Slower turn toward recovery?

  
Staff Report
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Most turnaround professionals predict a hard slog toward economic recovery in 2010 as businesses weighed down by debt hit rough patches and credit markets shun them.

Nearly half (49 percent) the respondents to the Turnaround Management Association’s distressed industries forecast think durable economic improvement is unlikely until at least the second half of 2010. About three out of 10 think the worst is over, but nearly 20 percent suggest the economy has yet to hit rock bottom.

Three out of four respondents think the commercial real estate industry will fare the worst in 2010 as debt matures and lenders remain reluctant to refinance. Retail again garnered the second highest proportion of responses, 35 percent, down from 52 percent last year. Automotive, at the top of last year’s predictions list for most troubled industries, slipped to third (31 percent) during a year in which the federal government brokered restructurings of two of the big three automakers.

Technology appealed to nearly 30 percent of respondents as the industry most likely to improve in 2010, and energy and health care ranked nearly as high. Commercial banks, which ranked third among industries most likely to improve in 2009, slid to fourth place.

Nearly all (92 percent) said economic conditions pose the greatest threat to struggling industries, and the most hard pressed will contend with too much debt compounded by lack of access to capital, according to 78 and 52 percent of respondents, respectively.

Industries likely to fare better in 2010 will do so mainly because of increased demand for products and services (59 percent) and an improved economy (52 percent).

If the economy recovers without sufficient job creation, most respondents suggest the unemployment rate could be lowered through tax incentives for hiring, capital spending, and technology investment. To a lesser degree, respondents think stimulus spending to create public works and youth employment projects and repatriate manufacturing jobs could help absorb some of the millions of out-of-work Americans.

The Chicago-based Turnaround Management Association has more than 9,000 members in 46 regional chapters who comprise a professional community of turnaround practitioners, attorneys, accountants, investors, lenders, venture capitalists, appraisers, liquidators, executive recruiters and consultants.