Commentary

Layoffs coming in rapid succession as perfect storm hits NASCAR

A slowdown in the NASCAR economy was expected after this season even if the nation's economy remained strong. With markets roiling across the globe, NASCAR is facing a perfect storm as layoffs and cutbacks hit the industry at a rapid pace, writes David Newton.

Updated: November 28, 2008, 11:38 AM ET
By David Newton | ESPN.com

CONCORD, N.C. -- The warm South Florida sun was a welcome change from the morgue-like atmosphere at Dale Earnhardt Inc. when Dave Kwasniak and Chris Hamilton arrived at Homestead-Miami Speedway last Friday. They were focused on helping Regan Smith win the Sprint Cup rookie of the year title, not the 100 or so of their fellow employees that had been laid off a few days earlier.

Then, shortly after qualifying, the word came:

Meet John Story, the organization's vice president of motorsports, in the back of the hauler.

[+] EnlargeJohn Story
AP Photo/Evan AgostiniJohn Story, VP of motorsports at Dale Earnhardt Inc., said having to tell employees their services are no longer required is, "excruciating."

All of a sudden, Kwasniak and Hamilton knew how it felt to be at an NFL training camp when the Turk, the person who tells players to come to the head coach's office with their playbook, came calling. Or what it was like to sit opposite Donald Trump on the reality television show "The Apprentice."

You're fired.

They weren't the only ones let go this way. Most of Smith's No. 01 crew and members of other organizations had the same fate befall them. Others were released after returning to the Charlotte area on Monday, as the entire NASCAR community began shrinking because of the economic crunch.

It has been estimated that between the Cup, Nationwide and Truck Series, anywhere from 750 to 1,200 or more people ultimately will lose jobs. Some of the downsizing is natural for the end of the year. Some can be traced to the additional people hired a year ago when organizations had to build the new car as well as the old one.

Some in the garage will blame labor costs that have gotten out of control over the past few years, with teams spending above real market value to stay competitive, particularly with the arrival of Toyota.

But it all goes back to the economic decline that has forced sponsors and manufacturers to either stop or decrease their spending, which forces teams to trim costs in other ways.

For DEI, that meant merging with Chip Ganassi Racing with Felix Sabates into a four-car operation, which meant two of DEI's four Cup teams had to disappear.

That meant lives were impacted.

"It's very scary," said Hamilton, Smith's transporter driver. "I have a few possibilities out there, but they are few and far between because there are more people out of work than actually working, it seems like."

Kwasniak, a mechanic, said he doesn't know what he'll do.

"If you didn't think two or three months down the road this wasn't a possibility, you were just blind to the whole thing," he said. "I've been talking to people for months trying to find something. You had to read between the lines. Between the lines you read you weren't going to have a job at the end of the year -- at our place, anyway."

You could hear the pain in their voices and see it in their eyes as they looked toward an uncertain future. They aren't bitter they were let go, understanding they aren't the only ones in this situation.

"The whole economy in the Charlotte area is going to suffer," Hamilton said. "The housing market is going to suffer. There are some people that aren't going to find anything and houses are going to be foreclosed on.

"Businesses that were doing really well because race teams would go in and eat lunch or shop and stuff like that, they're going to suffer because you have half the people there now."

Dr. John Connaughton, an economics professor at UNC-Charlotte, estimates that the motorsports industry has a $3.9 billion economic impact on the Charlotte area. Of that, he estimates $2.4 billion is the result of spending generated by parties involved in the industry.

So the concerns are real.

"Nobody is immune," Hendrick Motorsports owner Rick Hendrick said. "So many jobs here in Charlotte are depending on our sport."

Nobody knows exactly what the final tally of layoffs will be. DEI released 116 employees within the last week and Ganassi Racing released 71 earlier this year, when Dario Franchitti's team folded due to lack of sponsorship.

Petty Enterprises, still without full sponsors on either of its cars for 2009, has let 30 people go. Bill Davis Racing is down to a handful of employees until it finds sponsor help. Hall of Fame Racing has notified its 44 employees that unless it finds sponsor help in the next month many of them will be looking for jobs.

Michael Waltrip Racing, the Wood Brothers and Roush Fenway Racing all have let go a dozen or so employees.

Even Hendrick Motorsports, which captured its eighth title in the past 14 years when Jimmie Johnson claimed his third straight championship, has trimmed 12 employees.

The cuts will continue through the end of the year as teams get a full understanding of what they face.

"There's a lot of good people looking for jobs," said Mike Dillon, the general manager of Richard Childress Racing, which has attempted to shift personnel to different areas to avoid major layoffs. "If there's 50 people, that's too many. It stinks.

"But all of these race teams have been fat for a long time. These sponsors were giving money and people were racing with no consideration for how much they were spending."

Tough on management, too
Story wasn't in the mood to talk about the merger with Ganassi last weekend as he stood behind the No. 1 hauler of Martin Truex Jr.

"I don't want to talk about anything to do with that until I fully explain it to all of our employees," he said.

Being fired is difficult. Having to do the firing is equally tough.

