Speed Sells Led by superstar Jeff Gordon, Nascar is going national. Now it's the hottest marketing vehicle in sports.
By Roy S. Johnson Reporter Associate Cora Daniels

(FORTUNE Magazine) – When he first laid eyes on Jeff Gordon, Lou Savelli wondered whether he had made a terrible mistake. The president of Du Pont's automotive-finishes division, Savelli had just staked about $11 million--and much of his aggressive growth strategy--on a stock car driven by the 20-year-old rookie. Stock-car racing was huge with Savelli's customers: automakers and repair-shop owners. So he saw the sponsorship as a way of putting them closer to the drivers they idolized. But when Savelli met the young driver seven years ago, his heart sank: The kid looked like George Stephanopoulos' baby brother. Slim and slight, he didn't have a Southern accent, and he was as polite as an altar boy. Could this guy really handle 700 horses at 200 mph against men much older, more experienced, and a whole lot ornerier? "Was I wrong?" Savelli asked himself.

Nope, not by a mile. Today Jeff Gordon is the hottest racecar driver on the planet. He's just 27, an age when most racers are still Winston Cup wannabes on training wheels. Yet Gordon is already the clear, fresh heir to stock-car legends like Richard Petty, Cale Yarborough, Darrell Waltrip, Bill Elliott, and Dale Earnhardt--if he hasn't joined their ranks already. Last year Gordon won his third Winston Cup title in four years. That's like winning as many World Series, Wimbledon, or Masters titles in the same span--only harder, since auto racing has no substitutes and no changeovers, and double bogies can get you killed.

This year Gordon opened the Winston Cup season with a thrilling win in the Daytona 500, stock-car racing's biggest event. He held off a charging, weaving, snarling Earnhardt over the final ten laps after taking the lead with a daring move: Roaring along the inside apron of the Daytona Motor Speedway's 2.5-mile oval at about 190 miles per hour, Gordon slipped past leader Rusty Wallace and back up onto the track just in time to clear the rear fender of Ricky Rudd's slow-moving Taurus. Somebody had to give, and just as it's been for most of his racing life, it wasn't Gordon. "I had to make a few moves out there I didn't want to make," he later said in Victory Lane. "But, gosh, coming down the stretch with Dale Earnhardt's black No. 3 right in my mirror--that was a dream come true."

Four races into the 34-race 1999 Winston Cup season, Gordon stands third on the points list. Petty and Earnhardt share the record for Winston Cup titles with seven each. Since top drivers often race (and win) well into their 40s, Gordon is all but a lock to join the duo atop the list. Or even leave them in the dust. "Everybody's been looking for the next Richard Petty," says Waltrip, 52, who's still racing. "Now they're looking for the next Jeff Gordon."

Nascar is as hot as a piston under the front-runner's hood these days, and you can argue all day whether it's become so popular because it has a telegenic, Gen X superstar or whether Gordon happens to be the face of a sport whose moment has finally come. Either way, stock-car racing--long viewed as a backwater bumpkin (or worse) in the big-business arena of professional sports--is suddenly a thriving $2 billion industry, 51 years after its founding as a small family business on the beaches of Daytona, Fla. Attendance at Winston Cup events is up 63% since 1990, more than any other major sport (the NBA, in second place over that span, had a growth rate of 12%). Gargantuan, state-of-the-art tracks have opened in urban markets like Las Vegas, Dallas-Fort Worth, and Los Angeles. More are on the drawing board in Chicago and Kansas City, Mo. Nascar may even get Trumped: Real estate magnate Donald Trump said this month he was scouting venues for a racetrack in the New York City area in partnership with International Speedway Corp., a $190 million company that owns five tracks nationwide. Gross retail sales of Nascar-related apparel, die-cast cars, and other licensed products are zooming too. Retail revenue is expected to exceed $1 billion this year, up from only $80 million in 1990. Also, Nascar is the second-highest-rated sport on television (not counting the playoffs in other sports), trailing only pro football.

