How did this giant end up like this?!

Hello! We hope you’re having a great weekend. This issue is coming out on a Sunday, due to scheduling conflicts (aka, me).

2024 has been a crazy year for cars, in general, and it just keeps getting crazier. The Olympics are drawing to a close, and here’s a fun fact. Motorsports have been a part of the Olympics twice.

Once in 1900, when there was an 837-mile race and, another, in 1972, when there was another rally. However, neither have been officially an Olympic event, only something that happened during them.

But hey, there’s breakdancing, so we can only hope.

Sincerely, Bernard

Key Takeaways

Don’t have much time? Here’s the summary of what we’re talking about:

• The world-famous seat brand RECARO filed for bankruptcy, and it’s a move that surprised everyone. 

• One would have guessed that RECARO, a big brand in aftermarket (and OEM) seats, was doing great.

• However, this filing highlights an ever-changing environment in the automotive industry. 

• The proof was that, just days later, BBS also declared bankruptcy.

• We dive deep into why this happened

LONG READ

How did these aftermarket giants end up like this?

This iconic brand filed for bankruptcy and is not the only one.

The world-famous seat brand RECARO filed for bankruptcy, and it’s a move that surprised everyone. 

One would have guessed that RECARO, a big brand in aftermarket (and OEM) seats, was doing great. However, this filing highlights an ever-changing environment in the automotive industry. 

RECARO surprises everyone, even its employees

Autocar broke the news one week ago: RECARO was filing for bankruptcy. At first, everyone in the automotive industry, from fans to automakers, was surprised.

After all, RECARO has always been the epitome of racing seat quality. Everyone knows that one of your first mods on your car is getting RECARO seats (or knockoffs, and we’ll get to that later).

Then, there was another big news story when BBS also filed for bankruptcy. Ironically, the second thing in store when modifying your car was “a good set of rims.” 

These two filings came as a shock. 

What’s even more surprising is that, apparently, its employees had no idea of the situation. When the news broke, some of the 215 workers found out through acquaintances. 

The Worker’s Union in Germany demanded transparency. 

Both brands had earned a reputation for high quality and a high price. RECAROs had an unbeatable driving position, and BBS rims could take tons of damage. They were so popular that some companies even offered them as part of an options package or similar. 

Here’s a short list of GM’s vehicles that came with RECAROs. 

Other brands include Audi, Aston Martin, Ford, Nissan (in the JUKE!), and Porsche, to name a few. 

The same goes for BBS. 

It has been this way for years. 

My BMW 2002tii comes with RECARO seats and is from 1972. 

So, how could a mainstay in the automotive industry declare bankruptcy? Plus, didn’t they sell aircraft and gaming seats as well? 

That’s where this story gets a little complicated. 

How the companies are divided

Yes, RECARO makes airplane and gaming seats. In fact, the company recently won a significant contract to provide seating for India’s largest airline, IndiGo. 

Then, there was the big product launch of their new gaming chair. Here’s the price. (Yes, that much for a gaming chair). 

RECARO and Porsche had created what seems to be the best gaming chair ever. 

So, the company was going great, or so it seemed. 

The problem is that the one manufacturing seats, RECARO Automotive, is an entirely different business. 

The RECARO group comprises its strategic division, aircraft seating, and gaming. RECARO Automotive is another company. 

This is crucial to understanding what happened. 

In fact, RECARO Automotive has changed hands several times. In 2011, RECARO sold its automotive division to Johnson Controls.

Johnson Controls spun off into ADient in 2016; in 2020, Adient sold it to a privately held entity. 

Why does this matter? The rumblings on the streets are that those who own RECARO don’t care much about the automotive sector. Instead, they saw this company as a cash cow. 

BBS shares a similar story, perhaps one with more controversy. In 2007, BBS experienced challenging times that eventually led to financial trouble.

The company sourced its aluminum from Guinea, which went through a civil war. 

BTW, it’s still happening

Aluminum market prices skyrocketed, and BBS struggled to recover. It filed for bankruptcy and was taken over by a Belgian firm. Then, in 2015, a Korean firm became the majority owner, and in 2020, it filed for insolvency. 

BBS was then acquired by another multinational company, and now, in 2024, it has filed for bankruptcy, which would mark its fifth time in such a scenario. The problem is that this time, the company has even failed to pay salaries since May. 

From the outside, it seems that these two companies have perpetually fallen victim to mismanagement. However, to the automotive world, this could be an omen. 

After all, RECARO and BBS were critical players in the sector. 

Why these two matter

Some brands simply stand out.

BBS, for example, carved its reputation for providing aesthetically beautiful rims that were lighter than the competition.

Not only that, but they could withstand massive potholes and were more robust than most other rims. 

Of course, this translated to an increase in price tag, but this, in turn, helped BBS establish itself as a respected brand. If you could afford them, you had something good in your car. 

Aesthetically, they were also beautiful, but this wasn’t the only factor. People knew that BBS stood for quality. 

This YouTube video has a common question: Why are BBS wheels everywhere?

The same applied to RECARO. From the start, these seats were some of the most comfortable seats for racing. The design allowed drivers to stay positioned even in the most challenging cornering situations. 

Plus, there’s the association. RECARO has always partnered with upscale brands, starting with Porsche and eventually making its way to others, such as Aston Martin. It has even sponsored racing teams. 

Not only that, but the seats are durable. I have a 52-year-old car with Recaro seats from the factory (well, OEM). They are, hands down, the most comfortable seats I’ve ever had, and that’s hard to find for my 6’4” frame. 

RECAROs were also light and durable, making them ideal for any modification. In fact, a RECARO seat is not unusual in every racing sport. 

That’s why the price tag kept increasing, to a point where you can find a RECARO seat worth $8000 or more. 

Here’s a review of some of the most expensive.

So, it’s clear that these companies have a solid reputation, and that’s why it was surprising to everyone. The problem is that BBS and RECARO aren’t the only ones in danger. 

Why is this happening?

The reality is that RECARO and BBS aren’t the only aftermarket and OEM companies in the automotive sector. Many others have built similar reputations, and all of them face one common challenge: competition. 

Knockoffs and imitation products exist, and they progressively improve while maintaining a lower price. Of course, the downside is the quality. 

While many believe that knockoffs have no downsides, they could still present a risk in an accident. Many YouTube channels have experienced the same thing: testing originals, replicas, and knockoffs always yields concerning results. 

But this will happen less and less, and eventually, these other brands will cease to be knockoffs. They will cement their place as a respectable option. 

It’s already happening. 

Then, there’s misfortune. RECARO had landed a massive deal with Ineos. This British company wanted to release the spiritual successor to the Land Rover Defender. 

Here’s a great review of the Ineos Grenadier.

The problem is that the Grenadier took too long.

The COVID-19 pandemic delayed those plans, and thus, this essential contract caused the company to struggle.

After that, prices continued to oscillate wildly, increasing and decreasing, leaving the company almost no room for strategies. 

The same can be said about BBS, but it struggles even more against competition as cheaper brands become increasingly common. 

Does this mean that both companies will disappear? No.

In fact, they’ve been through this before, but the challenges are getting bigger. So, whoever takes the reins has to act fast and act smart. 

At the same time, other high-quality brands must look closely and learn from what’s happening because they might be next in a world of replicas, knockoffs, and improving industries. 

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