"Communicating to someone you respect greatly that their role has been effected is excruciating," Story said. "I pray none of use are involved in anything like this again."

Max Siegel, DEI's president for global operations, called the layoffs gut-wrenching.

[+] EnlargeMax Siegel, Chip Ganassi
AP Photo/Terry RennaMax Siegel, president of Dale Earnhardt Inc., left, and Chip Ganassi, owner of Chip Ganassi Racing with Felix Sabates, are having to winnow down their respective teams as they prepare to merge as DEI-Ganassi Racing for 2009.

"When you travel every week and you get to know people on a personal level, it's a lot more emotional than if you're sitting in a corporate headquarters somewhere and you just say, 'OK, well, we're going to lay off 50,000 people or whatever,'" he said. "It is very personal."

The NASCAR community is like a traveling circus, a family. The employees spend more time with the race teams than they do with their families.

"People do this because they love it," Siegel said. "A lot of people go to work to earn a living and do a job. People are involved in racing, by and large, because they just are so passionate about it."

The people come from all over the country to work in NASCAR because the compensation for being a mechanic or engineer in the sport is much better than working for a local dealership or garage.

"So they began to flood into North Carolina to take the jobs," Roush Fenway Racing president Geoff Smith said. "Now that there'll be a shrinkage of jobs there will be a big employment impact."

The elimination of testing in 2009 has added to that impact. NASCAR made the decision to help save teams money, which it will. That also means people that were employed strictly for test teams or to help with testing will have their jobs eliminated.

"There's some high-skilled folks here, and a lot of other business around," Hendrick said. "It's kind of a trickle-down effect. If the support companies don't have as much work, if they don't have the Cup stuff and NASCAR stuff to pull from, it's going to be a tough winter."

Scary times
Kwasniak grew up racing dirt modified cars in New York. He moved to Charlotte five years ago because of the opportunities NASCAR offered.

Now he's starting over, sending out resumes and making calls with the hope something will turn up.

"But the problem is these people aren't going to know anything until the first of the year," he said. "That just makes it more difficult."

Some people who were let go will be hired back at lower salaries, team officials project. That, ultimately, could be good for the industry.

"There is an unemployment bubble that was triggered by the millions of dollars we were required by NASCAR to invest to build these new cars," Roush Fenway's Smith said. "We had to build 150 cars in the space of 15 months to get a fleet of cars, plus at the same time work on the old car.

"That bubble of employment was going to be over, naturally."

The economic downturn sped up that timetable. Teams which may have been able to reassign the extra employees can't do so, due to lack of sponsor or manufacturer help. Roush Fenway, for example, downsized two Truck teams when Ford pulled financial support from the series.

There is an unemployment bubble that was triggered by the millions of dollars we were required by NASCAR to invest to build these new cars. We had to build 150 cars in the space of 15 months to get a fleet of cars, plus at the same time work on the old car. That bubble of employment was going to be over, naturally.

-- Geoff Smith

Some sponsors that were paying $25 million under their previous deal are now paying $18 million or less. Petty Enterprises plans to keep the No. 43 on the track by selling sponsorships to four to six companies.

"We live and die by sponsors," Hendrick said. "You don't see teams out there running without sponsors very long. When [sponsors] cut back, we have to cut back.

"When we plan to do programs for other teams -- motor programs, chassis programs -- and when they fall through then we've staffed up our parts and then we have to make adjustments."

That's when the Turk, or somebody like him, comes in. That's when the surreal becomes real.

"It scares you knowing there are that many people out there," said Marc Hendricksen, an engineer released by DEI. "But you can't sit around feeling sorry for yourself. If you take the time to do that and get worried about it you fall behind.

"There are going to be people hustling every day to find something. You've got to compete against them."

Hendricksen said he believes he is lucky to a degree because he doesn't have a wife and kids to support.

"That would make it harder, more emotional," he said.

But most of those let go know somebody with families they must support. They're reaching out to one another now, just as they did at the track last weekend after learning their fate.

In many ways, the No. 01 team has had an us-against-the-world mentality for months. The crew didn't think any more of DEI executives not being at the rookie of the year luncheon on Tuesday than they thought of them not being around the team at the track.

"They were at the racetrack, but they didn't associate about what we're doing," Kwasniak said.

Said Hamilton: "All you worry about is your group of guys that work on the car. That's all we cared about was each other. All you cared about was how well he was doing his job and how well I am doing my job, what can I do to help him.

"If he's sick, it's 'You do this for him' and 'I'll do this for him.' That's all we cared about."

The good news for the DEI employees is the company will pay salary and benefits through the end of the year. When that time comes and goes, that's when it'll get even scarier for people such as Kwasniak and Hamilton.

"I'm not saying we make a ton of money, but we make decent livings doing this," Kwasniak said. "The unemployment you're going to get is barely going to cover everybody's mortgage.

"It's going to be tough."

Hamilton nodded.

"Yep," he said. "It's not fun."

David Newton covers NASCAR for ESPN.com. He can be reached at dnewtonespn@aol.com.

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