CHAMPCAR/CART: Korea deferred to 2006 transcript, part 2

Continued from part 1 Q: I don't know whether you want to comment on this or not because we are talking about the Korean situation on the schedule, but Mr. Robert Clarke created quite a fervor with his visit to you guys in vas Vegas looking...

Continued from part 1

Q: I don't know whether you want to comment on this or not because we are talking about the Korean situation on the schedule, but Mr. Robert Clarke created quite a fervor with his visit to you guys in vas Vegas looking for some competition with his engine that he won't be able to run in the other league, and I wonder if you wanted to comment on what he may be proposing. We've asked this question of Kevin and a few others before. I kind of wondered what you thought of Mr. Clarke's visit and maybe cared to offer a comment on it.

JOE CHRNELICH: Well, I am impressed with the media attention that this garnered almost as much as Paul Newman at times. Obviously Bob Clarke is a very recognizable figure in motor sports and in his company, and they're constantly talking with everybody. Depending on the timing of his visit, it can create a lot of speculation and whatnot, but I think what's most important maybe from all of your perspectives is just the fact that Honda is talking with Champ Car, communication issue. Whether it's Honda, whether it's some of the other -- the old business partners of our prior series, I think that's a notable point in and of itself. People want to talk with us again. That shows, I think, progress, and I think that shows kind of a renewed confidence in what we're doing with the company and how we're growing.

So specifically in terms of the conversations, I was not involved in the meetings. He has stopped over to talk with Kevin, so I don't know the substance of the conversation, but we're always pleased that people from -- who used to be with this company as partners now feel comfortable coming and talking to us as a possible future partner somehow.

Q: A quick follow-up and back to the schedule, you want to keep the schedule as solid as you can as you go into a season because it's based on television exposure and contracts with sponsors and what have you, and I'm thinking kind of with Montreal that certainly does come to mind with a Canadian race as it is. We know there's a year left on the contract. But the fact that circumstances aren't even comparable obviously, but would you look at something like Montreal and say that's a good market, we want to hang onto that, there is a year left in the contract? You've heard all the rumors about what they may want to do after next year. What about taking a more concerted effort and taking races like Montreal and making sure it's firm and nailed into the schedule?

JOE CHRNELICH: Well, clearly it's a very important market to us. We view it as a strong market. It's proven it in the past. Not only with us, but you look at the F-1 appeal there. So you know the fans in that town like open-wheel racing; they're attracted to it. In our situation, there were some interesting variables that hit us this year, not the least of which was the International Aquatics Competition. That was an enormous event that really diverted a lot of resources away from our race. It's a one-time event. Our promoter happened to be involved in it, which obviously took some of his resource away. That's an issue we don't have to deal with next year.

As is our policy with our promoters, we treat them like partners when things are going good and when things are not going quite so good. In this case we're going to roll up our sleeves with the promoter; we're doing a debrief with them on what worked, what didn't work and what we're going to improve upon next year.

We both have a mutual goal of success. Promoters don't get in the business because they want to lose money; they get in because they want to have a healthy business. It's our job to make sure that our property and our event fits their business model, which it will. We think Montreal is a great market for us; we just need to reposition ourselves. Remember, we're rebuilding. This is only our second year out of the gate. Last year was pretty much a fire drill for all practical purposes. We believe in the market, and I think you'll see better things coming of it in the future.

Q: We had heard that there was a lot of scrambling Monday and Tuesday and some money might have been transferred. Did you come close to saving it, or just tell us, was there ever a period where you thought maybe it was going to happen?

JOE CHRNELICH: Yeah, we actually, going into this week -- and believe me, we've been in constant communication with the new general manager over there who has been very good for us. He wasn't a member of TRK, the prior promoter, so we've got a solid guy on the ground there, and just ask my wife, I've been on the phone weird hours of the night on these calls, but he said, "Look, Joe, here's what we're trying to do." They did make payment to us, as did the mayor. He kept his promise on some payments for some of the operational needs that we have, and they came through on that.

We were hoping -- there were some additional payments that needed to be caught up on, if you will, and we were hoping that was going to happen today, and it didn't. They called last night and said, "Look, we can't get there, Joe. It's not our investors, the new sponsors behind us aren't prepared to move that quick."

