Long Beach to IRL?

[sgjb]

Everyone can throw numbers of fans at tracks, tv audience numbers around, but in the end when the LBGP committee decides IMO money will talk. There is not yet a real relationship with the new OWRS people so history is not on their side either as alot of people want to hold on to. Take out the 500 and both series struggle in the US with TV audience and attendance. But the fact is you can't really take out the 500 because it is real and is every year becoming stronger since it's worst days.

Toyota is the main sponsor and they are there for one reason and that is to see their cars in the race. They would not have held on this long if they did not believe this will happen.

OWRS is facing an uphill battle that from what I know is almost insurmountable in keeping the race past next year.

[indycool]

I can't believe I'm hearing that LBGPA and the OWRS are "familiar" with each other's way of doing business. They've done one race together. The previous CART managements were gone.

[jjspierx]

It's no different for LBGP to negotiate with CART under different names(Pook, Heitzler, Rahal, etc...) then for them to negotiate with Forsythe, Gentilozzi and Kalkhoven under the name OWRS. Its the same thing.

[Boli-Nica]

Originally posted by indycool
I can't believe I'm hearing that LBGPA and the OWRS are "familiar" with each other's way of doing business. They've done one race together. The previous CART managements were gone.

That is upper management. Many of the same folks who do the detail work are still there.

[sgjb]

Originally posted by jjspierx
It's no different for LBGP to negotiate with CART under different names(Pook, Heitzler, Rahal, etc...) then for them to negotiate with Forsythe, Gentilozzi and Kalkhoven under the name OWRS. Its the same thing.

I beg to differ! ON the surface that may seem to be true but remember Pook, Rahal and Heitzler negotiated when they had over 125 million in the bank and a public company so it was easy for LBGP to see who they are dealing with and the liquidity of the company they are getting into bed with.

Now you are asking LBGP to negotiate with 3 men to with a company that is private. Know one knows how much cash flow they have, if they have any cash in the bank. LBGP will need to assume in signing the next contract that OWRS will keep funding the growth and that they are solvent enough to honor that contract. Just because the owners are rich does not mean they will keep funding forever.

So I don't believe the history will play much part in the dealings between LBGP and OWRS. It will be what have you done for me lately! and what can you do for me in the future!

[Flatspot]

Originally posted by sgjb
Now you are asking LBGP to negotiate with 3 men to with a company that is private. Know one knows how much cash flow they have, if they have any cash in the bank. LBGP will need to assume in signing the next contract that OWRS will keep funding the growth and that they are solvent enough to honor that contract. Just because the owners are rich does not mean they will keep funding forever.

I agree, however, I would submit that the same holds true with the competition save its only one man not three.

Given the current state of all open wheel racing, if I had to place my bets in Long Beach the bet would be on Champ Cars. Frankly, the TV ratings suck for both so why even risk killing the attendance base too?

[indycool]

Name a few then, Boli, that have any clout on business decisions. Lopes? Maybe, but he's more competition-minded. Kneifel? No horsepower. Credential people, secretaries and the like? So what?

And jjs, when you deal with two different sets of people at two different car dealerships to buy a car, you're going to get different deals and different approaches from different people. Sorry, I don't buy it.

[Snrub]

Regarding "who they're dealing with", ultimately Forsythe was a controlling shareholder in CART because he owned so much of it. (similar to how Renault controls Nissan with something like 22% of shares) If you were dealing with CART, it was going to be done generally the way Forsythe wanted it. That doesn't mean he had control of every minutiae, but major issues couldn't have been done in a way that he strongly objected to. Now you've got the same man with a 1/3 say and probably more than 1/3 the shares.

Regarding TV numbers and audiences, it all directly relates to money so that's why it's mentioned.

[racinthestreets]

I got a reply to my email to LBGP:

Steve, thanks very much for your comments and for your support throughout the years. Let me assure you that we are concentrating on making the 31st annual Toyota Grand Prix of Long Beach the best ever and have not made any decision yet as to years 2006 and beyond. In reaching that decision, we will carefully consider all of the factors including expressions of preference such as yours.

I look forward to seeing you here in Long Beach in April.

Jim Michaelian
President/CEO


In reaching that decision, we will carefully consider all of the factors including expressions of preference such as yours.

Please, go to lbgp.com select comments and email a request. I hope it is a request for CCWS.

