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Champ Car Media Conference

Open Wheel Racing Topics:  Champ Car

Champ Car Media Conference

Joe Chrnelich
September 28, 2005

ERIC MAUK: For those of you what did not get the release that we put out just a little bit ago, the Champ Car World Series announced that the Ansan Gran Prix that was scheduled for October 14th through 16th has been deferred to the 2006 season. We fully expect that the race will take place in Ansan, South Korea, in 2006 as part of the previously released 2006 Champ Car World Series schedule. Thank you for joining us today.

JOE CHRNELICH: Thank you, Eric. Good afternoon, everybody. I won't give you a long statement here, I just will say we obviously are disappointed today on the news on Korea, and we've deferred the race into 2006. But as always, and I think most of you have had enough time with me now, we will be very honest about the circumstances to you. As we go through the Q & A, I think you'll come around to agree that there are a lot of positive elements here that we as a company can build upon moving forward, but we're going to look at this. In the meantime, I'm sure you have a long list of questions, so why don't we proceed into the question and answer session.

Q. Saturday night in Vegas you were pretty honest and said there were a lot of issues. Can you just break down, was it just too much to try and -- I know the last three or four days you've been working pretty hard.

JOE CHRNELICH: Sure, yeah, you're right. I think you could see in my voice and how tired I looked. There were a number of issues here that we were trying to help the promoter and help the city overcome, but at the end of the day, we got to a point in time where we said, you know what, folks, it was a valiant effort but it's not there yet, and rather than force a race on a promoter just to prove that we could go in a race was not a good business decision for either Champ Car or our partners over at Ansan. The elements more specifically that caused the deferment decision today were, A, operational preparedness on the part of the promoter TRK; and secondarily, some of their lack of adherence to our contract terms.A while back, as some of you probably have learned, the general manager for TRK had been removed by the investors and at the request of the mayor because the performance was not keeping pace with the demands of the event. After the removal of the GM, there was a lot of scurrying around to try to find a replacement, and unfortunately it cost the promoter a lot of valuable time. So that is probably the single biggest issue.The circuit, if you will, would have been prepared and ready to race. Some of the esthetics around the borders and things probably would not have looked as nice as they would have liked, but the circuit was, and still is, within days of being complete. So that was less of an issue from our side.But at the end of the day, it was just operational preparedness on the part of the promoter.

Q. Just a quick follow up, Formula 1 has had problems getting Korea to follow through. Do you have any confidence that this thing can be pulled together? What makes you think that you can get these guys to follow through by 2006?

JOE CHRNELICH: Well, there were a number of positives that we saw, which gave us the confidence to make the statement today that we're going to defer this into '06. You've got a circuit that is near completion, and it's a very, very nice circuit. It'll be competitive for us, good backdrop, so that's a big plus. You have to have a circuit to race on, obviously.Secondly, the mayor of Ansan has been incredibly supportive. Whenever we ran into a challenge and needed some additional emphasis or push, he was there for us, and he personally is committed on behalf of the city to making sure this race event is a success. So whether it's Ansan or anywhere else in the world, that is very, very important to us.The third is, and even though this is not public, there are some very, very major sponsors in the wings here waiting to come on board. They do want to see the promoter situation sift its way out, if you will, but when we step forward with those names, I think people are going to have a renewed sense of confidence on the progress made there.So those are the elements that told us, you know, we're not far off here, so let's be patient. We'll be back over there meeting with the mayor, working with him to make sure the promoter situation is stabilized properly, and we'll be prepared for next year.

Q. With the postponement today and the fact that the China race that kind of got previewed in April isn't on the 2006 schedule, would you say that you guys maybe slightly underestimated the challenge of organizing a race in a non-English speaking country on the other side of the world?

