Champ Car Media Conference
Topics: Champ Car
THE MODERATOR: Good afternoon, Ladies and Gentlemen. I'd like to welcome you to the media call. I think probably by now you will have caught up with the news that has been announced earlier today over here in Europe. What we'd like to do on this call is to run through that news again. I'm joined by Richard Perry Jones, who is the group vice president, chief technical officer, and has overall responsibility for motorsport at Ford. Also joined by Kevin Kalkhoven who has been confirmed as the new owner of Cosworth today, and Tim Routsis, who is the managing director of Cosworth. The format today is we will just make a few short remarks from the speakers, then we'll hand it over very much to you and take the Q&A over the telephone line. I'm going to turn it over to Richard Parry-Jones who is going to make a few remarks.
RICHARD PARRY-JONES: Good morning, good afternoon, wherever you are, Ladies and Gentlemen. This is probably old news by now, but for the avoidance of doubt, I'm going to reiterate the main points of the announcement we made today, that is that Ford Motor Company and Cosworth purchased by Kevin Kalkhoven and Gerald Forsythe, who as many of you know are co-owners of the Champ Car World Series and PKV and Forsythe Championship Race Car Teams respectively. I personally am absolutely delighted that Kevin and Gerald have bought Cosworth. Many of you will know that since we made the announcement to sell our Formula 1 businesses in September, we've received tremendous support from the management and the employees at Cosworth. We've been working very hard to secure a sale to a reputable buyer. Kevin and Gerry are very successful businessmen, they have long history in motorsport and a clear vision of how they want to take Cosworth forward. You can imagine how pleased I am that we've arrived at this outcome. Of course, separately today we've also announced the sale of our Jaguar racing team to Red Bull. As part of that decision, we've announced that we're very pleased that Red Bull will be racing with the Cosworth Formula 1 engine next year in their car. From our point of view at Ford, of course, it's a day mixed with sadness and joy. A sadness that we're in the passing of an era after 35 years in Formula 1 with a partnership with Cosworth. Deciding to exit was a very tough decision. But during that time, we should rejoice in the fact that Ford and Cosworth together have experienced the highs and lows of the sport and we've left a very rich legacy of victories and championships that have been won by some of the most famous drivers and teams in motorsport history. Sadness and joy mixed up in those emotions. Just to remind ourselves as we reach this point in our history that this success would not have been possible without the contribution of all our employees. Our partners, our drivers, our sponsors, and last but most important of all, the fans. I'd like to thank them all. I reassure this famous racing name will go forward under the stewardship of Kevin Kalkhoven and Gerry Forsythe. We look forward to a positive relationship in the future with Cosworth and Ford. Congratulations on your new acquisition.
KEVIN KALKHOVEN: Thank you, Richard. Good afternoon or good morning, folks, it's Kevin Kalkhoven. When Gerry and I first talked about the situation, it's something that filled us with a great deal of excitement, partly of course because we're both motor racing nuts and also because we're businessmen. Cosworth is one of the great motorsports engineering companies in the world. Its legacy, as Richard has said, extends on both sides of the Atlantic to many, many championships and many, many victories. When we started thinking about it and talking about it, we also began to realize the opportunities of the future because while Cosworth does have a significant heritage and legacy, what is of course as important is where we take it from here. The first aspect of that was the Formula 1 side. Of course, I'm delighted that the Red Bull team will be on the grid for Formula 1 in 2005 with a Cosworth engine, as will Menardi. So Cosworth will continue to be represented on the Formula 1 grid, and it will continue to the development of Formula 1 capabilities in the engines. The second pillar of what we wanted to be able to do was, of course, in North America, with the Champ Car World Series. CART, Champ Car, has used Ford-Cosworth for many, many years, incredibly successfully; some of the great victories in the series has been with Cosworth engines. The Cosworth engine in the Champ Car World Series has proven to be an outstanding engine with significant horsepower, a lot of software capabilities have been built into the engine to allow flexibility in the race formats, and has been an engine that has provided incredibly close and competitive racing this year, which has led actually to an average increase per race in our fan attendance. The engine has really done everything that we asked of it. We look forward with this pillar of Cosworth for the future for developing more racing engines for North America, including potentially those of our latter series and also extending the capabilities of Cosworth into this very fast-growing sector called the tune market, that generation of folks 16 and above, reaching to 60 in my case, but typically ending at about 30, of people who are dedicated fans of motor cars and wish to continue to improve them. While the brand of Cosworth is a wonderful platform to be able to provide tuner accessories for these folks, it is certainly something we will be extending. So Cosworth is an icon of motorsports. We're thrilled to be able to continue its development. We look forward to its next generation of technology, and we look forward to having Cosworth engines in the Champ Car series powered by Ford for a long time to come, together with a very successful relationship with Ford. Thank you very much. I'm now going to hand it over to the managing director of Cosworth, a gentleman who has headed it up and will head it up in the future with the existing management team, Tim Routsis.
