Stabilizing At Risk Companies and Jobs Through Incumbent Worker Training

1. Stabilizing At Risk Companies and Jobs Through Incumbent Worker Training SEMCOG University – Ensuring Economic Success by Leveraging Education and Workforce Assets July 27, 2010

2. Topics • 2009 Economic Overview • Outline of the Solution to Save Companies (CAT) • Overview of the Process & Benefits • Program Costs & Return on Investment • Program Status – 2010 • Case Study • Q & A • Appendix

3. What was Michigan’s Emergency?Generally Known Issues in 2009: • Six year single-state recession • One year single-state depression • Unemployment near 15% – highest in the nation • Over 550,000 jobs lost in six years • Sixth worse foreclosure rate in the nation • Dramatic decline in manufacturing output and jobs base • GM & Chrysler teetering on bankruptcy • Corporate bankruptcies up 41% from 2007 – 2008 • Personal bankruptcies up 19% from 2007 - 2008

4. What was Michigan’s Emergency?Generally Unknown Issues: • Many large banks were quietly divesting of automotive, real estate, and construction clients • Traditional alternative lenders had credit issues • Traditional alternative lenders were more selective • Assets had degraded, thus borrowing power was down • Reasonably stable companies were being forced into bankruptcy or liquidation

6. Livingston County’s Desired Approach Save jobs by getting to the root-cause of the problem…..underperforming companies Stabilize distressed companies before they are sent to workout or become insolvent!

7. How? Utilize a Corporate Assistance Team (CAT) to assist the companies at NO CHARGE to the companies. The CAT consists of: • EDSI Consulting – A management consulting group that specializes in turnarounds. • Blue Ocean Advisors – An advisory group that specializes in cost and risk reduction. • Express Employment Professionals – A staffing company that provides temporary staff at reduced rates. • Grace & Porta Benefits – A team of benefits experts that can assess current benefits packages to ensure low cost structures are achieved.

8. CAT Objectives: Strengthen Livingston County’s struggling businesses via: • Providing turnaround management assistance: • EDSI Consulting • Providing cost reduction assistance: • Blue Ocean Advisors • Express Employment Professionals • Grace & Porta Benefits Increase stable jobs – (ST) Increase total jobs – (LT)

9. Process Centerpiece: Proactive Business Review (PBR) A PBR is a tool used by turnaround professionals to: • Quickly assess: • Financial health • Operational efficiency • Organizational structure - Urgency of Situation • Functional effectiveness - Changes Required • Strategic direction • Identify short-term actions required to stabilize the company. • Identify long-term actions required to ensure the company returns to growth and profitability.

10. Overview of Process • Companies are identified. • The process is explained to key executives. • If the owners/executives agree to proceed, an IWT grant is submitted. • Once the grant is approved, a Proactive Business Review (PBR) begins. • Financial analysis is conducted to assess the severity of cash flow issues.

11. Overview of Process (Continued) • Key functions, processes, strategies, organizational structure and personnel are assessed. • Once the assessment is completed, a document is created that contains specific observations and recommendations and a prioritized list of action items. • Consultants and management team create an implementation plan and custom training plan. • Training and implementation begins. • Other CAT team members follow with cost reduction efforts at no initial charge.

12. Process Benefits • Identifies and remediates companies before they degrade into Chapter 11 or Chapter 7 bankruptcy candidates. • Creates a path to improvement, thus decreasing the likelihood of layoffs, volume shifts, or shuttering of the entire facility. • Identifies the root-cause of job stability, i.e. the fundamental well-being of the company itself. • Provides a progressive tool for EDC’s and WIB’s.

14. Program Status as of July 2010 • Companies assisted to date: 6 • Current survival rate: 100% • Pre-employment level: 163 • Current employment level: 207 • Funding utilized: $59,000 • Cost per current job: $285

15. Q&AContacts Fred Dillingham Executive Director – EDC of Livingston County 1240 Packard Drive, Suite 101 Howell, MI 48843 Work: (517) 546-0822 fdillingham@livingstonedc.com www.livingstonedc.com Jim Bitterle Managing Partner - EDSI Consulting 15300 Commerce Drive North Dearborn, MI 48120 Work: (313) 271-2660 ext. 132 Cell: (734) 945-2480 jbitterle@EDSIsolutions.com www.EDSIsolutions.com

16. Appendix: Case Study – Machine Shop • Current Status: • Solvency: Company is solvent and operating. • Employment: 16 • Financial Condition: • Monthly revenues have increased over 15% • YTD profits achieved • Cash flows are positive • Key Changes: • Stabilization Plan fully implemented (Reduced operating expenses by $336k) • 13-week cash forecast created • Re-finance book created, re-finance efforts under way • Scheduling processes modified June 2009 Status: Revenues: Down 52% from peak of $4MM Employment: 14 from a peak of 26 Financial Condition: • Revenues down 53% • Net Loss of $168k • Negative Cash Flows • In workout at bank Key Recommendations: • Create a Stabilization Plan to stem the cash losses • Create a 13-week cash forecast • Begin searching for alternative financing • Re-engineer scheduling process to reduce overtime and improve delivery performance