Tony George: he just faded away

This might not be bad news, but it probably isn't good. Tony George is no longer a member of the Board of Directors of his family's company.

The entire press release is below. My commentary follows.

TONY GEORGE RESIGNS BOARD MEMBERSHIPS

OF INDIANAPOLIS MOTOR SPEEDWAY, HULMAN & COMPANY

INDIANAPOLIS, Tuesday, Jan. 19, 2010 - The Board of Directors of Hulman & Company and affiliated companies, including the Indianapolis Motor Speedway, has received the resignation of Anton H. "Tony" George from the board of directors effective immediately, according to Mari Hulman George, chairman.

"As members of his family, we are sorry to see Tony leave," said Mrs. George. "We are grateful for his service to our company as a board member and of course for formerly serving as CEO and president of our companies. I speak for our whole family in wishing him well.

"All of us had hoped that Tony would continue to serve on the board, and we made that clear to him. We are disappointed with his decision to step down despite our wishes."

His resignation removes George from any remaining role in Hulman & Company, Indianapolis Motor Speedway, Indy Racing League, IMS Productions and other affiliated companies. His term as CEO of the family companies ended June 30, 2009. He continues to be involved in racing through his ownership of Vision Racing, a competitor in the IZOD IndyCar Series of the Indy Racing League.

The board vacancy will be addressed at a later date. In addition to Mari Hulman George, board members include Nancy George, Josie George, Kathi George-Conforti and Jack Snyder.

Mari Hulman George said she is very pleased with the direction of the company and the progress that has been made during the last six months.

"Our company is healthy and is weathering the economic recession well," she said. "Jeff Belskus, president and CEO of the Indianapolis Motor Speedway, and Curt Brighton, president and CEO of Hulman & Company, are both doing excellent jobs in guiding our companies through this difficult time. Many hard decisions have been made, and now our companies are well positioned for the future."

I would be interested to know exactly why Mari believes that the IMS and IRL are so well positioned.

The IMS is going to be for sale before long. That's my prediction. That is not to say that the Hulman George Family intends to sell. I believe that the opposite is true.

Unfortunately, intentions mean very little in light of the gross incompetence that threatens this firm. Eventually, the family will have not choice but to sell. All that remains to be seen is 1) how soon, and 2) for how little.

Roggespierre

Cryptic IMS Leaks are Cause for IndyCar Concern

The headline atop the latest motorsports entry by enigmatic Indianapolis Business Journal blogger Anthony Schoettle is ominous.

Speedway CEO about the get down and dirty

Apparently, laying off more than 13 percent of its staff was only the beginning of budget cuts at the Indianapolis Motor Speedway. It seems that CEO Jeff Belskus has hinted to Schoettle that additional and, perhaps, more substantial cuts are in the pipeline.


Schoettle indicates that both the Brickyard 400 and the MotoGP race are potential casualties. Not surprisingly, he also suggests that the Month of May could be primed for a haircut.



Not a TEAM Player?


Most important to IndyCar Series fans, Belskus is apparently considering either reducing IndyCar TEAM payments or scuttling the appearance money program altogether. Schoettle also mentioned that Belskus might alter the IndyCar Series schedule, focusing on more profitable (read: publicly subsidized) road and street races in lieu of oval tracks.


In my view, that these items are under consideration demonstrates the severity of the financial difficulties that imperil this unwanted product. Belskus is reputed to be a fine accountant. I do not doubt his qualifications with regards to reshaping the projected 2010 IMS Income Statement.


The question is whether or not he is capable of making strategically advantageous decisions. For example, if Belskus were to reconfigure the ridiculously wasteful IndyCar TEAM program, then I would be the first to applaud his efforts. Similarly, I would not shed a tear upon learning that the Brickyard 400 and the MotoGP race are not part of the long-term IMS operating strategy.


Shortening the Month of May would be a mistake, in my assessment. The 500 is a declining event by any objective measure. Whittling away at its edges would not create efficiency, but rather it would only hasten the event's plunge toward irrelevance and, ultimately, annihilation.


Conversely, ending the non-IndyCar escapades at Indianapolis might just make trips to the IMS seem special again. Re-establishing scarcity could be a first step toward restoring the mystique of the Greatest Race in the World.


I will likely have much more to say whenever Belskus chooses to take definitive action. For now, there is a specter that hangs over the hallowed ground of the World's Greatest Race Course. Is Belskus a workouts and turnarounds guy, or is he merely a manager of the downward spiral.


We shall soon know the answer.


Roggespierre

IndyCar: Heads still Rolling at IMS

A good person and employee has been deemed expendable by the Indianapolis Motor Speedway Corporation.

According to Curt Cavin of the Indianapolis Star, IMS Director of Public Relations Ron Green was one of several staffers who lost their jobs Tuesday.

In a previous life, I worked directly with Ron Green on many occasions. He was always professional and accommodating. Like me, Green was then a true believer in the Indianapolis Motor Speedway in its past, present and future permutations.

His ouster leaves me sad and angry. Ron Green did his job well. The same can not be said of those who make strategic business decisions at the IMS and IRL offices.

I remind you that this is an organization that has demonstrated zero understanding of the differences between media relations and promotions, corporate sales and product marketing, supply chain management and product development.

Fred Nation, Green's former supervisor at the IMS, issued a statement in which he predictably blamed the economy for the latest round of layoffs.

I consider Fred a friend. In this case, he is wrong. Green and the others lost their jobs because they happen to have worked for a company that is very poorly managed. They are paying the price for decisions that were made by others.

