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Business bankruptcies soar in '08

By Chris Walsh, Rocky Mountain News (Contact)

Published January 6, 2009 at 12:05 a.m.

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The number of businesses that filed for bankruptcy in Colorado last year hit the second-highest level since at least 1999, no surprise given the anemic economy, the unraveling real estate industry and the crumbling credit markets.

An estimated 900 to 950 businesses - from a window company to a casino operator to energy and real estate firms - filed for bankruptcy here in 2008, according to data from the U.S. Bankruptcy Court for the District of Colorado. That represents a 43 percent to 50 percent jump over 2007, when 628 companies filed.

"The economic and credit situations have had a huge ripple effect on businesses," said Brad Bolton, the clerk of the court. "There were a lot of business failures, and that's expected" given the environment.

The increase is higher than the 37 percent spike in overall bankruptcy filings, which include those made by individuals.

Businesses can file either for Chapter 11 bankruptcy protection, in which they continue operating while they restructure, or Chapter 7, in which they typically liquidate.

The number of Chapter 11 filings hit 118 for all of last year, the highest total over the past decade. Exact data on the number of Chapter 7 cases filed by businesses last year won't be tallied until later this month because the court must still separate them from those filed by individuals.

Still, the 900 to 950 estimate for all business bankruptcies is far higher than any year over the past decade with the exception of 2005, when there were 1,102 cases. That year, however, was an anomaly because the court handled a rush of filings before a new law went into effect that made it more difficult to declare bankruptcy. Filings then dipped dramatically in 2006 and have been trending upward toward traditional levels since then.

"You can disregard 2005 because of a mass panic to file before the law change, and 2006 was relatively quiet because everybody was trying to figure out" those changes, said Jon B. Clarke, a bankruptcy attorney in the Denver Tech Center.

Two of the more notable Chapter 7 cases this year involved aircraft manufacturing companies Adam Aircraft and Aviation Technology Group. The once- promising companies spiraled quickly into bankruptcy during the first half of the year as the credit markets tightened, leaving hundreds of workers without jobs.

Many businesses that filed more recently were hit hard by a shift in consumer spending. Many consumers have lost their jobs, and others are worried that they're next. So they've dramatically cut their discretionary budgets, affecting a wide swath of companies.

That's exactly what happened to Accent Windows, a well- known local business that actually posted record revenue in 2007. Its fortunes changed in 2008, when the 26-year-old company experienced a dramatic decline in business as consumers backed off home improvement projects. Terry Marcovich, the president of Accent, told the Rocky Mountain News several months ago that sales were down 35 percent to 40 percent.

Experts say we'll likely see more of the same this year.

The bankruptcy court's Bolton expects overall filings for individuals and businesses in Colorado to increase by as much as 4,000, which would put bankruptcy cases back to levels seen before the run-up in 2005.

Clarke also predicts an increase, although he thinks the makeup of the filings will change.

"In 2008 it was driven primarily by real estate issues. We had a lot of land developers, home builders, sub-prime mortgage borrowers and speculative investors who would fix and flip homes," Clarke said. "I think in 2009 we'll have more unemployed people and small businesses, particularly retail stores, restaurants and boutiques and those selling luxury items."

walshc@RockyMountainNews.com or 303-954-2744

Forced to file

Businesses across a wide swath of industries were forced to file for Chapter 7 or Chapter 11 bankruptcy last year in Colorado. Some examples:

*Accent Windows

*Adam Aircraft

*Aviation Technology Group

*Bailey Auto Body

*The Clubhouse at Fairway Pines>

*Immune Health Technologies

*Imperial Gaming Corp.

*Polar Molecular Corp.

*Tatonka Oil & Gas Co.

*Storm Cat Energy

*Vail Plaza Development

*Village Homes of Colorado

Comments

  • January 6, 2009

    6:36 a.m.

    Suggest removal

    HolierThanThou writes:

    Conservative economic policies begin with offshoring American jobs to countries like China and India. This has been America's biggest export under Bush. Even Ronald Reagan realized that our computer and IC chip manufacturing needed protection by tariffs.

    Then conservatives spend government money like there's no tomorrow while saying they believe in smaller government. Of course, while the government grows in directions that threaten your liberties and the lives of people abroad, it shrinks on all the services you need the most. Remember hurricane Katrina?

