Simon Thiel and Eva von Shaper report on Bloomberg.com what has become a regular and repetitive story about “failure.” Quimoda AG is a unit of chipmaker Infineon Technologies AG and it has failed to get sufficient financing it needs due to the decrease in chip prices. Quimoda AG is just another example of the global economic crunch that has creditors refusing credit where they would typically give it.
Due to the unexpected and forced price of chips, Quimoda AG finds itself in an insolvent position.
As the article goes on to report, the Munich-based company has 12,200 employees and needed $420 million but the loan couldn’t be completed in time and prices of “dynamic random access memory” (DRAM), went down a grand 51%.
Quimoda AG is battling a number of factors.
First of course is the diminished financial market that can at any time prevent the normal available cash flow to be available to continue the needed business pattern.
Next, cheap Asian labor slashes prices across the board and there is no way within the German economy (anymore than there would be in the United States economy) of maintaining a competitive edge. It should be remembered that Asian labor, especially that out of China cannot or will not guarantee a certain level of quality.
Finally, the memory chip industry as an industry is very high risk. That means that when they cannot get bank financing, they cannot turn to their investors to provide money because investors are scared away by just this type of insolvency.
The insolvency procedure by no means solves the problem. All that they have done so far is to fill out an application. This must be approved and even then it will take some time.
Even in our city of Peoria, Illinois, Caterpillar Tractor Company, a company that is about as solid as they come has had to make changes in their programs with respect to employees.
I guess my question with respect to Quimoda AG is what if they do get their needed protection. If all basic factors with regard to the company’s operation remain the same, can they hope for any type of success?