With those kinds of numbers, Nascar is finally being embraced by big national corporations that until now had ignored it as too regional, too downscale, and, frankly, too redneck to risk the bother. Today Nascar's list of "official" sponsors--a distinction that lets a company add its logo to the collage slapped around the racecars' front wheels--includes Kodak, Circuit City, Gatorade, Kellogg, McDonald's, MCI Worldcom, and True Value, to name a handful. Ten years ago the sport's top sponsors were mostly pushing products you could drink, smoke, or chew.

Individual teams are also attracting new benefactors outside racing's traditional categories. At this year's Daytona, the garage area was filled with dozens of 18-wheelers parked side by side, each serving as a team's headquarters during the week. The place had the feel of a Main Street fair. The trucks blazed with the bright colors and logos of companies like Lowe's, Philips, M&Ms, BellSouth, Hot Wheels, and Kmart. Even the Cartoon Network was there as a team sponsor (its pit was easily identified; it was the one with the giant Scooby-Doo character).

You won't catch any of the Nascar folks--or the fans--wringing their hands about all this commercialism either. Not yet, at least. Since the early '70s, stock cars have looked like rolling billboards, and their drivers like victims of a deranged corporate tattoo artist. For good reason: Other major sports derive the vast majority of revenues from TV-rights fees and ticket sales; for them, sponsorship dollars are almost gravy. Well, it's the exact opposite in auto racing. This sport, with its regional following, hasn't traditionally been able to charge a fortune for TV rights or tickets, so it has long needed corporate dollars to survive. Team owners usually budget $9 million to $10 million annually, which typically includes about 12 cars per driver and a couple of dozen employees. Most, if not all, of the cost is covered by sponsorships. "Everybody out here realizes how important the sponsors are: Without 'em we're a bunch of broken-down old cars," says Earnhardt.

For sponsors, Nascar may be the best buy in sports, for a simple reason: Speed sells. Some snobs still regard race fans as po' trash, but these folks spend freely to support the companies and brands that back their favorite drivers. Slap your logo on a stock-car product and race fans will embrace you. Coke has filled orders for 20,000 new Nascar-themed vending machines. Visa says it's running to keep up with demand for its new Nascar affinity cards. Sales of Hot Wheels cars jumped 30% last year after the brand became Kyle Petty's primary sponsor. But this is all you really need to know: Nascar Barbie was Mattel's hottest collectible Barbie last year. More than a million were sold, generating about $50 million in revenue. "Our sponsors are not stupid," says team owner Felix Sabates, who has two Winston Cup cars. "They're not here because the CEO wants to sit in the grandstands."

Home Depot's Dick Sullivan certainly isn't. The giant home-improvement chain became one of Nascar's newest "official" partners this season, and not because the marketing head has any particular love for auto racing. "I'm proud to say that when we signed the deal, I knew nothing about the sport," he says. Home Depot actually passed on Nascar four years ago. Two factors changed Sullivan's mind: The sport's successful expansion outside the South and its buy-happy race fans. "I don't call it a sport anymore," Sullivan says. "I call it a marketing machine."

Du Pont's Savelli is giddy over the impact of the affiliation with Nascar. In 1991, the year before Savelli decided to sponsor Gordon, the automotive-refinishes group was a $500 million business. Last year revenues exceeded $1 billion. Savelli attributes 20% of the growth--$100 million--to his association with Gordon. Savelli adds this: He earns $5 for every $1 he spends on the Gordon team, a return that'll bring a tear to any CFO's eye. "This has been magnificent for us, absolutely phenomenal," Savelli says. "He's helped us keep our current business and obtain new business. In three or four years, the deal paid for itself."

Nascar has always had charismatic superstars. You didn't have to be a race fan to know and admire King Richard Petty, with his front-feathered cowboy hat and distinctive shades. Petty drove the sport into the Television Age during his years behind the wheel, from the 1950s through retirement in 1992. And no one lives his nickname like Earnhardt, the "Intimidator." But Gordon is different. He's much the same guy Savelli met years ago: shockingly slight with a crooked, mischievous smile and a folksy, Midwestern persona. His idea of getting psyched for races is eating a tuna sandwich on whole wheat prepared by his wife, Brooke, a former Miss Winston.

