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August 21, 2019

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Peter DeLorenzo has been in and around the sport of racing since the age of ten. After a 22-year career in automotive marketing and advertising, where he worked on national campaigns as well as creating many motorsports campaigns for various clients, DeLorenzo established on June 1, 1999. Over the years DeLorenzo's commentaries on racing and the business of motorsports have resonated throughout the industry. Because of the burgeoning influence of those commentaries, DeLorenzo has directly consulted automotive clients on the fundamental direction and content of their motorsports programs. DeLorenzo is considered to be one of the most influential voices commenting on the sport today.

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FUMES #454

July 16, 2008

Reality is about to hit GM Racing's NASCAR programs - hard.

By Peter M. De Lorenzo

Yesterday, GM CEO Rick Wagoner outlined a series of cost-cutting measures, including laying off salaried workers, eliminating health care benefits for GM retirees over 65 years old, making even more drastic reductions in truck production, suspending its stock dividend, suspending all executive bonuses, cutting advertising, marketing and promotional programs (including racing), and borrowing at least $2 billion, all in the next eighteen months. These moves are designed to basically save the company from bankruptcy and raise its cash position by $15 billion through the end of 2009. And everything - and I mean everything - is on the table when it comes to these cost reductions, including all of GM's motorsports programs. "There are some elements of motorsports that are very effective means of promotion and communication with certain customer segments. The ones that are less are the ones that will be ... scaled back," GM North America President Troy Clarke added at the news conference.  Ouch.

First of all, yesterday's news conference was the first time in the history of the corporation that GM upper management openly addressed or commented upon GM's racing programs in front of the media. In the past, GM's Director of Racing would make statements, or a divisional general manager might make a statement, but only in the context of being at a race weekend or when it was deemed appropriate (signing or re-signing drivers or teams, etc.). Going back long before this, some of you might remember that GM adhered to the bogus "ban" from building and promoting high-performance production cars and racing that the old AMA tried to enforce on the domestic manufacturers in the late 50s and early 60s. While Ford blew the lid off that wrong-headed edict with their "Total Performance" marketing push in the 60s, GM spent most of that decade refusing to admit that they were affiliated with legends like Smokey Yunick, Junior Johnson, Roger Penske, Jim Hall, etc., etc., while providing those stars with "back door" support. (For the record, I preferred the Ford way of going racing, but that's irrelevant to this discussion.)

In mentioning all of this, I'm trying to frame the significance of this event for our readers out there. Think about the fact that GM has never discussed their racing programs on the highest corporate level, in public, ever. Then think about the fact that the first time they do discuss it, it's to talk about the cuts that are on the table. That is a big deal, folks.

As I have been warning for the last two years now, the creeping reality of the domestic manufacturers' freefalling fortunes in the U.S. market was bound to strike at the heart of the Detroit Three's racing programs - especially their NASCAR involvement. And now reality has finally come home to roost at GM racing, and the fallout is not going to be pretty. NASCAR's adoption of the "CoT" was a disastrous decision on their part, because it exposed them to the burgeoning faction within these car companies that refuses to buy into the NASCAR hype and instead correctly point out that all brand recognition has been expunged from NASCAR's Sprint Cup equation by the generic blobs masquerading as "Impalas," "Fusions," "Chargers" and "Camrys," and that the return on investment for the company's involvement is deteriorating at a rapid rate.

So, what does this mean for GM Racing going forward? Here are the five key actions on the table right now at GM:

1. Immediate cuts to NASCAR promotional programs. Ever go to a NASCAR weekend and notice the Chevrolet billboards around the track, or attend Chevy-sponsored events surrounding a race weekend, or go to the "Chevy Rock and Roll 400," or see co-branded promotions in grocery stores or auto parts stores featuring Chevy NASCAR drivers? GM spends millions of dollars on these programs every year, and these are the deals that will come under immediate scrutiny. Some track contracts have already been cancelled, and other contracts with individual tracks expiring at the end of this year will not be renewed. Ongoing contracts will come under heavy fire. And a lot of the small promotions that add up to a significant chunk of change will fall by the wayside. It doesn't sound like much, but believe me, to the tracks involved this will have a huge impact.

