april 2009 tma detroit volume 4, issue 2 newsletter tma ... · the oem and tier i bankruptcy train...

What a fantastic event we had on March 25th when the Michigan Chapter of the TMA partnered with the Federal Bar Association – Bankruptcy Section to host our annual Spring Conference focused on the automotive industry. Nearly 300 people were on hand to hear from some of the industry’s top experts representing virtually every constituent involved in reshaping the industry. As I listened to the speakers throughout the day, it continually reinforced to me the notion that we are truly living in historic times. I would like to thank Scott Terryn and Jim Embree for assisting with the planning for the

event and a special thank you goes to Dave Priestley for taking the lead on putting together a great event. Beyond the programming, what really makes the Michigan Chapter of the TMA a special organization is the terrific leadership and active members we have had over the years. The 2009 membership drive is still under way and we are currently short of our targeted membership as set by National TMA. Therefore, if you know of anyone who has not yet renewed, or if you yourself have still not renewed or joined, please do so. There are tremendous advantages to becoming a member. There is still time to submit your name for consideration to be part of the 2009-2010 local TMA board of directors. Both Detroit and Grand Rapids have their own boards and I can assure you, participation is a very rewarding experience. If you are interested, please contact Jenni Brewer by May 1. Lastly, I am very happy to report that Pat O’Keefe has been selected as a recipient of the Individual Contribution Award to be handed out by National TMA at the Spring Conference in Chicago in late April. Pat has been a tireless supporter of TMA and was behind many of the ideas and initiatives that positioned our chapter for growth and served as the basis for the Michigan chapter being awarded Most Improved Chapter in 2005 and Chapter of the Year in 2006. Congratulations Pat, and thanks for all that you have done. Sincerely,

TMA Detroit Chapter President

FROM THE CHAPTER PRESIDENT

TMA Detroit

T U R N A R O U N D M A N A G E M E N T A S S O C I A T I O N

Volume 4, Issue 2

April 2009

Corporate Sponsors 2

Turnaround Article 4

Event Highlights 7

Save the Date 9

Members in the News 11

Sponsors in the News 12

New Members 13

2008-2009 Advertising 14

New Member Application

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Inside this issue:

May 20 - Chunka Mui, 7:30 breakfast meeting at the Skyline Club in Southfield Jun. 23 -Annual Golf Outing Twin Lakes Golf & Swim Club

Upcoming Events:

TMA Detroit Newsletter

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Turnaround Management Associa tio n

6001 N. Adams Rd., Ste. 205 Bloomfield Hills, MI 48304

Phone: 248-593-4810 Fax: 248-593-6108 Email: [email protected] www.turnaround.org



Many Thanks to our 2008-2009 Sponsors

GOLD SPONSORS

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SILVER SPONSORS




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Daubert Challenge – Opposing Attorneys Trojan Horse



FEATURED TURNAROUND ARTICLE

Article continued on page 5...

Auto Workouts Getting Uglier By Brad Coulter, O’Keefe & Associates and International TMA Board Member

Never pretty, auto workouts continue to get uglier as the fortunes of Detroit’s producers continue to deteriorate. Losses flow down hill, so if you take GM, Ford and Chrysler’s combined $18 billion loss in the fourth quarter of 2008, translate that loss directly into the supply base which has not only been hit by dramatically reduced production volumes, but also by years of forced price reductions and give backs. The supply base is on edge and the workout options are limited. In the past, failing suppliers to the Detroit 3 could proceed down one of many workout paths: refinancing/recapitalization, sale of the business, or managed liquidation. Now all three of these paths are fraught with financial pitfalls that put recovery for the secured lenders at risk and, in the case of private company, put the shareholders at risk of exposure on any personal guarantees that may be attached to the financing.

