NASCAR hits wall as financial crisis widens
Sponsors of NASCAR, the No. 2 sport on U.S. television after professional football, are slamming on the brakes because of the world's financial crisis. General Motors Corp., Chrysler Corp., Sears Holdings Corp. and Chevron Corp. will cut or drop sponsorships next season. Dario Franchitti, the 2007 Indianapolis 500 winner was forced out of the stock-car series by a lack of sponsors.
Teams with family names revered in stock-car racing like Petty, Waltrip and Earnhardt may enter 2009 with unfunded cars. The circuit might even have trouble filling 43-car fields.
``There's maybe 26 teams that have sponsorship for next year, and five or six that have partial,'' said Michael Waltrip, an owner and driver who shored up his finances by selling a stake to Fortress Investment Group LLC founder Robert Kauffman a year ago. Waltrip, 45, faces 2009 with only one of three cars fully sponsored. He said he might have to shut down one team.
Waltrip, two-time winner of the Daytona 500, isn't alone. Dale Earnhardt Inc., founded by the seven-time NASCAR champion and now run by his widow, has secured a backer next season for only one of four cars. Financial, automotive and consumer goods companies are balking at paying as much as $25 million to support a top team amid job cuts, seized credit markets and slow spending.
Earnhardt's 34-year-old son, Dale Earnhardt Jr., faces the prospect of a season without sponsorship for the team he owns in the second-tier Nationwide Series. NASCAR’s most recognizable driver hasn't yet found a company to replace the U.S. Navy as sponsor for his car, driven by Brad Keselowski.
He said he wouldn't run the car without a backer because of the estimated $7 million it takes to compete in Nationwide's 35 races.
``The economy is the way it is, there isn't much you can do about it,'' Earnhardt said after qualifying for NASCAR’s Talladega, Alabama, Oct. 5 race. ``A lot of these guys are going to walk around empty-handed next year.''
NASCAR has some support from its $4.5 billion in television contracts that run though 2014, said Dennis McAlpine, president of researcher McAlpine Associates in Scarsdale, New York. NASCAR and the tracks split the money from the contract, which is in its second year, McAlpine said. Teams get a share of the television money in race purses.
TV contracts won't be enough to keep some racing teams on the track as the crisis deepens, he said.
``It may show up in the cars,'' McAlpine said. ``They may not be able to get full fields next season.''
Chevron said in August it would no longer use a NASCAR sponsorship to sell its Texaco Havoline motor oil after 21 years in the racing league's top series, citing a decision to support more cars in racing's lower levels. The cut leaves Chip Ganassi Racing without a primary backer for the car driven by Juan Pablo Montoya next season.
Ganassi lost Molson Coors Brewing Co.'s Coors beer as a sponsor of its No. 40 Dodge last season. Unable to find a replacement, Ganassi shuttered the team in July and fired 70 crew members. Driver Franchitti will return to the IndyCar Series next year.
Economist Nouriel Roubini, the professor who predicted the financial crisis in 2006, said the U.S. will suffer its worst recession in 40 years. Over an 18-to-24-month span unemployment will rise to 9 percent and home prices will fall another 15 percent.
Cuts in consumer spending caused by the slowdown will make all sports advertising more difficult to sell next year, said Don Hinchey of the Bonham Group, a sports marketing consultant in Denver. That means the top teams are going to have the most success drawing money.
In NASCAR, that's the richest. Four car owners -- Roush Fenway Racing, Hendrick Motorsports, Richard Childress Racing and Joe Gibbs Racing -- locked up all 12 spots in the top Sprint Cup Series championship playoff.
Roush Fenway, which is co-owned by Boston Red Sox owner John Henry's Fenway Sports Group, last month snapped up United Parcel Service Inc.'s sponsorship from Waltrip.
Childress grabbed General Mills Inc. from Petty Enterprises in April and Caterpillar Inc. from Bill Davis Racing in June. Neither Petty, a family-owned team that fielded a car in NASCAR’s first race in its top stock-car series at Charlotte, North Carolina, in 1949, nor Davis have secured replacements.
Team owners may have to cut in other areas to maintain spending on improving performance, said Richard Childress, whose cars carried Earnhardt Sr. to six championships. Teams may have to hold back on new shops, corporate hospitality and perks like having helicopters transport drivers to tracks.
``We'll have to look at other ways to save the money, put the money where it's going to be the most effective,'' Childress, 63, said after his No. 31 car won the Bank of America 500 last weekend.
General Motors, whose stock last week dropped to a 58-year low, won't renew naming rights for the three NASCAR Sprint Cup Series races it sponsors next season and will cut supplies of vehicles provided to racetracks. The Detroit-based company didn't say how much it would save by the measures.
NASCAR is looking for a backer for its third-tier truck races after Sears departs next month, and Dodge said in September it will no longer support teams in the series. The racing league still expects to have full 43-car fields in its top Sprint Cup Series races next season.
``We know it's more challenging than ever,'' said spokesman Kerry Tharp in Charlotte. ``At this point we still anticipate having full fields for next year.''
For Earnhardt Jr., a third-generation racer whose JR Motorsports shop is in his hometown of Mooresville, North Carolina, survival is the first responsibility of a team owner.
``We'll race the races we can afford to race,'' Earnhardt said. ``A lot of the people that work there are family and so that place has to be open.'' Bloomberg