The Truth about the Ganassi Shut Down
Written by Journo on July 7th, 2008In the days since the shut down of the #40 Chip Ganassi Racing with Felix Sabates team a lot has been written about the cause, and the potential for the future. The message board rumors have ranged from Ganassi closing at the end of the season to Target turning the team’s facility into a warehouse. Even journalists have gotten in on the act suggesting more cuts are coming and blaming the layoffs solely on the economy. Whatever the case, I want to provide some analysis and insight of the situation.
Let me start off by saying I believe much of what occurred last week had nothing to do with the lack of sponsorship for the #40 car. It does not take 71 people to operate a cup team. Many of the positions that were cut within the team had nothing to do with operations on the #40 team. I have heard several front office positions were eliminated, as well as some of the departments on the shop floor. John Fernandez’s firing was obviously unrelated to the lack of sponsorship. His lack of knowledge about the situation afterward demonstrates how necessary his release probably was. As I see it, while the team was hemorrhaging money, this was the perfect opportunity for them to stream line operations. They cut the fat and made sure the team they saw as the best one, was in place.
The idea that this shut down is the cause of an economic down turn is perhaps not as great as it sounds. This is certainly not the first time in history a team was unable to get sponsorship despite being part of a larger organization. I think the more feasible idea is that Dario Franchitti was not competing and no one was interested. The sponsorship Franchitti did have throughout the season were associate deals through Target. I guarantee they did not pay well, and served more as a perk for the vendors at Target than as a moneymaker for Ganassi. While he never went without a sponsor weekend-to-weekend, most were one off deals.
As far as the future of Target’s involvement with the team, I would venture to say it will continue beyond this season. I know there was a point that even I gave into the Target leaving hype, however I doubt today that a company that has stood by Chip Ganassi for almost two decades will pick up and leave after a couple of bad seasons (this is certainly not the first time a Chip Ganassi Racing team has had trouble). Target can not be happy with the performance of Reed Sorenson, that being said their future with the company is probably not in jeopardy. As a Target related side note I read that Ganassi would be shutting down at the end of the year and the shop would be turned into a warehouse for the Minneapolis based company. A simple Google search will tell you the average size of a Target warehouse is over one million square feet; now compare that to the about 180,000 square foot CGRFS Concord, NC facility. Does not sound so good does it? It is not fit to distribute gum balls, let alone serve as a warehouse for the company.
Comparisons of the team to the ill-fated Ginn Racing have also abounded. This is a very unfair comparison. Anyone familiar with that situation will tell you Bobby Ginn spent way too much way too fast and lacked even decent paying sponsorships. Of course not the case with Ganassi. As the lawsuits that flowed afterward told, Ginn was more than a little behind in paying people. Also not something Ganassi can be accused of. Ginn’s business practices were less than impecable and I think this reorganization of sorts proves that Ganassi has some business sense. Long story short Ganassi will exist well beyond this season.
Don Coble, a NASCAR reporter with Morris News Service, reported today about police officers at the layoffs and expectations of more cuts. It sounded feasible, but from what I hear Mr. Coble’s son was one of those employees fired on Tuesday, perhaps not the best source in the world. A son spited and a father scorned. Mr. Coble apparently did not take an ethics course in journalism school, because having that kind of a connection to a story and not disclosing it treads a very fine line.
In the end the company releasing 71 people is very sad and difficult. Anyone who has ever gone through massive layoffs like this one can tell how painful it is. However, the move made by Chip Ganassi and some of his management team was a strategic one that I bet will pay off. This is not the first massive firing by a NASCAR team and certainly will not be the last. As we have said time and time again this is a business. As much as we all love the sport, if we are not making money it can not survive.
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Comments: 14
Comments
Comment from mudder
Time: July 8, 2008, 10:41 am
If Ganassi wants to get rid of dead weight, than why did’t he start with Lorin Ranier. He has mad more bad choices for Ganassi than a convicted felon.
Comment from Jerry
Time: July 9, 2008, 6:11 am
Interesting, Micheal Waltrip lays off people and you are closing the doors and turning out the lights. Ganassi closes a team and you run to his defense. Can you say objective? I think not.
Comment from admin
Time: July 9, 2008, 6:35 am
Jerry, thanks for the comment. When we ran the original MWR post, we certainly didn’t say they were closing the doors and turning out the lights as you say, and we reiterated this point when we ran the follow up post. And I don’t necessarily think we were defending Ganassi’s decision, so much as we were trying to help explain the situation.
There are some key differences between MWR and CGR to note. Ganassi has been a steady team in the Cup Series for over a decade, while MWR is only in its second full year. Ganassi also knows how to win races in major motorsports, something Waltrip’s team hasn’t figured out yet. Ganassi also has some sponsorship deals that are on a better footing then those at MWR. When Ganassi realized the #40 was dragging his organization down, he shut it down. If only Waltrip were smart enough to do the same (the #00 doesn’t have a full time sponsor). Also, MWR has already lost one of its big sponsors, and there is still no word if NAPA is coming back next year. Ganassi at least has some level of sponsorships looking forward; Target, Havoline, Wrigleys, and Fastenal.