Already Gordon has stepped into the heady air of high-priced product endorsers--the first racecar driver to do so. He'll earn about $3.5 million this year from the likes of Pepsi, Chesebrough-Pond's (Close Up toothpaste), Edy's ice cream, Chevrolet, and Ray-Ban. And there may soon be deals with companies in the sneaker, telecom, and financial services sectors. "Nascar has emerged with a very broad-based image on Madison Avenue that is far from the Southern cracker mentality that some people would have conceived for it recently," says David Falk, the prominent sports agent.

But will consumers really get excited about a racecar driver? Many ad execs think so. They've clearly embraced Gordon as the latest "next" Michael Jordan, a sports celebrity whose appeal spans generations, genders, and even ethnic groups. I know, the last "next" Jordan, Tiger Woods, is just 23 years old, but the buzz accompanying the golfer's pro debut three years ago faded somewhat during the nine-month victory drought that ended in February. Woods didn't help himself, either, by often appearing uncomfortable and distant under the glare of celebrity. Not Gordon. He just slips on his Ray-Bans and soaks it in like sunshine. He works crowds with the flair of a seasoned standup. He's an autograph machine who almost always carries a felt-tip marker just in case a fan is caught without one. He's a regular on the late-night talk-show circuit. "I can't think of anybody I'd rather send up to New York to represent our sport," says Waltrip.

"Can he do what Muhammed Ali and Jordan did and go beyond his sport?" asks Humpy Wheeler, president of Speedway Motorsports, the nation's largest track operator. "He might, because he's the antithesis of what a racer should be. He's not a good ol' tobacco-chewing guy. But he needs what Ali and Arnold Palmer had--great victories over tremendous competition. Now he makes it look too easy."

If you're struggling with the notion that racecar drivers are, well, athletes, consider this: Gordon typically loses about eight pounds during a race. He's so intense when driving, he says, "someone could shoot me and I probably wouldn't notice." After races his eye sockets ache.

Jeff Gordon was always out of the ordinary. As mothers helped their 8- and 9-year-old sons into their uniforms, gloves, and helmets and buckled them into their quarter-midget racers, young Jeff dressed himself. He pulled his jacket over his racing suit, slipped on his gloves--always the right one first, then the left--slid his slender frame into the car, and buckled himself in. He was only 5. By 8, he was a national champion. At 11, he won 25 of 25 races in the next highest division, go-carts. Soon longtime racing fans were driving several miles to see the 13-year-old prodigy with the knack for speed and a surgeon's touch, as he deftly outraced older combatants in the sprint-car division. Spectators marveled at how he stalked a competitor into a turn, then sliced downward into a space that was barely there, pulling ahead as the two cars roared into the straightaway. Folks said the kid was a magician out there.

John Bickford, Gordon's stepfather, was, like most dads, trying to give his child an experience his own father hadn't been able to afford. "It was fun for both of us," Bickford says. "I was living my childhood through him." There were rules, of course, some of which helped shape Gordon's skills. Maybe he has such finesse today because Bickford made young Jeff give the first-place trophy to the runner-up if he bumped another car while passing--even if there was no crash and no penalty. "Sometimes he'd cry and say, 'But, Dad, I didn't hit him hard,' " Bickford recalls. "It hurt him to walk over and hand the trophy to another kid. It only happened a couple of times. Throughout his life, though, he drove like he wasn't allowed to hit anyone." There were other lessons too, usually involving professionalism and hard work. "The driving came pretty natural, but [Dad] never ever let me get overconfident," Gordon says. "He always made me work harder, work for more. He wanted me to be better."

There's a turning point in the lives of most sports stars, and for Gordon it came on the day of his high school graduation. That day a big race featuring some of the top drivers in the region was to be held at Gordon's "home" track, a dirt track in Bloomington, Ind. "The big boys were coming to town," Gordon says. "They were coming to my territory." Gordon's parents told him he had to attend graduation, even though the ceremony probably wouldn't end before qualifying started. Bickford wanted badly for Jeff to go to college, maybe because Bickford himself never had. "I think he knew what he missed out on, but he knew I wanted to race," says Gordon. The two made a pact: If Jeff raced well that summer, he could continue racing. If not, he'd go to college.

When the graduation ceremony ended, Jeff raced to the racetrack. He finished second in qualifying, fourth in the feature race. "I was just beaming," he says. "That was one of the best days of my life." Gordon proved that day that perhaps he was made to race. He never made it to college.

