Economic crisis leaves many NASCAR Cup teams seeking sponsorship

By Bob Pockrass - Associate Editor
Friday, November 21, 2008
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The No. 43 Petty Enterprises Dodge does not have a primary sponsor for the 2009 NASCAR Sprint Cup Series season.

Todd Warshaw
Getty Images for NASCAR

As the 2008 season comes to a close, only 30 NASCAR Sprint Cup teams have announced full sponsorship for 2009. Six other teams have at least partial sponsorship and 10 haven’t announced any significant sponsorship, leaving owners trying to merge or sell and leaving employees worried about their jobs.
   
Throughout the sport’s history, sponsor commitments have varied from year to year. But 2009 is shaping up as a year of dramatic decline after nearly five years of steady growth which, at one point, saw more fully sponsored cars than grid spots. In 2004, there were 36 fully sponsored teams. In 2006, there were 41 fully-sponsored teams, and in 2007, 44 fully sponsored teams competed to fill the 43 starting spots. Of the 43 current full-time teams, 39 had full sponsorship in 2008.
   
And with full sponsorships ranging from $15 million to $25 million, the loss of 14 sponsored cars represents a drop in corporate investment in the sport of $210 to $350 million since the peak in 2007.
   
Among the companies leaving the Sprint Cup Series is Texaco, whose parent company Chevron is sixth in the Fortune 500 world rankings. Also leaving is 29th-ranked AT&T, which is being forced out because of Sprint’s series entitlement. The American Automobile Association is leaving as well, though the regional affiliate is remaining for a handful of races. Officials with Chevron and AAA said their marketing efforts were becoming more regional-based, with their franchises controlling the marketing budgets.
   
The situation is unlikely to improve significantly.
   
“If you don’t have a sponsor by now, you’re not going to get one,” says Chip Ganassi Racing co-owner Felix Sabates, whose team still needs to fill half a season for Juan Pablo Montoya after Texaco opted to leave the sport. “Because of the way the economy is right now, no sponsor is going to put money out there.
   
“If you have Montoya or somebody like that, you can get a sponsor. But if you don’t have a name, you’re not going to get a sponsor. The problem we have is the economy. When the economy changes, which it is going to change eventually – it always does – it will be easier. But right now, it’s tough. Anybody that will tell you different is lying to you.”
   
The dire situation has led teams to talk about merging. Chip Ganassi Racing and Dale Earnhardt Inc. announced their merger Nov. 12. Bill Davis Racing, Hall of Fame Racing, Gillett Evernham Motorsports and Petty Enterprises all have been part of merger talks.
   
“I’ve never quite seen the garage like this,” says team owner Bill Davis, who admits his Cup team might not be back in 2009 if he cannot find a sponsor. “But then again, we’ve never had these huge budgets and these huge payrolls. Maybe this garage is going through an adjustment period, just like the business world does. It happens. When things get tight, you adjust and scale back. Unfortunately, that involves hard times for some people.”
   
With the possibility of mergers and only two additional full-time teams announced for next year, it is likely that the number of full-time teams could drop from its current number of 43. Teams could disappear like sponsorless Dario Franchitti’s Chip Ganassi Racing team that suspended operations this year.
   
DEI’s merger with Ganassi will cost the sport one full-time car as the No. 01 team (currently driven by Regan Smith) won’t compete in 2009 and it could be more if Yates Racing decides to remain a two-car operation with the addition of DEI’s Paul Menard.
   
“The fact of the matter is, we’re in a tough economy,” DEI President Max Siegel said in the weeks leading up to the DEI-Ganassi deal. “It’s a competitive sport. Most every owner in the garage every day is looking to fund the program and get healthier.”
   
Sabates doesn’t see any teams being able to ride it out in 2009 without a sponsor, but it’s likely some will try. Yates Racing has been able to piece together enough sponsorship to run two teams throughout 2008 without full-time primary sponsors. Could it compete in similar fashion in 2009?
   
“It depends on how big the pieces are,” says team co-owner Max Jones.
   
Those that do field teams might do it with a leaner crew and a leaner budget, especially given the fragile state of the car manufacturing industry and cuts in marketing budgets at Ford, General Motors, Dodge and Toyota. Garage sources said teams could run an additional car for $7 to $10 million instead of the $12 to $15 million that most teams ask for.
   