TIM ROUTSIS: Thank you very much, indeed. Good morning, everybody. I thought you might appreciate a short overview of the sort of things that we're going to be doing with Cosworth in the near future now and new ownership. Just before going into that, I did want to take a moment to express a vote of personal thanks to all of the Cosworth employees on both sides of the Atlantic. The sale of a sort of nature that has been gone through has attracted a massive amount of interest and attention for all the sort of reasons that Kevin and Richard have touched on. And inevitably, that sort of a process is very distracting for an organization, and inevitably it involves some uncertainties and a degree of worry in the work force. Given that sort of an environment, it would have been somewhat understandable if people had in any way sort of had slightly sloping shoulders, heads down a little bit. But I'm absolutely delighted to say that the performance and professionalism of the staff of Cosworth, as I say on both sides of the Atlantic, has been absolutely exemplary. They've continued to do the job in a fabulously professional manner, in a way which I found both inspirational and I would say slightly humbling, because without doubt, today's successful outcome is in no small measure due to their ongoing level of commitment. When we do these sort of sales, it's inevitable that there's a great deal of emphasis placed on balance sheets and assets. But I think in this case Gerry and Kevin really have got a first-class off-balance sheet asset in the Cosworth folk, and they are absolutely raring to go now into the future under this new ownership. So what sort of things are we going to be doing? First of all, as you've gathered, we are going to be very much maintaining and strengthening our position in all of the forms of motorsport in which we're currently active. What you can expect from us in the not to far distant future will be ongoing announcements of the sort of developments we're planning on undertaking. In parallel with that, we've got some expansion plans which will be moving Cosworth and the Cosworth brand, which has been acquired as part of this sale, into some symbiotic markets and, in particular, we're expecting to do a lot of activity through the Torrance branch into the North American market. You will see us in areas such as marine, but above all, the key message with this is that Cosworth knows where its heritage is, we know what we're good at, and you are going to continue to see us in all aspects of motorsport. There's a little overview about where we're going to be going in the near term. I think we're heading for some quite exciting times, and I know there's a very talented group of men and women that are really now ready to show the world what they're capable of. So with that, if I can hand it back now to Stewart, and we'll take some questions, I believe.
THE MODERATOR: Thank you, Tim. We'll take the first question, please.
PAUL NEWMAN: I don't have a question, but a comment. I'm delighted that you guys have bought Cosworth. You are great competitors, you're savvy businessmen. I just am glad that you guaranteed that Newman/Haas won't be down on horsepower. Also, I'm specifically delighted that we'll continue to guarantee a supply of engines from Champ Car, free from any outside interference, which I think is really important. That's not a question, it's a comment.
KEVIN KALKHOVEN: We thank you and congratulate you on your championship season with Sebastien Bourdais.
Q. Kevin, as everyone knows, Cosworth still has a deal to badge engines for Chevrolet for one more season in the Indy Racing League. Is there going to be any interruption in that contract or will that deal go ahead through this season?
KEVIN KALKHOVEN: Absolutely no interruption at all. We are professional businessmen. This is a contract that is in place and will continue to be serviced to the best of Cosworth's ability in the 2005 season.
Q. Kevin, when you and Gerry and Paul first bought the assets of CART and became Champ Car, there was some discussion that somewhere down the not-too-distant road there would maybe be a switch to a normally aspirated V-10 engine. I know that's kind of the reverse where Formula 1 may be heading. What does this deal do for that possibility or is, indeed, that a possibility somewhere down the road for Champ Car?
KEVIN KALKHOVEN: First of all, we fully expect in the next season we will continue to use the Cosworth XFE engine, which has proven to be so reliable and competitive this year. With of course now the ownership of Cosworth, we have also some opportunities for us in the future. I think where they will take a little bit of time for us to absorb the full capabilities of what Cosworth has got and feed them into our plans for the future. But certainly for the 2005 season, the sound of those wonderfully turbocharged XFEs will be resounding through the streets of many North American cities.
