UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION ) ) COLLINS & AIKMAN CORPORATION, et al., ) ) Debtors.

) _________________________________________ ) In re Case No. 05-55927 (SWR) Chapter 11 Honorable Steven W. Rhodes (Jointly Administered)

OBJECTION OF THE C&A POST-CONSUMMATION TRUST TO THE FINAL FEE APPLICATIONS OF (1) KZC SERVICES, LLC AND JOHN R. BOKEN, (2) AKIN GUMP STRAUSS HAUER & FELD LLP AND (3) ALVAREZ & MARSAL, LLC

DYKEMA GOSSETT PLLC Ronald L. Rose (P19621) 400 Renaissance Center Detroit, MI 48243 Telephone: (313) 568-6553 Facsimile: (313) 568-6893

Attorneys for the C&A Post-Consummation Trust

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TABLE OF CONTENTS Page PRELIMINARY STATEMENT .....................................................................................................1 STATEMENT OF FACTS ..............................................................................................................5 A. The Non-Settling Professionals ...............................................................................5 (1) (2) (3) B. KZCS ...........................................................................................................5 Akin..............................................................................................................6 Alvarez & Marsal.........................................................................................6

Background Relevant to the Fee Applications of the Non-Settling Professionals.......................................................................................8 (1) (2) (3) (4) The Debtors Capital Structure ....................................................................8 The 2006 Operating Plan .............................................................................9 The 4+8 Plan ..............................................................................................11 The 6+6 Plan ..............................................................................................13

C. D.

Appointment of the Fee Examiner.........................................................................15 The Fee Examiners Conclusions ..........................................................................17

STATEMENT IN SUPPORT OF SETTLEMENTS.....................................................................19 OBJECTIONS TO FEE APPLICATIONS....................................................................................19 I. KZCS SHOULD NOT BE AWARDED OVER $44 MILLION IN FEES .......................20 A. B. C. D. KZCS did not independently evaluate the Debtors projections ...........................22 KZCSs deference to Mr. Macher undermined the quality and results of KZCSs work on behalf of the estate .....................................................23 KZCS cannot deflect responsibility to the Pre-Petition Lenders for the delay caused by the 4+8 Plan .....................................................................29 KZCSs fees should be reduced to account for the losses incurred by the estate as a result of the two-month delay identified by the Fee Examiner ..............................................................................31

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II.

AKIN AND A&M SHOULD NOT BE AWARDED THEIR REQUESTED FEES FOR THE PERIOD BEGINNING IN JULY 2006.........................33 A. B. Section 330 requires creditors committee professionals to reduce their work when unsecured creditors are "out of the money"................................33 Akins fees should not be allowed in full ..............................................................35 (1) (2) (3) C. Fees Incurred through June 2006...............................................................36 Non-Objectionable Fees Incurred after June 2006 ....................................36 Objectionable Fees Incurred after June 2006.............................................37

A&Ms fees should not be allowed in full.............................................................40 (1) (2) A&Ms post-June 2006 fees should be disallowed under Section 330 ....................................................................40 A&Ms post-June 2006 fees should be disallowed under Section 328 ....................................................................41

CONCLUSION..............................................................................................................................43

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TABLE OF AUTHORITIES Cases Page

In re Airspect Air, Inc., 288 B.R. 464 (6th Cir. B.A.P. 2003) ...................................................... 42 In re Allied Computer Repair, Inc., 202 B.R. 877 (Bankr. W.D. Ky. 1996) ........................... 21-22 In re Arnold, 162 B.R. 775 (Bankr. E.D. Mich. 1993) ..................................................... 21, 25, 34 In re Auto Parts Club, Inc., 211 B.R. 29 (9th Cir. B.A.P. 1997)............................................ 34, 40 In re Big Buck Brewery & Steakhouse, Inc., No. 04-56761-R, 2006 WL 1343461 (Bankr. E.D. Mich. 2006) .................................................................... 20, 21 In re Boddy, 950 F.2d 334 (6th Cir. 1991).................................................................................... 20 In re Channel Master Holdings, Inc., 309 B.R. 855 (Bankr. D. Del. 2004)...................... 34-35, 40 In re Churchfield Management & Inv. Corp., 98 B.R. 893 (Bankr. N.D. Ill. 1989) .................... 42 In re Collins & Aikman Corp., 368 B.R. 623 (Bankr. E.D. Mich. 2007) ............................... 16, 20 In re Emons Indus., Inc., 50 B.R. 692 (Bankr. S.D.N.Y. 1985) ................................................... 35 n.6 In re EWI, Inc., 208 B.R. 885 (Bankr. N.D. Ohio 1997) .................................................. 20, 21, 25 In re Gilbertson, 340 B.R. 618 (Bankr. E.D. Wis. 2006) ............................................................. 42 In re Jones, 339 B.R. 903 (Bankr. E.D. Mich. 2006) ................................................................... 37 In re New Boston Coke Corp., 299 B.R. 432 (Bankr. E.D. Mich. 2003)................................ 20, 34 In re Schubert, 143 B.R. 337 (S.D.N.Y. 1992)............................................................................. 42 In re Sharp, 367 B.R. 582 (Bankr. E.D. Mich. 2007)........................................................ 20, 32-33 In re Smith, 256 B.R. 730 (W.D. Mich. 2000).............................................................................. 32 In re Taxman Clothing Co., 49 F.3d 310 (7th Cir. 1995) ........................................................ 33-34 In re Wang Labs., Inc., 149 B.R. 1 (Bankr. D. Mass. 1992)................................................... 35 n.6 In re Woodward East Project, Inc., 195 B.R. 372 (Bankr. E.D. Mich. 1996).............................. 21 Statutes 11 U.S.C. 328............................................................................................................................. 41 11 U.S.C. 330................................................................................................................. 19, 20, 33 -iii-

The C&A Post-Consummation Trust (the Post-Consummation Trust), by its counsel, Dykema Gossett PLLC, hereby files this Objection to (i) the Final Fee Application of KZC Services, LLC and John R. Boken for Compensation and Reimbursement of Expenses for Restructuring Services Provided to the Debtors for the Period from May 17, 2005 through October 12, 2007, Inclusive of the Seventh Interim Fee Period from May 1, 2007 through October 12, 2007 [Docket No. 8555]; (ii) the Application of Akin Gump Strauss Hauer & Feld LLP, Co-Counsel for the Official Committee of Unsecured Creditors of Collins & Aikman Corporation, et al., for Final Allowance of Compensation and for the Reimbursement of Expenses for Services Rendered During the Period from May 26, 2005 through October 12, 2007 [Docket No. 8513]; and (iii) the Sixth and Final Application of Alvarez & Marsal, LLC for Award of Compensation and Reimbursement of Expenses [Docket No. 8492]. In support of its Objection, the Post-Consummation Trust respectfully states as follows: PRELIMINARY STATEMENT 1. The Post-Consummation Trust is successor to substantially all of the

Debtors remaining assets (other than certain causes of action) as well as the Debtors obligations to pay such fees and expenses as may be allowed pursuant to the fee applications discussed herein. Accordingly, the Post-Consummation Trust has a direct economic stake in the matters at issue. The beneficiaries of the Post-Consummation Trust are the Debtors pre-petition secured lenders (the Pre-Petition Secured Lenders). 2. The Post-Consummation Trust is not eager to object to the fees of

professionals who worked tirelessly over many months on the estates behalf. It recognizes that the Debtors reorganization efforts failed primarily for business reasons beyond any

professionals control, and therefore does not object to the vast majority of professional fees now before the Court. 3. These chapter 11 cases, however, present unusual circumstances that have

led multiple stakeholders, as well as the Court, to raise questions about the level of professional fees billed to the estate. During these cases, tens of millions of dollars have been billed to the estate by professionals who are renowned for their financial and operational expertise; nonetheless, the Debtors issued projections for 2006 that were utterly divorced from operational reality. In addition, millions of dollars were billed after June 2006 by professionals representing the Committee of Unsecured Creditors (the Committee); however, during that entire period, unsecured creditors were clearly out of the money. 4. It was precisely those unusual circumstances, coupled with a desire to

avoid costly and contentious litigation over professional fees, that led JPMorgan Chase Bank, N.A., as administrative agent (the Agent) for the Pre-Petition Secured Lenders, to support the Courts appointment of a fee examiner (the Fee Examiner). That appointment has proven well-founded. To date, as a result of the Fee Examiners efforts, most estate professionals covered by the Fee Examiners mandate have reached settlements with respect to their final fee requests. Three professionals, however, have not reached settlements: (a) KZC Services, LLC and John R. Boken (together, KZCS), restructuring advisor to the Debtors, (b) Akin Gump Strauss Hauer & Feld LLP (Akin), co-counsel to the Committee, and (c) Alvarez & Marsal, LLC (A&M), strategic and operational advisor to the Committee (collectively with KZCS and A&M, the Non-Settling Professionals). The Post-Consummation Trust objects to the final fee applications of those three professionals only, and supports the settlements reached by all other estate professionals whose fees were addressed in the final report of the Fee Examiner filed with

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the Court on October 22, 2007 (including the exhibits thereto, the Fee Examiners Report, and cited hereinafter as ER). 5. KZCS was retained by the Debtors based on its reputation as a world-class

turnaround specialist with deep financial, operational and strategic experience. As the Debtors principal restructuring advisor, KZCS supplied the Debtors with two members of their Board of Directors (including the Chairman of the Board), a Chief Restructuring Officer, and numerous additional restructuring professionals and paraprofessionals; the Debtors, in turn, granted KZCS the authority to make critical decisions regarding their operations. And yet, as revealed in the Fee Examiners Report, KZCS concededly deferred to the Debtors operating management with respect to the most critical of those decisions i.e., whether the dramatic cost savings and revenue improvements projected by operating management should be included in the Debtors business plan. That deference proved exceedingly costly, as it facilitated the issuance of wholly inaccurate projections that (a) undermined the Debtors going concern sale efforts and (b) prolonged these cases even while the Plastics business lost millions of dollars per month and the Debtors customers prepared to re-source major programs. Consistent with the Fee Examiners recommendation, the Post-Consummation Trust believes that KZCSs fees should be reduced to account for at least a two-month delay in the resolution of these cases. The cost of the delay can reasonably be quantified as (i) the average amount lost by the Plastics division in 2006 over a two-month period ($8,029,000), (ii) the average amount paid by the Debtors in professional fees over such a two-month period ($15,256,000), or (iii) a combination of those two amounts. Alternatively, the Court could exercise its discretion to cut KZCSs high hourly rates to reflect the quality and results of the services provided by KZCS to the estate.

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6.

