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May 2009
Banking On The Draft
By Ellison Clary

     In true NASCAR fashion, Dale Earnhardt, Inc. and Chip Ganassi Racing with Felix Sabates may just be banking on the draft created by their two racing organizations in partnership to combat the sports and general economic malaise. There’s no doubt that recessionary signs have penetrated professional sports. Teams in baseball, football and basketball have announced measures to deal with tight revenue.

     NASCAR is not immune. The country’s marquee automobile racing circuit faces financial pressures as disposable income shrinks and so does weekend attendance at the track. NASCAR wrestles with escalating costs of running a successful team.

     Yet executives of a Concord-based racing team with a long name and a short history believe they are uniquely situated to ride out economic hard times and thrive in the face of fiscal stress much as they do physical stress.

     “It’s about being as smart and innovative as you can,” says Steve Lauletta, president of Earnhardt Ganassi Racing with Felix Sabates. “It’s about winning, on the track and for our sponsors, delivering value to them, making sure their investment pays off.”

     The partnership’s moniker reflects what it is: An alliance of the storied Dale Earnhardt, Inc. with Chip Ganassi Racing, an entity that fashioned a string of successes in Indy Car racing before entering NASCAR through an alliance with Charlotte-based businessman and NASCAR owner Felix Sabates.

     Teresa Earnhardt, widow of stock car icon Dale Earnhardt, continues to preside over Dale Earnhardt Inc. (DEI) in various racing-related ventures and Ganassi still runs cars in Indy Car and Grand Am competition. But the partnership, announced late last year and effective January 1, is designed to produce more victories for both Earnhardt and Ganassi in NASCAR, the major league of racing.

     “Chip and I share the same standards for excellence, by winning, serving our partners and growing our businesses,” says Teresa Earnhardt. “Together and along with Felix, we have a very strong organization that will further our goals of winning races and ultimately championships in the NASCAR Sprint Cup Series.

     “We have capitalized on the synergies between our organizations,” she adds.

     About eight miles from the DEI complex, the partnership operates from 186,000 square feet in Concord, in a facility that initially was Chip Ganassi Racing. The two-level structure includes a brightly lit, spotless garage where mechanics and engineers hover over dozens of high-horsepower vehicles in various stages of competition readiness.

     Most of the partnership’s 160 employees touch the race cars in some way. Including pit crews, about 75 people travel weekly with the partnership’s teams.

Even with combined resources, the partnership isn’t on the financial level with NASCAR’s elite teams such as Hendrick Motorsports, Joe Gibbs Racing, Roush Fenway Racing and Richard Childress Racing. But it harbors hopes of dramatic expansion.

 

Growth Potential Is Strong

     “Our financial goal is to position ourselves to grow the company,” says Lauletta, who became president of Chip Ganassi Racing in July 2007 after a decorated career in sports marketing, primarily for Miller Brewing. He was close to the beer titan’s Rusty Wallace racing team before Wallace retired.

     “We’ve got the ability to grow because, under NASCAR rules, you can own four Sprint Cup cars,” Lauletta says. The Sprint Cup is the prize for the driver, car and team that wins an annual competition for points based on performance.

     “We’re running two full-time teams right now, and a third that isn’t fully funded,” Lauletta says.

     Drivers for Earnhardt Ganassi Racing with Felix Sabates include Martin Truex Jr. in the Number 1 Bass Pro Shops car and Juan Pablo Montoya in the Number 42 Target racer. In April it was announced that Aric Almirola’s Number 8 Guitar Hero car had been suspended.

     “Unfortunately we had to suspend operation of the 8 car due to a lack of sponsorship. We knew from the beginning of the season we would need to piece sponsorship together for that car but had hoped we would be able to take it through the season. It was sure not from a lack of interest in the car or Aric, but in this economy it takes a lot of time to close deals that involve this much money,” comments Lauletta. “We are continuing to seek sponsorship for Aric and the 8 and hope to have the car back on the track as soon as possible.”

     Dale Earnhardt Jr. is not a part of the partnership. He left DEI to join the Hendrick stable before the 2008 season.

     Truex Jr. has competed previously in The Chase, the circuit’s last third of the season that decides who wins the Cup. Montoya is flirting with being Chase-eligible.

     Lauletta points out that Earnhardt Ganassi Racing with Felix Sabates has several finishes in the top 12 so far this season, but they have been split by Truex Jr. and Montoya.

     “So it’s consistency we’re working on with all the guys,” he says. Ganassi, he adds, pays a lot of attention to the performance of all the crews.

     “The number one reason we formed the partnership was to get better on the track,” says Ganassi, a fixture in auto racing for more than 25 years with a reputation for innovation. “We brought together the best people of two organizations to form one stronger team and, from the beginning, that was the number one goal.”

     Long-time Charlottean Sabates likes the partnership’s chances. “I’m optimistic that one of our drivers will end up in the Chase,” Sabates says. “I don’t care who it is. I like all three.”

     Sabates adds matter-of-factly that he got into the sport more that 20 years ago when economics weren’t as tight. “At one time, you could make money owning a race team,” says the investor whose enterprises include a Charlotte Mercedes-Benz dealership and a custom yacht builder. He’s been associated with Ganassi since 2000.

