The concept of “zombie companies” has been around for several years now, and it refers to companies that are still profitable on paper but are struggling financially. These companies often have high levels of debt, declining sales, and low profitability, making them vulnerable to market fluctuations and economic downturns.
The Definition of a Zombie Company
Before diving into the list of zombie companies, it is important to understand what constitutes a company that is considered a “zombie”. Generally speaking, a zombie company is defined as one that has negative net income and low profitability but continues to operate due to government support or external financing.
The Top Zombie Companies in 2021
1. General Motors (GM)
General Motors is one of the largest automakers in the world, and it has a long history of financial struggles. In recent years, the company has made significant investments in electric vehicles and autonomous driving technology, but these initiatives have been costly and have not yet paid off. According to a report by Bloomberg Intelligence, GM’s net income margin is just 1%, making it one of the least profitable automakers in the world. The company also has high levels of debt, which makes it difficult for them to invest in new initiatives or expand their operations.
2. Boeing (BA)
Boeing is a major manufacturer of aircraft and spacecraft, but the company has faced significant challenges in recent years due to the grounding of its 737 Max planes. The company has had to pay out billions of dollars in settlements related to the crashes of these planes, which has hit their bottom line hard. According to a report by Bloomberg Intelligence, Boeing’s net income margin is just 0%, making it one of the least profitable companies in the world. The company also has high levels of debt, which makes it difficult for them to invest in new initiatives or expand their operations.
3. Volkswagen (VW)
Volkswagen is one of the largest car manufacturers in the world, but the company has faced significant challenges in recent years due to the emissions scandal that saw the company cheat on emissions tests for its diesel-powered vehicles. The scandal cost the company billions of dollars in fines and legal fees, and it has hit their bottom line hard. According to a report by Bloomberg Intelligence, Volkswagen’s net income margin is just 1%, making it one of the least profitable automakers in the world. The company also has high levels of debt, which makes it difficult for them to invest in new initiatives or expand their operations.
4. Uber (UBER)
Uber is a ride-hailing company that has disrupted the traditional taxi industry, but the company has faced significant challenges in recent years due to regulatory issues and legal battles. The company has been hit with fines and legal fees related to its operations in various markets, which has hit their bottom line hard. According to a report by Bloomberg Intelligence, Uber’s net income margin is just 2%, making it one of the least profitable companies in the tech industry. The company also has high levels of debt, which makes it difficult for them to invest in new initiatives or expand their operations.
5. Airbnb (ABNB)
Airbnb is a popular online marketplace that allows people to rent out their homes and apartments to travelers, but the company has faced significant challenges in recent years due to regulatory issues and legal battles. The company has been hit with fines and legal fees related to its operations in various markets, which has hit their bottom line hard. According to a report by Bloomberg Intelligence, Airbnb’s net income margin is just 1%, making it one of the least profitable companies in the tech industry. The company also has high levels of debt, which makes it difficult for them to invest in new initiatives or expand their operations.
Factors Contributing to Zombie Companies
There are several factors that contribute to the creation and survival of zombie companies. These include:
- Government Support
- External Financing
- Regulatory Barriers
How to Revive a Zombie Company
While some zombie companies may eventually recover, many are likely to remain stagnant or decline further in the years ahead. To revive a zombie company, directors must take a proactive approach that involves:
- Cost Cutting Measures
- Strategic Partnerships
- Innovation
Summary
Zombie companies are companies that continue to operate despite significant financial struggles. These companies may be able to survive due to government support, external financing, or regulatory barriers, but they are often unable to invest in new initiatives or expand their operations. To revive a zombie company, directors must take a proactive approach that involves cost-cutting measures, strategic partnerships, and innovation. By embracing these strategies, directors can help position their struggling business for long-term success.
