Everyone Else Is Bankrupt, Join In

162817719_e2c010295cWith the world seemingly going bankrupt we took a look yesterday at the mechanics of bankruptcy.

Today it seems like declaring bankruptcy is the in thing.  All the cool kids are doing it so maybe you should be too.  With all the cool companies going bankrupt it seems that the world may be slowly grinding to a halt.  Lets look at a few of the companies that have crashed recently and discover what is going on here.

Chrysler

The first of the “Big Three” automakers to crash and burn.  With the US government overseeing this bankruptcy closely it seems to be one of the least typical bankruptcies ever.  The restructuring plan currently going forward is to basically chop up Chrysler and sell it to a second Chrysler company.  This basically allows the company to move forward without any current contracts tying them down.  Its actually a very smart, yet very scary plan.  The plan will un-encumber the company of basically anything and everything it so desires which is both good and very bad.  The people who stand to loose and loose big are the dealerships who have huge investments and obviously the lenders.  I am still not sure if the current warranties will continue to be valid.  I know it has been announced that the Canadian government will be doing something to protect the warranties, but I haven’t heard similar news from the US.

Nukote

You likely have never even heard of this company.  They manufacture printer cartridges.  Based upon their bankruptcy filing it appears that they decided to file for bankruptcy because it seems quite cool.  With $86 million in assets and $79 million in debts they aren’t even close to bankruptcy.  Heck their LTV ratio is only 91%.  If people started filing for bankruptcy because they only owned about 10% of their assets I think most of North America would be considered bankrupt.

Phoenix Coyotes

The only real lesson here is that to bring hockey to the south you have to have extremely deep pockets.  Almost every other sport is OK but not hockey, at least not yet.  The actual interest in this bankruptcy is how many people are willing to pay big money to purchase this team and yet the NHL really doesn’t want to accept.  This has got to be one of the most laughable bankruptcies in history.  Someone wants to buy the assets for a pile of money, and the league won’t let them.  What a spectacle.

General Motors

The big one.  The bankruptcy that is on every one’s lips.  This bankruptcy is basically a clone copy of Chrysler’s.  The awkward twist is this is at least 5x the size and has the possibility to really stall out the economy.  The funny part of this bankruptcy is with all this work and the huge amounts of money that will be lost spent to bring the company back from drowning, they still could fail just because demand for cars is dropping.

The curious lessons to be learned here is to basically try to avoid doing what everyone else is doing.  Since bankruptcy seems to be in, some companies are filing.  A year or two ago the in thing was borrowing tons of money.  In a year or two what new completely idiotic plan will everyone be following.  The true lesson is to forge ahead and do what is right for your business instead of what everyone else is doing.

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