Tracking the Cash

Jeff Gordon won a Nextel Cup race in May at California Speedway in a Hendrick Motorsports Chevrolet. Greg Biffle won two weeks ago at Michigan in a Roush Ford. Dale Earnhardt Jr. won the Daytona 500 in February and won again last week at Bristol, Tenn., in a DEI Chevrolet. Different races at different times, but there was a common thread.

These results were pretty much determined months, perhaps years, earlier in boardrooms of corporate America.

NASCAR and its premier Nextel Cup series today are all about money, and the millions of dollars it takes to field winning teams -- even non-winning ones -- come primarily from sponsors.

The winner’s purse, such as the $219,515 to be paid Sunday at the Pop Secret 500 at California Speedway in Fontana, is tip money.

Officials from NASCAR, its racing teams and sponsors declined to discuss specific dollar figures, but estimates of what it takes to run a competitive team in the 36-race stock car racing season start at $8 million to $10 million and go as high as $20 million -- if you count the airplanes and yachts some teams use.

If the same driver had won all 36 races last year, his total purse would have been $9,089,507 -- not enough to pay the season’s bills in a sport that is facing increasing costs.

“Cup racing has grown so expensive, I think we’re almost to the edge of pricing ourselves out of good sponsorship,” warned Richard Petty, the man whose 200 wins and uncommon charisma helped NASCAR evolve from a regional Southeastern sport to a national phenomenon. “It is getting so it’s hard for any one company to get a return on its money. But lowering the cost is sort of out of the question because to be competitive you have to do what the next guy does.”

In 24 Nextel Cup races this year, only three teams have won three or more times and all of them are well-heeled -- Hendrick, whose drivers are Jeff Gordon and Jimmie Johnson; Roush Racing, with Matt Kenseth, Mark Martin, Kurt Busch and Greg Biffle, and DEI with Earnhardt and Michael Waltrip.

Having a big budget, however, does not ensure winning. Chip Ganassi and Felix Sabates, whose budget includes a yacht, have not won a race in two years.

Nor does winning guarantee a rich sponsor.

Gordon learned that a few years ago when, after winning three season championships in four years himself, he decided to form a team with Johnson as the driver. It was such a difficult task, Gordon said, that it hurt his own driving performance.

“I was spending more time in a business suit than I was in my driver’s suit,” Gordon said. “Rick [co-owner Hendrick] and I had both been very successful with the No. 24 car, but it took hours and hours and days and days before we found enough backing to bring out the No. 48.”

Lowe’s, a home improvement retailer, signed on and it proved to be lucrative for all sides as Johnson quickly joined the front-runners and has led in points for most of the season.

“It all depends if you count the airplanes and the yachts, or just the bare bones racing expenses,” said Chip Williams, a former NASCAR executive and now a public relations consultant, in discussing the costs of racing.

For drivers like Gordon, Earnhardt and others at the top, airplanes are necessary to get them from races to corporate outings, personal appearances and meetings with sponsors.

And yachts that line the dock at the Halifax River marina in Daytona Beach twice a year are used for sleeping, partying, business gatherings and schmoozing would-be sponsors. Then there are those who race but rarely win.

“We do everything we need to do, but not everything we could do, and certainly not everything the best teams do, but we do enough to do the job every Sunday,” said Eddie Jones, team manager for BAM Racing and veteran driver Ken Schrader. The team, in its second season, has yet to win a race and Schrader has not won since 1991. But he remains one of NASCAR’s most popular drivers.

“There are some expenses none of us can avoid, like tires,” Jones added. “We’ll spend more than $1 million on tires this year and we’re pretty much a one-car team.”

A top-of-the-line Goodyear passenger tire costs about $75 and should last about 60,000 miles. A NASCAR Goodyear tire costs $402 and usually lasts about 100 miles, its life expectancy depending more on stopping for yellow flag caution periods than wear.

“At Fontana, we’ll mount at least 10 to 12 sets of tires, and they cost us roughly about $2,000 a set,” Jones said. “Besides buying them, we have to hire a company to transport them and to dispose of them. Years ago, we could sell the old ones for $25, or give them to a friend for a short track, but not anymore. There is such a glut of old tires that we have to pay to get rid of them.”

Engines are another major cost. A few teams build their own engines, and most of them sell or lease engines to other teams. Engines cost $40,000 to $70,000 each and teams have about 15 of them. They are rotated so a team can have two or more -- one in the car and one in the transporter -- at all times on race weekends.

Then there are shock absorbers, used in passenger cars to make for an easier ride, but in race cars to help in handling. A set of four costs about $4,000 and, because of varying track and weather conditions, teams may have as many as 60 shocks at the track and 40 more in the shop for future races.

The biggest expense of all, however, is personnel. The days when a driver-mechanic gathered five or six friends and built a car, worked on it and drove it to races are long gone. Childress Racing, with Kevin Harvick and Robby Gordon, has 280 employees. Hendrick Racing has 330.

Engineers, who were scarcely in the picture a decade ago, are all the rage today. NASCAR had been seat-of-the-pants racing -- they still use carburetors in this day of fuel injectors -- until newcomers such as Roger Penske, Ganassi and Joe Gibbs brought advanced racing technology from CART, the IRL and the NHRA into NASCAR.

