10 Insanely Popular Companies That Nearly Went Bankrupt
From toy makers to airlines, many companies have dealt with financial troubles at some point in time. Included in this list are 10 companies that are so popular that you would not have expected them to have once been on the brink of bankruptcy.
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The Founder and CEO of Fed Ex once saved the company with nothing but luck. Frederick Smith created the company with a combination of loans, inheritance money and funding. With the money, he purchased eight planes with which he shipped packages across the United States. No other business was operating this way at the time. Instead, their method of transportation was mostly trucks. This worked out for Smith, until jet fuel charges began to rise. Unable to cover the cost of fuel whilst maintaining the pricing strategy, Fed Ex was down millions of dollars. Smith had two choices: either he could file for bankruptcy, or he could take the final $5,000 in the company’s budget and use it to gamble in a Las Vegas casino. I’m sure you guessed which option he chose.
Within a week, he had $32,000, which was enough to refuel the planes and complete the deliveries. $24,000 was the amount needed to pay the oil companies for the jet fuel. Whilst Smith’s gamble had prevented the company from collapsing for only a week, the limited time allowed him to seek out additional funding and eventually grow the company into what it is today.
One of the most popular toy companies in recent years has not went without its troubles. It experienced a series of problems between 1998 and 2003. After the drop in profits and the threat of bankruptcy, a new CEO took over and paired up with George Lucas and his production company. This allowed them to produce Lego sets based on Indiana Jones and Star Wars. This decision likely saved the company. Instead of generic ‘pirate ship’ or ‘construction site’ sets, they moved on to make movie themed products. It is difficult to imagine that a toy company that went on to earn millions through their movie franchise alone was once on the brink of collapse. The company is now more successful than ever, meaning that we can all continue to accidentally stand on those tiny bricks and be in pain for years to come.
When Sega was in threat of bankruptcy in 2002, the then-President Isao Okawa donated all of his stock to the company, in order to save it. He was towards the end of his battle with cancer, which killed him shortly after his donation. Their troubles had been caused by the decision to end production on Dreamcast, their latest console. The release had been underwhelming, leaving them at a loss of 80 billion Yen. Okawa’s personal fortune of 85 billion yen made up for the hit that the company was about to take. If only Sega could convert Sonic coins to Yen – they would have solved their issues a lot sooner!
1997 was a terrible year for Apple. The iPod, which went on to become the company’s flagship product, had not been invented yet. Had an unexpected company not decided to invest in Apple, then we may never have had a convenient way to carry our music around with us. We may have had to do something else to distract ourselves on the commute. When Apple ran into some financial issues, Microsoft invested $150 million to save it from having to declare bankruptcy. Microsoft is the last company you would expect to save Apple, as they are their biggest competitor. It ultimately turned out to be a great business decision, as Microsoft made a huge profit off this investment.
In 1948, BMW began to create luxury cars. This was a move away from their usual affordable automobiles, a huge risk for the company. After all, Mercedes-Benz dominated the luxury car market. In 1951, the BMW 501 was released and it was priced at 4 times the average wage of a citizen. Very few cars sold, leaving the company close to bankruptcy. The Quandt family, most notably Herbert Werner and Harald Quandt, German industrialists and the sons of members of the Nazi party, made a large investment in the company which saved it. This investment did not come free, however, as the family demanded a restructuring of the company, with new managers put in charge. Now, BMW is well known for making luxury cars, but had it not been for the job-losing decision to change the company’s focus, then they would not have the same great reputation.
5 Six Flags
Despite having a reputation for being a place of joy, Six Flags has went through some dark times. In June 2009, it filed for bankruptcy, after falling $2.4 billion in debt. On top of this, it had to pay $300 million to its stockholders in August of that year. With less than two months left to make up the money for these payments, Six Flags had no choice but to file for bankruptcy. It had had a relatively good year besides the debt, as it profited $275 million from the 25 million visitors so far that year. A few months later, the company returned thanks to its lawyers arranging a restructuring of the debt. It now continues business, with a series of theme parks and water parks across America. It sure was a “rollercoaster” of a journey.
