NASCAR's Rich Get Richer
Are the "Big Four" busting the sport of NASCAR?
By: Athlon Sports | 12/5/11, 12:51 PM EST
In celebration of Athlon Sports' upcoming 10th annual Racing magazine, we've dug into the archives to uncover some of the most memorable features, profiles and Q&As that have graced our pages. Visit the site daily for more retrospective looks at NASCAR throughout the decade.
Article originally published in 2009 Athlon Sports Racing annual
— by Tom Bowles
As Jimmie Johnson wrapped up his third straight championship in 2008, he stood alone on the precipice of a dynasty in the Chase era. As Johnson and co-owner Rick Hendrick sat at the head table at the Waldorf-Astoria last December, they provided Exhibit A in how to succeed in the sport of NASCAR this decade.
But in the face of declining TV ratings and economic uncertainty, the team’s record-setting performances haven’t been enough to sustain the sport’s growth in recent years. Coinciding with Johnson’s excellence has been a subtler, more disturbing trend towards consolidation of power in the Sprint Cup Series — one that has as much to do with who’s holding the checkbook as who’s sitting in the driver’s seat. Occurring at a time when changes — the introduction of the sport’s new car, the testing ban and a pending limit to four-car teams — are supposedly working to bring parity and increased competition, a small group of powerful men is quietly rising above and reaching a level of dominance the likes of which this sport has never seen.
A look at last year’s points standings shows that the top 13 finishers were owned by Hendrick and three other men: Jack Roush, Richard Childress and Joe Gibbs. Their drivers accounted for 32 wins in 36 races, accumulating 261 of 360 top-10 finishes (73 percent). Composed of 15 individual teams in 2008, the group known simply as the “Big Four” put up its highest totals of the decade in an environment that’s looking more and more like their personal playground. Only two other teams won a race last season — Penske Racing and Gillett Evernham Motorsports — and both have at least three cars in their stable. Forget single-car teams winning a race: Heading into this year’s Daytona 500, no remaining organization planning to field two cars or fewer on the Sprint Cup circuit has won since Dale Jarrett won for Yates at Talladega in the fall of 2005.
The sport finds itself struggling with a shrinking middle class. There’s parity, alright, but only at the top, condensed amongst a select group of owners in position to keep collecting the financial resources they need due to consistent on-track success. Of course, that’s not to say every individual in the “Big Four” hasn’t earned his place in the sun. For Hendrick, it’s been a two-decade-plus climb to reach the pinnacle through carefully selecting not one, but two Hall of Fame drivers in Jeff Gordon and Jimmie Johnson. For Childress, it’s been a decade of rebuilding following the death of seven-time champion Dale Earnhardt. Gibbs is an NFL Hall of Famer turned racing genius, with exactly the type of management style to successfully corral “wild men” like Tony Stewart and Kyle Busch. And then there’s Roush, whose one-car beginnings with Mark Martin in 1988 evolved into a five-team dynasty in which every one of his racers made the Chase in 2005.
“Hendrick Motorsports wasn’t what it is today 15 years ago,” says Red Bull Racing GM Jay Frye, regarding the current champs. Frye worked deals with Hendrick for chassis and engine support while helping run the middle-class MB2 Motorsports team for over a decade. “But they’ve done a great job hiring the right people. They’ve done a great job hiring the right drivers. They’ve done a great job with their sponsors. You look at the sponsors that Hendrick Motorsports has, they don’t leave. They’ve done a great job with the business-to-business aspect of the sport. That’s what it’s supposed to look like. And if you do that, you’re going to be successful. That’s great. That’s America, man.”
“There’s just a lot of adjustments you make,” adds Childress driver Kevin Harvick, whose owner is in an enviable position as the only owner to place all his drivers in the Chase two years running. “I think Richard’s been the best at it through the years as far as adjusting his business to however the environment of the sport is leaning to. You know, how it just needed to be treated at that particular moment in the ’80s, to the ’90s, to the 2000s.”
No question, these men have worked hard to adapt, landing on the top rung of Sprint Cup success for their efforts. But as the sport and the country begin to suffer from a tightening economy, to those victors go all the spoils. In a time of financial uncertainty, money appears to be funneling rapidfire from the struggling teams to the ones who’ve proved they can survive.
Take Childress’ operation, for example. Needing a sponsor to replace sudden NASCAR no-no AT&T, the car owner wasted no time last spring snagging Caterpillar as a replacement for the No. 31 Chevy driven by Jeff Burton. That came just months after announcing he’d be one of the few teams to expand next season, bringing a fourth car into his stable full-time with the backing of longtime NASCAR sponsor General Mills.