That summer Gordon so dominated the sprint circuit that soon he was no longer a secret. He was pursued by several Winston Cup owners, including Joe Gibbs, the ex-NFL coach, who owned two teams. "I'm flattered," Gordon told him, "but I'm not ready." Gordon was 19.

When Gordon was ready the following year, he joined the two-team stable owned by Rick Hendrick, the nation's largest private automobile dealer and the owner of Hendrick Motorsports. Gordon asked Hendrick to hire his crew chief, Ray Evernham, as well. Hendrick was apprehensive. A rookie driver, rookie crew chief, and rookie sponsor (Du Pont) aren't exactly a combination preordained for success. But Gordon and Bickford were adamant. "Ray was smart. He had driven a racecar before, so I liked that. He understood me," says Gordon. "We pretty much [told Rick], 'Hey, Ray's a part of me.' "

Today the Hendrick-Gordon-Evernham team is the envy of the garage area, and Hendrick Motorsports has prospered. The company's 240,000-square-foot facility on 60 wooded acres just outside Charlotte is not your daddy's auto shop. You could eat on some of the floors. There's a museum to accommodate the 150,000 visitors who drop by every year; a 200-seat theater is planned. Hendrick was one of the first stock-car owners to think outside the box: He hired engineers (electrical, mechanical, design, and chassis) and physicists when other teams were still hiring Cousin Bubba because he was good with cars. Besides its three Winston Cup teams, the company also owns a team in Nascar's Craftsman Truck Series. Yes, truck. Last year the company generated about $50 million in revenues, but Hendrick wasn't around to enjoy the ride. He was under house arrest, banned from having any contact with any of his businesses, after pleading guilty to mail fraud in connection with payments to Honda executives to obtain more of the company's most popular cars for his dealerships. His return to racing this season has been bittersweet. Hendrick is undergoing treatments for a two-year battle with leukemia. Fatigue kept him from Daytona on race day, but Gordon spoke with him by cell phone from Victory Lane. That evening, Gordon finally seemed ready to crash--physically, that is--as he sat in the back of a van after post-race interviews and glad-handing with sponsors. "A lot of people took chances on this team," he said. "It's neat to see it pay off."

For the uninitiated, Nascar is an acronym for the National Association of Stock Car Auto Racing. Yeah, it's a bit clunky and redundant, but then, this is a sport whose founder operated the circuit out of a corner garage. Many of its first racers were reformed bootleggers. Today Nascar is a unique enterprise in the sports industry. It's not a traditional league, run by an association of team owners. It's a family business that is still owned by heirs of founder Bill France Sr.--"Big Bill" to the Nascar folks. The founder's son, Bill France Jr., recently turned over day-to-day operations to 45-year-old Mike Helton, a longtime Nascar executive. But Bill Jr.'s word is still pretty much law. Sabates calls him a "dictator." Then adds: "But he's a benevolent dictator."

Nascar likes to bill itself as a family sport. That's hard to dispute when more than a handful of drivers are second-, third-, and even fourth-generation racers. But the Frances are undoubtedly Nascar's First Family; they're all over the sport. Bill Jr.'s son Brian, 36, is Nascar's senior vice president and the respected dealmaker on the marketing side. Bill Jr.'s brother Jim is Nascar's executive vice president and secretary. Jim's also president and COO of International Speedway Corp. ISC's chairman and CEO is none other than Bill Jr. The company's executive VP is Lesa France Kennedy, Bill Jr.'s daughter. For good measure, Brian serves on ISC's board. What's sticky about all this is that Nascar (read: Bill Jr.) awards race dates. So far, no one accuses France of playing favorites. "We're used to [France's extensive power]," Wheeler says. "They've been extremely good about listening and working with the operators to make things better. As long as they practice democracy and respond to the various factions--the drivers, owners, and track operators--it'll continue to work. When they stop, it's not going to work."

Think of Nascar as a constellation with three stars--track owners, team owners, and Nascar. Here's how the money flows: Track owners turn over 10% of all TV revenue from Nascar events to Nascar as a sanction fee. They put up another 25% as part of the prize money and keep the rest.