4The Walt Disney Company
The early years of The Walt Disney Company was by no means a perfect fairy tale. Disney was at the brink of bankruptcy twice, once in 1920, when their financial backer went bankrupt himself and again in 1937. The creation of ‘Snow White and the Seven Dwarfs’ was a huge financial burden for the company. It was their first feature length film, but it required a $1.5 million investment from Walt Disney and a bank loan in order for it to be completed. Looking back, it was a huge risk, because had it failed, then Disney would not have become the household name that it is today. ‘Snow White and the Seven Dwarfs’ went on to make $8 million at the box office, which is especially good considering how it was released during the Great Depression.
3 American Airlines
American Airlines once found its self in such a bad situation that it was removed from the New York Stock Exchange. The stock had fallen to 20 cents per share and in its entirety, the company was worth $90 million. It may seem like a lot of money, but ‘The Wall Street Journal’ put this into context by appropriately comparing it to “less than the typical list price of a new passenger jet.” The company has since returned to the New York Stock Exchange, with a value of $300 million. Had it not been for a large amount of investors buying the stock cheap, American Airlines may have went the same way as Eastern Airlines and Pan American World Airways. A partner for Pinnacle Investment Advisors purchased roughly $50,000 of shares in the airline, which resulted in a huge profit for him, after the company returned strong.
2 Tesla and SpaceX
It is incredibly difficult to believe that the company that once sent a car into space was once bankrupt. In the beginning, Elon Musk feared that his companies would fail. He was so sure of this, in fact, that he did not take money from investors. Instead, he opted to fund the company with his own money, which he had a substantial amount of due to the sale of his company PayPal for $1.5 billion in 2002. He continue to fund it until 2008, when the financial crisis almost destroyed Tesla and SpaceX. Without any other options, Musk shut down operations, being essentially bankrupt for a few hours. That is when, at the last minute, he secured a $50 million investment in time to save the company. Daimler invested in Tesla and SpaceX, despite themselves being in financial trouble. Whilst this money saved the companies from being closed down, it was not a permanent fix. He still had to work hard to ensure their continued existence. Musk is quoted as having said “we only narrowly survived … we actually closed the financing round on Christmas Eve 2008. It was the last hour of the last day that it was possible.” Only 10 years later, he had sent a car into orbit to the tune of ‘Starman’ by David Bowie.
1 Etch a Sketch
This children’s toy would not have been as iconic as it is today, had it not featured in a popular Pixar movie. Etch a Sketch was on the brink of bankruptcy in 1999, when the creators of Toy Story 2 approached them. The scene in question featured an Etch a Sketch for only 12 seconds, but this appearance revived the popularity of the product. It allowed the company time to seek financing, with which they moved production of the toy from Ohio to China. This cut down production costs and prolonged the life of the company. They were not the only product which appeared in Toy Story 2 (obviously, a movie about toys would be pretty dull without toys in it.) Barbie and Mr Potato Head were also written into the script, but neither of them were as reliant on this appearance as Etch a Sketch. Thanks to Toy Story 2, it was named one of the top toys of the century in 2008. Who knew that an appearance in third highest grossing movie of 1999 could make you so popular?
Etch a Sketch belongs at the top of this list because unlike the other companies featured, they produced something which was a typical household item. It did not need batteries or make any noise, so it became a popular gift for parents to buy. Had the business went bankrupt and the toy disappeared from shelves, it would still be remembered as a part of many people’s childhood memories. Few people would remember one of many airlines disappearing, or a production company who had only made one movie in the late 1930s. The escape from the brink of bankruptcy allowed Etch a Sketch to be exposed to many more generations of children, brightening their childhood with two dials and a hundred little lines.
For more cool lists like this, check out 10 Incredibly Dangerous Banned Toys, and 10 Ridiculously Elaborate Things Made With LEGO Bricks.