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The automotive industry is on its knees. General Motors is burning through $1bn a month and is worth a fraction of what it was. Other manufacturers including Ford and Honda are cutting production.
But Volkswagen, the business that gave the world the Beetle and the camper van, found itself the most valuable company in the developed world yesterday, the result of another bout of financial speculation that went spectacularly wrong.
Panic-buying by hedge funds drove the company's share price into the stratosphere, allowing VW at one point to leapfrog oil giant ExxonMobil to become the biggest company by stockmarket value at just short of a staggering €300bn (£240bn). Amid the buying frenzy, the shares touched €1,005 each, five times the level at which they were changing hands on Friday.
VW was worth more than US grocer Wal-Mart, the world's biggest group by sales in this year's Fortune 500 list, Microsoft and General Electric - and substantially more than all of America's and Europe's car-makers combined.
But its gain was the hedge funds' loss. The German financial daily Handelsblatt reported that London-based Marshall Wace lost more than €5bn, and two New York funds, Perry Capital and Greenlight Capital, lost billions each.
Amid pandemonium on Frankfurt's stock exchange, VW shares experienced a rollercoaster ride before ending 82% higher on the day at €945, valuing the group at €280bn.
The panic-buying, which began on Monday, came after hedge funds were caught short by Sunday's announcement from the luxury car-maker Porsche that it had seized 74.1% of VW.
With the federal state of Lower Saxony holding a further 20.2% in VW, that left just 5.7% of the firm's shares traded freely. With global car companies in freefall as the recession bites into sales and profits, the funds bet hugely on VW's stock falling dramatically. In market parlance, they "shorted" VW shares by "borrowing" and then selling them in the hope they could buy them back at a much reduced price.
Porsche's announcement forced them to close their positions by chasing the few shares on offer and paying ever-higher prices for them. They dumped stocks in Germany's top companies to pay for scarce VW stock.
Some fund managers were reportedly in tears as they realised the scale of their losses - estimated to be as high as €30bn, and bringing out a large dose of schadenfreude among market watchers. Many funds, derided as asset-stripping locusts in Germany, are facing ruin. This week's frenzied buying of VW shares is the latest stage in the saga of Porsche's single-minded pursuit of VW, a process that has seen the two controlling families, the Piechs and the Porsches, engage in open warfare for control, often indulging in public slanging matches.
Porsche made its declaration only days after Ferdinand Piech, VW's chairman, settled his differences with Wolfgang Porsche, the smaller company's chairman.
The effective takeover by Porsche is an extraordinary coup for a company that almost went bankrupt 15 years ago. VW's annual sales of €100bn dwarf its €7.5bn turnover. VW sells 6m cars a year and wants to overtake Toyota as the biggest car firm in the world; Porsche sells 100,000. But Stuttgart-based Porsche enjoys the healthiest profit margins among global car-makers, largely thanks to its obscure financial dealings in swaps and options.
Under German corporate law it doesn't have to declare these options, laying it open to the charge that it is taking over VW by stealth. It said on Sunday it would acquire directly more than 50% by December, and 75% in 2009.
Porsche's dealings have brought Germany's stockmarket system into disrepute, with investors, fund managers and analysts crying foul and demanding the suspension of VW shares from the Dax index and an inquiry by regulators into alleged manipulation and insider trading.
But a Porsche spokesman said the company "utterly rejects" these allegations: "It's the funds themselves which are responsible, with their huge bets on a fall in VW shares which never happened."
Germany's financial services authority, BaFin, and market regulators held back from direct intervention despite pressure from investors. But a BaFin spokeswoman indicated that the authority was scrutinising the deal very closely, with a possible view to mounting a full investigation.
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