It’s the concept of “survival of the fittest” at work; but as RCR celebrates its good fortune, those marketing coups allow it to beat down opponents before even stepping foot on the race track. After being associated with Bill Davis Racing for nearly a decade, Caterpillar’s departure caused the end of the team’s Sprint Cup operation after 15 years of competition. That’s because unlike other major sports, NASCAR owners are like private contractors, with no protection from the sanctioning body should they fall into debt or lose sponsorship support. That “hands off” attitude used to allow the garage to remain the epitome of the American Dream — even today, all you need is a car, a crew and a driver with a NASCAR license to participate. But when times are tough, there is no golden parachute to save you. In a matter of days, a legendary team could wind up as broke as some of today’s retirement victims suffering from bad investment portfolios they had waited a lifetime to use.
The current plight of those longtime NASCAR operations came to a head with Childress’ swipe of General Mills. Petty Enterprises, the lone NASCAR team remaining from the sport’s inaugural season of 1949, went under after failing to find a replacement for a sponsor that had been with them since 2000. Despite a series-leading 268 wins, the two-car organization was unable to sell itself as a viable alternative to the Big Four, even after bringing in a cash infusion from midseason investor Boston Ventures. Just six months after attempting to stabilize the future of the organization, new CEO David Zucker and Co. were looking to simply salvage their investment at fire-sale prices.
“No one is patient these days,” says former NFL agent turned prospective NASCAR team owner Rick Clark, who has been trying to get into the sport for the last few years, working with several investment groups to purchase and/or start an organization in the Cup and Nationwide Series. “Everybody wants to come in and be at the A game as opposed to building it over a period of time. So, now the pressure that you see with these private equity firms, they have got to show a profit back to their investors, or it’s not a good deal. And they want to get out from under those kinds of deals (if it’s not working right away).
“The most storied and most successful race teams have been ones that have been family generated, where there’s a genuine love of the sport. Now, you’ve got an environment where there’s an expectation there’s got to be an immediate and measurable return, or it’s not successful.”
That concern immediately trickled down to the Pettys, who were unable to turn around a decade of disappointment. Even the hiring of 2000 Cup champion Bobby Labonte gave the team only a handful of top-5 finishes in three years on the job. With such a poor track record, there’s some question about whether NASCAR should step in and save an operation, when that displays clear favoritism. It’s that type of fallout that made CEO Brian France announce publicly in November the sport would refuse to step in to save teams just for the sake of saving them.
“They’re individual businesses,” he says of the teams in divisions all over the country that have either closed down or scaled back for 2009. “And there are literally hundreds of them that can be affected, depending on how far you would go in our national series, different teams starting up or exiting all the time. So, we’re not talking about 20 or 25 traditional sports teams where some halo credit line could be established for them. That’s not practical.”
But if NASCAR doesn’t step in, one wonders whether the biggest challenge in 2009 will become filling a 43-car field. Already, the series has seen mergers and consolidations that included Chip Ganassi and Dale Earnhardt, Inc., joining forces — dropping two full-time cars off the roster. With the Pettys’ merger and as many as a half-dozen other teams in danger of folding, only 35 or 36 full-time machines are a real possibility.
How does the Big Four fit into that scenario? Simple: Their consistent, overwhelming success has devalued other competitors to the point that sponsors are unwilling or unable to pay the price to keep them on the racetrack.
“It reminds us that this is a performance sport,” says NASCAR veteran Burton. “If you don’t have the performance then your time here — no matter who you are — can be short-lived. The sport’s hard. Once the ball starts rolling down, it’s hard to stop it. Your funding gets less, the willingness of employees becomes less — it’s hard to slow that down.”
During the sport’s last downturn — a delayed dry-up in funds following 9/11 — the series eventually bounced back due to Toyota’s entrance. But this time around, there’s no auto manufacturer waiting in the wings with the type of cash infusion needed to start even a single-car team these days — as it is, the viability of GM, Ford and Dodge are in question due to a pending bailout plan from the federal government designed to save them from bankruptcy.
That leaves a gap of perhaps tens of millions of dollars between those on top and those trying to start from scratch. And with that, there’s concern as to whether new owners can compete with them before they even get to the starting grid.
“It would be a lot harder today than it was then,” says Frye, who helped start MB2 in 1997 as a one-car operation. “Could it be done? Yes. Could you be successful? Yes. But you’d have to have a little luck involved.
“Part of the problem is recruiting talent. Well, if you’re a top crew chief, top tire changer, are you going to take the risk of going to some one-car team somewhere who’s just starting when you can be at one of these elite teams that have had a history of being around? Hendrick’s been there for 25 years; people don’t feel the risk of something going wrong there. (On the other hand), a new one-car team would obviously create some issues, I’m sure, for some people.”
Toyota was able to overcome those concerns by simply throwing extra cash at crew members in order to get them to jump ship. But for a new prospective investor or owner, that type of extra money is harder to come by in these lean economic times. And with sponsorship now approaching levels never before seen in the sport — Roush signed Aflac for Carl Edwards to the tune of $26 million over the next three years — raising the capital to even compete with the Big Four is approaching nearly impossible levels.
