How to reduce manufacturing costs by 1000 basis points...

1. Reduce price of purchased material by substituting less expensive material
2. Reduce price of purchased material by negotiating actively with vendors, creating auctions, to gain lowest market price
3. Increase material yield in manufacturing process by reducing scrap

It's easy to do, just takes a lot of work and commitment.

Two Days in a Row of DJ Index Drop Greater than 200 points

Even though reports of last quarter's growth of the US and World economies were above average, the DJ dropped. Remember how businesses are valued, which is on the present value of future cash flow. The recent drop suggests that investors believe that current prices overstate value.

The "so what" to me is that business managers who create real value above expectations will be rewarded greatly.

Change in dynamics relating to turnaround exits

I have noticed in the past couple of years that lenders with troubled assets in their portfolio have a much easier time (generally) now exiting from those credits. The exit is not through participating in a workout with the borrower but much more frequently through selling their position to a hedge fund (sometimes posing as a lender). This trend is great for banks as they can take advantage of liquidity to reduce loan losses, reduce expenses related to maintaining their own workout staffs and reduce the time it takes to convert an asset to cash.

But this trend makes it more difficult for borrowers who have a loan sold since the new buyer (lender) does not have the instituitional knowledge or lending knowledge needed to help in the situation. It also makes business development much more difficult for turnaround consultants for a number of reasons including the fact that their prospective referral sources for troubled loans are often in a different location than the borrower and the consultant. The hedge fund lender is also less aware of what value a consultant can add and so is less likely to refer consultants to his/her borrowers.

David Cho of the Washington Post on 1/31/07 reported that private equity funds spent $540 billion in 2006, compared to $59 billiion in 2003. Hedge funds may be included in that number. The point is that there was 10X increase in capital spent and available in just 3 years.