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Tuesday, July 8, 2008

Blame Teresa’s ego for rumored demise of DEI

What was unthinkable just over a year ago is on the verge of happening, as Dale Earnhardt Inc. will likely be sold off to investors by Teresa Earnhardt, basically ending the company Dale Sr. started so many years ago with the intention of leaving it to his children.

Max Siegel, president of global operations at DEI, is talking with major investors about buying DEI. Rumblings are that Teresa would retain all rights to the name “Dale Earnhardt” and “Intimidator” and related merchandise sales, but Siegel and his investors would take ownership of the race teams, race shops and the company’s headquarters. Her asking price is reportedly more than $100 million.

If this all goes through as planned, DEI may continue in name only with the new investors … but without any Earnhardt involved in the operation, they will essentially be a new operation.

I can see Dale Sr. rolling his eyes from the grave.

Let’s look back at how it all unfolded, how badly Teresa miscalculated what would happen in the aftermath of her power struggle with Dale Earnhardt Jr., and how different things could have been.

Jr.’s contract decision
Last year was one of the most pivotal of Dale Earnhardt Jr’s career, as he was in the process of hammering out a long-term contract with DEI, where he had driven since jumping into NASCAR in the mid-1990s. When Jr. first started in NASCAR, most fans likely imagined him driving the #8 Budweiser car for DEI for the rest of his career.

Had Dale Sr. remained alive, that likely would have been true. But dealing with the company owned by your stepmother is a lot different than dealing with the company owned by your father. Jr. drew a line in the sand and bluntly stated that in order to stay, he wanted 51 percent ownership, so he could be in control. Otherwise, he wasn’t going to stay. He wanted to win a title, and didn’t feel like DEI was going to provide him the cars to do that unless he was in charge.

Teresa Earnhardt had a choice. She could let Jr. take over majority ownership of the team, and sit back collecting big checks for the rest of her life as minority owner. Or she could keep the power, and lose Jr. as a driver, and see what happened next.

As everyone knows, she chose option B. Jr. landed a ride at superpower Hendrick Motorsports, home of champions for the past decade-plus. In his new ride, Jr. is doing very well, and is no doubt happy now that he did not become owner of DEI. His chances of winning a title are very high at Hendrick … much higher than they would have been at DEI.

The aftermath
Meanwhile, with Jr. gone, DEI has had very little to celebrate so far this year. Top driver Martin Truex Jr. is struggling mightily this season, and the rumor mill has him as a candidate for just about every decent ride that comes open. After his car didn’t even pass inspection this weekend at Daytona, don‘t expect him around next year.

The #01 car, driven by Regan Smith, is the definition of an also-ran. The team has no sponsor for 2009 and will likely not run next year, regardless of who‘s running the company. The #15 car, driven by Paul Menard, sits far back in the standings. Menard is sponsored by his father’s company, and there are rumors his father is considering a move. This move may become more likely if the new investors take over.

The #8 car was taken over this year by Mark Martin and Aric Almirola, and has been pretty consistent. Problem is Martin is leaving after this year (ironically, to Hendrick again) and the unproven Almirola will be the full-time driver in 2009. He has lots of potential, but who knows how much success he‘ll have?

Many people in the sport, most importantly Earnhardt Sr. himself, have long credited Teresa with a great business acumen and called her the key to creating the brand name that is Dale Earnhardt. Thanks in large part to her, marketing of drivers was taken to a new level with her husband, paving the way for the current situation, where NASCAR is in your face basically everywhere you go and drivers are hyped in every way possible.

But, especially in light of the latest news, it’s obvious Teresa missed the ball on these negotiations with Jr. She appears to have misunderstood how much more difficult it would be to maintain a successful stable of teams without Jr. in the fold. Like him or not, he’s the biggest star in the sport.

Some readers have accused me of being biased toward Jr., and prejudiced against other drivers. Believe it or not, this is not the case. On the contrary, I believe there are several drivers in the Cup series who are more talented behind the wheel than he is. While he will no doubt be in the running for the title many times in his career, it’s entirely possible Jr. will end his career without winning a Cup title, and be viewed as somewhat of a failure by everyone (including myself) when he hangs up his helmet. But no one can deny that he does have a good degree of talent, and that (in large part because of his name) he draws sponsorship money easier than anybody else in the sport. Losing him was clearly a bad choice for DEI on many levels.

