So what will President Obama's ultimatums to GM and Chrysler mean for NASCAR?
Penske-Dodge driver David Stremme inspects his car during practice for the NASCAR Sprint Cup 500 at Martinsville (Photo by Rusty Jarrett/Getty Images for NASCAR)
By Mike Mulhern
mikemulhern.net
Spooked? Hey, no kidding.
At the 4 p.m. closing bell Monday Wall Street was awash in red.
Okay, it's only been a few hours since President Obama lowered the boom on Detroit. But the shock waves…..well, think tsunami: you can't easily see just how big that wave coming may really be.
Just as spring was blooming, and Wall Street was starting to blossom again – the DOW climbed 20 percent in just 17 days earlier this month, in the best monthly gain since 1991 -- the President poured cold water on everything with his stark critique of the automobile industry, at least the General Motors and Chrysler side.
And anyone looking to buy a car – however few those are right now – might just have been stopped dead in their tracks.
Chrysler, Obama says, has 30 days to gets it problems settled.
General Motors, he says, gets 60 days.
There's blood in the water.
Is Obama really offering realistic solutions? Or simply trying to wash his hands of the whole debate, as best he can?
Will what Obama is presenting really change the dynamics here and save Detroit?
Well, the initial Wall Street take on the latest Obama initiative wasn't very positive.
Perhaps it's time to prepare for the worst, and consider what might lie ahead for the NASCAR part of this ugly situation.
And it could be considerable.
Ford and Toyota are doing better than GM and Chrysler, yes. But everyone's eating at the same table.
A 2005 economic study out of the University of North Carolina at Charlotte said that NASCAR racing pumped about $5.9 billion annually into the North Carolina economy, including almost $1.7 billion in salaries to workers in racing.
Another economic analysis says that motorsports in the United States is a $22 billion a year industry.
Chrysler, from many indications, is lost. A shotgun marriage with Italian Fiat honestly doesn't look likely.
Kurt Busch winning Atlanta. At least with NASCAR's 'common templates,' if Busch and car owner Roger Penske have to change car brands, all they need are some different decals (Photo: Getty Images for NASCAR)
In NASCAR, cue Roger Penske, and his Kurt Busch-Dodge team. What happens there?
Cue already-beleaguered Richard Petty, and his business partner George Gillett (who has already tried to bail out of his Chrysler deal). What happens there?
And General Motors, despite Obama's declaration that he would save it, may well be least seriously chopped down in size.
Bankruptcy?
Obama used that word pointedly about GM.
But bankruptcy, no matter how glossy the President might try to polish it, is not very pretty at all.
Maybe the Obama brain-trust in Washington, D. C., has examined all the angles in this, and maybe Obama's moves are the right ones.
But the sense here at the moment is that major disaster is looming.
Hey, the reason Detroit is in such trouble is that banks screwed things up so badly with wildly off-based decisions that credit has been tough to get and workers have been fired right and left.
Create jobs, fix credit, and maybe car sales will go up.
Blaming Detroit for all this mess is absurd. It's a victim.
Richard Petty was already struggling, and Obama's 'Drop Dead' to Chrysler won't make the King any happier (Photo: Getty Images for NASCAR)
Maybe Obama's Monday statement was 'shock therapy' to get things going?
Well, it was certainly a shock, on several fronts.
The real issue, of course, isn't GM and Chrysler, but the ripple effects through the U.S. economy of their failure.
And North Carolina's motorsports industry is squarely in the cross-hairs.
Obama has certainly shown little interest in this gas-guzzling sport, with its antiquated technology, like carburetors and 358 c.i. engines.
Indeed Monday Obama was pushing Detroit to move in precisely the opposite direction.
NASCAR promoters and officials themselves have done little to help their case here. At the least someone could have invited the then presidential candidate to a race, or made some PR moves that way – how about putting Obama in an E-85 pace car for the California 500, or a hydrogen-powered pace car?
