Fall 2016 Newsletter

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Fall 2016

Message from the President

Jason W. Bank, TMA Detroit Chapter President

Football, donuts, cider mills, raking leaves and . . . TMA! The lazy days of summer are over and fall is here. Time to dust off that Rolodex or Outlook contacts list and get back to business. The Detroit Chapter of the TMA affords great opportunities for you to grow your network and attend excellent educational events.

At the TMA Kickoff Event last month, I spoke with some of our members regarding the state of the turnaround business and when they thought the next restructuring wave will come. Opinions range from "after the election", to "a year or two away", to "who knows?" Under any scenario, TMA has the people, events and the resources available to help you prepare for when the restructuring industry ramps up again, while exploring new avenues of business opportunities.

The slowdown in restructuring has spurred many professionals to develop new areas of expertise and explore new client bases. Personally, it is satisfying to provide legal advice to healthy companies so that they avoid the various pitfalls I have seen while representing businesses in the bankruptcy and restructuring arena. I know many of you have had similar experiences, helping companies take their business to the next level. Expanding our toolbox not only makes us better professionals, but also helps to increase the overall body of knowledge within our diverse Detroit Chapter.

The TMA Detroit Chapter has several exciting events planned for the fall. We will be conducting a two-part educational series on October 6 and November 18 at 7:30 a.m. at Oakland Hills Country Club titled "Hulk Hogan Body Slams Company into Bankruptcy." This case study, loosely based on the Gawker bankruptcy, will feature panelist discussion of the many aspects of dealing with a distressed company (part 1) and ultimately what happens when the company files for Chapter 11 bankruptcy (part 2). Of special note, the November 18 panel will include the Honorable Phillip J. Shefferly, Chief Judge of the United States Bankruptcy Court for the Eastern District of Michigan.

Our annual holiday networking and charity event will take place on December 7, 2016 at the Birmingham Country Club and our nextGen and NOW (Network of Women) groups are planning several educational and fun-filled events.

Fall is the time when many professionals increase their marketing efforts. I would encourage you to join one of our various committees: programming, membership, nextGen, and NOW. Participation in a committee is a great way to develop relationships with professionals who will drive business your way in the future. Committee participation also provides members with a voice in the future direction of our Chapter. Please contact me if you are interested in joining one of these committees.

Please check out the terrific content pieces below. There is article from Newsletter Chair John Klehm suggesting now is a great time for auto suppliers to be utilizing advisory talent in our area to look for operating efficiencies. We have a submission from member Megan Uphoff of Angott Search Group on enhancing employee engagement. Last, but certainly not least, a spotlight piece on long-time board member Russ Long from O'Keefe.

Enjoy the changing colors, football games and other pleasures of fall. It is also the season to take advantage of networking opportunities available through the Detroit Chapter of the TMA. Whether you are advising a business that has completed a successful turnaround and is trying to stay on top like the Michigan State Spartans, or one that is trying to take that final step in a return to glory like the Michigan Wolverines, or is in a perpetual state of turnaround like the Detroit Lions, the TMA has plenty to offer!

Past Peak Auto: Suppliers Should Be Looking for Efficiencies

By John L. Klehm

As we are experiencing the warmth of summer shift to the chilly nights and mornings of fall, so too is the dominant industry of our region showing early signs of cooling off. For most of 2016 a consensus has been growing on Wall Street that the US auto industry is past the peak of the current cycle. With the release of the August 2016 sales figures, even auto OEMs are acknowledging that the high-water mark was in 2015. Where 2016 will end up and more importantly what will happen in 2017 is speculation. What can be said, however, is that now is the time for suppliers to look for efficiencies, as profitability going forward will likely be under increased pressure.

Prominent automotive consulting firm LMC Automotive forecasts 2016 sales to be fractionally lower than 2015 then decline by 250,000 units/year (approx. 1.5% per year) for the next several years. Looking back over the past 30 years industry sales data, peak-to-trough sales declines have varied between 10% and 50%. From 1978 to 1981, sales declined about 45%. From 1986 to 1991 unit deliveries declined 25%. After the prior peak of 17.4 million units in 2000, deliveries only fell about 10% over the following three years then flattened out. This however, was followed by a 50% plunge in 2008. Even the 10% decline during the early 2000s meant a 3+% volume reduction per year.

Whatever the magnitude of future sales declines, any meaningful decrease will negatively impact supplier profitability. Automotive component manufacturing typically entails high fixed costs and lots of capital investment. This operating leverage is great as sales are increasing, profits grow faster than sales. Unfortunately, the opposite is true when sales turn lower. Previously fat profits disappear and losses can pile up quickly.

