Technological progress in industries has led to the demise of companies and whole business sectors throughout history.
A classic example of the collapse of an industry caused by technological advancement was the death of the video retail sector as video streaming services took hold in the mid-2000s.
The popularity of home video systems and VHS tapes in the 1980s led to a proliferation of video rental stores and the launch of Blockbuster Video in 1985 and its top competitor Hollywood Video in 1988.
By the mid-2000s, DVDs had overtaken the VHS format just as video streaming was developing. By 2010, as streaming began to expand and the price of DVDs was plummeting, video retail stores faced financial distress.
Hollywood Video and Blockbuster Video filed for bankruptcy in 2010
Hollywood Video’s parent Movie Gallery in February 2010 filed for Chapter 11 bankruptcy and two months later converted to Chapter 7 and liquidated.
Blockbuster followed close behind Hollywood and filed for Chapter 11 in September 2010 with about $1 billion in debt and closed all of its stores in August 2014.
Death of the video store industry
- Movie Gallery converts to Chapter 7 liquidation in April 2010 and closes.
- Blockbuster Video files Chapter 11 bankruptcy in September 2010 and closes in August 2014.
- Redbox Video’s parent, Chicken Soup for the Soul Entertainment, converts to Chapter 7 bankruptcy and liquidates in July 2024.
The final nail in the coffin for the video rental industry was Redbox Video’s parent Chicken Soup for the Soul Entertainment’s conversion of its Chapter 11 case to Chapter 7 liquidation on July 10, 2024.
Another business sector, the refrigeration appliance industry, also faced a technological change that has led to the demise of a major company.
Norcold files for Chapter 11 bankruptcy to liquidate
Former recreational vehicle refrigerator manufacturer Norcold LLC filed for Chapter 11 bankruptcy with a plan of liquidation to sell its assets to its debtor-in-possession financing lender, then liquidate and wind down its business.
The Ann Arbor, Mich.-based debtor filed its petition in the U.S. Bankruptcy Court for the District of Delaware on Nov. 3, listing $10 million to $50 million in assets and $100 million to $500 million in liabilities.
The debtor’s largest unsecured creditors include Dellware Electrical Appliance Co., owed over $1.02 million, ZenCargo Freight, owed over $341,000, and Longoal Tech LLC, owed over $150,000.
Norcold’s largest unsecured creditors
- Dellware Electrical Appliance Co., owed over $1.02 million
- ZenCargo Freight, owed over $341,000
- Longoal Tech LLC, owed over $150,000
Norcold, founded in 1959, manufactured refrigeration units for recreational vehicles and marine vessels that used either propane or natural gas to fuel the appliances, according to a declaration filed by Chief Restructuring Officer Richard Wu of Alvarez & Marsal North America LLC.
A product recall in 2010 for units with an elevated fire risk led to the company transitioning from manufacturer to distributor. Product liability lawsuits led to costly settlements, increased insurance premiums, and defense costs, which impacted operations and caused reputational fallout.
Technology change impacts Norcold sales
Changing consumer behavior and increased competition also led to a decline in sales. In 2018, original equipment manufacturers of RVs transitioned from gas absorption refrigeration to direct current compressor technology, further impacting Norcold’s business.
Norcold’s large market share of the gas absorption refrigeration market led to a substantial loss of overall market share. Financial losses continued to rise with lingering product liability litigation, increased insurance costs, recalls, and warranty claims, as revenue and market share shrank.
More bankruptcy:
- 34-year-old casual dining chain files for Chapter 11 bankruptcy
- Major seafood company files for Chapter 11 bankruptcy
- 55-year-old women’s fashion company files Chapter 11 bankruptcy
Norcold’s net sales declined 60% between 2022 and 2023, and the company closed its manufacturing plant in Ohio in 2022, laying off 500 full-time employees. Manufacturing was transitioned to non-debtor, foreign affiliates.
The company currently has no employees and operates as a “buy and sell” distributor, relying on third-party manufacturers and non-debtor affiliates for manufacturing capabilities.
Norcold to sell assets to Dave Carter & Associates
Before filing for bankruptcy, Norcold hired restructuring advisers to develop a bankruptcy plan of liquidation, looking to sell its assets to stalking-horse bidder Dave Carter & Associates, which also agreed to provide $13 million in debtor-in-possession financing.
“Ultimately, Norcold concluded that commencing a sale process within Chapter 11 of the Bankruptcy Code was the most viable path to preserve and maximize the value its assets,” Wu stated in his declaration.
Under the plan, Dave Carter & Associates will credit bid the DIP loan debt in an auction for the debtor’s assets.
Dave Carter & Associates is a national distributor of OEM components for manufactured housing, RVs, modular homes, and specialty vehicles.
Related: Popular beer brand files Chapter 11 bankruptcy a second time
