Nabeel Zafar describes a spate of Huge corporate failures
There is hardly any doubt Huge corporate failures that the corporate world largely underpins economic growth the world over and is currently considered an inevitable part of public welfare. Like any other human activity, corporate sector is likely to err and reverberations of any such error are felt far and wide. Certain errors committed by the corporate sector resulted in bringing in global recession in 2008 including large scale corporate failures. In the first quarter of 2020, the leading wealth generating entity Wall Street took a beating as the COVID-19 pandemic took its toll and several industries faced an economic crisis. It is instructive to look at some of the largest corporate losses that affected lives of millions.
General Motors – $38.7 billion in 2007
On the eve of the Great Recession, General Motors posted its largest annual corporate loss ever at $38.7 billion. At the time, GM blamed the loss on unused tax credits but in 2008 the company lost another $30.9 billion. In 1992, GM posted another massive loss of $23.4 billion, which it blamed on a change in healthcare accounting.
Vodafone Group – $40.9 billion in 2006
Vodafone became the largest cellular service provider in the world by gobbling up smaller companies and competitors with deep pockets, but it struggled to return a profit from those investments after the dotcom bubble popped in the early 2000s. In 2002, Vodafone posted an annual loss of $24 billion, the largest corporate loss in European history at that time, and then broke the record again in 2006 with a loss of $ 40.9 billion.
Freddie Mac – $50.8 billion in 2008
Freddie Mac, like Fannie Mae, is a US government-backed mortgage securities firm, which got hit hard by the Great Recession in 2008. As it became clear that mortgages were defaulting and these securities weren’t as valuable as previously thought, Freddie Mac lost an astonishing $50.8 billion in 2008 and another $25.7 billion in 2009.
JDS Uniphase – $56.1 billion in 2001
Ottawa-based JDS Uniphase was a casualty of the dotcom crash in 2000 and its effects on the telecom industry. The fibre-optics manufacturer posted a massive loss of $56.1 billion in 2001, largely due to the write-down of SDL Inc., an optical components business it had purchased less than 12 months prior.
Fannie Mae – $74.4 billion in 2009
The federally-backed housing mortgage company Fannie Mae posted two of the biggest annual corporate losses of all time in the wake of the Great Recession. Originally created by the US Congress during the Great Depression to help issue mortgages, Fannie Mae was particularly susceptible to a crash in the housing market losing $59.8 billion in 2008 and $74.4 billion in 2009 and going into conservatorship of the government.
AOL Time Warner – $98.7 billion in 2002
Upstart internet company America Online purchased telecommunications giant Time Warner for over $100 billion at the height of the dotcom bubble. The honeymoon period only lasted a short time. When the telecom crash occurred in 2002, it eventually wiped out the value of America Online, and in 2002, the recently rebranded AOL Time Warner posted a loss of $98.7 billion, the largest corporate loss in history at the time.
American International Group (AIG) – $99.2 billion in 2008
American International Group was one of the most prominent faces of the Great Recession in 2008. Having invested deeply in risky mortgage-backed investments, AIG faced insolvency when foreclosures started to rise and AIG incurred billions in losses, eventually posting a $99.2 billion loss in 2008 and requiring a bailout from the American government, not just to keep itself afloat, but also to keep the American economy afloat. TW