Saturday, November 8, 2008
Updated: November 9, 4:04 AM ET
Tough economic times forcing NASCAR teams to streamline their budgets
By David Newton
AVONDALE, Ariz. -- Bill Elliott has a thought about how NASCAR can help team owners struggling to find sponsors and meet budgets survive in tough economic times.
"Maybe it needs to be like the government," said the 1988 Sprint Cup champion and former team owner as he relaxed behind the No. 21 Wood Brothers hauler at Phoenix International Raceway. "Maybe they should bail everybody out."
The governing body won't do anything that drastic, but it is looking at everything from putting strict limits on testing to reducing the length of days during a race weekend to help lessen the financial burden.
"Anything you spend money on is under scrutiny right now," said Robin Pemberton, NASCAR's vice president of competition. "Anything, from testing to schedules, we've got to look at it in all the garages right now.
"I'm sure there'll be some decisions made during the offseason that will help us for next year."
Most in the garage agree that the economic crisis that has hit the country is having a larger impact on NASCAR than they want to admit. Some have estimated as many as 750 employees could be released among the top three series.
Nobody is immune. Roush Fenway Racing is eliminating two Truck Series programs and an ARCA program to redistribute that money into the Cup and Nationwide series. Hendrick Motorsports, which is on the cusp of a third straight title with Jimmie Johnson, recently let 12 people go.
Once-thriving organizations such as Dale Earnhardt Inc., Chip Ganassi Racing with Felix Sabates and Petty Enterprises are looking at mergers because they can't find enough sponsors to fully fund their teams as they are.
Organizations such as Bill Davis Racing and Hall of Fame Racing could disappear altogether.
Friday's news that General Motors, the biggest automaker in the United States, reported a net third-quarter loss of $2.5 billion and burned through another $6.9 billion in cash further sours a mood that should be celebratory as Johnson marches toward a historic moment.
"NASCAR has got to step in and do something on their own," team owner Richard Childress said. "And they are. They understand the crunch everybody is in and they're taking a look at it."
Because organizations are independent contractors, NASCAR can't legally institute a salary cap on drivers and crew members the way the NFL does on players. It can't force teams to fly commercial instead of renting or buying private planes and helicopters, although many organizations are looking at that as a way to save.
"If you're going to load up and take your whole team from Charlotte [N.C.] to Martinsville [Va.] on helicopters, we can't regulate that," Pemberton said. "But that's what you see. Teams still have to be responsible."
Testing and scheduling are the two biggest areas in which NASCAR can make an impact. It costs an estimated $100,000 for a team to conduct a one-day test, and Pemberton believes that is on the low end.
Throw in that it costs $3.5 million to $3.8 million per car for a yearlong engine program, and consider the number of engines a team goes through in testing, and the savings there could be huge.
"It's pretty stout," said J.D. Gibbs, the president of Joe Gibbs Racing.
NASCAR floated the possibility of open testing at all tracks that host races early this season. It then suggested the possibility of 24 tests, but with the current economic challenges, owners have asked that be cut in half.
But to make that work and keep the haves from pulling further ahead of the have-nots, NASCAR would have to put a ban on testing at non-NASCAR hosting tracks.
"Testing is certainly a big save," said Ray Evernham, the minority owner of Gillett Evernham Motorsports and an analyst for ESPN. "But they need to collectively get together and control the testing legitimately."
Cutting time out of a Cup weekend also could result in huge savings. Cup teams typically arrive Thursday, spend Friday practicing and qualifying, Saturday practicing and Sunday racing.
"When you look at it, you're here less, firefighters are here less, every team member is here less," Pemberton said. "Rooms are really high. They're a big expense. Obviously, airline tickets have gone up.
"There are things that are very obvious that add a lot of costs to it. Those are things we'll address."
He added that it's not too late to make such moves for 2009.
|DEI's Max Siegel on the economic state in NASCAR: "One fix is to try to develop related and alternative revenues so you're not solely dependent on that [sponsorship] income."|
"We're not in a box on anything right now," Pemberton said.
But there are some things NASCAR can't do, such as make organizations cut back on salaries that have skyrocketed over the past five years, reduce labor counts and make sponsors commit to teams when they can't meet budgets.
Rusty Wallace, the 1989 Cup champion and an owner in the Nationwide Series, is most concerned with employee count.