Wall Street's expectations of lower future profitability has recently been reflected in the stock prices of the automakers. Ford and GM's share prices are both down 25% or so from their recent peaks (while the overall stock market is near all-time highs). Lower tier suppliers should not be surprised when their OEM and higher-tier customers come asking for pricing reductions, reductions needed to mitigate their own decreased profitability.

Well-run companies develop internal processes to uncover opportunities for cost take-out and production efficiencies. Whether or not suppliers have this capacity, getting advice from independent consulting firms can be invaluable. Often a "fresh set of eyes" looking at operations yield new insights or out of the box ideas that managers caught up in day to day management would not have considered. Here is Southeast Michigan, we are blessed with a plethora of experienced consulting professionals.

The consensus seems to be that the auto industry is past the peak in the current sales cycle. According to a leading automotive forecasting firm, small sales declines should be expected over the next several years. Looking at historical data, peak-to-trough sales declines vary between 10-50%. Suppliers would be wise to be looking at ways to improve efficiencies and take out costs. Whether or not they have internal processes to accomplish this, there is value to be had by working with some of the many restructuring professionals in Southeast Michigan.

Improving Employee Engagement: It Starts with Managers

By Megan Uphoff and Mark Angott

Staff engagement among the U.S. workforce has remained steady at 33 percent over the past few years, according to recent data from Gallup. This is quite low and should concern management, given that strong employee engagement is the catalyst for company growth and success.

As managers across the country scramble to increase feelings of ambition, connection and enthusiasm among employees, they should first start by looking within. While a wide range of factors can impact one's feeling of involvement within his or her company, poor management ranks at the top. Managers are reportedly responsible for 70 percent of feelings of imbalance and discontentment. The good news is that there are a number of simple, effective ways managers can boost employee engagement.

"A great leader understands that the success of a company relies heavily on the dedication, commitment and achievements of the employees," says Mark Angott, President of Angott Search Group. "By creating an environment that encourages open communication and fosters trust, managers have the opportunity to empower their employees to not only become engaged, but to go above and beyond."

Angott provides the following tips for raising employee engagement:

1. Cultivate trust

Cultivating an environment of trust is an important way to ensure that all staff members feel valued, heard and comfortable. Trust is not just about leaders acting in a fair or equitable manner, being accountable, or honoring the agreements that they've made with staff. Employees also want to feel their managers will back them up in tough or negative situations, even sharing in the blame when necessary. When an environment of trust is created in this manner, it strengthens relationships with employees, making them more likely to want to work hard and do well. On average, those with supportive supervisors are 67 percent more engaged in the company, based on data from The Energy Group.

2. Promote open communication

Regular meetings, consistent social contact and open channels for communication are key for promoting open and honest dialogue between managers and employees. When managers are empathetic and aware of others, they're more likely to be in tune with the general consensus among employees. Responding to all questions, concerns and feedback - and taking each one seriously - in an adequate time frame, confirms that each employee's voice is heard and valued.

3. Maintain visibility

Rather than being tucked away in a corner office with the door frequently closed, managers should be accessible and visible throughout the workplace. Doing so makes employees feel more comfortable reaching out and asking questions. It also further enhances open communication. Along the same lines, recognizing the hard work and accomplishments of employees is just as important. Publicly acknowledging the work of staff members encourages a healthy commitment to advancing the organization's mission.

4. Lead by example

When managers lead by example, not only are employees more likely to remain at the company, they're also much more engaged. Workers don't just want their leaders to be accountable, they want managers to provide mentorship and guidance for how to be more effective, based on their own experience. By demonstrating the behaviors and qualities that are expected of staff members, and investing time in developing direct reports, managers can boost engagement and improve work ethic.

"Improving employee engagement should be at the forefront of a manager's responsibilities, and holding themselves accountable is the most effective way to do that," adds Angott. "When managers are open, flexible and authentic, employee happiness and engagement will naturally skyrocket."

Mark Angott is founder and President of Angott Search Group, a leading executive search and human resources consulting firm. Megan Uphoff is a managing director of Angott Search Group focusing on banking and financial services.

Member Spotlight

by John L. Klehm

Russell Long, Partner and Managing Director, O'Keefe

Russell Long has been an active member of TMA since 2001. His tenure on the board spans more than 10 years and includes a term as President. Russell was there when the Detroit Chapter won TMA Chapter of the Year and in his current position as Treasurer, he oversaw the separation of West Michigan and Detroit into separate TMA chapters.

Russell, a CPA, earned his Bachelor of Arts in Accounting, with Distinction, from Walsh College. Prior to deciding on accountancy as a career, he had formed a successful construction company in the Detroit area. Upon earning his CPA designation, Russell worked for a CPA firm in Birmingham and within a few short years became partner. He branched out and formed his own CPA practice in the mid-nineties. Though he was already operating his own successful CPA firm, specializing in small business consulting, tax preparation and tax planning, in 2001 Russell decided to join O'Keefe, a newly formed boutique financial consulting firm. He is now a partner at O'Keefe, a nationally recognized, award winning strategic and financial consulting firm focusing on turnaround and restructuring, enterprise consulting, strategic advisory services and litigation support.

