2009 – 2010 Economic Forecast

1. 2009 – 2010 Economic Forecast Mr. Gene Collins University of Toledo

2. Review of 2009 Forecast • Global Liquidity Crisis is still being resolved • Global Credit Crisis is being resolved through global coordinated efforts • Global recession is on schedule and will likely end by the fourth quarter of 2009, or first quarter of 2010 • Slow economic growth will be with us for a few of years • A U.S. or global 1930’s style depression is highly unlikely • Domestic CPI will decline and remain under control over the next 18 months • Core CPI will remain under control and show a downward bias • Unemployment will continue to rise through 2010 • Housing prices will stabilize by the end of 2009 – some markets will stabilize sooner • No further reductions in the Fed Funds rate from 1% as the rate will effectively remain at zero • Direct lending by the Fed to stressed sectors will continue • The term structure of interest rates indicates economic growth at some point with an associated moderate inflation potential

3. Themes for 2010-2011 • The Immediate Global Banking Liquidity Crisis has been resolved – Slow Liquidity removal remains. • Coordinated Global Credit management efforts are working unevenly • Slow growth will likely continue through the first quarter of 2013 • The increase in taxes to pay for the prior excesses has already begun • Dollar stability some strength until 2011

6. 2009-10 Economic Forecast Detail

7. 2010-11 Economic Forecast Detail

8. Inflation –Employment - Housing • Domestic CPI will rise slightly and remain under control over the next 18 months • Core CPI will remain under control and show a stable to upward bias • Unemployment Rate will have an upward bias into Q 1 of 2011– Employment will expand • Housing prices have stabilized in some markets others will stabilize later this year • The over built areas will see some further price depreciation into Q 4 2010

9. Forecasted CPI

11. Stimulating Monetary Policy • Fed Funds rate will remain well below the Fed 0.5% target into Q3 as the Fed begins to withdraw liquidity. Year end Fed Funds below 1% • Direct Fed stress sector lending is ending “small “ liquidations will start. No major liquefying of the Fed balance sheet until 2012 • The term structure of interest rates indicates non inflationary economic growth has started and is expected to continue.

12. Stimulating Fiscal Policy • Federal Economic Employment Package • Fewer Tax Cuts and Incentives not last years 60% • Mostly Spending Increases • Some Public Works Infrastructure • No Federal Tax increase proposals until after the November Elections

13. “One should not confuse AN ECONOMIC RECOVERY with THE ECONOMIC RECOVERY.” Vincent Malanga Phd. President La Salle Economics

14. Data and information resources: • LaSalle Economics, Inc (Analysis and context) • Barclays Capital Markets Research • Bloomberg LLC • Blackrock LLC

15. Managing Business In a slow growth economy

16. Demand for your Products • Watch your Customers • Customer Types • Naysayers – frightened, older lost finances, working? • Short Termers – Younger, little savings, working /\* • Long Termers – Worried but time to make it up /\* • Simplifiers – Baby Boomers, do with less • Sympathizers - Were in cash, can afford to buy /\* • Permabulls – Don’t worry be happy, optimistic * \/ You need a sales strategy for each customer type

17. Suppliers • Business worthy versus credit worthy – Distinguishing between these became harder • Take advantage of 30 day pay discounts – Fewer available • Watch billings more closely • Watch for shipment delays • Watch for quality and or manufacturing sub contractor changes • Strong Inventory Control remains a priority

18. Operations • Staffing – 60% to 80% of your Costs • Most staff reductions are done – now quality upgrades • Decide whether to start at the TOP or BOTTOM • Decide in your CORE Business • First decide what functions need upgrade not who • Decide What you need versus What you can Afford • Review your operating plan for change be creative

19. Letting-People-Go • Be prepared to feel badly • Have a plan for the termination and exit interview • Be creative and non judgmental you may want to hire them back after the turn. Consider a Monday termination rather than Friday. • Be prepared for hard feelings and horrific financial stories • You are doing the right thing so that jobs will be there when things turn around.

20. Hiring New People • Develop a hiring strategy in your Business Plan • Hire versus the plan – whether it is a replacement or a new hire • Have a detailed job description for each position with detailed required testable skills – test for the skills against minimum standard • Conduct multiple interviews with multiple candidates • Rank the candidates against strengths and weaknesses - for ties go with “desire”

21. Financing and Bank Relations • Call everyone • No – means not now • Go back to banks you talked to last year • Look at methods not used in the past • Factoring receivables combined with 30 day discount payables • Smaller banking institutions • Chamber of Commerce Small Business Develop • Can you write for a government Grant?

22. Prioritize and Problem Solve • Customers – 80/20 rule • Suppliers – Keep contact/ Know your Supplier/be prepared to add new ones • Operations – Survivability - expansion • Finance and Banking – Have a plan/Know your numbers/Keep contact

23. Recovery Plan • Keep watch on your customers • This is an opportunity to change your business for the better • Upgrade your human capital • This will be a slow recovery • Keep Your Attitude • It is the only thing you own outright

24. Credits and References • Financial Times – Mastering Management, • February,6, 2009 • Conversations with Michael Bloomberg, Donald Reinbolt, Dr. Gary Moore, Dr. Clint Longenecker