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Tom Strattman/AP
Race car driver Dario Franchitti

Soft Economy Putting Brakes on NASCAR

July 10, 2008 07:59 AM
by Josh Katz
The struggling economy is taking its toll on NASCAR, the giant money-making enterprise run on fuel that’s soaring in cost. But gas isn’t the only problem.

30-Second Summary

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On July 1, news surfaced that car owner Chip Ganassi shut down the race team of 2007 IndyCar Series champion Dario Franchitti because the team lacked sponsorship; his 71 employees lost their jobs.

Fifty-three cars strove to qualify for the sport’s season opener at Daytona International Speedway in February. Because of financial difficulties, only 45 made it to Daytona this past weekend.

The economy is hitting NASCAR from several directions. Automakers pump about $500 a year into NASCAR, but General Motors shares hit a 54-year low after reporting an 18.2 percent decline in sales. Sales for Ford Motor Company dropped 27.9 percent, Toyota experienced a 21.4 fall, and Chrysler’s numbers tumbled 22 percent.

NASCAR teams are also fighting to win sponsors, and Bob Margolis of Yahoo Sports explains how vital sponsors are to the sport: “Approximately 65–70% of the cost of this infrastructure, along with a team’s other operating expenses, is funded using sponsorship dollars. The rest comes from purse money and endorsements.”

But sponsors are hardly immune from the flailing economy, leaving many with less money to spend. For example, Starbucks recently announced it will close 600 stores. Sponsors have also starting moving some of their marketing money to media, particularly television, because gas prices have stymied plans to travel and watch the races.
 
The economy has hit smaller, less successful teams more seriously than larger teams, who can rely more on sponsors.

Fan attendance at NASCAR races has presented another problem. This past weekend, attendance at Daytona was 20–30 percent less than usual.

Headline Links: ‘NASCAR’s feeling effects of slumping economy’

Background: ‘Low-Tier Racecar Drivers Burned at the Pump’

Opinion & Analysis: ‘NASCAR’s money game’

Reference: Auto racing guide

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