Top Milwaukee executives expect Obama’s stimulus plan to work

    The Obama economic stimulus plan will help revive the economy, but improvements are not likely to begin occurring until late in 2009 or 2010.

    That was the consensus viewpoint among the top executives of some of the Milwaukee region’s most significant companies, according to an informal survey by Greater Milwaukee Committee president Julia Taylor.

    Taylor relayed the executives’ viewpoints about the economy at the Northern Trust Economic Trends Breakfast presented by BizTimes Milwaukee Wednesday. Nearly 600 people attended the event.

    Here are excerpts from some of the prognostications the executives e-mailed to Taylor:

    Ed Zore, chairman Northwestern Mutual Life Insurance Co.
    "Many culprits: Wall Street, Globalization, D.C. Created bubbles: Dot com, real estate… Governments globally throwing money at the problem. We’ll prevent a depression. Economy bottoms out third quarter of ’09. Slow, sluggish recovery."

    Jeff Joerres, CEO, Manpower Inc.
    "I do believe that we will see signs of rebound in 2009. If we were to project out into the third quarter, we could see housing begin to settle. The third quarter would be about the 85th month of housing downturn – the longest in the history of the housing market. I believe that the labor market will continue to go in a downward spiral throughout the first two quarters of 2009. By the third quarter, in addition to the flattening of housing, we will also see the stimulus packages start to work through the system, and normal recovery trends of some enhanced demand also start to kick in.
    "I believe the ‘million dollar question’ is, how much of a ‘reset’ of lifestyle will take place. Clearly, the reduced disposal income and the diminished wealth effect will have a substantial effect on quality of life. What I mean by this is that many people will be cutting back on leisure activity and spending, as well as more discretionary technology items and other household goods. This will create a slouch in demands for products in those markets, and therefore, have more of a lasting effect. I believe this is one of the reasons why you would hear some economists talk about a very slow climb out of the challenge that we have in front of us.
    "I think one of the opportunities for growth besides healthcare, which is obvious, will be in middle-of-the-road or lower-end consumerables, as this is where I believe people will be making their decisions more often than on the higher end.  The real major obstacle is when will the consumer kick in as the U.S. has assumed the role of the global consumer. This is not only a U.S. problem, but also a global problem. Without the U.S. consumer coming back it will be very difficult for us to have a charged up economy."

    Gale Klappa, chairman/president/CEO, Wisconsin Energy Corp.
    "As We Energies put together its revenue forecast for 2009, we talked extensively to 115 of our largest customers  Based on that input, it would appear that the region will suffer an economic downturn this year about as severe as the recession that hit the area in the early 1980s. My understanding is that the early ’80s recession was very painful for the region and resulted in the permanent loss of thousands of manufacturing jobs.
    "As for the potential duration of the downturn … anyone’s guess. But I don’t see any evidence that would suggest a rebound before late 2009 at the earliest. The only good news is that the regional economy is far more diversified today. So the prospects for recovery should be brighter. These developments clearly underscore the importance of the M7’s work to grow and attract jobs to the region. No government or social program ever invented can take the place of a solid, good paying job."

    Sheldon Lubar, chairman, Lubar & Co.
    "We are currently experiencing a financial market meltdown. These can be shown to be regular historic happenings that result from speculation, excess credit, reckless lending and ultimately deleveraging by banks and investors. It is this part of the cycle where blood runs in the streets.
    "It is difficult to put a time line on this situation. I recently read the Goldman Sachs outlook which recounted that they started their 2008 outlook by forecasting 2 to 3 percent annualized GDP growth for the fourth quarter of 2008 which actually turned out to be negative 5 to 6.5 percent. They were off 7 to 9.5 percent.  They conclude by asking the question, ‘What confidence can we have in forecasting the next 12 months?
    "No one can be certain where the bottom is or how long the recovery will take. We can already see growing unemployment, foreclosures and bankruptcies. On the positive side, the Federal Reserve Bank and the Treasury are countering with a huge government bailout and creative stimulus programs based on putting persons to work rebuilding the nation’s infrastructure. Like all cycles, this one too will pass."

    Tim Sullivan, president, Bucyrus International Inc.
    "This is such an unusual set of circumstances, clearly a situation that we have never experienced, that the simple answer to your questions is, I really don’t think anyone knows.
    "The key to recovery is keeping people employed (or re-employed) and keep them in their houses, neither of which on are mutually independent. There has been a financial bailout, but the banks are now being ultraconservative with their lending practices across the board making it almost impossible to refinance a problematic home loan. This has to change. I will say that the banks have taken steps to move slower on foreclosures. I believe this is being done for a couple of reasons. First, foreclosure is in no one’s best interest. Secondly, they need to dust to settle a bit to determine what risk they should take or what risk will be backed by the Fed.
    "Employment or re-employment is much more complex. The panic in the stock market and general market the last four months has to stop. It will be incumbent on the new administration to change the mindset of the American public. If panic is allowed to continue, we will be in a very long, protracted recession. I personally think that this president can turn off the panic and re-instill optimism if for nothing else, he should enjoy the normal honeymoon period of every new president. We are an extremely resilient country, and if he makes the right moves, he can get things moving in the right direction fairly quickly.
    "In summary, a lot depends on Obama and the moves he makes. The Fed will dictate whether this is a long or shorter-than-expected recession.”

