lron poor

DnTROIT
BUSII{E
SS
OnruNS
OEntirecontents copyight 2OO2by CEin CommunicationsInc. A1lrights reseryed
Depotdrop
Home
plansfor
Detroit
THIS
IN
JUST
Ballot
language
nextstep
forregional
arbtax
A major hurdle keeping
an arts and culture millage
off the November ballet is
gone, but organizers say
the Reglonal Cultural FundIng Inltlailve isn't safe yet.
Between Aug. 22 and
Aug.27, delegatesto the Re
glonal GulturalCouncllmust
be approved and ballot language agreed on, or voters
won't vote on the issue in
November, said Bettie
Buss, director ofpolicy pre
jects for Detrolt Renalssance
Inc, The council comprises
delegates from Wayne and
Oakland counties.
Getting both initiatives
done in six days will be a
huge task. But supporters
were pleased last Thursday
when Oakland County Executive L. Brooks Patterson named the chairman of
the Oakland County Board
of Commissioners Thomas
Law, one of tluee delegates
to the council. Patterson
previously appointed three
delegates, but Law wasn't
amongthem.
The council's articles of
incorporation require the
Wayne and Oakland county
exmutives to appoint three
delegates each and one
must be the county commission chairman.
The Oakland County
board must approve Patterson's delegates at its Aug.
22 meeting, and then the
entire Regional Cultural
. 'Council
must approve the
ballot language by Aug. 27.
The haU-mill property
tax could raise about $29.9
million for u arts and cultural institutions in Wayne
and Oakland counties and
$15.4million for local community cultural and recreational programs. If it fails
or doesn't get on the ballot,
it means "significant layoffs" for some of the cultural institutions, Buss said.
In 2000, an arts tax pre
posal won 53 percent of the
overall votes. But it had to
win in each county. Oakland County defeated the issue by 1,03? votes, or one
tenth ofa percent.
-LauraBailey
SeeThis Just In, Page2
Wal-Mart,
Lowe'seye'ing
Jffirsons'ite
BY BRENT ST.IevEI,y
CRN N'S D ET RO I T AUSINESS
MARTIN
JOHN
Natlonal Steel Gorp. ls a blg part of Rlyer Rouge - such a
blg part that Mayor Greg Joseph sald lts fallure to make
two tax payments has created a ffnanclal crlsls.
F
trl
z
Home Depot Inc.'s long-awaited plan to
build a store.on East Jefferson Avenue in
Detroit has collapsed, but other national
retailers, including wal-Mart Stores Inc.,
now are considering the site.
After negotiating with Home Depot for
several years, Michael Curis, owner and
developer of RlverbendPlaza near Grosse
Pointe Park, said all hurdles were cleared
and the site was ready.
But Atlanta-based Home Depot (NYSE:
HD) stopped the planned $15 million project after concluding that there are too
many renters and not enough home owners in the area, said Tom Gray, Home De-
lronpoor
D'ispute ulitlt steel
fir* hasR'iuerRouge
fani,ngbankruptny
BY TERRY KosDRosKY
C RAI N'S DETROIT AUSIA'ESS
One bankruptcy could beget
another if Natlonal Steel Gorp.
and the city of Rlver Rouge
don't resolve a property-tax
dispute.
River Rouge Mayor Greg
Joseph said the city facesbankruptcy and a possible state receivership if its largest taxpayer, National Steel's Greatlakes
Steel, doesn't pay its property
taxes this year'. National Steel
hled for Chapter 11banlorrptcy
protection March 6 and told the
city it won't pay property taxes
this year.
Great Lakes Steel occupies
I{HAT's
tvRllNG?
Greatlakes Steel is
arguingthat
propertytaxes
becomean
obligationon Dec.
31 of the year
beforethey are due.