Russell recalled a memorable case early in his career at O'Keefe where he led a forensics team that ultimately recovered $25 million in a "Ponzi" scheme in a west Michigan corporate bankruptcy. The case proved bittersweet, however, because while the recovery was substantial, everyone loses in a "Ponzi" scheme.

Russell's real estate knowledge and construction expertise would serve him well beginning in 2006 when he was engaged to liquidate a substantial portfolio of residential real estate. He oversaw the entire operation and successfully sold 50% of the portfolio individually and the remaining units to a single investor in December 2007, at the beginning of the recession. That project was the beginning of a six-year stretch where most of his work involved real estate receiverships. His approach was different than his competitors. After a complete analysis of the assets, he offered the creditors options as to how to best liquidate, which often meant he borrowed more funds to complete construction on partially completed units. The overall loan recovery improved as a result.

A particularly satisfying case is one he is currently working on as a Creditor Trustee. Russell is the financial advisor to a creditor's committee involving a grocery store chain in Denver, Colorado. A substantial number of the unsecured creditors are small farmers and suppliers whose livelihood would be severely impacted had the grocery chain gone out of business. After the company demonstrated signs of improvement, and as consideration for approving the plan of reorganization, the unsecured creditors will receive 100% of their claim over time, a win-win for everyone. The Creditor Trust was formed to insure the creditors are paid in full, in accordance with the plan.

His dedication to the TMA, as evidenced by his substantive contributions to the chapter, demonstrates his ability to build relationships and find solutions to complex situations. "My experience with the TMA over the last 15 years has been invaluable," Russell reflected. "The relationships I've cultivated and the experiences I've enjoyed have positively impacted my successes."

nextGen Top of the Class

From left to right: Michael Romaya, Alex Calderone, Bob Kendall, John Dimovski, Jessica VanWert, Jeff Tischler and Anthony Kochis.

On August 18, 2016, in a ceremony at the Detroit Athletic Club, The Detroit Chapter recognized the following recipients of the TMA nextGen Top of the Class Award as emerging leaders who have accomplished a significant level of success prior to age 40.

Alex Calderone, Calderone Advisory Group, LLC
Bob Kendall, UHY
Anthony Kochis, Wolfson Bolton, PLLC
Michael Romaya, Varnum LLP
Jeff Tischler, Conway MacKenzie
Jessica VanWert, Bodman PLC

Special Founder award was given to John Dimovski as a founding member of TMA Detroit, nextGen.

Members in the News

September 13, 2016, Alex Calderone, Managing Director of Calderone Advisory Group, LLC has banded together with Harve Light, formerly the Senior Vice President of Comerica Bank's Middle Market Special Assets Group, to form a new firm, Calderone & Light, LLC.

September 11, 2016, Pat O'Keefe, Founder and CEO of O'Keefe was quoted in Crain's Detroit Business in an article titled, "Icahn's Federal-Mogul Bid Likely Part of Profit Plan."

August 16, 2016, Pat O'Keefe, Founder and CEO of O'Keefe was interviewed by Alisa Zee on the Sunday Edition of CBS Radio discussing Detroit and other local educational systems and funding.

August 2, 2016, Pat O'Keefe, Founder and CEO of O'Keefe was quoted in Debtwire.com in an article titled, "Detroit's USD 615m Bond Deal Helped By Market, Held Back By Michigan."

August 2, 2016, Mike Deighan, Managing Director of O'Keefe was quoted in Racked.com in an article titled, "The Case For the American Mall - Malls Aren't Dying. They're Changing."

July 18, 2016, Patrick O'Keefe , Founder and CEO of O'Keefe, spoke with DBusiness News Daily about his experience working with municipalities and his thoughts on how public schools can succeed.

August 11, 2016, Andy Dillon, former state Treasurer and now Executive Director of financial and management consulting firm Conway MacKenzie was quoted in The Detroit News in an article titled, "Michigan Retirement Funds Boost Stake in Tesla Stock."

September 11, 2016, Steve Wybo, Senior Managing Director, Conway MacKenzie, was quoted in Crain's Detroit Business in an article titled, "Icahn's Federal-Mogul Bid Likely Part of Profit Plan."

Newsletter submissions

We are always looking for new content for our newsletter. Have an article you wrote? Received a promotion? Quoted in a newspaper or other publication? We want your information so we can help promote you, our member!

Please send us your submissions for our next newsletter here.