The bottom line at the moment: President Obama's pushing General Motors toward bankruptcy didn't set well on Wall Street Monday, and GM stock in particular was down – 25 percent to $2.70 a share.
And just about every company related to Detroit's car makers watched its stock fall considerably too.
Is the President on target to help save Detroit? (Photo: White House)
That's not the only backlash against Obama's push.
The full implications of a possible GM bankruptcy – a bankruptcy that Obama made quite clear is easily in the cards now – are still being weighed, because of a major rippling effect that could create through the U.S. economy, if GM, though bankruptcy, writes off its bills.
And Obama was blunt about his plans for Chrysler -- Chrysler must merge with Italian car maker Fiat within the next 30 days, by April 30th, or let the chips fall where they may. Chrysler has debt of about $9 billion; if it can make a deal with Fiat, Obama appears to be saying he will okay $6 billion more in bailout money for Chrysler.
GM owes about $27 billion in debt. How much of that could be written off in a bankruptcy is not clear. But the people owed that money might not be very pleased with such a write-off.
And then some people are raising the issue of why Obama 'fired' GM boss Rick Wagoner, while bank CEOs, who have lost a lot more money and taken a lot more taxpayer money, are still in their corner suites.
The implication of a double-standard in Washington is obvious.
There are also very pointed questions about whether Obama is overstepping his bounds in firing the head of GM.
Obama Monday spoke of the ouster of Wagoner and said it was because he felt GM needed a new direction. Why he hasn't made the same hard stand in the banking sector is now being questioned.
The stock market rally that had been underway for the past two weeks may now being souring.
Spring is in the air? Looks like a hard freeze to me.
Chevy's Rick Hendrick: GM's top man in NASCAR....and one of the biggest car dealers in America (Photo: Getty Images for NASCAR)
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This would not be that big a
This would not be that big a problem for racing if NASCAR had done its job and restricted team spending instead of letting it escalate to the level it has reached. Team spending is the biggest culprit here.
The environmental argument advanced in this issue has always been worthless because it has always been false - there never has been global warming any more than there was global cooling in the 1970s, and it has now come out that the satellite data on which a good percentage of the global warming argument was based as wildly inaccurate - and Obama isn't helping with his preposterous "clean cars" pushes. Gas is not being guzzled here, in racing or in general.
Where this all started was government, pushed with substantial effort by Congressmen such as Barney Frank and Christopher Dodd, paying banks to make bad loans. It is a situation that has blown up but is also something where letting the market work will solve it as the housing crunch is being solved in those areas of the country where the market is being allowed to work. For the car manufacturers, bankrupcy doesn't mean extinction - if GM and Chrysler went to bankrupcy where the market is allowed to work, they'd be reorganized, their ruinous contracts with the UAW thrown out, and they'd eventually work their way back up.
What NASCAR needs to do here is stop fooling itself, step in, and mandate a hard spending cap on raceteams - a cap that manifestly includes forcing the contraction of multicar teams like Hendrick and Roush.
Detroit deserves much of the
Detroit deserves much of the blame too -- it's easier to call up two or three team owners on Monday than 10 or 15. But Brian France and Jim France should have pushed harder to keep things under control. I am suggesting a 'spending cap' on Truck teams, as a starter, to get something under control, and maybe a spending cap on Nationwide teams too. That is something that could be put into effect right now. Doing something that dramatic with Cup teams would be too risky, without some example first, which is why I think the Trucks should immediately come under strict budget controls. But i simply don't believe bankruptcy will work -- I think it may well mean extinction. Most companies that go into bankruptcy never come out the other end. I would chop GM into five companies, and let each do its own deal. But the idea of Washington politicians sending 'experts' to Detroit to tell car makers what to do, what to build....that's not just a recipe for disaster, it's theater of the absurd. All the U.S. economy really needs is a good cheerleader, some good news -- look at what happened the first few weeks of March: a glimmer of hope of turnaround, and things went happily wild. The future of Detroit looks clear to me -- and it's spelled FORD.
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