The list of old guard, nationally known Michigan-based companies that have failed or bailed is entirely too long. It starts with the likes of Kmart. The newest addition is Pulte Homes.
The most recent and most similar to Pulte’s departure was Comerica Bank leaving Detroit for Texas. If you believe the press releases, the companies are growing in the south and west and therefore the headquarters staff needs to be close to the core business. It’s a good story but much like anything else in this global economy you can do business from anywhere electronically.
Dan Gilbert gave a jump start to the outcry about 1 a.m. with this snarky tweet about poor corporate citizenship: “If rumor true @Pultehomes is moving HQ to Atlanta then punk CEO & invertebrate board even worse than its P&L last 5 years & that's hard to do.”
Should you need a translation of his business speak there he essentially accused the spineless board of directors and the self-serving CEO of making an exceptionally bad business decision that dwarfs the company’s profit and loss statement over the past five years by comparison, which in Gilbert’s estimation is no small feat. It’s also not entirely accurate. Yes, Pulte took a bath during the housing collapse as did pretty much everyone else.
But the Pulte Homes stock price has rebounded smartly recently as the housing market continued is slow but steady comeback nationwide. He circled back around this afternoon in a newspaper article. He said Comerica’s CEO Ralph Babb moved to Dallas because that is where he is from. He said Pulte Homes CEO Ruchard Dugas Jr. is moving the company to Atlanta because that is where he is from.
While my research into Mr. Dugas’ background shows he is actually from Louisiana, he did spend significant time in Atlanta as a lower level executive with Pulte Homes before moving to Michigan and taking over the company reigns in 2003. It is entirely likely Dugas sees Atlanta as the true center of the Pulte universe considering it is now the largest homebuilder in the United States. It is also entirely likely he wants to live in a place where the winters aren’t so cold and inhospitable.
Dugas is Pulte Home’s Board Chairman and the company is no longer controlled by the Pulte family. Founder Bill Pulte retired two years ago and in that time it is more than likely that Dugas solidified his power base with the board, showed he can lead the company to profitability and earned the right to call the shot of where to put the corporate headquarters. There is nothing written anywhere that Dugas needs to stay in Michigan, there is nothing necessarily binding the company to Michigan even though this is where the company started.
What’s more: the departure of a few hundred jobs, though high paying, will have little actual economic impact on Michigan. It was the same story for Comerica’s departure. The company is still operating, it is getting a lot of mileage out of the naming rights for the Tiger’s home stadium and life has gone on.
Pulte is building homes in Michigan. Local 4 visited a new development going up in South Lyon today and at least 50 employees who operate that division will remain in Michigan and will likely grow their business over time.
That said, the Pulte Homes announcement was more than just a pebble in the pond. The ripple effect will dampen the state’s business climate whether anyone wants to admit it or not. In short it is a very badly timed blemish on the state’s recovery effort. This we know by the accounts of the word spreading on Mackinac Island last night like wildfire.
The annual conference of business and political leaders was wrapping up and the commotion this caused tells it all. Everyone simultaneously grabbed their cellphones and lit up the towers relaying the dismay and disbelief. The reason is because Pulte Homes' board vote to leave town decidedly goes against the narrative grain that Michigan is on the economic mend. Governor Rick Snyder’s entire tenure has been about making Michigan a place where businesses want to move; that lower taxes and Right to Work will mean Michigan is a better place to do business.
That narrative ended up toast this morning leading Snyder’s political opponents to jump on this as the truest evidence of the wrongheadedness of his policies. Dan Gilbert’s outbursts, though heartfelt, sound similar to his infamous postings about LeBron James’ departure from the Cleveland Cavaliers. Both had that quality of poor sportsmanship our mothers all told us wasn’t becoming and should be avoided. In the end the headline grabbing announcement felt like the gut punch we all felt when Comerica bailed at the height of the state’s economic depression. We were left then wondering if the state would ever recover.
But, there is good news here. Loomis Sayles Vice President and Portfolio Manager and exceptionally astute economist David Sowerby told me today we all need to calm down and look at Pulte Home’s Headquaters move as a simple and unemotional business decision … and nothing more. He said while it looks as if Michigan has more businesses gliding out the back door than it has new ones coming in the front, Michigan is much stronger today than even two years ago. He noted the 2013 State Business Tax Climate Index from the Tax Foundation. He said Michigan leads the nation for its track record since 2011, rising six spots to 12th overall with the best tax environment.
When you look at individual income tax ranking Michigan is ahead of Georgia by about a mile. [Michigan is ranked 12th, Georgia 34th of 50 states] He says Michigan has a lot going for it and there is nothing at play here to give us any reason to believe the business climate here is the driver in Pulte’s Decision. In other words it’s not that Michigan is so bad or that Georgia is so good. It just is what it is. Did Dugas want to “go home” as Gilbert proclaims? Maybe. Did Dugas pull the trigger on this because he wanted to leave Michigan running and screaming because it’s a failing business backwater? Sowerby says no.
So let’s all look at the Pulte Homes loss like we would the Detroit Tiger’s 11th inning losses to the Pirates this week. Yes they smarted! Still, tonight there’s another game and another team. Tonight Michigan’s economy is still moving along. The headlines like Comerica and Pulte Homes will fade like the games at Comerica Park. We will all keep on keeping on building Michigan’s future for those who genuinely want to be here.