Akin has billed the estate over $6 million. Until June 2006, while there

was arguably a basis for Akins position that unsecured creditors were the fulcrum creditors, the high level of activity by Akin may have been appropriate. However, once it became clear that the Debtors business operations could not support a recovery for unsecured creditors, Akins role in these cases should have been drastically curtailed. As this Court knows, the sole recovery for the Debtors general unsecured creditors is a share of the litigation trust created under the Plan (the Litigation Trust); the Pre-Petition Secured Lenders, who had prepetition liens on substantially all of the Debtors assets other than the causes of action in the Litigation Trust, have been far from fully paid. Thus, the Post-Consummation Trust concurs in the Fee Examiners view that much of the work performed by Akin subsequent to June 2006 was not reasonably likely to benefit the estate or Akins creditor constituency. The Post-Consummation Trust therefore requests that Akins allowed fees and expenses be reduced in the first instance by at least $560,540, the amount billed by Akin after June 2006 for activities that were not reasonably related to estate administration, negotiation of the Debtors chapter 11 plan, or the Litigation Trust. In addition, in respect of excessive and unnecessary fees incurred by Akin after June 2006 in connection with court hearings and travel, the Post-Consummation Trust seeks a further reduction of Akins fees in the amount of $27,912 plus related expenses. Finally, in respect of fees incurred defending fee applications, which are not reimbursable under section 330, the Post-Consummation Trust seeks a reduction of Akins fees in the amount of $85,344. In total, Akins fees should be reduced by more than $673,796. 7. A&M has billed over $3 million to the estate at a rate of $150,000 per

month. From the start, the Agent objected to the Committees request that it be permitted to retain two financial advisors a request the Committee sought to justify by claiming that unsecured creditors were the claimants to the residual value of the Debtors businesses and -4-

therefore would be paying all professional fees in these cases (which, of course, turned out to be untrue). In any event, as soon as it became clear in June 2006 at the latest that there was no value in the Debtors businesses for unsecured creditors, A&Ms function unquestionably became duplicative and unnecessary. A&Ms allowed fees and expenses should therefore be reduced by $1,050,000, the amount billed by A&M from July 2006 through January 2007. STATEMENT OF FACTS1 8. On July 18, 2007, the Court entered an order confirming the Debtors

Plan. On October 12, 2007, the Plan became effective (the Effective Date). Under the Plan, all of the Debtors assets that were not transferred to the Litigation Trust or the residual trusts were transferred as of the Effective Date to the Post-Consummation Trust, which assumed the obligation to pay the fees and expenses of estate professionals. The Pre-Petition Secured Lenders are the sole owners of the Post-Consummation Trust. A. The Non-Settling Professionals (1) 9. KZCS

On May 25, 2005, the Debtors filed an application seeking approval of a

services agreement between the Debtors and KZCS. Pursuant to that services agreement, (a) John Boken would serve as Chief Restructuring Officer of the Debtors, (b) KZCS would generally be authorized to make decisions with respect to all aspects of the management and operation of the Debtors businesses, and (c) the Debtors would pay hourly rates for the services of KZCS professionals. Docket No. 122, at 4-5.

The facts stated herein are drawn from the Fee Examiners Report, documents filed with the Fee Examiners Report, or documents that are otherwise publicly available.

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10.

In his affidavit filed in support of KZCSs retention, Mr. Boken stated that

KZCS has experience in virtually all aspects of the manufacturing industry, and that he had significant experience in developing and implementing solutions for companies facing financial or operational problems. Id. Ex. C 17, 19. In a separate Statement of Qualifications submitted in support of KZCSs retention, KZCS stated further that its reorganization expertise included, among other things, [a]ssess[ing] the viability/potential viability of the business, the Business plan, and [o]perations improvement and cost reduction. Id. Ex. D, at 11. 11. Although the Debtors sought an order approving the services agreement

with KZCS pursuant only to sections 105 and 363 of the Bankruptcy Code, the order approving KCZSs retention states that KZCS and Boken shall be compensated in accordance with the procedures set forth in sections 330 and 331 of the Bankruptcy Code. Docket No. 292 8(a). 12. On July 7, 2005, the Debtors appointed Frank Macher as President and

Chief Executive Officer. At the same time, the Debtors appointed Stephen Cooper, Chairman of KZCS, as Chairman of the Board, and Leonard LoBiondo, a managing director of KZCS, as a member of the Board. ER 16. (2) 13. Akin

The Committee filed its application to retain Akin as its co-counsel on

June 8, 2005. Docket No. 301. The order approving Akins retention, entered on June 15, 2005, provides that Akin Gump shall be compensated in accordance with the procedures set forth in sections 330 and 331 of the Bankruptcy Code. Docket No. 353. (3) 14. Alvarez & Marsal

On July 21, 2005, the Committee filed applications to retain two financial

advisors: A&M and Chanin Capital Partners, L.L.C (Chanin). The Committee sought to

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retain A&M as its operational and strategic advisor and Chanin as its investment banker. Docket No. 768 (A&M); Docket No. 897 (Chanin). 15. The Agent objected to the Committees retention of A&M on the grounds

that, inter alia, (a) A&Ms proposed services appeared to be duplicative of Chanins services, and (b) the Committee had agreed to pay A&M $150,000 per month as opposed to an hourly rate. See Docket No. 845 3-4. In its objection, the Agent also noted that, in light of the uncertainty regarding the Debtors business prospects, the unsecured creditors whose claims are represented by the Committee may very well be out-of-the-money. Id. 2. 16. In its reply to the Agent, the Committee sought to distinguish A&Ms role

from Chanins: while Chanin would provide services typically associated with investment banking (e.g., valuation, finance-related and M&A advisory services), A&M would focus on the Debtors business operations and related contractual and customer issues. Docket No. 993 21. The Committee further asserted, without qualification, that unsecured creditors were not in fact out of the money. Id. 27. At a hearing on August 29, 2005, Committee counsel Michael Stamer of Akin reiterated those points. He asserted multiple times that unsecured creditors are the fulcrum creditors and that, as a result, every penny of administrative costs, all the professional fees that are . . . going to be paid here are coming out of the hide of our my creditors constituents. (Tr. 13; see also Tr. 33) Mr. Stamer explained further that A&Ms distinct responsibility as operational consultant would be to work with [KZCS] and management to make sure theyre doing what needs to be done to fix the company. (Tr. 32) 17. The Committee initially sought an order under which A&Ms fees would

be evaluated solely under section 328 of the Bankruptcy Code. Consistent with the Courts direction at the hearing, however, the order approving A&Ms retention provides that A&Ms

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fees will be evaluated under section 328 unless the Court determines that there was unnecessary duplication of function or work product between A&M and Chanin Capital Partners, LLC, in which circumstances A&Ms compensation for such function or work product shall be subject to the standards of review under section 330 of the Bankruptcy Code. . . . Docket No. 1183, at 3. B. Background Relevant to the Fee Applications of the Non-Settling Professionals (1) 18. The Debtors Capital Structure

During most of the period in which the fees under review were incurred,

the Debtors had well over $1 billion in secured and priority claims that had to be satisfied before any value would inure to unsecured creditors (i) $748 million borrowed from the Pre-Petition Secured Lenders; (ii) $150 million borrowed from lenders under a debtor-in-possession financing facility entered at the outset of these cases; (iii) a guaranty of approximately $21 million in obligations of the Debtors European affiliates; (iv) $30 million in bridge financing extended by OEM customers on an administrative expense priority basis; and (v) $82.5 million in debtor-in-possession financing extended by OEM customers on a junior secured basis. In addition to those claims, the Debtors had other secured obligations, capital lease obligations, and significant administrative expense obligations, including obligations to pay professional fees incurred by the Debtors, the Committee, and the Agent. See generally ER 10-11, 17-20 & Ex. H; Amended Disclosure Statement, Docket No. 3977, at 15-19. 19. According to the Fee Examiners Report, substantially all of the Debtors

Key Constituents namely, customers, the steering committee of Pre-Petition Secured Lenders, and the Committee (a) approximated the value of the Debtors by multiplying annual EBITDA by five; and (b) assumed a necessary threshold valuation of approximately $1.25 billion in order for the unsecured creditors to have a recovery. ER 19 n.13. As a result, -8-

they assumed that annual EBITDA needed to be at least approximately $250 million for value to clearly extend beyond secured and priority claims to unsecured creditors. Id. (2) 20. The 2006 Operating Plan

On November 22, 2005, the Debtors issued a draft 2006 budget. That

budget projected adjusted EBITDA for 2006 of $264.9 million, a figure that (a) incorporated over $100 million in customer pricing accommodations obtained in October 2005, and (b) assumed approximately $100 million in projected cost savings. ER 30. At meetings of the Debtors Board of Directors (the Board), Mr. Macher expressed confidence that the cost savings could be achieved. Mr. Boken, in contrast, expressed the view that the projections were aggressive. Id. 21. The Agent shared Mr. Bokens skepticism about the Debtors projections,

and repeatedly urged KZCS not to use them as the basis for a business plan. ER 31. On December 20, 2005, at a meeting between Capstone (the Agents financial advisor) and KZCS, Peter Nurge of Capstone argued that, even if the Debtors could achieve some of their cost savings projections, they would have to share some or all of the savings with their customers, who had just made substantial price concessions to the Debtors. Id. With respect to the cost savings themselves, Capstone doubted that the Debtors 750 initiatives with an average projected savings of over $164,000 per item could be executed. Id. at 36. Capstone further believed that unrealistic projections would negatively affect the Debtors credibility in conducting a sale process. Id. at 37. 22. On January 24, 2006, the Debtors disseminated an operating plan (the

2006 Operating Plan) that forecasted adjusted EBITDA of $265.2 million. ER 32. The assumptions underlying that EBITDA projection included: (a) incremental price increases from

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customers in the amount of $116 million, which were obtained in October 2005; (b) additional revenue from the service parts business of $15 million, which required major changes in the pricing and purchasing of such parts; (c) materials indexing from Ford yielding $11 million; (d) incremental cost reductions totaling $123 million, which required the Debtors to achieve 750 different initiatives on a tight timeline despite a poor history of achieving cost savings; and (e) approximately $13 million of EBITDA impact from the transfer of DaimlerChrysler business from Lear Corporation, to which DaimlerChrysler had not yet agreed. See id. at 33. For the Debtors to generate sufficient cash to meet their obligations, including interest and professional fees, the Debtors had to achieve the January projections nearly in their entirety. Id. at 32-33 & Ex. O. 23. Notably, the 2006 Operating Plans EBITDA forecast for the first quarter

of 2006 was $26 million lower than the forecast issued to constituents in November. ER 32 (emphasis added). However, additional cost savings were projected for subsequent quarters, such that the overall cost savings were back-ended and the projected EBITDA figure for 2006 as a whole remained approximately the same. Id. 24. The Committee and its professionals were aware that the Debtors

projections were aggressive. A&M in particular saw holes in the projections and had doubts about the companys ability to implement them. Nonetheless, A&M avoided giving the Committee any written analysis of the projections, for fear that such an analysis would suggest that unsecured creditors were not in the money. ER 38. Nor did the Committee openly question the projections: although Committee professionals privately conveyed A&Ms concerns, the Committee itself argued to the Debtors that the projections were too conservative. Id. Recognizing that KZCS did not necessarily share Mr. Machers confidence in the Debtors

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projections, Akin also sought to limit KZCSs influence. In a memo sent to Committee chairman David Barse on the eve of a meeting between Mr. Barse and Mr. Macher, Akin advised Mr. Barse to convey to Mr. Macher that the companys advisors (a) should resign from the[ir] engagement if they disagreed with him and (b) should be removed from the [projections] process to the fullest extent possible. Id. Ex. P. 25. In March 2006, WL Ross & Co. LLC (Wilbur Ross) submitted a non-

binding indication of interest in buying the Debtors North American operations for a total purchase price of $1.032 to $1.288 billion, conditioned on the Debtors businesses performing as projected. ER 41 & Ex. U. Wilbur Ross declined to submit a bid at that time because of various uncertainties in the Debtors projections. Id. at 42-43 & Ex. U. (3) 26. The 4+8 Plan

On May 8, 2006, the Debtors issued financial statements for March 2006.

