A recent article in the New York Times noted the first fruits of the Chrysler and Fiat merger (see A Merger Once Scoffed At Bears Fruit in Detroit and Will the Dodge Dart be a high-caliber replacement?). Fiat seems to be experiencing some early success in its Chrysler acquisition, as the company introduced two new models last week: the Maserati Kubang and the Dodge Dart.

Auto analysts have heaped praise on both the Kubang (the Maserati SUV) and the Dart (a fuel-efficient small car offering). They view these products as evidence of the types of synergies that exist between Chrysler and Fiat. The Kubang brings together Maserati styling with Jeep technology (notably, the platform). The Dodge Dart brings Alfa Romeo small-car technology to Chrysler.

On the Kubang:

…the marriage of an all-American Jeep with the Italian luxury heritage of a Maserati is the best evidence yet that Chrysler and Fiat can create products together that they could not afford to make independently… “the closest thing to a truly symbiotic relationship that the industry has ever seen,” said Jim Hall, managing director of the automotive consulting firm 2953 Analytics.

On the Dart:

The Dart gives Chrysler a competitive product in the important small-car segment of the American market, where the company has had little success…From a marketing standpoint, the Dart should be a big boost to Chrysler’s dealers, who have been hard-pressed to attract younger, first-time car buyers.

I was one of those who didn’t think Fiat-Chrysler was such a great combination (see Fiat/Chrysler Revisited, Can Fiat Really Pull It Off, Is Fiat Nuts?). I remain a bit skeptical that this deal will succeed due to the challenges associated with deriving value from Chrysler, and integrating it into Fiat’s global operations. But who knows, …maybe I’ll be proved wrong.

For me, the success of the Fiat-Chrysler deal depends critically on this first set of offerings (e.g., the Dodge Dart and the Maserati Kubang).

Personally, I think they’re both pretty good-looking cars. We’ll just have to wait and see if there’s more to it than just looks…

The Economist recently summarized Joseph Lampel’s (Professor at the Cass School of Business) reaction to Ryanair’s planned expansion. Professor Lampel believes the expansion represents a poor decision on the part of Ryanair CEO Michael O’Leary (see Michael O’Leary’s lessons from Napoleon and Ryanair Eyes Fresh Growth).

Joseph Lampel’s opinion (as quoted by the Economist):

One of history’s enduring mysteries is why Napoleon invaded Russia. He had an empire…and the all round title of military genius. And yet he could not resist the lure of complete domination of the European continent…he wanted…total victory.

One gets the same feeling reading the news release about Michael O’Leary’s ambition to acquire 300 aircraft…The goal is to grow Ryanair to 130 million passengers, which would make the airline the largest in Europe…

What is clear is that he sees the current economic crisis as an opportunity to push aggressively forward where other airlines fear to tread. The risk he runs is that an extraordinary success story will come apart…this expansion will stress Ryanair’s organizational capacity…

Perhaps he should take a lesson from Napoleon. When told by his advisers that the winters in Russia were exceptionally long and cold he insisted that they were misinformed…He lived to find out that reality can bite.

While Ryanair sees the acquisition of 300 additional aircraft as an opportunity to steal share in an economic downturn, I tend to side with Professor Lampel on this one. I think the planned expansion might reflect a bit of Napoleonic hubris. Not only will the expansion stretch the organization thin, but this is an incredible risk to take while Europe is in the midst of a crisis that threatens to turn into a nasty, and protracted, recession (see OECD warns of Euro Recession). A deep recession on the European continent would not bode well for travel in general, and air travel in particular.

A recent business week article highlights the release of Amazon’s new tablet, the Kindle Fire, and Amazon’s novel approach to capturing profits from its new product (see Amazon the Company That Ate the World, ht Brett).

The article centers on how Amazon focuses less on extracting profits from the sale of the hardware (like Apple) in an attempt to capture profits from sales of complementary content.

