CART Manufacturer's Forum Portland International Raceway Portland, OR June 23, 2000 TEAM OWNERS Participants: Bruce McCaw, PacWest Racing (Mercedes-Benz) Pat Patrick, Patrick Racing (Ford) Derrick Walker, Walker Racing (Honda) Cal...
CART Manufacturer's Forum
Portland International Raceway
June 23, 2000
Bruce McCaw, PacWest Racing (Mercedes-Benz)
Pat Patrick, Patrick Racing (Ford)
Derrick Walker, Walker Racing (Honda)
Cal Wells, PPI Racing (Toyota)
Moderator: Mike Zizzo, CART
Q: Could each of you gentlemen comment a little bit on the direction you see CART going now with the change at the top and what you expect Bobby to accomplish in the next few months.
Pat Patrick (Ford): I don't know how to answer 'how CART's going'. I think the change at the top is very significant. I think Bobby will do an excellent job. He is very experienced, and he's a racer. And that's the kind of guy we need running this company. We use the word 'interim', and that is what he is right now for the company, and I only have one vote, but I would vote to keep him if he is willing.
Cal Wells (Toyota): I think Bobby is going to contribute massively. Because he has such a core understanding, such an integral understanding, of the business. His experience as a driver, a team owner, how to run a business and not put it in the tank. He's had multiple perspectives how to view the challenges that are ahead for CART, and the opportunities. I think that Bob will recognize the opportunities and keep the CART 'boat', if you will, steaming ahead. Plus there are a lot of exciting things ahead on the horizon, like the schedule, and television. I think Bobby is the right kind of guy to capitalize on those, while still looking at things such as the equipment we run, and where the next set of changes are going to be, as it relates to engine and chassis, and team costs and sponsorships and so on and so forth. He's uniquely suited to attack the job at hand. And while I think he'd be great (as permanent CEO), I've got to credit him with more intelligence than that. So I think he'll hang around for a while and work to find someone suitable to take the job (permanently).
Derrick Walker (Honda): I agree 100% with what Cal said. I'm sure Bobby can't afford to take a pay cut to keep the CART job, anyway! But I think, in the short term, while he's at the helm, I'd expect to see a very positive effect, getting everybody back on track, not only internally, but outside the 'motor groups', the manufacturers, sponsors, the community of racing that has become somewhat fragmented or flat over the last few years. I think he will have a positive effect, get everyone to 'rally around the flag' as it were, to deal with the issues we've got that are already in place. Then at some time in the near future we're going to find out whether Bobby wants to hold on, or get out and find the next person. If you ask me, that's going to be our next big challenge, if he doesn't want to stay on board.
Bruce McCaw (Mercedes-Benz): I pretty much agree with everybody else as well. The only other observations I'd make is that: A) I don't see any massive changes in the direction of CART. I think the direction that's been set off has been pretty clear. And I think that the objectives of the board are pretty obvious. We've made some changes to bring in some stronger people - Hal Whiteford and Pat Leahy as well as some new members of the board as independent directors. I think the company is well positioned to move forward. I think we've got the people in place to accomplish this. I think the combination of both Bobby as president and CEO, and Jim Hardymon as chairman brings a lot of strong business savvy to the company. Don't forget that Jim is taking a strong leadership role. So I think there's an opportunity now, as Derrick said, to pull people together. This is a business where everybody becomes an 'instant expert' on everything from marketing to rules and I think that Bobby perhaps can provide some real strong leadership. He's a great people person, he understands them, cares about them. I think this is a positive move, and now we'll move forward from it.
Q: Do you guys think that, after all the leaders CART has had to date. Do you think it's finally time to have one guy to lead you and give that guy the say-so to lead this group and not have votes all the time. Is this something that is possible and how do you feel about it?
Bruce McCaw (Mercedes-Benz): I think that, the way CART has become organized, that particularly as a public company, that we have certain responsibilities. I think that trying to build a strong professional management team will ease the decision-making process and I personally would like to see more strength in the management team in terms of the decision making. The owners obviously will (continue) to have a lot to say about, and care about, the direction of the company. But a strong management team will help to accomplish that.
