Experts at the Kellogg Turnaround Conference note red flags on the road to economic recovery
4/7/2009 - The message echoing from the podium April 3 at the Kellogg Turnaround Conference was one of caution.
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| Former U.S. House Majority and Minority Leader Richard Gephardt was among the speakers April 3 at the Kellogg Turnaround Conference. |
| Photo © Nathan Mandell |
While the U.S. economy might be showing signs of health, that recovery will be paved with red flags and short-term fixes, speakers at the student-run conference said.
Keynote speaker Michael H. Moskow, chairman and senior fellow at the Chicago Council on Global Affairs, kicked off the third annual conference with a warning that the recovery would be sluggish at best.
“We’ll have had four quarters of declining [gross national product] growth,” he said. “I think if you look at the numbers, you’re seeing things are a little better; they’re still declining, but the rate of decline is slowing.”
The current $1.7 trillion deficit and the recently passed federal stimulus package, which includes $400 billion toward social programs, are both cause for concern, he said. “These are all worthwhile causes, but how do you stop it? The stimulus package can help give us a boost, but it doesn’t guarantee a sustained recovery.”
He cited four other potential long-term problems: the risk of inflation as the economy starts to improve while interest rates remain low; the 600-pound “gorilla” of Social Security and Medicare; the threat of protectionism with regard to trade; and increased government involvement. “We have to be vigilant that this doesn’t impact our entrepreneurial spirit,” he said. “We don’t want to undermine that market economy.”
Panelists at the conference went into depth on such areas of concern, addressing topics that included the media crisis and the liquidity crunch to the valuation of distressed assets and firms.
“We think these are all relevant topics of the moment,” said Daniel James ’10, co-chair of the conference. Each offers “lessons that can be applied across the board,” he said.
“Turnaround is a hot topic,” added co-chair Sandy Foo ’09, who noted that the student committee that planned the event sought to address all aspects of turnaround consulting, including legal and international.
A media turnaround panel offered a lively discussion on the struggle by traditional media companies for survival. “I’m seeing the media industry body-slammed,” said panelist Carlyn Taylor, a CPA and senior managing director of FTI’s corporate finance practice. With ad revenues plummeting 30 percent in the last year, the loss of revenue is “happening too fast” for many newspapers, magazines and other traditional media companies to survive.
“I find it fascinating, the speed with which things are changing,” Indraneel Ganguly ’09 commented after attending the media panel. “We need to act really fast.”
Keynote speaker Frank M. Clark, chairman and CEO of ComEd, shed light on the utilities industry and its reaction to increased government involvement in the wake of the financial meltdown. While some regulation is good, he said, “some of it is going farther than it should.”
But not all the conference rhetoric was doom and gloom. Clark told the crowd not to worry about the 8.5 percent unemployment rate. “There are never enough good, smart, talented people who can bring about change,” he said.
Also speaking at the conference was former U.S. Rep. and House Majority and Minority Leader Richard Gephardt, now president & CEO of Gephardt Group Government Affairs. The event was organized in conjunction with the Larry and Carol Levy Institute for Entrepreneurial Practice.