Actual EBITDA for the first three months of the year was $56.1 million, as opposed to forecasted EBITDA of $59.8 million for the same period. ER 47 & Ex. X. Notably, sales for the period exceeded budget by $24.6 million (i.e., 3.5% above projections), but that surplus in revenue was more than offset by the failure to achieve projected cost savings. Id. On June 2, 2006, the Debtors issued financial statements for April 2006. ER 48. While forecasted EBITDA for April was $11.2 million, actual EBITDA was $5.8 million, for an unfavorable variance of $5.4 million (48.2% below budget). Again, actual revenues exceeded budgeted revenues, this time by $19.8 million (10.6%), but the company continued to fail to achieve its projected cost savings. Given the significant deviation from the 2006 Operating Plan, the Debtors proceeded to revise their business plan. Id. at 48 & Ex. Z.

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27.

On June 8, 2006, the Debtors issued a new business plan for 2006,

comprised of actual operating results through April 2006 and revised monthly forecasts for May 2006 through December 2006 (the 4+8 Plan). Under the 4+8 Plan, forecasted 2006 EBITDA dropped from $265 million to $179.4 million. ER 48 & AA. That negative variance resulted largely from the failure to achieve projected efficiency gains and cost savings (at least $32 million), lost business ($16 million), and delays and setbacks in implementing price increases (almost $20 million). Id. Ex. AA, at 12-13; see also id. at 49. Additionally, the Debtors had not obtained new DaimlerChrysler business at Lears expense or developed new revenue through their service parts business. Id. at 49. 28. Like the 2006 Operating Plan, the 4+8 Plan was back-ended, such that

most of the projected cost savings were to be realized in the third and fourth quarters of 2006. Mr. Macher believed that he could achieve the cost savings required by the 4+8 Plan, and the KZCS-led Board acceded to him. Mr. Boken, on the other hand, was skeptical, and advised Mr. Macher to spend more time at the plants. ER 49-50. On or about June 20, 2006, key constituents met with the Debtors to go through the new projections, which clearly suggested that unsecured creditors were out of the money. Id. at 49. 29. On July 6, 2006, Wilbur Ross delivered a proposal based on the 4+8 Plan

to purchase the Debtors assets. The updated proposal contained a purchase price equal to 80 percent of the debt of the Pre-Petition Secured Lenders, but was subject to numerous conditions. ER 51. In particular, the term sheet required, among other things, (a) that there would be no material adverse change with respect to the Debtors results of operations since March 31, 2006 or the reasonable likelihood of the Debtors achieving their revised projections, and (b) that there would be no material variance from the [4+8 Plan]. Id. at 51-52 & Ex. EE. As the Agent and

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the lender steering committee had already been informed by the Debtors that the 4+8 Plan would not be achieved, see KZCS Resp. to Rep. of Fee Examiner 13, the Agent and lender steering committee concluded that Wilbur Rosss offer was in effect illusory, and rejected it, see id. at 52. (4) 30. The 6+6 Plan

On June 29, 2006, the Debtors issued financial statements for May 2006.

The Plastics division missed its sales projections by approximately $1.6 million. ER 51 n.31 & Ex. DD. The Debtors June 2006 operating results showed even further decline in Plastics performance. By June 2006, the Debtors were able to access a given months results 9-10 days after the end of the month. Thus, early in July right before a July 12, 2006 meeting at which the parties were seeking to reach a sale agreement with Wilbur Ross based on the 4+8 Plan the Debtors learned that they would not meet that Plan. They had missed their June EBITDA projections by approximately $5.6 million (as compared with the 4+8 Plan produced just one month earlier) or $11.2 million (as compared with the 2006 Operating Plan). See id. at 53, 55. As noted above, the Debtors advised the Agent and lender steering committee of the large, unexplained shortfall, and the sale process effectively halted. 31. Faced with the dismal results that had derailed the Debtors sale effort,

Timothy Trenary (the Debtors CFO) and Matti Masanovich (the Debtors Controller) conducted a plant-by-plant review of the underperforming Plastics division. Based on that review, Messrs. Trenary and Masanovich generated a new forecast for the remainder of the year (the 6+6 Plan). ER 53. The 6+6 Plan projected 2006 EBITDA of $105 million. Id. at 54 & Ex. FF. Those projections were detailed in an August 16, 2006 Presentation to Stakeholders. Id. Ex. HH. 32. In the 4+8 Plan, the negative deviation in projected EBITDA as compared

with the 2006 Operating Plan had consisted of $44.4 million in unrealized revenue improvements

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and $41.2 million in unrealized cost improvements. By contrast, in the 6+6 Plan, the negative deviation consisted of $61.7 million in unrealized revenue improvements and $97.8 million in unrealized cost improvements. Thus, in the two-month period between the 4+8 Plan and the 6+6 Plan, the deviation in cost improvements more than doubled. ER 81 & Ex. BB. 33. During the summer of 2006, Mr. Macher and other representatives of the

Debtors (and other constituents) visited some of the Debtors plants, where they saw clear proof that the Debtors first two business plans for 2006 were not achievable. For example, during a visit by Mr. Macher and Capstone to the Debtors Evart, Michigan plant, a thunderstorm revealed leaks so significant that within minutes, water was ankle-deep and surrounded electrical equipment. ER 23-24. At the Debtors Port Huron, Michigan plant where significant cost savings had been projected to be achieved there was no plant manager, controller or engineer, and the plant shut down as a result of workers feigning illness on days when they did not receive overtime pay. See id. at 62-63. 34. Faced with the magnitude of the Plastics divisions actual problems and a

sale effort that had been undermined by unrealistic projections, the Agent and the lender steering committee sought to preserve going concern values by proposing a stand-alone reorganization plan during the summer of 2006, under which the Pre-Petition Secured Lenders would convert all of their debt to equity and unsecured creditors would receive a small percentage of warrants and/or common stock. Once the 6+6 Plan was issued, it became clear that significant relief would be needed from customers in order for a stand-alone plan to be viable. ER 52, 57. In mid-October 2006, after unsuccessful negotiations with the Debtors customers, announcements by customers that they would reduce production of models that included the Debtors parts, and indications that the required exit financing could not be obtained, the Agent, the lender steering

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committee, and the Debtors determined that a stand-alone plan was not feasible. The Debtors subsequently announced their intention to sell all of their assets. Id. at 58-59. C. Appointment of the Fee Examiner 35. On November 8, 2006, Third Avenue Value Fund (Third Avenue), a

former chair of the Committee, filed oppositions to various interim fee applications submitted by professionals representing the Committee and the Debtors. In the oppositions, Third Avenue objected to the interim applications and requested the appointment of a fee examiner. See Docket Nos. 3602-3613. On December 11, 2006, this Court granted the interim fee applications over Third Avenues objection, but also directed interested parties to submit statements concerning the appointment of a fee examiner. 36. In its Statement filed in response to the Courts direction, the Agent noted

that, although it had no desire to blame professionals for the Debtors business failure, multiple lenders had raised questions about (a) the performance of certain estate professionals and (b) whether professionals appropriately reduced and adjusted their activities in view of the changing circumstances affecting the Debtors and these chapter 11 cases. Docket No. 4159 5. The Agent further explained that, absent a fee examiner, highly contentious and expensive litigation might ensue in connection with final fee applications, whereas a fee examiner could gather facts in a less formal manner and prepare a report that may be of substantial assistance to the Court and the principal parties in more efficiently resolving final fee allowance issues, whether judicially or consensually. Id. At the March 12, 2007 hearing on the motion for a fee examiner, the Court noted its concern that $78 million in fees had been billed to the estate through November 2006. (Tr. 46)

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37.

On May 4, 2007, this Court entered an Opinion (the Fee Examiner

Opinion) concluding that appointment of a fee examiner was warranted given the magnitude of the fees in this case and the importance and complexity of the questions raised by JPMorgan and Third Avenue. In re Collins & Aikman Corp., 368 B.R. 623, 626 (Bankr. E.D. Mich. 2007). On May 24, 2007, this Court entered an order (the Fee Examiner Order), pursuant to Rule 706 of the Federal Rules of Evidence and 11 U.S.C. 105, appointing Judy A. ONeill of Foley & Lardner LLP as the Fee Examiner. Docket No. 7331. The Fee Examiner Order directed the Fee Examiner to address the following questions: (a) Should the substantial operational, managerial and financial issues in the debtors plastics division and the effect of such issues on the achievability of management's business plan goals have been discovered earlier? (b) If so, did the delay result in either unnecessary losses or reductions in creditor recoveries? (c) Were the key assumptions underlying managements business plan, the nature and substance of the debtors operating challenges in the debtors plastics division and substantive developments and changes in the debtors views on future operating performance adequately and timely disclosed to the debtors' principal creditor constituencies? (d) Once it became reasonably clear that the value of the debtors estate was substantially diminished or that a reorganization was unlikely, did any of the estate professionals undertake or continue work on activities that no longer were reasonably necessary under the circumstances in view of their roles? Id. 3. 38. Under the Fee Examiner Order, the Fee Examiner had the authority to

conduct interviews and collect documents in order to investigate the questions posed to her. The Fee Examiner was further required to circulate a draft report to interested parties within 90 days. At that point, recipients of the draft report were required to consult with the Fee Examiner within 30 days in an attempt to reach a consensual resolution of any issues raised by the Fee -16-

Examiners draft report. Id. 4. After the final report was filed, interested parties had an additional 30 days to respond to the report. Id. 39. The Fee Examiner circulated a draft report on August 30, 2007. Counsel

for the Post-Consummation Trust offered various comments on factual statements in the draft report, and understands that other interested parties likewise communicated with the Fee Examiner. On October 22, 2007, after receiving comments from interested parties, the Fee Examiner filed her final report, along with numerous exhibits. Docket No. 8378. KZCS subsequently filed the sole response to the Fee Examiners Report. Docket No. 8617. D. The Fee Examiners Conclusions 40. The Fee Examiners Report focuses on two distinct time periods: (a) the

January 2006 period, when the 2006 Operating Plan was put into effect, and (b) the summer of 2006, when the 4+8 Plan was introduced and then swiftly replaced with the 6+6 Plan. 41. With respect to the 2006 Operating Plan, the Fee Examiner concluded

that, despite the deep problems in the Plastics division and the consensus among the key constituents that the Debtors projections were overly aggressive, see ER 37, it was reasonable for the Board and KZCS to defer to Mr. Machers projections, ER 7. The Fee Examiner does not directly address whether KZCS performed adequate due diligence regarding the projections in the 2006 Operating Plan or whether KZCS would have preserved value for stakeholders (including creditors and employees) had it conducted the kind of due diligence regarding the Debtors projections that was ultimately performed in July and August of 2006. 42. With respect to the 4+8 Plan, the Fee Examiner reached a different

conclusion. According to the Fee Examiner:

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[B]ased on the Debtors performance in March, April and May of 2006 (particularly with respect to initiatives intended to correct the issues in Plastics, the failed implementation of which became clear in June 2006) the Debtors should have known that (a) the aggressive $179 million 2006 EBITDA projection in the 4+8 Plan was unachievable considering the Plastics Issues in June 2006; and (b) projected 2006 EBITDA at that time should have more realistically resembled the $105.5 million projected in the 6+6 Plan subsequently issued in August 2006. As a result, the Fee Examiner concludes that there was a delay in discovery of the impact of the Plastics Issues on the Debtors Business Plan during the period between the issuance of the 4+8 Plan in June 2006 and the 6+6 Plan in August 2006. Id. One result of the delay, according to the Fee Examiner, was a reduction in the recovery of the Pre-Petition Secured Lenders, who had to pay two extra months of professional fees that would have been avoided had the Agent begun in June 2006 to take the steps that it eventually took starting in August. See ER 9-10, 85. 43. Aside from concluding that professional fees were unnecessarily increased

as a result of the two-month delay caused by the issuance of the 4+8 Plan, see ER 100, the Fee Examiner also identified unnecessary activities undertaken by Committee professionals after June 2006. In particular, the Fee Examiner found (a) that the services of two separate financial advisors, A&M and Chanin, were unnecessary as of June 2006 (ER 102); (b) that fees incurred by Committee professionals developing fraudulent conveyance and related claims against customers can be argued to be reasonably unnecessary (ER 103); and (c) that the Committees analysis of the Debtors corporate structure, their significant contracts and relationships with non-Debtor affiliates was unnecessary (ER 104). The Fee Examiner further concluded that, because the achievement of the 2006 Operating Plan was known by the Committee to be highly contingent, after January 2006, the continued retention of both Chanin and Alvarez at the

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monthly rates negotiated at the outset of these cases was likely unnecessary. ER 105-06 (emphasis added). STATEMENT IN SUPPORT OF SETTLEMENTS 44. After the Fee Examiner circulated her draft report, the Fee Examiner

contacted various estate professionals to determine whether settlements could be reached that would avoid the need for litigation over fee applications. As a result of those efforts, the Fee Examiner and the Agent arrived at proposed settlements with most professionals. See, e.g., ER 109-10 (reporting settlements with Kirkland & Ellis, Lazard and Chanin); see also Supplement to Report of Judy A. ONeill, Fee Examiner, Docket No. 8576 (reporting settlement with Davis Polk & Wardwell). The Post-Consummation Trust supports each of the proposed settlements negotiated by the Fee Examiner and the Agent. OBJECTIONS TO FEE APPLICATIONS 45. Under section 330(a) of the Bankruptcy Code, a bankruptcy court may

award professionals reasonable compensation for actual, necessary services rendered and reimbursement for actual, necessary expenses. 11 U.S.C. 330(a)(1)(A) (emphases added). In determining the amount of reasonable compensation to award a professional, the court must consider the nature, the extent, and the value of such services, taking into account all relevant factors including . . . whether the services were necessary to the administration of, or beneficial at the time at which the service was rendered toward the completion of, a case under this title. Id. 330(a)(3)(C) (emphases added). Under no circumstance, however, may the court allow compensation under section 330 for unnecessary duplication of services or for services that were neither reasonably likely to benefit the debtors estate nor necessary to the

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administration of the case. 11 U.S.C. 330(a)(4)(A); accord In re Collins & Aikman Corp., 368 B.R. 623, 625 (Bankr. E.D. Mich. 2007). 46. The burden of proof is on the professional requesting compensation for

his or her services from the bankruptcy estate. In re Sharp, 367 B.R. 582, 585 (Bankr. E.D. Mich. 2007) (citing In re New Boston Coke Corp., 299 B.R. 432 (Bankr. E.D. Mich. 2003)). The determination of fees is left to the discretion of the bankruptcy court. E.g., In re Big Buck Brewery & Steakhouse, Inc., No. 04-56761-R, 2006 WL 1343461, at *2 (Bankr. E.D. Mich. 2006). I. KZCS SHOULD NOT BE AWARDED OVER $44 MILLION IN FEES. 47. The Sixth Circuit uses the lodestar approach to determine whether

professional compensation is reasonable under section 330. In re Boddy, 950 F.2d 334, 337-38 (6th Cir. 1991). Under that approach, fees are initially calculated by multiplying the [professionals] reasonable hourly rate by the number of hours reasonably expended. Id. at 337 (internal quotation marks omitted). Once that amount is calculated, the court may consider other factors, including the results obtained by the relevant professional. Id. at 338. 48. In accordance with the Sixth Circuits guidance, bankruptcy courts in the

Circuit have not hesitated to look beyond the initial lodestar figure to determine whether fees should be awarded under section 330. For example, in In re EWI, Inc., 208 B.R. 885 (Bankr. N.D. Ohio 1997), the bankruptcy court explained that, [i]n addition to developing a lodestar figure when evaluating fees, the court should consider both (1) the quality factor i.e., the quality of advocacy required and delivered, considering the difficulty of the issues, skills called for, time constraints and the professional's personal qualifications and (2) the result factor i.e., the bottom line recovered for the estate and the creditors. Id. at 891 (emphases added).

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Based on those factors, the EWI court found that Schroder Wertheim & Co., the investment bank hired to sell the debtors business, failed to perform as the circumstances required. Id. at 892. Although Schroder marketed the debtors property and identified a stalking-horse bidder under tight time constraints, the court found that Schroder did not aggressively pursue[] other interested parties or otherwise act to maximize the sale price. Id. at 892-93. Consequently, the court declined to award Schroder the $300,000 fee provided for in Schroders fee agreement, and instead reduced that fee by 25%. Id. at 893. 49. Similarly, in In re Big Buck Brewery & Steakhouse, Inc., No. 04-56761-R,

2006 WL 1343461 (Bankr. E.D. Mich. 2006), this Court partially disallowed fees requested by the debtors special consultants for time spent preparing projections. In allowing only 30% of the fee amount requested, the Court noted that the consultants projections were both inadequate, because they only projected revenue and expenses over a six-month period, and inaccurate, because they included questionable income and revenue. Id. at *2. As in EWI, therefore, this Court looked beyond the mere product of hours worked and hourly rates, and refused to award fees that were unjustified given the applicants performance. See also In re Woodward East Project, Inc., 195 B.R. 372, 377 (Bankr. E.D. Mich. 1996) (Rhodes, C.J.) (declining to award compensation for some hours worked by debtors attorney where the attorneys quality of work was substantially below that normally and customarily provided by debtors counsel in similar cases); In re Arnold, 162 B.R. 775, 777 (Bankr. E.D. Mich. 1993) (determination of the market rate for a particular applicants services should not necessarily end a courts analysis under section 330; [i]f the applicants performance is substantially better or worse than predicted by the market based on the applicants track record, then an upward or downward adjustment in the hourly rate may be appropriate); In re Allied Computer Repair,

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Inc., 202 B.R. 877, 885 (Bankr. W.D. Ky. 1996) (numerous courts have held that . . . the results obtained . . . carries the greatest determinative weight in evaluating fees under section 330). 50. Based on the logic of cases such as EWI and Big Buck Brewery, this Court

should not award KZCS all the fees it has requested. By any standard, KZCS is one of the worlds premier restructuring advisors, and its billing rates reflect that reputation. During these cases, the blended hourly rate for KZCSs professional services (including the services of paraprofessionals) has been $448.08. Mr. Boken in particular billed $695 per hour for his time. In addition, KZCS billed the Debtors approximately $1.6 million for the time spent by Messrs. Cooper and LoBiondo serving on the Board. 51. Despite its world-class reputation and its $44 million bill, KZCS failed to

conduct the due diligence and analysis that was necessary to prevent the release of two blatantly flawed business plans. That failure compromised the quality of KZCSs services, as it delayed the resolution of these cases and undermined the Debtors going concern sale efforts. A. KZCS did not independently evaluate the Debtors projections. 52. The basic facts underlying the Post-Consummation Trusts objection to

KZCSs fee application are not disputed. KZCS has acknowledge[d] that it did not impose its judgment regarding the achievability of the Business Plan and overrule those with more automotive experience. ER 77 (emphasis added). Instead, [w]ith respect to the preparation of financial information and the Debtors business plans, Machers operations team provided KZC the information on the operational turnaround, which KZC then incorporated into the Debtors financial models and business plans. ER 60. In sum, despite its professed expertise in [a]sses[sing] the viability/potential viability of the business and [o]perations improvement and cost reduction (KZCS Retention App. Ex. D, at 11), KZCS concededly did not perform the -22-

due diligence that was necessary to assess the viability of the Debtors businesses or the achievability of the Debtors projected operational improvements and cost reductions. 53. KZCSs response to the Fee Examiners Report tells much the same story.

There, KZCS asserts that [t]he 4+8 Plan was presented to the Board for approval before it was issued, and the Board determined to adopt that projection based in large part on Frank Machers representation that the numbers were achievable. KZCS Resp. to Rep. of Fee Examiner 10. KZCS does not claim to have independently assessed Mr. Machers 4+8 Plan before it was presented to the Board. Nor does KZCS explain why both the Chairman of the Board (Mr. Cooper) and the Chairman of the Boards reorganization committee (Mr. LoBiondo) both from KZCS acceded to a second back-ended business plan after the first one failed dramatically. B. KZCSs deference to Mr. Macher undermined the quality and results of KZCSs work on behalf of the estate. 54. As a result of KZCSs deference to Mr. Macher regarding revenue and

cost projections, the Debtors delivered deeply flawed projections to its constituents at least twice: (a) the 2006 Operating Plan issued in January 2006, and (b) the 4+8 Plan issued in June 2006. The delivery of such projections had adverse consequences for the estate that could have been prevented by KZCS. 55. The 2006 Operating Plan. The issuance of the 2006 Operating Plan,

which contained an array of aggressive and speculative assumptions, had multiple adverse consequences. First, the Debtors aggressive projections gave the Committee the inaccurate impression that its constituents held the fulcrum security, which resulted in the incurrence by Committee professionals of millions of dollars of fees that were ultimately absorbed by the PrePetition Secured Lenders. Second, the Debtors aggressive projections prevented Wilbur Ross -23-

from submitting a meaningful term sheet to the Debtors in March of 2006. ER Ex. W. Indeed, Wilbur Ross specifically challenged some of the very projections that ultimately were not met, including projections related to new business, pricing improvements, and cost savings. Id. Third, the Debtors aggressive projections led the Debtors to act as if the Debtors businesses would continue operating as one going concern; thus, for example, the Debtors entered into a new lease and moved their headquarters in March 2006, even though the move cost $1.5 million and the Debtors would be obligated to pay nearly $5.3 million to break the lease. ER 45. Fourth, the Debtors aggressive projections permitted the Debtors and the Committee to indulge the fiction that the Debtors businesses were cash flow breakeven. ER Ex. O. Putting aside the very real possibility that [t]he inability to pay fees might have prompted different decisions regarding the incurrence of professional fees (ER 91), early recognition of the Debtors cashflow problems would at least have led all parties to focus on the Debtors viability well prior to August 2006. Had that occurred, the money-losing Plastics division could have been sold months earlier, and the Soft Trim business likely could have been sold for a higher price. See ER 88 (If Soft Trim had been sold earlier, the Fee Examiner believes that the sale proceeds would have been greater.). 56. While acknowledging the deep flaws in the 2006 Operating Plan, the Fee