Derrick Walker (Honda): Yeah, I agree with Bruce. We'd like to see our front office be more independent, less reliant on direct direction from the owners. But, whether you like it or not, (CART's) been invented by the owners, and to a large part controlled by the owners. So it is an owner's organization that invented this series. So that influence is always going to be there. I think that it is important that the next person who runs CART - if it's not going to be Bobby - that in the long term that person has the respect of the owners. And it seems like we've had people in the past that we, the owner group, have put a lot of pressure on to sometimes perform miracles. And sometimes I think we need to understand the issues in greater detail so we can provide better support to our leader. I think we're getting better at that. I think the fact the company is a public company now makes things a lot clearer now, even more than just five years ago. So I think the changes at the board of CART are going to give the new president more responsibility in the running of the company. I often wonder if the CEO's job is really two jobs. If there's anything I think Andrew (Craig) should've done differently it would've been to delegate more. Hal Whiteford, who just came on board, perhaps he (Craig) should've had a Hal about five years ago. Basically divided the company so you'd have operations headed by one guy and the guy looking at the big picture and the commercial aspects. I think part of the problem is that you look for a guy with expertise in all areas and it becomes very difficult someone who's available and can do that. I wonder that in the future maybe we should have two separate sort of entities, but still one guy sort of overall in charge. So delegating to the right people and having the right people in charge should be our mission when we search for senior management.
Cal Wells (Toyota): I'll echo a lot of their thoughts. When the company went public, from a business perspective, I'm not on the Delaware Board. But from where I sit, there's a lot of business expertise that's been acquired with the addition board members we've added and the team owner board members on now, has improved massively Certainly, everything needs to be managed in the best interest of the company, and the interests of the shareholders. I think maybe if things had been done that way 5-6 years ago, we might've been able to dodge a couple of potholes in the road. But like any public company, there cannot be one all-empowering individual, like NASCAR, that is a privately-held organization. But we can have a more strongly focused group of people, determined to build the business, than we have had in the past.
Q: Pat, if I can alter the questions a bit for you, since you are one of the founding fathers of CART. Can you talk a little bit about how difficult it is to find someone with all the qualities for this position. Someone with the proper background and experience in all the different facets.
Pat Patrick (Ford): You know, I was involved in the CART management for probably the first 10 years, even though John Frasco was president. He relied heavily on people like Roger Penske and myself for advice. Then when he didn't want to do that anymore, and I don't blame him, he resigned. Then we got this guy (Bill) Stokkan in. He was a very professional person in his own area, and so was Andrew Craig. The problem was, they just didn't understand our sport. I'm a sincere believer that if you run this operation you have to be an insider. And Bobby (Rahal) is an insider. I think it's going to be an excellent opportunity for us to find out if an owner really can run the organization, or an ex-owner. Now we need to address the franchise board, that's a totally separate thing. What we focus on is rules and the number of events. We don't allow them to work in any other areas. Having been there himself as an owner and a driver, he ought to understand that board more than anybody. He'll let that board do what it should be doing, and he'll do what he should be doing.
Q: This questions is for Cal and for Derrick. You guys are involved in other series. What have you learned, Derrick you in the IRL and Cal in NASCAR, there that will help you make better decisions and going forward with CART.
Derrick Walker (Honda): Well, in the IRL they're a younger organization. So, the level of competitiveness and the demands you get when a series becomes more competitive and you get double the number of races, that really changes the look of the front office. So it appears to be very much a simpler system of operation. They have fewer races, fewer cars, and rules and everything you see when something starts to grow. I think in terms of 'one against the other' in plusses and minuses, you know, they just operate differently. They have their advantages being somewhat simple and in a smaller group, and their decision making seems a lot simpler. On the other hand, I think CART has a much more democratic feel about it which, when you take the benefits of being a democracy you get a lot of imput from a lot of different areas, so you actually end up with a richer product. I think they're just two different ways of doing it. I don't see one being overall a better system than the other. You can things either way and still be quite effective.
Cal Wells (Toyota): I haven't been around NASCAR long enough to tell. I mean, I've enjoyed what I've done so far. It is a very dictatorially controlled organization - and they make their mistakes, too. They're a pretty big monolith, they're able to drag a rug along and sweep a lot under it. It's a real apples and oranges comparison. They're not a public company, they're really only responsible to themselves. They do have their competitors' interests at heart, there's no doubt about that. But, any other comparison today, right now, would be a real stretch.
Q: The last two directors came, as has been noted, from outside the sport. The press isn't privy to the compensation package. But it seems a lot more attention was paid to the exit compensation, rather than to the entrance compensation or performance compensation. Have you guys learned anything from hiring people who's exit packages seem to be very rich?
Cal Wells (Toyota): You know, from my perspective the guys come in, they bust ass and you take care of them when they leave. I think it's very unfair for anyone to judge that because he's not here any longer, that he screwed up. Bottom line, as owners, it is incumbent on us to hire the right guy. And if we make a selection, as Pat alluded to earlier, Bob is well suited to the job. But what if he wasn't available. Each time these guys are hired, they're hired with the best intentions. Nobody hires them setting them up to fail. It's a big challenge, and a lot of work. There are certain things that needed to get done, that Andrew did. And there are certain things that needed to get done, that maybe didn't have the support of the majority it could go. But as far as severance packages, those are really private deals that A) shouldn't be discussed in public; and B) when somebody does a competent job, you don't run them out on a rail. That's not what Andrew's departure is about.