[jjspierx]

Originally posted by indycool
And jjs, when you deal with two different sets of people at two different car dealerships to buy a car, you're going to get different deals and different approaches from different people. Sorry, I don't buy it. [/B]

You'd get different deals by talking to different people even at the SAME dealership. The point is, LBGP would be dealing with basically the same scenario as before with CART. Sure the owners are different, but the package they bringing is essentially the same.

[indycool]

The package they bring is the same but they're an entirely new set of owners with what is supposed to be a different business plan and way of conducting it than CART, which went bankrupt. For CCWS' sake, I HOPE they do business differently.

[JohnSSC]

Does anyone have anything more than a speculative guess as to what the actual arrangement is currently for this race?

Specifically:

1) What type of entity is LBGP? Non-profit or for profit?

2) How is the City of Long Beach reimbursed for the services they provide (police/fire/paramedical, public works - street closings, sanitation, street repair/paving, etc)?

3) Does the City of Long Beach view this as money-maker for them? By that I mean not just the generation of ancillary dollars due to increased local spending, but paying to close down streets, weld manhole covers down, unweld them, pick up garbage, etc. How does this directly impact the City's bottom line?

The reason I am asking is that so far this discussion has centered on attendance impacts based on whether IRL or OWRS provides the racing, with some ancillary discussion of the impact of a reduced gate.

Based on pressures to generate a profit (in the case of LBGP) and the added political pressure (City of Long Beach not "throwing taxpayer $$ away for frivolous events")it may be that the question is not which entity LBGP is more comfortable with, but which entity can demonstrate the maximum opportunity for revenue.

[indycool]

All good points, John....and hospitality and sponsorship and all those things generate dollars as well and there may be more of it available in the IRL right now.

It IS a "for profit" entity now because Dover Downs Entertainment bought the race a few years ago and still owns it.

Your other questions, I can't answer.......

[JohnSSC]

Apologizing for a second long-winded post in advance!

Based on the above, and some of what has been written here by indy and others, we should consider:

1) The SoCal Toyota Dealers have long sponsored this event.
2) Toyotas appear prominently nowhere in the racing with the exception of the Celebrity race and the Atlantics.
3) Toyota as a corporate entity would, I am sure, be willing to sweeten the pot if their powerplants would be seen powering the cars in the "featured" race.
4) Those same deep pockets would bring more intense marketing efforts for the race. Potentially the sponsor would "guarantee" the gate, making up for any shortfall due to fan backlash should a switch to IRL occur in '06.
5) We have not addressed the deep pockets that the other manufacturer's bring to the show. Honda definitely would want to find ways to make their presence known as well which would enhance revenue opportunities.
6) At this level, Cash is King.

[JohnSSC]

As an accountant friend of mine once said: "There is always room in the books for more profit."

[Snrub]

John I think you've identified a number of the important issues that the LBGP people will look at. I think it all boils down to a risk/reward tradeoff when comparing the two series. There's risk with continuing with CC (what if the event slowly/quickly dies) or swith to the IRL (if there's substantially less turnout, the event could die) and potential extra rewards if the IRL can bring in more money or if CC can grow the event as the series strengthens.

Regarding the Toyota sponsorship of the race, I was thinking, the Canadian races usually have heavy "Dodge" sponsorship and I *think* Cascar only runs support races for one of them. Didn't Toyota sponsor LB before they participated in open wheel? My point is that it is possible for the sellers of cars to sponsor an event that is successful. While I'm not suggesting this is the case, what if the Toyota dealers predict that the event would lose out by switching to the IRL? Our assumptions have been that the dealers haven't analyzed that situation, but with all thier marketing money at stake, they'd be foolish not to before pushing for the IRL.

[indycool]

One thing to remember on that one: Penske has the nation's largest Toyota dealership in soCal.

[JohnSSC]

Thanks, Snrub!

While we are all comfortable here wrapped in a "Forum Fog" debating the relative merits of which type of car can claim lineage from "Indy Cars" (funny, though that for as much as the 500 is dissed here that this is a point worth considering by many who favor OWRS), out there in the world promoters are making decisions based on their bottom lines.

Can-Am (God bless it) was a terrific Series that had great drivers and truly innovative cars from a technical standpoint. Guys like Tony Cicale made their reputations in that Series and who can forget Mark Donohue and "The Panzer?"