Amazon sees the product as an opportunity to direct customers to its world of “content, commerce, and cloud computing.” Apple, by contrast, attempts to capture a majority of its profits from the sale of hardware – pricing the hardware high with third-party content providers appropriating much of the value of the sale of content.

Amazon has priced the Kindle Fire at $199, nearly half the cost of the cheapest iPad. While the Fire lacks some of the functionality of the iPad – think 3G connectivity and video chat – it claims to provide an easy to use interface that ties directly to Amazon’s content.

According to the article:

The stripped-down Fire is more of a sit-back-on-the-sofa-and-shop device. It crystallizes the difference between Apple, which tends to keep prices (and profit margins) high, and Amazon, which likes to start low and drive lower in an effort to knee-cap the competition. The tablet is symbolic of Amazon’s remarkable ability to adapt and reluctance to cede the future to anyone. If the Fire and its inevitable sequels are successful, they will add even more might to one of the fastest-growing retail operations the world has ever seen.

The Kindle Fire is designed to ensure that…purchases go to Amazon. The company has built a tablet-optimized shopping application, with simplified and streamlined pages but none of the clutter of the main website.

Analysts speculating on the new device widely pegged the Kindle Fire at $250 to $300…[but Amazon CEO Jeff] Bezos is able to go lower because he can make his profit on media content and with additional subscriptions to Amazon Prime—which then will drive additional purchases of toys, toasters, diapers, etc.

What I find most interesting about Amazon’s approach to the tablet space is its attempt to flip the business model on its head – making money from the content rather than the hardware. With the remarkable hardware price point afforded by its novel business model, the Amazon Fire represents, to date, the most credible threat to Apple’s dominance of the tablet space. Time will tell whether Amazon can make inroads in its attempt to challenge Apple head-to-head…

For those of you who have been following this blog, you know I have had an interest in the development of Tata as an automobile entity, and especially the plight of the Nano and Jaguar/Land Rover (see Is Nano the New Yugo?, Tata and JLR I, Tata and JLR II, Tata and JLR III, Tata and JLR IIII).

Anyhow, this week’s issue of The Economist provides a nice review of the most recent Nano developments (see Stuck in Low Gear). Their conclusion: So far, it’s been a marketing disaster!

Since its launch with great fanfare in 2009, the Nano has swerved from one crisis to another. There was opposition to Tata’s original plans to site the factory in West Bengal, forcing a last-minute scramble to switch the site to Sanand. It opened last summer, but not enough cars came off the production line to meet a huge surge of early orders. The orders then petered out. To make matters worse, a few cars burst into flames, raising fears about the Nano’s safety. Sales, which had been predicted to be 20,000 a month, fell as low as 509 in November last year. Sales recovered to 10,000 a month in the spring, but have fallen back again this summer: 3,260 in July, amid a slump in the Indian car market caused by rising interest rates and fuel prices.

Carl-Peter Forster…head of Tata Motors…admitted earlier this year that he was having to reinvent the Nano business model. There was no real national distribution scheme, very little marketing and advertising, and no effective system of consumer finance.

The Nano’s marketing problems began with its product positioning. The price crept up by around 15%, putting it out of the reach of first-time buyers with no regular employment or payslips to back an application for credit. And by emphasising its cheapness rather than its basic but appealing qualities, it deterred slightly better-off consumers who could afford one but aspired to more sophisticated vehicles…

Interesting stuff, and fully consistent with my priors.

Although the Nano is a wonderful concept in theory. In practice, it has turned out to be much harder to turn into a successful reality.

I stumbled across an interesting opinion piece authored by Anil Gupta and Haiyan Wang in the Wall Street Journal several weeks ago that echoes my sentiment regarding China as a potential powerhouse in innovation (see China as an Innovation Center? Not so Fast). The article provides some compelling evidence that China has a long way to go before it is able to catch up to the West in this important economic dimension.