    Conservatives will shoot the moon on guns and weapons because they sell those things. They go cheap on anything that might provide the least benefit to anyone else.

    Now conservatives want you to blame the Republican Party. This is like blaming the bottle for the rotgut whiskey. I suggest that first you empty the poison from the bottle and then fill it with something better.

    We're importing plenty of junk from China. A visit to any retailer will show you that. But the Chinese do something brilliant that we spineless Americans seem unable to do. They hold their business leaders responsible for the results they produce. They make good use of their courts and justice system to deal with those who believe they can profit from cheating and failure at the expense of the people. They use firing squads.

    We paid the executives of failed finance and banking companies over 3.2 billion dollars last year with our tax money. As the saying goes, you get what you pay for.

  • January 6, 2009

    7:11 a.m.

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    SockRayBlue writes:

    Perhaps Walmart needs to be renamed "Little China"?

    Methinks that the executives were paid large sums per their contracts. And we all know what a large "benefit" lawyers are for this country.

    I do prefer the guillotine over the firing squad. It makes a better statement than the sound of gunfire. Too many complaints from the anti's.

  • January 6, 2009

    8:41 a.m.

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    wyhammertime writes:

    Hang on folk's it's just getting started !! It's funny that all these banks go bailed out with our money and they are blowing it on their selves and other perks and what do we do about it ???Get mad and do nothing I feel that a few of these bank exec's that cried the blues should get a helping hand out a 5th story window !! I see that G.M. is still hosting a bowl game on our dime along with alot of other's and they are making us a bunch of fool's hope we all like it !! I say let's all not pay taxes this year and let the bailout baby's foot the bill and return the favor they OWE us am I right ???

  • January 6, 2009

    8:45 a.m.

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    bxwatso writes:

    HolierThanThou:

    The reason jobs are 'exported' to the likes of China is because it is more profitable to make things there. I have no idea how this trend, which has been going on for decades and decades, can be hung on 'conservatives' or Bush. Even counting the mess we are in now, the economy added millions of new jobs during the past 8 years.

    I presume you think this trend will stop now that Democrats control Washington. Good luck with that.

    If you really want to create manufacturing jobs in the US, why not try reducing obscene union cartels on labor costs and excessive employment law expenses so that manufacturing costs are competitive?

  • January 6, 2009

    8:58 a.m.

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    mytwosense writes:

    bxwatso, you're right in that so-called liberal politicians have certainly been on the globalization bandwagon, as well. Clinton definitely comes to mind.

    However, your proposed fix to bring back US jobs could stand some closer examination. Consider that these jobs have been shipped off to export processing zones in places like China, Bangladesh, and Vietnam where the workers are paid substandard wages they can barely subsist on, where union organizers are harassed or even killed, where the workers are actually locked in the factories and work 16 hours a day or more, live crowded together in cramped dorm rooms, and where armed guards patrol the zones. In other words, these are manufacturing hellholes - not places where the labor costs and expenses are just less expensive than the US. That's the understatement of the year.

    What I'm saying is that if US companies would allow offshore workers to suffer such miserable conditions in the name of a whopping bottom line, do you honestly think just some concessions here, some breaks there would be enough to bring them back?

    We cannot look to these companies suddenly having a crisis of conscious. They have proven time and again that profits will always come before people, even when just a small raise for some of these workers wouldn't cut into their profits that much. THEY DON'T CARE.

    It's up to citizens to boycott companies that engage in such practices, and buy from retailers and suppliers who still have something resembling a soul. Reward the latter with our dollars, not the former, and that's how you'll see more US jobs here again. We may be in an economic downturn, but the US is still an incredibly lucrative market. These businesses aren't going to want to lose that market share, which they will as more people become disgusted with their business practices.

  • January 6, 2009

    9:08 a.m.

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    Nobama writes:

    "The number of businesses that filed for bankruptcy in Colorado last year hit the second-highest level since at least 1999, no surprise given the anemic economy, the unraveling real estate industry and the crumbling credit markets."

    Well, if it's "no surprise", why is it newsworthy? This is just another "chicken little joke". Between the negative Democrats and the main stream news media, the consumer confidence level was beaten down to a pulp. Then, we wonder why the economy tanked? I'm betting the economic news takes on a whole new rosey aura about January 20th.

