What happened?

2/5/2008

I have to admit that I was fairly certain that the NHRA/HDP program would go through. After all, NHRA prez Tom Compton and HD Partners principle Eddy Hartenstein are experienced big businessmen and their announcement last year sure made it appear that it was a “done deal.” Surely, I thought, these two executive types had done their due diligence before making the big announcement and all that was left were the formalities.

Well, Eddy Hartenstein and his HD Partners went to Wall Street with their NHRA deal on the table and asked them, “Deal or No Deal?” and Wall Street looked at the NHRA as an investment and gave a resounding “NO DEAL!” as their answer.

No muss, no fuss. Mr. Hartenstein pulled the plug, they will dissolve the company, and what promised to be the deal that would take drag racing to the mythical “next level” was sucked under the Wall Street financial pond without even leaving a ripple on the surface. In a few weeks, if that long, it will be as if the deal never existed. The only people financially hurt here are those who read the press releases, drank the Kool-aid, and bought HDP when it was selling for $15 a share.

So much for Tom Compton leading the sport to the next level…but let’s not blame Compton or his management staff for this public relations fiasco. Make no mistake, drag racing’s image in the business world takes a big hit over this. In recent years under Compton and his team’s guidance the NHRA has become a company that grosses over $100,000,000 a year and makes a profit each year.  In 2006 NHRA grossed over $114,000,000 (according to the 2006 IRS form 990 for the NHRA)  and spent just over $107,000,000, with surplus funds and assets amounting to more than $36,000,000 left over at the end of the year.

The figures for 2005 were also good, with NHRA grossing just over $107,000,000 and spending just under $106,000,000. The figures for 2007 won’t be available until next year, but it is obvious that Tom Compton has done exactly what Wally Parks hired him to do: to get the NHRA’s financial house in order and make the NHRA profitable. In fact, Wally Parks and Dallas Gardner hired a lot of bean counters, they just didn’t hire anyone who really understood or cared, really cared, about drag racing as a sport.

Both the NHRA (and for that matter, the IHRA) have improved their financials in the past few years and while the IHRA tax returns aren’t public information the NHRA’s  tax returns for the past three years back up the fact that NHRA is profitable. Bill Bader Sr., who owns a quarter of the IHRA, has let it be known that his 25% stake in the IHRA gets him a 10% or better return on investment each year. (The fact that Evan Knoll has stated in print that his financial commitment to the IHRA is over $5,000,000 a year could have something to do with that.)  So yes, Virginia, you can make money in the sanctioning business, but evidently you can’t get investors.

The NHRA eventually will be sold; you can take that to the bank. The only way Tom Compton and his team get a return on their efforts is to sell the NHRA.  They’ve tried twice, so there is no reason to think they won’t continue to try. 

All of which brings us to Bruton Smith and his SMI Corporation. The late Wally Parks, according to my sources, nixed the sale to Mr. Smith the first time because he didn’t like the way the deal would treat his beloved sportsman racers. Mr.Parks isn’t part of the equation any longer, and a source privy to the negotiations, who has to remain unnamed because negotiations are ongoing, tells me that Smith’s SMI Corp is making a serious attempt to buy the 25 percent of the IHRA that Bader owns and the other 75% that Live Nation owns. Several other of my sources report that Smith’s people have already begun negotiations again with Compton’s team to buy the NHRA. Without Wally Parks there is virtually nothing to keep a deal being made this time.

Two people with contacts inside Bruton Smith’s organization have given me basically the same description of what Smith would do should he get control of both the NHRA and IHRA series. They tell me that Smith would have a professional class only series with the NHRA where only the elite 16-18 teams in each division would be eligible to compete and there would be NO SPORTSMEN! 

The IHRA would then become a development series for the second tier pro teams as well as hosting the ENTIRE sportsman program. The second tier pro teams could advance to the NHRA races based upon merit. What would happen to Pro Mods, Mountain Motor Pro Stock and the different Sportsman classes hasn’t been discussed.

Until someone does something, the NHRA will lumber along under the deft financial guidance of the Tom Compton team, and the IHRA will do the same under its president, Aaron Polburn. The racers will remain in the dark just as they are now, evidently expected to support the respective sanctioning bodies without question while waiting for the other shoe to be dropped by the likes of Bruton Smith or Evan Knoll.  

jeffburk@dragracingonline.com

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