JOE CHRNELICH: I think that's a real good question. To be honest with you, probably. I mean, when you go to a foreign land where you have language barriers and you have time differences, time zone differences, it just makes the challenge of fixing a problem that much tougher because you don't have the ability -- for instance, as an example, we had two new races here in North America; we had Edmonton and we had San Jose. There were challenges with those promoters, no doubt about it, in terms of things we had to fix. But we both spoke English, were within a quick plane ride of each other, and we solved the problems, not the least of which is a first-year race is always most challenging. When you take that idea right there and move it to Asia, it just makes solving problems that much harder.So back to your question, yes, we've come to learn it's much more challenging than we anticipated, but we're learning from it, we're moving things forward, and we're also learning you have to be patient, and that's what we're going to be.

Q. With the deferment and cancellation of this race, are there any thoughts about distributing the points because effectively now the champion is virtually over and gives Sebastien the title?

JOE CHRNELICH: Good question, although Sebastien has not obviously won yet. The issue has come to the table, and between our series ownership and management, we're discussing that issue. I would suggest you'll probably hear something in the near future as to a decision on it.

Q. Maybe it was just scuttlebutt, but I heard that there was some consideration of having the race in the spring of next year. Is it still going to be in the fall of next year?

JOE CHRNELICH: As usual, your antennas are always up high. We did talk about that briefly, thought about getting it to the market sooner, but at the end of the day when we talked internally, we said we put it at that position on the schedule for a reason, which is to bundle it to the Australian race, and there are a lot of benefits to doing it back-to-back when you travel that far of a distance. So we've decided to keep it at the current date on the '06 schedule as a result of that.

Q. While we're on the topic of schedules here, you still have a schedule, and I know some of it is based on the fact that you've got to get from one place to another in terms of geography, but you've still got periods of the schedule where you disappear off the radar screen for two or three weeks at a time, and I know there has been discussion in the past about closing up some of those gaps, and also, too, there is concern that this championship maybe shouldn't end outside of North America in terms of the bottom part of your schedule. Have there been any thoughts about closing up some of those gaps and juggling things around so those things don't happen?

JOE CHRNELICH: Absolutely. That's a challenge that's probably one of the biggest challenges that fell in my lap when I took the job a year ago. What I've come to learn in the job is when you form a schedule, you can't just move dates around willy-nilly, if you will. There's a lot of considerations to it, which is, A, weather; B, whether events are going on in the city; C, network time availability. So you've got to look at all these variables before you take a date and move a date, much less find a venue and put a date on the schedule. It's a lot tougher than just moving it around.I think the first step forward we made this year to help ourselves a little bit on the April-May gap was to put Houston on the schedule. That narrowed it a touch. Every year when we added an event to the schedule, you're going to see those gaps start to narrow a little bit, but it's going to take time. But our objective is to do that, to answer your question.And to your second question, yes, we very much want to end the season in the U.S. Obviously it's much more convenient to everybody being here, but more importantly, it's back in the market, our home base market, if you will, so that is one of our top priorities, as well.

Q. I know that there was talk that there was some announcements or press releases made about the Beijing race and that was also not put on next year's schedule as many of us had anticipated. Is there any update on that?

JOE CHRNELICH: Actually it will be back on over there in early October to continue discussions with BASM, more accurately their new company, which is IS. And back to the prior question on the difficulty of dealing in Asia, what we're also finding out not only on a logistical basis but on a business basis, people in Asia, the cultures of Asia, look at things a lot differently than we do back home here. And part of the challenge is reaching an agreement on key points but also how they're packaged together, and images and pictures are much more important in the Orient than they are in the U.S., which we're just the opposite, we're more focused on words.That's been a challenge for us, but we're continuing to talk with them. We think they're a good partner. We're a ways away on some money issues. We do have some track options there, as you know, but at the end of the day, we need to continue to be patient with our decision. We're not going to just race into an arrangement to say we've gotten that off our list. We just need to make good business decisions, and that requires patience.

Q. I don't know whether you want to comment on this or not because we are talking about the Korean situation on the schedule, but Mr. Robert Clark created quite a fervor with his visit to you guys in vas Vegas looking for some competition with his engine that he won't be able to run in the other league, and I wonder if you wanted to comment on what he may be proposing. We've asked this question of Kevin and a few others before. I kind of wondered what you thought of Mr. Clark's visit and maybe cared to offer a comment on it.

