Background
An automotive aftermarket manufacturer, founded by two industry veterans, developed a close partnership with a major global automaker. Leveraging deep technical expertise and a long-standing relationship, the company began designing high-quality original equipment manufacturer (OEM) products tailored to the automaker's exact specifications. As the exclusive supplier for these parts, the business experienced strong growth and a reliable sales pipeline.
Challenge
In the late 2000s economic downturn, the automaker scaled back purchasing. With most of their revenue tied to a single customer, the manufacturer faced a steep decline in orders. The company was already paying significant taxes and had limited cash reserves to weather the slowdown. Without additional capital, leadership feared they would have to close their doors.
Approach
Introduced to the company through a mutual contact, MGO quickly recognized their eligibility for the federal research and development (R&D) tax credit. Because the manufacturer was investing heavily in engineering and testing to meet the automaker's stringent quality requirements — including experimenting with new product development and various metals and tolerances — their activities qualified as R&D under IRS guidelines.
MGO worked closely with management to:
- Document qualifying R&D activities and expenditures
- Calculate eligible credits for prior years
- Submit claims while remaining compliant with all regulatory requirements
Over a three-year period, the company secured approximately $750,000 in R&D tax credits — translating to roughly $500,000 in direct cash savings.
Value to Client
The infusion of cash allowed the manufacturer to stabilize operations, increase staffing, and expand their product offerings. They diversified into new OEM accessories, which strengthened their relationship with the automaker and reduced dependency on a single product line.
The company ultimately rebounded, grew its business, and eventually sold for tens of millions of dollars — enabling the founders to retire. Leadership credited the R&D credits as a critical factor in surviving the downturn, later remarking: "Without those credits, we probably would have had to shut our doors."
Fuel Your Innovation with R&D Credits
Whether you're developing new products, improving existing designs, or refining manufacturing processes, MGO can help you identify and claim valuable R&D credits to reinvest in your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