Barring significant and unanticipated upgrades in management talent at the IMS and IRL, Green and his cohorts will certainly not be the last to go.

Green's dismissal reminds us of the reality that has befallen IndyCar racing. Masquerading an intellectual property licensing agreement as Title Sponsorship does not change that reality.

Roggespierre

Appeal to the Indianapolis Motor Speedway Board

Citizens, we must expose the entrenched interests that threaten the future of IndyCar Racing!

We know that the correct price of sponsorship for a top IndyCar team is $1.3 million. However, recent comments by Terry Angstadt make clear that the IRL hopes only to reduce costs from their present level of $7 to $8 million per season.

Not Good Enough

The cost of operating a top IndyCar team must be no more than $1.3 million. Otherwise, there will be no new sponsors for IndyCar Teams. Advertising decisions are made by MBAs who are trained to do what their spreadsheets tell them to do. The secondary market for NASCAR Cup sponsorship (think: Subway) will continue to be of greater value.

Robin Miller has floated a $3-$4 million dollar target. We believe that Robin has very good intentions, but his figure is still at least double the market value of the product. Furthermore, we believe that his valuation was likely provided by Target Chip Ganassi Racing, an organization that distributes abnormal economic returns to Chip Ganassi and Mike Hull precisely because TCGR competes in an overpriced series.

Unlike Team Penske, Target Chip Ganassi Racing is financed with a sponsorship artifice that is divisible. TCGR does not have to compete with other IndyCar teams for consumer products sponsors. Why? Because TCGR can offer something of much greater value than team sponsorship - namely, concessions from a large national retailer. Therefore, Ganassi and Hull would act irrationally if they were to accept a cost structure for IndyCar teams that is equal to the promotional market value of those teams. They do not have to lose sponsors outright in order for their individual returns to decline.

We are confident that TCGR has contacts protecting its interests inside the IRL and the IMS; it would be foolish not to because so much is at stake. Ganassi and Hull have every incentive to see that the IRL manager who dares to bring operating costs in line with market value loses his head.

To the IMS Board of Directors

Please consider the individual economic interests of your suppliers of racing teams, which vary greatly. The interests of Target Chip Ganassi Racing are not at all aligned with your own. Do your managers defer to them out of fear for their jobs? If not, then you have marvelously courageous managers.

We would not blame you for disregarding the pseudonymous writer of an obscure website. We therefore encourage you to hire a consultant to provide analysis and protect the Board of Directors - not management, not partners, not suppliers, not customers, and not family members who are not Board members.

This consultant should not be someone who knows racing, but rather someone who knows business. He or she should be a complete outsider who does not travel in racing circles. Contacts of "friends" should not be trusted because "friends" have interests that are not aligned with yours. We can provide the names of several candidates that are highly respected in industry and academia. They have no interest in auto racing. Therefore, they are free to look out for yours.

Our email address is provided.

Roggespierre

IndyCar Growth depends on IMS Board

Your faithful IndyCar Montagnards recently perused this Roundtable Report from the Minnesota Chapter of the National Association of Corporate Directors. We invite citizens to read the following conclusion, keeping in mind the present state of corporate governance at the Indianapolis Motor Speedway and its related entities.

"Too often, family businesses maintain an informal, 'family only' board
long after business needs have outgrown this structure. Growth of the
business and the shareholder group eventually require governance with a level of
objectivity, discipline, and strategic focus that family members alone can
rarely provide."

We are not here to tell the Hulman George family how to run its business. But we do care deeply about the future of IndyCar racing and the Indianapolis 500. Therefore, we shall briefly consider IMS corporate governance, the one issue that must be resolved satisfactorily if IndyCar is to have a viable future in the competitive marketplace.

The More, the Scarier

The business of the Indianapolis Motor Speedway has grown substantially since Tony Hulman re-opened the track for business in 1946. New events, product lines and strategic business units (SBUs) have been added. Like the business, the family has grown. In a sense, Tony and Mary Hulman had it easy; they handed the family business to one daughter. Predictably, Mari Hulman George has had a more difficult time, balancing the interests of her four children.

The job now becomes even more complicated as a new generation of the family comes of age. Who will be in charge? How will equity in the company be distributed? What rights will equity holders have? Will family members actively manage the company; if so, then which family members? These questions are the first of many that are extremely difficult to answer.

Deliberations among the five members of the Hulman George family who currently serve on the Board of Directors must achieve certain goals if the Indianapolis Motor Speedway and the Indy Racing League are to thrive. Professor John A. Davis of Harvard Business School identifies them here.

• Clarity on roles, rights and responsibilities for all (family) members...
• Encouraging family members, business employees, and owners to act responsibly
• Regulating appropriate family and owner inclusion in business decisions
  

Professor Otis Baskin of the Graziadio School of Business at Pepperdine University puts it this way.

If family relationships are divisive, those negative relationships carry over
into the business and often are more destructive than they would be between
co-workers or managers who have no other relationship.

Recent empirical evidence suggests that this is indeed the case at the IMS. A well defined system of corporate governance can alleviate such problems, allowing family members to trust each other and empowering professional managers to lead the firm toward market competitiveness. We hope that this is currently Job One, Two and Three at the Indianapolis Motor Speedway.

IndyCar racing will not thrive without an empowered, knowledgeable product manager. Sales and racing operations appear to be in good hands, but that is not nearly good enough. Salesmen will sell whatever and whenever they can, regardless of whether or not it is strategically advantageous. Racing operations is a cost center that at best aids business growth via operating efficiency. Direction, strategy, customer focus, product development and supply chain management are all severely lacking.

It does not have to be this way.

Roggespierre