Open Wheel Racing Series media teleconference transcript with Paul Gentilozzi and Kevin Kalkhoven
Part 1 of 3
WENDY GABERS: Good afternoon and thank you all for joining us today. I'd like to introduce Paul Gentilozzi and Kevin Kalkhoven two principals with the Open Wheel Racing Series who will discuss their recent CART asset purchase agreement as well as the plans to acquire Trans-Am Racing, LLC. Following a brief opening statement by Mr. Gentilozzi, Champ Car News Manager Eric Mauk will then invite members of the media to ask questions.
Paul if you could, please give us a brief overview of the asset purchase agreement and what we can expect to see in the short term.
PAUL GENTILOZZI: Well Wendy thank you, I just want to thank all the ladies and gentleman who have joined us here today to talk about 2004. It's a few days before that but the primary point of our topic today is to talk about the future of the Champ Car World Series, where we're taking it and where we're going, and we'll even touch on what's going to happen in the next few days, which is the asset purchase of CART. I'd like my partner Kevin Kalkhoven to touch briefly on that because he certainly has a better knowledge base on that than I do.
KEVIN KALKHOVEN: Thanks everybody. Just briefly, the asset purchase is all the assets of CART, not of Champ Car, that are necessary to run the 2004 series. This includes contracts with the promoters, the teams, the sponsors and of course all the equipment that will be necessary. We will also, at the completion of the transaction, be responsible for all the Champ Car staff. In the meanwhile, we have an interim CEO, Dick Eidswick, who is helping Champ Car run the operation. If presented to the judge, the necessary information in Indianapolis we expect a response from the court literally in days. And it's our belief with the information that we've provided them, that this will be something that will be handled with speed and done extremely quickly. So we are looking forward to starting the 2004 series with the full expectation that the courts will be behind us.
PG: I think that concludes it Wendy, and we're anxious to get started.
WG: Eric, perhaps you could start with questions.
ERIC MAUK: Thank you for joining the call today, I can't stress enough that media is encouraged to limit their questions to one question and a brief follow-up as we do have a very large contingent of media on the call today.
Q: For Kevin, in terms of purchasing all of the assets, was this more preferable to the original deal or is this something where you basically took what you could get at this point.
KK: It is preferable. It is cleaner and it's faster and time was very much of the essence as we have to allow our sponsors and our teams to have confidence that things would take place in the 2004 season, and to do it without any legacy. So we think that this is the fastest and most expeditious way and one that will help us to start planning for the 2004 season as of yesterday.
Q: Have you thought about 2005 and where you'd like to see this series and have you thought about talking to the IRL?
PG: We started this really, in any effective method of planning a new business you start with a long-range plan and work your way back to a short- range plan so that you understand your objectives. We have a clear vision of where we want to race, who we want to race with, in both 04 and 05 and beyond and we've had really lengthy discussions over the last four months, we know where our rules are for 04 and we are contemplating where our partnerships will be in 05, what the engines will be like, what the cars will be like, we've given those intense study and you have to make conclusions very early into this year to be able to make any impactful changes beyond that. But your question relative to the IRL is one we get a lot and I have the same answer. I consider Tony George a friend. I was around Tony when he first formed the IRL, I was involved there as an engine builder and as a part supplier and I was with Tony when he made his first visit to Dallara to get chassis built. I understand his vision and his enthusiasm toward what his product is. We have had occasion to talk recently about the philosophy of open-wheel racing in North America and around the world. They're always intriguing, engaging conversations but at this point it is just two guys talking.
Q: What about television? CART spent a lot of money to be on CBS last year. Is that going to be necessary to fulfill sponsorship and promoter commitments to be on CBS seven or eight times or do you see maybe a better way to do it with SPEED or Spike or something like that?
PG: We've spent considerable time analyzing the cost of television, and where the audience is. For obvious reasons, if you spend a million dollars and you only get a few hundred thousand viewers, then you're not doing a good job in marketing your product. We've looked at all the available television avenues and the television programs, we have to realize that on the business side, it has changed dramatically in the overall impact of the company in the last three to five years. We went from an environment where we were getting paid for our television product and having our production paid, and somehow that slipped away through relationship issues and now we're back in the market trying to prove our value. For us to spend money on network for every event isn't practical, we've got to make our product good enough so that eventually, the networks want to pay us. We think for 04, we've done the best thing. We've gone to a mass-available cable channel. You know there are 105 million American homes with television and we needed to get to almost 90 million of them to have real impact for our sponsors. So we're in negotiations to finalize that agreement. We really couldn't sign it quite honestly, and we've had it done in concept, but we couldn't sign it until we had control. Now we're going to sign it in the next few days and announce it formally.
Q: Is CBS still in the picture?