In that case,the
debt would be part
of the company's
bankruptcypetition
and not payable
until they emerge
from bankruptcyor
the companyis
sold.
kl
U)
CrucrHPLU{s
the retailsiteeastof Riverbend
Plazahadbeen
markedfor a HomeDepot.Butnowthat it has
cancelled
its plans,otherlargeretailersare
considering
the site.
Businees
her4r€ updaLed
at uluru.r.srainsdef-roiL.con
dailg
SeeRiuerRouge,Page25
pot's Midwest public-relations manager.
Bentonville, Ark.-based Wal-Mart, however, has an interest in the site, as does
Lowe's Cos. tnc,, a national competitor of
Home Depot in home-improvement centers.
SeeHome Depot, Page 24
Fbiendsnow foes
goes
Compuware
toblows
withBlgBlue
BY ANDREw DIETDERIcH
CM I N'S D ET RO I T AUSTNTSS
Forget the lackluster tech
market, stock prices that
have fallen nearly 80 percent this year and constant
criticism from analysts.
What has comprware
Corp.seeing red is Big Blue.
Strong partners for more
than two decades,IBM Corp.
recently has become a virulent competitor alter years
of a cozy relationship that
allowed Compuware to develop software tailored to
IBM mainframes.
That means big trouble
for the Farmington Hills-
based company, because B0
percent of its software revenue and 36 percent of its to
tal revenue comes from the
IBM mainframe market,
said analyst John Moore, an
assistant vice president at
New York City-based Moo
dy'sInvestorsServlceInc.
postage
Risilg
slows
spending
ondirect
mail,
spunmove
toe-mail,
Page
3.
The relationship has
strained to the point that
Compuware has sued IBM
twice in U.S,Dlstrlct Court in
Detroit, with allegations
including anti-competitive
schemesand libel.
"Compuware has been
surprised and disappointed
by IBM's actions," said
David Ettinger, an attorney
for Compuware with Detroit-based Honlgman Mlller
Schwart and CohnLL.P.
So has Wall Street.
"IBM is crucial to Compuware," Moore said in a
report Tuesday in which
SeeCompuware,Page25
Cmn'ShSTS
l{uning
homes,
aidines
seruing
Meho
laaikth lc rmhl at zuzoza.un'htstletxtit.
cont.
AugustL9,2OO2
CRATN's
DETRotrBustNEss
PaEe 25
Gompuware:
OnetimefriendIBM becomes
a rival
l From Page 1
Moody's downgraded Compuware's debt rating to junk.
"The lawsuits filed by Compurvareagainst IBM ... are indicative of the strained relationship
between the two companies and
challenge Compuware's ability to
renerv existing multiyear software
enterprise license agreements at
maturity, much of which occur in
the next two years."
Tim Breuer, public-relations director for IBM's software group,
said Aramonk, N.Y.-based IBM
(NYSE:IBM) couldn't comment on
its relationship with Compuware
becauseof the lawsuits.
Like many analyst reports, the
one Moody's filed last week rnentioned the lawsuits as impoftant
and potentially devastating to
Compurvare but didn't provide
much detail on the cases.
Compuware (Nasdaq: CPWR)
finished fiscal 2002in March on a
losing note. The company posted
net losses of $245.3million or 66
cents a share, compared with net
income of 9119.1million or 33cents
itr fiscal 2001. The stock plice
closed at $3.14Ffiday, down from
$13.65in January and a high of
about $40before the dot-com crash.
A closer look at the lawsuits reveals how Compuware and IBM
went from walking hand-in-hand
for more than 20 years to butting
heads in the past three.
According to the complaint filed
by Compuware against IBM on
March 12 and expandedThursday,
tlrings began to sour in 1999.
Compuware alleges that it was
then that IBM began to develop
two products, File Manager and
Fault Analyzer, to compete with
Compuware's FiieAid and AbendAid, respectively.
IBM began marketing File Manager and Fault Analyzer in August
2000,and the secondversions were
released last year. The products
are designed to operate as tools for
the IBM operating system on
IBM's mainframes, huge computers that process vast amounts of
information quickly.