  • January 6, 2009

    10:01 a.m.

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    Willy writes:

    Outsourcing has become a wedge issue - something politcians use to inflame emotions but has very little overall impact on society. About 70% of "outsourcing" contracts are awarded to American companies. You might recognize a few of the names like IBM, Microsoft, Accenture, Deloitte, Convergys, SAIC, etc. do they do some of the work overseas, of course, but the revenue stream comes through the US.

    Remember, the root cause of our involvement in WWII was protectionism. We waged economic war on Japan for ten years before Pearl Harbor. Not a mistake we want to make again.

  • January 6, 2009

    10:11 a.m.

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    bxwatso writes:

    mytwosense

    I agree that they don't care, and they never will. It is not the job of a company to care, and if a company puts 'people before profits,' it will soon go out of business. That is because it is not the job of a consumer to care either. Consumers buy the items that give them the best value (from their points of view), and have never shown any measure of caring how the workers are treated.

    I disagree that the US needs to lower wages and working conditions to Asian levels to compete. US labor is the most productive in the world, by far. Our physical infrastructure is the best. Our rule of law is the best. Our access to investment capital for machinery is the best. Our workforce is the most flexible and adaptive. All of these advantages allow manufacturing to work in the US at good wages, and it does in many locations like Georgia, Alabama, and Kentucky.

    What doesn't work is the kind of obscene union contracts that are killing companies like GM.

  • January 6, 2009

    10:15 a.m.

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    mytwosense writes:

    Willy writes: "Outsourcing has become a wedge issue - something politcians use to inflame emotions but has very little overall impact on society."

    You mean it has little impact on your own life. However, you are not a worker hunched over a sewing machine or standing in front of an assembly line for 16 hours somewhere in an offshore export processing zone. And apparently, you're not one of the millions of Americans who has seen your job shipped overseas.

    Willy writes: "About 70% of "outsourcing" contracts are awarded to American companies."

    I'd be curious to see your source for that information. Because every product label I see almost always has "Made in China" on it, or another country, not the USA. The manufacturing sector in the US certainly isn't dead, but it's been sharply declining for years and years.

    Willy writes: "You might recognize a few of the names like IBM, Microsoft, Accenture, Deloitte, Convergys, SAIC, etc. do they do some of the work overseas, of course, but the revenue stream comes through the US."

    Yes, a great deal of revenue comes back to the US - in the form of profits, which, if you happen to be a large shareholder in one of those companies, has made you extraordinarily rich if you cashed in your shares, or, in the case of an executive, exercised your options, at a high stock price.

  • January 6, 2009

    10:22 a.m.

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    mytwosense writes:

    bxwatso writes: "mytwosense, I agree that they don't care, and they never will. It is not the job of a company to care, and if a company puts 'people before profits,' it will soon go out of business. That is because it is not the job of a consumer to care either. Consumers buy the items that give them the best value (from their points of view), and have never shown any measure of caring how the workers are treated."

    Well...probably not surprisingly, I have a different take. :) As a small business owner, from time to time I have to outsource some work to others (in the US, not overseas). I do care about paying them a good fee in exchange for their quality work. Just because I'm conducting a business transaction doesn't mean I all of a sudden relinquish any sense of human decency and fairness.

    And as both a consumer and a citizen, I do care about buying products that aren't made by virtual slaves, especially children. Again, just because I'm shopping for a set of bath towels, doesn't mean I become nothing more than a coldly calculating buyer of goods - I look on the labels now to see where it was made. I'd rather pay a higher cost for a set of towels made under fairer conditions.

    In other words, I don't have to sacrifice my conscious to be either a business owner or a consumer. Although, as more companies outsource to these hellish export processing zones, my latter role gets more and more challenging trying to hunt down a product that isn't.

  • January 6, 2009

    10:59 a.m.

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    Willy writes:

    My2cents - I work with offshoring on a daily basis. My sources are industry trade magazines. Like it or not we are now a global economy that is getting tighter knit every day. We have to adapt to that or we will fall behind other countries. Your rant about stockholders and executives being the only beneficiaries of the profits is off base. Those profits are usually reinvested in the businesses to pay down debt, develop new products and hire more workers. Stockholders and executives are not a bunch of Scrooge McDucks sitting in their castles on a pile of gold coins.

