PARTS PRICE CRISIS THREATENS INDYCAR’S MOMENTUM
By John Oreovicz
Is there any sport in the world that features as much infighting between the governing body and the participating teams as Indy car racing?
Don’t kid yourself: the dissention in the sport didn’t start with the CART/IRL split of 1996. It goes all the way back to the late 1970s, when CART was formed by a group of team owners who believed that USAC focused almost exclusively on the Indianapolis 500 and was not placing enough emphasis on the kind of season-long championship the teams needed to survive as business entities.
Therefore, it’s either ironic or disturbing that the IZOD IndyCar Series could be on the brink of another owner’s revolt. In a USA Today story published this week, Jeff Olson documented the current war that is quietly raging below the surface, pitting team owners against exclusive chassis supplier Dallara, with INDYCAR forced into the role of mediator.
Dallara, you might recall, won the rights to the contract to build the new spec chassis introduced into the IndyCar Series for 2012. INDYCAR stipulated that Dallara must build the car in America, so Dallara constructed a spectacular final assembly facility on Main Street in Speedway, Indiana, within sight of Turn 1 of the Indianapolis Motor Speedway. Don’t call it a factory, because cars are 80 to 90 percent completed at Dallara’s base in Italy before being shipped to the USA for completion.
Dallara, in return, demanded that all spare parts for the DW12 chassis must be sourced from Dallara. In the past, most teams maintained fabrication shops capable of making suspension components and small carbon fiber bodywork parts like wings and endplates. If they didn’t do it themselves, the parts were available from independent local suppliers.
This is where the current problem lies: Because INDYCAR determined the sale price of the rolling chassis ($385,000, considerably lower than the cost of the outgoing Dallara IR03 design), Dallara is making up for lost profit by selling spare parts (and other components necessary to put a rolling chassis on track) at a considerably higher cost than team owners were used to paying. And the team owners are not happy, claiming their costs to prepare and run the DW12 are actually higher than the outgoing IR03.
The owners claim that the extra parts necessary to put the car on track add 50 to 70 percent to the initial $385K sticker price – an estimated $150,000-190,000 per car. They are demanding an across-the-board 40 percent price cut on those parts.
And here’s the tricky bit: because INDYCAR’s contract with Dallara gives Dallara exclusive rights to manufacture and sell those parts, the team owners have no recourse but to use INDYCAR as a middleman to bring those costs into line with where they were in the past.
INDYCAR CEO Randy Bernard says the parts in question make up only about 5 percent of a team’s total budget.
“There are some very rational owners who have discussed issues with me and have discussed them in a practical way,” IndyCar CEO Randy Bernard told USA Today. “There are others that just want to create turmoil and continue to fight. I’m not sure that they understand the bigger picture…it’s very important for us to be able to sit in a room and understand the complete economics and make decisions that are in the best interest of the series overall.”
The team owners are upset to the point that they are threatening to produce enough of the necessary parts themselves and show up at a race in unison without the required Dallara components, risking disqualification or penalty.
“You don’t want to see it get nasty,” said longtime team owner (and three-time Indy car champion driver) Bobby Rahal. “You don’t want to get to the point where the owners all decide to use parts from outside vendors and take the chance of getting black-flagged. That’s a possibility en masse. But if everybody keeps a cool head, there should be a reduction in the price of parts.”
Bernard and INDYCAR president of operations and strategy Brian Barnhart, who is considered the architect of the Dallara deal, say they hope to reach a resolution by September 15. Of course, that won’t make any difference to any team’s 2012 bottom line, given that September 15 is also the date of the final IndyCar Series race of the season in Fontana, California.
“Internally, we’ve got everybody working on this,” Barnhart remarked to USA Today. “We’re trying to do everything we can. I would say there is a sense of urgency. We do have a responsibility to respond to this.”
Needless to say, Dallara is holding its ground. “We made a big investment to come to the United States,” said Dallara’s chief of U.S. operations, Stefano di Ponti. “We have bills to pay and mortgages to pay. We can’t release too much, otherwise we can’t stay in business. We’ll go bankrupt.
“They're asking for a big percentage,” he added. “Forty to fifty percent is a big number for us. We’re trying to come up with the best solution to please them.”
Many longtime Indy car fans are discouraged that the sport has in effect become a spec car formula over the past seven years, although this year there is at least heavily regulated competition between engine manufacturers. The larger teams remain unhappy that they are no longer able to develop their own parts for cars in an effort to gain a performance advantage.
But the real point of contention remains the price – and the performance – of the Dallara spare parts. Owners contend that not only are the self-produced components considerably cheaper, they are also of higher quality.
“We know what we can make parts for and what we can buy them for on the open market,” said team owner Bryan Herta. “That’s the root of the problem. We were told that the cost we were going to pay for a running car would be less than they were before. Those things have not proven to be true.
“We’re willing to work with Dallara on buying their parts, but it’s got to be reasonable. The representations that were made to us as we were preparing to start with the car are not in line with what’s happening now.”
It’s a shame that Indy car racing as a whole continues to shoot itself in the foot. The DW12, which polarized many fans with its appearance, has been a huge success on the track, with this year’s competition featuring plenty of passing and exciting action. With three races remaining in the 2012 season, four drivers (Will Power, Ryan Hunter-Reay, Helio Castroneves and Scott Dixon) are in a tight battle for the series championship.
But as always seems to be the case in this particular sport, the action on the track continues to be overshadowed by political issues that leave a sour taste in the mouths of competitors and fans.
Let’s hope a resolution to Indy car racing’s latest crisis is reached soon to put the spotlight back where it belongs.
John Oreovicz is a veteran motorsport writer who contributes to a variety of publications, including ESPN.com.