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Economy has NASCAR on the skids

At least near-term, NASCAR future looks bleak.

Every December since the Reagan Administration, the denizens of stock car racing have gathered in New York’s elegant Waldorf-Astoria to congratulate each other on another successful year amid a slew of parties.

Yet this year, the mood at NASCAR’s end-of-the-year ceremony was so grim that, if one had to compare it to a type of car, the only fitting example fitting would be a hearse.

During the Sprint Cup Series Awards ceremony, winners were more intent on urging support for a Big Three bailout than thanking those who got them to the podium. A Ford party was dropped. noted the annual parade of stock car drivers gunning around Times Square was canceled — too pricey.

Though the news was already bleak during the gathering in early December — layoffs had hit top NASCAR garages such as Dale Earnhardt Inc., and it had become obvious that few teams would run a full slate of races in 2009 — the news has worsened since then. The Detroit News reported GM has yet to renew a decades-long sponsorship of NASCAR’s signature race, the Daytona 500, despite needing to do so before the end of the year. DirecTV opted to ax the NASCAR “Hot Pass” pay-per-view package. And the potential Big Three bailout, which passed the House, died in the Senate.

In fact, it is the problems of U.S. auto manufacturers GM, Ford and Chrysler that is NASCAR’s biggest headache. They have traditionally paid tens of millions of dollars per year to be plastered on a host of NASCAR vehicles and have backed entire races.

“The Big 3 are more endemic to NASCAR than any other category in any other sport,” said David Carter, executive director of the Sports Business Institute at the University of Southern California. “Financially and culturally, they go together seamlessly, like beer and pretzels. NASCAR’s future will always be closely linked to the auto industry, whether domestic or abroad.”

But near-term at least, that future is bleak. Ford and Dodge have already pulled out of NASCAR’s truck series, and GM ended its ties with two speedways this year. Of course, NASCAR isn’t the only race circuit in the world facing cutbacks from its most loyal sponsors. Audi exited the American Le Mans Series, and Honda bid adieu to Formula One. But those companies are healthier than their American counterparts and may return to those circuits. Already bleeding billions and with the prospect of bankruptcy real, the U.S. auto companies are unlikely to underwrite expensive sports marketing ventures for years.

The Big Three’s woes aren’t NASCAR’s only problem. It is more dependent on sponsorships than most major sports leagues. At least three-quarters of a NASCAR team’s revenue comes from sponsorships, whereas, say, the Dallas Cowboys can count on luxury suites revenues and the NFL’s massive TV contract to tide it though tough times. That’s why big-name teams such as Petty Enterprises, facing a cutback in sponsorship, are begging for a merger to try to survive.

The good news? NASCAR’s long-term prospects — unlike those of lesser entities such as the AFL — are solid. It is still popular and boasts perhaps the best fan/athlete relationship in sports. Though attendance may decrease as unemployment rises in 2009, fans will still watch on Fox, ESPN and elsewhere as part of NASCAR’s $1 billion-plus TV contract. And according to SportsBusiness Journal, NASCAR’s top five brands by monetary value — Sprint, Chevrolet, Toyota, Ford and AT&T — all saw double-digit percentage increases in exposure during TV broadcasts in 2008. There is quite a bit of value to be had for those who can afford it.

But the party has been put on hold at NASCAR. For a sport which has seemed to enjoy an endless boom, it’s been painful to finally step on the brakes.