More Troubles Ahead In 2007 For Auto Industry

Dec. 24, 2006
Excess manufacturing capacity a factor.

Skittish consumers are a significant factor in the top choices for the most troubled industries in 2007, according to respondents to the Turnaround Management Association's annual Trend Watch poll.

The top four candidates predicted to encounter the "greatest financial and/or operational difficulties" in this year's poll:

  1. Automotive - 74% of this year's responses
  2. Homebuilders - 58%
  3. Construction/contractors - 36%
  4. Manufacturing - 26%

"There is excess manufacturing capacity in North America that the Big Three auto manufacturers are beginning to address and, as a result, many of the Tier One and Tier Two suppliers are having to deal with revenue declines," said Colin Cross, TMA 2006 president and managing director of Crystal Capital in Chicago.

Manufacturing has been near the top of the list of distressed industries since TMA began the survey in 2002, with members citing general economic conditions, global competition, legacy costs and a high level of debt as major factors in 2007.

When asked to name the key factors affecting 2007 turnarounds, nearly half the respondents (48%) believe the influence of hedge and private equity funds will continue to increase. Nearly 30% foresee an increase in second lien and junior tranche lenders participating in corporate renewal, and nearly 40% predicted that traditional financial institutions will tighten credit during 2007.

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