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GM to reduce NASCAR involvementUPDATE #5 The series, which is already struggling in a sluggish economy, is nervously awaiting the auto company's decisions on sponsorships. A few years after NASCAR was founded in 1947, a General Motors executive named Charles Wilson uttered the memorable line that "what was good for our country was good for General Motors, and vice versa."
But what's good for GM today might not be good for NASCAR.
As NASCAR's Sprint Cup Series arrives for the Pepsi 500 on Sunday at Auto Club Speedway in Fontana, the sluggish economy already is making it tough for the series, race teams and tracks to attract all the corporate sponsors to help pay their bills.
GM is reeling from huge financial losses and the giant automaker plans to slash annual spending by $10 billion. Its support of NASCAR and other auto racing is not exempt from possible cuts.
GM's slump added to economic problems now buffeting NASCAR stock-car racing, the IndyCar Series, the NHRA drag-racing circuit and smaller niche circuits such as sports-car racing.
The tough economic times, combined with high gas prices, also are keeping many fans from attending races. That's causing problems not only for the series and teams, but for the top two operators of U.S. race tracks, International Speedway Corp. -- whose properties include the Fontana venue -- and Speedway Motorsports Inc.
In addition, two other major U.S. automakers, Ford and Chrysler (Dodge), are struggling as well and reportedly are weighing whether to cut back their motor sports activities.
"The Detroit manufacturers have been dissecting their involvement in NASCAR with a fervor not seen since, well, ever," Peter M. De Lorenzo, a former auto advertising executive, recently wrote on his website Autoextremist.com.
Three of the top Cup teams -- Hendrick Motorsports, Richard Childress Racing and Dale Earnhardt Inc. -- race Chevrolets. Roush Fenway Racing is the leading Ford team, Joe Gibbs Racing is the top Toyota team and Gillett Evernham Motorsports and Penske Racing head the Dodge teams.
GM hasn't provided details as yet. "We're in a very early stage of evaluating all of our marketing initiatives and I just can't elaborate" on what might get scaled back, said Terry Dolan, Chevy's racing manager. LA Times
07/24/08 Terry Dolan, marketing manager for Chevrolet racing, said Thursday that it is too early to predict where the company could cut into its NASCAR marketing program as it tries to return to profitability.
“We are examining and continuing to examine all expenditures,” Dolan said at Indianapolis Motor Speedway, a track where Chevrolet is an official sponsor. “This is not an unusual occurrence by any means.
“We continually review not only our marketing initiatives but all of our racing programs to insure there is a solid return on our investment. But racing has been part of our DNA going to back to [co-founder] Louis Chevrolet. We build cars. We race cars. And we are natural-born competitors. And we compete successfully on the track with a variety of manufacturers and we plan on continuing to do so.”
Chevrolet mainly supports four Sprint Cup race teams – Hendrick Motorsports, Richard Childress Racing, Dale Earnhardt Inc. and Haas CNC Racing. Chevrolet won 26 of the 36 races last year (when Chevrolet also had Joe Gibbs Racing) but has won only four of the first 19 races this year.
“Frankly, when it comes to our involvement in NASCAR Sprint Cup competition, we value the philosophy of our co-founder Louis Chevrolet,” Dolan said. “We plan on continuing to honor Louis Chevrolet’s legacy of 'never give up.'" More at Scenedaily.com
07/16/08 This rumor is upgraded to 'fact' as the move has begun. General Motors has notified two racetracks that run NASCAR events that their current contracts will not be renewed as part of an overall $10 billion cost-cutting program. Speedway Motorsports Inc., which owns eight tracks that hold NASCAR events, already has been told GM will not renew contracts at two tracks—New Hampshire Motor Speedway and Bristol Motor Speedway. GM has contracts with 12 of the 22 tracks where NASCAR’s top Sprint Cup series races and is the title sponsor for the fall race at Richmond International Raceway.
07/16/08 In his latest article, the Autoextremist again hammers on his prediction that NASCAR is about to be dealt a severe financial blow from a pull back of the Big 3 automakers, with GM being the first. Look for Toyota to possibly pick up another top team or two if that happens.
