The Economics of NSCS Teams
Not many people realize it, but NASCAR and racing as a whole is in a way, considered a team sport because teammates use fellow drivers of their race team as defense systems, holding drivers off while another races for a championship. I argue that running a NASCAR team is an even more risky operation than most people think. The NASCAR rule book states a team can consist of 4 full time cars and 1 extra car for a rookie driver running a limited race schedule. There are many teams in the Sprint Cup Series. The”big four” are the teams of Hendrick Motorsports, Penske, Stewart Haas Racing, and Joe Gibbs Racing. There have been many stories over the past two years concerning race teams closing and alliances being formed between teams.
Running a race team is not as easy as you think. There's a reason why some teams run in the back and some teams run in the front. Operating week to week is very stressful for everyone associated with the team.. On monday, after Saturday or Sunday's race, the drivers, crew chief, team members, and team owners will have meetings summarizing the events of the previous race. Next, comes lots of overnight hours for the mechanics, engine makers, and body experts, working on two brand new cars for the coming race weekend. After that, the car is loaded into the hauler and transported to the race rack. Then, the driver gives feedback on how the car is handling and then the team will therefore make adjustments to the car over the course of three practice sessions. Finally, race day comes and the team repeats that process 36 times from Daytona to Homestead.
Now, NASCAR teams seem to be struggling to support themselves. In an article from Fox Sports titled “Michael Waltrip Racing prepares to lay off 217 employees”, author Tom Jensen notes the sequence of events of how and why the situation came to be. On September 2nd, 20015, Michael Waltrip Racing received a WARN notice that was produced by the NC Department of Commerce. This in-turn, is a confirmed report of pending layoffs, employers have filed with the state of North Carolina. Rob Kauffman, Co-owner of MWR, in July, announced that he, himself was buying an ownership interest in Chip Ganassi Racing with Felix Sabates for the 2016 season. Then, surprisingly Kauffman announced MWR will be going out of business and seizing all racing operations at the end of the 2015 season. The MWR organization has been somewhat successful over the course of their history. Few wins, however consistent top 15 drivers. However, Kaufman went on to address the issue of decreased performance in the organization. He said “I think that just from a business standpoint, that didn't make sense any longer (referring his financial investment within the race team). You can't have a top-10 budget and top-10 resources and not be in the top 10 for a sustained period of time. This is a performance-related business and it’s all about performance”. MWR has been in the a good number of times, yet, only once had been a real contender for the championship. And the way they got their is not because they ran well, it's simply because they figured out how to work the points system in their favor. They did that by running consistently outside the top 10 but with no dnf’s.
NASCAR teams have many costs to pay. In terms of the factors of production, NASCAR teams take into account the factors of land, labor, human and physical capital, and enterprise. The aspect of land refers to all natural resources used to produce goods and services. Resources include rubber, carbon fiber, lexan, metal, foam, race fuel, steel, and oil. In terms of labor, there are many employees pitching in time and energy into setting up the car, painting decals, assembling the car, and driving the car to the race track. Physical capital refers to things like machinery, equipment and buildings. With a race team, physical capital consists of, jacks, helmets, computers, workers, the team headquarters, drills, welding equipment, car body, engines, and the car itself. Human capital of a race team can be considered the skills employees possess that allows them to work on the cars efficiently and access problems and figure out the solution. Finally, there is enterprise, or entrepreneurship. Recently, in 20014 there have been agreements among team, dubbed “the race team alliance”. This so called race team alliance was created to help struggling teams that finish in the bottom part of the field, and help competitive race teams as well. Most of the time teams that have an alliance run the same car manufacturer. Maybe the most notable would be the alliance between Hendrick Motorsports and Stewart Haas Racing. These two teams are good teams and yet, they share some information with each other and cooperate more with race team drivers on the track. NASCAR has decided that this has the potential to increase the level of competition within the NASCAR Xfinity Series and Sprint Cup Series. Increased competition can e considered a good thing in NASCAR, resulting in more fans and TV viewers.
The economics of NASCAR racing can not be fully understood without bringing up tires. Tires are the version of gold in NASCAR. The tire is made by Goodyear. The tires have become a subject of increased scrutiny. The compound Goodyear comes up with is different week to week. Some tracks, the tire completely blows out on many cars, and others, tire ware is higher than usual. But tires are expensive. At nearly $300 for 4 tires. Every team is given a certain amount of tires to begin the race weekend. Sometimes NASCAR will give more tires if there seems to be a lot of unexpected blowouts and failures. However, Indy cars, have multiple tires to choose from.
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