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Thursday, May 14, 2009

Bankruptcy for Chrysler, and probably GM, is bad news for NASCAR teams

Despite all the talk about how NASCAR’s Dodge teams still have the commitment of Chrysler, despite the company having filed for bankruptcy, there’s a dirty little secret lingering behind it all.

It’s really not up to them. And if GM files for bankruptcy, the same thing applies to them.

When a company gets into bad enough shape that it must file for bankruptcy, that means they basically hand over power to the banks (and the government in this case) when it comes to financial decisions. And if you know anything about bankers, you know that all that matters to them is the bottom line.

So here’s the scoop, plain and simple: When these companies are going through bankruptcy, the goal will be to focus spending on areas that make them money and stop spending in areas that lose them money.

If the bankers decide that the money spent supporting NASCAR teams does not bring in enough of a return, they won’t do it anymore.

Roger Penske, whose team fields Dodges for Kurt Busch, David Stremme and Sam Hornish Jr., has denied a report that Chrysler will pull its support from NASCAR after this season.
"Chrysler guys contacted us and said they were going to continue to support NASCAR," said Penske, also the owner of Chrysler dealerships. "Hopefully, they can do that based on what the government allows them to do. We're cautiously optimistic right now.'"

“Cautiously optimistic” is the right word to use, because it’s not simply a matter of whether they want to keep their word to the teams. Chrysler executive Mike Accavitti has said the manufacturer plans to be in NASCAR for the foreseeable future, but it’s really not his call anymore.

According to Automotive News, Chrysler wanted to spend $134 million in advertising over the nine weeks it is expected to be in bankruptcy, but the U.S. Treasury's auto industry task force gave it half that. “So if General Motors, which is wrestling with the possibility of a Chapter 11 filing itself, is wondering how much influence the task force will have over marketing, the answer is plenty,” the publication said.

Penske is hopeful for the future, saying: "Really, quite honestly, if they get the capital and have a smaller company they're going to be more viable than before. Hopefully, motorsports turns into a marketing opportunity."

I hope he’s right, but I wouldn’t bet on it.

What will happen with GM is still up in the air, though bankruptcy looks to be the most likely next step.
But on the Chrysler end of things, both Penske’s team and the Richard Petty Motorsports team might be in for a world of hurt when the season ends, and maybe a manufacturer switch too, if the banks and the federal government decides to force Chrysler to slow or stop the flow of support dollars to their NASCAR teams.


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