"Just four months before the 2009 season-opening Daytona 500, two of
NASCAR's most revered teams, Petty Enterprises and Dale Earnhardt
Inc., are searching for sponsors to bankroll four of the six racecars
they intend to field between them."
" 'Nothing could stay as hot as NASCAR was'" said Peter DeLorenzo, a
former automotive advertising executive and editor of the
Autoextremist.com blog. 'It had to have some sort of a correction.' "
"Corporate sponsors that helped transform stock-car racing from a
workingman's pastime into the country's dominant form of auto racing
also are scaling back their investment."
----------------------------------
"Automakers Apply Brakes to NASCAR"
By Liz Clarke
Washington Post Staff Writer
Thursday, October 23, 2008; A01
For decades, the success of NASCAR's brand of high-octane, fender-
banging stock-car racing has been intertwined with the fortunes of the
U.S. automotive industry. NASCAR victories represented a nod to
Detroit's ingenuity. And showroom sales, in turn, were credited to the
exploits on race day. As the marketing adage went: "What wins on
Sunday, sells on Monday!"
But with the Big Three U.S. automakers struggling to survive, they
have begun to dramatically scale back their financial involvement in
NASCAR, threatening the economic model that has driven the sport's
popularity. Other corporate sponsors that helped transform stock-car
racing from a workingman's pastime into the country's dominant form of
auto racing also are scaling back their investment as a result of the
sagging economy. Some companies may not renew their commitments --
many of which run more than $10 million -- when current contracts
expire.
"The U.S. enjoyed a pretty robust economy that enabled the sport to
grow, but that has changed significantly in the last six months," said
Terry Dolan, manager of Chevy Racing. "And it's probably going to
drastically affect what the sport may look like 12 months from now."
Sports of all stripes are feeling the brunt of the global economic
crisis. With season-ticket renewals lagging in the National Basketball
Association, Commissioner David Stern has announced cuts in staffing
at league offices. The National Football League is revisiting its
labor agreement with players as a potential way of paring expenses.
The Washington Nationals still haven't found a buyer for naming rights
to their new baseball stadium, while Philadelphia's NBA arena is
bracing for another name change now that its rights holder, Wachovia
Bank, has been gobbled up by Wells Fargo.
Individual and Olympic sports, which rely on corporate money more
heavily, are feeling the squeeze as well. The U.S. Olympic Committee
lost its $1 billion sponsorship from General Motors following the
Beijing Games. In January, golf's hallowed Masters tournament lost its
sponsorship from Cadillac. And insurance giant AIG, which averted
collapse only after the federal government bought 80 percent of the
company, is bowing out of its long-standing sponsorship of the U.S.
Davis Cup tennis team, the Associated Press reported last week.
But NASCAR is expected to get hit harder than traditional stick-and-
ball sports because of its overwhelming dependence on corporate
dollars. The 43 cars that start every race are essentially 200-mph
billboards, advertising Miller beer, M&Ms, Office Depot --
virtually every product in the basket of American consumer goods --
not to mention the U.S. Army and, as of last Sunday, the Federal
Communications Commission, which is using the No. 38 Ford to publicize
next year's conversion to digital broadcasting.
Corporate sponsors account for roughly 80 percent of the typical
NASCAR team's budget -- roughly four times the percentage of an NFL
team, which gets the majority of its revenue from the league's
lucrative TV contracts and ticket sales.
But just four months before the 2009 season-opening Daytona 500, two
of NASCAR's most revered teams, Petty Enterprises and Dale Earnhardt
Inc., are searching for sponsors to bankroll four of the six racecars
they intend to field between them.
To stay marginally competitive, seven-time NASCAR champion Richard
Petty sold a controlling interest in his family's race team to an
investment firm, Boston Ventures, earlier this year. Three other
NASCAR teams have raised capital in the same manner. Now Petty
Enterprises is entertaining three proposals to merge with a rival team
-- among them, the one founded by the late Dale Earnhardt -- to remain
viable.
"Nothing could stay as hot as NASCAR was," said Peter DeLorenzo, a
former automotive advertising executive and editor of the
Autoextremist.com blog. "It had to have some sort of a correction."
