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Sports Business

Deal with flip-flopping Firestone big gamble for Miles

January 2, 2013
KEYWORDS Sports Business

The recent agreement between Firestone and IndyCar to maintain the tire maker as the open-wheel series’ sole tire supplier through 2018 is an interesting one on several fronts.

First, the Dec. 21 announcement of the deal came just four days after Mark Miles had been installed as Hulman & Co.’s new CEO overseeing IndyCar and Indianapolis Motor Speedway. He told me a week before the announcement it was one of the first big issues he had to get nailed down.

The lingering tire supplier issue was making more than a few IndyCar constituents antsy heading into the new year, and Miles was certainly eager to relieve that angst.

Still, I’m surprised Miles didn’t take a little more time with this decision. Especially with the Hoosier Racing Tire Co. begging to get a shot at the contract.

Hoosier officials told me as recently as the International Motorsports Industry Show in December that they were willing to go whole hog on the series, and its partner in the deal—Continental Tire—was prepared to pour as much marketing cash into the series as Firestone.

Although Hoosier has never supplied tires for IndyCar, it’s not new to motorsports. No company makes more racing tires annually than the Indiana-based manufacturer.

While Firestone has been a reliable supplier to IndyCar since the series was founded in 1996, it more recently has been at the center of controversy and political unrest within the sport.

In early 2011, Firestone threatened to pull out of the IndyCar Series. The timing couldn’t have been worse with the series bringing on a new chassis and engine in 2012. One series insider told me Firestone had IndyCar “over a barrel.”

“During our long history in racing we have met or exceeded all of our motorsports goals,” Firestone’s racing director Al Speyer said in March 2011. “So now it’s time to set new goals—for ourselves and our brands.”

Looking back now, you have to wonder what those new goals were.

Former series CEO Randy Bernard had to do some fast negotiating to keep the tire maker in the series through 2014. But Firestone leveraged a hefty pay increase out of the deal. Before 2012, Firestone provided IndyCar free tires, saving teams about $750,000 a year.

With IndyCar team budgets stretched thinner, team owners complained that they couldn’t afford the aero kits many fans were anticipating and that Bernard had championed. The tight budgets also led to tension between team owners and Bernard, with owners telling him they couldn’t afford spare parts for the new cars, which were costing slightly more than forecasted by Bernard’s staff.

When Bernard, in 2012, began talking with other tire makers, Speyer was indignant.

“We’ve got certain rights and we want to stay,” Speyer said late last season. “This new direction caught us by surprise. We had no idea it was coming.”

Speyer made tracks over Bernard’s head, driving straight to IMS boss Jeff Belskus to complain. Firestone can certainly be credited for hammering a few nails in the coffin of Bernard, who was fired in October.

Firestone has proven it has lots of power in this sport. Miles should tread carefully here if he wants to maintain law and order over his new fiefdom. Tying the knot with such a partner through 2018 is a decision with major ramifications.

There didn’t seem to be any immediate rush to get this tire deal done, certainly not before the 2012 calendar flipped to 2013. So I’m surprised Miles, as calculating an operator as there is, didn’t take a little more time to evaluate this.

Maybe it's unrealistic to think Miles could have waited to hire his new IndyCar CEO before finalizing a deal with such a major supplier. But now the new IndyCar CEO will be saddled with a deal that he had no input on for the next five plus years.

A race series’ tire supplier is not only critical for the series’ speed and safety, but is also one of its biggest marketing engines. Firestone, sources said, paid about $8 million annually to market IndyCar.

One element of this new deal makes it stranger still. The deal did not include an extension of Firestone’s title sponsorship of the Firestone Indy Lights Series, the top feeder series for IndyCar. That deal expires after 2013.

I suppose Miles could choose to bring in another tire supplier for the Lights Series and use that to test them. And in turn, use that company’s presence to keep Firestone in line. But with the kind of political power Firestone packs, it's a tactic that could easily backfire on Miles.

One thing is certain: This saga has more twists than a serpentine road course.

With Bernard fired and Firestone’s Speyer set to retire in 2013, the IndyCar-Firestone soap opera must proceed with new protagonists.

Just two years after Firestone threatened to exit IndyCar, racing sources now say that it could become the presenting sponsor of the open-wheel series and possibly even replace Izod as the title sponsor in the next year or two.

Only time will tell if this fast-track deal will lead to long-term harmony and growth for the series or a rough ride for Miles and his new IndyCar regime.

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