So we made a fundamental decision here among our series owners and our management team that, you know what, rather than try and force this thing just to say we did it, let's take a step back, let's examine the positives and let's decide right now whether there are enough good things here to proceed into next year, and based on our statement today about deferral, that tells you that our assessment that, you know, there's enough good equity in that market and positives that we're going to have a race next year. I will tell you after being over there three or four times now, that is going to be a great marketplace for us.

Q: Just a quick follow-up, you mentioned Saturday night when we were talking about maybe having somebody over there full-time. Is that still a priority?

JOE CHRNELICH: Yeah, good point. What we are learning is when you're that far away, talking on the phone is okay, email is okay, but at the end of the day, you need somebody there on a constant basis making sure you facilitate the needs of the promoter, making sure that the communications are coming back on a regular basis to our office. So you can expect to see somebody there on a more regular basis from our perspective because that does pay benefits.

Q: Whatever happened to David Clare, what I thought was the original Korean connection?

JOE CHRNELICH: Well, David actually is over there right now, and when the new TRK originally was formed, a step forward to us, they were in discussions with David about having him join the team. There were some relationships there.

The best we could tell, they could not arrive at a mutual agreement on the contract, and so it kind of went to the side. David did -- when management change took place, the investors went back to David and talked to him a little bit, but again, they could not come to an agreement. There was just a little bit too much consternation from David's perspective, as well. So he's there, but he has not been involved in the effort.

Q: I think this has been touched upon, but I know in the past when we've had foreign races, a lot of times the promoter is responsible for paying a lot of the costs, and in the case of England and Germany, I think those two promoters split all the cost of bringing the whole circus over, shall we say. With this being so close to the race actually happening, is the Korean government, which I had originally understood was backing the Korean race, and maybe I'm wrong about that, but how is Champ Car going to fare in terms of the costs that have been spent or committed to?

JOE CHRNELICH: Good question, fair question. We actually -- this is important for everybody to know. This year is very, very different than last year. Last year there wasn't even a license agreement for the race, which is what we had come to learn because I entered the picture very late on that one.

But this year between the city and the promoter, a significant amount of dollars had been paid to us, so we do have a buffer. We also had made pre-arrangements with our Australian promoter and our Korean promoter on how to handle the shipping and the airline tickets to achieve economies of scale. Now that we have to repivot, those questions were thought out. We had to think through a worst case scenario with our Australian promoter to say, "Look, if this doesn't happen again, how are we going to handle it." So we had thought about that in advance, and quite frankly at the request of Australia. So we're prepared for it, and it won't be a problem.

Q: As a follow-up question, I found it interesting to hear you say that there are companies that are over there that would be sponsors of this event that really want it to happen, and obviously you feel that they're still behind it. Can you clarify, is this being put on by TRK as a private organization? I mean, how much is the private company versus the government, and how do we hold their hand through the process since this is all a brand new experience for them?

JOE CHRNELICH: Sounds like you have a couple questions here. In terms of the sponsorship interest, there are some very big names in Korea as we know, Samsung, Hyundai, Kia, LG; these are names that we recognize here in the U.S. on a daily basis as products we buy. Those are all domestic Korean corporations, if you will, which makes the market that much more attractive to us. They have been in discussions, all of them are aware of the race and there are varying interest levels. I would tell you to stay tuned as to who are really the sponsors that are intending on stepping forward on this.

In terms of the promoter, TRK is the independent private promoter. They quite frankly are the ones that have not been prepared and who have not kept current with the contract requirements. The mayor, on the other hand, and the city have a license agreement tied to us and tied to the promoter, and they have, quite frankly, met and done all the things we have asked of them. So the mayor has been a very strong supporter in trying to move the promoter along here. So in that regard, that was one of the big positives we saw.

Q: You mentioned TRK being the primary promoter, and before you mentioned that there's been a change in promoters in China, that BASM -- was that a government agency before, and who is this new IS that you mentioned? Is that a private promoter in China?

JOE CHRNELICH: Actually BASM, Beijing Asset State Management, that is a quasi-government entity, they actually acquire and hold assets on behalf of the state, but -- they're a quasi-government company. That's the best way to define them. Very early in our discussions with them, they had informed us they were going to form a subsidiary company to help attract sports events to the capital of China, Beijing, and that's the company IS which was ultimately formed. That company is involved with the Olympic effort, but it's also very keen on bringing racing to China. That's how they intertwined.

ERIC MAUK: That will bring an end to our Champ Car teleconference today. I'd like to thank everybody for participating.

-ccws-

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Series IndyCar
Drivers Paul Newman , David Clare