Trying to get up to speed
Once the dominant force in open-wheel racing, sputtering CART hopes to rev its profile with this week's Grand Prix of St. Petersburg.
By ALICIA CALDWELL, Times Staff Writer
© St. Petersburg Times
published February 17, 2003
ST. PETERSBURG -- A decade ago, Championship Auto Racing Teams dominated open-wheel racing with a roster of the sport's stars: Andretti, Unser and Penske. The company ruled Victory Lane at the Indianapolis 500. Sponsors lined up to paint their logos on the cars.
But then came the upstart Indy Racing League, which slowly eroded CART's dominance. Fans fell in love with NASCAR, which became a marketing juggernaut. Top teams defected from CART. Federal Express dropped its sponsorship.
Even CART's president and CEO bluntly concedes he has work to do as he opens the 2003 season with the Grand Prix of St. Petersburg on Friday.
"This is a case of a successful organization that declined when sheer arrogance set in," Chris Pook said. "We're attempting to rebuild."
CART's obituary has been written repeatedly during the past year. While Pook has addressed some of the problems by attracting new sponsors and drivers, CART still is fast depleting its cash. And its nonstandard television deal so far has been a woeful underachiever, losing money for the struggling organization.
Pook wants three years to make CART a success, attracting fans, sponsors and the hottest drivers. But Wall Street isn't so patient.
"You need to see something happening by the end of this season," said Dennis McAlpine, who follows CART for McAlpine Associates in Scarsdale, N.Y.
The problems have hurt CART's bottom line. For the quarter ended Sept. 30, CART posted a net loss of $8.3-million compared with a net loss of $1.7-million for the same quarter in 2001. Revenues fell to $18.5-million from $29.5-million a year earlier, reflecting lower race fees, sponsorships and television revenue.
The stock, traded under the ticker symbol MPH on the New York Stock Exchange, has been hammered. A year ago, it was at $14.56 a share, but on Friday it closed at $3.30, down 9 cents. At its peak in 1999, it was $33.62 a share.
CART was born of rebellion in 1978, created by six car owners who were dissatisfied with how Indy-style racing was being run.
The company established itself as the dominant open-wheel racing organization. Open-wheel cars are what they would seem: race cars with no wheel wells. CART, which moved to Indianapolis last year from Michigan, fielded Indy 500 winners from 1979 to 1995.
CART made money by selling TV broadcast rights to its races and by charging race sanctioning fees to conduct a series of races on ovals, permanent road courses and temporary street circuits.
But a long-simmering feud with CART leaders prompted Tony George, who was president of Indianapolis Motor Speedway, in 1994 to form a rival race organization, the Indy Racing League. For a time, CART boycotted the Indy 500 because of the formation of the rival IRL.
Ultimately, the prestige and television revenues associated with the Indy 500 won out and helped IRL seize the advantage in open-wheel racing.
While CART and IRL had their disputes, NASCAR was enjoying a meteoric rise.
NASCAR, the National Association for Stock Car Auto Racing, is a different animal altogether. Founded in 1947 and catapulted to commercial success in the mid-1990s, it runs stock cars, mostly on oval tracks. Its cars look a lot more like ones you'd drive, though they're souped up to race in the 180 mph range on super speedways.
NASCAR has a blue collar, beer-drinking feel, while open-wheel racing is black tie and Champagne.
As CART and IRL feuded, NASCAR was marketing personalities, stoking talk of rivalries and wooing sponsors.
The subsequent hits CART took were devastating. In 2001, it lost Roger Penske's team to IRL. Penske was one of the owners who founded CART. Engine builder Honda went, too. Drivers followed. Three of CART's top 10 finishers last year, Michael Andretti, Dario Franchitti and Kenny Brack, went to IRL. CART's series lost its title sponsor, Federal Express.
In December 2001, CART named Pook its president and chief executive. According to disclosure statements, his annual salary and bonuses total $134,000.