Hardly a week goes by without a headline pronouncing that China is about to overtake the U.S. and other advanced economies in the innovation game. Patent filings are up, China is exporting high-tech goods, the West is doomed. Or so goes the story line.

The reality is very different. China is indeed mounting considerable efforts on the innovation front. However, many of the pundits seem to confuse inputs with outputs. The “inputs” for innovation are impressive. China’s R&D expenditure increased to 1.5% of GDP in 2010 from 1.1% in 2002, and should reach 2.5% by 2020. Its share of the world’s total R&D expenditure grew to 12.3% in 2010 from 5.0% in 2002, placing it second only to the U.S., whose share remained steady at 34-35%.

At first blush, data on “outputs” also look impressive. According to the World Intellectual Property Organization, Chinese inventors filed 203,481 patent applications in 2008. That would make China the third most innovative country after Japan (502,054 filings) and the U.S. (400,769).

Yet there’s less here than meets the eye. Over 95% of the Chinese applications were filed domestically with the State Intellectual Property Office. The vast majority cover Chinese “innovations” that make only tiny changes on existing designs. In many other cases, a Chinese filer “patents” a foreign invention in China with the goal of suing the foreign inventor for “infringement” in a Chinese legal system that doesn’t recognize foreign patents.

A better measure is to look at those innovations that are recognized outside China—at patent filings or grants to China-origin inventions by the world’s leading patent offices, the U.S., the EU and Japan. On this score, China is way behind the others.

The most compelling evidence is the count of “triadic” patent filings or grants, where an application is filed with or patent granted by all three offices for the same innovation. According to the OECD, in 2008, the most recent year for which data are available, there were only 473 triadic patent filings from China versus 14,399 from the U.S., 14,525 from Europe, and 13,446 from Japan. Data for patent grants in 2010 by individual offices paint a virtually identical picture.

Starkly put, in 2010, China accounted for 20% of the world’s population, 9% of the world’s GDP, 12% of the world’s R&D expenditure, but only 1% of the patent filings with or patents granted by any of the leading patent offices outside China. Further, half of the China-origin patents were granted to subsidiaries of foreign multinationals…

…Yes, China is making rapid strides in some areas…However, on an across-the-board basis, it still has quite some distance to cover before becoming a global innovation power.

Although I had not seen the patent data cited by Gupta and Wang, the findings do not surprise me. In fact, I expressed similar concerns in previous posts (see Innovation in China, Technological Ascendancy: Lessons for China, Emergence of Emerging Market Innovation, China Attracting High-Tech Research, China Alternative Energy).

For example, in the Emergence of Emerging Market Innovation I wrote:

…with respect to the prospects for developing countries (and their firms) to quickly close the [innovation] capabilities gap with the developed world…Despite the incredible potential…my position has been that we ought not get too giddy thinking that developing countries will be able to catch up anytime soon

Similarly, in Innovation in China (part one) I mentioned:

It will take a long time for developing countries like China that rely on manufacturing for export to close the innovation gap with the West.

Finally, in comparing Taiwan’s development to China’s (in Technological Ascendancy: Lessons for China) I suggested that…

…China (and many other developing economies) risks finding itself in [a commodity trap] as it continues its commitment to manufacturing and export-oriented growth…The key for countries like Taiwan and China is to transition from an economy that simply manufactures the goods that are designed and developed elsewhere to one in which innovation, creativity, and high value-added services take root. Unfortunately, for developing countries, those transitions take an inordinate amount of time.

Nevertheless, I really enjoyed reading the WSJ piece. And I’d encourage you to take a look at it in its entirety. It speaks to the substantial gap that remains between China’s innovation, and that of Europe, Japan, and the US.

Nice article in this week’s Economist about the downside of outsourcing (see Trouble with Outsourcing). This is a topic I’ve recently discussed in this blog (see Reevaluating Outsourcing).

