U.S. Auto Industry Shaken by Major Bankruptcies: First Brands and Tricolor Holdings Collapse

In September 2025, the U.S. automotive industry faced significant upheaval with the bankruptcies of First Brands Group and Tricolor Holdings. These events have exposed substantial financial irregularities and raised concerns about potential systemic risks within the financial sector.

First Brands Group, a major auto parts supplier known for products like filters, brakes, and lighting systems, filed for Chapter 11 bankruptcy in late September, disclosing liabilities of approximately $11.6 billion. The filing followed lender investigations into financial reporting irregularities, including potential double-financing of invoices and off-balance-sheet financing practices. Notably, over $2 billion in assets were reported missing, leading to the resignation of founder and CEO Patrick James. Charles Moore, previously the company's Chief Restructuring Officer, has since taken over as interim CEO. The U.S. Department of Justice has initiated a preliminary inquiry into First Brands' collapse, focusing on the company's financial dealings and interactions with creditors.

Tricolor Holdings, a Texas-based subprime auto lender and dealership, filed for Chapter 7 bankruptcy on September 10, 2025. The company reported liabilities and assets between $1 billion and $10 billion and listed at least 25,000 creditors. Tricolor specialized in providing auto loans to consumers with limited credit histories and was the third-largest used auto retailer in Texas and California. Allegations of fraud have emerged, including "double-pledging" loans across multiple lenders and duplicating vehicle identification numbers to generate multiple loans per vehicle. Major financial institutions, including JPMorgan Chase, have disclosed significant exposure to Tricolor's collapse. JPMorgan CEO Jamie Dimon acknowledged a $170 million charge-off related to Tricolor, stating that the bank's exposure was "not our finest moment."

The bankruptcies of First Brands and Tricolor have had a ripple effect on the financial sector. Jefferies Financial Group disclosed $715 million in receivables tied to First Brands through its Leucadia Asset Management unit but stated that potential losses are manageable. UBS is assessing over $500 million in exposure to First Brands. Bank of America stated that its syndicated loans to First Brands are asset-backed and well-secured, and it has no exposure to Tricolor. Morgan Stanley confirmed it has no exposure to either company.

These developments have prompted increased scrutiny of Wall Street's credit risks, particularly in sectors associated with subprime lending, leveraged loans, and structured finance products. While some financial leaders view these incidents as isolated, others, like JPMorgan CEO Jamie Dimon, have warned of broader underlying issues, suggesting that these defaults could hint at more systemic problems.

The bankruptcies of First Brands and Tricolor have significant social and economic implications. Employees of both companies face job losses, and consumers with limited credit histories may find it more challenging to secure auto loans. The financial sector's exposure to these collapses raises concerns about the stability of credit markets and the potential for broader economic repercussions.

These events underscore the need for enhanced regulatory oversight and corporate governance to prevent similar financial misconduct in the future. As investigations continue, the financial industry must address these vulnerabilities to maintain market stability and protect stakeholders.