“If you had a race team today, wouldn’t you see that as a necessity, that you’d reduce your expenses?” says Bruton Smith, whose Speedway Motorsports Inc. owns several race tracks. “There are so many things that a team owner can do to reduce expenses....If you had looked at that some years ago and somebody said $12 million [to sponsor a car], somebody would have went out and shot them. This is stock-car racing. We’re not Formula One.”

The Fight For Sponsorship

The teams looking for sponsorship all have something in common – they’re not part of NASCAR’s 12-driver playoff, the Chase For The Sprint Cup.
   
The organizations in the Chase – Hendrick Motorsports, Richard Childress Racing, Joe Gibbs Racing and Roush Fenway Racing – have 16 cars among them fully sponsored for 2009. One of Hendrick’s cars, the No. 88 of Dale Earnhardt Jr., has split sponsorship with Amp and National Guard.
   
RCR acquired two sponsors from teams that weren’t in the Chase – Caterpillar from Bill Davis Racing and General Mills from Petty Enterprises. To supplement General Mills’ sponsorship, BB&T is moving from RCR’s Nationwide car to a 10-race primary sponsorship with driver Clint Bowyer.
   
Roush Fenway Racing did lose one sponsor – Office Depot – after signing Aflac, which reportedly paid $26 million to sponsor Carl Edwards and hopes to sell about a dozen races to other sponsors. Roush Fenway also picked up UPS from Michael Waltrip Racing to replace AAA.
   
Tony Stewart, whose new Stewart-Haas Racing is absorbing Haas CNC Racing, is splitting up sponsorship among his cars. Office Depot (from Roush Fenway) and Old Spice, which has increased its commitment after having sponsored Stewart at JGR for several years, will be on Stewart’s car. Stewart’s team has lured the U.S. Army from DEI for 22 races and hopes to add another company for driver Ryan Newman.
   
While the big teams and big names are signing sponsors, teams such as Waltrip, Ganassi, DEI, Yates Racing, Bill Davis Racing and Petty Enterprises are among those looking. MWR still needs to find a half-season sponsorship to go with Aaron’s for David Reutimann’s car, and team executive vice president Cal Wells is worried that the big teams and big names are taking all the money.
   
“It’s a tough environment,” Wells says. “It’s a land grab. You’ve got the very successful teams, and because of that, the sponsors gravitate and they’re taking [them].
   
“It’s ridiculous what’s happening there. It’s frankly a little unhealthy for the garage right now. People are reducing sponsorship into partial deals and this and that. There are good, high-quality athletes that are available for smaller deals. It hurts the infrastructure of the garage.”
   
DEI Vice President John Story has seen his team lose the Army to Stewart, but he said prior to the team’s merger that he doesn’t agree with Wells entirely.
   
“We still have our own responsibilities and things we have to work on,” Story said. “I don’t think that has any effect on us.”
   
Popular Cup drivers also lure sponsors to other series. Earnhardt Jr. landed Unilever as a 10-race sponsor for his Nationwide Series team, where Earnhardt Jr. will split driving duties with veteran Mark Martin and young Brad Keselowski.
   
Unilever, which has been with Tommy Baldwin Racing and Gillett Evernham Motorsports, ranks 122nd on Fortune’s list of the biggest companies in the world with products ranging from Ragu to Klondike bars.
   
How come they’re not in Cup?
   
“We’ve been in Nationwide for about five years, and it really has been getting us awesome results,” says Mark Shaw, Unilever director of integrated marketing. “Based on the numbers and the results that we’re getting, we feel like it’s the right place to be. … I don’t think there’s any reason for us to be changing the recipe.”
   
Shaw says that his NASCAR budget is bigger for 2009 than 2008 but wouldn’t go into specifics.
    
Torrey Galida, the chief marketing officer for Roush Fenway Racing, which also handles sponsorship searches for Yates, recently had a disappointing phone call from a company that would have been new to the sport.
   
“We started talking to them back in June and had a couple of meetings, and they sent us inquiries and we educated them on the sport,” Galida says. “They came back last week and said, ‘We’re out for 2009.’ They felt like they were going to go with what was proven for them, which was national advertising. In this environment, they weren’t going to take a risk in something they haven’t tried.”
   
