Continued from part 1 Q: Looking at this new car from a strictly commercial standpoint, in an attempt to address your TV issue, and also to provide additional value for sponsor identification, do you envision the dimensions on the body ...
Continued from part 1
Q: Looking at this new car from a strictly commercial standpoint, in an attempt to address your TV issue, and also to provide additional value for sponsor identification, do you envision the dimensions on the body work of this car to be significantly longer than the current package so as to make the cars more easily identifiable for the TV audience, especially on ovals, and also to provide just more space for sponsor commercial ID?
RANDY BERNARD: It's a great question and probably a better one for Tony or Brian. I did ask that question, and when we were going through the process is how much more space will there be on the cars for sponsorship, and I think that, you know, some of the areas that I don't think anybody right now can tell you that there's going to be a tremendous amount more space on these cars. It's going to depend on the aero kits that are designed. But I think that you can see how a fin could be created -- could create more sponsorship elements to it. That would be primarily my answer. Tony or Brian might have a better answer than that.
BRIAN BARNHART: I would certainly agree with Randy. It's certainly been part of our RFP and goal to improve and maximize sponsor exposure and what we are doing. We have a challenge with our cars running 230 mile an hour, and as small as they are, it is difficult to get that sponsor signage where we want it, so it's something that's at the top of our list so there's a lot of components that went into this deal.
So certainly going to be part of the package when we as a safety body sit down and draw up the rule book for 2012, we want to leave those windows and those boxes open as much as possible. Yet at the same time, we do want to define them enough so that we get an increase in square inches to improve sponsor visibility.
Q: Randy, Governor Daniels made reference to grants and tax credits from the State of Indiana in order to facilitate Dallara bringing its facility to Speedway. Can you put a total dollar value on the State of Indiana's commitment in terms of these grants and tax credits?
RANDY BERNARD: We started visiting with the governor and his office about two months ago, and Jeff was involved in those preliminary meetings, as well. The governor wanted to make sure that we would ensure that the next manufacturer would locate here in Indiana.
What we did is we had as a mandate in our request for a proposal, we felt that it was great to bring jobs and manufacturers over here from Italy, but we wanted to take it one step further, on how could we retain the different team owner shops here and how could we promote a way to bring more here. We want to make this, again, and renowned for the racing capital for the world.
I think that we addressed that in what the governor presented today; that there will be basically 150,000 per car, per team owner, if you are located here in Indiana. So hopefully it's going to bring some new business, and if you add that up on 28 cars, it should be close to 4.3 million, so that's basically what that part of that grant is.
Q: Is there a ceiling on the amount of funding from the State of Indiana?
RANDY BERNARD: From the State of Indiana, I believe it's at $5 million, but you might want to get that from the Governor's Office.
Q: Are manufacturers going to be allowed to make changes to basically tweak their aero package during the middle of the season, or does it all have to be done up front at the beginning of the season? And also, are you at all concerned that after two years, it will become apparent that one design is better than the other designs and it will become the dominant design in the series.
TONY PURNELL: With the number of updates that you can have, we are imagining that you come up with your update package and you go with that through an approval procedure and you live with that for one season.
I think your second question is very pertinent. If somebody emerges with a better package, is that it, and does the whole grid just buy it? I would like to think not, because I worked in aerodynamic development on race cars for 15, 20 years, and it is utterly remarkable how year on year, the aero guys find more and more advantage; and every year you sit there saying, guys, they have been at this -- they have maxed out, but they never do. At 225 miles an hour, even tiny advantages translate to big gains in track performance.
So I think that the challenge is there for people to take advantage of, and there's no way that people can't be beaten, year on year, a good team with good facilities will be able to out perform whatever is out there.
Q: Obviously with the current state of the economy, every company is learning for a return on their investment; do you feel there is enough benefit in the series as it stands now to entice all of these potential manufacturers to create the aero kits to make them believe that being involved in IndyCar racing and the Indy 500 that they will be able to get a solid profit out of creating these kits to justify their investment in the series?
RANDY BERNARD: I think this is a great starting point. I think now we have to go and visit with them and convince them that we want partners. If they are selling cars and we can help them sell cars, that has to be one of our priorities, as well, and we have to be able to listen to them and understand what they need from a relevance standpoint. The fact that we went from -- up to a V6 Turbo where an inline four has allowed the run, I think is important. We heard from a lot of especially European auto manufacturers, an that inline pole is very important.
We also have to keep this in check in relativity to the fact that we are under a timeline and I'm not sure how many different manufacturers will be able to produce an engine by 2012. But the offer, it's out there right now, and we are sure optimistic and welcome anyone that wants to participate.
Q: The 2012 engine, how will it fit into the chassis? I was wondering if the engine, if you've discussed or made decisions about whether the engine will be a stressed or non-stressed member of the new Safety Cell.
BRIAN BARNHART: Actually, I think the possibility exists for it to be either. The more conventional would obviously be the stressed member of it, but I think there's some creative ways that it could actually be up being either at this point. I think some of that will be addressed as we make further progress with engine manufacturers that we're in discussions with.
Q: Where do the cost savings come from on the manufacturer of the car, is Dallara taking a 40 percent hidden profit or what?
BRIAN BARNHART: No, Dallara is leaping pretty heavily on the suppliers that are providing the components for them. They will be dealing with the transmission supplier, the brake supplier, the fuel cell provider, the electronics provider, the drive shaft and drive line provider. So they will be leaning hard on those partners, as well, to help achieve this cost parameter and this guideline of where we are at.
