KK's Interview...

[Dov]

From Speedtv.com:

Part 1

A Conversation With Kevin Kalkhoven
Written by: David Phillips
London, England – 12/9/2003

It was my happy lot to be able to attend the AUTOSPORT Awards banquet in London over the weekend, doubly so because on Sunday afternoon I had the chance to join a couple of colleagues in meeting with Kevin Kalkhoven. Along with Gerald Forsythe and Paul Gentilozzi, Kalkhoven is one of the three principles of Open Wheel Racing Series LLC (OWRS), the entity that has been working to acquire the financially troubled Championship Auto Racing Teams since mid-summer.

Last week brought yet another twist in the story, of course, with the news that OWRS is planning to adopt a new tack, specifically, buying from CART the assets necessary to operate the Champ Car World Series in 2004 rather than the whole company, lock, stock and barrel. At the same time, CART revealed it is considering filing for protection from its creditors under Chapter 11 of U.S. bankruptcy laws.

To most of us, this is but the latest in a bewildering series of events surrounding CART, OWRS and the Champ Car World Series, and it seemed to me that offering up Mr. Kalkhoven’s thoughts on the situation is appropriate.

Q: In shorthand, what exactly is OWRS proposing to do now?

KK: We are proposing to buy all the assets necessary to run the 2004 season next year, which is everything from the physical assets to the supplier contracts with Ford, Bridgestone; the contracts with the promoters and the circuits. Basically, everything that is necessary to run the series next year….

We wanted a clean sheet. That’s really what we’re trying to achieve here.

There’s no lack of (commitment on our part). In fact, I personally have guaranteed a large amount of money, if necessary, to keep CART running -- independent of everything else -- for the next 60 days.

There’s a (CART) board meeting next Wednesday where the board will review our offer, and by next Friday we will know the result one way or the other. Now, I don’t know what the board’s going to do. However, we believe they do understand that logic will prevail in all of this which, strangely enough, the shareholders will probably get what they had before and that CART can keep running forward. So we hope that (the board) will understand that we can go forward.

But in the last five months since we had our offer, nobody else had come forward to run this; nobody else is smart enough to put forth tens of millions of dollars of their own money to keep it running.

Q: Is there no fear that this situation could allow, say Tony George or Roger Penske, to come in, buy the assets and dismantle the series?

KK: Of course. There’s always that risk. But mind you, there’s been that risk for the last five months. And whether the risk is x-million dollars or eight millions dollars or whatever, I honestly don’t believe -- and I say this very sincerely -- that Tony George and Roger Penske want to be the guys who bought CART and then stopped it from running. I really don’t believe that’s in their best interest, or in the best interest of the sport or what they honestly want.

I do believe that we can build a strong series. I can’t begin to tell you the number of letters, e-mails, voice mails -- I mean some of them incredibly touching -- from people who really want to see this thing be preserved; that this is too damned good to let go….

We’re in a period of a week or two or three where who the hell knows. But I don’t believe Tony or Roger want to buy it and bankrupt it. I think that is a legacy in motorsports that they would not want. If we screw it up, fine, they can laugh at us. But I don’t think they want to be the seen as the ones who bankrupt the series.

Of course we also put in the proxy, if anyone else wants to come in and buy it to run the series . . . great. That’s been in the proxy for as long as we’ve ever had discussions, because it wasnt our job to run the series. We will do, but it wasn’t our intention. If somebody else wants to run it and let us be team owners and go have fun motor racing, we’re only too happy.

Q: Does that mean to the average fan, they’re won’t be any obvious differences between the series from last season to next?

KK: Next year, apart from a few technical changes to make the racing more exciting, I don’t think the fans will see anything different.

One of the things that truly amazed me in all this is not just the support of the fans, but the support of the teams. We have a huge amount of loyalty from people who want to turn right as well as left.

Actually, the past few weeks have been…I would almost describe it as a touching situation. I have felt, occasionally, very emotional about the support the teams, the fans have given us. Because they realize this isn’t exactly a situation that is anything other than, "We want to go racing."

Q: If you are successful in taking control, would you anticipate that the next level down, the people who run the operations on a day-to-day basis, will there be much change there?

KK: The race operations group is a pretty good group and they are intact. People like (director of technology) Lee Dysktra and (vp of racing operations) John Lopes and that crew are a pretty good crew, so we don’t see any need to change that.

Q: So, in a ideal world, on a race weekend you’ll be a team owner not a championship owner?