If Jr. had remained at DEI, the likely DEI lineup for 2009 would have been pretty solid … Jr., his buddy Truex, and Menard, with a possible fourth car. And it’s not a stretch to say the team would probably have gotten some better results with Jr. calling the shots.

As it stands now, the team not only has an unknown driver lineup for next year, it’s also up in the air who will be running the show.

What could have been
To be fair, I don’t know what happened behind the scenes during negotiations last season. Maybe there was so much personal conflict between Jr. and his stepmother that it just couldn’t be overcome. Maybe they just didn’t want to work with each other anymore, under any circumstances. Whenever family is involved in any dispute, business or otherwise, it’s likely there’s a lot of stuff going on that only the two people involved will ever know.

But I do know one thing … Had Teresa swallowed her pride and let Jr. take over majority ownership of DEI, Both she and her stepson could have become very rich and successful for many, many years. Now, he’s reaping plenty of rewards over at Hendrick, and she’s so disgusted with the sport that it appears she wants out for good.

DEI is about to succumb to squabbling of a nature Dale Sr. would not have allowed. His death has had many major effects on the sport, and it appears the demise of DEI is the latest.

6 Comments:

Anonymous Anonymous said...

It may not be Teresa, at all. I think you should place a little on Jr. He was the one that walked away from the family business. He wanted it all and had not proven anything himself, still hasn't really. Nascar will see him with a championship this year or next. Thats a sure thing. Remember he wanted controlling interest his greed. I believe if he wanted control and Sr. wanted his children to have it then he would need too buy someone out and then apart from someone else. Please don't think that the true race fans don't know whats going on with the Hendrick's teams they put more effort in Jr. eariler in the year. Jr. is about a 10th or 12th best driver not in the top five for sure. Dale Sr., at best was a 4
th. or 5th. on best drivers ever. Just to many people want face it. The way he won races and (I saw ever race he ran)was ?able he would get by with more than any other driver. Please let Jr. drive and he will be good but like you said how good would he be if he had too drive his way. The skills was less than some drivers but the cars has been good and have gotten better so has he. He is not or will never be God, like some people think.
Thanks
Gene Dix

July 8, 2008 at 2:10 PM 
Anonymous Anonymous said...

Actually, if Earnhardt SR had left a proper will and had the business in a trust, his children would have been the owners. Instead, he left the whole thing to his current wife, so the only kid really protected financially was the one he had with Theresa. This whole debacle could have been prevented with a proper estate plan and a proper plan for how the business would be run in the event of an untimely death. It is very tragic all the way around.

July 8, 2008 at 9:57 PM 
Blogger Matt Myftiu said...

You are absolutely right about the will issue. I can only guess that since Sr. had that invincible attitude, he figured he'd be around a long time and never bothered with that proper will. So I suppose he's just as much to blame for the sorry situation of DEI as anyone else.

July 8, 2008 at 10:08 PM 
Anonymous Anonymous said...

She might have known about merchandising and promotion and been a whiz but sadly had very little training in running a entire racing operation as a whole. This would not be a surprise as I'm sure Dale Sr. would most likely never involved her in that aspect of the business. The writing was on the wall last year when the Jr walked the cash cow left the auditorium period. While all the naysayers will pick and snipe at his accomplishments behind the wheel there is one thing they can't deny the man is a virtual money machine for whoever he drives for. I might add he is still sitting 2nd in points clearly in the Chase and barring the other worldly year Busch is having in other years most likely would be leading the thing, not bad for the first year with a new team for this "average driver" Mr Dicks is talking about. Racing runs in cycles, last year it was Johnson this year it's Kyle Busch someone invariably always seems to have the whole package, the hot hand. The year Jr finished 3rd in points I believe he won 6 races and would have been closer had he not shot his mouth off in Dega in the victory lane. The years is still young lots can happen packages can come apart and hands can cool off.

July 9, 2008 at 6:11 AM 
Anonymous Anonymous said...

I think Dale Sr would be turning over in his grave with all the crap that is going on this past year. Terese has just one person to blame Herself..So live with it, Dale Jr did the right thing when he left and the Jr fans will go where ever he goes.

July 9, 2008 at 7:24 AM 
Anonymous Anonymous said...

It's funny you never here people questioning Mark Martin's,Jeff Burton's,and many other driver's talent that have not won a cup.

July 9, 2008 at 4:12 PM 

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