 

Diversity Spices Partnership

     With the Cuban-American Sabates and Teresa Earnhardt, the partnership’s owners are more diverse than is customary in decidedly white-male NASCAR. Throw in the Colombian and Cuban heritage of Montoya and Almirola, respectively, and the team becomes even more unusual.

     “That diversity gives us the ability to tell a little bit different story,” says Lauletta. “And we can market our brand a little differently. We’ve got Dale Earnhardt and the legacy of who he is and what he built in this sport. Nobody else has it. We’ve got assets in other motor sports that Chip brings with our Indy and Grand Am teams.”

     Montoya, Truex Jr. and Almirola drive Chevrolets exclusively, a situation that reflects a conversion for the Ganassi portion of the team. Previously, Ganassi’s drivers wheeled Dodges.

     Executive Vice President Chad Warpula calls the Chevy alignment significant because the General Motors division brings impressive resources to racing. “Chevrolet is one of our big sponsors,” says the former lawyer with the Charlotte office of Alston & Bird who doubles as legal counsel at DEI. “We work as part of Chevrolet to develop advances.”

     Sabates agrees that the Chevrolet relationship is important. “The opportunities for promotion are strong,” he says, “and we are sponsor-friendly.”

     Many close to NASCAR estimate it takes between $15 million and $30 million to run a successful race team. Driver earnings can be significant, but sponsor money is the biggest part of the financial pie. Ganassi emphasizes the importance of sponsors by giving them a warmer name—partners.

     “I am much less interested in having sponsors than I am in having partners,” Ganassi says. “Partners look out for each other’s best interests at all times and, in this type of economy, that becomes even more important as everyone looks to maximize their spends. These partnerships have to work for both parties.”

     Ganassi cites his two-decade relationship with Target and Warpula adds that Bass Pro Shops has been loyal for eight years.

     Lauletta picks up on the partner theme and characterizes the relationship between his race car teams and their sponsors as tightly focused. He cites his own experience with Miller and with sports marketing agencies for that emphasis.

 

Passion to Deliver Value

     “I’ve spent hundreds of millions of dollars in my career on behalf of companies I was lucky to work for, and I’ve wasted a lot of money,” Lauletta admits. “I’m not going to convince someone to become one of our sponsors if I know it’s a waste of their money.”

     It’s harder to entice new sponsors these days for reasons other than the economy, Lauletta says. No longer are potential sponsors content with bragging rights related to having a car on the track. The logos and messages on the cars have to deliver business results.

     “Particularly in this economic environment,” Lauletta adds, “sponsors need to say, ‘We spent this kind of money and it paid off for us.’”

     “We’re an extension of their marketing team,” Warpula says of the partnership’s sponsors. “Each day, our guys in sponsor services are talking about how we can extend their brand and deliver results back to their bottom line.”

     Speaking of the bottom line, the Earnhardt Chip Ganassi partnership has to pay attention to its spending.

     Lauletta emphasizes an efficient operation. Warpula mentions being smart about seemingly small choices that can make a difference. A decision as elementary as increasing investments in and use of simulation equipment can be a real cost-saver when you compare it to the cost of some on-track testing.

     “We’re thankful for our sponsors’ commitment,” Warpula says. “We’re going to make the most of it.”

     Lauletta would like to see a concerted effort within NASCAR to control expenses. “What it costs to run one of those top level teams is just too much,” he says. “We need to adjust the model so we can deliver a different cost value relationship to our sponsors.”

     But would Lauletta’s counterpart at say, Hendrick Motorsports, agree? Good question, Lauletta responds. An elite operation such as Hendrick might say, “Hey, its working fine for us.”

     Attendance is down at NASCAR tracks, but Lauletta believes it isn’t off as much as some think.

     “Attendance does affect us,” he says. “Our sponsors are active on site at race tracks.” Television viewership numbers are easy to get, as well.

     Fan loyalty to sponsors, legendary in NASCAR, remains strong. Lauletta thinks it’s because fans realize their favorite drivers and teams could go out of business if their sponsors fail to see financial results.

     “The interest level in this sport is as high as I think it’s ever been,” he says.

     Running a racing partnership can be grueling, Lauletta says, because each Monday morning everyone comes to work knowing exactly how the race teams performed on Sunday.

     “It’s a pretty exciting thing to have,” Lauletta says. “When you come in and you know everything went really well, you can feel the bounce in the step of everybody. Or you’ve had a rough weekend and you’ve got to figure a way to get over that. Because the next race is coming.”

     Lauletta is impressed with the partnership’s success in bringing two race operations together. He praises the culture of achievement that has evolved.

“We’re focused on one goal,” he says, “and that’s on-track performance.”

     He likes the passion. “Everybody around here wants to succeed,” he says. “They want Earnhardt Ganassi Racing to be that powerhouse we all want it to be.”

     Five years down the road, the partnership will still be attracting new sponsorships and added driver talent, he vows.

     “It’s going to be a place where our employees want to work and grow their careers,” Lauletta predicts. “It will be a place we’re all proud to be a part of.”

 

Ellison Clary is a Charlotte-based freelance writer.
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