2. Immediate cuts to NASCAR-themed advertising spending. The ubiquitous Chevrolet spots on NASCAR broadcasts will be cut by 20 percent right off the top. This is probably the most painless cut GM can do, unless you're on the receiving end of it as a TV network media honcho, or at a media company that has the responsibility of placing that ad, that is.

3. All team and driver contracts will be put on the table for immediate review. That deal that Tony Stewart just signed to receive half of Haas-CNC Racing, so it can become Stewart-Haas Racing in 2009? There was GM Racing money involved in that deal, or it wouldn't have happened. But by participating in that deal, GM Racing also has set the table for its entire technical partnership fee structure with its NASCAR teams to be reviewed, given the company-wide mandate to take 20 percent out of its marketing/promotion/advertising budgets. The deal with GM Racing is this: The technical aspect of GM Racing reports up through engineering and GM Powertrain and has a budget assigned to it. But the actual serious money involved which supports these sponsorship deals and other programs comes out of GM Marketing. Last fall, GM signed Hendrick Motorsports, Richard Childress Racing and DEI, Inc. to contract extensions of varying lengths. The man at GM marketing who made those deals happen - Brent Dewar - a known NASCAR "friend" and cheerleader, has since been shipped off to Europe. Needless to say, there are people within GM marketing and the rest of the corporation who are clearly not happy with some of Dewar's decisions. Now, every single one of those decisions has been put on the table for review and discussion, with GM going back to the teams for "adjustments" to their contracts not out of the question. Look for those "adjustments" to translate into a percentage cutback to the direct payouts to the teams, and don't be be surprised if the low man team on the GM NASCAR totem pole is given its outright release with a cash buyout by the end of this year.

4. GM may stay in NASCAR - at least for now - but to what degree? All of these reductions in GM Racing's involvement in NASCAR begs the question, as in, if GM stays, to what degree will their involvement "cover" NASCAR? Keeping a presence in Craftsman Truck and maintaining a reduced presence in Sprint Cup may be all that's left for GM's NASCAR budget. GM will race where and when they see fit, but look for the Nationwide Series to become the odd man out when it comes to GM Racing's involvement. And if teams are given the choice to cut their programs in response to GM's demands, watch their Nationwide programs drop off the map too.

5. Corvette Racing caught in the crossfire? It appears that a direct result of the additional juice necessary to make the Tony Stewart deal happen is that Corvette Racing may take a big hit. One scenario already on the table is that Corvette's annual appearance at the 24 Hours of Le Mans might be in jeopardy, which would be a complete travesty because that one single race is the raison d'etre for the entire Corvette Racing program. The global image enhancement and benefits to GM, Chevrolet and the Corvette brand because of the success of Corvette Racing at that one race - the most prestigious endurance road racing event in the world - is almost incalculable. But it takes a lot of money to present a front line two-car GT effort at Le Mans, and it is rumored that 1/3 of Corvette Racing's annual budget is consumed at that one race. So that's why the discussion is on the table. It doesn't help that the internal NASCAR cheerleaders within GM (at least the few who are left) regularly dismiss Corvette Racing as an afterthought, but the reality of the situation is that Corvette racing's annual budget is approximately equal to a top one-car effort in NASCAR's Sprint Cup, so the arguments to decimate Corvette Racing fall flat in the Big Picture of things. As we like to say around here, this is a "developing" situation, and the next 60 days will determine Corvette racing's fate for 2009 and beyond.

There's a lot to contemplate in this column by any measure, but one thing is crystal clear: The days of NASCAR dictating to the manufacturers is clearly over. GM upper management has stated publicly that they will reduce the company's motorsports programs by at least 20 percent. And since NASCAR-related spending accounts for 90 percent of GM Racing's total annual budget - or between $120 and $140 million - the cuts are going to be deep, highly visible, and they will signal a fundamental change in one Detroit automobile company's historical relationship with NASCAR.

Oh and one more thing, if you think GM is the only Detroit manufacturer contemplating substantial or even radical cuts to their NASCAR programs, think again.

More news will unfold on this subject before the summer is out.


Publisher's Note: In our continuing series celebrating the "Golden Era" of American racing history, here is another image from the Ford Racing Archives. - PMD

(Ford Racing Archives)
Pomona, California, 1964. Ronnie Sox does a burnout in his A/FX 427 Mercury Comet at the NHRA's Winternationals.