JOE CHRNELICH: Well, I am impressed with the media attention that this garnered almost as much as Paul Newman at times. Obviously Bob Clark is a very recognizable figure in motor sports and in his company, and they're constantly talking with everybody. Depending on the timing of his visit, it can create a lot of speculation and whatnot, but I think what's most important maybe from all of your perspectives is just the fact that Honda is talking with Champ Car, communication issue. Whether it's Honda, whether it's some of the other -- the old business partners of our prior series, I think that's a notable point in and of itself. People want to talk with us again. That shows, I think, progress, and I think that shows kind of a renewed confidence in what we're doing with the company and how we're growing.So specifically in terms of the conversations, I was not involved in the meetings. He has stopped over to talk with Kevin, so I don't know the substance of the conversation, but we're always pleased that people from -- who used to be with this company as partners now feel comfortable coming and talking to us as a possible future partner somehow.

Q. A quick follow-up and back to the schedule, you want to keep the schedule as solid as you can as you go into a season because it's based on television exposure and contracts with sponsors and what have you, and I'm thinking kind of with Montreal that certainly does come to mind with a Canadian race as it is. We know there's a year left on the contract. But the fact that circumstances aren't even comparable obviously, but would you look at something like Montreal and say that's a good market, we want to hang onto that, there is a year left in the contract? You've heard all the rumors about what they may want to do after next year. What about taking a more concerted effort and taking races like Montreal and making sure it's firm and nailed into the schedule?

JOE CHRNELICH: Well, clearly it's a very important market to us. We view it as a strong market. It's proven it in the past. Not only with us, but you look at the F-1 appeal there. So you know the fans in that town like open-wheel racing; they're attracted to it.In our situation, there were some interesting variables that hit us this year, not the least of which was the International Aquatics Competition. That was an enormous event that really diverted a lot of resources away from our race. It's a one-time event. Our promoter happened to be involved in it, which obviously took some of his resource away. That's an issue we don't have to deal with next year.As is our policy with our promoters, we treat them like partners when things are going good and when things are not going quite so good. In this case we're going to roll up our sleeves with the promoter; we're doing a debrief with him on what worked, what didn't work and what we're going to improve upon next year.We both have a mutual goal of success. Promoters don't get in the business because they want to lose money; they get in because they want to have a healthy business. It's our job to make sure that our property and our event fits their business model, which it will. We think Montreal is a great market for us; we just need to reposition ourselves. Remember, we're rebuilding. This is only our second year out of the gate. Last year was pretty much a fire drill for all practical purposes.We believe in the market, and I think you'll see better things coming of it in the future.

Q. We had heard that there was a lot of scrambling Monday and Tuesday and some money might have been transferred. Did you come close to saving it, or just tell us, was there ever a period where you thought maybe it was going to happen?

JOE CHRNELICH: Yeah, we actually, going into this week -- and believe me, we've been in constant communication with the new general manager over there who has been very good for us. He wasn't a member of TRK, the prior promoter, so we've got a solid guy on the ground there, and just ask my wife, I've been on the phone weird hours of the night on these calls, but he said, "Look, Joe, here's what we're trying to do." They did make payment to us, as did the mayor. He kept his promise on some payments for some of the operational needs that we have, and they came through on that.We were hoping -- there were some additional payments that needed to be caught up on, if you will, and we were hoping that was going to happen today, and it didn't. They called last night and said, "Look, we can't get there, Joe. It's not our investors, the new sponsors behind us aren't prepared to move that quick."So we made a fundamental decision here among our series owners and our management team that, you know what, rather than try and force this thing just to say we did it, let's take a step back, let's examine the positives and let's decide right now whether there are enough good things here to proceed into next year, and based on our statement today about deferral, that tells you that our assessment that, you know, there's enough good equity in that market and positives that we're going to have a race next year. I will tell you after being over there three or four times now, that is going to be a great marketplace for us.

Q. Just a quick follow-up, you mentioned Saturday night when we were talking about maybe having somebody over there full-time. Is that still a priority?

