Thompson In Turn 5 · Tommy Thompson · Wednesday July 23, 2008
One need not be overly intuitive to suspect that the Big Three U.S. automakers’ support of NASCAR is in jeopardy. All three have been on a downhill slide financially for an extended period of time, and there’s plenty of reason to think that will continue. Just look no further than the stock quotes, and you’ll see that both GM and Ford have been on at least a five year tumble downward, one that has now only accelerated due to skyrocketing gasoline prices at the pump. With the cost per gallon now well over $4, their most profitable products — trucks and SUVs — have seen their sales numbers start plummeting as a result. Chrysler LLC, owned by the management firm Cerberus Capital Management, is believed to be in even more dire fiscal straights, and could file for bankruptcy protection or sell off divisions of the business in the very near future.
Over the last five years, the financial pages have repeatedly reported on cost-cutting measures by these companies as they try to shore up their sinking ships, such as early retirement incentives, layoffs, frozen retirement pensions, cancellation of retirees’ health care benefits, and plant closings. Short of bailing out on NASCAR, they have about played every hand they can to cut expenses and minimize their losses.
But now — with nothing left in the deck — the writing is clearly marked on the wall. Short of a miracle… NASCAR’s turn for cuts is coming.
Which companies may desert the sport first? It’s doubtful that anyone can say with any degree of certainty today. However, it is apparent that things cannot remain as they are for much longer — and when the first break from the ranks, others will be under pressure from stockholders to follow suit.
Already, warning salvos have been fired in the form of cutting corners in other divisions of motorsports. The American-owned car builders have, by and large, stuck with NASCAR, but over the past several years they have noticeably cutback on their support to the Nationwide and Craftsman Truck Series, bypassing them to focus their dwindling motorsports budgets on the considerably more high profile Sprint Cup Series. It’s a move that’s allocating — for the most part — only money needed to fund the lower division teams to a level necessary to support, in conjunction with Sprint Cup owners, the development of crew talent to feed the never-ending need for experienced personnel to their respective Cup teams. Nothing more, nothing less … for the Truck and Nationwide Series isn’t offering enough incentive for them to invest marketing dollars these companies just don’t have anymore.
With that said, the manufacturers obviously still believe that NASCAR is a good promotional tool for them to spotlight their products, or they wouldn’t still be in it at a cost reported to be in the neighborhood of $140 million dollars per manufacturer per year. But their justifications for the expenditures are coming under intense criticism by investors, as losses increase and stock holders demand further measures be taken by company executives to save money. Is the old stock car racing adage “what wins on Sunday sells on Monday” still true, they say? Well…Chrysler, GM, and Ford are soon to be at a desperate enough crossroads to gamble that it isn’t.
In some ways, the first shoe already fell this past week. The president of General Motors North America, Troy Clark, admitted publicly that their motorsports participation and support has not gone without scrutiny when he stated, “I’m not going to get into specifics about NASCAR. But there will be modifications – changes in our marketing footprint – in this area.” This came on the same day that it was announced that GM would not renew track sponsorship with two successful NASCAR tracks, New Hampshire Motor Speedway and Bristol Motor Speedway.
In the meantime, NASCAR is keeping a stiff upper lip and, of course, is hoping that the ship is able to miraculously right itself. But they’re not immune to these types of things; in the past, the sport has suffered from several manufacturer pullouts. In the late 1950s, there was a loosely enforced ban on racing by the American Manufacturers Association which set back NASCAR’s early growth. Just five years later, Chrysler left the series due to a rules dispute in the mid-1960s — and in the process, they even took the sport’s Most Popular Driver, Richard Petty, to go drag racing for a time.
This situation could play out a similar way. Industry watchers believe that if and when one manufacturer determines that further support of the series is not a good business plan, the decision would very possibly have a “snowballing” effect, resulting in one or possibly both of the other struggling companies under similar financial distress to be pressured into leaving the sport as well. Certainly, this is all a hard blow for NASCAR and its race teams to absorb — but one in which I believe all can survive.
