CitiMortgage, which manages most of Citigroup Inc.’s $170 billion mortgage portfolio, is cutting 108 positions at its 255,000-square-foot office in Avis Farms South off of State Road. That division continues to employ more than 850 workers, but the cuts come as the industry is bracing for a dip in new mortgage originations and refinancing.

Meanwhile, several other firms in the Ann Arbor area that have not resorted to layoffs are, nonetheless, facing industry troubles:

— Masco Cabinetry, which consolidated divisions into a new operation in Ann Arbor Township in late 2010, is facing a major drop in sales over the last few years. The company moved some 350 workers to the former Flint Ink building with plans to eventually add another 100.

— Edwards Brothers, which employs about 450 workers at it’s Ann Arbor book printing headquarters, is fighting for market share in a declining industry that also affects several other book printers in the area.

— General Dynamics’ Advanced Information Systems division in Ypsilanti Township employs about 450 workers. But in 2010, General Dynamics reported its lowest sales increase in 15 years as defense spending comes under greater scrutiny in Washington.

— Terumo Cardiovascular Systems recently agreed to pay $35 million to the U.S. Food and Drug Administration after the company failed to comply with numerous FDA regulations over quality procedures and reporting requirements. The company has said that it won’t have to cut from its 450-person workforce on Jackson Road in Scio Township, but further squabbles with the FDA could spell concern.

In March, University of Michigan economists projected that Washtenaw County would add 8,840 jobs from 2011 through 2013 as the region’s unemployment rate declines from an average of 8.6 percent in 2010 to 7.2 percent in 2011, 7.0 percent in 2012 and 6.7 percent in 2013.

A recovery in the manufacturing sector and a strong health care industry can be partially credited with fueling the turnaround.

But the projections show that a total recovery is still far off. If the U-M forecast is accurate, the Ann Arbor area will still have 500 fewer jobs in 2013 than it had in 2005.

Jobs categorized as "management of companies and enterprises" are not fueling growth. In fact, the number of jobs in this category fell by 958 from 2005 to 2010 and they’re not coming back. That figure is expected to rise from 1,358 in 2010 to 1,472 in 2013 — basically flat.

Indeed, job growth is likely to occur mostly at the region’s health care industry and its mid-sized, entrepreneurial companies. Look for job growth at firms like Ann Arbor-based online customer satisfaction measurement firm ForeSee Results, which is adding 70 workers this year, and Ann Arbor-based battery firm Sakti3, which is expanding its capacity to produce pilot-stage battery materials.

Krutko, who started his job as SPARK’s new CEO in April, said he’s asked his staff to deliver a list of “the 150 leading companies in the Ann Arbor region” so that he can meet with them within his first six months on the job.

Will taxes sway the company’s decision? That’s impossible to say. Thomson Reuters recently declined to say how Snyder’s tax changes would affect its local operation.

But Krutko is convinced that the cost of doing business in Michigan is competitive with the rest of the country.

“We need to be sure we are communicating why this is a good location for business with a high quality of life and relatively low operating costs when compared to other locations around the nation,” Krutko said.

Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.