Bruce McCaw (Mercedes-Benz): I'm not quite sure what you're alluding to. But if you're talking specifically about Andrew's case, I mean I don't think that was the case. The exit package that was negotiated with Andrew was done very much on the basis of a lot of things that he had accomplished, particularly with regards to the stock side and everything else. I've been involved in a number of these things and I think the exit package was negotiated very quickly, was fair on both sides, and reflected the accomplishments that had been done. So I really don't think that's an appropriate thing to focus on because I don't believe it was a negative. I think it was handled extremely well on both sides. And I think Andrew did have a substantial amount of performance orientation in his package.
Pat Patrick (Ford): I think that Bruce pretty well said it. I don't know, don't remember what Stokkan's exit package was, if it was very much or not. It shouldn't have been, if you want my opinion! But Andrew's exit package was very fair. He did a lot for the company, he did a lot to bring this sport a long ways. He was not over-paid in my opinion, as an executive is paid. Let's say you don't pay a guy anything. How are you going to attract people. I's a two-edged sword.
Q: There's been a certain amount of talk, looking at the next guy, that compensation should be based on certain things, such as race attendance, or TV ratings. Would you have any response to that"
Derrick Walker (Honda): Well, in principal it sounds like a good idea to base it on that. But the reality is, if you look at that person in that position, how much control they have over those areas is (questionable). They can certainly lead the organization but, its very hard to base it on television ratings when it takes a long time to build those ratings, and you can argue how much he can really influence that. So, giving someone a compensation package over things he can really control himself, I'm all for it. But I don't think, we've been there with the compensation committee, looking at areas like that. But we've always had difficulty putting something there that an individual can directly be measured by. You seem to put a lot of emphasis on the compensation, and that's a fair question, that's why we're here. But I think in Andrew's case, when you look at what the organization was like in 1994, when we hired him. He did do a lot for the organization. So his compensation level over the years, and his exit amount, is really a function of what he did for the organization. So I don't really think it's fair to look at one number without looking at the big picture and all the benefits that Andrew did achieve in CART, turning it around and getting it focused in a forward direction. All credit to him. So in my opinion he received his 'just desserts' with his compensation. If we want to find someone who can run this company well, then we've got to compensate him. Otherwise we're not going to get the kind of leader we're looking for.
Q: Is the direction of the scheduling changing? Or is it still pretty much the same strategy the same in terms of where CART is going to go and going to race?
Pat Patrick (Ford): I think that's already set by the Delaware Board. I think that's pretty well set. The only problem with scheduling is that we raced in Detroit last weekend, Portland this weekend and Cleveland next weekend. Now, one way or the other you've got to find a way to solve that. It's just a little thing that maybe not too many people think about. But it just kills us. It kills our people, and it's very expensive. As far as events, there's certain events we don't need to be at, and there's certainly events we should be at. We've got to do what we think is best for our sponsors.
Q: The CEO of any public company serves at the pleasure of the board of directors. However, there comes a point in time when the CEO begins to lose the confidence of the board and begins to attain a defensive posture.
The perception is that more people in the CART front office are more concerned with keeping their job than losing their job. In Bobby's case, CEO isn't the whole thing. He's still a team owner, he's still a member of the board, he's still got all the other things. Do you think it's an advantage he's not as worried about whether he's not... He's still able to make decisions and 'if you guys don't like it, that's fine, I'm still part of the team'. Will that freedom allow him to be more effective?
Pat Patrick (Ford): I think, I've been the CEO of a lot of companies, too. And the biggest problem you have isn't whether he's scared of losing his job. Either they're doing their job or they aren't. So if you're scared of losing your job, you shouldn't have it in the first place. It's that simple. And if Andrew was on the defensive the last two years I wasn't aware of it. There's been a lot of dissatisfaction on both sides - the management side and some of the owners. I don't think that's the issue. You Roger Bailey worked for me for 12 years. I don't think he ever a bit cared about losing his job. I should've fired him, I'm sure, 10 years ago. And Bruce has run a lot of companies, as I have. People need to work together as a team. Anybody that's running scared like that causes friction and morale goes to hell very quickly when that happens, and that's just bad.
Q: Keeping Pat on the hot seat here...
Pat Patrick (Ford): Okay, I'm enjoying this.