JOE CHRNELICH: Yeah, good point. What we are learning is when you're that far away, talking on the phone is okay, email is okay, but at the end of the day, you need somebody there on a constant basis making sure you facilitate the needs of the promoter, making sure that the communications are coming back on a regular basis to our office. So you can expect to see somebody there on a more regular basis from our perspective because that does pay benefits.

Q. Whatever happened to David Clair, what I thought was the original Korean connection?

JOE CHRNELICH: Well, David actually is over there right now, and when the new TRK originally was formed, a step forward to us, they were in discussions with David about having him join the team. There were some relationships there.The best we could tell, they could not arrive at a mutual agreement on the contract, and so it kind of went to the side. David did -- when management change took place, the investors went back to David and talked to him a little bit, but again, they could not come to an agreement. There was just a little bit too much consternation from David's perspective, as well.So he's there, but he has not been involved in the effort.

Q. I think this has been touched upon, but I know in the past when we've had foreign races, a lot of times the promoter is responsible for paying a lot of the costs, and in the case of England and Germany, I think those two promoters split all the cost of bringing the whole circus over, shall we say. With this being so close to the race actually happening, is the Korean government, which I had originally understood was backing the Korean race, and maybe I'm wrong about that, but how is Champ Car going to fare in terms of the costs that have been spent or committed to?

JOE CHRNELICH: Good question, fair question. We actually -- this is important for everybody to know. This year is very, very different than last year. Last year there wasn't even a license agreement for the race, which is what we had come to learn because I entered the picture very late on that one.But this year between the city and the promoter, a significant amount of dollars had been paid to us, so we do have a buffer. We also had made pre-arrangements with our Australian promoter and our Korean promoter on how to handle the shipping and the airline tickets to achieve economies of scale. Now that we have to repivot, those questions were thought out. We had to think through a worst case scenario with our Australian promoter to say, "Look, if this doesn't happen again, how are we going to handle it." So we had thought about that in advance, and quite frankly at the request of Australia. So we're prepared for it, and it won't be a problem.

Q. As a follow-up question, I found it interesting to hear you say that there are companies that are over there that would be sponsors of this event that really want it to happen, and obviously you feel that they're still behind it. Can you clarify, is this being put on by TRK as a private organization? I mean, how much is the private company versus the government, and how do we hold their hand through the process since this is all a brand new experience for them?

JOE CHRNELICH: Sounds like you have a couple questions here. In terms of the sponsorship interest, there are some very big names in Korea as we know, Samsung, Hyundai, Kia, LG; these are names that we recognize here in the U.S. on a daily basis as products we buy. Those are all domestic Korean corporations, if you will, which makes the market that much more attractive to us. They have been in discussions, all of them are aware of the race and there are varying interest levels. I would tell you to stay tuned as to who are really the sponsors that are intending on stepping forward on this.In terms of the promoter, TRK is the independent private promoter. They quite frankly are the ones that have not been prepared and who have not kept current with the contract requirements. The mayor, on the other hand, and the city have a license agreement tied to us and tied to the promoter, and they have, quite frankly, met and done all the things we have asked of them. So the mayor has been a very strong supporter in trying to move the promoter along here. So in that regard, that was one of the big positives we saw.

Q. You mentioned TRK being the primary promoter, and before you mentioned that there's been a change in promoters in China, that BASM -- was that a government agency before, and who is this new IS that you mentioned? Is that a private promoter in China?

JOE CHRNELICH: Actually BASM, Beijing Asset State Management, that is a quasi-government entity, they actually acquire and hold assets on behalf of the state, but -- they're a quasi-government company. That's the best way to define them.Very early in our discussions with them, they had informed us they were going to form a subsidiary company to help attract sports events to the capital of China, Beijing, and that's the company IS which was ultimately formed. That company is involved with the Olympic effort, but it's also very keen on bringing racing to China. That's how they intertwined.

ERIC MAUK: That will bring an end to our Champ Car teleconference today. I'd like to thank everybody for participating.19

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