"The board believes that Mr. Pook has the experience in the motorsports industry necessary to guide CART during these critical times," James Grosfeld, a member of the company's board of directors, said at the time Pook was hired. "His reputation in the industry, significant shareholder support and outstanding business accomplishments made Mr. Pook the logical candidate for this position."
Pook had been the president and chief executive of the Grand Prix Association of Long Beach, Inc., which is a wholly owned subsidiary of Dover Downs Entertainment, Inc. He conceived the idea of running a world-class automobile race through the city streets of Long Beach, which has become an open-wheel racing staple in the California city since 1975.
Since being hired at CART, Pook has been making promises and keeping them.
In November, CART announced it had a new title sponsor in Bridgestone Tires. Cosworth, a Ford-owned company, was secured as the series' sole engine manufacturer for 2003. Pook promised a field of 18 to 20 drivers. There are 19 scheduled to start this week's Grand Prix.
But the challenges ahead are steep ones.
The financial losses have been exacerbated by a fundamental change in the way the company operates. It is taking bigger financial risks in exchange for potentially greater profits.
Instead of being merely a sanctioning body that takes a set fee from a promoter who wants to use CART's expertise in running a race, CART is taking lower fees upfront for a percentage of the profits. It is buying television time for its races and taking advertising revenue instead of payments from networks in exchange for the rights to broadcast a race.
John Mansell, a senior analyst with Kagan World Media, a Carmel, Calif., media, entertainment and communications research company, said the structure of CART's television deal is more proof that the company is foundering.
"CART is in a position of weakness," Mansell said. "You can tell since CART wasn't able to generate a TV rights fee deal. They had to go out and buy their own time. That's not a good deal."
Another issue is cash. The CART series is expected to spend half of the $103-million of its remaining cash on financing its 2003 races, stock analyst McAlpine said.
Tom Begley, race manager for the Grand Prix of St. Petersburg, thinks the change was "a positive one."
"It's part of a rebuilding process, there's no question about it. Everything is a risk, no matter what."
CART has to improve TV ratings for and spark sponsor interest in a 19-race series that has nine new drivers and lost half of its top 10 from last year. The St. Petersburg race still did not have a title sponsor as of last week. The competition is stiff, not only from IRL but from the NASCAR juggernaut, which crushes both U.S. open-wheel racing organizations when it comes to ratings and sponsorships.
Nevertheless, Pook is optimistic not only about the future of the St. Petersburg race, but for the whole series.
Breaking even on the St. Petersburg race, Pook said, will be the first goal for the retooled CART.
Though St. Petersburg City Council members agreed to allow promoters to run the race on city streets annually for five years and spent $85,000 improving rough roads, the future of the event depends upon whether CART makes it.
"This is like any business," Pook said. "You open any business and it's not going to make money overnight."
-- Alicia Caldwell can be reached at Alicia@sptimes.com or (727)893-8145.
Name: Championship Auto Racing Teams, a race-sanctioning organization
Revenues: $18.5-million for the quarter ended Sept. 30, down from $29.5-million a year earlier.
Races: The 2003 schedule for the Champ Car series has 19 races, half of them in the United States and the rest in places such as England, Germany, Canada, Mexico and Australia.
Tracks: CART races are run on ovals and street circuits.
Cars: CART's racing series and the cars that race in it share the name, Champ Car. The open-wheeled car runs on a turbocharged Cosworth V-8 engine and has a top speed of about 220 mph.
Drivers: The series' top drivers are Bruno Junqueira, a Brazilian, who finished second in the CART series standings last year; Adrian Fernandez, a Mexican, who is entering his third season in the Champ Car Series; Jimmy Vasser, an American, who finished seventh in the points standings last year; and Canadian Paul Tracy, who is expected to make his 200th Champ Car start this year, making him the series' most experienced driver.
Championship Auto Racing Teams Inc. sustained a major blow in December 2001 when racing team owner Roger Penske abandoned the league, which he had helped to create. Shortly thereafter, Christopher Pook was named CART's president and chief executive. In the year that followed, the series lost some of its biggest names, including marquee driver Michael Andretti and title sponsor Federal Express. Revenues plummeted, and the stock price went with it.