Elon Musk famously stood on stage and declared, “The only two American car companies that haven’t gone bankrupt are Ford and Tesla.” That should give you an idea of how cut-throat the automotive industry is.

Car companies have to invest huge sums of money in R&D and even larger sums in infrastructure like factories. And if your cars are panned by the press and ignored by the public, you might never see a return on your investment.

In this article, I’m going to look at three famous car brands that went through catastrophe and collapse, only to return to the market stronger than ever before.

General Motors

General Motors is one of the Big Three American car manufacturers, an automotive giant shifting upwards of five million cars in the US every year.

Unfortunately, the global financial crisis hit the North American automotive industry hard. The Big Three all suffered from nose-diving sales and significant financial losses.

Despite taking swift action — GM idled its factories and laid off huge swathes of its workforce — the manufacturer declared bankruptcy on 1st June 2009.

Nine days after going bust, General Motors emerged from government-backed Chapter 11 reorganisation with a $49.5 billion investment from the US Treasury. (That’s roughly equivalent to the GDP of Macau!) The Treasury also invested a further $17.2 billion into GM’s former financing company, GMAC.

It wasn’t just new money that got GM back on its feet. It also jettisoned a bunch of poorly performing nameplates like Saturn, Pontiac and Hummer. It also sold other more successful brands like Saab.

Just one year on from its bankruptcy announcement, GM went public again and returned to profitability a couple months later.


Volkswagen is the second largest car manufacturer in the world, shifting almost 11 million vehicles last year and generating over $269 billion.

In short, it would take a seismic event to destabilize the German giant. Well, that’s exactly what we got.

The Volkswagen emissions scandal (also called dieselgate) began in September 2015. Essentially, the Environmental Protection Agency (EPA) found that Volkswagen was cheating emissions tests with a bit of kit called a defeat device.

These defeat devices were fitted in Volkswagen engines and tricked the engine to emit less pollution during emission tests than it did in real-world driving scenarios. In practice, the EPA discovered some Volkswagen cars emitted up to 40 times as much toxic fumes as was permitted.

And the scale of this scandal? Conservative estimates peg it in excess of 11 million cars.

The scandal blew up and investors reacted with vengeance. Share prices fell from a peak of €253 in April 2015 to a trough of €92 in October. With consumer trust shattered and investors panicking, the future did not look bright.

I spoke to Will Craig, the CEO of car leasing comparison site LeaseFetcher about the scandal and its effect on his buying choices.

“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!”

In response to the scandal, Volkswagen threw their hands up and announced, “Mea culpa!”

The group’s chief executive resigned immediately and was replaced by an outsider from Porsche. The company also set aside €6.7 billion to pay for a large-scale recall.

Since the scandal, Volkswagen has been very public about its electric ambitions, hoping to rebrand itself as a futuristic green marquee.


As we saw earlier, the 2008 global recession hit all businesses hard. And while some like General Motors and Chrysler were big and important enough to demand a rescue package from the government, others were not.

Tesla was one of those companies.

In 2008, Tesla was just five-years-old and was struggling to stay afloat in the cutthroat automotive industry. The global financial downturn dissolved what little stability the company had left and the company began spiralling towards bankruptcy.

Tesla needed money and it needed money fast. Unfortunately, no one was willing to part with their cash.

On Christmas Eve 2008, Tesla was on the brink. And then, when all hope was lost, Daimler stepped in and invested $50 million into the stricken company, giving it just enough cash to continue.

As founder Elon Musk admits, Tesla, “closed the financing round on Christmas Eve 2008. It was the last hour of the last day that it was possible.” Quite the narrow escape!