Is NASCAR Spinning Out?

The NASCAR sponsorship engine that has run so hot for years may be developing some pings in this down economy.

As the racing season ended in November, the major teams appeared secure in their corporate backing. But sources say eroding corporate sponsorship dollars will put the brakes on smaller teams and likely trim the competitive field from 43 to 40 teams.

The recent team merger between Chip Ganassi and Dale Earnhadt Inc., reducing the number of cars they run from four to two, is a sign of the prevailing adverse economic winds.

Chevron is ending its support of Ganassi through its Texaco and Havoline brands in favor of regional marketing programs. The U.S. Navy terminated its sponsorship of Earnhardt. GM will pull the plug on its presence at some tracks. Kodak has ended a 22-year relationship with NASCAR and a four-year deal with Penske Racing, shifting gears to PGA Tour sponsorship.

Some teams will easily get new sponsors. Camping World magazine will fillSears’ Craftsman NASCAR truck series sponsorship.

But the sport’s ability to maintain its corporate sponsor roster is clearly in doubt. The annual primary team sponsorship price of $20 million to plaster a company name on a stock car hood is exerting a discernible drag.

NASCAR is trying to control its track costs by eliminating mandatory testing, which enables racing teams to fine-tune their cars in pre-race circuits at each track. That cost-cutting could undercut the competitive edge each team seeks as NASCAR struggles to keep its corporate edge intact.

“Due to tight budgets, we may not have a 100 percent renewal rate,”says Jim O’Connell, NASCAR vice president of corporate marketing. “ But we will do well, as companies can point to the results they get with a NASCAR sponsorship, both in reaching a loyal consumer and in capitalizing on the largest and most fertile B-to-B environment in sports.”

But the economy is tempering even that renowned brand loyalty of NASCAR fans, with attendance at the race tracks this year at something under 10%.

NASCAR claims it still averaged 120,000 spectators at 36 Sprint Cup Series events. But as a source at Richard Childress Racing put it, “We’re definitely concerned. Anything that affects the fans affects the sport.”

Despite the decisions some sponsors took to drop out, O’Connell notes that Office Depot, Unilever, Mars, Tylenol and others extended their partnerships with the sanctioning body this year. He claims corporate hospitality attendees at Daytona last year outnumbered fans at the NBA All-Star game.

At Roush Fenway Racing, AAA dropped its sponsorship, but UPS stepped in to replace it. Insurer Aflac supplanted Office Depot as the primary sponsor of Roush star driver Carl Edwards, with Office Depot moving its sponsorship to another car.

“We’re actually in a good place,” says Joyce Caron-Mercier, Roush Fenway vice president of sponsor operations, “but I’m not saying we’re not worried.”

Roush is laying off some staff, according to Caron-Mercier, who declined to specify numbers. Another major player, Hendrick Motorsports, is laying off 12 employees, representing a 10 percent reduction. The significant job losses will occur among small teams that don’t make it and among teams that consolidate. The Ganassi-Earnhardt merger alone probably translates to 100 jobs lost, according to a NASCAR source.

Teams like Roush and Hendrick, with drivers who win consistently, are likely to maintain their front-running position with sponsors. “It’s an extremely difficult climate right now, and everyone recognizes that, but there isn’t any indication that commitments won’t be honored,” says Patrick Perkins, vice president of marketing at Hendrick Motorsports. “Right now, people are looking for programs with proven, successful track records, and that’s what we have here.”

The crucial issue is whether companies can prove the value of costly NASCAR roles to stockholders as the economy spins out of control.

“I really believe that in times like this, the way that businesses are, they really have to do things that support their consumers,” says sports marketing consultant Richard Laermer.

NASCAR is America’s second-ranked TV sport and occupies a unique marketing niche with its avid fan base. While the Navy is opting out, the Air Force forged a new deal to back one of Gillett Evernham Motorsports’ cars next year, shifting dollars in its ongoing NASCAR relationship.

“NASCAR fans are typically very patriotic,” says Air Force Recruiting spokesman Col. Timothy Hanson.

But hard times are testing the legendary allegiance of NASCAR fanatics and the avidity of corporations to court their brand loyalty at the track.