First off, unlike factory desertions of the past, NASCAR is not dependent any longer on stock cars built by the factories for consumption by the public. The NASCAR Car of Today is a generic body and frame, built in race shops to their own specifications — not the manufacturers themselves. Today’s Chrysler, Chevy or Ford is essentially a NASCAR prototype car with factory decals on them — there’s some small modifications for each brand, but nothing to the point that would require a major revision of the chassis. Throughout these changes, the car builders have come to accept and appreciate this arrangement, as it has created a semblance of parity that assures that their manufacturer-branded car will at least occasionally visit Victory Lane.
The truth is, the American auto manufacturer’s primary assistance to NASCAR teams today is in the area of money. They give lots of money to teams to have their decals on the cars, and that money is then used to test and tweak the vehicles in hopes of making the manufacturer-branded car go faster. Should that funding dry up, it’s money that teams would be hard-pressed to replace — but could, in time, if NASCAR racing’s popularity is not significantly damaged by a factory pullout from the sport.
The lack of control by these manufacturers also filters down from the chassis to the engines. Though technical assistance lent to teams by these car companies is not insignificant, it is important to understand that the NASCAR-approved power plants are being largely developed by owners such as Dodge’s Gillett-Evernham Motorsports, GM’s Hendrick Motorsports, and Ford’s Roush-Yates teams, among others. Certainly, the assistance from company engineers is appreciated, but that support is not crucial in the team owned engine shops of NASCAR today.
So, with semi-independence already in place, NASCAR can survive without support from Detroit — I am reasonably sure of it. And I give them credit for moving in a direction that gives them the best opportunity to continue on should the manufacturers’ well run dry. Make no mistake, the possibility has been carefully considered, for the news of American car builders struggling is not a new one. It has been known for years now; and coincidently, the industry woes began in earnest not too long before NASCAR set out to build their own version of stock cars…then known as the Car of Tomorrow.
Where the pullout by the American automobile builders without a doubt will have a major setback is in NASCAR itself’s bottom line — a blow that would have teams and the organization scrambling in the short-term to compensate for lost sponsorship dollars, but one that would hardly be noticeable to fans in the stands. No matter how bad it gets, the same cars will race, continued to be piloted by the top stock car drivers in the world. Additionally, NASCAR will assure, for their own survival, that those cars are still fast and the racing is competitive.
Sure, some teams will still suffer — particularly those most dependent on factory backing. Depending on the severity of the cutbacks, the sanctioning body may even have to adopt drastic cost saving measures by severely limiting testing, or possibly even developing an engine package to save team owners. As a last ditch effort, it is not beyond the realm of possibility that NASCAR would spearhead development of a generic 750-horsepower affordable “crate engine” — one that could easily drop into their already developed and utilized crate-like chassis and frames — to cut operating costs to teams and still assure fast and competitive racing.
And like during the development and implementation of the CoT, fans will balk at those types of suggestions. Some will abandon the sport; but in the end, most will recognize that it is still the best game in town. NASCAR, likewise, will be cranking up their high-powered promotional know-how, making the transition to generic race cars as seamless as possible with the lapse of manufacturer support.
The bottom line is that like it or not, NASCAR has distanced itself from racing stock cars steadily in recent years. It has been a slow process, but it has come to the point where today, the cars are only rolling billboards for the automobile manufacturers — not even “kissing cousins” to anything they sell in their showrooms. The sanctioning body may create an illusion that a Chevy, Dodge, Ford or Toyota is still competing… but fans are not deceived. They have just willingly went along with the harmless deception out of loyalty to their preferred brand of American ingenuity; but they will continue to support NASCAR as long as it continues to be the best show in town. It’ll take more than a decal to make them turn off the sport on a weekly basis.
Clearly, NASCAR cannot save the American automobile manufacturers — but at least they are well positioned to save themselves.
And…that’s my view from Turn 5.
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