Friday, February 11, 2005

The Cosworth Spin

As the dust begins settling around the Cosworth deal and the reviews come in from the all of the racing pundits and more recognizable columnists perhaps it’s now time for a deeper dive into realm of Cosworth. I don’t think there is any question about the prime reason for Messrs Kalkhoven and Forsythe buying Cosworth. Hopefully they had enough advanced knowledge to put together a solid plan for the business. In any case there was almost no choice if the Champ car series was going to be saved from the rival IRL which reportedly sent one of its team owners to bid for the business. It did my heart good to hear Richard Parry-Jones, Group Vice President – Global Product Development and Chief Technical Officer, Ford Motor Company say they had worked very hard to secure a sale to a reputable buyer, and that Kevin and Gerry are very successful businessmen, with a long history in the sport and a clear vision for how they wish to take Cosworth forward. Implicitly this seems to suggest that the IRL and Mr. Ganassi didn’t have a plan or a clue, something which should come as no great surprise to anyone! With ownership of the critical engine supplier in the fold Champ Car is assured of living another day. Kudos to Kevin and Gerry.

But what about the downside of this deal? Can the Champ Car World Series really survive long term without the considerable infusion of money of a major automobile manufacturer? When I first heard of the possibility of Cosworth being purchased by two of the CCWS principles that was the second thing that went through my mind. The first was, wow that would be great, now we don’t have to worry about an engine supplier. Would it be possible for a series without some major automobile manufacturer sponsorship to survive long term? NASCAR and F1, two sanctioning bodies which have set the standard for racing business success, certainly embrace it. Even the NHRA runs things that claim to be of major automobile manufacturer origin, although they don’t look like it, and no doubt receive monetary support as a result. I wonder if the owners have some long term plan up their collective sleeves, that business model they constantly refer to, which does not include the infusion of automobile manufacturer money. What a coup that would be!

The point is this; I doubt there could ever be a successful racing series without the direct support of some major automobile manufacturer. Conversely the manufacturers want to be involved in a successful racing series because racing on Sunday sells cars on Monday. Since our beloved Champ cars bear little resemblance to anything that can be seen on the street the significant way for the automobile manufacturer to participate is by becoming an engine supplier. It isn’t clear to me if Ford will continue its support of the series in any way next year and beyond. Surely the Ford badge will no longer be a part of the engine supplied to the Champ cars. This seems to leave the series without any significant major automobile manufacturer involvement or at the very least, a declining involvement. If automobile manufacturer support of the series is as critical as I think it is then getting some other engine suppliers would seem to be a top priority of the series. How eager are the two series owners, that also own the engine business, going to be to solicit other engine suppliers to the series. Wouldn’t that be like inviting your competition to take some of your business? Could of a conflict of interest be looming here? Of course, but I don’t think it will happen. The new owners are going to do whatever it takes to assure continuation of the series including encouraging automobile manufacturers’ participation the series. After all, the team owners need all the sponsorship money they can get. And without teams there is no series.

The IRL is now facing the real possibility of loosing engine suppliers at the end of the 2006 season. This was likely the driving force behind the purported attempt to have Mr. Ganassi appear as a buyer of Cosworth. Since that ploy failed (does anyone believe Mr. Ganassi needed Cosworth for his NASCAR effort – I don’t think so) the IRL has announced engine changes are in the works, which seems to confirm their concern over Toyota and Honda leaving. Although no decision has yet been made they are talking of going back to production based engines. If that happens there will be a few good drivers available, i.e. those whose pay is subsidized by Honda and Toyota. There might even be a team or two wanting to come back Champ car. I know a lot of Champ Car fanatics that would prefer certain teams never come back. Is it possible that Kevin and Gerry have been able to see the future well enough to predict the demise of the IRL simply by owing Cosworth? Perhaps there is no downside to this after all.



Bill Sheets
© Copyright 2004

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