Examiner nonetheless concluded that the Boards deference to Mr. Macher with respect to the formulation and pursuit of the Business Plan as initially issued in January 2006 was reasonable. ER 77 (emphasis added). For the purposes of evaluating KZCSs fees, however, whether the Board properly deferred to Mr. Macher is beside the point. Rather, the critical question is whether it was appropriate for KZCS, which was billing millions of dollars per month for its services, to defer to Mr. Macher. If not, KZCSs fees should be reduced on the basis that the result it obtained and the quality of its services were not sufficient considering the difficulty of -24-

the issues, skills called for, time constraints and the professionals personal qualifications. EWI, 208 B.R. at 891 (emphases added); see also Arnold, 162 B.R. at 777 (section 330 analysis includes consideration of whether applicants performance was substantially better or worse than predicted by the market based on the applicants track record).2 57. KZCS did not occupy a passive role in the Debtors businesses; rather, it

had a broad mandate (a) to advise the Board with respect to financial and operational issues, and (b) to put its imprimatur as a world-class consultant on all aspects of the Debtors restructuring. Consistent with that mandate, individuals from KZCS occupied the Chairmanship of the Debtors Board, the office of Chief Restructuring Officer, and essential positions in the Debtors financial staff. Given how fundamental the Debtors projections were to every aspect of their restructuring including to any potential sale it should go without saying that KZCS was expected by the Debtors constituents to make an independent judgment about the Debtors business plan. Indeed, KZCS represented early in these cases not only that it was responsible for the Debtors Financial Forecasting but also that it had established procedures and led [the] process for development of [a] detailed two year financial forecast (June 2005 through June 2007) on a plant-by-plant basis. First Interim Fee Application (Docket No. 1652) 24(b); see also Second Interim Fee Application (Docket No. 2392) 26(c). In addition, at an October 14, 2005 hearing on proposed customer agreements, Mr. Boken testified that, in his judgment, the company was making reasonably conservative assumptions on what cost reductions we can In its response to the Fee Examiners Report, KZCS cites various cases for the generic proposition that a boards decisions are evaluated under the business judgment test based on facts available at the time of the decision. See KZCS Resp. to Rep. of Fee Examiner 10. Those cases are irrelevant, as there is no basis to analyze KZCSs fee application, which is subject to section 330 of the Bankruptcy Code, using the standards applied under state law to analyze board decisions.
2

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achieve over the course of in particular the next six months. (Tr. 27) Both KZCSs fee applications and Mr. Bokens testimony thus suggested that KZCS was intimately involved in the projections process, even if management had ultimate responsibility for achieving the projections. 58. Yet, had KZCS conducted adequate due diligence prior to January 2006,

deference to Mr. Machers projections would have been untenable. During the summer of 2006, when the Debtors management finally conducted a plant-by-plant analysis of the poor performance of the Plastics division (including by visiting plants), it was evident that the Debtors operations were incapable of achieving the huge cost savings that had been projected. For example, in Port Huron, Michigan, where significant cost savings were supposed to be achieved, Mr. Macher learned that the Debtors plant had no plant manager, no controller and no engineer; nonetheless, the Debtors had launched a new program at that plant that yielded 95 percent scrap on the parts produced. ER 62. Macher also learned that Port Hurons former plant manager had met projections in the first quarter of 2006 only because he ran excessive overtime during the fourth quarter of 2005. That manager quit in April 2006, because he knew he could not meet his targets again. ER 62. The Debtors Evart, Michigan plant was similarly dysfunctional: when Macher toured that plant with Capstone, [a] thunderstorm revealed roof leaks so significant that within minutes, water was ankle-deep and surrounded electrical equipment. ER 23-24. 59. Mr. Machers visit to the Guelph, Ontario plant was also noteworthy.

There, [Macher] witnessed forty extra personnel on a shift. In addition, although Mr. Macher determined that subcontracting business to another supplier would save the Debtors $4 million per year, the plant manager failed to take timely and appropriate steps to effectuate the

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outsourcing and also neglected to tell Mr. Macher that the plant had a second set of tools that could be used while the re-sourcing took place. As a result of such mishaps, the Debtors lost the opportunity to realize $1 million of the anticipated $4 million in cost-savings. ER 61-62. 60. Based on those accounts and others, the Fee Examiner concluded that [a]

significant cause of the failure to achieve the cost-cutting improvements in Plastics was the lack of effective management. Plastics lacked competent personnel, which created a high execution risk in the operational turnaround. ER 50 & Ex. I. Had KZCS conducted adequate due diligence prior to the issuance of the 2006 Operating Plan, the facts that emerged during the summer of 2006 could have been discovered much earlier. Instead, KZCS signed off on the 2006 Operating Plan and permitted it to be shared with constituents and potential buyers. 61. In sum, the Post-Consummation Trust believes that KZCSs deference to

Mr. Macher was not reasonable in January 2006. Had KZCS conducted adequate due diligence to determine whether the 2006 Operating Plan was in fact achievable, it could have brought these cases to a swifter conclusion, thus preserving value that was (a) lost by the Plastics division on a monthly operating basis, (b) lost over time as the OEMs re-sourced to other suppliers, leading to a decline in the sale value of the Soft Trim division and various Plastics plants, and (c) spent on professional fees. 62. The 4+8 Plan. While the Post-Consummation Trust believes that KZCSs

accession to the 2006 Operating Plan was unreasonable, KZCSs continued deference to Mr. Macher certainly was unreasonable once it became clear, in June 2006 at the latest, that the 2006 Operating Plan could not be achieved. When the Debtors issued their ill-fated 4+8 Plan, Mr. Boken had growing skepticism about the Debtors projected cost savings, and advised Mr. Macher to spend more time at the plants to effectuate those savings. ER 49-50. Nonetheless,

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KZCS did not stand in the way of the issuance of a second set of heavily back-ended projections. See KZCS Resp. to Rep. of Fee Examiner 10. Within two months, however, the Debtors had to reverse course and issue the 6+6 Plan, which cut revenue projections by another $15 million and cost-savings projections by another $40 million. 63. KZCSs deference to Mr. Macher in June had precisely the prejudicial

effect that the Fee Examiner identified. Had KZCS issued realistic projections in June, the Agent and others would have recognized then that a stand-alone plan would require significant customer concessions, and the Debtors and the Agent could have begun negotiations with customers at that time and the wind-up and sale process soon thereafter. See ER 82, 85. In contrast, as a result of the flawed June 2006 projections, the Agent spent much of June and July of 2006 evaluating a sale offer predicated on the 4+8 Projections and then working on a standalone chapter 11 plan while the Debtors again revised their business plan. The Pre-Petition Secured Lenders thus absorbed at least two extra months of professional fees (ER 85) as well as additional operating losses at the Plastics division. They also likely absorbed a further decline in the sale value of the Soft Trim division. 64. Those extra costs were absorbed by the Pre-Petition Secured Lenders

because KZCS did not conduct the due diligence that was necessary to reach an informed judgment about the 4+8 Plan. Indeed, it appears that KZCS did not even insist upon the creation of a detailed, plant-by-plant comparison of historical results against historical projections. When such a comparison was attempted, just weeks after the 4+8 Plan was released, the projections were exposed as groundless: Trenary and Masanovich plotted the historical results on a graph, and overlaid it with the projections. This comparative analysis demonstrated that the historical performance bore no relationship to the forecasts. Rather, the comparison of historical performance -28-

to forecasts resembled the proverbial hockey sticks, suggesting that forecasts could only be achieved with a definitive plan to accomplish the improvements. ER 54. 65. Even if KZCS can somehow defend its hands-off approach in January

2006, that approach was inexplicable in June 2006, when it was clear that the Debtors operating management had failed to generate reliable projections. C. KZCS cannot deflect responsibility to the Pre-Petition Lenders for the delay caused by the 4+8 Plan. 66. In its response to the Fee Examiners Report, KZCS offers two theories as

to why the Pre-Petition Secured Lenders should somehow be tagged with responsibility for whatever delay transpired in these cases. First, KZCS suggests that the Agent and other constituents failed to the same extent as KZCS to identify the flaws in the 4+8 Plan, because the Agent and other constituents enjoyed complete transparency with respect to the Debtors business. See KZCS Resp. to Rep. of Fee Examiner 9.3 Second, KZCS asserts that the PrePetition Secured Lenders caused a delay in these cases because, on July 12, 2006, they rejected a purchase offer that was conditioned upon the Debtors meeting the 4+8 Plan. Id. 13. Neither theory survives even minimal scrutiny. 67. In suggesting that KZCS was not responsible for the 4+8 Plan because

financial advisors for other constituents acceded to that plan, KZCS overlooks the difference between its role in these cases and the role of advisors for other constituents. As financial advisor to the Agent, Capstone did not have unfettered access to the Debtors employees, plants or documents. Information received from the Debtors, including the Debtors projections, was
3

KZCS apparently made the same argument to the Fee Examiner, who noted that KZC asserts that it made full disclosures of all of the risks, so that the Key Constituents could make informed choices about the Business Plan. ER 77.

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filtered through the Debtors professionals, namely KZCS. When Capstone reviewed the 4+8 Plan, it identified execution risks attendant to the Plan. ER 50-51. In contrast to KZCS, however, Capstone could not conduct independent due diligence to determine whether those risks in fact rendered the plan unachievable. Only KZCS which had taken over a large part of the Debtors financial operations and had an army of its paid consultants on site was in a position to conduct a full-fledged review of the Debtors projections, but it failed to do so. 68. Worse yet, KZCS repeatedly gave the impression that it was exercising

independent judgment regarding the Debtors projections. In its first and second interim fee applications, KZCS represented that, as part of its Financial Forecasting work, it had established procedures and led [the] process for development of [a] detailed two year financial forecast (June 2005 through June 2007) on a plant-by-plant basis. First Interim Fee Application (Docket No. 1652) 24(b); see also Second Interim Fee Application (Docket No. 2392) 26(c) (emphasis added). Likewise, in its third interim fee application, which covered the period through April 30, 2006, KZCS represented that it assisted the Debtors incoming management team in establishing procedures, conducting due diligence activities and performing analyses relating to the development of a detailed plant-by-plant operating budget for 2006. . . . Third Interim Fee Application (Docket No. 3051) 32(c). KZCS further stated that it had (a) conducted plant visits to approximately half of the Plastics facilities and assisted the Debtors incoming Plastics management team in identifying potential operational and other performance issues, and (b) assisted the Debtors incoming Plastics management team in monthly review of operating performance, gaining an understanding of the root causes of variances from the 2006 Operating Plan and refining forecasts of and expectations for future performance. Id. 38(b)-(c). Finally, in testimony proffered to the Court on May 11, 2006, Mr. Boken averred that the Debtors were addressing their cost issues, planning to reduce -30-

manufacturing costs by approximately $50 to $60 million annually, and expected to save an aggregate amount of $40 million by rationalizing their production footprint. (Tr. 12) All of those statements, both in fee applications and proffered testimony, conveyed that, although the Debtors management was responsible for achieving operational improvements, KZCS was exercising independent judgment as to whether those improvements were achievable. 69. KZCSs additional contention that the Post-Petition Secured Lenders

should be held responsible for a delay in these cases because they rejected Wilbur Rosss July 6, 2006 purchase offer is equally unfounded. The July 6 offer was expressly predicated on the Debtors meeting the projections in the 4+8 Plan. As KZCS concedes, however, the Lenders knew, before they rejected Wilbur Rosss offer, that a substantial downward reforecast of results projected by the 4+8 Plan was underway. KZCS Resp. to Rep. of Fee Examiner 13. Having just learned that the Debtors would revise their business plan, the Agent and its steering committee were in no position to embrace Wilbur Rosss offer. Nor were they in any position to negotiate a lower sale price in the short-term: the pre-petition secured debt was trading at a level well above the 80% mark precisely because the public markets had only the Debtors wildly off-base projections and, in any event, the Agent and the lender steering committee had no reliable projections based on which to negotiate. D. KZCSs fees should be reduced to account for the losses incurred by the estate as a result of the two-month delay identified by the Fee Examiner. 70. As discussed above, the Post-Consummation Trust believes that KZCS

bears some responsibility not only for the delay caused by the 4+8 Plan but also for value lost by the estate as a result of the 2006 Operating Plan. Unlike the Board, which is subject to the deferential business judgment rule (although the application of that rule to the two KZCS directors is questionable given that they were being highly compensated to serve as Chairman -31-

and as a member of the Debtors Board), KZCSs fees are expressly subject to the standards of section 330, under which the quality and results of a professionals performance are properly taken into account in fixing that professionals fees. 71. Although bases exist for objecting to more of KZCSs fees, the Post-

