Filing for bankruptcy is a practice that provides a new lease of life to not just financially struggling individuals but also ailing companies. However, the social stigma attached to bankruptcy may cause more mayhem in the business world. According to Los Angeles, based law firm Recovery Law Group a stigma does exist with corporate bankruptcy. However, there have been many instances where companies have flourished after declaring for bankruptcy. The latest case of Cadillac and General Motors is proof of the stigma attached to corporate bankruptcy.
Cadillac is the luxury brand of General Motors Co. It recently announced its decision to distance itself from the Detroit-based parent company since GM Co. had declared for $ 50 billion U.S. backed bankruptcy. It chose to erase the GM name from its marketing and dealerships apart from replacing the official email address to @cadillac.com instead of @gm.com. This separation strategy was due to the fact that GM was undergoing restructuring as part of bankruptcy proceedings.
Cadillac, which prides itself on the high quality of products didn’t wish to associate itself with a name which would drag its brand name down. Since GM was undergoing through bankruptcy proceedings, the market had lower credibility in the brand and the quality of its products. Though there is a stigma attached with corporate bankruptcy, the steps taken by Cadillac seem a bit extreme, especially in the restructuring phase. However, filing for bankruptcy saved GM and the company was able to survive through the passing bad phase.
Unlike corporate handlers, consumers are not that ignorant. A company filing for bankruptcy is somewhat similar to an individual filing for the same. Just like an individual needs respite due to some bad financial decisions, a company too might need a fresh start. The company’s ability to flourish post-bankruptcy depends on their will to stand by their products and avoid making similar mistakes like the ones that caused bankruptcy the first time.