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Wednesday, December 3
Updated: December 14, 5:27 PM ET
A new CART expected to emerge
By Robin Miller
Special to ESPN.com
The three car owners trying to buy Championship Auto Racing Teams aren't abandoning their plan to rescue the beleagured open wheel series. But they are changing strategies in a move that may save them big money and aggravation even though it has created some major confusion in the CART community.
Instead of waiting on a shareholders' vote Dec. 19, Open Wheel Racing Series (OWRS) principals Kevin Kalkhoven, Gerald Forsythe and Paul Gentilozzi are, in effect, asking the CART board of directors to liquidate the 24-year-old company and sell them certain assets -- immediately.
"We made an offer to buy selected assets of CART and we are willing to put up the money it takes to get CART and run the company if the Board approves our offer," said Gentilozzi late Tuesday night from his shop in Lansing, Mich.
"We've asked for immediate consideration because we need to get this deal finalized."
Originally, OWRS made a bid of 56 cents a share to purchase CART, which admitted several months ago it would not have the funds to continue in 2004. But this story took another twist Tuesday when a release was issued stating that OWRS felt a number of conditions could not be satisfied by the special stockholders meeting in Indianapolis later this month.
Specifically, CART could not guarantee the 2004 car count would not decrease from 2003, when 18 cars competed in the Bridgestone presents the Champ Car World Series powered by Ford. And this is on the heels of American Spirit Team Johansson, a two-car team with Jimmy Vasser and Ryan Hunter-Reay, recently going out of business.
Additionally, the Toyota Atlantic feeder series (also owned by CART) is facing a depleted lineup for 2004 with a couple of long-standing teams already folding or moving to another form of motorsports.
Even though OWRS believes it will field a sufficient number of cars to comply with contractual agreements in 2004, the demise of American Spirit effectively put CART's pending sale/merger in default.
That, in turn, gave OWRS a new avenue to take that possibly will prevent any stonewalling or lawsuits by angry stockholders and also get a bargain basement price. CART's release said it was considering its alternatives, which included ceasing operation and liquidating its remaining assets after filing Chapter 11.
If CART goes bankrupt, OWRS would not have to pay 56 cents a share (roughly $8 million) and would likely be able to buy the assets at a greatly reduced price. Also, there's a chance during this process they could become the Debtor in Possession, thus OWRS would provide funding with no obligations toward liabilities (there is at least one pending lawsuit with California Speedway) and have first claim on the assets. It's also feasible that the estimated $7 million remaining in CART's kitty could be paid out to the stockholders.
"OWRS will provide the cash, at a high rate of interest, so if somebody bids the property up, OWRS at least gets the money it spent plus interest. If nobody else comes in to bid, OWRS buys it cheaper and they could also acquire the assets by default," said one Indianapolis-base analyst.
Of course CART's assets are basically its three races in Canada (Toronto, Vancouver, Montreal), two in Mexico (Mexico City and Monterrey), Surfer's Paradise, Australia, Cleveland, Milwaukee, Elkhart Lake and Long Beach.
"Obviously, the sanction agreements are one of the main assets and we would keep the CART name and trademark but start a new company," said Gentilozzi, who also owns the Trans-Am series in addition to fielding a Champ Car for Alex Tagliani.
The fly in the ointment for OWRS could be Tony George, whose Indy Racing League is in direct competition with CART and already making plans to go road racing. George could out-bid OWRS for CART's assets, pluck the choice venues and deep six CART forever.
It's easy to see Toyota, one of the IRL's three engine manufacturers and title sponsor of CART's race at Long Beach, pushing or helping George acquire a winner like the street show in southern California that annually draws more than 175,000 fans in three days.
"We look to the owners/promoters, which is Dover Downs and the Grand Prix Association of Long Beach, to provide us with their recommendations and what they think is going to happen," said Les Unger, national motorsports manager for Toyota whose company celebrates its 30th year of being title sponsor at Long Beach in 2004. "We've had conversations with Dover to keep us abreast of the situation but I don't know that anybody has any answers yet.
"Obviously, if the situation is less than satisfactory, what would the options be to the city of Long Beach and Toyota? I don't know if they've gotten that just yet because Dover has not come back and said anything is different."
Jim Michaelian, president and CEO of GPALB, didn't want to speculate on the IRL or any other series coming to The Beach.
"We've got a contract with CART and, until there is something from a legal standpoint to indicate that won't be possible, we're preparing for our 30th anniversary with them," said Michaelian. "Our concern is that this doesn't get caught up in legalese and bureaucratic tape.
"If there is new resources, energy and ideas thrown into CART it's important to everyone that gets out quickly so we can all get behind the new group."
Michaelian said if CART files Chapter 11 that does not automatically abdicate the contract while longtime CART bastions like Toronto and Cleveland have different agreements in place.
"Let's say we go in under CART and come out under OWRS. We have to approve the contract," said Bob Singleton, vice president and general manager of the Molson Indy Toronto and Molson Indy Vancouver. "Molson Beer has been partners with CART for 18 years and we want to continue to support them. Are we concerned? Yes. Are we panicking? No.
"The issue is timing. We were planning to put tickets on sale to public in mid-January but we can't do that until this transaction is finished."
CART owns the rights, assets and lease agreement to race at Burke Lakefront Airport in Cleveland and paid IMG Motorsports to run it this year.
"I spoke with Paul last week and the whole thing is in CART's hands," said Bud Stanner, longtime president of IMG. "They might ask us to run it again but if they don't find a promoter, they'll run it themselves. Obviously, nobody can make any guarantees right now so we're just going to have to wait and see.
"Other than Canada and maybe Mexico, no promoters have made any money the past couple years because it's so hard to sell a title sponsor or hospitality."
Stanner attempted to bring the IRL to Cleveland a couple years ago.
"My primary goal is to make sure we have a race here," he said. "I don't care who runs it."
Most of the CART community was grasping for information Wednesday.
"Paul (Gentilozzi) tried to call me last night and we missed each other but their direction has obviously changed," said Derrick Walker, who fielded two cars this year and is scrambling to keep at least one car on track for 2004. "I don't think anybody fully understands what this release means and I would recommend OWRS organize an owners meeting as soon as possible to tell us what can and can't happen.
"We are craving for information, especially the sponsors, and we need to get the information out to corporate America or corporate wherever. This business is all about confidence and we need facts, not surprises."
Al Speyer, executive director of motorsports for Bridgestone/Firestone, has five pressing questions for OWRS.
"Like everyone else I want to know the real schedule, what TV is going to be, the realistic team status and who is going to run the thing?" said Speyer. "And if there is a new title sponsor how is that going to affect our positioning in the logo? We were very happy with our exposure value in 2003 and the CBS races were good for us because we were prominent in the logo.
"We need to determine how much to invest in CART if this changes."
Walker said it was nearly impossible to sell a sponsorship without details.
"If we don't get some facts it's going to be very hard for us to get a full field," he said.
But Speyer sees some positives in this latest development.
"The good thing for OWRS is that they will invest less in the acquisition and that leaves them more money to pour back into it," Speyer said. "It could also expedite the process and, hopefully, the court will act swiftly.
"But this really hasn't changed our view much at all. We are concerned but not any more or less since this happened. I can actually see some advantages to this."
Robin Miller covers open wheel racing for ESPN.com.Send this story to a friend | Most sent stories