According to the Economist:

Outsourcing has transformed global business. Over the past few decades companies have contracted out everything from mopping the floors to spotting the flaws in their internet security. TPI, a company that specialises in the sector, estimates that $100 billion-worth of new contracts are signed every year. Oxford Economics reckons that in Britain, one of the world’s most mature economies, 10% of workers toil away in “outsourced” jobs and companies spend $200 billion a year on outsourcing. Even war is being outsourced: America employs more contract workers in Afghanistan than regular troops.

Can the outsourcing boom go on indefinitely? And is the practice as useful as its advocates claim, or is the popular suspicion that it leads to cut corners and dismal service correct? There are signs that outsourcing often goes wrong, and that companies are rethinking their approach to it.

These are not new questions. These issues are central to the fields of international business and strategy (see also Williamson and Transaction Cost Economics). In fact, outsourcing has been one of the hottest topics in both literatures for at least the last 25 years.

But the topic is certainly worth revisiting every once in awhile. And although the economics of outsourcing can be compelling, it is also important for managers to keep in mind that outsourcing is not without strategic consequences.

As the Economist recognizes:

Outsourcing can go wrong in a colourful variety of ways. Sometimes companies squeeze their contractors so hard that they are forced to cut corners…Sometimes vendors overpromise in order to win a contract and then fail to deliver. Sometimes both parties write sloppy contracts. And some companies undermine their overall strategies with injudicious outsourcing.

It is this last outcome that poses the greatest strategic threat. When firms outsource important value-creating activities, it often portends a phased exit from a part of the business that later precludes them from reentering that business.

Think Apple.

For a long time, Apple refused to follow the industry trend to outsource elements of the value chain – operating system, hardware, peripherals. Instead, they remained staunchly closed and proprietary. Apple was roundly criticized for doing so. Most industry analysts had written them off, and Apple was, at one point, on the verge of extinction.

However, it is Apple that got the last laugh.

Apple was ultimately able to benefit from their decision to keep much of their value chain in-house. Indeed, they experienced a miraculous recovery sparked by the innovation that their integrated approach allowed. Their competitors, by contrast, had jettisoned many of the complementary value-chain activities that, in the long run, helped differentiate Apple. As a result, many are now struggling.

One extreme example: IBM. The mighty IBM, king of the PC, fell prey to the very industry outsourcing trend that they helped create, …and they are now completely out of the PC business.

The moral of the story: Beware the long-term consequences of outsourcing.

As I’ve mentioned before, although the auto industry seems to have stabilized in the wake of the financial crisis (and I see that as a good thing), overcapacity continues to be the major, long-term problem facing automakers (see Auto Industry’s Big Little Problem).

An article in last week’s issue of the Economist reiterated that concern (see Danger Ahead).

According to the Economist:

THE mood at the Detroit motor show this year was very different from the dark days of 2009. Then, bosses of American car companies wondered if their firms would survive. Now, thanks to $60 billion of federal finance and the cold shower of bankruptcy to wash away their debts, General Motors (GM) and Chrysler are still alive, while Ford’s canny financial manoeuvring before the crisis allowed it to clean up its act and roar back to record profits.

Yet the industry’s problems are not behind it. The American rescues averted catastrophe, but they—along with continued European subsidies—have exacerbated the overcapacity that has dogged the sector for years. The car industry can produce 94m cars a year, against global demand of 64m. Unless that changes, it will never return to health.

I agree. Unless massive productive capacity is eliminated from the industry or demand explodes by 50% (not very likely), there will need to be another shake out in the industry.

The interesting thing about the article is that for many years we’ve been told by industry participants and observers that growth in China would help ameliorate the overcapacity concerns. However, as the Economist article astutely points out, it’s not clear that demand growth in China and/or other emerging markets will finally rid the industry of its overcapacity problems. This is because upstarts in those emerging markets continue to add capacity to the industry, and it’s unclear that demand growth in the emerging world will continue at its torrid pace.