KK: I’ve never wanted to be a championship owner. We will hand the operation of the company over to someone else. We do not want to get into the same historical issues of the confrontations between being team owners and running the series. That’s never been what we want. We don’t personally want to influence the competition.

The only reason we’re doing for this is passion we have for open-wheel racing in the United States. And for the people. There are a couple of a thousand people who, if this thing doesn’t work out, will be out of a job.

Q: What is the time frame with the new proposal, assuming the board approves of the proposal?

KK: The board will meet next Wednesday, vote on our proposal. Then it goes to the judge next week.

Let me emphasize this is not the bankruptcy of the public company, but it’s the bankruptcy of the company that holds the assets and the contracts. Then the judge will rule on it and in whatever time he or she believes is appropriate, the deal is done. It could actually happen more quickly than it would have done the other way (with the originally proposed buy-out).

Q: Was there a concern on your part that the shareholders would not have approved the original merger proposal?

KK: It was a concern of course, but more importantly we had to get the issues out there and get it sorted out and get it done very, very quickly.

Q: Are you expecting to see some lawsuits filed as the result of this?

KK: I’m not.

Let me emphasize, it is not the holding company, it is not the Delaware public corporation (Championship Auto Racing Teams, Inc.) that is being declared bankrupt. It’s really important for people to understand that. So the public company still exists; all its liabilities, all its issues still exist. What we’re trying to do is make sure that as quickly as possible, that the assets are acquired to make the series run next year.

Q: So what happens to the public company?

KK: They will probably redistribute their cash to the shareholders. That’s up to the board (but) there’s every possibility they (shareholders) will do reasonably well at it. But that’s not in my hands.

Q: Is it correct to say through this new proposal OWRS gets CART cheaper and moves on from there?

KK: No. The issue is not the assets of CART. Let me emphasize that. From Day One that’s not been the issue.

In comparison of running the series next year, anything on the acquisition is almost irrelevant. That’s why, if anyone else wants to step forward and raise the money for next year . . . good luck to ‘em! We’ll be very happy to give it to them, give them all the assets of CART.

The costs of acquiring the physical assets of CART in comparison are infinitesimally small in comparison to the tens of millions of dollars that will be required to run the series next year. It’s like buying the shell of a house, it’s going to cost you a lot of money to rebuild that house to what it should be. Should you pay the final house of what the house will be like? No. Because you’re going to have to pour all that money in. The point is, after several months of open invitation, nobody else has come forward. Nobody else. Which may mean that there are a lot of people in this world who are a lot smarter than me….

Q: How long do you think it will be before you don’t have to put money into CART? That it will survive on its own?

KK: We reckon that it’s two or three years. And that doesn’t surprise me. My whole working experience in life has been starting new companies. And all of them take a couple of years to turn around.

There is a huge amount of interest in the series; from teams, sponsors and promoters. We have a lot of opportunities to go racing in a lot of places; a lot of people want to come and join us. All they're waiting for is a period of stability. Literally, they keep saying to us, “Give us 12 months of stability, we’re with you. Give us six months of stability . . .and we’re with you, and that’s all we want.”

Kevin Kalkhoven remains relentlesly optimistic about the future potential of CART (LAT photo).

The fascinating aspect of Champ Car racing is that we can take it to the cities and deliver it at one tenth the cost of Formula 1, and have a very good spectacle. Particularly with some of the technology changes we’re looking toward next year -- standing starts, push to pass and all those things – will really make it a very interesting spectator sport.

[Dov]

Part 2

The thing about Champ Car racing, and it was proven last year is, in Formula 1 there are probably only one of three teams that are going to win, probably only one of four drivers who are going to win. In our series, nobody really knows, and there’s a lot more excitement about the fact that there’s a lot of real wheel-to-wheel racing, and with push-to-pass, standing starts, we think we can create some exciting racing. Which is what fans want.

Fans want to see action . . . they want to see really exciting pit stops, really exciting overtaking and, unfortunately, the occasional accident. They want to be able to identify with the drivers. We’ve not done a good job with the drivers (for the fans); we’ve not done necessarily a good job of creating the most exciting racing we can. But relatively few changes can make that work.

There’s nothing fundamentally wrong with the series. If there were you wouldn’t have had 400,000 people in Mexico, 300,000 in Australia -- we have more people turning up for Surfers than turn up for the Formula 1 race. There’s not a lot broken in the series. It just needs stability.

Q: Will the final 2004 calendar be much revised from what we’ve already seen in terms of the contracted events?