Refinancing used to take the usual path of moving the company from cash flow lending, to asset based lending, to factoring, with some sub-debt occasionally thrown in for good measure. Now maybe a handful of lenders, mainly factors, will even look at financing Detroit 3 or their related Tier I receivables. All other lenders are staying away from the automotive sector completely. For lenders already having a troubled loan with large automotive exposure, it’s a mixed bag of approaches to the issue. While some are starting to ratchet down exposure at the expense of the suppliers, others recognize the no win situation they are in. Ratchet down too much and the supplier is forced into liquidation, stay the same and watch with eyes wide open as the OEM and Tier I bankruptcy train keeps heading your way. Sales of distressed auto suppliers to either private equity buyers or existing suppliers in the industry used to be a great option for maximizing value. Compared to a liquidation, the assets could be sold as part of an ongoing business. Now, investors are very wary of buying assets that have Ford, GM or Chrysler receivables attached. It’s well known the Detroit OEM’s want to drastically reduce the number of direct suppliers and have told suppliers they must either grow or go away, standing still is not an option. The only interest seems to be from suppliers that already have that exposure and are betting on being one of the survivors after the shake out. We’ve been associated with one deal where the only party interested in acquiring a Chrysler supplier was a Chinese company that already had large Chrysler exposure. Their motivation was both to acquire technology as well as increase product diversity. No other buyers wanted to take on additional Chrysler risk. With refinancing pretty much unavailable, and a dearth of potential investors looking to take on Detroit 3 exposure, liquidation is often the only answer. Liquidations under the current market conditions are ugly. Equipment is going for amounts that even veteran auctioneers cannot fathom. O’Keefe just liquidated an auto supplier with loads of CNC machines and metal forming equipment. We pre-sold the equipment to an auction house for roughly 50% of the 2007 forced liquidation value in order to hedge our bets. Two months later in February 2009, the auction only grossed 60% of what the auctioneers paid for the equipment and the auction house took a large loss on the deal. Not even the auctioneers who are in the market every day can be sure of where the market his headed under these uncertain conditions. In the current economic environment, assets are truly mark to market, and with the markets broken, lenders have no compass for judging their collateral value. Liquidations in this market can mean large losses for the secured lender or an extremely prolonged sale period if manufacturing related real estate is involved.

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...Article continued from page 4

One of the new difficulties in supplier workouts is the complete lack of credible volumes to use for planning purposes. With all the Detroit OEM’s virtually shut down in January and February, all forecasts pointed to a large up tick in production staring in March. So far, that up tick has been less than expected and given the situation in the economy, its extremely uncertain as to what auto volumes will be going forward. Suppliers are under an obligation to maintain certain capacity levels, so fixed cost reductions can only go so far before they become unable to perform when volumes return to even the low end forecast levels. This situation ensures a continual bleeding in the supply base and uncertainty as to how long many suppliers can continue to hang on. The other difficulty, while not unique to autos, is that bank’s workout departments are expanding at such as fast rate, that many work out lenders are not only new on the job, but swamped with loans to administer and may not have the time to fully evaluate the complexities of an auto workout. In addition, with the recent mergers of many major banks, workouts are being handled by lenders all over the country and may not be familiar with manufacturing or the auto industry. These factors can make the learning curve extremely steep in a crisis situation where fast action and quick decision making is required. In addition, the uncertain volume projections mean numerous revisions to forecast, an inability to meet projected covenants, and frustration at the lenders end over the high maintenance nature of the account. Banks are loaded with companies experiencing financial distress. They can’t force their entire loan portfolio to exit (i.e., liquidate in this market) and at some point must decide which loans to hang on to and rehabilitate versus which to send to workout. We are seeing banks start to identify companies which they believe are worth supporting and it’s important that companies stay in close contact with their lenders and clearly communicate what pro-active steps they are taking to minimize losses during the downturn, diversify their business model, and improve internal operating systems to more closely manage the business. I believe the domestic auto industry is setting on the precipice and in danger of collapse. With sole sourcing of parts (one supplier per part) and just in time inventory, massive financial problems in the supply base could cause an implosion shutting down North American auto production for a number of months while the industry reorganizes. If this worst case occurs, opportunities for the survivors will be tremendous and it may only be by blowing the industry up that it can be saved and rebuilt on a more profitable model.

Brad Coulter, CTP, is a Director at O’Keefe & Associates in Bloomfield Hills, MI and a member of TMA’s international board. Brad specializes in restructuring middle market companies.

The opinions expressed in this article are solely those of the author and do not constitute any opinion on the part of the TMA.