Consummation Trust is focusing for purposes of this Objection only on the two-month delay period identified by the Fee Examiner. To quantify the amount by which KZCSs fees should be reduced, the Post-Consummation Trust has calculated the Plastics divisions average operating losses over a two-month period during 2006 approximately $8,029,000.4 The PostConsummation Trust has also calculated the average professional fees incurred over a two-month period during 2006 approximately $15,256,000. The cost of the two-month delay identified by the Fee Examiner can reasonably be quantified as (i) the average amount lost by the Plastics division in 2006 over a two-month period ($8,029,000), (ii) the average amount paid by the Debtors in professional fees over a two-month period in 2006 ($15,256,000), or (iii) a combination of those two amounts. 72. Alternatively, this Court has discretion to reduce KZCSs fees within the

confines of the lodestar figure i.e., by finding that, in the circumstances presented, KZCSs reasonable hourly rate was lower than the high rates charged by KZCS. See, e.g., In re Smith, 256 B.R. 730, 737-38 (W.D. Mich. 2000) (affirming 33% reduction of hourly rates based on bankruptcy courts assessment of the quality of counsels performance); In re Sharp, 367 B.R.
4

The Plastics divisions monthly operating loss is equal to the sum of (a) unadjusted EBITDA for the Plastics division as reported by the Debtors, (b) 75% of the Debtors overhead (not including professional fees), and (c) the Plastics divisions capital expenditures. Attached hereto as Exhibit 1 is a summary of the calculation used to derive the Plastics divisions average monthly operating loss. Exhibit 1 also quantifies the professional fees incurred by the Debtors on a monthly basis, as well as the two-month average of those fees.

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582, 585 (Bankr. E.D. Mich. 2007) (Rhodes, C.J.) (reducing counsels hourly rate from $320 to $265 based on, inter alia, the quality of legal services provided). The Post-Consummation Trust attempted to identify the fees requested by KZCS that were related to the development of the deeply flawed 2006 Operating Plan and 4+8 Plan, but was unable to break out such fees based on the information provided in KZCSs fee applications. Given that KZCS did not conduct adequate due diligence with respect to the Debtors business plans, the PostConsummation Trust believes that KZCSs hourly fees should be reduced by a substantial percentage across the board. II. AKIN AND A&M SHOULD NOT BE AWARDED THEIR REQUESTED FEES FOR THE PERIOD BEGINNING IN JULY 2006. 73. In order to be compensated for work performed during a bankruptcy case,

a fee applicant must show that the services performed were necessary to the administration of the estate or reasonably likely to benefit the debtors estate. 11 U.S.C. 330(a)(4)(A)(ii). As demonstrated below, neither Akin nor A&M can meet that standard for work performed after June 2006, when it was clear that unsecured creditors were out of the money. A. Section 330 requires creditors committee professionals to reduce their work when unsecured creditors are out of the money. 74. Section 330 of the Bankruptcy Code requires estate professionals to

consider the relationship between the cost of their services and their expected benefit; in other words, professionals must exercise care, diligence, and skill in deciding which claims to prosecute, and how far. In re Taxman Clothing Co., 49 F.3d 310, 315 (7th Cir. 1995) (Posner, J.). Based on that principle, the Seventh Circuit in Taxman held that a lawyer should not have been awarded hourly compensation for prosecuting a preference action when it was reasonably obvious that the costs of the action would exceed its risk-adjusted value to the estate. Id. at

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315-16. According to Judge Posner, the lodestar approach was plainly . . . the wrong approach where an estate professional thr[ew] good money after bad. Id. at 316, 313. 75. Courts in this jurisdiction have consistently adhered to the principles

endorsed by Judge Posner in Taxman. For example, in New Boston Coke Corp., en route to concluding that special counsel to the debtor did not exercise sufficient judgment when it incurred nearly $500,000 in fees on a weak case, the court explained that counsel, know[ing] the strength of its defense (or lack thereof), should have minimized its costs to the estate in order to preserve as much of the estates assets as possible for the benefit of creditors. 299 B.R. at 441; see also, e.g., Arnold, 162 B.R. at 779 (A lawyer . . . owes a professional duty to the client to recommend that no action be commenced if the cost of the battle exceeds the value of the litigation.). 76. The principles articulated in Taxman have likewise been applied with full

force to professionals retained by a creditors committee. For example, in In re Auto Parts Club, Inc., 211 B.R. 29 (9th Cir. B.A.P. 1997), the Bankruptcy Appellate Panel for the Ninth Circuit reduced the fees of committee counsel upon a finding that counsel failed to scale back its services based on the reasonable expected recovery for unsecured creditors, but instead . . . continued to incur fees based on the potential optimum recovery[.] Id. at 34 (emphasis added). Rejecting the applicants contention that it had worked to procure a purchase offer that would exceed the sum of the debtors secured debt, the court concluded that, when the fees at issue were incurred, it was reasonably obvious that no such bid would materialize and, therefore, that unsecured creditors would recover nothing. Id. at 34-35. Similarly, in In re Channel Master Holdings, Inc., 309 B.R. 855 (Bankr. D. Del. 2004), the Bankruptcy Court for the District of Delaware disallowed certain fees incurred by the committees counsel and financial advisor at a

-34-

time when unsecured creditors appeared to be entitled to nothing, id. at 861. In doing so, the court dismissed the notion that chapter 11 is a license to perform services and generate fees in a vacuum without considering the possibilities of recovery for the professionals constituents. Id. at 861.5 B. Akins fees should not be allowed in full. 77. Beginning in June 2006, the Debtors lowered 2006 EBITDA

expectations and the Debtors attendant life-threatening liquidity issues implied insufficient value to support a recovery to the unsecured creditors. ER 102. Indeed, given that the 4+8 Plan projected EBITDA of $179 million for 2006, and the Debtors constituents valued the Debtors business at no more than five times EBITDA, the 4+8 Plan indicated that unsecured creditors were out of the money by hundreds of millions of dollars. The 6+6 Plan, which projected 2006 EBITDA of $105 million, further extended that margin. 78. As set forth below, the Post-Consummation Trust has not focused on fees

or expenses incurred by Akin through June 2006. Starting in July 2006, the Post-Consummation Trust has divided Akins fees and expenses into two categories: Non-Objectionable and Objectionable. Attached hereto as Exhibit 2 is a chart reflecting the fees incurred by Akin beginning in July 2006, divided into those two categories.
5

Similar reasoning has been used in connection with fees incurred by equity committee professionals in insolvent cases. See In re Wang Labs., Inc., 149 B.R. 1, 4 (Bankr. D. Mass. 1992) (Where the debtor, despite its protestations, is prima facie insolvent . . . it may be that it will prove inappropriate to compensate the professionals hired by the equity committee.); In re Emons Indus., Inc., 50 B.R. 692, 694 (Bankr. S.D.N.Y. 1985) (counsel which takes on representation of the equity committee of an allegedly hopelessly insolvent debtor takes on a significant risk [of nonpayment because] . . . neither the debtor nor the creditors should have to bear the expense of negotiating over the terms of what is in essence a gift).

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(1) 79.

Fees Incurred through June 2006

Prior to June 2006, the Debtors projections implied an enterprise

valuation for the Debtors of more than $1.3 billion. Although the Agent and its professionals took strong issue with those projections, the Post-Consummation Trust does not seek to penalize Akin for its reliance on the Debtors and KZCS and thus has not objected to the fees and expenses incurred by Akin through June 2006 as unnecessary. The Post-Consummation Trust notes that those fees, which at times exceeded $300,000 per month, may be regarded by the Court as excessive. (2) 80. Non-Objectionable Fees Incurred after June 2006

The Post-Consummation Trust acknowledges that, even after unsecured

creditors could no longer reasonably expect a recovery, Akin still had a fiduciary duty to perform certain limited functions on behalf of the unsecured creditors. Akin discharged that duty by, inter alia, negotiating the terms of a Litigation Trust (of which pre-petition unsecured creditors own 25%) and evaluating causes of action that the trust might pursue. 81. Accordingly, the Post-Consummation Trust does not object to reasonable

fees incurred after June 2006 in the following categories: General Case Administration Analysis of Other Professionals Fee Applications/Reports Retention of Professionals Creditors Committee Meetings Financial Reports and Analysis Analysis of Pre-Petition Transactions Exclusivity Plan, Disclosure Statement and Plan Related Documentation -36-

82.

It bears noting that the level of fees in several of those categories is

surprising. For example, in September and October of 2006, at a time when it was clear that the Pre-Petition Secured Lenders were effectively paying the fees of Committee professionals, Akin billed approximately $65,000 for Creditors Committee meetings. Months later, in February and March of 2007, Akin billed the estate almost $55,000 for services related to General Case Administration. Akins bill for January 2007 was approximately $150,000, and its bill for September 2006 was approximately $270,000. Although the Post-Consummation Trust has focused its attention on categories of fees that are clearly objectionable, the Court may well find other fees to be excessive under section 330. See In re Jones, 339 B.R. 903, 906 (Bankr. E.D. Mich. 2006) (the Court has an independent duty to determine the reasonableness of requested fees), revd on other grounds, 360 B.R. 624 (E.D. Mich. 2007). (3) 83. Objectionable Fees Incurred after June 2006

After June 2006, it was clear that the Pre-Petition Secured Lenders would

not recover in full on their claims and, as a result, were the sole claimants to the residual value of the Debtors businesses. Consequently, Akins post-June 2006 fees in the following categories none of which appear to involve the Litigation Trust or the proposed plan should be disallowed in full: DIP and Exit Financing Executory Contracts / License Agreements General Claims Analysis / Claims Objections Analysis of Secured Claim / Adequate Protection Issues Lift Stay Litigation General Adversary Proceedings Tax Issues -37-

 84.

