Diesel USA Bankruptcy : A Restructuring Plan for Survival

Diesel USA Bankruptcy : A Restructuring Plan for Survival
Case Code: BSTR587
Case Length: 10 Pages
Period: 2008-2019
Pub Date: 2019
Teaching Note: Available
 Price: Rs.300
Organization: Diesel USA Inc.
Industry: Textiles & Apparel
Countries: Italy
Themes: Corporate Strategy, Bankruptcy & Turnaround Management
Diesel USA Bankruptcy : A Restructuring Plan for Survival
Abstract Case Intro 1 Case Intro 2 Excerpts

Abstract

The case is about the American arm of the Italian corporation Diesel S.p.A, Diesel USA Inc. (Diesel USA), best known for its high-end denim. Diesel USA ran into problems due to some of the strategies it had adopted in the post-recession US market. Since its launch in 1995, it had been the sole distributor of Diesel products in the US. Its five-pocket jeans dominated pop culture in the 1990s and early 2000s. But the global recession had a negative impact on the retail sector and Diesel USA fell victim to it. In an attempt to turn the company around, the management wanted to develop an exclusive presence in high-end locations, for which it executed several long-term, expensive leases and repositioned some of the existing stores in premium locations. But these strategies were ill-timed and non-productive and impacted the profits of the company. Incidents of cyber theft and fraud in the company only added to its problems. These failed strategic decisions implemented by the management compelled Diesel USA to file for Chapter 11 bankruptcy protection on March 5, 2019. In the court filing, the company outlined a three-year restructuring plan, emphasizing profitability of the company by opening stores in cost-effective locations, closing some of the stores, improving the product lines, and associating with social media influencers. It remained to be seen whether the plan would help extricate Diesel USA from the situation in which it found itself.

Issues

The case is structured to achieve the following teaching objectives:

  • Understand the market for premium denim in the US
  • Understand the reasons for Diesel's poor performance in the US
  • Examine the post-recession strategies of Diesel in the US
  • Examine reorganization post bankruptcy
  • Assess the future prospects of Diesel in the US

Contents

Keywords

High-end denim; Global recession; Out-of-court restructuring; Real estate strategy; Cyber fraud; Chapter 11 bankruptcy; Trade obligations; Restructuring plan; Social media influencer; Strategic positioning; E-commerce platform

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