Developments in China are likely to make things worse still for rich-world companies. China too has a surplus of car manufacturers, excess capacity and a problem with demand. Annual sales growth is forecast to fall from 30% to around 10%…

And the issues are not limited to the U.S., China, or India. Europe’s automakers face similar overcapacity and productivity problems.

…tough labour laws and government stakes in some firms—a German Land, Lower Saxony, owns 20% of VW, for instance, and the French government owns 15% of Renault—discourage them from shedding workers. As a result, despite the biggest crisis in living memory in the industry, firms are failing to rationalise.

The question then remains: What gives? Where will the much needed capacity rationalization come from??

This has all the makings of a multi-country “my industrial national champion is more important than your industrial national champion” kind of a spat.

I received a call yesterday from Nin Hai Tseng, a reporter at Fortune, asking my opinion of the tax credit portion of Obama’s recent stimulus proposal (see Why Obama’s Plan Won’t Buy Votes).

President Barack Obama heads to Cleveland, Ohio today to unveil more measures aimed to jolt the country out of a frustratingly slow economic recovery ahead of the November mid-term elections. In an effort to create jobs, the administration’s proposal includes a $50 billion infrastructure spending plan and a tax write-off for businesses that invest in new equipment.

…as far as Obama’s proposal to allow companies to deduct from their taxes the full value on purchases of new equipment through 2011, it remains to be seen if this would be a big enough incentive to get businesses to invest more and hire more. Companies can already deduct these expenses, but the plan would allow them to make the deductions upfront.

If the tax break pans out anything like consumers’ response to Obama’s tax credit on home purchases, then that’s a bad sign, says Robert Salomon, professor at New York University’s business school. The tax credit supported home sales briefly. When it expired in April, sales of previously owned homes dipped in July to their slowest pace in 15 years.

Salomon supports more stimulus spending. He adds the tax credit holds promise, but it could act as a “misincentive,” merely giving tax relief to businesses who were going to buy new equipment anyway. The hope is that the incentive prompts businesses to buy things they otherwise might not have without the tax break.

Companies have been sitting on record amounts of cash, but the lack of demand has largely kept many from spending more.

This more or less represents my view. Overall, I am in favor of some form of stimulus to help combat stubbornly-high unemployment. Therefore, I view Obama’s stimulus proposal, however small, as something that’s better than nothing.

That said however, I wonder whether the business tax credit portion of the stimulus could be better spent on efforts that have a more direct impact on employment. My fear is that the business tax credit will work much like the home-buyer tax credit, either by pulling demand forward thereby leaving a demand void once the stimulus expires, or by wrongly rewarding firms that were planning to make capital investments anyway, again failing to meaningfully influence future demand.

As I see it, the goal of any tax-related stimulus should be to encourage economic actors to make purchases/investments that they otherwise might not have made, in the hope that it will improve confidence and kick-start a virtuous private demand/investment cycle. I’m not sure that this specific business tax credit accomplishes that goal, especially in an environment in which final demand remains extraordinarily weak.

In this sense then, I believe it’s a poorly-targeted stimulus. Instead, I think the $30B estimated total cost of the tax credit program would be better spent on additional infrastructure projects and/or additional employment tax relief. I view those alternatives as having a more direct, immediate impact on employment.

For those of you who read my blog, you know that I’ve had an interest in Tata’s acquisition of Jaguar and Rover. When it was announced, I failed to see the value proposition in the combination of Tata and JLR, and I remain somewhat skeptical of JLR’s ability to provide value to Tata (for background see Jaguar/Rover Revisited, Jaguar/Rover Update, and Buyer’s Remorse).

Irrespective of my opinion, it was with great interest that I read this week’s Economist, which contained an article on Tata’s progress with those previously beleaguered brands (see Tata Motors’ Boss Moves Up a Gear).

