He went bankrupt because it was funny. It’s as simple as that.
Why hasn’t somebody just killed Mr Burns?
With all the cops incompetent and corrupt, why isn’t Springfield completely overrun with crime?
With his extensive criminal record, why is Krusty allowed near kids?
If Frink is so brilliant, why hasn’t he become wealthy?
Why does every single character’s backstory contradict itself in some way?
Now, if you’ll excuse me, the Simpsons is on. Marge has done a dirty calendar, but Homer is too tired to get his yang up.
Earlier in that episode, Herb has a meeting with executives and designers (one of whom pitches a new model called the Persephone) and I recall Herb saying something along the lines of “This is why we’re getting killed in the marketplace.” I figure Powell Motors was in trouble long before Homer came along, and Herb may have mortgaged his mansion to try to keep the company afloat. Notice also that he’s so happy to have relatives that he spends a lot of time with Marge and the kids, neglecting problems at the company even when his own engineers call him to report that Homer’s designs are unworkable.
Of course, in the real world, CEOs of failed companies get golden parachutes and jobs elsewhere.
If I were going to point out something strange from a Herb episode it would definitely be this disappearance. Even when we keep in mind that The Simpsons resets itself at the start of every episode, that reset just means things go back to normal. Events of past episodes still happened (Maude stays dead, Homer makes many references to past adventures). The whole show (and world) would have changed had the baby translator stayed on, so I totally and completely understand why it never appeared again, but it’s one of those things that you realise only when you think about it all a little too hard.