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3 Famous Car Manufacturers That Survived Near Collapse

September 3, 2018 by admin in Tips

The automotive industry is notoriously fierce and most marquees have, at some point in their history, come perilously close to failure.

And it’s not all that surprisingly why. To bring a product to market, car companies have to invest huge sums of money in R&D and even larger sums in manufacturing infrastructure.

If a marquee’s cars are panned by the press or ignored by the public, that colossal investment is for nothing.

In this article, I’ve picked out three famous car brands that had near brushes with catastrophe but managed to fight through and keep going.

Tesla

Elon Musk once claimed that, “the only two American car companies that haven’t gone bankrupt are Ford and Tesla.”

Well, at various points in its history Tesla has come perilously close to joining the bankrupted masses. Perhaps its most serious brush with financial disaster came amid the global recession.

In 2008, Tesla was just five-years-old and, despite its grand all-electric, mass-market vision, was struggling to stay afloat in the cutthroat industry.

When the global financial downturn dissolved what little stability the company had left, Tesla began spiralling towards bankruptcy.

Tesla needed cash — fast!

On Christmas Eve 2008, Tesla teetered on the brink of collapse, unable to secure a financial backer to see them through the challenging economic times.

And then, when all hope was lost, Daimler stepped in and invested $50 million into the stricken company, giving it just enough cash to continue.

As founder Elon Musk admits, Tesla, “closed the financing round on Christmas Eve 2008. It was the last hour of the last day that it was possible.” Quite the narrow escape!

Volkswagen

This next story proves that no business is too large to fail.

Volkswagen is the second largest car manufacturer in the world, after Japanese giant Toyota. Last year, the whole Volkswagen group has an output of 10,875,000 cars worth an estimated $269 billion.

So what would it take to destabilize such a huge multinational? Let’s find out.

In 2015, the Environmental Protection Agency (EPA) discovered Volkswagen had been cheating their emissions tests via a bit of kit called a defeat device. This kickstarted a scandal later dubbed Dieselgate.

A quick recap on how the defeat devices work.

The defeat device was built into many Volkswagen engines. The device would detect when the engine was running in test conditions and alter the workings of the engine to make it more efficient. So when tested in the laboratory, Volkswagen’s cars looked super clean.

However, in real world conditions the EPA discovered some Volkswagen cars emitted up to 40 times as much toxic fumes as was permitted.

The scandal blew up and the consequences weren’t good for Volkswagen.

In the immediate aftermath of the revelations, share prices plummeted from €253 to €92 in October.

I spoke to Will Craig, the managing director of car leasing comparison startup LeaseFetcher about his response to the dieselgate scandal.

“I bought a Volkswagen Golf as my main family car because I trusted Volkswagen’s marketing. I believed it was a good, safe, efficient and clean car. When the newspapers started reporting on Dieselgate, I felt betrayed by what Volkswagen had done. Safe to say, that Golf will be my last Volkswagen vehicle.”

What saved Volkswagen was their swift reaction to the scandal. They immediately confessed and all the key executives were either removed or left. The group’s chief executive, for example, resigned immediately and was replaced by an outsider from Porsche.

To help address the long-term impact of the scandal, the company set aside €6.7 billion to pay for a large-scale recall and compensation for drivers.

Since the scandal, Volkswagen has been very public about its electric ambitions, hoping to rebrand itself as a futuristic green marquee.

General Motors

Another story from the 2008 global financial crisis. Although this time we’re looking a company at the opposite end of the scale — General Motors.

General Motors is one of the Big Three car manufacturers with Chrysler and Ford completing the trio. Unfortunately for GM, size didn’t soften the blow of the global financial downturn.

Nose-diving sales and significant financial losses put GM in a tailspin and despite taking swift action — GM idled its factories and laid off huge swathes of its workforce — the manufacturer filed for Chapter 11 bankruptcy protection on 1st June 2009.

Thankfully, GM’s story doesn’t end there.

Nine days after entering proceedings, General Motors emerged with a $49.5 billion investment from the US Treasury.

It wasn’t just new money that got GM back on its feet. It used the reorganisation to jettisoned a bunch of poorly performing nameplates like Saturn, Pontiac and Hummer, and sold other more successful brands like Saab.

Just one year on from its bankruptcy announcement, GM went public again and returned to profitability a couple months later.