After a torrid couple of years in which demand for JLR’s pricey models evaporated…2010 has seen at least a partial recovery in sales and profits…

After the success of the mid-size XF and with heavily revised Range Rovers and the radical new XJ saloon just launched, JLR’s product line-up has never looked in better shape.

MY COMMENT: I will give that to them. Tata Motors is performing better now than in 2009. They are profitable again, with net income of around $550 million. However, a look under the hood suggests that profitability was not bolstered much by results at JLR (Jaguar Land Rover). A good chunk of Tata Motors’ profitability came from a gain booked on the partial sale of Tata’s stake in Telco Construction Equipment. JLR’s net profit was reported at around $20 million. That’s very small (less than 5% of total profit for a brand that represents greater than 50% of Tata’s entire automobile enterprise), …but it’s admittedly greater than zero.

Another thing that I will say about Jaguar and Land Rover: Their new models are stylish. They are good looking cars. And boy have they been marketing the heck out of them in the US. Everywhere I turn I feel like I see/hear another JLR advertisement – on TV, radio, billboards, and even through the internet (e.g., pandora radio). This is more than I ever remember Ford promoting those brands.

So Tata Motors is definitely making the investment. The question remains: Will the pricey advertising campaigns pay off, or are the brands already too far gone??

Nevertheless, I will admit there are definitely some things for the optimists to get excited about.

Back to the article:

One of the biggest puzzles Mr Forster [the Chief of Tata Motors] has to solve is how to replace the legendary Land Rover Defender…The new vehicle will have to be cheaper to make (and sell) than the current “Landie” to make it competitive with Japanese rivals in developing-country markets…[and] come up with a product capable of finding at least 80,000 buyers a year—four times as many as the current Defender. There is a good chance that, to keep costs down, the new model will be made in India.

MY COMMENT: Um wait. From what I remember of the original deal, Tata agreed not to shift production out of the UK, and made pledges not to cut staff or close plants. It’s unclear to me therefore how many of those 80,000 cars they’ll be able to assemble in India.

The new-model blitz is in impressive contrast with the sluggish pace of development under JLR’s cash-strapped previous owner, Ford.

MY COMMENT: Yes, I agree the new models (especially the Jaguar XF/XJ and the Land Rover Evoque) are impressive. However, lest we forget, these models were designed and developed under the previous owner, Ford. What matters most is what comes next, …in the generation of models that follow. We’re still several years away from seeing the fruits of any design efforts under Tata Motors.

And one of the big takeaways from the article:

Apart from economic uncertainty in its traditional markets, there is, however, one big cloud on the company’s horizon: ever-tightening fuel-efficiency and emissions rules.

MY COMMENT: Really?? That’s it? Fuel-efficiency and emissions rules? That’s the best you can come up with?

C’mon, JLR’s downside risks are far greater than that. For example:

1. How will JLR compete with the Japanese (Acura, Infiniti, Lexus) on price or the Germans (BMW, Audi, Mercedes) on perceived quality? My view is that JLR’s models are too expensive to effectively compete with the Japanese manufacturers. They just don’t have the volume. And they are not as highly regarded as the German brands. They just don’t have the prestige, and as a result must settle for lower margins. In this sense then, JLR is stuck in the middle.
2. The auto industry continues to be saddled by mass overcapacity. Coupled with what I suggested in point #1, it’s not entirely clear to me how Jaguar and Land Rover can survive the inevitable industry shakeout.
3. What happens if/when the global economy slows again (especially in Europe and the US) and sales of durable goods decline? JLR is already teetering on the verge. Even a modest economic slowdown could spell the end to the brands.
4. JLR still carries a hefty debt burden that Tata Motors is working through. Even with a restructuring of that debt, a turnaround of JLR is a tall order, and $3 billion in debt is not chump change. It’s reasonable to ask whether Tata will ever earn enough (even if JLR remains profitable) to provide a reasonable return on investment.
5. As in my previous posts, I still wonder about Tata’s ability to derive synergies from JLR, to rationalize JLR’s operations, and right two long-uncompetitive brands.