“The trend in the last 10 years has gone from one or two team engineers to specialty engineers,” said Gary Nelson, head of NASCAR’s $10-million research and development center, whose priority, besides safety issues, is cost containment. “There are specialty engineers for aerodynamics, brakes, carburetors, shocks, tires, even paint schemes on the cars.”

At $75,000 to $150,000 a year, these specialists can drive costs up quickly.

Nelson might have started the engineering craze when he was chief mechanic for Bobby Allison’s DiGard team in 1981.

“We were racing a Buick and the Chevrolet people asked us to run a Chevy,” said Nelson, who began his career in Redlands, tuning cars for West Coast stock car legend Ivan Baldwin. “We told them the Buick was more aerodynamic and they said, ‘Let’s put the two of them in the wind tunnel and find out.’

“I think that was the first time we had stock cars in wind tunnels.... Now, nearly every team uses them and they are really expensive, about $20,000 a day to operate.”

Wind tunnels are kept busy 24 hours a day, week after week by teams looking for an edge.

“It has become so refined, and NASCAR has such tight rules on body shape and size, that engineers are looking for the tiniest change,” Nelson said. “Typically, the biggest area for those gains comes from the front axle forward. A few millimeters on the front fender massaged just right can make a world of difference. Everyone is looking for that sweet spot.

“No matter how many templates we apply, teams will always find the freedom they need to end with more speed. It’s a constant challenge for us. We try to contain costs by writing and regulating tight rules, but if a car owner wants to spend more money on engineers to go faster, there’s not much we can do about it.”

To lighten the load on a primary sponsor, some teams have taken to farming out their sponsorships for given races. Sunday at Fontana, for instance, Gibbs’ Interstate Batteries car, driven by 2000 Cup champion Bobby Labonte, will be sponsored by Wellbutrin XL, a medicine used to treat clinical depression. Interstate has sponsored the No. 18 car since the team’s first race in 1992, but the financial burden has increased so much that for eight races this season, the car will carry Wellbutrin’s logo and color scheme.

It is widely agreed in racing that finding and holding on to a sponsor are unending jobs.

“When you get a sponsor, your first priority is to satisfy them, to keep them happy, but at the same time you need to keep looking for a better-paying sponsor, or an associate sponsor to supplement the first one,” said one owner, who spoke about finances on the condition of anonymity. “You either need an in-house marketing guy, or you hire an outsider. One way or the other, it has to be a constant thing.”

Adding to the difficulty, teams now must compete with individual tracks -- and with NASCAR itself -- for sponsor dollars.

Nextel, the wireless communications provider, signed on this year to pay an estimated $700 million to $750 million over the next 10 years for the right to splash its name and black and yellow colors over everything involved with NASCAR’s premier racing series.

“NASCAR’s reach is unmatched, and we’re thrilled to be associated with it,” said Tim Donahue, president of Nextel.

NASCAR also has 35 “official sponsors,” such as Coca-Cola, Visa, Sunoco, Gillette, Minute Maid and McDonald’s, which pay millions.

Then, the tracks sell sponsorship so they can pay fees of $5 million or more to NASCAR for a weekend of racing. Some have sold naming rights, such as Lowe’s at Charlotte, N.C., and Infineon at Sears Point, in Sonoma, Calif.

California Speedway, where the Target House 300, a Busch series race, will be run Saturday and the Pop Secret “Finish Under the Lights” 500 on Sunday, receives sponsorship from General Mills, which owns Pop Secret and supports Target House, a housing facility at St. Jude’s Children’s Research Hospital in Memphis, Tenn.

Estimates put high-end sponsorships by Budweiser, on Earnhardt’s No. 8; Dupont, on Gordon’s No. 24, and UPS, on Dale Jarrett’s No. 88, at $10 million to $18 million a year.

Associate sponsorships, which buy logos on the rear quarter panels, are said to cost between $500,000 and $5 million. Teams with winning records and good marketing might have three to six. Lesser sponsorships, which buy 3-by-5-inch decals on the car, cost $200,000 to $700,000.

“Probably the only two areas left for sponsor decals are underneath the car -- which is pretty tasteless -- and the driver’s window net,” said Williams, the former NASCAR executive. “You could take that net and put some sort of logo on it, and it would show up pretty good.”

What used to be a “win on Sunday, sell on Monday” philosophy for automakers is no longer viable. Sponsors want to sell every day, and their products now might just as well be men’s perfume (Drakkar Noir), sexual enhancement (Viagra) or women’s physical welfare (Kodak Mammography Film) as traditional automotive-related products.

What do firms get from pouring money into 43 cars going round and round 36 times a year on U.S. racetracks?

In 2002, according to a survey by Joyce and Julius Associates, Cup series sponsors received more than $3.7 billion in television exposure. More than 13 million fans attended NASCAR races last year, with an estimated 75 million adults saying they were NASCAR fans. Of that 75 million, more than 30 million are women.

“Team sponsors get a return of $5 to $7 for every $1 spent,” said George Pyne, NASCAR chief operating officer.

And fans are loyal. Surveys show that three of every four NASCAR fans favor brands linked to their favorite drivers.

So, as Mark Schweitzer, Nextel senior vice president of marketing, said: “If 75 million fans are three times more likely to choose your product over a competitor, that’s a pretty good foundation for business.”

As long as there is enough money to go around, that is. As Petty warned, there may be a limit to it.