PRUETT: The perfect buyer at the perfect time

Image by Levitt/LAT

PRUETT: The perfect buyer at the perfect time

Insights & Analysis

PRUETT: The perfect buyer at the perfect time

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In searching for the perfect steward to take the reins at Indianapolis Motor Speedway and the NTT IndyCar Series, the Hulman George family came up with one name that stood above the rest.

An envoy of board members, including Tony George, requested a meeting with Roger Penske, the 82-year-old business and racing tycoon, at the season finale in Monterey where the opening pitch was made. Six weeks later, the grandest change to American open-wheel racing since the CART/IRL war was solidified.

Seemingly overnight, IMS and IndyCar has become part of a world-class organization led by The Captain where vast knowledge in sports, marketing, sales, and entertainment will alter every aspect of the business. Penske’s track record – the good and the bad – is the greatest gift in the transaction.

Over the last 50 years, his story is IndyCar’s story. Penske arrived as an entrant at IMS in 1969, helped with the CART IndyCar Series’ formation in 1979, watched the series become the country’s dominant form of motor racing in the 1980s, and rode CART’s wave until it peaked.

By 2001, Penske Racing was splitting its strategies in CART and the Hulman George family’s Indy Racing League. The full-time move came in 2003. Where Roger goes, success tends to follow, and it wasn’t long before Penske’s top CART rivals sided with the Captain and joined the all-oval series.

After bearing witness to CART’s eventual collapse under the Champ Car brand in the latter stages of the 2000s, and the slow, ongoing recovery for open-wheel racing since unification in 2008, the smartest plays and silliest missteps are well known to Penske.

Consider the historical context found not only with the man whose name is atop the corporation, but all of the leaders and winners beneath its founder who’ve delivered a record number of victories inside and out of the boardroom. The best organization for the job comes with Penske.

As often as Penske’s achievements are celebrated, his memory is surprisingly short in that regard. It’s the sting of bad days and poor decisions that linger within the Ohio native.

Factor in his team’s embarrassment at missing the 1995 Indy 500, plus years of underwhelming Penske IndyCar models that led to the shutting down of his custom chassis manufacturing program in favor of buying off-the-shelf cars, and it becomes clear that Penske’s willingness to adapt in the face of failure is a critical part of his approach.

By 2001, Penske was playing on both sides of the Split. Image by LAT

Fueled by the frustration of whatever’s gone awry, Penske’s hardened reactions, driven by intense problem-solving and resource allocation, have resulted in major turnarounds. IndyCar, and IMS, to a lesser degree, will benefit from the same formula.

The sale comes at the perfect time. Amid a decade-long recovery process, IndyCar’s incremental gains – capturing inches, rather than yards – has the series on a painfully slow path towards finding its former glory. Using Penske’s aggressive business practices as a guide, he won’t be satisfied with modest annual gains. Expect the restoration process to accelerate under Penske’s guidance.

Moving forward, everything Penske will need to improve revolves around a trinity of money, reach, and participation.

At its core, all Penske has achieved with his corporation involves identifying the services or items people might want to buy, finding ways to sell them to the masses, and delivering profits. Strip away the encouraging growth of late with IndyCar, and the series is in need of the very same Penske methodology. Identify, sell, and prosper.

Few would question the quality of IndyCar’s on-track product, but its attendance figures, television ratings, and the volume of income pouring into paddock are ripe for improvement.

Below the surface, most IndyCar teams spend their off-seasons mired in frantic searches for corporate support. In too many instances, the handouts from the series, its various partners, or wonky business-to-business dealings are needed to complete their budgets.

As one of the few people who touches all aspects of the automotive and media marketplace, Penske is uniquely positioned to bring his reputation and contacts to bear in ways that can uplift the series. It won’t manifest in playing the role of motor racing Santa Claus; doling out sponsorship contracts isn’t a sustainable answer.

In R.P., Fortune 100 brands will have new reasons to consider IndyCar for investment due to the name and standing of its new owner. Spanning a 25-year timeline, the IRL, and even its modern iteration as the IndyCar Series, has given prospective sponsors and auto manufacturers more than a few reasons to worry about its decision-making prowess. Plenty have taken meetings, taken a look around, and left. With Penske installed, this is yet another area where change should occur.

Moored by a business that generates more than $20 billion in annual revenue, Penske embodies the stability and credibility IndyCar and IMS has lacked at the negotiating table. Of all the metrics to use to gauge Penske’s impact, contracts and income rank first.

Penske’s presence could open new doors to potential income streams, and increase IndyCar’s economic viability across the entire grid. Image by Abbott/LAT

Improving IndyCar’s reach will come as a knock-on effect from new corporate partnerships and sponsorships. In understanding the periods where CART was a raging success, the series’ position as America’s top racing series came from the brand names associated with the series. CART’s marketing budget, like today’s NTT IndyCar Series, was minuscule by comparison to the companies that played in the sport.

It was the combined advertising power brought to bear by the sponsors involved with CART that blanketed the country with TV ads and print campaigns. Those ambitious sponsors also purchased thousands upon thousands of tickets as giveaways that brought new fans to the series. As one of CART’s most prominent team owners, Penske was central to both initiatives.

For IndyCar and IMS to reach beyond its regional appeal and reconnect with both coasts, Corporate America’s involvement will be required. Trade tobacco money for tech sector dollars, and the playbook still works.

The third pillar of Penske’s turnaround challenge is found in the paddock. A surprising number of new teams have entered the series in recent years, and most face worrying shortfalls in funding. One could argue that on merit alone, some of the incoming teams have failed to justify high levels of corporate support, or the interest of cash-wielding drivers.

While true, the bigger issue is the extreme price to participate in IndyCar. Based on the current state of limited engagement by major companies, Penske would have a hard time making a case for new owners to join the series. Millions are needed to acquire a single car, engine, and tires before a wheel is turned. And with that chassis sitting primed and ready to race, millions more are required to hit the championship trail from March through September.

Teams with all the cars and personnel strive to hit the $6 million mark for each entry, and while that number is relatively tiny positioned next to a NASCAR budget, the problem is unchanged. Whether it’s bringing in more money to the series, delivering sponsorship leads for teams to pursue, or driving costs down to a more attainable sum, a heavy revision to IndyCar’s economics sits at the center of this issue.

The series has 10 full-time teams. Seven of its primary owners range in age from 57 to 84. In most cases, IndyCar’s ageing ownership base began fielding entries in their 20s or 30s, and have remained faithful to the series as time has passed. This dynamic has not continued as their next-generation counterparts, barring 23-year-old George Steinbrenner IV, are missing from the grid. As long as IndyCar operates as a sport reserved for wealthy older men, doubt about its future will remain.

Penske didn’t agree to buy IMS and IndyCar with limited expectations for improvement. It isn’t his style.

Everything the IndyCar Series needs is contained within the Penske Corporation. To succeed, all of the skills and savvy that have served the man while building his empire will be called upon in this venture. It’s thrilling and frightening at the same time.

IndyCar’s greatest winner is in charge of restoring the series where he made his name in competition, and led the charge in blending business and sport.

Imagine the possibilities.

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