Alex Meshkin

The global credit crisis may be slowing the M&A markets of Corporate America, however, mergers and acquisitions remain all the buzz in NASCAR. Back in July, I wrote Team Consolidation on the Horizon and it appears more likely than ever that Michael Waltrip Racing (MWR) led by Robert Kauffman will acquire Chip Ganassi Racing.
Additionally, speculation is running rampant – Gillette Evernham Motorsports (GEM) will acquire Bill Davis Racing (BDR). With BDR having yet to secure a replacement for Caterpillar for the #22 Toyota Camry, the value proposition of the proposed acquisition appears to be strictly around the coveted partnership with Toyota Motorsports and BDR’s ownership in Triad Racing Development. So it appears that if both transactions are completed; and Gillette changes from Dodge to Toyota – Dodge Motorsports will be left with just Penske Racing and Richard Petty Racing. Furthermore, I suspect at the root of Gillette’s motivation to acquire BDR is the reality that Dodge is looking to leave NASCAR all together. As my readers know, earlier this month Dodge announced their plans to leave the NASCAR Truck Series and with the founding Dodge Sprint Cup Team (Evernham) possibly joining the Toyota camp through the BDR acquisition – I think this will be most definitive indication that Dodge is saying “bye bye” to NASCAR.
It’s rather apparent, that in 2009 the pit lane of the NASCAR Sprint Cup series will be dominated and owned by just a few organizations. One must wonder – will NASCAR reverse their policy to limit teams to just 4 cars? – Because in 2010, Roush Fenway Racing will be required to “sell” one of their teams which is expected to be transferred to Yates Racing. However, NASCAR may reverse or postpone plans to prevent any additional sponsorship deflections.
With primary sponsors becoming increasingly elusive and operating costs continuing to soar, the benefits of team consolidation may be the only way for the NASCAR teams to have a fighting chance of survival. The fact is clear: The economies of scale and integrated marketing advantages are vital to remaining competitive on the track and attractive to the few remaining potential sponsors.
Is there any hope for NASCAR’s future? Yes, but not without some major changes and “redistribution of wealth”. NASCAR’s unfair revenue model and overall lack of innovation are the primary contributing causes to the sponsorship crisis for race teams. NASCAR needs to immediately revise the distribution of TV revenues to fairly compensate the race teams – or face the reality that the life expectancy of many NASCAR race teams are limited at best and more teams will continue to close their doors.

The first domino has fallen in the shakeup with the Big 3 automotive manufacturers’ involvement in NASCAR. The exit announcement by Dodge is the latest blow to the NASCAR Craftsman Truck Series which has yet to find a title sponsor to replace Craftsman in 2009 and beyond. In 2009, Dodge will not provide any financial support to any teams in the series. Dodge Motorsports senior manager Mike Delahanty said,

“We’ll have no factory-funded teams.”

Delahanty told ESPN.com,

“When times are tough, there are certain things that are lower on the priority list than others.”

This leaves us to ponder: Are the other series next? For years, rumors have circulated that Dodge would pull out of NASCAR- is it finally happening?

Earlier this decade Dodge was a powerhouse in the NASCAR Truck Series, winning 46 of 99 races from 2001-2004 and championships with drivers Bobby Hamilton in 2004 and Ted Musgrave in 2005. This year, Dodge scaled back its involvement and provided manufacturer support only to Bobby Hamilton Racing-Virginia. However, Dodge informed the team that its factory support would end this season. Delahanty said the manufacturer’s involvement with the Sprint Cup and Nationwide Series is unaffected.

Now you might ask: why hasn’t NASCAR attempted to “fix” the Truck Series value proposition to raise its “priority” with Dodge and the other manufacturers – the answer is part of the problem for NASCAR – with unprecedented sponsorship deflections in the Sprint Cup Series, the Truck Series is a low priority for NASCAR.

As the former owner of Bang Racing, Toyota’s first NASCAR Team to compete in the Truck Series and the leading competitor of Dodge Motorsports, it is a sad day for the entire NASCAR community. As I have predicted, it is only a matter of time before all of the Big 3 reduce their involvement in NASCAR. The writing is clearly on the wall – the inverse proposition of marketing costs versus benefits is an alarming trend and appears to be continually ignored by the NASCAR leadership.

Instead of squarely addressing the concerns of corporate sponsors and automotive manufacturers’ – NASCAR seeks new automotive partners to rejuvenate the floundering Truck Series. In 1999, Dodge Motorsports announced their plans to enter the Truck Series and, at the time, were widely credited with saving the series. In 2003 the Truck Series was still floundering andfloundering and the Big 3 began scaling back yet again, but Toyota Motorsports and Bang Racing soon entered the the Truck Series and delivered an unprecedented amount of media attention which fueled substantial increases in technical, financial and marketing spending from the Big 3 manufacturers in the Truck Series. But now times are tough; and with the uncertainty and questionable sustainability of the Truck Series, combined with plummeting light-truck sales; the odds of NASCAR finding new automotive manufacturer partners is rather slim. Sadly, it appears NASCAR will attempt to solely treat their symptoms and leave the underlying problems unresolved.