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EVENTS
CNNSI.com GROUP
COMMERCE
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In the red Dodge taking big risks in Cup return
By Mike Fish, CNNSI.com DAYTONA BEACH, Fla. -- As the new kid on the block, the return of Dodge is being sold as a happy story. It's the old friend coming to his senses, returning to the macho fraternity. It's high-fives and flashbacks to yesteryear when Richard Petty was kicking butt in the No. 43 Dodge Charger. Not so fast. See, not everybody can afford to be so pumped. Brushed under the rug by NASCAR and the race crowd, amid the hysteria of Speedweeks, is the cold fact that DaimlerChrysler -- the German auto manufacturer that bought Chrysler two years ago believing it would form the most profitable automaker on the planet -- is hemorrhaging red ink. More precisely, it's Dodge that's running around with fat holes in its pockets. Forget about how the candy-apple red Dodge Intrepid of Bill Elliott will shake down during the Winston Cup season. The question is how long Dodge can afford to hang around the sport? And how do corporate honchos justify the NASCAR investment to shareholders and Wall Street analysts? Better yet, how can they look 26,000 workers in the eye -- 20 percent of the Chrysler work force that's about to lose jobs in a belt tightening -- and tell them Dodge has gone racing? This is the sort of dilemma an ethicist might dig his or her teeth into: Should a financially challenged company sink millions in a non-essential race program? Or is Dodge right in saying it has to spend in order to move cars -- and nothing sells like NASCAR? For now, Dodge is banking heavily on racing to help reverse its fortune, investing in the manufacturers' adage about racing on Sunday and selling on Monday. "This was a business decision soundly based in strategy, soundly based in brand guidelines," explained Jim Julow, a Dodge vice president. "At end of day, even with the most conservative assumptions on loyalty enhancement, this is more than a good idea from business standpoint. It says we're one of the big boys.
"Strategically, it is absolutely obvious that we should be in Winston Cup racing. Some consumers feel if Dodge is a significant brand, one of the top-three in the country, we should be there. We'll see this year if the general consumer and [racing] enthusiasts alike connect the dots and see that we are equal of Ford, Chevy or Pontiac." The NASCAR drivers and owners buy into the Dodge move for obvious selfish reasons. At the same time, those wearing the Dodge logo recognize the importance of their role in the big picture. Team owner Rick Hendrick has conflicting interests, though. He wants Dodge to run well, but not too well. Jeff Gordon and his other drivers race Chevrolet Monte Carlos, but Hendrick owns a Dodge dealership and thus is helping finance his team's new rival. Yet as a Dodge dealer, Hendrick believes Dodge lost ground to General Motors and Ford, in part, because of its 18-year hiatus from NASCAR. "Owning a dealership, it's like a motivating tool," Hendrick said of ties to a manufacturer who's active in racing. "It's like what a basketball team is to a university. It gives your people inside the store something to pull for or root for on Sunday. "And when you're talking about performance and reliability, it helps to have a Dodge out there on the track. It helps sell. A lot of those diehard race fans will buy the brand they see on the track." Team owner Ray Evernham, a leader in developing the Dodge racing program, says Dodge has provided ever dollar he asked for to get the cars running competitively for Daytona. No one connected to the five Dodge teams has a complaint, so far. "Eventually if things were to change and get bad enough, it could affect us," acknowledged Elliott, a former Winston Cup champion. "We need to do whatever we can and hopefully help in selling more Dodges. Maybe that'll turn the deal around down the road." So for Chrysler's future, Elliott & Co. best run fast. Chrysler is losing more than $1 billion a quarter. DaimlerChrysler's share price has plummeted to about $50 from a high of $108 two years ago. Vehicle production is being slashed by almost 15 percent as six factories shut down. Thousands of jobs and billions of dollars are on the line. At the same time, an estimated $70 million have been put into car development -- a larger sum is tied to NASCAR marketing. All 39 regional members of the Dodge Dealer Advertising Association signed onto the deal, agreeing to allocate the bulk of advertising dollars to the NASCAR program. The idea behind it all is to get consumers in the door, and then worry about closing the sale. Dodge is armed with studies showing almost 8 percent of those attracted by showroom promotions end up purchasing a vehicle. More telling, Dodge officials estimate general consumer interest in their product to be in "the teens," while NASCAR staples Ford and Pontiac enjoy a dramatic bump to 30-40 percent from race fans who'd consider buying their cars. Sure enough, more than one-third of those in a recent study said they would be "more likely" to consider a Chrysler product now that they've returned to Winston Cup racing. "If we can approach the levels that both Ford and GM have with NASCAR enthusiast households vs. the general market, there are tons of incremental sales of Dodge that could be realized," said Julow, who oversees Dodge marketing. "Our hope is to mirror the lift of those brands. It's not an unreasonable assumption. If we can do that, it is very beneficial to the company. "In our business, you move a few share points and it's big money." Nobody expects to hit the jackpot the first year out. Corporate bosses, in fact, aren't looking for Chrysler to turn a profit this year. And while Dodge isn't being counted on to win the Winston Cup title, it still needs to run competitive to justify the huge investment. "We've got 10 cars, and we'd like to qualify all 10 for most of the races," said Julow, describing what would rank as a successful season. "We'd like to have a lot top-10 finishes, win a couple races, win some poles. You can't be a creditable marketer of this series if you're an also-ran who never does anything. "If you achieve a level of success, the consumers will see you as a credible participant. That is what you're after."
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