How 3 Famous Automotive Brands Avoided Catastrophe
The automotive industry is ruthless. Any car manufacturer who finds themselves falling behind can almost certainly kiss goodbye to any glimmer of remaining in the competitive running.
In fact, every American car company has been forced to declare bankruptcy at some stage in their lifetime, with the exception of Ford and Tesla.
With vast amounts of time and money poured into research and development, factory infrastructures, raw materials, and marketing, automotive companies cross their fingers and pray that they strike gold with each new model.
Some aren’t so fortunate and their efforts are thwarted by negative press and disinterested potential customers.
Despite the merciless nature of the industry, not every company disintegrates as soon as disaster hits. Here I’m going to look at three famous car brands who have managed to claw their way back from the brink of collapse, reclaiming a strong market position.
If I ask you to think of one of America’s greatest car manufacturers, General Motors will surely spring to mind.
One of the Big Three American car manufacturers, it moves over five million cars every single year.
The automotive industry was by no means immune to the hardship of the global financial crisis. The Big Three saw their sales plummet, quickly pushing them towards the point of no return.
GM tried to react by slowing down production and laying off hordes of workers, but they were unable to stave off bankruptcy, which they declared on 1st June 2009.
With friends in high places, GM were able to revitalise themselves only nine days after crashing.
They were granted a fresh start with the aid of the government-backed Chapter 11 reorganisation, and a healthy $49.5 billion investment from the US Treasury. They also received another $17.2 billion to invest into GM’s former financing company, GMAC.
This generous investment wasn’t the only thing that propped GM back up. They slashed lines from unprofitable brands like Saturn, Pontiac and Hummer in a bid to save some much-needed cash for more fruitful endeavours like Saab.
Fast forward one year: GM went public again and moved back into the green.
Taking the spot of the second largest car manufacturer in the world is Volkswagen. Last year, they distributed close to 11 million cars, bringing them in $269 billion!
Ah, Volkswagen – the people’s carrier. A trusty, reliable brand. Consumer faith in them drove their distribution of 11 million cars last year, racking up $269 billion! What gailforce wind could possibly shake them from their stronghold?
Oh, that’s right! They cheated on their emissions tests.
The ‘dieselgate’ Volkswagen emissions scandal first came to light in September 2015. By installing a ‘defeat device’ on their vehicles, the company had been manipulating the results of their emissions tests, but the Environmental Protection Agency (EPA) soon found them out.
The devices were designed to encourage the car to emit less pollution during emissions tests than they would in real-life.
Shockingly, some Volkswagen cars were found to emit up to 40 times more toxic fumes than the legal limit.
This was no small-scale effort. Over 11 million cars were caught up in this whirlwind.
The scandal spurred on fury from consumers and panic from investors as share prices took a nose-dive from €253 in April 2015 to €92 in October.
Will Craig, CEO of car leasing comparison site, LeaseFetcher, spoke to us about dieselgate and how it affected him.
“I was driving a Volkswagen Golf at the time because I thought it was a sensible and safe family car. When I found out it was spewing toxic gases into the air, I felt genuinely sick. It wasn’t just a company bending the truth slightly, this was a company lying to my face. Suffice to say, I won’t be buying another Volkswagen any time soon!”
There was certainly no hiding for Volkswagen who admitted their wrong-doings and promised to do better.
Their chief executive resigned, replaced by someone from Porsche, and they set aside a cool €6.7 billion to support their enormous recall efforts.
Volkswagen has learned from its mistakes and they want to undertake a green rebrand to reclaim that consumer trust. The future of Volkswagen is electric.
In its infancy when the 2008 recession hit, Tesla was not deemed worthy of government rescue financing unlike the other household automotive names.
At the time, the company was only five-years-old, finding its feet in the relentless automotive industry landscape. They hadn’t started on strong ground, so the crisis could easily have tipped them over the edge.
But in a Christmas miracle, Daimler generously invested $50 million dollars into Tesla on Christmas Eve 2008, enough to see them through the winter and beyond.
Tesla’s founder, Elon Musk, noted that the company “closed the financing round on Christmas Eve 2008. It was the last hour of the last day that it was possible.”
A very close call.
What Can We Learn?
So there you have three world renown automotive brands that came within a whisker of collapse but managed to battle through.
The lessons we can take from these example are relatively diverse.
The General Motors case, for example, teaches us to ask for and accept assistance. Just as the government didn’t want GM to fold, it doesn’t want its citizens to go bankrupt. If you are struggling financially, investigate what state-provided assistance there is. You might find free advice and support or some form of formal debt arrangement scheme.
The Volkswagen lesson is perhaps more moralistic. If you take risks, you ought to be prepared to accept the consequences. It really is no more complicated than that.
Finally, we come to Tesla, which is perhaps the trickiest example to extract a lesson from. If Tesla’s scrappy story can teach us anything, it is to continue pushing until the end. Even if things look bleak — as it did for Tesla — you may be able to secure a positive outcome in the end.
About the Author
Tom Butcher is a freelance writer, covering a wide range of topics, including finance, business and motoring. You can follow his (new) Twitter feed here.