Most respondents to the Trend Watch poll put job creation, tax cuts, and freeing up credit as the top three means to jumpstart the U.S. economy.
"If the government issues contracts for companies to fix roads, sewer systems and other public works, they will put money back into the economy," said TMA Vice President of Public Affairs Margaret M. Good, who is a Certified Turnaround Professional (CTP) and president of The Meridian Group. "The way you get out of a recession is to get people working again."
Industry outlook for 2009
When naming the most troubled industries for 2009, poll respondents said:
1) Automotive industry, up from 3rd place in last year's poll
2) Retail, jumping up from 6th place
3) Homebuilders, falling from 1st place last year
Healthcare, energy, and commercial banks were named by one-third as most likely to show some improvement in 2009.
Those responding to the poll taken during the first two weeks of December had a strong reaction to a government bailout that was still being considered by Congress at the time:
- 76% disagreed that Congress should approve federal loans to the Big Three.
- 77% thought filing for Chapter 11 bankruptcy would be a better solution.
- 68% said if bankruptcy was filed, the government should guarantee the DIP loans necessary to reorganize.
- Only 39% thought the government should also provide Chapter 11 exit financing.
"The fundamental problem is there [currently] is no plan," said Steve Mischo, a member of the TMA Board of Directors and an adjunct professor of finance at Adelphi University's School of Business. "Simply infusing money into an industry will not solve the problem."
Effect on the turnaround industry
While some restructuring professionals may see an increase in business, few are jubilant. Crisis management for firms with dismal prospects for recovery is not what excites TMA members who are dedicated to maximizing corporate value and saving companies and jobs.
"DIP financing to take debtors through Chapter 11 provides the liquidity runway for the reorganization of the business or to run a dual track process of turnaround or sale of the business as a going concern," said Arthur Perkins, 2008 president of TMA and co-head of the West Region Reorganization Services practice for Deloitte Financial Advisory Services LLP. "Recently, the market for DIP financing has not been functioning, which combined with other factors, has resulted in more liquidations than in past downturns."
Even liquidators, busy selling assets of closed stores and manufacturing plants, face discouraging results.
"Although liquidation sales have fared better than regular retail, they are not generating historic returns," said Tom Pabst, COO of the Great American Group, an asset management firm. "Fewer buyers for machinery, equipment and fixtures are driving down values. We expect liquidations to remain active through 2009, but returns will be impacted by economic conditions."
Henderson confirms that business bankruptcy attorneys are not as active as one would expect, due to the shortage of traditional turnaround work. "The turnaround specialists have to get busy first, and unless you're in Delaware or New York, things are slow."
