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Big Three Automakers' Woes Affect NASCAR's Economy
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."