KK: There will be a few changes. The first thing was to work our way out of the St. Petersburg race, which was a strange way to start the series because you had to wait two months after that for the next race. You want to start on a high note, like Long Beach.

There is interest in a couple more non-U.S. countries having a race next year. Korea is still on; Australia is still very much on. You have the three Canadian races, the two Mexican races, it’s a pretty strong calendar, but there’ll be a few changes.

Q: Will it be smaller?

KK: Maybe by one or two races, but that’s not necessarily bad. We had a season that was too long last year. You can’t have a season that starts in St. Petersburg (in February) and ends in California (in November). People lose interest when there’s big gaps. We need a more concise race calendar, more regular racing and, preferably, not on the same weekends as Formula 1. So, inevitably, there’s refinements to be made.

Q: I think it’s fair to say that, in the early years of the split between CART and the IRL, many, many people underestimated the resolve and commitment Tony George had to making the IRL work. Someone noted to me the other day that the years that have now passed since the split are, in the final analysis, a drop in the bucket to the history of the Indianapolis Motor Speedway that dates back nearly 100 years now. It’s almost an Eastern outlook on things, where any timespan less than several generations is insignificant.

Mr. George is entirely focused on racing, be it the IRL and the Indianapolis Motor Speedway. That is not the case with your group. In addition to your various motorsports ventures, Gerald Forsythe does what, billion of dollars worth of business through the Indeck Group? Paul Gentilozzi owns a successful commercial real estate firm and you are also involved in a venture capital firm.

One could make a convincing argument that a lot of CART’s problems from the original founders on through to its days as a public company stemmed from the fact that the people who were calling the shots were not solely focused on making Champ Car racing their life’s work. What assurances does anybody have that OWRS is any different?

KK: I question whether anyone can afford to support a race series indefinitely, whether it’s Tony George or ourselves. Tony is clearly losing tens of millions of dollars a year on his racing series and his family is not overly enthusiastic about that. So, while he can afford to adopt an Eastern-like viewpoint on this, financial reality does exist.

Financial reality is that open-wheel racing in the United States -- as a singular group -- is and has never been as successful as other forms of racing. That is proven with Formula 1 at Indianapolis, which is not exactly the greatest spectator event in the United States sporting calendar.

So, what we have to do is take a cold dose of reality in this and say what is it that we all have to do to promote open-wheel racing, not just in the United States but also in Canada, Mexico and the Americas.

In the early 1900s in the United States, motor racing really depended on people being able to go to the horse racing tracks. So they got used to going around and around and around on ovals. Very interesting racing.

The rest of the world was used to road racing. So you’ve got this strange island of circular racing, which is the American world, which really doesn’t exist outside. And clearly, there are no really successful oval racing events outside of the United States.

So, if you’re looking at an international audience, you have to recognize that while there is one very successful oval event -- which is Indianapolis -- the worldwide audience fundamentally does not want to just see oval racing. That is proved among television figures of oval racing in the IRL. It used to be that spectators came to be familiar with the drivers. If you got to many of the (single seat) oval racing events in the United States, the spectators are so few that the drivers get to know the spectators. It’s not something that in the long term is going to catch on. If you want to look at a series that is based throughout the Americas, you have to look at the fact that people want road racing.

Now, is there an important aspect in the Indianapolis 500 and a couple of other oval races? Yes. Clearly. Indianapolis is known around the world. But for open-wheel racing to survive it needs more than ovals. We implicitly believe that; we implicitly believe that you could put an oval in Mexico and nobody would go there to watch it.

Who’s got the strength? I don’t know, but if you want a purely U.S. environment, ovals will partly work. If you want an international environment -- which includes by the way from an American viewpoint, Canada and Mexico –- you’ve got to go road racing.

Q: Do you see a time when CART won’t race on ovals at all; that it will be all road racing?

KK: Possibly. It’s not, by the way, in our plans, but it’s possible. If the marketplace dictates that’s what people want to watch, let’s go with the audience.

Q: Is there a chance to return to Europe in the future?

KK: I think there is a significant opportunity for road racing, internationally. One of the things that completely fascinates me in the last four months is the number of cities around the world that have approached Champ Car racing who want races. Whether it’s in the Americas, Asia, actually Africa and the Middle East -- because we can put on a race for one tenth the price and create almost the same excitement -- not the same, by definition -- but almost as much and do it much more quickly (than Formula 1). Because people are interested in open-wheel road racing around the world.

So will we see it in Europe? Probably. Will we see it in other parts of the world? Probably.