Team owners typically split the prize money with drivers, who earn salaries. Gordon's salary this year is close to $2 million. He also gets 50% of winnings, about twice the typical split. Some drivers receive as little as $200,000 in salary, with no percentage of winnings.

Owners supplement their revenue from sponsorships and prize money with sales of licensed products bearing the likeness of the car and driver. Those funds are typically split equally among the owner, the driver, and the sponsor--with most sponsors reinvesting their portion in the team. Jim Mattei, founder of the Checkers fast-food chain and owner of two Winston Cup teams, expects to generate $3 million this season in licensing revenue. Gordon and Earnhardt sit at the front of the pack in this category: Each driver's team expects to generate about $15 million this season in licensing revenue.

The lion's share of team revenue comes from sponsors. A primary sponsor pays between $5 million and $9 million to splash its logo across the car's hood and TV panel (the back of the trunk)--and across the driver's chest. Associate sponsors pay between $75,000 and $1.5 million for various portions of an auto's real estate. A sponsor might pay, for instance, between $75,000 and $150,000 to appear on a car's B-post (the strip separating the two side windows).

Robert Hagstrom, who manages the Legg Mason Focus Trust fund (ISC and Action Performance, the nation's largest distributor of Nascar-related products, are among its largest holdings), calls stock-car racing's economic triangle "free-flow capitalism." Teams that perform well attract more lucrative sponsorship deals. Top drivers earn more prize money and sell more products. Others scramble for scraps. "Other sports are socialist operations, where owners and players are paid regardless of performance, and they benefit from the growth of the entirety," says Hagstrom. "In racing, each person works like an entrepreneur. They succeed or fail on their own ability. The capitalist model will always beat the socialist model."

Auto racing is different from other major sports in another way. Since there are no teams to support a young person's ambition to race, anyone looking to get into the sport must be an entrepreneur from the get-go. If you travel to the Phoenix offices of Action Performance, you'll see a T-shirt on display that reads JEFF'S GANG. It was the first "official" product Gordon ever sold. He was 7. A sponsor paid for the shirts, so all sales were gravy. The proceeds were used to purchase better equipment. Today Gordon is president and chairman of Jeff Gordon Inc., which manages all his operations and supports nine employees, including two pilots. Gordon has his own Lear.

Bob Brannan, Gordon's business manager, says the driver is not a figurehead executive. "He may not know all the terms, but he's always had a good head on his shoulders for understanding value, delivering value, and being compensated appropriately."

Gordon also runs JG Motorsports, which manages his licensing business. The company gets 12% to 20% of revenue from the 80 or so Gordon-licensed products on the market. Unlike other drivers (except Earnhardt), Gordon controls his own likeness. He's expected to earn at least $6 million in licensing income this year. In 1998, Gordon-related products generated sales of about $112 million. Gordon also has stakes in several properties and ventures: a Chevrolet dealership in Wilmington, N.C.; 100-plus acres of prime real estate near Lowe's (nee Chevrolet) Motor Speedway; Silicon Motor Speedway (a chain of arcades featuring racing simulators); and Race Rock, a restaurant in Orlando. "Some [drivers] are probably envious, but his success wets the mouths of most people," says Waltrip.

Gordon's contract with Hendrick Motorsports expires at the end of next season. In January, tucked in the back of his Lear, Gordon revealed that he wants to sign a lifetime deal. "I know there's a whole lot of people out there who'd love to do what I do," he said. "There's not a lot of people who can. Everybody's happy with the way things are now. If they want it bad enough, they'll do a lifetime [deal]." Gentlemen, start your negotiations.

Gordon acknowledges that his stepfather got him off to a fast start in the racing business, but four years ago he asked Bickford to leave. Yep, he fired his dad. "He's a father; he didn't want me to make any mistakes," says Gordon. "I wanted to learn. And sometimes you learn by making mistakes."

Bickford doesn't like to talk about Gordon much, and when he does you can hear the pain in his voice. "You meet every goal, then walk into a board meeting one day, and with the words of one young person it's all gone," he says. "It's very, very difficult. I don't think I'll ever get over it."