NASCAR teams need to convince companies that the sport’s long-standing reputation of serving its sponsors is worth taking that risk, says David Carter, executive director of the University of Southern California Sports Business Institute.
   
“At times like this, marketers go back to what they know, and in doing so, they incur a whole lot less risk,” Carter says. “But they also might incur a lot less return. What I would say to that potential sponsor ... is when other people are standing down right now, you really have a chance to differentiate yourself in NASCAR.”
   
Tom Reddin, CEO of Gillett Evernham Motorsports, indicated his team has all three of its cars mostly sponsored for next season. He says teams must go beyond traditionally proven methods to give back to sponsors.
   
His team has the luxury of an owner in George Gillett who also owns car dealerships, the Montreal Canadiens and the Liverpool soccer team.
   
“It’s hard work,” Reddin says. “One of the things we’re focused on is walking the talk on B to B [business to business relationships among sponsors]. We try to hold ourselves and our partners accountable to what has actually been executed. It is hard work to make it happen, but when you make it happen, it’s a big win for everybody.”
   
NASCAR officials say they believe there will be at least $80 million in new or additional money coming in from sponsors next year to help replace those companies that have cut back. That is less than in previous years.
   
Among the teams looking for sponsors is Yates Racing, which has two cars in the top 30 in points. But even the help from Roush Fenway’s sponsorship arm, it hasn’t inked a major sponsor for either car for 2009. Yates recently sold a 2008 three-race sponsorship to the Federal Communications Commission for $350,000 total – compared to the $684,210 per race received by a team getting $26 million for a season.
   
“Obviously we’d like to have full sponsorship,” co-owner Doug Yates says. “Everybody would. But we also know this is a rebuilding process and to be able to get to where we’re at, we’ve got to stick it out and make some decisions for the long run.”
   
With the 2009 season less than three months away, is there money still on the sidelines?
    
Ann Barker, who headed the NASCAR marketing efforts for Texaco/Havoline, says there might be.
   
“I talked to so many people in marketing in a very large organization; they’re saying they have to redo their marketing budgets, the last six weeks,” Barker said in early November. “There isn’t a business in the land that isn’t re-evaluating their budgets.”
   
Another theory is that because so many teams are looking for sponsors, potential sponsors will wait until December in hopes of driving the price down.
    
“I’m sure there is an element of that taking place,” Carter says. “But, should a sponsor wait too long or otherwise allow a team to falter and become less competitive due to a lack of funding, it may reduce not only the cost the sponsorship, but also the value of the marketing partnership.”
       
Companies also are hesitant to commit to full-year contracts, says Chip Ganassi Racing President Steve Lauletta says.
        
“You can do a direct mail program and you know you’re going to do four of them through the year – you can commit to the first one and you don’t have to commit to the other three,” Lauletta says. “You try to be as flexible as you can because if you get to July and somebody comes to your office and knocks on the door and says, ‘You need to cut 10 percent of your budget.’ If they’re all in contracts, you can’t cut.”
   
Petty Enterprises CEO David Zucker is lobbying for NASCAR to consider franchising as a way of guaranteeing owners spots in the field. One of the Petty cars is outside the top 35 in points, which means it isn’t guaranteed starting spots – and thus visibility for the sponsor.
   
“It’s the only major sport in America where there aren’t team franchises,” Zucker says. “[NASCAR has] a good argument. Their argument is they want to keep the ability for new teams to enter. But that’s something extremely hard to do. The days of the one-car teams joining the sport are probably slim.”
   
NASCAR has no plans to cut the size of the field or award franchises. Its system has worked in the past through the good and bad economic times.
   
“We’ve had various other times where the economy has been very difficult,” NASCAR Chairman Brian France says. “This probably to everybody is more significant, at least on the surface. So there is a big uncertainty about people’s ability to do all the things that they want to do financially, given the backdrop of the credit crisis and all the rest.
   
“We are nervous like everybody else. We’re taking every precaution we can in terms of getting costs out of our system on behalf of the team owners, on behalf of the track operators. But this is also a time when you can’t freeze either. You’ve got to still be aggressive and still push hard your product.”