And in terms of being objective, we don’t really need to be. This is a blog, not the Associated Press.
Comment from Kent
Time: July 9, 2008, 12:16 pm
As should be obvious from years of IRL experience, American race fans–and consequently racecar sponsors–could care less about foreign drivers.
Comment from Ray
Time: July 10, 2008, 5:02 am
You’re right about one thing…..this is a blog, not the AP. We see why you right for blogs, and not the AP.
Comment from admin
Time: July 10, 2008, 6:52 am
Haha, thanks for the comment Ray… I’ve got to say, this one made me laugh out loud. If we did write for the Associated Press though, we wouldn’t know or be allowed to divulge half the stuff we do. The blog format allows for all the freedom we want.
And I also think its funny that you think so poorly of our writing, yet you took the time to not only read the post, but all the comments, and then add your own comment… That’s like 10 minutes of your life you’ll never get back! Thanks again for stopping by!
Comment from cvt
Time: July 10, 2008, 10:13 am
Mars Inc (M&Ms) purchases Wrigley (Juicy Fruit/Big Red). Ganassi could lose his sponsor and driver.
Comment from Michael
Time: July 11, 2008, 2:34 pm
Just a question…
When a team shutters its doors after luring an open wheeler to drive for them such as the case with Dario Franchitti,are they obligated to that driver to find other opportunities?
Comment from Journo
Time: July 11, 2008, 3:01 pm
CVT, you bring up a great point. From what I have heard and read about the merger, Wrigley’s will operate as a seperate subsidiary of Mars. Here is what William Wrigley Jr. said about the merger in a NY Times article “Under the terms of the deal, which is subject to shareholder and regulatory approval, Wrigley will remain a stand-alone company “with a high degree of autonomy” under the umbrella of Mars brands.”
Michael- There are performance clauses in all of these contracts. If the driver is not performing where they should be, they can be released from that contract. In the case of Dario, while the Cup ride is not a possibility at this point, Chip has made the #40 Nationwide car available as well as his very successful Indy Car and Grand Am teams. If Dario would like to be released from his contract I doubt Chip will make much of a fuss about it.
Comment from cvt
Time: July 12, 2008, 4:59 am
Journo, I call your attention to the comments JD Gibbs made about the prospect of JPM joining JGR. The photo of JPM’s Wrigley’s sponsored car pushing Kyle Busch’s M&Ms car across the finish line at Talladega went down real well in the boardrooms at both companies days after the merger announcement.
JD and Joe Gibbs acknowledge JPMs driving skills, but really like his sponsor skills and foundation work.
More to the point of this thread, Chip Ganassi complains about his team’s inability to land first-tier driving talent (JPM excluded) when they become available, such as Kyle Busch. Does he think any driver of that caliber would ever consider his team after this Franchitti fiasco?
Comment from Journo
Time: July 13, 2008, 12:11 am
CVT - I’m sorry, I’m not familiar with the comments JD made. About attracting talent though, it is something every team struggles with. There are only so many Kyle Busch’s and Dale Jr.’s to go around. This is where a solid driver development program comes into play. As far as the shutdown goes, I would say most within the garage recognize that shutting down Dario’s team had a lot to do with performance and inability to get sponsorship, not so much Ganassi’s inability to field decent cars. As far as the lay-off of 71 people, that is a whole different story.
I have a hard time seeing Montoya leaving Ganassi at the end of the season. He has a contract that goes beyond this year, and I know Chip would not let him out of it without a fight.
Comment from Woo
Time: July 13, 2008, 9:03 am
I still can’t understand why Ganassi thought that Franchetti was marketable. Must have been the Ashley Judd connection.
But from what I understand, Ganassi’s Nascar operations is a shell to garner money for the IRL teams anyway. If he goes away it will be no big loss for NASCAR.
Comment from Journo
Time: July 13, 2008, 2:44 pm
Woo - There is an old saying in the sport. “If you want to make a million dollars as an owner, start with two million dollars.” Not to say Chip Ganassi does not make money off the team, but I’m sure he makes plenty off the more successful IRL side to fund those cars. If that was the only reason he started in NASCAR, he is not such a great business man.
As far as Dario’s marketability, I would argue that he is as marketable as Juan Montoya or Jimmie Johnson. He is young, good looking, an Indy 500 winner and an IRL champion. His marriage to Ashley Judd has little to no bearing on his personal marketability. She is rarely at the race track and I doubt they come as a package deal.
Comment from Michael
Time: July 15, 2008, 8:55 am
Thanks for the response Journo.
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