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EVENT HIGHLIGHTS

Following the tour of this amazing new building, this group catches up over a cocktail. Left to right, Kevin Costello, Elaine Frydrych, Scott Eisenberg, Ted Tzafaroglou, and Jim Embree

We held two great events since the last newsletter in January. In February, we hosted an event at the Federal Reserve Building which featured a program led by Economist, Sam Kahan. We also had another successful automotive event at the Westin Book Cadillac in Detroit. We had 270 people signed up to listen to Steve Miller of Delphi on “If I Were the Car Czar” in addition to a full day line up of other spectacular speakers.

Tom Lindahl, Keith Francis and Martin Hilker at the Federal Reserve in Detroit.

Talking business while waiting for Sam Kahan to speak.

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EVENT HIGHLIGHTS

Lansing’s Mayor Virg Bernero and Jennifer Owens from MEDC spoke on “A View from the Government”

The breakout session featured “Technology Trends and Implications”. This group was insightful and entertaining to the audience.

Judge Rhodes at the podium on “Views from the Benches”

Former Chrysler Economist, Van Jolissaint, Ted Chu, GM Economist, Tom Klier, of the Federal Reserve, and Dave Priestley moderating, discussed “Economic Fundamentals of North American Auto Industry.”

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SAVE THE DATE

OTHER UPCOMING DATES TO PUT IN YOUR CALENDAR • May 20th - Chunka Mui, Author of “Billion Dollar Lessons: What Can You Learn

From the Most Inexcusable Business Failures of the Last 25 Years” speaking at the Skyline Club in Southfield, Registration and Networking at 6:00

• June 23rd - Annual Golf Outing at Twin Lakes Golf & Swim Club WEST MICHIGAN • May 19th - Joint event with ACG, Federal Stimulus & Financial Market Interven-

tions: the Effect on West Michigan” Presented by Paul Isely, Ph.D., Economist at Kent Country Club in Grand Rapids. Registration begins at 4:30 p.m.

CTP • CTP program will be held May 7-9th at Dickinson Wright in Detroit REGIONAL • Mid America Conference - See details on the next page

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MEMBERS IN THE NEWS • Michael Goldsmith has joined BBK as a Managing Director in the Financial Advisory Group. He will support

the expansion of BBK's reach into the non-automotive and private equity markets, in addition to leading BBK's Commercial Real Estate practice.

• Fred Leeb of Fred Leeb & Associates is the expert ready to put Pontiac on track

Catherine Jun / The Detroit News PONTIAC -- Fred Leeb is something of a fixer. In industry-speak, he's what's called a "turnaround specialist." He takes troubled companies and rehabilitates them back to health. Whether the symptoms are poor cash flow, glaring inefficiencies or limited funding, Leeb is called in to get operations back on track. And it's this know-how that state officials believe could solve the city of Pontiac's fiscal problems. Gov. Jennifer Granholm has tapped Leeb, 57, as the city's emergency financial manager. Starting Monday, he will take control of the city's financial books, which have been in the red for years. The state projects the deficit at $12 million; the city says it's more like $5 million to $7 million.

• Patrick M. O’Keefe has been selected as an Outstanding Individual Contribution award recipient from among

the nearly 9,000 members in 45 Turnaround Management Association (TMA) chapters worldwide. This award is given to individuals whose dedication and commitment have made a lasting contribution not only to TMA, but also to the corporate renewal industry. Mr. O’Keefe will be honored at the TMA 2009 Spring Conference April 28-30, 2009 at the Hotel InterContinental in Chicago.

• On March 11th, Chuck Moore of Conway Mackenzie and Detroit TMA President, was quoted in Bloomberg

regarding Deutsche Bank said to pick Hilton to Run Las Vegas Cosmopolitan. • On March 29th, Jonathan Labarre of O’Keefe & Associates was featured on the front page of the Oakland Press

in connection with All Cities Media Group an L.A. based film networking group which now has a Michigan presence.

