Week of March 16, 2009
Snapshot from the Field
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Vroom to Grow
"When did they have the first automobile race? Just as soon as they built the second car."
- Richard Petty
by TOM JENSEN, Senior NASCAR Editor, SPEEDtv.com
Seven-time NASCAR Sprint Cup Champion Richard Petty, arguably the most famous American automobile racer of all time, has a simple but succinct explanation for the birth of the automobile racing industry in the United States.
"When did they have the first automobile race?" asked Petty. "Just as soon as they built the second car."
That’s not literally true, but it’s close. Auto racing in America dates back to 1895. It grew with the domestic automobile industry in the early 1900s, before exploding in popularity after World War II. In the process, different parts of the country became home to different racing segments: On the West Coast, for example, drag racing down the quarter-mile became all the rage, while in the Midwest, single-seat open-wheel racers dominated. In the Southeast, on the other hand, production-based stock cars were the vehicle of choice, while in the Northeast, sports cars and modified jalopies were big.
Today in the United States, there are more than 400 race tracks of all varieties from coast to coast. They range from drag strips and quarter-mile dirt tracks to Indianapolis Motor Speedway, which hosted the first Indianapolis 500 in 1911 and now seats more than 250,000 people.
And all those tracks translate into an industry that packs a substantial economic wallop. Consider the huge economic impact that individual races have on the surrounding communities.
That Burn Big-Bucks Rubber
There’s the Indianapolis 500, of course. The Indy 500 infuses US$336.6 million annually into the local economy.
Then there’s Pocono Raceway in Blakeslee, Pa. Pocono pumped about $363 million into the Pennsylvania economy in 2005 through its two annual NASCAR dates, according to a 2006 Pennsylvania House of Representatives economic impact study, conducted by the research firm of Buchart Horn, Inc./BASCO Associates.
The industry also burns big-bucks rubber in Florida. The annual NHRA Gatornationals drag race at Gainesville Raceway, for example, is a $66-million-per-year windfall, according to The Gainesville Sun.
"Gatornationals are similar, in terms of economics, to two [University of Florida] Gator football games being played back to back," John Pricher, tourism program coordinator for the Alachua County Visitors and Convention Bureau, told the newspaper.
Similarly, the industry’s nationwide numbers are staggering. According to a study by USA Motorsports Report, the cumulative value of the U.S. auto-racing industry grew from $16.5 billion in 2002 to $22 billion in 2007 an eye-popping increase of 33 percent in a five-year span. Nationwide employment in motorsports may be in excess of 60,000.
So just where is the massive U.S. motorsports industry located? Most of it is tightly clustered in specific regions throughout the country.
Clustering Creates Steady
Flow of Both Cash and Ideas
For example, more than 75 percent of the teams competing in NASCAR are based in North Carolina. A 2005 study by University of North Carolina-Charlotte Economics Professors John Connaughton and Ronald Madsen concluded that auto racing provided a total annual impact of more than $5.9 billion for the state. In terms of employment, the study found that the Tarheel State’s motorsports industry accounted for 27,252 jobs, paying $61,633 a year on average about 34 percent higher than the state average.
The clustering of infrastructure support has been a major catalyst in creating the imposing dimensions of North Carolina’s racing business: Clearly, it’s not just racing teams that have based their operations in the Tarheel State. So, too, have the suppliers of chassis, engines and mechanical parts; marketing and advertising firms; uniform makers and graphic designers; engineers and technicians; and literally dozens of other occupations that support the auto racing business. All told, the businesses that support North Carolina’s motorsports industry stretch across more than 40 industrial classification codes.
And one central concern drives those companies’ location strategies: They’re businesses that need to be near one another.
"By being so close, every business and individual in the industry is swimming amidst an ongoing flow of ideas," said Dr. Carlos Martinez-Vel, who conducted research on the Charlotte market on behalf of the Massachusetts Institute of Technology’s Industrial Performance Center. "These ideas flow through formal interactions with suppliers, informal meetings at lunch times, through the ongoing movement of people from business to business as they change employment, as well as through the personal networks in the industry, which cross business boundaries. This flow fuels the innovation process."
That same sort of powerful symbiosis is evident in the metropolitan Indianapolis area, the epicenter for U.S. open-wheel racing.