    Steve Roell, CEO, Johnson Controls Inc.
    "There are a number of factors that will continue to negatively impact the U.S. economy in 2009: housing has not bottomed out; unemployment will increase further; lending (personal, corporate and municipal) will remain tight; consumer sentiment ­ confidence remains pessimistic; credit card debt and growing delinquencies; and corporate profits are under extreme pressure.
    "Of those, the biggest concern obviously is the level of consumer confidence. With the depressed stock market, concerns about job security and uncertainty about the duration of the recession, it¹s difficult for me to see any recovery until late 2009. I believe the first six months of the year will be extremely difficult in terms of corporate profits, with business failures dominating the headlines.
    "From a planning standpoint, it’s important that the actions we take are consistent with the long-term strategies of the business. That becomes increasingly more difficult as the duration of a recession is prolonged. As a management team, we’re beginning to plan under the premise that the global economy will remain in a recession for the next 12-18 months. That doesn¹t mean there will not be some stabilization or slight improvement in the environment, but it will not be a recovery.
    "I’ve already highlighted the obstacles. What could change? The benefit of global government stimulus; consumer confidence recovers faster than expected and significant cash begins to flow into the economy; tThe housing market stabilizes quicker than expected. All three factors are critical to any recovery, but I¹m not optimistic that any will have a meaningful impact until 2010."


    Jill Morin, executive officer, Kahler Slater Inc.
    "We are cautiously optimistic that the economy will rebound, but much will depend upon the economic stimulus package currently being developed. We think it’s important that any economic stimulus package rolled out for Wisconsin ensures that as many Wisconsin firms as possible benefit from the process, rather than out-of-state companies that arrive on the scene to get a piece of the pie. We strongly believe that federal dollars applied to local projects should result in local firms getting the benefit – keeping local money here, and not in the pockets of firms from other states who will do work on a local project, and then return to their own states.
    "As far as opportunities for growth, we think that anything having to do with sustainability will continue to be huge. ‘Green’ is not a trend – it’s becoming a way of life.  And tying green to our state economy, where we already have made progress, will bring great benefit to us. Any other opportunities will again depend on the final make up of the stimulus package. 
    "In terms of significant obstacles – we are our own worst enemy! Our conservative nature, our unwillingness at times to embrace change and take risks – while some may say these qualities have saved us from making huge mistakes, these attitudes also stand in the way of making significant progress and becoming a leader in a number of areas in which we are well-positioned or well-suited to do so. As the economists tell us, informed optimism, a positive attitude and a compelling vision for the future can speed up the recovery of any economic crisis. I think we need to take a risk, and believe in our shared community future for a change."

    Bill Bertha, president, Wisconsin market, U.S. Bank
    "2008 was tough … a year I’ve never experienced in my professional career. We’ll stay in a deep recession and maybe pull out in 2010. Third Ward, other area development will slow down. Fiscal management is good here – balance sheets are not leveraged, which helps stability. Lack of due diligence will come on some out-state deals.
    "$350 million in TARP funds went out the door from the government. Money went to shore up capital positions and cover losses as they go mark to market. Incremental stimulus packages are needed; needs more oversight.
    "What can we do? Manage businesses in lockdown mode – take advantage of research base. Seed incubators and grow in the water industry, biotechnology. Grow and become global entities again."

    Carlos Santiago, chancellor, University of Wisconsin-Milwaukee
    "My sense is that the recession will worsen and hit bottom by summer 2009. The recovery will be slow and we will only see a bit of light at the end of the third quarter. Unless and until consumer confidence is restored, will we begin to pull out this thing. Personal consumption expenditures constitute over two-thirds of our GDP, and the success of the stimulus package will be measured by its ability to restore consumer confidence."

    Michael Knetter, dean of the University of Wisconsin School of Business
    Referring to the Obama stimulus plan at the Northern Trust Economic Trends Breakfast Wednesday, Knetter said he understood apprehensions, but he told the audience, "I’m telling you that is (the) correct (approach)."
    Knetter said in dire economic conditions, "the government needs to be the buyer of last resort" to avoid collapse.
    "We’re at the bottom," Knetter said. "I think we needed to have the change in administration … It’s not as bad as we think it is right now, and I think our best days are still ahead."

    Steve Jagler is executive editor of BizTimes Milwaukee.

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