Media & Marketing and Sports Business

Merger talks near finish?: George optimistic about open-wheel reunion; sources say deal may be reached by May 26

May 8, 2006

Indy Racing League President Tony George said earlier this year "the stars, moons and planets" would need to align for his series to merge with open-wheel rival Champ Car in time for the 2007 season.

According to motorsports sources, the alignment appears to be happening, and George told IBJ he is cautiously optimistic.

George said in a May 3 interview that discussions with Champ Car principal Kevin Kalkhoven are ongoing, but that there are still a number of issues to iron out.

"I remain optimistic that as long as we're having dialogue, it will lead to good things," he said.

One issue George said would not be up for discussion was control. He said he aimed to keep control of the open-wheel series the Indianapolis Motor Speedway, which his family owns, is involved in.

"I don't need others who don't know what we're about telling us what to do," George said. "Last June at the Indianapolis Motor Speedway was a good example of what can go wrong when you're not in charge. Sometimes having influence isn't quite enough."

On June 19, all but six cars pulled out o f Fo r - mula One's U.S. Grand Prix at Indianapolis due to tires they claimed were unsafe for the track's racing conditions.

Control aside, George said he favors open-wheel unification.

"I think people would like to see it because [a unified open-wheel series] could have the potential to ascend the top rung of motorsports," he said.

Though George declined to discuss what issues remain to be worked out, a source close to both series said next year's schedule is the only sticking point.

Derek Daly, a former race car driver and longtime motorsports commentator, including work locally for WISH-TV Channel 8, said issues such as engine and chassis formulas, television contracts, deals with race track owners, and race scheduling are among the critical issues the two sides have been wrestling with.

A North American-based open-wheel race series strong enough to eclipse NASCAR in popularity, much less the world-leading F1, might seem like a joke, but Mel Poole, president of Charlotte, N.C.-based SponsorLogic, said people who feel that way have a short memory.

Before George broke away from Championship Auto Racing Teams-Champ Car's predecessor-and formed the IRL in 1994, "studies showed sponsor exposure was greater in CART than NASCAR," Poole said. "I think had [CART] fixed their problems in the early 1990s, they'd be challenging F1 for world supremacy in auto racing."

Doug Boles, who heads up the Indianapolis office of Ignition Inc., an Atlantabased sports and event marketing firm, said unifying the two sides is no "magic bullet" to save open-wheel racing.

"A merger cleans up the noise in openwheel racing and brings about a short-term media hit, but you have to convert that into long-term growth," said Boles, who is also part owner of Panther Racing, an Indianapolis-based IRL team.

Boles said George has not contacted Panther officials for their input on a merger, but George said he has been in contact with several teams about a potential deal. Sources said officials for Andretti-Green Racing, Target Chip Ganassi Racing and Rahal Letterman Racing have discussed the merger with George.

Sponsors and potential sponsors also need to be called to the table, Poole said. Motorsports sources said IRL and Champ Car officials are working on that.

George and Kalkhoven agreed to meet separately in late April with Zak Brown, president of locally based motorsports marketing firm Just Marketing, to get a feel for what the sponsorship climate would be for a merged IRL/Champ Car series.

Brown represents a litany of corporate clients, such as Subway restaurants, DeWalt Tools and Crown Royal, that are involved in NASCAR but not in the IRL or Champ Car. Brown said he has heard from several companies that would like to be involved in a unified North American open-wheel series, including potentially becoming a title sponsor.

Brown said a major mass retailer or large restaurant chain willing to spend millions to market the series would be ideal.

"I think they need to look at a sponsor that extends beyond motorsports and reaches out to a mass audience," Brown said.

From his conversations with George and Kalkhoven, Brown said he sensed the merger is closer than ever.

"My sense in talking to them is that the rift is gone," he said. "I think both sides want to get together, and commercial interest is pretty high."

Brown hopes George and Kalkhoven will keep potential sponsor feelings top of mind during negotiations.

"Sponsors don't care what kind of chassis they use or if the engine is a V-8 or V-10," Brown said. "This merger needs to get grounded in solid commercial rationale. Right now, both sides are struggling financially. With a merger, I think this [series] becomes pretty sellable overnight."

Brown said negotiations are entering a critical period with a small window to "get this done" for the 2007 season.

"To get the schedule set, I think they have to make an announcement by June or July," he said.

Some sources close to the IRL have said a merger announcement could come by the end of the month, perhaps on the Indianapolis 500's Carburetion Day May 26.

But George said he prefers to keep the focus on the Indianapolis 500 this month.

Even so, George's main spokesman, Fred Nation said, "Things can move quickly I suppose."

Though there's been talk of open-wheel unification almost since the CART/IRL split, sources close to both series said something is different this time around.

Even George admits this is the first time he's had direct conversations with someone with the power to make decisions about the rival series. In January 2004, Kalkhoven and two partners bought Champ Car out of bankruptcy. At the time, court records showed Kalkhoven owned 45 percent of the series. Kalkhoven, who was in Italy and unavailable for comment, reportedly now has majority ownership.

"I know I'm talking to the right guy," George said.

The IRL chief calls his conversations with Kalkhoven, whom he initially met by chance at a motorsports banquet in Paris in December, "frank." The pair later snowskied together and met periodically through the off-season and spring.

"I feel I can say exactly what I think to Kevin, and he can say exactly what he thinks to me," George said.

As an indication that talks have reached their most serious point in a decade, sources also pointed to meetings in early April among key IRL team owners, Kalkhoven and executives for Honda and Ford, the two series' engine suppliers, to discuss a potential engine formula for a merged series.

Other developments have also indicated unification talks this time are more serious, including pronouncements by chassis manufacturers that they wouldn't stand in the way of unification, and IMS Production officials' announcement that their television contract with ABC-ESPN takes into account the possibility of a merged series.

Although George said work is ongoing on finalizing the IRL's 2007 schedule, sources said talks between Kalkhoven and George have included the possibility of an 18-race schedule for a unified series next year, with 12 ovals and six street and road courses.

That would be a major departure for Champ Car teams, who this year will race on 14 road and street courses and only a single oval. IRL's 2006 schedule includes 11 ovals and three road courses.

"Our sponsors are very interested in where we're going to race and which markets we're going to be in next year," said Mike Hull, managing director for Ganassi Racing. "But this is bigger than what's good for Chip Ganassi Racing. If openwheel racing truly wants to succeed, it has to change its ways. The most important thing is [to] have clarity and a single direction for open-wheel racing."
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