Championship Auto Racing Teams, Inc. History

Company Perspectives:

The Company's mission is to build America's premier open-wheel series--our core business--into a major U.S. sports and entertainment business. Subsequently, the Company will 'export' the Series to international markets through television and by racing in a limited number of major international markets. The Company will apply innovative strategies across a number of related businesses to achieve its mission. However, everything that the Company does must be evaluated on the basis of its contribution to the core business. We must achieve the mission in a manner that provides value to our key stakeholders&mdash′omoters, sponsors, licensees, race teams, drivers, media partners and shareholders--and provides our fans with a sense of pride and 'ownership' in the Series. As a public company, we must provide competitive returns and growth to our shareholders. Key Dates:

Key Dates:

1978:

CART is formed by a breakaway group of U.S. Auto Club team owners.

1979:

First CART-sanctioned race is held in Phoenix, Arizona.

1986:

Bobby Rahal wins $1 million for the year, first CART driver to top this mark.

1989:

CART president and chairman is fired; Board is expanded to include all shareholders.

1991:

First overseas race takes place in Australia.

1996:

CART teams boycott Indianapolis 500, stage U.S. 500 race in Michigan instead.

1998:

CART-sanctioned racing begins in Japan.

2000:

Return to Indianapolis 500; CEO Andrew Craig is replaced by Bobby Rahal.

Company History:

Championship Auto Racing Teams, Inc. (CART) sanctions open-wheel 'Indy Car' races, primarily in the United States. These custom-built, single-occupant cars can reach speeds of more than 240 miles an hour. CART sponsors more than 40 races per year, which make up three series. These consist of the premier Fedex Championship series, the Datsun Indy Lights Championship series, and the Toyota Atlantic Championship series. CART was founded by a group of driving teams that broke away from the United States Auto Club (USAC) in 1978, and the organization has since become the leading American sanctioning body for Indy Car races. CART has recently patched up its strained relationship with USAC successor the Indy Racing League, allowing its drivers to resume competition in the prestigious Indianapolis 500, which a CART team won in 2000. CART also operates a merchandising and licensed products subsidiary.

Beginnings

CART's roots go back to the early years of the 20th century, when automobile racing (and the automobile itself) was in its infancy. Races of specially built high-speed cars drew crowds as soon as the idea was originated, with the first race held at Indianapolis Speedway in 1911. In 1955 the United States Auto Club (USAC) was formed to serve as the sanctioning body for races of the type of custom-built, open-wheel cars that were used at Indianapolis.

By the mid-1970s, with expenses rising and having only token representation on the USAC board of directors, a group of team owners began to push for greater control of the organization. When USAC refused their request for more input, 18 owners broke away and created their own sanctioning organization. Championship Auto Racing Teams, Inc. was formed in November of 1978, with owner U.E. 'Pat' Patrick chosen as president. A total of 24 ownership shares were distributed to members of the group, with several (including Patrick and Roger Penske) receiving more than one.

In March of 1979 the first CART-sanctioned race was run. Gordon Johncock won the nationally televised 150-mile event at Phoenix International Raceway. During its first year in operation, CART produced a total of 13 races. These were organized separately from a series run by USAC, which bitterly resented the breakaway group. The antagonistic USAC refused six CART teams entry into the Indianapolis 500 that year, relenting only after CART filed a lawsuit.

During its first year, CART also signed a deal with PPG Industries to sponsor the 1980 CART World Series, beginning a relationship that would continue for many years. On the technical side, CART team Hall Racing introduced an innovative car during the year that utilized what was called 'ground effects.' The aerodynamically designed vehicle was literally sucked to the ground by the creation of a low-pressure area beneath it, giving it better stability and traction.

Following a successful first season, the new organization's events grew in popularity, with several additional races added to the schedule over the next decade. Top drivers such as Rick Mears (who won the first championship series, as well as back-to-back championships in 1981 and 1982), Mario Andretti, Al Unser, and Al Unser, Jr., won titles during the 1980s, with Bobby Rahal becoming the first to achieve $1 million in yearly earnings in 1986. Initially, USAC and CART both declared separate national racing champions, but this was resolved in 1982, when the groups agreed to recognize a common winner. USAC continued to sponsor the Indianapolis 500, but it had few other races of consequence, while CART's schedule typically featured 15 or more races in major markets around the United States and Canada. Unlike USAC, which favored an oval racetrack, CART races were run on several different types of courses, which required that its drivers be skilled in each racing style. Speedways such as Indianapolis, shorter oval courses, temporary road courses created in the downtown areas of large cities, and existing roadways were all used for different CART races.

