During the early days of the recession, as stock markets were vacillating between gains and losses, investors had hopes that 2009 would bring about a slow economic recovery as the housing market stabilized. However, two quarters later, with stocks at their lowest levels since the mid 90s and no turnaround in sight, Americans are bracing for what could be a devastating depression. The pain has been felt around the world with 8 members of the European Union pleading for help, loss of jobs all around the world, and a drop in commerce levels.
In a few months time, America has seen drastic drops in consumer spending and less demand for almost everything. This has led to sweeping changes in the economic landscape as thousands of smaller companies and a considerable number of large ones have closed their stores, laid off their employees, and filed for bankruptcy protection. Some of these companies include: Circuit City, Linen N’ Things, Mervyn’s, Pier 1 Imports, Sharper Image, KB Toys, Tribune, Saab, and Lehmann Brothers.
As 2008 tested the flexibility of businesses, 2009 will also not be kind to many companies that have been unable to restructure their budgets to deal with lack of demand and credit. As one economist states, “Short-sightedness, failure to think outside the box,and the inability to adapt to a changing market and changing demographics coupled with arrogance will lead to their failures.” The companies below are best bets to close down their stores sometime in 2009.
I. Sirius XM Satellite Radio
With shares just above a dime each, Sirius satellite is facing major problems in debt repayment. It posted a half billion dollar loss in 2008 and demand is generally nonexistent for its products. It has over 3 billion in unpaid debt and with deadlines approaching, it may be timed for this short lived company to close down.
4 years of billion dollar losses (2.7 billion loss of 2009) and a 53% drop in car purchases in the month of February 2009 has left Ford in shambles. Shares have fallen in the few dollar range with no increase in sight as every report seems to point to the end of almost 92 years of Fordism. Only a swift turnaround in the economy led by an increase in consumer spending and complete makeover of its business will allow Ford to survive.
III. General Motors
General Motors has received cash injections from the federal government but has seen no major turnaround and a staggering 27 billion of losses in 2008. They would surely be bankrupt if it had not been for intervention from the feds. In a worse situation than Ford, GM (the second largest automaker in the world) is nearing the end of its historic run.
An American record $61 billion loss in a quarter and a 30 billion cash injection from the Fed’s has been the story of AIG in the last few weeks. Sooner or later, the government is going to stop using taxpayer money to bail out the 18th largest company in the world.
V. Sears Holding Corporation
Sears has been struggling to change its business image to appeal to customers and fend off competition from larger retailers. With losses of $826 million, it’s a matter of time before investors figure out that the $35 per share for SHLD is overpriced. However, their somewhat dependable appliance division might be here to stay.
VI. Borders Books & Music
Facing stiff competition from overzealous Barnes & Nobles and Amazon.com, Border’s holiday sales decreased over 10% in 2008 and revenue has been dropping consistenly. Unless their is some major reorganization at the top executive level, Border’s will become another victim of the economy.
Rite Aid stores are losing their appeal as CVS and Walgreen’s have begun to entice consumers with excellent promotions, savings, and better merchandise. Shares of Rite-Aid have fallen to about a quarter from their 52 week high of $3. More importantly, consumer reviews of Rite Aid seem to show corporate distruct and a drop in customer service, which over time translates to a drop in demand.
Overpriced and off the radar, Blockbuster has been surprassed by NetFlix. Consumers are also turning to cheaper alternatives, such as Redbox. Also, online statistics show in 2008, pirated movie downloads increased more than ever before. Blockbuster is already in great peril and seeks to change its corporate image.
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