AKRON—Economic conditions may have several tire manufacturers' motorsports programs running on fumes in 2009, but no one is hitting the pits just yet.
The recent recession and falling stock prices have taken their toll on tire makers, forcing a number of them to cut jobs, reduce capacity and put expansion plans on hold. While most manufacturers are hopeful that the popularity of racing competition will help carry their motorsports programs through this rough time, they are being more cautious this year.
Kumho Tire U.S.A. Corp.'s sales have been impacted negatively by the recession. The company's motorsports budget for 2009 has been reduced by more than half, down from the approximate $3 million it invested last year, said Rudy Consolacion, motorsports manager for Kumho.
“Kumho's 2008 U.S. sales target was not met, which is directly proportional to the motorsports marketing budget,” he said. “And with a reduced budget, Kumho has re-evaluated each racing series and made the appropriate reductions based on a number of factors such as brand exposure and tire sales.”
Kumho is involved in racing competition with Sports Car Club of America (SCCA), National Auto Sport Association (NASA), the American Le Mans Series (ALMS) and Championship Off-Road Racing (CORR). The company already has eliminated contract drivers at the grassroots level SCCA and NASA competitions, as well as its contingency program. In the professional ALMS and CORR series, Kumho is reducing its number of sponsored teams as well as staff at each racing event.
“I feel that we are already at the lowest level of our motorsports program compared to the competition, but a worsening economy could mean total elimination of the program itself,” Consolacion said.
Toyo Tire U.S.A. Corp. also has evaluated its motorsports program for 2009 and has scaled back from previous years, said Julie Sediq, director of marketing communications.
“This year, with the current economic climate and credit situation as it is, our greatest concern and question was if each organization was financially sound and able to deliver on the promises made in an agreement,” she said. “So with that in mind, and a goal of maximizing our returns while also reducing our expenses, we took a good look at all of the opportunities and carefully mapped out our 2009 motorsports plan.
“We feel it is an extremely efficient use of our dollars and, while reduced from the last couple of years, it still provides the Toyo Tires brand with significant exposure including national television.”
Sediq did not specify what reductions took place.
Toyo is involved with motorsports organizations and series including Formula Drift, National Hot Rod Association (NHRA), NASA, the Dakar Rally, Speed World Challenge, SCCA Spec Miata, SCCA Solo Nationals, Best in the Desert Racing Association and SCORE International Off-Road Racing.
Other companies have not faced severe reductions but at the same time are not actively pursuing expansions to their motorsports programs either.
A spokesman for Michelin North America Inc. said the company would be taking “a more conservative approach to spending” in 2009.
Chris Pantani, director of motorsports and business development for Cooper Tire & Rubber Co., said the company is “happy with (its) current level of activity” and will retain the same level of involvement in motorsports it had in 2008.
Likewise, Bridgestone Americas Inc. will focus on maintaining sponsorships it already has entering the 2009 motorsports season, said Al Speyer, executive director for Bridgestone motorsports.
“There won't be any fundamental changes to our program in 2009,” he said. “Longer term, we'll be evaluating some other options, but for 2009, right now, everything stays the same.”
Speyer said the company will be cutting costs in some areas where it is able.
“We're trying to save on travel with our own people, looking at the number of people we take to each event,” he said. The company may also reduce the number of customers it invites to racing-related hospitality events, he added.
Bridgestone invests a “very significant amount of marketing dollars” in its motorsports program, which includes FIA Formula 1 and GP2 racing, IndyCar Series and Firestone Indy Lights and off-road and motorcross events, Speyer said.
“We're in a difficult time now, but we don't expect it to last forever,” he said. “…We still believe that the fans are there and the consumers are going to want to be entertained in some way. Sports are still popular so the TV audience, I think, has the possibility to expand.”
In terms of future plans, Speyer said the Nashville, Tenn.-based tire maker will be looking to extend or renew sponsorship agreements, provided they offer the “right return on investment.”
“Everything has to have the right return on investment right now to be contingent,” he said.
Yokohama Tire Corp. also will be maintaining involvement consistent with past years, said Robert Dole, director of motorsports for the company.
“Like everyone, we have been constantly evaluating our budgets and where we spend our dollars,” he said. “These are challenging times to all businesses. While it might be tempting to cut back sharply or even all the way on motorsports, it is a key element of who we are at Yokohama.”
Dole said the firm has been more diligent in evaluating its spending but added that any cutbacks Yokohama makes in its motorsports program in 2009 likely will be a “continuation of a normal exercise.”
“We saw in 2005 that we were spread thin on too many activities and not really successfully utilizing any one series or track,” he said. “Thus, we made some candid evaluations on where we needed to be and went in that direction. I think our current involvements reflect that.”
Dole said in order to cut costs this year, the company will be reducing non-essential trips, as travel is a major expense in its motorsports program.
“That is not to say (the trips) were wasteful, but if there are ways around taking the trip, still getting things done and of course saving dollars, we are going to do it that way,” he said.
Yokohama would not likely be reducing staffing at its racing events, he said, since the company already sends what it considers the necessary number of staff.
The company is involved in a number of sports car racing venues, including the ALMS and Patron GT3 Challenge, as well as SCORE, SNORE and BITD off-road competitions, Dole said.
“In the short term, I think our programs are very strong as they satisfy many of the required elements of why we do motorsports,” he said. “In the long term, anything is possible and truly just depends on how the economy and Yokohama's business plan unfolds.”
On the other hand, Pirelli Tire North America Inc. (PTNA), actually is expanding its motorsports programs in 2009.
Rafael Navarro, director of media communications and motorsports for PTNA, said the company is seeking new motorsports opportunities and has “capacity to fill.” Pirelli will expand its motorsports presence with the addition of two race series in 2009, the Pirelli Drivers Cup USA and the Jetta TDI Cup.
Additionally, parent company Pirelli Tyre S.p.A. recently invested $40 million to build a state-of-the-art facility in Izmit, Turkey, that will produce up to 250,000 tires destined for motorsports each year, Navarro said. Its capacity can be doubled if needed.
“While there is no denying the current state of the economy is in flux, our management has been very good at employing a selective strategy in where and how we do business, as well as working towards greater efficiencies, productivity and value-added services,” he said. “All of the places in which we are involved make sense for our motorsports business plan.”
Though the economic slump shows no signs of letting up in the very near future, most manufacturers remain optimistic.
“In the last 15 years that I have been involved, we have had two or three recessions, the dot.com rise and bubble burst, the height of tobacco involvement (in motorsports) and now their absence due to government regulations and of course, the fluctuating stock market,” Dole said. “Motorsports has been through a lot during these times as funding levels have oftentimes followed these events.
“…It is a very interesting time, to say the least, but the positive is that these tough times often force people to become more creative in how they spend their dollars and more demanding in how they measure success,” he said.