Working capital had fallen from $26 million in 1926 to $3.5 million in 1932 and the banks were owed $6 million, for which they demanded payment. Studebaker defaulted and went into receivership.
The decline of working capital from $26 million in 1926 to $3.5 million in 1932 created a severe cash crisis, prompting the banks to demand payment of their outstanding debt of $6 million. As a result, Studebaker's financial struggles led to its bankruptcy and receivership.