Economics 8,000: NASCAR's Title Sponsor Announces Cutbacks

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Economics 8,000: NASCAR's Title Sponsor Announces Cutbacks

It appears nobody is safe from the strain on America's tough economic status, and that holds true for the title sponsor of the NASCAR Cup Series as well.

It was announced today that Sprint-Nextel would cut 8,000 jobs—or 14 percent of its workforce—by the end of March. The effort will reduce the companies costs by more than $1 billion.

Along with the cuts, the company will also take part in a company-wide pay freeze and put a hiatus on employees' 401(k) match for the year.

According to reports on NASCAR.com the nation's third largest provider of wireless service provided a net loss of $326 million in the third quarter of 2008 and a $1.2 billion loss for the other three quarters.

"Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment," chief executive officer Dan Hesse said in a press release. "Our commitment to quality will not change."

Sprint became the title sponsor for NASCAR's premier series in 2005 when it acquired Nextel. According to NASCAR.com, the company pays around $75 million a year to have their name on the series.

The news was bad across the board for some of the sport's top advertisers as well.

The same report on NASCAR.com said Caterpillar, Home Depot, and GM will also be experiencing cuts in employees.

Caterpillar (the new sponsor for the No. 31 Richard Childress Chevy driven by Jeff Burton), is expecting to cut 20,000 jobs—about 18 percent of their worforce—through layoffs and buyouts.

"While 2008 was our sixth consecutive year of record sales and revenues, it was an extraordinarily challenging year," Caterpillar chairman and chief executive officer Jim Owns said on the company's Web site. "We have initiated actions which will remove about 20,000 workers from our business and every indirect spent dollar will be heavily scrutinized."

NASCAR's official home improvement warehouse and sponsor of rookie Joey Logano is also planning cutbacks.

About 7,000 jobs—or two percent of the workforce—will be cut through closures of 34 Expo Design Center Stores and 14 other speciality stores over the next two months, according to NASCAR.com.

The fourth large sponsor—General Motors—also has plans to cut its workforce this spring, and has already seen large cuts throughout its manufacturing plants.

The news is tough for NASCAR, which relies heavily on the funding from top sponsors.

As the businesses that pay the millions of dollars begin to cut back, you have to wonder when that will include pulling funding from NASCAR teams.

With these announcements, it makes Jack Roush's argument that his team should be allowed to keep all five teams all the more stronger.

Sure, this isn't the loss of sponsors—yet!

Roush-Fenway currently has five cars that have full sponsors and NASCAR may not want to risk the loss of those precious funds if the team is forced to relocate to another shop.

It should be interesting to see how things progress as more and more announcements continue to surface of lay-offs and cutbacks.

Employees of these companies have got to be wondering why the company can't afford their $8 an hour, yet can afford to spend millions of dollars to put their logo on a car going 200-mph.

Just another installment of Economics 101 in NASCAR today.

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