Q. A question that stems from comments that you made, Kevin, about this strengthens the association with Ford, will obviously see that Cosworth is involved in the Champ Car World Series for a long, long time to come. I wondered if you might sort of on a more sort of philosophical level comment on how you see the role of manufacturers involved in racing, how you see that maybe evolving in terms of the Champ Car World Series where, as you said, it would appear for at least for the foreseeable future that it is going to be a single-engine series for as far as we can see.
KEVIN KALKHOVEN: As you probably know, I'm not very good at philosophy. If I were, I wouldn't be involved in motorsports, let's put it that way. But I think we see an interesting situation in motorsports, particularly in open-wheel racing at this moment, which is that the manufacturer support is by definition a significant two-edged sword. The financial support that the manufacturers bring is obviously significant. The financial support, when it disappears, as well we know in CART and now in Champ Car, causes some significant heartburn. We've lived through this and we've taken a very deliberate approach which is that we worked with one manufacturer very successfully, our partners at Ford, in order to provide something that is increasingly important in motorsports, which is the fact that it is entertainment, it's not just a purist form of open-wheel racing. We have to provide entertainment for our fans, and that entertainment comes from not just only seeing manufacturers compete with each other but seeing close and competitive racing where the driver is the determining factor, not the manufacturer or the amount of money that they spend. So what we've achieved in this year, Champ Car, is a series where the driver is very much the king, where any driver, now that they all have significantly the same package, can rise to the top. We've seen that clearly in the racing this year. New teams can come in and rise to the top, as we have seen with, for instance, RuSPORT and AJ Allmendinger. What we have managed to do is at least, without the embarrassment of riches coming from the manufacturers in the way that it has in the past, is revert to what we think is important for the future, which is to make motorsports entertaining, make it exciting, close, overtaking, a lot of incidents on track, and not have it just dominated by money, but by the drivers.
Q. If not philosophy, then pragmatic philosophy. How is that?
KEVIN KALKHOVEN: I'll take that one (laughter).
Q. Tim had referred a little bit to the American market, Torrance and so forth. I wonder if both Kevin and Tim, if there's anything you could say at this stage of the game in terms of how you would see Torrance expanding at the moment, as you go forward.
TIM ROUTSIS: This is Tim here. I think one of the key aspects that Kevin has touched on is the sort of emerging importance of the tuner market. And one thing that is very clear for me is that although we may continue to do some of the design work that will be associated with the sort of genuine performance items that we will be provide to get market in the UK, we will certainly be looking to put much more of the manufacturing and distribution of those sort of components actually into the target market, and I see Torrance as being absolutely pivotal in that.
KEVIN KALKHOVEN: We've already released in the United States three different kits for the Ford Focus, which can take it up normally aspirated to 250 horsepower. We leased those a couple weeks ago. The interest level, the demand for it, has been very, very significant. We're looking forward to expanding our Torrance capabilities to serve this market.
Q. To update us, Tim, what are your total number of employees and how many do we have there at Torrance?
TIM ROUTSIS: The total number of employees in Cosworth sort of overall at the moment is just a tad under 600, and of that we have about 80 in Torrance.
Q. It sounds, Kevin, like you basically said any other manufacturer participation, in the brand form or in the actual development form in Champ Car is probably not in the cards in the next several years?
KEVIN KALKHOVEN: For the 2005 season.
Q. So even though Cosworth will continue in 2005, beyond 2005, there is a possibility that other manufacturers might return to the series?
KEVIN KALKHOVEN: There's always a possibility of that, yes.
Q. Will Cosworth continue to supply Ford WRC?
RICHARD PARRY-JONES: What we have arranged is that for the 2005 WRC season, we will support M Sport, who are the organization that campaigned the WRC Focus, in a manner which enables them to maintain and distribute the WRC V-Tech engine that is currently in the cars. We are working at the moment with Malcolm Wilson, who is the principal of that organization, with a view to seeing if we can flesh out the terms of the deal whereby Cosworth will develop a variant of the Ford dura-tech alloy block engine for the 2006 WRC car, which will under current plans be the new Focus. I'm sort of quietly hopeful and optimistic we will be continuing for a long and very successful relationship with Ford and WRC because certainly I think it's true to say that the current Ford-Cosworth WRC engine is still regarded as the class of the field.
