RJ Reynolds Create a Smoke Screen - tobacco company - Brief Article

Auto Racing Digest, Sept, 2001 by David Stone

THE 1998 NATIONAL TOBACCO Settlement, signed by tobacco companies, 46 state attorneys general, and representatives of five U.S. territories, all but guaranteed the eventual divorce of tobacco companies and the motor sports industry. Under the terms of the agreement, various forms of tobacco ads--including auto racing-related sponsorships--would slowly be phased out over a period of years. However, this spring, five states (Arizona, California, New York, Ohio, and Washington) sued RJ Reynolds, claiming that the company violated certain clauses of the agreement that dealt with race-related ads.

In King County, Wash., Christine Gregoire, that state's attorney general, filed a lawsuit against RJR that claimed the company's billboards at the Seattle International Speedway violated the agreement. Legally, a tobacco company can now put up outdoor advertising 90 days before and 10 days after a sponsored race event. The Seattle race in question took place on July 16 of last year, but the state claims that RJR's ads are visible year-round. RJR isn't disagreeing. An RJR executive has said, however, that the ads should be allowed to be posted all year, because they advertise the entire racing season--which runs from February to November--rather than just one event.

The Arizona attorney general's office filed a similar suit, which claims that RJR advertised year-round for the Winston Cup and NHRA drag racing series, even though the two series' races take place locally only once a year. California's attorney general also filed a suit targeting billboard ads, as well as one that alleges RJR violates the settlement by targeting ads at youths. According to the state, RJR's ads in Hot Rod and Sports Illustrated are illegal because each publication's youth readership is more than 15% of its total.

In April, CART engine manufacturer Toyota announced that, beginning in 2003, it will join GM and Nissan Infiniti as IRL engine suppliers. The company has said that it will continue to build CART engines until then, but has not committed beyond 2002 as it waits to see what engine rules the series will adopt.

Toyota's decision isn't expected to clear the way for the two competing series to merge, but most consider it to be a good development for open-wheel racing, as it should allow more CART teams to compete in the Indy 500 and other IRL events. Toyota Racing Development executives have said that the agreement could potentially lead to more sweeping compromises between CART and the IRL, which would allow other CART suppliers to also become involved in the IRL and the Indy 500.

Jeff Gordon, NASCAR's current endorsement king, recently signed a long-term endorsement deal with sunglasses manufacturer FosterGrant. The company will create a new line of sunglasses featuring Gordon, and he will join Cindy Crawford, Raquel Welch, Woody Allen, and other celebrities as past or current FosterGrant endorsers.

Ball Park Franks, a subsidiary of the Sara Lee Corp., signed a two-year deal with NASCAR. The sponsorship is the company's first with a national sports property, although Michael Jordan appeared in TV commercials for Ball Park in the past. The company will create a sweepstakes centered around its sponsorship, and award four trips to Phoenix's Dura Lube 500 as a grand prize. Ball Park will also have a presence on the car of Busch Grand National driver Kevin LaPage, who is sponsored by State Fair Corn Dogs, a sister company of Ball Park Franks.

In February, Viacom Inc. closed its 11 NASCAR Thunder retail stores, and two months later, a bankruptcy filing by NASCAR Silicon Motor Speedway Racing Centers ensured the closing of its 12 outlets. The Racing Centers had featured simulated stock car racing. Although NASCAR says that the series plans to continue looking into retail opportunities, it has no immediate plans to replace the Thunder or Racing Center stores.

NASCAR's next expansion market could be the New York metro area, as the New Jersey Sports and Exposition Authority has been studying the addition of a race track at the Meadowlands. In order to make the project occur, the NJSEA would move its horse racing facility to another site, which would create the amount of land necessary for a NASCAR-sanctioned track. The International Speedway Corporation has been studying the feasibility of a potential track at the Meadowlands, which has not been offered public funds for construction.

The recent string of serious race-related accidents--which in the past year have resulted in the deaths of Dale Earnhardt, Kenny Irwin, Adam Petty, and Tony Roper--could end up costing drivers more to get behind the wheel. The deaths may force insurance companies to raise premiums paid by racing teams for coverage of not only their drivers, but also of pit crew members and equipment. A typical insurance policy for a NASCAR team and driver costs approximately $100,000 per year, and the driver's life insurance accounts for approximately $20,000. However, insurance executives who sell to race teams have recently said that because of the deaths, annual premiums could potentially increase by as much as 20%.