But who knows. Tata Motors might just prove me wrong. After all, JLR is marginally profitable (for now). And Tata Motors certainly picked a qualified leader in Carl-Peter Forster to lead the group.

Only time will tell…

In January I predicted that “major” bankruptcies in 2010 would number around 300 (see Notable Bankruptcies of 2010: Q1). According to Bankruptcydata.com, there were 59 “major” filings in the first half of 2010. Assuming that bankruptcies are equally distributed throughout the year, this puts us on pace for around 120 bankruptcies. Again, this would be well shy of my prediction.

In previous posts I discussed why I believed “major” business bankruptcies were tracking below expectations (see Notable Bankruptcies of 2010: Q1 and Notable Bankruptcies of 2009). The candidate explanations include: an improving economy; massive government stimulus/liquidity programs keeping structurally weaker firms on artificial life support; and the recovery disconnect between Main St. and Wall St. (i.e., small-firm bankruptcies are on the rise even while major bankruptcies have declined).

Personally, I continue to believe that the significant dip in “major” business bankruptcies that we have witnessed over the past year has a lot to do with the extraordinary government stimulus and liquidity programs. Nowhere has this been more evident than in the disconnect between the bankruptcy patterns across small and large corporations (see Notable Bankruptcies of 2010: Q1 for details). And as I’ve maintained all along, absent a second round of stimulus, we will find out if my hypothesis is correct as the stimulus and liquidity programs begin to wind down. In this sense then, the true test for corporate balance sheets (and by extension, the economy) will come in the second half of the year.

Given the recent troubles in Europe and the softer economic employment and growth numbers at home, it continues to be my expectation that the pace of corporate bankruptcy filings will increase in the second half of 2010. Will we ultimately reach 300 “major” business bankruptcies? At this point, likely not. But I do not think 200 is out of the question.

If fundamentally weak companies are being propped up by an artificially-stimulated economy that cannot structurally support them, it is only a matter of time before bankruptcies begin to reflect true underlying economic fundamentals.

Anyhow, below you can find an updated list of what I see as the “noteworthy” bankruptcies of 2010, as reported by Bankrupctydata.com. New additions since March appear in RED (please note that this is not an exhaustive list):

• Affiliated Media, Inc. (Newspapers)
• American Mortgage Acceptance Company (Real Estate)
• Anthracite Capital, Inc. (Real Estate)
• Atrium Companies, Inc. (Windows and Doors)
• Beach First National Bancshares, Inc. (Banking)
• Black Gaming, LLC (Gambling)
• Chem Rx Corporation (Pharma Services)
• Community Bancorp (Banking)
• Corus Bankshares, Inc. (Banking)
  
• Electrical Components International, Inc. (Manufacturing)
• EnviroSolutions Holdings, Inc. (Waste Disposal)
• Evergreen Bancorp, Inc. (Banking)
• FirstFed Financial Corp. (Banking)
• Haights Cross Communications, Inc. (Publishing)
• International Aluminum Corporation (Real Estate)
• Mesa Air Group, Inc. (Airlines)
• Morris Publishing Group, LLC (Media)
• Movie Gallery, Inc. (Retail)
• Neenah Enterprises, Inc. (Manufacturing)
• Neff Corp. (Construction)
• Orleans Homebuilders, Inc. (Real Estate)
• Penton Business Media Holdings, Inc. (Media)
• Point Blank Solutions, Inc. (Security)
• Regent Communications, Inc. (Media)
• R&G Financial Corp. (Banking)
• Saint Vincent’s Catholic Medical Centers (Healthcare)
• Spheris Inc. (IT Services)
• TierOne Corporation (Banking)
• The Newark Group, Inc. (Paper)
  
• Uno Restaurant Holdings Corporation (Restaurants)
• US Concrete, Inc. (Construction/Basic Materials)
• Xerium Technologies, Inc. (Paper)