PG: Yes, we've had long, ongoing conversations. We're not compelled to do CBS programming but we're looking at each individual race and when the show can be broadcast and the impact of that market. The difference between a Spike and a CBS is about 15 million homes and if we can make a real value decision to get to those 15 million homes and to get to more viewership, then it's worthwhile. But I think the primary thing in our television programming is that we want to be on the same place, with a consistent broadcast time as many times as possible so that the fans don't have to hunt for you. That doesn't work. This is a commercial entity that relies on its exposure and we need consistency to do that.
Q: You released I think, a 19-race schedule for CART recently and I think St. Petersburg is up in the air. Do you expect to be able to fulfill 19 races with the latest deal or is that still a work in progress?
PG: The schedule that we released had some compelling entries because of contractual obligations that were in place. This new process of course, exempts us from some of those obligations and allows us to really put forth a clean document and we'll put out a new one here in the next couple days, but the content will be very similar to what you saw. The overall count will be reduced from 19 to 16 and the major variance here could be one event. I don't see us adding any more than one event, for 17. The question relative to St. Petersburg is an important one. South Florida is a great market and has had a tradition of really welcoming Champ Car. When we knew the scheduling with Dover was so early in the year, our intention in making the deal we did was to take those assets, Dover had some conflict and couldn't operate the race later in the year when we though the window fit us better, so we made a business deal there to take the assets and we are now working hard with the City of St. Petersburg to schedule an event. At this point, we are investigating May but if it has to go to the Fall, we'll do it in the Fall. So there will be a rescheduling likely of St. Petersburg and we are going to end up with 16 events.
Q: Just a follow-up as it relates to Trans-Am. I understand that you expect to release your schedule the week of the 21st, do you expect a larger or smaller schedule for Trans-Am?
PG: I think that the Trans-Am Series is optimized at 10 to 12 events, with 12 being kind of a round number. In our survey we projected 15 or so full- time contestants but the big thing about a series like Trans-Am is as it goes regionally around the country, we've seen SCCA GT1 competitors with good programs able to race one or two Southeast races or three or four West Coast races, bringing our fields up into the mid 20s. So they'll do 10 to 12 as I mentioned. The exceptions to the Champ Car schedule will be, we will successful last year racing at Sears Point with Winston Cup and we will conclude the season in Puerto Rico at a new race this year that was another huge success.
Q: In your discussions about the scheduling, obviously there is a lot of interest in the three Canadian races, will there be three Canadian races this year?
Q: Are the Canadian races important to Champ Car?
PG: Kevin and I have had long philosophical discussions about the essence of, not only is our champion Canadian and we have a lot of drivers from Canada in the series, we look at ourselves as not just an American series, we're primarily a North American series and our two Mexican races and our three Canadian races are extremely valuable and critical to our success as we go forward and we think that the reputation of Champ Car in North America is what makes those races good.
Q: So looking into the future, as long as there are tracks to race on in Canada, you would be happy to keep coming back here.
PG: Absolutely, we want, our plan is definitely to keep racing there. We love racing there, it's a big success for us, and we think that it sets an international tone to our series that is a big asset.
Q: I wonder if you guys could talk a little bit about the branding and the title. Will the CART name continue or has that gone away. Will the Champ Car name continue, will the Champ Car World Series name continue?
PG: There are three of us to vote on that and in all honesty, in all the business that we've done so far, we've had small discussions about the brand. It was talked about in philosophy about what we want to call it. I think that it's a safe assumption that our plan at this point is to call it the Champ Car World Series. I for one, just as an individual, having been around the series for so long, I understand the acronym CART, but I'm not sure that the general public really understands. When I get that occasional afternoon once a year when I get to go to the country club and I'm standing on the tee, my friends say 'Oh yeah, aren't you into cars, what do you race?' If you aren't clear in your definition, there isn't a great understanding so we're setting the brand issue. We want to pick something that has history and certainly Champ Car has great history. That's what open-wheel racing was for decades in this country so we want to understand what the fans will accept and appreciate and what helps us communicate what we do but at this point I believe that we are going to go with the Champ Car World Series.
KK: I concur with Paul on that. We recognize the legacy of Champ Car. I think the CART name is probably inappropriate right now.
Q: Will Bridgestone and Ford continue on next year in the same role that they had this year?
Q: On the schedule is there any chance of putting anything else up front or is it pretty much set that you are going to open the year at Long Beach?
PG: I think that it's a safe assumption that we are going to open the year at Long Beach. We've looked at other races that could be available to us the first of April but Long Beach is a premiere event. It's really the Kentucky Derby of Grand Prix racing anywhere in the U.S. and we're honored to be able to do that. We want to spool up or make more important, the notoriety of the series. We'll have a couple of great test session where we'll do a little television coverage in an effort to get the general public interested. We want to show the people side, we think that it will be a year of great conflict with great competition on the race track. Paul Tracy, our 2003 champion, has a great spirit and personality and there's a few guys in the series that want to diminish his notoriety. We're going to try and make the public aware of that and we're going to start the season in Long Beach, that's our plan.