• On March 30th, Van Conway of Conway Mackenzie Inc. was quoted in the New York Times in an article titled

“President Gives Short Lifeline to Carmakers.” • On March 31st, Van Conway of Conway Mackenzie was quoted in USA today in connection with Chrysler/ fiat • On March 31st, Brad Coulter of O’Keefe & Associates was quoted in the Detroit Free Press and USA Today

Re; GM’s “Quick Rinse” bankruptcy plan. • On April 27th, Mike Boudreau of O’Keefe & Associates was quoted in WSJ, Detroit News, front page of the

Oakland Press, Forbes.com, AP and others regarding the GM shutdown.




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SPONSORS IN THE NEWS CM&D is pleased to announce the following promotions: Vi Zdravkovic to Managing Director from Director, Glenn Kushiner to Managing Director from Director, Tim Zeeb to Director from Senior Associate and Alex Calderone to Director from Senior Associate. All are located in the firm's Birmingham office. CM&D is pleased to announce the addition of Craig Ghelfi as a Senior Managing Director in the Birmingham office. Craig grew up in Las Vegas and has spent most of his professional life in the gaming industry. He spent 20 years at the Golden Gate Hotel & Casino, becoming General Manager/Managing Partner in 1983. During this time, Craig was a member of the Downtown Progress Association (currently known as the Fremont Street Experience) and served as Chairman between 1988 and 1990. He also served on the boards of the Nevada Resort Association, Las Vegas Events and Sunrise Children’s Hospital. O’Keefe & Associates is pleased to announce Navia McCloud as Director of Corporate Development. Ms. McCloud will be responsible for introducing mid-sized companies, creditors and lenders to the firm. Prior to joining O’Keefe & Associates, she was Vice President of Commercial Real Estate at Huntington National Bank and provided financial services to commercial real estate developers.




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NEW MEMBERS

Jason Bank, Varnum, LLP

Joe Cotant, Core Industries Group LLC

Timothy Gates

Geoffrey Langdon, Midelem Companies LLC

Paul Maliszewski, Ashwin Partners LLC

Stephen Mickelson, AT Kearney Inc.

Judy Rinkus, Amherst Partners LLC

Albert Schauer

Agatha Sygulinska, Huron Consulting Group

Stephen Taglion, Tag Group Enterprises

Bryan Tolles, BlackEagle Partners LLC

David E Maronek, HMH & Associates

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2008-2009 ADVERTISING INFORMATION

General: The Detroit Chapter’s Newsletter is published four times per year. The current publication months are January, April, July, and October. The Newsletter is e-mailed to all Detroit Chapter members (over 300) and others on the Detroit Chapter events mailing list (approx. 600). The Newsletter also appears on the Detroit Chapter website. Each edition of the Newsletter is also e-mailed to regional members of guest organizations whose members overlap with TMA, including the Association of Insolvency and Restructuring Advisors (AIRA), the Risk Management Association (RMA), the Midwest Business Brokers and Intermediaries (MBBI) , the American Bankruptcy Institute (ABI), and the Association for Corporate Growth (ACG). The deadlines for submission of ads for 2009 is as follows:

Inquiries may be directed to Jennifer Brewer at 248-593-4810 or [email protected] Ad Rates: Ad Description Actual Size (w x h in inches) Price Full page 7.5 x 10 $875 Half page 7.5 x 5 - horizontal or $500 3.75 x 10 - vertical Quarter page 3.75 x 5 $315 Eighth page 3.75 x 2.5 $190 The Newsletter Committee has approved a discount of 25% for any organization advertising in three of the four annual issues and for Gold Sponsors of the Detroit Chapter. Prepayment for the three issues is required to receive the discount. Ad Specifications: 1. Ads must be e-mailed pdf or jpeg format to [email protected]. 2. In the subject line of the email please put “TMA Newsletter Ad_Issue Date”.

Example: TMA Newsletter Ad_April 2009 3. In the body of the e-mail, please state:

• What program the ad was created on • Direct contact information of the person who created the ad in case there are any issues.

Publication - 2009 January April July October

Ad Submission Due Date December 5 March 15

June 1

September 1

Publication - 2009 January April July October

Ad Submission Due Date December 5 March 15

June 1

September 1




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april 2009 tma detroit volume 4, issue 2 newsletter tma ... · the oem and tier i bankruptcy train...

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