The two men are not quite estranged. But they see each other only on major holidays, and they rarely speak. "We talk after races sometimes, but it's not the same," says the son. "When the business side of our relationship separated, our relationship suffered. Before when I won, he won. Now I think he feels like he's missing a part of it because he's not involved."

"I hate to say we have no relationship," says the stepfather. "He's 27 years old and lives in a very different circle. A kid doesn't understand when he asks a 48-year-old person to start life over again."

"The way I look at it," says the son, "he's still just as involved because he's the one that made me who I am. I'll always feel"--Gordon begins speaking in the second person--"that, hey, whether you're still involved or not, when I win, you win."

Nascar has by no means entirely shed its Southern legacy. Blacks, Hispanics, and Asians are all but invisible at every level of the sport--in the stands, among drivers, on pit crews, among team owners, and especially in the offices of Nascar, which has 250 employees in Daytona Beach, New York, Charlotte, and Southern California. Maybe the biggest challenge for the sport is to overcome its stigma as an unfriendly arena for minorities. A good start would be to ban the display of Confederate flags, which were hoisted atop a few motor homes parked in the infield at Daytona. Only one African-American driver, Wendell Scott, has ever won a Winston Cup race, and he often had to "pass" for white while racing on Southern tracks between 1961 and 1973. Almost everyone I spoke with in the sport talked of the need for Nascar to be more aggressive in attracting blacks and Hispanics as participants and fans. Says Wheeler: "As I go around the country, I see black and Hispanic teenagers all over riding around in today's version of my generation's hot rod--a souped-up Accord or something else. Out of that group has got to come some crew chiefs, drivers, pit crews, whatever. I think it will happen."

This issue is wrenching for France, who hasn't quite come up with a comfortable response to inquiries regarding the dearth of minority drivers. "Somebody'll get a break," he says. "Somebody will." Two African-American owners are making a respectable run in the Busch series, Nascar's equivalent of a minor-league circuit--former NFL running back Joe Washington and the incomparable "Doctor J," Julius Erving. After four races, the Washington-Erving car, driven by Mark Green, was 15th in points. Two years ago the team couldn't find a sponsor. Today it's backed by Dr Pepper. "As a brand we were looking to expand our support of minority-owned ventures," says Dr Pepper President Jack Kilduff. "But Nascar also gave us some promotional and business benefits. We looked at some of the brands sponsoring cars and said, 'Why not us?' "

Nascar people are well aware that growth can be a mixed blessing--even a curse--if it isn't managed well. The sport is wrestling with several challenges, even in these breakthrough seasons. One is escalating ticket prices--now $50, on average. Another is finding a way to let teams run each race, without facing the prospect of elimination if they have a bad day in qualifying. "Owners need to be able to develop some equity in their investment," says Mattei. Also, the sport is considering limiting the number of teams an owner can operate--one, Jack Roush, has five teams--to avoid even the hint that drivers might somehow cooperate during a race for improper reasons.

In February, Nascar announced that it will begin negotiating all TV-rights contracts on behalf of track operators, which had previously cut their own deals. Opinions vary on whether the change will double, triple, or even quadruple TV revenue, which was close to $100 million last year. Nascar has been valuable as big-chunk programming for the six broadcast and cable networks that air Nascar races. "It's difficult to say you're a leading sports network unless you have a schedule of Nascar events," says CBS sports head Sean McManus. Fox is apparently anxious to grab a ride, so things could get interesting when the major contracts start expiring in 2001.

Certainly if Nascar continues to thrive, the circuit may struggle to remain a cozy family business. Entertainment conglomerates are swallowing up franchises in all sports, so why not Nascar in one big gulp? Says owner Jim Mattei: "This will get a lot bigger than Mike [Helton], even bigger than Brian [France]."

It would be a real shame if Nascar lost all its grits and became just another sports machine. For now, there's not much danger of that happening. Not with folks like Speedway Motorsports President Humpy Wheeler around. At his office one day, he went on about how Nascar needed another hot race product to complement the Winston Cup, Busch, and Truck series--something that gives track operators more events to lure race-hungry fans. He walked toward a shelf behind his desk, pulled out two model cars, and dropped them on the table between us.

His hot idea? Convertibles.

Yikes.

REPORTER ASSOCIATE Cora Daniels