“There’s so many advantages to having a multi-car team as far as being able to subsidize through sponsorship,” says veteran driver Bill Elliott, who has been trying to keep the Wood Brothers’ No. 21 above water for the last two seasons. “You have a better opportunity to keep good drivers and good crew guys because you have multiple resources.”
Of course, sometimes even the resources for the “middle class” come from the very teams who are dominating above them. As teams like Hendrick’s have achieved high levels of success, they’ve also dipped into the equipment supply business, distributing engines and chassis support to a wide variety of clients — including current two-car team Stewart-Haas Racing. While a legitimate means of gaining extra cash, it’s a questionable maneuver that’s caught the eye of fans and officials who wonder whether such a move promotes fair competition.
For the record, Hendrick, Roush and Gibbs, who all deliver equipment to other owners, insist everything is created equal.
“We had 100 percent confidence that we were getting the same stuff that every one of their other cars were,” Frye says of a chassis and engine agreement that was in place for several years with MB2. “So, it was never an issue. We were proud of our relationship. Great ethics, great morals.”
“From our standpoint, it’s just two more variables of the budget that we don’t have to create for ourselves,” adds Stewart. “It just eliminates some of the human resources that we have to have at Stewart-Haas to do it ourselves.”
Just don’t tell Stewart about the uphill battle he’s facing. It’s notable that no team receiving chassis or engine support from the Big Four has made the Chase in its five years of existence.
So if the reach of the Big Four is getting out of hand, what can be done to increase parity? Two words: cutting costs. In NASCAR’s defense, it’s tried to do just that, neutralizing resources late last season by taking unprecedented steps, such as a testing ban designed to keep the bigger teams from using their extra cash to travel all over the country each week and test. NASCAR hopes the ban keeps them from developing an additional edge on the new car. For a brief time, it looked like it would work; a rumored document appeared to be circulating among the top car owners, all of whom were ready to pledge to stay at home.
That era of good feelings lasted, oh, about three weeks — until Hendrick and others discovered Rockingham Speedway was not on the “do not go” list. No longer a NASCAR-sanctioned track, the facility may become a testing haven for organizations that have the money to keep moving forward in the offseason.
“The way I look at it, we’ll be going to Rockingham every week now so as long as we can get tires,” says Gordon. “Which means it comes down to NASCAR and Goodyear to control that. We shouldn’t have fresh tires to go to Rockingham for two days when the purpose of the testing is just that, no testing. And that’s for cost as well as competition, in my opinion. That’s something that should be enforced.”
So, as the big-money teams find ways to circumvent the rule, NASCAR’s lower class tries to figure out how to survive the winter. At this point, it’s not out of the question to see only a dozen full-time car owners by the time Daytona rolls around. Is that enough to sustain the sport? For some, the answer is yes.
“Our sport is better off — it’s safer, it’s more secure, the sponsors are better represented by having a limited number of car owners that understand what it takes to be successful in this sport,” says Burton. “I don’t think that our sport is wrong because we may have 12 car owners — I don’t think 30 car owners make our sport better than having 12. I don’t see it. Now, wouldn’t it be great if a Harry Hyde-type guy can put a team together, and come out and race with Rick Hendrick? It’s a glamorous idea. But if we had 43 car owners individually run and individually operated, overall I don’t think our sport is better off for that.”
That won’t prevent men like Clark from trying to buck the consolidation trend. He’s trying to break through with a multi-faceted plan that ties in fashion and entertainment through a movie deal and his company’s own clothing line.
“Had I come in the traditional way, I would not have investor interest,” he says. “Because the pressure would have been to perform, perform, perform, and how do you compare, compare, compare to the mega-teams. But by coming in and bringing a new face to the sport and a new market segment to the sport, the investors, they see the other vertical opportunities that don’t exist with even some of the major teams that are there that we bring to the table.”
The longer only four owners and their drivers stay entrenched at the top, there’s a question as to whether the fans will accept the cars within their stables as individual teams or simply view them as four men with a bunch of expensive toys rotating who’s got the best car in their stable.
“The negative is when we start focusing on Hendrick winning rather than Jeff Gordon, Jimmie Johnson, Dale Earnhardt Jr. and Mark Martin winning,” Burton says. “But in the environment that we’re in today, (almost) all the multi-car team ownerships have individual sponsorships.
“Look at where we are. We have General Mills. We have Caterpillar. We have Sunoco. We have Jack Daniel’s. Each one of those sponsors expects Richard Childress to give that team 100 precent effort, to do the best they can. So, it isn’t like we’re going to stop the world so just the No. 07 can win races or just the No. 29 can win races. We have to build four competitive teams.”
This much we know: The Big Four have the money and resources to remain competitive for years. It’s whether the rest of the competition has the money it will need to stay in the battle. And if it doesn’t, NASCAR’s hand may be forced.
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