A Restructured Board from 1989

Conflict surfaced in 1989 when the CART board voted to remove Chairman John Frasco and President John Caponigro. The two executives were accused of favoring the teams of Roger Penske and Pat Patrick to the detriment of less influential members. Frasco had been chairman since 1980, and Caponigro had been in office less than a year. Following this action, CART's board was restructured to include everyone who held one or more of the 24 ownership shares. John Capels took the reins as transitional leader and chief operating officer until July of 1990, when William Stokkan was named CEO. Stokkan previously had headed the licensing and merchandising arm of Playboy Enterprises, Inc.

CART was increasing its purses at this time, with a record $1 million given out in 1989 at the Detroit Grand Prix. In 1991 the company's first overseas event debuted, the Gold Coast CART Grand Prix, held in Surfer's Paradise, Australia. That year the company also signed a four-year broadcasting contract with cable sports network ESPN. In technical matters, 1992 saw Ford re-enter the open-wheel racing field with its first series of new Indy Car engines in 21 years. Recent CART races had been dominated by Chevrolet's Ilmor engines, which had won 60 of 63 races, but Ford was able to take five of the first 16 that it entered. Other new engines were introduced by Mercedes-Benz and Honda over the next several seasons.

CART vehicles were completely custom-built, with the cost of running a racing team as high as $10 million per year. Most teams lost money, with all relying heavily upon corporate sponsorships to remain afloat. A typical car and driver were plastered with the logos of as many as several dozen sponsors, which might include automotive companies like PPG, Valvoline, and Texaco, as well as the ubiquitous Marlboro, Budweiser, and Miller Lite. Teams were often owned by former drivers, such as Foyt and Paul Newman, or wealthy racing fans like David Letterman and Bruce McCaw.

The early 1990s saw CART experiment with a seven-member board, which was abandoned after 18 months when the larger one was reinstated. CEO Stokkan was replaced in 1994 by Andrew Craig, formerly of ISL Marketing. Craig was charged with restructuring and revitalizing CART, which had begun to lose ground against the marketing success of NASCAR-sanctioned stock-car racing. Soon after taking charge, Craig faced a crisis when a major new rift arose between CART and the sponsors of the Indianapolis 500. Tony George, whose family had run the Indianapolis race for several generations, announced new rules for qualifying to run and new technical specifications. CART's response was to remove its teams from the event and create a new $1 million race, the U.S. 500, that would be held on the same day at a speedway in Brooklyn, Michigan. For his part George announced the creation of the Indy Racing League (IRL), which was to sponsor a series of races that were intended to steal some of CART's thunder.

Results of the first skirmishes were mixed, with the primarily rookie field at Indianapolis generating reduced fan interest, though the race itself was hailed as an exciting one, and the tickets sold out. George also successfully sued CART to prohibit its use of the expression 'Indy Cars' when referring to its vehicles. CART took up the name 'Champ Cars' instead, which it claimed had often been used in the past. After a second year of sponsoring a race the same weekend as Indianapolis, CART scrapped its head-to-head anti-Indy strategy, but its teams continued to avoid Indianapolis and other IRL races. The rules George had created for IRL qualification required a substantially different vehicle, one that was not turbo-charged, used a different chassis, and was slower, though also less expensive to build. CART maintained that technology should lead the way, and that car designs should not be limited in ways that prevented them reaching the maximum possible safe speed.

In January of 1997 the company formed CART Licensed Products (CLP), a merchandising and licensing subsidiary that was a joint venture with Robert E. Hollander. One of the most visible elements of NASCAR's success had been the cross-promotion of its brand through the selling of collectible toys and clothing and by the use of its drivers as advertising pitchmen. CART hoped to follow this same path with the newly created CLP. The company also signed an agreement with Federal Express Corporation to sponsor CART's championship race series for three years beginning with the 1998 season. On the track, CART teams continued to make technical breakthroughs, with a record qualifying speed of slightly more than 240 miles per hour reached in September.