Yesterday, GM CEO Rick Wagoner outlined a series of cost-cutting measures, including laying off salaried workers, eliminating health care benefits for GM retirees over 65 years old, making even more drastic reductions in truck production, suspending its stock dividend, suspending all executive bonuses, cutting advertising, marketing and promotional programs (including racing), and borrowing at least $2 billion, all in the next eighteen months. These moves are designed to basically save the company from bankruptcy and raise its cash position by $15 billion through the end of 2009. And everything - and I mean everything - is on the table when it comes to these cost reductions, including all of GM's motorsports programs. "There are some elements of motorsports that are very effective means of promotion and communication with certain customer segments. The ones that are less are the ones that will be ... scaled back," GM North America President Troy Clarke added at the news conference. Ouch.
First of all, yesterday's news conference was the first time in the history of the corporation that GM upper management openly addressed or commented upon GM's racing programs in front of the media. In the past, GM's Director of Racing would make statements, or a divisional general manager might make a statement, but only in the context of being at a race weekend or when it was deemed appropriate (signing or re-signing drivers or teams, etc.). Going back long before this, some of you might remember that GM adhered to the bogus "ban" from building and promoting high-performance production cars and racing that the old AMA tried to enforce on the domestic manufacturers in the late 50s and early 60s. While Ford blew the lid off that wrong-headed edict with their "Total Performance" marketing push in the 60s, GM spent most of that decade refusing to admit that they were affiliated with legends like Smokey Yunick, Junior Johnson, Roger Penske, Jim Hall, etc., etc., while providing those stars with "back door" support. (For the record, I preferred the Ford way of going racing, but that's irrelevant to this discussion.)
In mentioning all of this, I'm trying to frame the significance of this event for our readers out there. Think about the fact that GM has never discussed their racing programs on the highest corporate level, in public, ever. Then think about the fact that the first time they do discuss it, it's to talk about the cuts that are on the table. That is a big deal, folks.
As I have been warning for the last two years now, the creeping reality of the domestic manufacturers' freefalling fortunes in the U.S. market was bound to strike at the heart of the Detroit Three's racing programs - especially their NASCAR involvement. And now reality has finally come home to roost at GM racing, and the fallout is not going to be pretty. NASCAR's adoption of the "CoT" was a disastrous decision on their part, because it exposed them to the burgeoning faction within these car companies that refuses to buy into the NASCAR hype and instead correctly point out that all brand recognition has been expunged from NASCAR's Sprint Cup equation by the generic blobs masquerading as "Impalas," "Fusions," "Chargers" and "Camrys," and that the return on investment for the company's involvement is deteriorating at a rapid rate.
So, what does this mean for GM Racing going forward? Here are the five key actions on the table right now at GM:
1. Immediate cuts to NASCAR promotional programs. Ever go to a NASCAR weekend and notice the Chevrolet billboards around the track, or attend Chevy-sponsored events surrounding a race weekend, or go to the "Chevy Rock and Roll 400," or see co-branded promotions in grocery stores or auto parts stores featuring Chevy NASCAR drivers? GM spends millions of dollars on these programs every year, and these are the deals that will come under immediate scrutiny. Some track contracts have already been cancelled, and other contracts with individual tracks expiring at the end of this year will not be renewed. Ongoing contracts will come under heavy fire. And a lot of the small promotions that add up to a significant chunk of change will fall by the wayside. It doesn't sound like much, but believe me, to the tracks involved this will have a huge impact.
2. Immediate cuts to NASCAR-themed advertising spending. The ubiquitous Chevrolet spots on NASCAR broadcasts will be cut by 20 percent right off the top. This is probably the most painless cut GM can do, unless you're on the receiving end of it as a TV network media honcho, or at a media company that has the responsibility of placing that ad, that is.