  • January 6, 2009

    11 a.m.

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    mytwosense writes:

    bxwatso: "What doesn't work is the kind of obscene union contracts that are killing companies like GM."

    We've been hearing about the supposed death of the auto industry ever since I can remember. If the unions are indeed "responsible" for this death that we still haven't seen, it's the slowest death in recorded history. The companies have been unionized for decades.

    Also, your average auto union worker doesn't make an obscene amount of money, although I've seen some figures floated around that give an inaccurate hourly rate for them. But even at those rates, which aren't true but if they were, are microscopic compared to the thousands of dollars an hour the auto execs are making and the millions they are paying - still - to sponsor sporting events, run marketing and branding campaigns, and also what they pay for supplies and materials. My understanding is that labor accounts for just 10% of the cost to make a car.

    And there is nothing obscene about working hard and using your skills in exchange for a very good wage, health benefits, and a pension that will support you well after you've put in decades of your time and productivity.

  • January 6, 2009

    11:08 a.m.

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    mytwosense writes:

    Willy, I'm pretty sure that industry trade magazines are going to spin a much more rosy-viewed picture of offshoring. You also state:

    "Those profits are usually reinvested in the businesses to pay down debt, develop new products and hire more workers."

    Actually, most of these companies are constantly concerned with divesting themselves of workers, not to add more of them. That's one reason why offshoring is so attractive to them; they can contract out the work to a contractor instead of being officially responsible for directly employed workers.

    As for hiring US workers, again, the trend is seeing more layoffs and offshoring of US jobs, not less.

    I will agree profits are often used to expand the business in terms of blanketing market areas with more stores, if we're talking about consumer retailers like Starbucks, Target, and Wal-Mart. I'd be happy to direct you to some studies that show how chain retailers often depress wages, take away jobs, and diminish local economies if you're interested.

    Finally, many of these companies don't develop products anymore, they just develop some designs for them, spend millions on marketing and branding them, but have someone else actually produce them. Fewer and fewer companies these days own their own manufacturing facilities. Very often, competing products are made by the same export processing zone factories. There's no real differentiation, just imaginary ones created by extraordinarily expensive branding campaigns.

  • January 6, 2009

    12:21 p.m.

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    Willy writes:

    my2cents says:

    "Finally, many of these companies don't develop products anymore, they just develop some designs for them, spend millions on marketing and branding them, but have someone else actually produce them. Fewer and fewer companies these days own their own manufacturing facilities."

    Why is that wrong? It is increasing efficiencies. Not manufacturing, but why should a company build a huge data
    center on its own when it can share one through outsourcing for a much lower cost? Why should J&J spend the money to build a plant to make asprin when they can buy them from Dow Chemical who makes them by the billions.

    The Walmarts etc. you mention would not exist and would not be expanding if there were not a demand for their services. Since they are able to operate more efficiently than the mom and pop store, they are able to offer lower prices and attract more consumers. That's life.

    Your take on the auto industry is also incorrect. Around 1970, GM and Toyota in a joint venture built the most efficient auto manufacturing plant in the world in Freemont, California. They built the Toyota Corollas and the Chevy knock offs in that plant. Those cars were among the highest quality and most efficient of their era. It was 25 years later before the UAW would allow that manufacturing technology to be used in any of the other manufacturing locations. The concession that was made to finally allow that technology to spread was the work rules that pay non working union members a salary. The wage figures you refer to have been well documented. The fully loaded wage and benefit package for the US automakers is about 75% higher than the same fully loaded package paid to non union workers in foreign owned US plants.

  • January 6, 2009

    4:14 p.m.

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    mytwosense writes:

    Willy, you sound like a boilerplate press release from one of those companies. You sure do like to toss around the generic corporate-speak.

    "Increasing efficiencies..." That's just another BS euphemism for exploiting workers, as is "streamlining processes" and "maximizing productivity." It all adds up to paying pennies an hour, overwork, and worker intimidation. A good chunk of those workers, by the way, who are children and teenage girls.

    Yes, there's a market for the goods they produce, by people who are either just plain unaware of the conditions those goods were made under, or who are too cheap to pay a little more for a product made by workers who receive better wages.