IBM's File Manager and Compuwhre's File-Aid essentially work
same customers stand to save a
from
by buying directly
aaIBll/Iccmo.fJbrthabundle
lBM, said Moody's Moore.
Itat'rLza
cnY,softzaa?v,
t,oolsanrl servi,ces
ut 0,
puckagera,tethati,,s
compelling.r,
JohnMoore,
Moody'sInvestorsServiceInc.
the same, in that they nranagelarge
amounts of data. Fault Analyzer
and Abend-Aid test mainfi'ame systems, pinpointing any problems
and recommending fixes.
Compuware alleges IBM used an
unidentified third party to develop
File Manager and Fault Analyzer
and that portions of the prog'amming code were copied from Compuware's File-Aid and Abend-Aid.
Compuware amended the complaint Thursday to include addi
tional software.
Compuware also alleges that
IBM choked offthe free flow ofnecessary information that Compuwale needs to develop new products and update older ones.
The complaint says that since
the l980s, IBM regularly shared information about its operating systems lvith Compurvare and other
independent software vendors, often as much as two years in advance.
But when IBM started to develop
competing products, it refused to
give Compuware and other software developers access to the information, Compuware said.
The complaint further accuses
IBM ol being anti-competitive by
tying the sales of its own softwale
to its mainframe products. It also
accusesGlobal Services, IBM's information-technology division, of
trying to steer customers away
from Compuware products.
"Such actions threaten to cause
substantial halm to Compuware,"
the complaint states.
IBM makes no bones about its
intentions to win over Compuware
customers, and analysts said those
"IBM can offer the hardwale,
software, tools and services at a
package rate that is compelling,"
he said. "Plus they can offer financing plans, which is very attractive
to custoners becauserve're not exactly talking about buying a hamburger at McDonald's."
Gary Spivak, vice president of
Old Greenwich, Conn.-basedSoun&
Vlew Technotog!€scroup, said Compuware has made many of its customers mad by raising prices over
the years, to the point where they
wer€ as much as 40 percent higher
than those of its competitors.
That discontent provided IBM
with an opportunity in the market.
Spivak said IBM needed to lower
the price of its system somehow to
sell its computers.
"What it appears Compuware
did wrong, which was a strength to
their bottom line for some time,
was to chalge premium prices on
its software," Spivak said. "You
had (Compurvare) customers who
sensed the dissatisfaction with the
malketplace and moved in to take
advantage of it."
According to a June 2001report
from the Glga Informatlon Group,
non-IBM software exceeds 55 percent of the cost of an IBM mainframe opemting system. As a re.
sult, the repoft said, costs of the
platform are in-flated to a point
whetr customers may seek other
systems that are cheaper.
"Hence, IBM has created its own
products over which it has pricing
control," the report said.
IBM is seeking to win over Compuware customers aggressively.
A June Webcast presented by
IBM and Tallahassee, Fla.-based
MalnllnelnformadonSystems,an IBM
reseller, did a side-by-sidecomparison of IBM and Compuware products that contended that IBM products were much cheaper.
The presentation, called "Feeling a Little Tied Down?" prompted
Compuware to sue IBM and Mainline on July 3 in U.S. District Court
in Detroit. The suit alleges unfair
competition, false advertising and
libel, among other charges.
That case is pending. On July 25,
U.S. District Judge George Caram
Steeh denied IBM's motion to dismiss the case.
In court documents from the
case filed in March, IBM called the
lawsuit a fishing expedition. lBM
also accusesCompuware of trying
to destroy or hinder competition
by eliminating a new competitor.
"The fact that Compuware's
dominance is threatened by IBM,
an efficient competitor that offers
lower prices, does not and cannot
give rise to any liability under the
antitrust laws." IBM said in a motion to dismiss the case.
Compuware COO Tommi White
said that the changing relationship has affected the company.
