The Effect of Chrysler Bankruptcy on NASCAR

With the global economic crisis in full swing, we are starting to see some pretty big players starting to fall.  It’s no surprise that the American auto industry has been facing difficult times. It was just a question of when the ..uuhm..sludge would hit the fan.  Well it has in the auto industry, in spades.  We’re now seeing Chrysler in chapter eleven bankruptcy with GM almost certain to follow shortly.  So what impact will this have on the NASCAR circuit which is dominated by cars provided by the big three?

Currently, Chrysler/Dodge represents seven NASCAR teams, most notably with Kyle Bush driving a Dodge.  While Dodge hasn’t been much of a performer in the last few years, Kyle could have been the light at the end of the tunnel Dodge was looking down.  To understand the impact these bankruptcies could have, we need to look at a couple of factors. Firstly, what is under the hood and secondly, what exactly does it mean to enter bankruptcy?

The cars these guys drive may have the Chrysler, Dodge, GM or Ford labels on them, but these cars didn’t come off the assembly line yesterday.  For the most part, they resemble an assembly line vehicle on the outside, but that is, for the most part, where the resemblance ends.  These cars take the term after market to the extreme.  They are stripped down by expert mechanics and pretty well rebuilt into a new car built entirely for high speed with upmost safety in mind.  From suspension, to engines, to seats and steering wheel, that ain’t your daddy’s Chevrolet so to speak.  Even the tires are made exclusively for NASCAR.  So even if one or all of the big three disappeared tomorrow, as long as someone can provide and aerodynamic shell, they will have a car to drive.  Toyota for example has been a major contender in NASCAR for many years now.

Next we look at the bankruptcy process itself.  Without getting too technical, In the US, there are six type of bankruptcy, chapter eleven being one of the most common, and the type which Chrysler filed for.  In Chapter eleven, the debtor retains ownership.  This type of bankruptcy protects the owner from creditors and allows time to develop a plan, acceptable to creditors, in order to continue on with normal operation once they come out from bankruptcy protection.

The reality is, that there is likely going to be little impact on NASCAR of any of the big three automakers going into bankruptcy. Even while in chapter eleven, the exposure it receives from being associated with NASCAR far outweighs the cost of it.  The relationship is a net gain for automakers so this isn’t something they aren’t going to let go of lightly.  Should one of the three completely disappear, there are plenty of other options for NASCAR teams. There’s just something patriotic and American about dominating the field in car racing tough isn’t there?  No one is going to let that go away.