So it's certainly not at a product from where they are at. It's more of a function of what the car price was arrived at before. We had a car sold from Dallara, and then the owner, Gil can probably address it as well as anyone; the owner had to buy a set of drive shafts. He had to go get brakes, and he had to go get the fuel cell and he had to go get an electronics system.
By the time you added all of that on top of what you were paying for Dallara, we were approaching $700,000 for a rolling chassis. Our parameters that we set forth in the RFP, we now want that number reduced in the neighborhood, as we said, about 45 percent; and the 385(,000) complete rolling car, includes all of those components, and the burden will be on Dallara to negotiate the deals with the suppliers of those components to help us achieve those prices.
GIL DE FERRAN: I think Brian touched on some very good points, and I think a lot of the reduction, it's in the fact that, you know -- let me answer in a different way.
This is no different than the automotive industry where you guarantee a certain market for your parts so you can dilute the cost of engineering development and manufacturing into a much larger pool of parts without the risk of losing that supply contract.
So there's a lot of issues that go into that cost equation. The number of parts is less, the number of parts in the kits is less, and there is a lot of interchangeability between parts, less than five parts and buying them five parts. You know, there's a lot of creative engineering that's going on in an effort to reduce costs without reducing performance, and that can be done -- I think that is being done, as you say, in a very creative way.
Q: You also mentioned the operating costs you project to be reduced by 50 percent, is that solely upon the parts or are you anticipating smaller crews or is it --
GIL DE FERRAN: No, I think that's purely from a parts standpoint. The number of parts is less. The durability of parts are projected to be higher. So the inventory of parts you have to carry are less and they will last longer.
So essentially, because of those three factors, we expect the running costs of the car to drop in the neighborhood of 50 percent, which is a great target. So from a cost perspective, this couldn't come soon enough.
Q: So does this mean the budget for a year would go from 6 million to say 4.5?
GIL DE FERRAN: The budgets, you know, they are not only running costs of the car; you have personnel, you have travel and so on and so forth. But the running costs of the car is a significant portion.
So I would say that the savings are probably in the neighborhood of what you're talking about.
Q: On the engine specifications, do you have any idea how many different engines that there may be available, different companies?
BRIAN BARNHART: Well, we don't have yet. The strategy was announced the first week of June. We just tried to make it clear to everyone that it is an open and inclusive formula. It is a smaller, more efficient package than what we have currently been running which we think is relevant technology and will provide a transfer of technology from the automotive manufacturers.
And that's just step one was announcing what our strategy is. As Randy mentioned earlier, step two is we are going to proactively go out there and make sure these auto manufacturers are aware of what our strategy is, what our policy is going to be, and it's basically a sales job by us to go out to each and every manufacturer we can find domestically and international to make sure they understand what we are doing and how we are doing it and hopefully attract them.
But at this point, we have no idea how that may land, as Randy said, we are probably realistically managing expectations, we are probably only 17 months from 2012, and that's a pretty tight time frame in terms of producing and manufacturing purpose-built race engines.
We are keeping our fingers crossed that potential exists for potential manufacturers coming on board by 2012, but we certainly are more hopeful that we will have multiples, especially by 2013.
Q: Gil, when you were a guest on my 'Race Reporters' radio show last year, you described your view of the IndyCar brand as, quote, insanely fast, unquote. Do you envision this new car package to advance your perception of the IndyCar brand as insanely fast?
GIL DE FERRAN: Well, I have to say yes, and perhaps we didn't talk enough about it. Throughout this process, we discussed many subjects about - - I won't even call it a new car. I will call it this new strategy, new concept, and certainly one of them was performance. And when I talk about performance of an IndyCar, I can't help but wear the driver hat. I spent most of my adult life as a professional racing driver, and it's hard to give up that mentality sometimes.
So as a driver, I very much wanted this new generation of IndyCars to not only retain and maintain this kind of, shall we say, this high-speed aspect of it. But I wanted this enhanced. I wanted IndyCars to become more difficult to drive, more challenging to drive; so that frankly not everyone can do it. I think if we make this car such that, you know, a couple of guys when they step out of it, they are a little bit scared; that's a good thing as far as I'm concerned.
The performance targets that were set for these cars, both on road courses and ovals, I think are in keeping with that idea, and I am confident given all of the parameters that were set, and capabilities that I think all of the companies involved have, that these targets will be achieved, and this new generation of cars will enhance that brand value of IndyCar Racing?
Q: Are you saying that you envision these new cars will, in fact, be more difficult to drive, and do you see the potential for this configuration of vehicle to set new track record, speed records at Indianapolis or any place else?
GIL DE FERRAN: I think they will be more difficult to drive from the standpoint that they will be faster. And in my book, any car that is faster is typically more difficult to drive, because you have usually less time to perform the same functions with the same or more precision.
So a faster car will always demand a higher level of skill from a driver. Performance targets in the ovals were to be in the same neighborhood as they are today, however, I think the latitude is there for those performance targets to increase if we can prove that that can be done safely with new safety enhancements that are not only happening on the chassis but in motorsports in general.
So I think the potential is there if we can work out a way to do it safely; but that you will see some improvement in increasing speed in ovals, but I can tell you that you will definitely see that in the road races, too.
MODERATOR: With that, we will conclude the teleconference today. We appreciate everybody participating.