Motorsports Authentics to seek new business model (cont'd)

If those scenarios play out, Motorsports Authentics could wind up as a trackside retailer with a focus on die-cast cars, similar to the model that Action Performance used in the 1990s to build its business before adding an apparel division. Its business peaked at more than $400 million in sales and 500-plus employees in 2002.

Action was eventually purchased by SMI and ISC for $245 million and merged with its competitor, Team Caliber, to form Motorsports Authentics in 2005.

"It's a much tougher business now," said Fred Wagenhals, Action's former CEO. "The sport has changed, the popularity of the drivers has changed, the economy has changed. Retail is tougher today than it's ever been. They've got to make adjustments."

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Those adjustments could come in the form of the way product is sold at the track. It is now sold out of trailers that are lined up together to form a type of merchandise row.

"What they're telling us is that they're evaluating how to make the trackside selling experience better for the fan," said Geoff Smith, Roush Fenway Racing's president. "They want to be able to make the buying experience more meaningful. What shape that takes, I don't know."

Whichever direction Motorsports Authentics chooses to go, it will be with far fewer workers than it had two years ago. Its roster of close to 500 employees has been chopped nearly in half, with the latest round of cuts in March shuttering 40 more jobs.

The company lost $6 million in 2006 and $20 million in 2007 (not including millions more in write-downs), before turning a $3 million profit last year on the back of Earnhardt, whose merchandise accounts for 35 percent to 40 percent of all NASCAR-licensed product sales.

Earnhardt's sales jumped last year when his car number changed to No. 88 at Hendrick Motorsports and his co-sponsors, Amp Energy and National Guard, replaced Budweiser. That also was the year Motorsports Authentics made significant cost cuts to its trackside selling program, which contributed to an improved bottom line.

Still, more losses are projected in 2009.

Mattes is working with Motorsports Authentics' four board members, two from ISC and two from SMI, to chart the company's new course.

ISC's representatives are VanDerSnick and incoming president John Saunders.

SMI is represented by Marcus Smith, president and COO, and Don Hawk, vice president of business affairs.

"The question is: What model is sustainable?" McAlpine said. "And can you get there painlessly? I would be surprised if you could."

"It's no secret that we've had some bumps in the road as we've tried to pull this thing together and run it the right way for the industry," VanDerSnick said. "A lot of things do very well over there. We've got a hard-working and loyal employee base that does trackside well, that does die-cast well, that's doing apparel well. We've got the wherewithal to stomach this."