Turnaround Management poll respondents expect housing crisis to hurt industries in 2008

By Caroline Salls

Pittsburgh, Dec. 28 - Turnaround Management Association's annual Trend Watch Poll revealed that turnaround professionals predict that the still unfurling housing crisis of 2007 will leave homebuilders, mortgage lenders and residential loan origination and servicing firms at the top of the list of the most distressed industries in 2008.

According to a TMA news release, 62% of poll respondents said that homebuilders will face the "greatest financial and/or operational difficulties" next year.

With fewer homes being sold and rising foreclosures, businesses that lend to homebuyers may take a hit in nearly equal measure, the poll showed.

Meanwhile, 35% said that mortgage lenders will incur the most distress, while 32% said residential loan origination and servicing firms will.

As cracks in the subprime mortgage lending market have quickly spread, TMA said the nation's housing pain appears to have dwarfed the battered automotive industry, which topped last year's list for most distressed industries for 2007, receiving 74% of responses.

But in this year's poll, only 28% of respondents said that the automotive industry will suffer the most in 2008.

For industries likely to face a serious pouncing, TMA said respondents placed the blame more on balance sheets than boardrooms, with 53% saying too much debt will hobble those industries and 49% saying lack of access to capital will.

TMA said 40% identified high-risk deals as likely culprits, but only 33% pegged ineffective management.

"Mortgages are the most visible part of this iceberg," TMA Trend Watch committee chairman Tom Henderson said in the release.

"What started in the subprime mortgage market is likely to infect the entire spectrum of securitized lending products that have become common in the markets over the past several years.

"The unanswered question is whether this credit-induced trauma is coming to an end, or just beginning."

The top external factors likely to impair industries will have little to do with the outcome of the U.S. presidential elections and everything to do with the economy, according to the poll.

Specifically, 88% said economic conditions will determine which industries take the hardest pounding in 2008, up from 65% in 2006 and double the proportion of responses from 2005.

Technology improving

According to the release, industries expected to improve the most in 2008 will do so in spite of faltering economic conditions and tightened credit.

TMA said the top three industries, which respondents identified as on the upswing for at least two years, were technology with 33% of responses; energy with 31% of responses; and healthcare/hospitals with 29% of responses.

In addition, 56% of respondents said greater demand for products and services will propel industries experiencing the most improvement, while 39% said significant restructuring and consolidation within the industry will.

Only 22% identified access to capital as a factor.

"The technology sector had gone through its recession at the beginning of this decade and there has since been consolidation and stabilization in that sector," TMA president William E.J. Skelly said in the release.

"The demand for technology at all levels of business has been increasing significantly."

Turnaround Management Association is a Chicago-based non-profit association dedicated to corporate renewal and turnaround management.

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