3. All team and driver contracts will be put on the table for immediate review. That deal that Tony Stewart just signed to receive half of Haas-CNC Racing, so it can become Stewart-Haas Racing in 2009? There was GM Racing money involved in that deal, or it wouldn't have happened. But by participating in that deal, GM Racing also has set the table for its entire technical partnership fee structure with its NASCAR teams to be reviewed, given the company-wide mandate to take 20 percent out of its marketing/promotion/advertising budgets. The deal with GM Racing is this: The technical aspect of GM Racing reports up through engineering and GM Powertrain and has a budget assigned to it. But the actual serious money involved which supports these sponsorship deals and other programs comes out of GM Marketing. Last fall, GM signed Hendrick Motorsports, Richard Childress Racing and DEI, Inc. to contract extensions of varying lengths. The man at GM marketing who made those deals happen - Brent Dewar - a known NASCAR "friend" and cheerleader, has since been shipped off to Europe. Needless to say, there are people within GM marketing and the rest of the corporation who are clearly not happy with some of Dewar's decisions. Now, every single one of those decisions has been put on the table for review and discussion, with GM going back to the teams for "adjustments" to their contracts not out of the question. Look for those "adjustments" to translate into a percentage cutback to the direct payouts to the teams, and don't be surprised if the low man team on the GM NASCAR totem pole is given its outright release with a cash buyout by the end of this year.
4. GM may stay in NASCAR - at least for now - but to what degree? All of these reductions in GM Racing's involvement in NASCAR begs the question, as in, if GM stays, to what degree will their involvement "cover" NASCAR? Keeping a presence in Craftsman Truck and maintaining a reduced presence in Sprint Cup may be all that's left for GM's NASCAR budget. GM will race where and when they see fit, but look for the Nationwide Series to become the odd man out when it comes to GM Racing's involvement. And if teams are given the choice to cut their programs in response to GM's demands, watch their Nationwide programs drop off the map too.
5. Corvette Racing caught in the crossfire? It appears that a direct result of the additional juice necessary to make the Tony Stewart deal happen is that Corvette Racing may take a big hit. One scenario already on the table is that Corvette's annual appearance at the 24 Hours of Le Mans might be in jeopardy, which would be a complete travesty because that one single race is the raison d'etre for the entire Corvette Racing program. The global image enhancement and benefits to GM, Chevrolet and the Corvette brand because of the success of Corvette Racing at that one race - the most prestigious endurance road racing event in the world - is almost incalculable. But it takes a lot of money to present a front line two-car GT effort at Le Mans, and it is rumored that 1/3 of Corvette Racing's annual budget is consumed at that one race. So that's why the discussion is on the table. It doesn't help that the internal NASCAR cheerleaders within GM (at least the few who are left) regularly dismiss Corvette Racing as an afterthought, but the reality of the situation is that Corvette racing's annual budget is approximately equal to a top one-car effort in NASCAR's Sprint Cup, so the arguments to decimate Corvette Racing fall flat in the Big Picture of things. As we like to say around here, this is a "developing" situation, and the next 60 days will determine Corvette racing's fate for 2009 and beyond. More at Autoextremist
07/15/08 This rumor is downgraded to 'speculation' today. General Motors is taking a hard look at its motorsports spending as it reduces marketing and event costs, part of a series of cash-saving cutbacks the automaker announced Tuesday. The specifics on motorsports spending aren't immediately known. But GM North America boss Troy Clarke said that traditional marketing methods aren't as effective as they used to be. When asked directly about support for NASCAR and other motorsports, Clarke would not give specific details. "There will be modifications and changes in our promotional footprint," Clarke said. AutoWeek [With sales plummeting, what is NASCAR doing for GM, except to look like a loser getting their tails kicked week in and week out by Toyota.]
07/06/08 Despite the severe economic problems that General Motors Corp. is experiencing, the automaker’s NASCAR point person said Sunday that GM remains committed to NASCAR. Alba Colon, GM Racing program manager for NASCAR Sprint Cup Series, told SPEEDtv.com that she expects that in 2009, GM will fund its NASCAR operations at the same level it is this year. Colon would not discuss specifics about reports that GM would scale back some specific elements of its program, including its track sponsorships. SPEEDtv.com
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