No sport came from more humble roots than NASCAR, which sprang from
Southern dirt tracks, where moonshine runners faced off to prove whose
souped-up Buick or Chevy was faster. Once the wild sport developed a
following, automakers started funneling money to the front-running
cars and touting their victories in newspaper ads to lure fans to
their dealerships.
NASCAR teams were still fairly modest operations as recently as 1992,
when Alan Kulwicki drove a Ford Thunderbird to the Winston Cup
championship with a team of 19 people, including the secretary.
Today, Hendrick Motorsports, which appears en route to its eighth
championship this season, boasts more than 500 employees and a racing
compound that could double as headquarters for NASA.
"The first year when I went to [work at] Hendrick, I was getting
accused of not spending enough money!" recalled Robbie Loomis, a
former crew chief for four-time champion Jeff Gordon who now manages
Petty Enterprises' two-car team. "This is the toughest economic times
we've ever experienced."
But the cutbacks by Detroit's Big Three -- General Motors, Ford and
Chrysler -- have struck at stock-car racing's heart.
Automakers fund NASCAR on several levels: making direct payments to
flagship teams; providing technical expertise; setting up elaborate
sales displays on racetrack grounds; buying title sponsorships of
races; and equipping tracks with fleets of vehicles.
GM's annual investment alone was rumored to be $120 million-$140
million at the peak of its involvement in NASCAR. But it severed
sponsorships with Bristol Motor Speedway and New Hampshire Motor
Speedway this summer, and deeper cuts are promised as part of GM's $10
billion cost-savings program.
Ford officials announced yesterday that while they were extending
their contract with Roush Fenway Racing -- its most decorated team in
the elite Sprint Cup ranks -- they were also ending all direct
financial support to teams in NASCAR's Nationwide and Truck series,
considered developmental leagues. Dodge took a similar step in pulling
out of the truck series, which also is losing Sears's Craftsman brand
as its title sponsor at season's end.
NASCAR spokesman Ramsey Poston concedes that the sport is feeling the
effects of the slowing economy, with unsold tickets, sponsor-less
teams and slipping TV ratings. But relative to other sports, he said,
NASCAR remains the most compelling vehicle for reaching consumers.
"We're still averaging 120,000 fans per Sprint Cup event, we remain
the number two sport on television, and 17 of the 20 highest-attended
sporting events are NASCAR events," Poston said. "All of those
fundamentals continue to be strong."
But even optimists in the garage project lean times ahead.
Said J.D. Gibbs, president of Joe Gibbs Racing: "We're no different
than any other business: Everyone is going to have to be real careful
in the next few years."
Gibbs Racing is fortunate in that all three of its primary sponsors --
Home Depot, FedEx and M&M/Mars -- are signed through 2009. But
plans to add a fourth race team are on hold until economic conditions
improve.
The cost of sponsoring a front-running NASCAR Sprint Cup team is $20
million to $25 million a year. And belt-tightening alone can't
compensate if a team loses a sponsor that accounts for $15 million to
$20 million of that.
Automakers originally involved themselves with stock-car racing to
experiment with new technology and incorporate those findings into the
design of production cars. Today, NASCAR is essentially a marketing
tool -- a platform for Ford, Chevy, Dodge and Toyota to show off their
range of models to an enthusiastic, automotively inclined crowd.
A study by J.D. Power found that 56 percent of Ford owners classify
themselves as race fans. The connection is even stronger among owners
of Ford's F-series pickups, with 65 percent identifying themselves as
NASCAR fans.
The argument is similar for the roughly 100 Fortune 500 companies that
have sponsored NASCAR cars. Whether selling consumer goods or
services, corporate America has been eager to tap into NASCAR's
uncommonly brand-loyal fans.
But if corporations simply don't have the money, their marketing
investment in NASCAR is likely to drop.
"With the global economic situation, I expect corporate America, when
their contracts come up, not to renew at quite as strong a rate. The
money just isn't on the table," DeLorenzo said. "NASCAR is really a
glass-half-full bunch, but they're having trouble masking the fact
that this is really affecting them. I think they never really believed
a day would come when Detroit's almost-blind embracing of NASCAR would
even wane."
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/22/AR2008...203343.
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