Commodore was in trouble way before the CD32.
First, they fouled up one Christmas by replacing the A500 with the A500+, and selling it packaged with games that wouldn't run because they hit the hardware, and the hardware had changed.
The following Christmas, they released the A600, which was a big step backward from the A500. They also released the A1200, but there weren't enough parts. Very few people wanted the A600 - most people wanted the A1200, so they put off their Amiga purchases. By the time parts for the A1200 were available, Commodore had lost a second Christmas and was in trouble.
This, of course, came on top of the fact that they had terminated development on the A4000 and decided to sell the prototype instead.
It was only after that that the CD32 was even released. If everything had gone perfectly with the CD32, they probably still would have gone bankrupt.
It takes a special set of skills to go bankrupt while selling the world's most popular computer (C64) and the world's best computer (Amiga), but Mehdi Ali stepped up to the plate.