The local auto industry’s sizable economic impact was underscored in a 2004 study that was conducted by The Center for Urban Policy and the Environment, a nonpartisan research organization in the School of Public and Environmental Affairs at Indiana University–Purdue University Indianapolis. Those researchers identified more than 400 motorsports-related companies that were doing businesses in central Indiana. In addition, the study found that about 8,800 individuals were working in full-time jobs directly related to motorsports. Interestingly, that research found that Indiana’s motorsports workers on average annually earned $48,359 35 percent higher than the average ($35,953) for all sectors of the Hoosier State’s economy. That disparity in earning power parallels the differences identified in North Carolina’s motorsports industry.
By definition, automobile racing has but one objective: to win. That means that competitors are constantly trying to innovate and attract the best minds and they’re willing to pay what it takes to hire talented people.
"Indiana’s motorsports workers are highly skilled and plentiful," the Indiana study noted. "The depth of the work force makes the Indianapolis region a very appealing place to locate a new or emerging motorsports firm, and the variety of skills possessed by the work force increases the likelihood that a business will thrive."
But it’s only in recent years, though, that governments and economic development agencies have come to realize the value that motorsports brings to local economies. Consequently, the progress made in recruiting and cultivating the racing industry is a comparatively new phenomenon.
Recruiting the Industry
The Virginia Motorsports Initiative, for example, was signed into law in 2003. That legislation authorizes the Virginia Economic Development Partnership (VDEP) to grant incentives to racing businesses to facilitate their locating in the commonwealth. The Virginia program’s biggest success thus far has been landing the NASCAR Craftsman Truck team HT Motorsports, which relocated from Harrisburg, N.C., to Martinsville, Va., in 2004, supported by $400,000 in incentives from the VEDP.
The VEDP also was responsible for establishing the Virginia Motorsports Technology Center at Patrick Henry Community College in Martinsville. Students at the center can train to become NASCAR crew members.
Other kinds of organizations are also getting heavily involved in racing. The Las Vegas Convention & Visitors Authority (LVCVA), for example, was instrumental in helping Las Vegas Motor Speedway (LVMS) land its first NASCAR race in 1998. Today, the Vegas track hosts all manner of racing and non-racing events that stretch beyond NASCAR, including NHRA drag racing, World of Outlaws and USAC sprint car racing, off-road racing, the Mario Andretti Racing School and the Richard Petty Driving Experience. The Nevada track was also used in the recent introduction of the new Mazda 6 sedan and the Jeep Liberty SUV.
"There is a multitude of events at Las Vegas Motor Speedway," says the LVCVA Vice President of Public Affairs Vince Alberta. "The diversity of events enhances the attractiveness of Las Vegas as a destination." The LVCVA, Alberta notes, regularly meets with track officials to identify business opportunities that make sense for both the track and the city.
"The LVCVA realizes the speedway’s importance in drawing 40 million people a year to Las Vegas," says Chris Powell, the track’s executive vice president and general manager. "That recognition opens doors in the resorts."
In fact, NASCAR’s annual stop at the LVMS is the biggest U.S. sporting event west of Fort Worth, generating an economic impact of about $200 million a year, Powell notes.
It’s undoubtedly a long, long way from the dirt tracks and the backstreets to America’s Main Streets and the boardrooms of major corporations. That, though, is precisely the road that U.S. auto racing has traveled, in the process evolving into a huge industry.
Resilience and Recovery
But like many other U.S. business sectors, auto racing endured a difficult 2008, as marketing and advertising budgets among Fortune 500 companies contracted. In NASCAR alone, about 1,000 jobs have been cut since the end of the racing season in November of 2008.
On balance, however, auto racing has historically demonstrated a robust resilience a trait that’s enabled the industry to endure and persevere in bad economic times, and to stand well-positioned for recovery.
That’s what happened in the late 1970s. And it’s likely to be what will happen in 2010. About the Author: Tom Jensen is the senior NASCAR editor for SPEEDtv.com, contributing Editor for TruckSeries.com, and the former executive editor of NASCAR Scene magazine. The author of "Cheating: The Bad Things Good NASCAR Nextel Cup Racers Do In Pursuit of Speed," Jensen has appeared on numerous television and radio shows to discuss NASCAR racing. He is the president of the National Motorsports Press Association.