Q: But not Europe, next year?

KK: I doubt it. We’re not set up next year to be able to do that.

Q: What about car count?

KK: I’m not anticipating a problem with car count. I really am not. That’s the one thing in all this . . . I go, “OK guys, so glad you’re with us.” Because we’ve got new teams coming in; we’ve got Carl Russo coming in with, probably the most significant American driver since Mario Andretti in young A.J. Allmendinger. If there is one guy who can go to Formula 1 and win, it’s A.J. There are two or three young American drivers coming up, A.J. being a good example, the traditional route of the ladder series. He’s got a very passionate backer in Carl Russo and he is determined that he will become the one.

Q: How vital are American drivers to the series?

KK: The answer is we need international drivers. If we go to Canada we need Canadian drivers If we go to Mexico we need Mexican drivers. One of the reasons Formula 1 has not been successful in America is that they haven’t had an American driver. I would question if Britain didn’t have a Formula 1 driver would the interest be that much?

Clearly we need to bring on American drivers, but we also need to bring on Australian drivers and drivers from around the rest of the world to make it a more international sport. But I do think that if all goes well next year, we will have a couple of young American drivers who will be entertaining, who will be press-worthy.

In particular, some of these new guys like A.J. and Ryan (Hunter-Reay) are world caliber. We have seen the influence of Champ Car racing with the drivers like (Cristiano) da Matta and Juan Pablo Montoya, it’s a hell of a good training ground. You have to have superb car control and these guys could make it, they really could.

Q: There have been rumors that you and Craig Pollock will not be involved together at PK Racing next year. Any truth to that?

KK: Partnerships always change. Craig’s primary responsibility is Jacques (Villeneuve), and Craig has to work that out.

Q: So you’re not sure how much involvement he’ll have in the team?

KK: I’m not sure, but the team will be going forward.

Q: Now you just need a series….

KK: The next week or two will determine all of this. All I can say is there are a huge number of fans and a huge number of people that are involved in this who want this thing to succeed. Then there are a few people who would rather see that it not (succeed) and they’ve got a pretty well-oiled machine to take anything you say and turn it to a negative spin.

But there is no lack of commitment by the principles to provide their personal capital and their personal energy to make sure that a great series survives and carries on; matures, changes, metamorphoses and keeps going on.

[Liz]

An excellent read! Now let's see how fast the Opposing Counsel can shoot it full of holes.

[codename_47]

A lot of excellent Soundbites there...I think I'll go with:

I do believe that we can build a strong series. I can’t begin to tell you the number of letters, e-mails, voice mails -- I mean some of them incredibly touching -- from people who really want to see this thing be preserved; that this is too damned good to let go

...as the soundbite of the day!

In other news....

Standing Starts.....GOOD

Push to pass: If it improves the racing...I don't really care at this point!

Lengthy but interesting read....thanks!

[Snrub]

I have to say this is the first thing I've read that's made me feel a bit better. He's a no BS kind of guy and that's what the series needs. Exactly what he was saying about people ensuring stability. If they're straightforward with everyone and tell them what is going on that's a kind of stability.

[paul-collins]

I'm not sure I buy his reasoning about ovals being unnecessary or unpopular. I think he's showing some Europhilia there. (As an aside, initially oval racing did enjoy some success in Europe, whether at Monza, Montlhéry, Brooklands etc. but it seemed to die off post-war.)

Also, what's this about bankruptcy being for the assets company, not the Delaware company?

Anyway, he seems pretty positive. Time is still an issue, and I doubt that there will be "no lawsuits." If they can sweep that off to the side, and let it get taken care of without affecting next year's racing, then that would be good news.

[macdaddy]

Thanks, Dov.
That was great reading.
Every word.

Informative re: bankruptcy.
Informative re: lots of things.

Russo and AJ are still sounding good...

[Fogelhund]

Thanks for the interview. KK is certainly a well spoken individual, and would make for a good leader. He is definately saying the required things right now.

Hopefully things work as well as he is saying.

[Ac.]

Thanks Dov. Regarding paul-collins question about bankruptcy, it seems likely that CART was structured as several different corporations with assets held by one of them. This is a standard way of limiting the liability of one organization from another.

Has anyone studied the incorporation documents filed with the SEC? They might provide some insight.

[macdaddy]

Good point, Ac.
A friend of my father's bought into a franchise all those years ago, soon bought out of the contract and opened under a new name, and over time opened over 500 stores without franchising. (He owned 'em all). I remember him explaining that any lawsuit against a particular location could close it down, but the parent company was protected somehow. And there were several layers of "parent companies". Pretty interesting really.

