Tuesday, July 27, 2010

2007 story I wrote about snake oil salesmen and the lure of new money in motorsports

BYLINE: BRANT JAMES, Times Staff Writer
St. Petersburg Times (Florida)

October 21, 2007 Sunday

The banner slowly circled Lowe's Motor Speedway behind a small plane, at first lost among the usual visual clutter of buy-this-support-that commercialism. It was free speech at low altitude.

"How much does Bobby Ginn owe you?"

NASCAR teams chase sponsorship dollars in an increasingly expensive sport and court outside investment to remain competitive. But the banner, flown last weekend, and the story behind it make for a cautionary tale.

Well-funded businessmen such as George Gillett Jr. and John Henry, who bought majority stakes in Evernham Motorsports and Roush Racing, respectively, could be a lifeline. But owners or sponsors who replicate Ginn's experience could have a destabilizing effect on the core group of teams.

"Even in this day of sanitized corporate involvement, there's still the wild card that comes in and self-destructs in 18 months," Peter De Lorenzo, an industry analyst and consultant who publishes Autoextremist.com, said of Ginn. "(NASCAR) doesn't do due diligence in that regard - certainly not enough."

The citizens of Hilton Head, S.C., sported bumper stickers that read "Honk if Bobby Owes You" in 1987 after the home builder's leveraged buyout of vast holdings failed, laying waste not only to the real-estate market but service industry of the vacation playland.

Now the 58-year-old head of a sprawling Celebration-based resort firm, Ginn re-created that maelstrom in microcosm after buying an 80 percent stake in MB2 Motorsports in 2006. He hired scores of employees, invested in expensive equipment, said all the right things about the long haul. But as debts mounted and he was unable to replace his resort empire as a rotating sponsor on his three-car Nextel Cup team, he laid off almost 100 employees and sold out to Dale Earnhardt Inc. in July, becoming a minority partner rarely seen at the track.

Ultimately, his maneuver had the look of an investor buying a house on the cheap and flipping it, as DEI moved into Ginn Racing's larger shop as part of the transaction. Former drivers Sterling Marlin and Joe Nemechek have since sued for unpaid wages.

Ginn representatives did not respond to requests for an interview.

He wasn't the first to overestimate his wealth and potential. J.D. Stacy, a Kentucky coal baron who entered the sport in 1977, owned/sponsored a record seven cars in the 1982 Daytona 500. A year later he fled, with lawsuits and vitriolic debtors and owners in his wake.

While bodies such as Major League Baseball and the National Football League control franchise sales and investigate ownership groups, NASCAR claims to yield to the free market.

"NASCAR is open to any team that can show up to the track and get in the show," NASCAR spokesman Ramsey Poston said. "Throughout our history some owners have succeeded and some have failed. Like most businesses, probably more have failed than succeeded"

The new batch of owners appears sound. Besides Gillett and Henry, who according to the Boston Globe paid more than $50-million for 50 percent of Roush's outfit, British billionaire Robert Kauffman recently bought half of Michael Waltrip Racing, and Arizona Diamondbacks managing partner Jeff Moorad and chief operating officer Tom Garfinkel secured a controlling interest in Hall of Fame Racing. Richard Childress quietly began the trend when he added unnamed investors two years ago.

Each investor has his reasons. Gillett and Henry were longtime fans, but even the most avid hobbyist likely wouldn't venture on a dalliance this expensive without the prospect of profit. Gillett, owner of the Montreal Canadiens and co-owner of Liverpool Football Club, sold the Harlem Globetrotters and a share of the Miami Dolphins when other opportunities interested him. The consolidation of teams and influx of outside investment make this a volatile time, De Lorenzo said, though he noted Gillett has the "deep pockets" to last.

"It's great to have this infusion of money," De Lorenzo said. "But now it's $20-million to run a single front-line car for the season. ... Eventually there is going to be only a handful of teams and I think some of these people who come in, they're going to get over their head and they're going to spike salaries again and they're going to take a lot of people from their current situations and then implode."

Veteran driver Kyle Petty, whose family team has raced in NASCAR since its inception, said "how race people are" has for years made owners vulnerable to snake oil salesmen and the traveling preacher show. Petty said a stranger with an ubiquitous old briefcase began showing up at races in 1988, boasting that he represented a company that wanted to invest $15-million to $20-million in a team.

"A sponsorship was $2-million," Petty said. "Along the road (at Talladega) ... he had a motorhome parked there. You could sit there - I think (team owner) Eddie (Wood) and them went and talked to him - and he invited people out. Darrell (Waltrip) went out there. Everyone went out and talked to them. He came to about 10-12 races right in a row. You'd see him out to dinner with (team owner Robert) Yates, all kinds of people. The guy called the racetrack and got garage tickets and just happened to walk through there and tell people these stories and everybody bought it.

"That's the way race people are. If they think anybody's got money, we're all hookers."

Brant James can be reached at brantjameslives@gmail.

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