CHAMPCAR/CART: Korea deferred to 2006 transcript, part 1

CHAMP CAR WORLD SERIES TELECONFERENCE TRANSCRIPT WITH JOE CHRNELICH REGARDING THE DEFERMENT OF THE 2005 ANSAN, SOUTH KOREA EVENT ERIC MAUK: For those of you that did not get the release that we put out just a little bit ago, the Champ Car...

CHAMP CAR WORLD SERIES TELECONFERENCE TRANSCRIPT WITH JOE CHRNELICH REGARDING THE DEFERMENT OF THE 2005 ANSAN, SOUTH KOREA EVENT

ERIC MAUK: For those of you that did not get the release that we put out just a little bit ago, the Champ Car World Series announced that the Ansan Grand Prix that was scheduled for October 14th through 16th has been deferred to the 2006 season. We fully expect that the race will take place in Ansan, South Korea, in 2006 as part of the previously released 2006 Champ Car World Series schedule. I will now turn things over the Champ Car's Executive Vice-President of Development, Governmental Affairs and Planning, Joe Chrnelich. Thank you for joining us today.

JOE CHRNELICH: Thank you, Eric. Good afternoon, everybody. I won't give you a long statement here, I just will say we obviously are disappointed today on the news on Korea, and we've deferred the race into 2006. But as always, and I think most of you have had enough time with me now, we will be very honest about the circumstances to you. As we go through the Q & A, I think you'll come around to agree that there are a lot of positive elements here that we as a company can build upon moving forward, but we're going to look at this. In the meantime, I'm sure you have a long list of questions, so why don't we proceed into the question and answer session.

Q: Saturday night in Vegas you were pretty honest and said there were a lot of issues. Can you just break down, was it just too much to try and -- I know the last three or four days you've been working pretty hard.

JOE CHRNELICH: Sure, yeah, you're right. I think you could see in my voice and how tired I looked. There were a number of issues here that we were trying to help the promoter and help the city overcome, but at the end of the day, we got to a point in time where we said, you know what, folks, it was a valiant effort but it's not there yet, and rather than force a race on a promoter just to prove that we could go and race was not a good business decision for either Champ Car or our partners over at Ansan. The elements more specifically that caused the deferment decision today were: A) operational preparedness on the part of the promoter TRK; and secondarily, some of their lack of adherence to our contract terms.

A while back, as some of you probably have learned, the general manager for TRK had been removed by the investors and at the request of the mayor because the performance was not keeping pace with the demands of the event. After the removal of the GM, there was a lot of scurrying around to try to find a replacement, and unfortunately it cost the promoter a lot of valuable time. So that is probably the single biggest issue.

The circuit, if you will, would have been prepared and ready to race. Some of the esthetics around the borders and things probably would not have looked as nice as they would have liked, but the circuit was, and still is, within days of being complete. So that was less of an issue from our side. But at the end of the day, it was just operational preparedness on the part of the promoter.

Q: Just a quick follow up, Formula 1 has had problems getting Korea to follow through. Do you have any confidence that this thing can be pulled together? What makes you think that you can get these guys to follow through by 2006?

JOE CHRNELICH: Well, there were a number of positives that we saw, which gave us the confidence to make the statement today that we're going to defer this into '06. You've got a circuit that is near completion, and it's a very, very nice circuit. It'll be competitive for us, good backdrop, so that's a big plus. You have to have a circuit to race on, obviously.

Secondly, the mayor of Ansan has been incredibly supportive. Whenever we ran into a challenge and needed some additional emphasis or push, he was there for us, and he personally is committed on behalf of the city to making sure this race event is a success. So whether it's Ansan or anywhere else in the world, that is very, very important to us.

The third is, and even though this is not public, there are some very, very major sponsors in the wings here waiting to come on board. They do want to see the promoter situation sift its way out, if you will, but when we step forward with those names, I think people are going to have a renewed sense of confidence on the progress made there.

So those are the elements that told us, you know, we're not far off here, so let's be patient. We'll be back over there meeting with the mayor, working with him to make sure the promoter situation is stabilized properly, and we'll be prepared for next year.