Comments

21 responses to "Economic crisis leaves many NASCAR Cup teams seeking sponsorship". Post a Comment.
  1. 1
    Jozef Colomy said:
    Nov 21, 2008 at 11:52 AM

    You make it sound like a lot of these sponsors just decided to leave but that's not so...NASCAR has driven away a lot of them because they interfere with NASCAR's sponsorships. "Hmmm we can't have AT&T or Alltel around if they're going to drive in the Sprint Cup". And Sunoco, being the "Official Fuel of NASCAR" made it so Chevron and Exxon-Mobil had to market using their motor-oil subsidiaries, which of course isn't enticing to Chevron because the Texaco brand isn't getting out there if it says Havoline on the cars. There are countless examples of NASCAR's greediness hindering the teams' ability to garner sponsorship, and that's very wrong.

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  2. 2
    Ronald Lechner said:
    Nov 21, 2008 at 5:25 PM

    Just because a corporation has signed a contract to sponsor, wouldnt a bankruptcy void those contracts? Therefore we MAY have 30 sponsored teams.

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  3. 3
    Robert Wingert said:
    Nov 21, 2008 at 7:50 PM

    Jozef Colomy are you playing with a full deck? First of all it's the Sprint Cup Series who Sprint is the sponsor of the entire series. It was Sprint who wanted Alltel and AT&T out. You don't see Budweiser advertised at Coors Field in Denver. You haven't seen many races this year, because if you looked at the 42 car it has Texaco on the hood. Do you have any more examples?

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  4. 4
    Daniel Kelley said:
    Nov 21, 2008 at 8:22 PM

    Sprint is a worthless sponsor. Back in the good old days when it was known as Winston Cup, Winston allowed other tobacco companies in. In the Busch series, other alcohol companies were allowed. I will never hook up with Sprint. I miss the old days. The Chase sucks. The top 35 getting a free entry, especially for the 1st 5 or 6 races of the year is pathetic. And it is ridiculous how much these youngster's get paid just to get in a car. Bring me back the days of Cale Yarborough, Richard Petty, Bobby Allison and others of their class. Bring back the days of racing the real car that looked like a Dodge, Chevy, Ford, or whatever make. I loved the motto back then, "Race on Sunday, Sell on Monday,". Back then they raced the real car. I can understand safety, but at least let the car look like the real McCoy instead of having to look at the emblem to tell what it is.

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  5. 5
    said:
    Nov 22, 2008 at 1:20 AM

    we have mr know it all (jozef colomy) opening his mouth again if you know so much about racing and sponser ships and a head for money why don't you go out and start your own race team mr know nothing

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  6. 6
    said:
    Nov 22, 2008 at 1:20 AM

    we have mr know it all (jozef colomy) opening his mouth again if you know so much about racing and sponser ships and a head for money why don't you go out and start your own race team mr know nothing

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  7. 7
    Robert Wingert said:
    Nov 22, 2008 at 8:17 AM

    Daniel Kelley an old school man. I agree with you, racing back in the old days was real racing. Real cars and real engines, and no lucky dog.

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  8. 8
    charley gysi said:
    Nov 22, 2008 at 8:50 AM

    We also played football with leather unpaded helmets and baseball with 5 fingered gloves and plain old wood bats. Times have changed and as much as I liked the old times being an old man myself, we have to adjust or find another pasttime. Business is business and NASCAR is big business today and the $$$$ is the center of attraction. If my memory is correct isn't NASCAR the only sport that has been self sustaining just because of sponsorship?

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  9. 9
    Scott Brennan said:
    Nov 22, 2008 at 12:37 PM

    NASCAR should have never got to the point that it takes $20 mil a year to run a race team and have to rely on sponsors to foot most of the bill. What a recipe for disaster like they are facing now. NASCAR not only needs to eliminate testing but shaker rigs, wind tunnel trips, etc. Race schedule doesn't need to be 36 races either. Two races at NH, Martinsville, Phoenix, etc? You got to be kidding. Shorten the season to 28-30 races, eliminate the stupid chase, and put in a franchise system much like the NFL. NASCAR racing will not survive in it's using the old business model of ever increasing sponsorship dollars to fund teams at $20 mil a year.

