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GM has to walk fine line in Chevy's NASCAR investment
May 31, 2009
GM has to walk fine line in weighing Chevy’s NASCAR investment
By JEFF CAPLAN | Fort Worth Star-Telegram
Back when the high-banking turns of Texas Motor Speedway existed only in concept, before even the purchase of 1,500 acres of flatland north of Fort Worth, Chevrolet raced to the forefront.
The division of General Motors signed on as the official vehicle sponsor of the superspeedway well before the inaugural 1997 racing season. Now, as NASCAR’s truck circuit and the IndyCar Series return to TMS for this weekend’s annual June showcase, angst over GM’s expected inevitable descent into bankruptcy today is prevalent at TMS and tracks throughout the country.
GM began significant cost-cutting at the end of 2008 when it chose not to renew four of its 12 track sponsorships. TMS general manager Eddie Gossage and Chevy wouldn’t disclose contract specifics, but it’s clear that if the deal is up this year, it’s possible the two partners could drive off in different directions.
Yet, Gossage and most others closely tied to NASCAR say loss or potential loss of sponsorship dollars matters little compared with watching business associates dangle in near-unprecedented economic uncertainty.
NASCAR sponsorships reach so deep into nearly every sector of American consumerism that the health of NASCAR, its teams and the tracks don’t hinge on the state of the automakers.
"I will forever be loyal to Chevrolet for taking that flier and helping legitimize us when we were just a paper racetrack," Gossage said. "What I found is working with sponsors, you’re working with people and you develop relationships and you get to know their wives and in some cases their children. So something like this, I spoke to someone from Chevrolet yesterday, they don’t know if they’re going to have a job come Monday and they’ve been there for decades.
"I feel great empathy for them. I hate to lose a sponsor, but I hate to see people lose their jobs and their programs."
Around NASCAR, expectations are that GM will walk away from more expiring contracts at the end of the year, yet remain invested enough to maintain a profile with NASCAR’s legion of brand-loyal fans as it regains footing.
GM doesn’t disclose its annual investment in NASCAR, including track deals and support to race teams, but estimates run as high as $125 million.
"It’s fair to say that we know that the odds of them renewing [track sponsorships] at today’s levels is zero percent and it wouldn’t surprise us if they end up dropping a couple of tracks. We know that very likely could happen," said Roger VanDerSnick, executive vice president and chief operating officer of International Speedway Corp., which operates 12 tracks, including Daytona International Speedway. "And then the tracks where they stay, if we are able to make it work, we do also know that those terms will probably be dramatically different."
Walking fine line
That was the case in January when Daytona and GM came to terms on a watered-down renewal for 2009. Reluctant to surrender prime turf to industry rivals — as it did this year to Ford at Bristol Motor Speedway and to Toyota at New Hampshire Motor Speedway — GM is now taking it year-by-year at Daytona.
Sponsorships typically include premium signage, pace cars, space for an on-site showroom and a fleet of trucks and cars used year-round by the tracks’ operations crews.
"What I suspect they are thinking about every day as they make these priority calls is this sport is such a terrific marketing investment," VanDerSnick said. "I am sure they are resisting the urge to dramatically cut here, particularly if it hurts them in a material fashion on their marketing side, on their branding side, and ultimately how many Chevrolets they’re selling to the millions and millions of NASCAR fans."
GM must walk a fine and prudent financial line.
In 2008, it ended an endorsement deal with Tiger Woods and it passed on advertising during the Super Bowl, the Emmy Awards and the 2009 Academy Awards.
Yet, GM obviously recognizes the unique kinship the auto manufacturers share with stock car racing and its fans. Fans embrace corporate sponsors as the lifeblood of the sport, and they often choose their NASCAR rooting interests by the nameplate on the car.
Unlike in other sports, GM might actually risk a fan backlash if it were to drastically diminish its profile at tracks and curtail support to race teams, perhaps even erode confidence in the very consumers most likely to buy a GM car.
A leaner company with less debt coming out of bankruptcy could be in a greater position to take advantage of its built-in marketing advantages within NASCAR.
"The point with the bankruptcy proceeding is to emerge as a viable company, and that company is going to need to sell cars and trucks," said Kevin Triplett, vice president of public affairs at Bristol Motor Speedway. "NASCAR has proven to be a very powerful vehicle for the manufacturers."
Of the eight tracks GM sponsors, it’s uncertain at how many or at which ones deals will expire after this season, but tough choices will be made.
"They’re going to be selective," said a Chevy spokesman who requested anonymity because of the uncertainty surrounding the pending bankruptcy. "They track these numbers and they know that NASCAR fans buy cars. They’ve accumulated this over the years to know it works for them. Now, which tracks provide more results or better results?"
Consumer city
NASCAR Sprint Cup races typically draw more than 120,000 brand-loyal fans to each venue during a 36-race season that stretches from February to November and crisscrosses to all four corners of the country.
At the Samsung 500 at TMS in April, Chevrolet’s redesigned Camaro escorted the field to the green flag in front of 176,300 fans.
"One of the reasons that you see that all four manufacturers [GM, Chrysler, Ford and Toyota] are still heavily committed to the sport is because it is an effective marketing platform for them," said Torrey Galida, president of motor sports for Charlotte, N.C.-based Millsport, a sports marketing and sponsorship agency.
"And so, while they’re cutting back their budgets in every area imaginable, they still all have a major commitment and are driven to continue to participate in the sport."
At the NASCAR Truck Series WinStar World Casino 400 on Friday at TMS, a Chevy Silverado pickup will set the pace in front of an estimated 60,000 fans. On Saturday night, a Corvette will launch the IndyCar field in front of an estimated 80,000 at the Bombardier Learjet 550k.
NASCAR Sprint Cup racing returns to TMS in November and attendance could reach 200,000.
If Chevy’s contract with TMS indeed expires this year, those types of numbers will press Chevy to decide if it can afford to renew, or better yet, if it can afford not to.