All that being said, where is the Can-Am now? Lots of reasons but they all boil down to one: The sponsor $$$ went somewhere else.

Promoters want to put on a Show. The Show attracts ticket buyers but more importantly, the Show also brings with it a package of sponsorship that will have a certain impact on the promoter's/track owner's/government entity's bottom line. Money follows money.

I think the bottom line here is that if you are Toyota, then it is far more effective to throw sponsorship dollars at a race event where Toyota engines are in the cars making noises, however dissonant that noise may sound to a purist.

[racinthestreets]

True JohnSSC. If Toyota is the presenting sponsor for the LBGP I will be shocked to see Toyota sponsoring the CCWS as the main event beyond 2005 - unless, they intend on leaving the IRL.

OWRS needs to work diligently with the LBGP and help them find another sponsor. I would presume this is the direction that OWRS is taking - find a presenting sponsor for LBGP!

[Snrub]

If Toyota is the presenting sponsor for the LBGP I will be shocked to see Toyota sponsoring the CCWS as the main event beyond 2005 - unless, they intend on leaving the IRL.

Correct me if I'm wrong, but wasn't the LBGP contract signed with CC when Toyota had already gone to the IRL or at least when it was clear that was their plan? Toyota could have pushed TG to go street racing much earlier. I'm not saying Toyota won't make a push for the IRL or that the IRL won't get it, but I think it's too early to say that the event is as good as in IRL hands. As for Toyota's staying power in the IRL, I don't know if they will plan to stay long term, but the way Honda destroyed them this year will give them something to think about, especially when their $400M F1 venture isn't going as hoped. Imagine if Honda destroys them with their two powerhouse teams in 2005? A case can be made that their marketing exposure in the IRL is good value when paying $25-35M vs. $200M for CC in 2001.

[sgw2]

No the contract with CCWS and GPALB long preceded Toyota's move to IRL in 2003. IIRC the last extension was signed before even Penske switched. (Penske being a big auto dealer in California)

[Amar7605]

Originally posted by Snrub
As for Toyota's staying power in the IRL, I don't know if they will plan to stay long term, but the way Honda destroyed them this year will give them something to think about, especially when their $400M F1 venture isn't going as hoped. Imagine if Honda destroys them with their two powerhouse teams in 2005? A case can be made that their marketing exposure in the IRL is good value when paying $25-35M vs. $200M for CC in 2001.

We have to keep in mind that Toyota and Honda are bitter rivals in racing, perhaps in some ways more bitter than any other company rivalries. So I doubt that Toyota will leave the IRL simply because Honda is beating them. They will probably try harder to be in top.

Saying that Toyota is leaving the IRL because it's butt is getting kicked all the time is like saying that the Red Sox will leave the American League simply because they cannot beat the Yankees in the playoffs!

[luke]

But Toyota have been improving recently and I would expect them to be on the ball next year.

[JohnSSC]

I don't think that Toyota was "destroyed" so much as Honda seemed to have outsmarted everyone by coming up with the tweaks needed to succeed with the new engine formula - Toyota and even Chevworth weren't that far behind.

Back to topic though. I believe that the deal originally revolved around the SoCal Toyota Dealers, of which Penske is a big part and pre dates the split.

If Toyota is going to stay involved I would think they will be pushing to have their powerplants in the race and therefore the IRL as the series.

If this does not happen and Toyota decides to end their sponsorship, is OWRS strong enough to attract a deep-pockets sponsor for this event?

[racinthestreets]

If Toyota is going to stay involved I would think they will be pushing to have their powerplants in the race and therefore the IRL as the series.

No question. It makes no common sense for Toyota to have any association with CCWS if they are remaining true to IRL in American open wheel racing. I am sure that TG loved the arrangement between Toyota and the The Toyota Atlantic Series.

If this does not happen and Toyota decides to end their sponsorship, is OWRS strong enough to attract a deep-pockets sponsor for this event?

Exactly JohnSSC!

Time will tell. I would think that LBGP would want to announce the new contract before or during the 2005 event, but, they very well could take a wait and see approach to see how the road racing of the IRL is received. I believe the the OWRS has a plan, and as we have seen of late they have determined to keep those plans out of the media - but in motion. Cheers OWRS