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Random Lugnuts: It's the Stupid Economy

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Stock Car Racing Topics:  Random Lugnuts
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Random Lugnuts: It's the Stupid Economy

Bill Crittenden
The Crittenden Automotive Library
January 6, 2009

"It's the economy, stupid."  Four words that helped Bill Clinton into office and have joined such catchphrases as "show me the money" in the American lexicon.  But I don't like calling people stupid (not without reason, anyway), so I'll just say that the biggest stories of the upcoming 2009 NASCAR season could all come down to one thing:  the stupid economy.

There is one thing on the minds of most everyday Americans these days, and it's not the upcoming Daytona 500.  The economy is the 800 pound gorilla in the room, the one thing that cannot be ignored no matter how far away you run, even if you run all the way down to Daytona Beach, Florida.

What does an economy in recession have to do with NASCAR, which has seen enormous growth and investment over the past few years?  Well, NASCAR exists for the fans.  Sure, racing wouldn't completely end if fans stopped coming to the races, but the NASCAR world runs on sponsorship money, and the sponsors are in NASCAR to reach the fans.  The more fans watch the races and spend at the businesses of the sponsors, the more money flows back in to NASCAR and its teams, and for better and for worse we have the sport that NASCAR is today.  Hence, the fans are the ones in control.

But all that sponsorship money has to come from somewhere.  Sprint has to sell a lot of cellular telephones and service to keep that trophy and series named the Sprint Cup.  How many cans of Amp and Mountain Dew does it take for PepsiCo to break even on its sponsorship of Dale Jr.?

I know I personally haven't helped the situation much.  Still employed but with money tight, I haven't been to a Cup race in person in a few years.  The only events I've attended have been a local short track race and the Truck Series event in Milwaukee last season.  I haven't had a can of Amp in months, and I haven't added anything to my collection of die cast recently.  I've cut back my expenditures at NASCAR sponsors from Menard's to McDonald's.  NASCAR fans from Illinois can take comfort in knowing I haven't cut back my spending with NASCAR sponsor Old Spice.  I know there are millions more like me out there, not counting the millions more unemployed.

With the economy in recession, companies aren't doing as much business as they used to.  With less money coming in, they have to cut costs, and budgets for expensive NASCAR sponsorships with the big ad campaigns that accompany them will likely get cut.  With companies dropping their support, and some teams unable to find sponsorship, the balance of supply and demand for sponsorship money is upset:  with more teams looking for money than there are companies spending it, the value of any NASCAR sponsorship goes down.  Something existing NASCAR sponsors will likely have in mind when it comes time to sign new deals or extensions at the end of the season.

For a lot of new NASCAR owners, the sport is less a passion than an investment.  NASCAR was built on teams founded by men who got into stock car racing because it was in their blood and there was nothing else they would rather be doing.  Now investment money flows into NASCAR from people who built their fortunes on something other than stock car racing but want "a piece of the action" from this up-and-coming sport and found car owners hungry for the investment money that helps them compete.  When the river of sponsorship money flowing into NASCAR chokes back to a stream, they may decide that NASCAR was an unfortunate misreading of the market.  Their public relations offices will issue press releases with words and phrases like "divest" and "new directions" as they announce that their financial involvement in their particular NASCAR team is at an end.

Let's not forget the manufacturers, either.  Now that the business working of the Big 3 are fodder for political pundits and Congressional hearings, and with federal money funding two of the manufacturers, at some point financial support for NASCAR teams and money spent on NASCAR-based advertising will come into question.  It may just need the hype of the Daytona 500 for the media lights to shine on the money Detroit spends in Charlotte, as the auto industry bailout became a major news issue after the NASCAR season ended.  And once it becomes a national issue, don't be surprised if one or more of the Big 3 drops its NASCAR program quicker than their CEOs can switch from private jets to hybrid cars.  It has happened before, but for different reasons.

All this together adds up to a volatile situation where any team could be affected by the economic problems of its sponsors, its owners, or its manufacturers.

We've already seen some huge shakeups in teams, especially in ownership, the last few years.  If the economy continues its downward slide in 2009, there is no way NASCAR and its teams can continue with business as usual.  A quick browse through the news shows sponsorship troubles and layoffs already hitting the NASCAR world, and like the rest of the economy it will probably get worse before it gets better.

One thing my predictions of 2008 taught me is that to never expect that the set of 43 or so teams will finish the season the way they started them.  Especially considering the volatility of the economy in 2009, I doubt that the field that starts the 2009 Daytona 500 will be the same one that finishes the season in Homestead.  2009 should be an interesting ride.  If you're one of those set-in-their-ways NASCAR fans that hates any and all change in the sport, it might be best not to watch this year.



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