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  10. 10
    147 Hot Dogs said:
    Nov 22, 2008 at 12:43 PM

    NASCAR needs to work with the broadcast team and make their contract include giving EVERY car in the field at least 2 minutes of airtime. If I was a sponsor I would hate it if my car wasn't shown or talked about at all.

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  11. 11
    Werner Boehmert said:
    Nov 22, 2008 at 2:24 PM

    gotta agree with Jozef...i don't lke the deals NASCAR makes to get sponsors for itself...and does NASCAR need and official sponsor for this and that...RCR...did you need a 4th car?...another team could have used that sponsor...if racing is so expensive, why add another team??...

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  12. 12
    terry ruth said:
    Nov 22, 2008 at 5:13 PM

    Here's hoping Wood Bros. get a sponsor for 2009......we need small " and historical teams" as well as the mega teams.

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  13. 13
    Worm Dirt said:
    Nov 23, 2008 at 12:40 AM

    Wow!!...Twelve comments so far... AND ALREADY someone is begging mommy Nascar to mandate "airtime" for every single car regardless of performance..... and another person is suggesting that team-owners forgo having multiple cars because "ANOTHER TEAM could have USED that sponsor"!?!?!?!?!? Are you KIDDING????? This sounds like what Nascar might look like in FRANCE! Enough is ENOUGH!!! Listen....Markets go UP..... and markets go DOWN folks!!! If you remove EMOTION from your thinking about the economy, you would realize that the amount of resources available to EACH team remains CONSTANT EITHER WAY! When times are GOOD, there are "X" amount of dollars available to ALL teams for sponsorships!!! When times are BAD, there are "X" amount of dollars available to ALL teams for sponsorships!!! The market LEVELS the field. High-power teams like Gibbs or Hendricks are weakened THE SAME AMOUNT as Yates or Wood Brothers are weakened right now BECAUSE THE RATIO IS CONSTANT. I have NO doubt that someone like Werner Boehmert has nothing but the BEST of intentions, BUT..... in ALL the years you have lived on this planet.....SURELY you have figured out by now that EMOTION and LOGIC have two SEPARATE purposes!!!!! Right?

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  14. 14
    Worm Dirt said:
    Nov 23, 2008 at 12:54 AM

    Wait a minute..... what was I thinking???? Man.... FORGET what I just wrote!! PLEASE!!!!! I mean... if people were to actually separate EMOTION from LOGIC, then how on earth would politicians be able to EXPLOIT us..... and pit us against ONE ANOTHER.... to fund THEIR positions of POWER?????????? Oh well. sigh.......

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  15. 15
    Robert Wingert said:
    Nov 23, 2008 at 11:15 AM

    The sponsers have a right to protect their investors by putting their money into winning cars and teams not also rans. That's how business works.

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  16. 16
    terry ruth said:
    Dec 2, 2008 at 2:59 PM

    So when we are down to 4 owners in a 20 car parade of IRL pretend cars.....then let the market take control and NASCAR can go down in flames as all the old school fans say ALOHA to them and their sponsers.

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  17. 17
    David Annand said:
    Dec 16, 2008 at 3:55 PM

    One bad year, and this might be it, and NASCAR will make drastic changes. The exclusive sponsorship deals seemed like a good idea at the time but obviously they didn't think about the possibility of teams unable to get sponsors.
    That testing ban looks like it'll really help. Just saw that Harvick has 10 tests planned for the season at non-Cup tracks. Yupp, that was a whole lotta help. Why not schedule tests for everyone at a few tracks and ban ALL outside testing.

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2009 Sprint Cup Race for the Chase Standings

Driver Standings after the AMP Energy 500

1 Jimmie Johnson 6248
2 Mark Martin -184
3 Jeff Gordon -192
4 Juan Pablo Montoya -239
5 Tony Stewart -279
6 Kurt Busch -312
7 Greg Biffle -340
8 Ryan Newman -402
9 Kasey Kahne -414
10 Carl Edwards -437
11 Denny Hamlin -448
12 Brian Vickers -556

NASCAR Schedules

abc

Dickies 500

Texas Motor Speedway
03:31 PM, 11/08/2009

Poll PositionView All

Which NASCAR Sprint Cup race winner from the past two seasons is most likely to earn his first victory of 2009 in the next three races?

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