Labor Issues / Employee Benefits Real Estate Issues / Leases Asset/Stock Transaction / Business Liquidations OEM Claim Analysis 2004 Motions / Investigations Accounting Investigation Intercompany Transactions Insurance Matters International As the residual claimants to the value of the Debtors businesses from

June 2006 at the latest, the Pre-Petition Lenders had the sole economic interest in, among other things, (a) financing options for a stand-alone plan, (b) the Debtors contractual and other relationships with suppliers and customers, (c) litigation between the company and third parties, (d) employee-related issues, (e) the Debtors international operations, and (f) government investigations. In addition, the Pre-Petition Lenders alone had a financial stake in the status of secured claims filed by third-party vendors, which appears to have been the focus of Akins work on secured claims and adequate protection. Any work performed by Akin in the above-listed categories, aside from not benefiting unsecured creditors, was duplicative of the work performed by the array of professionals representing the Debtors and the Agent. Thus, Akins fees in those categories a total of $560,540 should be disallowed in full. 85. The Post-Consummation Trust does not object in full to fees incurred after

June 2006 in connection with court hearings, travel, and fee applications. However, as set forth below, the Post-Consummation Trust believes those fees are excessive and should be reduced.

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86.

Court Hearings and Travel. At least after June 2006, there was no reason

for Akin to send more than one attorney from New York to appear (along with Detroit counsel) at court hearings. As a result, for every hearing to which Akin sent more than one attorney, its fees for travel time and court appearances should be reduced by 50%. The total reduction amounts to $27,912. The unnecessary travel expenses incurred in connection with court hearings should also be disallowed, but the Post-Consummation Trust was unable to extract the amount of those expenses from Akins fee application. 87. Fee Applications. Beginning in July 2006, Akin has billed approximately

$85,344 for work related to fee application objections or the Fee Examiners Report. The general rule is that attorney time for defending fee applications is not compensable. New Boston Coke Corp., 299 B.R. at 442. Here, there is no basis to make an exception to that rule. As a result, Akins fees should be reduced by $85,344. 88. In addition, time spent generating fee applications is generally limited to

5% of the total fees requested. Id. at 446. Including time spent defending fee applications, Akins work relating to fee applications amounted to 8.6% of its total work beginning in July 2006. Should the Court allow the fees incurred defending fee applications, Akins total fees for the period at issue should be reduced so that fees related to fee applications are only 5% of Akins allowed fees. 89. In total, therefore, the Post-Consummation Trust requests that the Court

disallow at least $673,796 in fees requested by Akin, as well as unnecessary travel expenses.

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C.

A&Ms fees should not be allowed in full. (1) 90. A&Ms post-June 2006 fees should be disallowed under Section 330.

The Post-Consummation Trust objects to allowance of fees incurred by

A&M for the same reason that it objects to allowance of certain fees incurred by Akin: as of June 2006, it was reasonably obvious that A&Ms work as the Committees operational advisor would not affect the recoveries of unsecured creditors. Under section 330, A&M was obligated to reduce its work accordingly. See Auto Parts Club, Inc., 211 B.R. at 34-35; Channel Master Holdings, Inc., 309 B.R. at 861. 91. Unlike Akin, A&M had no appropriate role in these cases after June 2006.

At the August 29, 2005 hearing on A&Ms retention application, Committee counsel Michael Stamer explained that, as operational consultant to the Committee, A&Ms task would be to work with [KZCS] and management to make sure theyre doing what needs to be done to fix the company. (Tr. 32) A&Ms fee applications reflect that operational role: they are broken down into categories such as (i) cash flow analysis, (ii) analysis of projections, (iii) analysis of accounting issues, (iv) analysis of financial information, (v) part profitability analysis, and (vi) fabrics winddown. See A&M Final Fee Application 36-84. 92. As long as unsecured creditors appeared to have a financial stake in the

success of the Debtors operations either as future owners of the Debtors business or as the residual claimants to proceeds of a sale it is understandable that the Committee would seek professional advice concerning operations. However, once the Debtors projections showed that unsecured creditors had no valid claim to the value of the Debtors business, any possible need for A&Ms services as operational advisor was obviated. As a result, all of A&Ms post-June fees a total of $1,050,000 should be disallowed under section 330. -40-

93.

A&Ms fee applications, which detail the work performed by A&M after

June 2006, confirm that A&Ms work was no longer necessary or appropriate during that period. A chart summarizing A&Ms work beginning in July 2006 is attached hereto as Exhibit 3. That chart shows, for example, that A&M spent substantial time after June 2006 on matters such as cash-flow analyses ($101,089) and analysis of the Debtors strategic plan ($111,224) matters in which unsecured creditors then clearly had no financial stake. By far the largest fee category reflected on the chart is the unapplied portion of [A&Ms] fixed fee ($377,254), a category denoting the difference between A&Ms fixed monthly fee and the lower amount it would have billed for its work on an hourly basis. In every month following June 2006, A&M would have billed far less than $150,000 for its work if not for its fixed-fee arrangement. (2) 94. A&Ms post-June 2006 fees should be disallowed under Section 328.

The order approving A&Ms retention provides that A&Ms fees will be

evaluated under 11 U.S.C. 328 unless the Court determines that there was unnecessary duplication of function or work product between A&M and Chanin Capital Partners, LLC, in which circumstances A&Ms compensation for such function or work product shall be subject to the standards of review under section 330 of the Bankruptcy Code. . . . Docket No. 1183, at 3. Once unsecured creditors had no economic stake in the Debtors operations, neither A&M nor Chanin could serve any useful function to the estate other than supporting the Committee in plan negotiations. Consequently, as of June 2006, the functions of the Committees two financial advisors, to the extent they had useful functions at all, were far too narrow to be distinct. Thus,

-41-

under the terms of the order approving A&Ms retention, section 330 governs A&Ms fee application.6 95. In any event, even if section 328 were to apply, A&Ms fees as of July

2006 should be disallowed. Under section 328(a), a court may modify pre-approved terms and conditions of a professionals employment if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions. 11 U.S.C. 328(a). The intervening circumstance that renders terms and conditions improvident must be one that would have affected the courts decision in the first place. In re Airspect Air, Inc., 288 B.R. 464, 471 (6th Cir. B.A.P. 2003), revd on other grounds, 385 F.3d 915, 922 (6th Cir. 2004). 96. Numerous courts in the Sixth Circuit and elsewhere have declined to allow

professional fees under section 328 when, as a result of unforeseen developments, professionals had reason to spend substantially less time and effort on a matter than originally contemplated. See In re Schubert, 143 B.R. 337, 343 (S.D.N.Y. 1992) (real estate brokers fee was improvident in light of brokers unexpectedly minimal role in the sale of the debtors property); In re Gilbertson, 340 B.R. 618, 623 (Bankr. E.D. Wis. 2006) (reducing the fees of a trustees attorney where prosecution of a fraudulent conveyance claim took less time than expected); In re Churchfield Management & Inv. Corp., 98 B.R. 893, 899 (Bankr. N.D. Ill. 1989) (contingency fee arrangement for debtors lawyer was improvident where the court did not know how small would be the effort required to defend the debtor in a tax dispute).

A&M conceded as much in its response to Third Avenues objection to its fourth interim fee application. There, A&M stated explicitly that [a]pproval of the Application is governed by section 330 of the Bankruptcy Code. Docket No. 3706, at 4.

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97.

When it approved A&Ms retention application, this Court could not have

foreseen that, within the span of months, the Debtors projections would show that unsecured creditors had no valid claim to the value of the Debtors business. Indeed, the Committee assured the Court in both the A&M retention application and at the August 29, 2005 hearing that unsecured creditors were the fulcrum creditors, and, as such, that they were effectively paying for all of the professionals retained in the case. Had the Court been aware of the Debtors true financial position at that time, the Post-Consummation Trust respectfully suggests that it would not have permitted the Committee to hire two financial advisors or even one operational advisor. 98. Whatever A&Ms entitlement to fees may be for the period in which

unsecured creditors, based on the Debtors projections, had some claim to the residual value of the estate, A&M should not be awarded the $1,050,000 in fees that it billed as operations consultant to the Committee for the period in which unsecured creditors had no stake in the success of the Debtors operations. CONCLUSION 99. The Post-Consummation Trust respectfully objects to the final fee

applications of KZCS, Akin, and A&M to the extent stated herein.

DYKEMA GOSSETT PLLC

By: _/s/ Ronald Rose___________ Ronald L. Rose (P19621) 400 Renaissance Center Detroit, MI 48243 Telephone: (313) 568-6553 Facsimile: (313) 568-6893 Attorneys for the C&A Post-Consummation Trust Dated: December 12, 2007 -43-

Exhibit 1

PLASTICS DIVISION OPERATING LOSSES FOR 2006

$ JAN FEB (368) $ 7,936 $ $ $ $ MAR $ 19,243 APR 1,379 MAY $ 10,361 JUN $ 11,240 JUL AUG $ (15,681) $ 1,351 SEP 2,581 OCT NOV (996) $ 6,279 DEC $ 18,182 TOTAL 61,507

EBITDA (1)

Corporate Overhead Allocation Capital Expenditures (2) Operating Loss $

(7,347) (1,173) (8,888) $

(6,569) (1,708) (341) $

(7,006) (3,531) 8,707 $

(6,750) (1,476) (6,846) $

(9,410) (2,869) (1,918) $

(4,979) (6,220) (11,693) (2,112) (1,100) (1,511) 4,149 $ (23,001) $ (11,852) $

(7,565) (1,975) (6,959) $

(6,724) (1,448) (9,168) $

(6,324) (6,180) (2,505) (1,508) (2,550) $ 10,494 $

(86,766) (22,915) (48,174)

Corporate Overhead Allocation Calculation: Total Home Office (3) Back Out Professional Fees (4) Adjusted Home Office Total Allocation to Plastics Division (5) Total Allocation to Plastics Div.

$ (19,299) $ (18,431) $ (17,390) $ (16,086) $ (19,646) $ (13,779) $ (15,427) $ (22,649) $ (17,183) $ (16,055) $ (15,903) $ (15,375) $ (207,224) 9,503 9,672 8,048 7,087 7,099 7,140 7,134 7,059 7,097 7,090 7,471 7,136 91,536 $ (9,796) $ (8,759) $ (9,341) $ (8,999) $ (12,547) $ (6,638) $ (8,293) $ (15,591) $ (10,086) $ (8,965) $ (8,432) $ (8,239) $ (115,688) 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% 75% $ (7,347) $ (6,569) $ (7,006) $ (6,750) $ (9,410) $ (4,979) $ (6,220) $ (11,693) $ (7,565) $ (6,724) $ (6,324) $ (6,180) $ (86,766)

TWO-MONTH AVERAGES: 2 Months of Plastics Division Operating Losses (6) 2 Months of Professional Fees (7) $ 8,029 $ 15,256

(1) Unadjusted EBITDA for the Global Plastics division as reported in the Company's records (HIP Report/Outlook Soft). (2) Capex for Plastics division per HIP Reporting/Outlook Soft. (3) Home Office includes the following catagories of cost at the corporate level: Commercial, Design Engineering & Development, General Administrative, Finance, Human Resources, Information Systems, Facilities Management, Legal, Aircraft, Investor Relations, Strategic Planning, Shared Services, and Professional Fees. (4) Professional Fees includes all costs for professionals and government investigations. Professional Fees are not included in the allocation of Home Office expenses to the Plastics Division. (5) 75% allocation was arrived at through an FTE and individual cost line-item analysis. The same analysis was used to support the allocation of overhead to the OEMs in accordance with Exhibit C of the Customer Agreement. Allocation based upon relative revenues would have resulted in a 64% allocation. (6) Equals the total Operating Loss for 2006 ($48,174) divided by 12 months and multiplied by 2 months. (7) Equals the total Professional Fees for 2006 ($91,536) divided by 12 months and multiplied by 2 months.