Q: With the postponement today and the fact that the China race that kind of got previewed in April isn't on the 2006 schedule, would you say that you guys maybe slightly underestimated the challenge of organizing a race in a non-English speaking country on the other side of the world?

JOE CHRNELICH: I think that's a real good question. To be honest with you, probably. I mean, when you go to a foreign land where you have language barriers and you have time differences, time zone differences, it just makes the challenge of fixing a problem that much tougher because you don't have the ability -- for instance, as an example, we had two new races here in North America; we had Edmonton and we had San Jose. There were challenges with those promoters, no doubt about it, in terms of things we had to fix. But we both spoke English, were within a quick plane ride of each other, and we solved the problems, not the least of which is a first-year race is always most challenging. When you take that idea right there and move it to Asia, it just makes solving problems that much harder.

So back to your question, yes, we've come to learn it's much more challenging than we anticipated, but we're learning from it, we're moving things forward, and we're also learning you have to be patient, and that's what we're going to be.

Q: With the deferment and cancellation of this race, are there any thoughts about distributing the points because effectively now the champion is virtually over and gives Sebastien the title?

JOE CHRNELICH: Good question, although Sebastien has not obviously won yet. The issue has come to the table, and between our series ownership and management, we're discussing that issue. I would suggest you'll probably hear something in the near future as to a decision on it.

Q: Maybe it was just scuttlebutt, but I heard that there was some consideration of having the race in the spring of next year. Is it still going to be in the fall of next year?

JOE CHRNELICH: We did talk about that briefly, thought about getting it to the market sooner, but at the end of the day when we talked internally, we said we put it at that position on the schedule for a reason, which is to bundle it with the Australian race, and there are a lot of benefits to doing it back-to-back when you travel that far of a distance. So we've decided to keep it at the current date on the '06 schedule as a result of that.

Q: While we're on the topic of schedules here, you still have a schedule, and I know some of it is based on the fact that you've got to get from one place to another in terms of geography, but you've still got periods of the schedule where you disappear off the radar screen for two or three weeks at a time, and I know there has been discussion in the past about closing up some of those gaps, and also, too, there is concern that this championship maybe shouldn't end outside of North America in terms of the bottom part of your schedule. Have there been any thoughts about closing up some of those gaps and juggling things around so those things don't happen?

JOE CHRNELICH: Absolutely. That's a challenge that's probably one of the biggest challenges that fell in my lap when I took the job a year ago. What I've come to learn in the job is when you form a schedule, you can't just move dates around willy-nilly, if you will. There's a lot of considerations to it, which are: A) weather; B) whether events are going on in the city; C) network time availability. So you've got to look at all these variables before you take a date and move a date, much less find a venue and put a date on the schedule. It's a lot tougher than just moving it around.

I think the first step forward we made this year to help ourselves a little bit on the April-May gap was to put Houston on the schedule. That narrowed it a touch. Every year when we add an event to the schedule, you're going to see those gaps start to narrow a little bit, but it's going to take time. But our objective is to do that, to answer your question.

And to your second question, yes, we very much want to end the season in the U.S. Obviously it's much more convenient to everybody being here, but more importantly, it's back in the market, our home base market, if you will, so that is one of our top priorities, as well.

Q: I know that there was talk that there was some announcements or press releases made about the Beijing race and that was also not put on next year's schedule as many of us had anticipated. Is there any update on that?

JOE CHRNELICH: Actually it will be back on over there in early October to continue discussions with BSAM, more accurately their new company, which is IS. And back to the prior question on the difficulty of dealing in Asia, what we're also finding out not only on a logistical basis but on a business basis, people in Asia, the cultures of Asia, look at things a lot differently than we do back home here. And part of the challenge is reaching an agreement on key points but also how they're packaged together, and images and pictures are much more important in the Orient than they are in the U.S., which we're just the opposite, we're more focused on words.

That's been a challenge for us, but we're continuing to talk with them. We think they're a good partner. We're a ways away on some money issues. We do have some track options there, as you know, but at the end of the day, we need to continue to be patient with our decision. We're not going to just race into an arrangement to say we've gotten that off our list. We just need to make good business decisions, and that requires patience.

Continued in part 2

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