I cannot recall a time when a well-established high-end German manufacturer declared bankruptcy; it is indeed a rare occurrence. However, that rare occurrence has now befallen Recaro Automotive, a manufacturer of high-end sports seats favoured by Porsche, BMW, and Mercedes, among other clients. Established in 1906, the Recaro Group underwent a restructuring phase in the late 1990s, effectively splitting into four separate companies, one of which became Recaro Automotive.

In 2011, the Recaro Group sold its automotive seating division to Johnson Controls, a U.S.-based automotive supplier. This acquisition allowed Johnson Controls to become a licensee of the Recaro brand in the automotive industry. By 2016, Johnson Controls established Adient, a supplier specializing in automotive seats.

In 2020, the Detroit-based venture capital firm Raven Acquisitions acquired Recaro Automotive, sealing the company’s fate and leading to its bankruptcy. Venture capital firms have developed a specific modus operandi: they take healthy firms with positive balance sheets and access to bank loans, then use these companies to launder the bank loans into the pockets of investors, using the company to pay off the interest.

Fate Sealed

They continue to borrow money from banks until the company can no longer afford to service the interest on the loans. For Recaro Automotive, this was an eight-year process of managed decline, and it is perfectly legal.

This business practice is known as vulture capitalism. The same methodology was used on Toys R Us, and numerous companies have fallen victim to this tactic of capturing and destroying otherwise healthy and well-managed businesses. Recaro Automotive employees were completely unaware of the situation until they were notified at the last minute.

Recaro representatives may attribute the company’s decline to increased competition, inflation, and rising energy costs. While these factors are indeed challenges for any business, the involvement of a venture capital firm strongly suggests that Recaro Automotive’s demise was a deliberate act of sabotage for the purpose of wealth extraction.