"The employee count is out of control," he said, recalling that there were about 120 full-time employees at Penske Racing before he retired as a driver three years ago compared to about 300 now. "There should be a [set] roster.
"This deal of having an amazing amount of people come in early, then having this other amazing amount of people come in to change tires -- it brings this employee count sky-high. Something is going to happen. People simply can't afford this right now."
Dale Earnhardt Jr., who recently let 18 employees go at his Nationwide organization, said the tough times have taught him a valuable lesson about economics.
"You know, you want to hire this guy because he's a buddy of yours and you want to bring this guy in because you're related to him and this guy in because you heard he's great," he said. "You've got to be careful.
"You just need to have what you need and nothing more or nothing less. You need to just take what you can afford when it comes to assets, people, parts, pieces, everything."
Teams are taking a hard look at everything. Gibbs said JGR is considering everything from flying commercial to throttling back on how fast a private plane flies to use less fuel.
Some organizations, such as Roush Fenway, are looking at little things such as reusing the all-weather logo jackets from this season to save $150 a team member.
"There isn't a cost in our company that doesn't go through a regular scrutiny, down to how many rental cars are being used on a weekend to making sure the gasoline that goes into them is used at the most efficient rate," said Geoff Smith, the president of Roush Fenway.
Team owner Roger Penske said accountability is going to be a major factor going forward.
"We're looking in the organization where we're heavy on people," he said. "That's not just in the racing side. That's in all of our businesses. We have 40,000 people. You've got to say, 'We can do it with 10 percent less, or do we need 10 percent more?'
|Friday's news of General Motors' third-quarter losses further heightened the economic anxiety being felt throughout NASCAR.|
"You've got to take a business approach to it. People might have to be multifunctional instead of specialists."
As Evernham said, "The frills are going to be cut."
"Teams are going to have to do the same things as most of the other companies in America," he said. "You're really going to have to look hard at efficiency. Guys are going to really have to tighten their belts so they can spend efficiently on the stuff that will give them performance."
Performance is the one area in which teams and manufacturers aren't willing to sacrifice. Chevrolet, for example, pulled some of its marketing from tracks, but hasn't greatly reduced its financial commitment to teams.
"I've said for 20 years, performance makes value and value makes sales," Smith said.
Sponsors certainly are paying attention. Of the 32 cars that are fully funded for next season, half come from Roush Fenway, JGR, Hendrick Motorsports and Richard Childress Racing.
Because sponsorship represents 75 to 80 percent of what it takes to fund a car, the fully funded teams can hire the best people and spend the most on research and development.
That transcends into results. Only two organizations outside of Hendrick, Roush, JGR and Childress -- Penske Racing and GEM -- have won this season.
Hendrick, Roush and JGR have combined for 27 of the 34 wins.
Elliott, who is driving a part-time schedule for the Wood Brothers, believes the gap between the top four and the rest of the field will grow wider as the economy worsens.
So does Max Siegel, the president of global operations at DEI, who has only one of four cars fully funded for next season.
"It's no secret that it's a tough time out there," Siegel said. "If you look across the country in every business, whether it's banks or manufacturers unrelated to what we're doing, they are cutting back and laying off people.
"I don't know why people would think we would be immune to that. Our problem is the essence of our existence is as a marketing platform for these companies that are impacted by the economy."
That means a company such as UPS that paid close to $25 million for sponsorship in the past is putting up only $18 million next season for Roush Fenway's David Ragan.
That means the team has to make up the difference by selling secondary sponsorships, and companies just aren't willing to make that commitment.
"One fix is to try to develop related and alternative revenues so you're not solely dependent on that [sponsorship] income," Siegel said. "I don't know how realistic that is for most people.
"The other thing is the cost for competing -- you've got to get a handle on that. It's just too expensive."
That's why Elliott is much happier as a part-time driver than he ever was as an owner.
"There's no way in hell I'd be an owner again," he said. "I don't have the resources. It takes a guy with a lot of money to do this stuff right now, and with the way things are there aren't a lot of guys with a lot of money."
David Newton covers NASCAR for ESPN.com. He can be reached at firstname.lastname@example.org.
Anything you spend money on is under scrutiny right now. ... I'm sure there'll be some decisions made during the offseason that will help us for next year.
-- NASCAR's Robin Pemberton