1998 IPO and Acquisition of Two New Race Series

In early 1998, CART made its initial public offering on the New York Stock Exchange. Each of the company's original 24 shares also was exchanged for 400,000 new ones. Sales of stock gave CART enough cash to purchase two additional race series, which were to be used as training grounds for new drivers. These were the Dayton Indy Lights Championship series and the Toyota Atlantic Championship series, each of which consisted of approximately a dozen races per year. CART also added new races to its FedEx Championship series in Houston, Texas and in Japan. The latter was CART's third foreign venture, the second having come in 1997 when a race was added in Rio de Janeiro, Brazil. The FedEx series also included two races in Canada. In July, tragedy struck at a race in Michigan when parts from an out-of-control car flew into the grandstand and killed three spectators, though the vehicle's driver sustained only minor injuries. The next year's racing season saw two more fatalities, both drivers who died in separate accidents.

Addressing concerns that CART drivers consisted almost exclusively of white males, in 1999 the organization announced its African-American Development Program, as well as newly increased efforts to recruit women. CART had also for some time been seeing declining attendance and television viewership, which seemed due at least in part to the absence of its teams from the hugely popular Indianapolis 500. Bowing to the inevitable, the company began talks with the IRL to resolve the two organizations' differences. The company also purchased the remaining interest in CART Licensed Products during the year. The FedEx Championship series now consisted of 20 races, with the most recent addition being in Chicago.

The year 2000 saw dramatic changes for CART. The talks with the IRL were successful, and a CART team entered and won that year's Indianapolis 500. At about the same time, CEO Andrew Craig was fired by the organization's board and replaced on an interim basis by retired driving champion Bobby Rahal. CART owners reportedly had been dissatisfied with Craig's performance for some time.

After nearly 20 years in business, Championship Auto Racing Teams, Inc. remained the premier sponsor of open-wheel racing in the United States. Having faced a number of difficulties during the 1990s, the organization was getting back on track by addressing the challenge to its audience base posed by stock car racing and by focusing on improving diversity among its drivers. Most important, perhaps, it had made amends with the backers of the Indianapolis 500, allowing its drivers to compete again in the most famous race in America.

Principal Subsidiaries: CART Licensed Products, Inc.; CART Properties, Inc.

Principal Competitors: Indy Racing League; International Hot Rod Association; National Association for Stock Car Auto Racing; National Hot Rod Association; National Muscle Car Association; Professional SportsCar Racing; SCCA Pro Racing; United States Auto Club.

Further Reading:

• Barkholz, David, 'CART Races Toward IPO, But Team Owners Will Steer,' Automotive News, January 12, 1998, p. 26J.
  CART FedEx Championship Series 2000 Media Guide, Troy, Mich.: Championship Auto Racing Teams, Inc., 2000.
• Glick, Shav, 'CART to Deal with Diversity in Its Meeting,' Los Angeles Times, January 8, 1990, p. 14.
• ------, 'Changing Gears--Indy Racing League Has Its Own Cars, Tracks and Schedule and Has Even Taken the Name Indy Car from Rivals at CART,' Los Angeles Times, January 22, 1997, p. C1.
• Hampton, William J., 'Gentlemen, Start Your Selling,' Business Week, May 5, 1988, p. 86.
• Helyar, John, 'Dueling Indy Car Circuits Set to Rumble,' Wall Street Journal, March 1, 1996, p. B8.
• ------, 'Racing Fans Are the Losers as Indy Feud Goes in Circles,' Wall Street Journal, May 23, 1997, p. B6.
• Kerwin, Kathleen, and Bill Koenig, 'Gentlemen, Start Your Grudge Match,' Business Week, May 27, 1996, p. 70.
• Melilli, Denise, 'A Shift in Leadership: Unhappiness with Craig Puts Rahal in Driver's Seat,' Crain's Cleveland Business, June 26, 2000, p. G7.
• ------, 'Driving for Diversity: CART Program Out to Widen Participant Spectrum,' Crain's Cleveland Business, June 21, 1999, p. G8.
• ------, 'The Race for Dominance: CART Looks to Share NASCAR's Marketing Success,' Crain's Cleveland Business, June 21, 1999, p. G12.
• Nauss, Donald W., 'Indy 500: Revving Up for War,' Los Angeles Times, May 21, 1996, p. A1.

Source: International Directory of Company Histories, Vol. 37. St. James Press, 2001.

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