Bankruptcies impact on racing tough to predict

GM, Chrysler situations have raised concerns about the extent of their future involvement in motorsports.

Wednesday, Jun. 10, 2009

Does NASCAR's future include Kurt Busch racing a Saturn? How about Kasey Kahne climbing behind the wheel of a Fiat?

The bankruptcies of General Motors and Chrysler have raised caution flags over the future of their longtime involvement with motorsports.

“Everybody's concerned about it because you just don't know what's going to happen,” says Bob Pockrass, associate editor of NASCAR Scene. “Everybody thinks manufacturers will continue to be involved in the sport because it's a good marketing arm. To what scale … is the question.”

Racing is still a key marketing tool for an industry whose motto has been “Win on Sunday, Sell on Monday.” For the companies that build cars and the teams that run them, that's unlikely to change.

“Racing is very important to us,” says GM spokeswoman Jan Thomas. “We want to win of course, but that's not the only reason we do it … It helps us sell cars and trucks.”

One study, for example, found that 56 percent of Ford buyers called themselves race fans.

But now, with courts and even Congress weighing in, people are hedging their bets.

Chrysler wanted to spend $134million on advertising over the nine weeks it expects to be in bankruptcy court. President Obama's auto industry task force gave it half that. Similar cuts could trickle down to the race teams Chrysler sponsors.

“We remain committed to our Dodge factory-backed teams,” said Mike Accavitti, Chrysler's director of brand marketing. However, he adds, “Interruption to the normal course of business … is inherent during this (bankruptcy) process.”

Car companies spend big on marketing. Business Week reported that the Big Three spent $3.4 billion on TV advertising alone in 2008. GM accounted for nearly half of that. And it's estimated the company spends up to $140 million on programs tied to NASCAR.

Recently at Dover, team owner and Chevy dealer Rick Hendrick said he has “unwavering faith” in GM and expected little change from a bankruptcy.

“My Plan A is Chevrolet, and my Plan B is Chevrolet, and my Plan C is Chevrolet,” he told reporters.

One reason the bankruptcies might not have an immediate impact is because car companies already had cut back on race-related spending.

Chevy, for example, cut back on sponsorships at tracks such as New Hampshire and Bristol.

“It's a gash; it's not a fatal wound by any stretch,” says Humpy Wheeler, former president of Lowe's Motor Speedway. “It's not going to be anything today like it would have been 20 to 30 years ago. Auto companies have been slowly pulling out their cash and replacing it with engineering knowledge and parts.”

Not all the bankruptcy fallout will come from marketing cuts.

In Gaston and Lincoln counties, promoter Clint Elkins worries about the effect on attendance at Carolina Speedway and East Lincoln Speedway. A lot of fans of the short-track racing featured there work at area dealerships that could close.

“There are a lot of our racers and our race fans who are employed by GM,” says Elkins. GM also makes the crate engines used in its Performance Late Model Division, a staple at both tracks.

But nobody knows how the industry changes will shake out.

On Friday, Roger Penske, who owns teams in NASCAR and Indy car, struck a deal to buy GM's Saturn division. Wheeler expects that as the sport continued to go global, companies such as Mercedes and BMW could join the foreign invasion of the sport that began in 2007 with Toyota.

And then there's the economy.

Though sales appear to be leveling off, Chrysler sales fell 47 percent in May from a year ago. GM's were down 29 percent.

“Nobody would have predicted 18 months ago that you'd have Dodge and GM going through bankruptcy,” says Pockrass of NASCAR Scene. “So it's difficult to predict where they'll be 18 months from now.”

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