You win some, you lose some, and for some companies, losing is not as simple as it involves losing billions of dollars.
Due to the hard times and continuing economic crisis, some companies took the hardest hits. When this happens, they are not the only ones affected; it creates a trickle effect of bankruptcy, unemployment, plant closings, foreclosures and high rate of poverty.
Here are the 10 biggest drops in company value as of late:
10. General Motors, $23.50 billion (1992)
General Motors was one of the country’s biggest and most admired companies. It has produced brands like Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. During its peak, GM represented 10% of the country’s economy and controlled more than 50% of the automobile market. In 1992, the company reported a loss of $23.5 billion, where $20.8 billion was for a charge in accounting for the health care benefits of retirees, $744 million for a change for investments made with National Car Rental Systems, Inc., and $749 million restructuring charge at General Motors Hughes Electronic Corp.
9. Royal Bank of Scotland, $34.2 billion (2008)
During the global financial crisis in 2008, one of the hardest hits was the Royal Bank of Scotland which reported a $34.2 billion loss, considered as the largest annual loss in the UK corporate history. Majority of the loss came from a $26 billion reduced value of an asset which was identified ABN Amro. Although the Royal Bank of Scotland chairman said the great loss of the 282-year-old bank was due to the unprecedented turbulence in financial market that time.
8. Qwest Communications, $35.9 billion (2002)
Qwest Communications International Inc., a Denver-based company that is the leading phone company in Minnesota had a rough 2001 with a loss of $4.8 billion. However, nothing could have prepared it for the $35.9 billion loss it posted in 2002. This huge loss was attributed to the goodwill reduction of $30 billion and asset impairments of $10.9 billion.
7. General Motors, $38.7 billion (2007)
Just when things are thought to be getting better in General Motors, it suffered another big loss in 2007 to the tune of $38.7 billion. United States’ number one automaker blamed a number of factors to have contributed to their loss. One was the decreasing U.S. auto market, union strikes by the United Auto Workers which caused a loss of $1.6 billion, accounting charges of tax credits for losses and loss in the home loan business.
6. Freddie Mac, $50.8 billion (2008)
Freddie Mac was created in 1970 to make it easier for people to afford a home revealed that it incurred a $50.8 billion loss in 2008, which was in the midst of the global financial crisis. Ironically, one of its functions is to provide stability for home mortgage markets especially in times of financial crisis.
5. JDS Uniphase, $56.1 billion (2001)
Maker of telecommunications equipment JDS Uniphase may not ring a bell for most people. However, it became known when it posted a $56.1 billion loss which was projected to be at least 10 times as big as its revenue for a lifetime. More than $51 billion out of the total $56.1 billion was from writing off bad investments and acquisitions. Due to the telecommunications boom, its stock became overvalued and JDS Uniphase used it to buy overpriced companies.
4. Fannie Mae, $59.8 billion (2008)
The Federal National Mortgage Association (Fannie Mae), is a government-sponsored enterprise but has become a publicly traded company since 1968. Fannie Mae guarantees loans to enable people to buy homes, help them refinance or rent. In 2007 it posted a loss of $2.1 billion that became 27 times higher in 2008 when it reported a $58.7 billion loss. The huge loss was mainly attributed to the financial crisis which was in full force in 2008 and as an effect, a prolonged housing slump and declining housing conditions.
3. Fannie Mae, $74.4 billion (2009)
Due to the difficulties it suffered in 2008 where it posted a record breaking $59.8 billion loss, the leading residential mortgage credit source in the United States, Fannie Mae, expected things to worsen in 2009 and it surely did. It broke new records in biggest losses with its $74.4 billion deficit to net worth. Fannie Mae, with its objective to support the country’s economy by making a better housing financing system, was greatly affected by the economic turmoil of the global financial crisis which has translated to weakening housing market conditions, losses on derivatives and write-downs of the values of its mortgage-backed securities, mortgage delinquencies, among others. Due to its increasing net worth deficit, it asked for continuous aid from the government.
2. AOL, $98.7 billion (2002)
AOL Time Warner Inc. is not new to the limelight not when it is the world’s biggest media company in 2002. However, the same year it made the headlines but not for the reasons it would have liked, when it was reported that it made the biggest loss in history for a United States-based company. This loss was primarily due to the declining value of its America Online and its two divisions: cable television and music. Not even the successful movie lineup of Time Warner for 2002 which included The Lord of the Rings, can save the company from the economic slump. With this development came the announcement that its largest individual shareholder in the person of Ted Turner was giving up his position as vice chairman and will be leaving the board of directors as well.
1. AIG, $99.3 billion (2008)
Taking the greatest hit in the midst of the 2008 global financial crisis is American International Group Inc. (AIG) which posted a whopping $99.3 billion net loss. As comparison, it only made $6.2 billion net income for 2007. AIG has several reasons for the great deficit, namely: continued grave credit market decline, ongoing restructuring activities costs, accounting costs, amortization and credit costs for government credit facilities, market disruption and severe decline in mortgage backed securities.
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