Exhibit 2

Akin, Gump Strauss Hauer & Feld LLP July 2006 to March 2007 OBJECTIONABLE FEES
Oct-06 $ $ $ $ Mar-07

Sep-06 96 3,330

Jul-06 22,440 4,370 4,229 3,100 5,051 20,652 384 792 7,607 36,024 576 1,485 22,615 491 336 6,276 955 6,874 1,124 1,710 3,299 1,480 137 3,115 1,390 3,813 333 728 638 408 475 2,158 24,711 4,396 581 2,489 $ 133,198 2,226 $ 98,867 2,378 $ 52,890 1,051 691 $ 50,560 990 126 4,847 1,051 2,226 $ 50,623 $ 8,843 $ 26,608 1,106 2,018 $ 26,422 95 5,046 225 6,220 2,075 4,532 612 2,495 24,465 84 192 2,405 498 10,308 458 6,113 450 180 2,600 1,221 523 10,778 24,399 1,950 4,004 7,338 5,394 10,040 194 28,286 1,008 13,800

Code 010 011 012 015 016 017 018 019 020 024 026 027 029 030 032 033
1

Description DIP and Exit Financing Executory Contracts/ License Agreements General Claims Analysis/ Claims Objections Analysis of Secured Claim/ Adequate Protection Issues Lift Stay Litigation General Adversary Proceedings Tax Issues Labor Issues/ Employee Benefits Real Estate Issues/ Leases Asset/ Stock Transaction/ Business Liquidations OEM Claim Analysis 2004 Motions/ Investigations Accounting Investigation Intercompany Transactions Insurance Matters International

Aug-06 924 18,982 5,142 17,187 16,939 5,791 384 3,759 9,419 21,617

Nov-06 1,116 9,361 936 536 5,194 1,922 48 1,959

Dec-06 3,719 21,803 1,374 1,368 1,452 3,215

Jan-07 135 1,275 4,612

Feb-07 1,998 3,750 7,660

003 3,843 $ 126,755

Akin Gump Fee Application/ Monthly Billing Reports

008

Court Hearing

Travel 025 Total Objection

The calculation for the objectionable Fee Application/ Monthly Billing Reports fees was as follows: Time billed in November and December 2006 with descriptions relating to fee objections and time billed in May to August 2007 with descriptions relating to the fee examiner were included in the Objectionable Fees total. 2 The calculation for the objectionable Court Hearing fees was as follows: If more than one person appeared in court, half of the total hours billed to attend the hearing was multiplied by the average applied billing rates.

The calculation for the objectionable Travel time was as follows: If more than one person appeared in court, half of the total hours billed for travel to the hearing was multiplied by the average applied billing rates.

Akin, Gump Strauss Hauer & Feld LLP April 2007 to October 2007 OBJECTIONABLE FEES
Apr-07 $ 48 3,541 270 135 90 1,834 6,307 1,023 240 45 1,430 $ May-07 $ 383 1,935 90 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07

2,010 120 45 1,260 90 833 3,160 450 5,659 90 45 225 135 1,080 180 5,375 720

Code 010 011 012 015 016 017 018 019 020 024 026 027 029 030 032 033 360 48 5,562 $ 7,518 $ $ 22,357 $ 44,832 2,171 $ 21,771 1,035 $ 1,687 32,506 17,224 495 90 $ 1,430 $ 45 90
1

Description DIP and Exit Financing Executory Contracts/ License Agreements General Claims Analysis/ Claims Objections Analysis of Secured Claim/ Adequate Protection Issues Lift Stay Litigation General Adversary Proceedings Tax Issues Labor Issues/ Employee Benefits Real Estate Issues/ Leases Asset/ Stock Transaction/ Business Liquidations OEM Claim Analysis 2004 Motions/ Investigations Accounting Investigation Intercompany Transactions Insurance Matters International 12,192 621 1,021 67,929 $ 85,344 10,562 17,350 673,796

Average 3,423 5,820 2,814 2,687 7,603 2,714 968 2,408 1,962 7,602 322 8,145 472 3,284 1,339 2,533

16 Month Total 30,810 69,841 36,587 26,874 76,031 43,418 7,741 26,484 21,579 114,033 1,611 57,013 1,415 16,419 5,354 25,333

003

Akin Gump Fee Application/ Monthly Billing Reports

008

Court Hearing

Travel 025 Total Objection

The calculation for the objectionable Fee Application/ Monthly Billing Reports fees was as follows: Time billed in November and December 2006 with descriptions relating to fee objections and time billed in May to August 2007 with descriptions relating to the fee examiner were included in the Objectionable Fees total. 2 The calculation for the objectionable Court Hearing fees was as follows: If more than one person appeared in court, half of the total hours billed to attend the hearing was multiplied by the average applied billing rates.

The calculation for the objectionable Travel time was as follows: If more than one person appeared in court, half of the total hours billed for travel to the hearing was multiplied by the average applied billing rates.

Akin, Gump Strauss Hauer & Feld LLP July 2006 to March 2007 NON-OBJECTIONABLE FEES

Code 002 $
1

Description General Case Administration $ 2,072 2,060 3,676 17,423 19,530 882 210 3,269 913 19,157 1,800 $ 69,008 7,634 789 10,051 46,502 7,087 $ 139,482 $ 19,435 8,767 $ 171,034 9,540 $ 73,075 2,775 $ 51,140 53 1,812 3,828 9,815 2,197 45,055 14,154 4,463 473 554 294 9,252 743 2,711 3,095 3,940 10,477 2,565 1,420 17,498 11,981 12,934 618 3,247 1,329 1,789 1,820 11,321 12,887 1,020 15,322 2,899 $ 87,723 $ $ $ $ $ 1,793 468 4,305 30,694 10,356 948 65,146 6,038 48,347 3,533 $ 183,858 7,305 $ 140,227 11,097 1,008 1,903 13,585 61,413 9,081 1,032 198 672 8,458 14,904 210 294 473 17,522 9,139 270 120 913 85,867

Jul-06 12,231

Aug-06 42,190

Sep-06 12,369

Oct-06 5,948

Nov-06 5,907

Dec-06 4,474

Jan-07 4,655

Feb-07 $ 15,091

Mar-07 $ 39,339

003 004 006 007

Akin Gump Fee Application/ Monthly Billing Reports Analysis of Other Professionals Fee Applications/ Reports Retention of Professionals Creditors Committee Meetings

008 009 013 021 022

Court Hearings Financial Reports and Analysis Analysis of Pre-Petition Transactions Exclusivity Plan, Disclosure Statement and Plan Related Documentation

Travel 025 Total Non-Objection

The non-objectionable Fee Application/ Monthly Billing Reports fees were calculated by subtracting the objectionable Fee Application fees from the total billed.

The non-objectionable Court Hearings fees were calculated by subtracting the objectionable Court Hearing Fees from the total billed.

The non-objectionable Travel time fees were calculated by subtracting the objectionable Travel Time Fees from the total billed.

Akin, Gump Strauss Hauer & Feld LLP April 2007 to October 2007 NON-OBJECTIONABLE FEES
Sep-07 $ 2,498 6,260 1,013 660 3,865 3,010 1,914 15,894 $ Oct-07

Code 002 $
1

Description General Case Administration $ 1,229 452 1,878 3,440 225 4,988 360 423 1,034 293 180 6,818 2,577 495 $ 1,388 479 1,756 201 1,260 978 2,583 870

Apr-07 410

May-07 $ 413

Jun-07 1,507

Jul-07 2,984

Aug-07 $ 90

Average 10,543

16 Month Total 147,604 61,839 48,164 21,057 158,935

003 004 006 007 2,371 1,223 60 8,830 $ 14,759 163 $ 21,220 $ 20,775 $ 10,655 $ 9,630 $ 2,751 3,507 $ 25,192 $ 12,997 12,045 13,242 315 450 45 5,903 678 8,856 3,622 22,020 4,738 81,043 $

Akin Gump Fee Application/ Monthly Billing Reports Analysis of Other Professionals Fee Applications/ Reports Retention of Professionals Creditors Committee Meetings

008 009 013 021 022

Court Hearings Financial Reports and Analysis Analysis of Pre-Petition Transactions Exclusivity Plan, Disclosure Statement and Plan Related Documentation

94,445 6,785 79,705 21,732 352,321 47,376 1,039,961

Travel 025 Total Non-Objection

The non-objectionable Fee Application/ Monthly Billing Reports fees were calculated by subtracting the objectionable Fee Application fees from the total billed.

The non-objectionable Court Hearings fees were calculated by subtracting the objectionable Court Hearing Fees from the total billed.

The non-objectionable Travel time fees were calculated by subtracting the objectionable Travel Time Fees from the total billed.

Exhibit 3

ALVAREZ AND MARSAL, LLC PROFESSIONAL FEES (July 2006 through January 2007)

OBJECTIONABLE FEES
$

Description Cash Flow Analysis - US/Canada Cash Flow Analysis - Europe Analysis of Projections - US/Canada Analysis of Projections - Europe Meeting/Teleconferences with Debtor and Debtors' Advisors Meeting/Teleconferences with Committee and Committee's Advisors Analysis of Accounting Issues Analysis of Financial Information Preparation/Attendance at Court Hearings Analysis of Motions Filed by Debtors Retention/Fee Applicatoins, Travel Time, and Other Administrative Matters Part Profitability Analysis Management Compensation Analysis Analysis of Strategic Plan Analysis of Capex and Tooling Substantive Consolidation Fabrics Winddown UNAPPLIED PORTION OF FIXED FEE Objection Total $

Jul-06 Aug-06 $ 23,590 $ 12,614 5,754 4,426 7,214 20,581 18,014 17,969 14,252 12,216 443 4,337 4,426 2,921 11,330 11,286 21,422 1,505 2,656 16,066 12,968 41,962 32,048 $150,000 $150,000

Sep-06 $ 17,350 6,418 12,260 20,050 11,153 5,400 8,763 18,235 5,975 44,397 $150,000

Oct-06 $ 19,961 12,968 17,881 11,685 4,692 3,895 8,675 22,926 11,729 5,665 29,924 $150,000

Nov-06 $ 11,463 4,913 19,430 10,003 11,109 3,231 7,524 12,171 11,330 8,542 50,283 $150,000

Dec-06 $ 15,225 17,306 11,242 9,870 1,770 11,596 8,852 266 24,299 2,479 47,096 $150,000

Jan-07 $ 885 2,523 2,301 4,957 797 3,939 2,169 885 131,544 $150,000

Total 101,089 37,001 96,973 93,919 797 67,230 2,213 32,885 50,235 266 111,224 24,564 2,656 51,695 377,254 1,050,000