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The former GEM Dodges are the last cars to regularly carry prominent manufacturer support.

As manufacturers teeter, race teams watch, wait

By David Caraviello, NASCAR.COM
April 10, 2009
09:37 AM EDT
type size: + -

As April Fool's pranks go, it cut a little too close to the bone. A fake story posted last Wednesday by Car and Driver magazine, which claimed that President Barack Obama had ordered financially strapped carmakers General Motors and Chrysler to drop their support of NASCAR, wasn't exactly received in a spirit of good humor. In a garage area where sponsors are in short supply, several teams have suspended operations, layoffs have been rampant and even sanctioned testing has been banned to save cash, it was seen as tasteless piling on.

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Auto industry blues

CNN's Michael Jones and NASCAR.COM's Mark Aumann discuss how the automakers' troubles may impact NASCAR.

But the prank only underscored real concerns over the uncertainty faced by auto manufacturers in NASCAR. Chrysler, whose Dodge nameplate backs eight cars in the Sprint Cup Series, was classified as a nonviable standalone company by a White House task force and given 30 days to work out an agreement with Italian automaker Fiat. The stakes are even bigger at GM, whose Chevrolet brand name is carried by 17 cars on NASCAR's top level. GM's chairman was recently removed at the behest of the president, and the company was given 60 days to put forth an acceptable restructuring plan. For both manufacturers, bankruptcy is a very real possibility.

Manufacturers play a very public role in today's NASCAR, supplying varying degrees of equipment, technical support, and cash to their affiliated race teams. They're also closely tied with race tracks, many of which have sponsorship deals with manufacturers that involve money and vehicles changing hands in return for exclusive promotional rights. They advertise on event telecasts, sponsor races, sign on as official NASCAR sponsors, and in a few rare cases -- such as with the Wood Brothers' Motorcraft-backed car or the former Dodge-backed vehicle at Gillett Evernham Motorsports -- sponsor race cars themselves.

It's a symbiotic relationship, with the manufacturers supplying teams with some of the parts, money and technology that it takes to win on NASCAR's national circuits. But what happens if one or more of those carmakers falls into bankruptcy? What happens if the president really does order them out of NASCAR? What happens if one disappears altogether? In such an unprecedented environment, no one is really sure. But that doesn't mean teams aren't bracing for the worst.

"I think the climate that we're in today, it would be poor business to not look at the worst-case scenarios," said Jeff Burton, who drives a Chevrolet for Richard Childress Racing. "That's not to say that we believe a worst-case scenario is coming, but if you turn the news on, you can't help but notice that it needs to have attention paid to it. Not only from that standpoint, but from the entire company standpoint with all of its sponsors and all of its partners. Our sport is driven by sponsors and fans being able to participate, and when the economy gets bad, it gets harder for those two groups to participate. I think that throughout the company, we have to be looking at worst-case scenarios. I don't think we have an option."

Complicating the situation is the fact that the amount of manufacturer money received by teams is one of those closely guarded state secrets, like how much drivers are paid. The amounts can vary greatly from one organization to the next, with more successful or higher-profile organizations receiving the lion's share, and small teams getting little to none. All teams want cash, but some may have to make due with a little time in a wind tunnel or on a manufacturer's seven-post rig.

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Today, most of the bills are paid by sponsorship money, which for championship-level organizations can run into tens of millions of dollars a year, far outdistancing the cash that manufacturers put in. Nobody wants to lose any money, especially in a recessed economy that's made sponsors more difficult to find. But should one of the carmakers go belly-up, insiders believe the results would be far from debilitating.

"From the standpoint of financially, I don't see [manufacturer money] being the lifeblood of the teams," said championship-winning car owner Rick Hendrick, who owns a number of car dealerships and fields four Chevrolet teams.

If we didn't have that support and if they went away, does it mean that Hendrick Motorsports would have to cut our employees in half? I don't think so.

JEFF GORDON

"I don't think anybody in NASCAR is dependent 100 percent on the manufacturers. I don't know anybody that's totally a factory deal. Evernham Gillett, it had been sponsored by Dodge in races, but that's kind of gone away. I don't know anybody that's totally looking to the manufacturer for all of their income by any stretch."

The same opinion is held by some on the race track side, where facilities receive promotional and advertising money from manufacturers. Several tracks have lost some of that income as manufacturers have cut back. Texas Motor Speedway president Eddie Gossage, whose facility has a tie-in with Chevrolet, said the manufacturer buys signs, suites and promotional rights, and provides the staff with free vehicles to drive. Should GM go under, the track would risk losing all that. It wouldn't be ideal, Gossage admits, but ultimately those losses wouldn't be irreplaceable.

"It would be like losing the Acme Corp., which buys a suite from you and some signs and tickets and things like that," he said. "Obviously, you don't want to do that, but we lose sponsors every year and pick up new sponsors every year. It's the constant ebb and flow of the business."

All of which may explain why, within the walls of a race track, there's plenty of concern over the manufacturers' viability but little discernible panic. NASCAR is full of veteran competitors and car owners who remember times when carmakers left the sport, and the series still carried on. If a manufacturer disappears or is forced to abandon its motorsports program, some organizations certainly will take a financial hit. But almost no one expects a devastated NASCAR as a result.

"The parts and the pieces and the support from a technical standpoint that we get from General Motors is crucial, and we need that," said Chevrolet driver Jeff Gordon. "They are fantastic at it. It's not that we don't want that, we do. We don't want that to go away. If we didn't have that support and if they went away, does it mean that Hendrick Motorsports would have to cut our employees in half? I don't think so."

"I think we will adjust," added Hendrick, Gordon's car owner. "We need them in the sport for a ton of reasons: technology, support, vehicles, it's going to hurt if they're not there. But I've raced when I had very little help from them, and there are some teams out there that get virtually nothing. It's just going to be part of the adjustment the whole world is going to go through."

As for the specter of bankruptcy? Not necessarily as bad as it sounds, Gossage points out.

"I think GM and Chrysler are going to survive," he said. "People have a misunderstanding about bankruptcy. It doesn't mean that you vanish, necessarily. It could mean that, but they're too big and important to vanish. It just means they're going to reorganize and basically not pay their bills and get dispensation for it."

Even though GM and Chrysler are facing bleak times -- Ford and Toyota, the other two carmakers that compete in NASCAR, are on better financial footing -- it's easy to find optimism. Car owners may be planning for a worst-case scenario, but that doesn't necessarily mean they expect to see it.

"I know that talking to the people at Chevrolet, they're very committed to the racing program. They realize the value of it with not only the rest of corporate America, but what it does to our nation. It still goes back to 'win on Sunday, sell on Monday.' This is a sport that's been good for the auto industry, and vice versa. I do know how committed they are," said Tony Stewart, who owns a two-car Chevrolet team.

"I'm very confident that the racing side is going to be fine. How it's affected, I think only time will tell. But talking to the people at GM, I mean, they're very committed to this program and understand the value of the racing side."

The End

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