NASCAR Economics 101: What Will Happen if General Motors Fails?

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NASCAR Economics 101: What Will Happen if General Motors Fails?

And just when you think things may be getting better...they take a turn for the worse.

General Motors and auditor Deloitte & Touche have recently come out doubting the viability of the former auto giant, that lost over $30.9 billion just last year.

This is despite the government "bailing out" the company with $13.4 billion.

"The Corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," Deloitte & Touche announced.

 

Car sales have reportedly dropped more than 40 percent from their peak, and if they don't rise the car company won't get more bailout money from the government.

 

According to auditors, a Chapter 7 bankruptcy filing will be "more expensive than its current request for U.S. aid."

 

Executives at GM are also expected to take pay cuts, and 47,000 more jobs are going to be lost, if not more. Fourteen plants could be shut down by 2012.

 

Detroit's Big Three, including Ford and Chrysler, lost a combined 14 million jobs last year alone.

 

GM chief executive officer Rick Wagoner, who is working for just a dollar this year in return for bailout money, "had his total compensation cut to $5.4 million last year."

 

Poor, Mr. Wagoner—and with all these people losing jobs!

 

Several teams run Chevrolets in the NASCAR Sprint Cup Series, including Richard Childress Racing, Hendrick Motorsports and newly formed Stewart-Haas Racing. When Chip Ganassi Racing with Felix Sabates merged with Chevy team Dale Earnhardt, Inc. they also made the switch to Chevys.

 

General Motors fields the most cars of any of the four car makes in NASCAR. If GM does have to pull out, how will these race teams survive?

 

Thanks to The Wall Street Journal- Market Watch, Bloomberg, The Detroit News, The New York Times, and The Associated Press for the quotes and information used in this piece.

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