Q. For Richard or anybody who can address it. We've heard different rumors about who else might have been involved in buying Cosworth, including gentlemen like Tony George and Chip Ganassi. Can you tell us about that interest and who else might have tried to buy the company?
KEVIN KALKHOVEN: Once we announced our decision on September 17th to exit the business and sell these businesses, we have generated quite a wide variety of interest in people coming forward and expressing to know more about the companies and potentially even make an offer for them. But we've spent a lot of time sorting through these offers and these expressions of interest with a number of critical criteria in mind. Just to quote a few of them, for a moment, one of them is the buyer must have a history in motorsport and a really good understanding of the business that's involved in motorsport. The reason for that is we fear that people who come forward thinking they understand a business like this, who haven't been involved in motorsport before at a significant level, almost certainly don't know what they're getting into. That could be very dangerous for Cosworth in the future. The second criteria we had was really, does the buyer have kind of a reasonably coherent view of what they want to do with the business, having understood what there is to understand about it, and a clear vision for taking the business forward. A third, of course, was their financial capability, financial backup, the wherewithal not only to pay the purchase price, but also to sustain the company through its subsequent period and make sure it has a substantial and stable base from which to grow. Another critical factor, of course, was the ability to move quickly, to move quickly into action and be a I believe to conclude the deal at this time. The reason for that criterion was that we needed to know what Cosworth's future was in time to deport the date by which those companies and teams that wish to compete in the 2005 Formula 1 championship need to register. In registering, they need to declare what engine they're using and that they have a valid engine contract. So we needed to complete the deal on time, both to support our sale of Jaguar racing to Red Bull, using the Cosworth engine, and to allow Menardi to allow their use of the Cosworth engine. So speed and effective decision-making were also the criteria for selecting the buyer. Suffice it to say that Kevin Kalkhoven, Gerry Forsythe approach was significantly superior against those criteria, and we're very happy that having decided to work closely with them to bring the process to a successful conclusion, we have been able to do that in a very expeditious and smooth manner. This morning's press conference, I complimented Kevin and his team on exemplary performance during the closing process. So for us, it was not so much a question of who has got the highest amount of money or who is shouting the loudest or who is making the best noises behind the scenes; it was based on solid criteria of where we could find a good future home as custodians of this fantastic company.
Q. Kevin, there's a comment in the press release from Jaguar about the Champ Car ladder series development of engines. I take it to mean that Toyota is at some point on its way out, and when do you expect that a Cosworth engine will appear in series such as Atlantics?
KEVIN KALKHOVEN: Well, first of all, we are completely committed to Toyota for the 2005 season, so that is something that we will be doing. We will examine the 2006 season and beyond and discuss the engines with a number of manufacturers. Of course, at this moment in time it's just too early to say.
Q. Is it possible to know approximately how much has been paid to Cosworth?
KEVIN KALKHOVEN: I'm actually under a confidentiality agreement, so there's nothing I can add on that situation at all.
Q. Can we say in millions?
KEVIN KALKHOVEN: It depends on what currency. You can say whatever number you like (laughter).
Q. The top level administration. Will you keep the people in place that you have now?
KEVIN KALKHOVEN: Yes, one of the things that impressed about Cosworth was the strength and depth of its management team, which of course is pretty profound. Tim will remain on as the chief executive and managing director of Cosworth together with his team.
Q. You will be providing the new owner of Jaguar for the year of 2005. Do you have any deals with them after that fact, after that year?
TIM ROUTSIS: Yes, you're quite correct, we will be supplying the new owners of what used to be the Jaguar racing team, now Red Bull, with Cosworth engines for 2005. Beyond that, as I'm sure you've picked up through the European press, there are some pretty significant rule changes coming up that affect the engine arrangements for 2006. Right now I and all of our colleagues in Cosworth and our competitors are reviewing the details of those changes very carefully. Together with the teams, we're going to decide exactly what the best type of engine configuration to deploy in 2006 is going to be. Once we've pinned that down, we'll then be in a better position to see who we will be supplying in 2006 and beyond.
Q. My question is in regards to the support series, comments that you made. I was wondering that perhaps with the stockpile of three-liter normally aspirated engines, maybe you might want to put those into a chassis and run those as a support series for Champ Car.
KEVIN KALKHOVEN: Let the dust settle before we announce some of these other plans on the ladder series, but there's certainly some interesting opportunities around.
THE MODERATOR: Thank you very much for joining us, Ladies and Gentlemen. If you have any further questions, the contact details are on the bottom of the press releases.
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