"Are they having an impact in
the marketplace? Well, competitors
always have an affect on the marketplace," White said. "So we're
relooking at our mainframe product strategies and making sure our'
customers still understand the value ofusing our products.
"We would like our competitors
to all go away, but that's never going to happen. So we don't concentmte every day on the'Woe is me,
we have competitors.' We concen.trate every day on what we're going to do to beat them." '
Although White insists Compuware is winning in the marketplace by winning more contracts
than it is losing, numbers are numbers. According to Compuware's
2002 annual report, revenue from
its software license fees dropped to
$41?.6million in 2002 from $819.2
million in 2000.
The drop has contributed to declining earnings and a flagging
stock price.
For the lirst quarter, which ended June 30, Compuware reported
net income of $22.5 million or 6
cents a share on revenue of $346.6
million. That's compared with
$31.4million or I cents a share on
revenue of $450.5million for the
same period a year ago.
Andrew Dietderich: (313) 4460315, adietder i ch@Srain. com
RiverRouge:Taxpa)rmentdisputeputscity in bind
I From Page I
I,100 acres in River Rouge and
Ecorse.The g3 million it pays River
Rougeeach yea-raccounts for nearly 30 percent of the city's gfl million budget, enough to fund the police and fue departments for a year.
In its court filing, the company
argues that the property tax for the
2002-2003fiscal year was decided
Dec. 31, 2001, making it a debt
owed before the petition was filed.
That gives it a lorver priority than
ifit were a current obligation.
A bankruptcy attorney not involved in the case said the city's
case wi-ll hinge on the judge's nrting whether the assessmentdate or
the due date determines when the
debt becomesactive.
"If it's determined to be a prepetition debt, then the company
won't have to pay until the property is sold or it emerges with a reor-
ganization plan," said Barbara
Rom, a partner at Detroit-based
PepperHamlltonLL.P.
Nonpayment would be dire for
the city, Joseph said: "It would literally ban}aupt us."
The city reported a 2ffi1 dehcit
of $2.2 million. A cost.cutting program that included the layoffs of
four police officers, a hiring freeze
and cuts in sidewalk and road programs reduced the deficit to gl.5
million for the 2002 fiscal year,
which ended June 30.
National's nonpayment rvill result in a 2003deficit of $4.9million.
$3.9 million more than projected,
according to Southfield-based
Plante & Moran LLP., the city's independent auditor.
River Rouge is contesting National's position in U.S. Bankruptcy
Court in Chicago and has hired the
Detroit-basedhrm Jatfe,Raltt, Heuor
&Welss P.C.to argue the case.
"I understand their plieht,"
Joseph said. "At the same tirne, we
have to survive ourselves. We
worked out a favorable settlement
on the water bills, so we're hying
to work with them on this."
National pays River Rouge installments of about g1 million each
in July, October and February.
The company has not paid its July
bill and told the city it won't pay
any of the 2002 property taxes.
Rouge also did not pay the last installment of its 2001-02property
taxes in February.
National Steel wouldn't comment on the situation. "The city
seems to simply igrrore the fact
that, under Michigan state law, the
real and personal property taxes
becomean obligation ofthe properl
ty owner on December 31 of the
year irnmediately preceding the tax
year,".the company's motion states.
Neighboring Ecorse is in a similar position but didn't have the
specific amount owed.
"Unfortunately, we'r'e very dependent on National Steel," said
EcorseMayor JamesDiTrapani.
Joseph said he is trying to work
out a deal with National while
seeking help from U.S. Reps. John
Dingell of Dearborn and Carolyn
Cheeks Kilpatrick of Detroit, both
Democrats.
The UnltedSteelworkersof Amerlca, the union representing employees at National, also is trying
to persuade the company to pay
part of its property taxes. Many
steelworkers live in River Rouge
and Ecorse.
Tenlt Kosdrosky: (313) 44&1626,
tkosdrosky@crain.com
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