Massey-Ferguson

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As England government, I wouldn’t give Massey anything because the jobs in the UK are at Perkins, which is probably the part of Massey that will survive the bankruptcy intact. There is no threat to the UK because those jobs aren't going to go away.

As Canada government, I wouldn’t lend Massey the money, but I would guarantee a new loan. This was because the jobs in Canada was at risk and such guarantee did not look like actually giving anything of great value.

As Massey’s shareholders, I would work hard with Massey’s lenders to agree on a restructuring deal. Because if Massey filed for bankruptcy, I got zero, or close to it. But if the deal worked, I got at least as much, if not more.

Why Did Massey Get Into Financial Difficulties

Massey was a firm in a risky product industry with a riskier product market strategy and financial financial strategy than its competitors. When adversity hit, Massey’s losses were not due to their operations, but their high interest costs. Massey funded its initial losses with more debt, starting a downward spiral. Massey then became paralyzed by the costs of financial distress and all this happened very quickly.

Massey’s Future

If a refinancing plan were successfully executed, Massey should be able to make profit in the future, as Massey would have already made a profit if it had no debt in 1980. However, the cost of this financial distress were the permanent loss of competitive position in the product market. Massey lost their developing-world market to foreign competitors and their U.S. market to John Deere.