[Dov]

KK: I’ve never wanted to be a championship owner. We will hand the operation of the company over to someone else. We do not want to get into the same historical issues of the confrontations between being team owners and running the series. That’s never been what we want. We don’t personally want to influence the competition.

If this is true, then what does this mean for the future of Forsythe, PKR & RocketSports Racing? :confused:

[Emfa]

I read that to mean that the OWRS principals will step back from running the series - probably leaving that to an appointee - and concentrate on running their teams.

Very interesting interview.

[jhansen]

Good read, very intelligent individual. A lot of positives to take away from that. I need a clarification though. Can someone explain "push to pass" please. Not familiar with that term.

[jklein6419]

what do you guys think he means by technical changes for next year. small tires and wings or what. i know bridgestone gonna mess with the tire to try to make the racin better, but what else

[gttouring]

push to pass- is a button used to increase fuel mixture and change advance, increas revs or boost or something- anyway you push the button and you get more power and you can go faster temporarily- too much and you blow up
this is 'push to pass'
I expect the technical changes may be in the wings to get rid of some grip make it more mechanical, so the reynard 3 or four may be more competitive and the lola will be sliding and bashing around some more, i wouldn't think the tyres 'd be smaller

[jhansen]

Thanks gttouring. I'd love to see standing starts for CART. That would add a lot. Wouldn't really care for a push to pass button, but more so I'd like to see the manditory pit windows abolished. Hopefully things move forward next year.

[Dov]

Originally posted by Jhansen
Can someone explain "push to pass" please. Not familiar with that term.

If CART/OWRS decides to implement this rule then all of the ChampCars will be outfitted with a "push to pass" button on their steering wheels. Basically if you are a driver who is stuck behind another car you would then have the option of pressing this button on the steering wheel which would give you a little more HP (I'm not sure how much) and therefore a good opportunity to pull out and pass the car in front of you. CART may only allow the drivers to use the button a certain number (I once heard 10 times) of times during every race, meaning each driver has to be very selective when using it.

[rustyfan]

Very interesting read, and the bit about standing starts came as a total - but very pleasant - surprise to me.

[indycool]

I've read all the stuff from advocates of push-to-pass. The one thing they all leave out is that the "passee" also has a push-to-pass button, and if he/she hits it when he/she is being challenged, it equals the issue and there is no pass. I can just hear the announcers now, "Here they are with five to go. Paul only has one push-to-pass left and Bruno has three. So if Bruno can get Paul to use up his last push-to-pass, he'll be in position to take him with one of his remaining two. There he goes! Paul hit the button, too, so he's done. Bruno has two more and we expect him to try it on the long straightaway coming up. Will he? Will he? Will he? YESSSSS!"

What a joke.

[Snrub]

Good point Indycool and you are completely correct. The only thing I'd like to mention with the "push to pass" is that the driver behind can get a momentary advantage before the guy infront gets to pass. Hense they've got a bit more momentum.

Before drivers had different fuel/timing settings. Drivers could run between I believe 95-100% of optimal A/F ratio. "The button" wasn't that different from running @ 100%.

[codename_47]

Lets just wait and see can we.....first we have to get CART on the (Standing ) Grid first, then we can all moan about the push to pass.....

[EBTM]

Excellent interview. Thanks!

About the standing starts... well, being a big fan of Adrian Fernandez, I can say that I expect him to make a lot of dougnuts when the turbo kicks in. But it should be interesting to see how they control the car at that point.

[jusafan]

Wow. This is the first positive thing I have read about CART in a while. Makes me feel better. I count myself among those KK refers to who who believe this is too damned good to let go. I hope they can save it, and then give it some stability. Once there is stability, the drivers, the sponsors and the television coverage will come back to CART, because it's an inherently better product than IRL. I think KK is right, that besides Indy 500 and maybe a couple of other venues, circle tracks are for NASCAR, not open wheel racing. Go for it KK, we are pulling for you and the OWRS group to save this!

[codename_47]

One thing I DID scour for when he was mentioning the "improved racing" is the removal of this annoying pit window rule.....Come on KK, it's been ruining races for two years now....put it back to how it was...PLEASE!

[The Snout]

Like to see them mix the starts, adds to the diversity. Say have half standing and half rolling, just MO.

Good interview, we needed to hear from someone at OWRS about what's shaping up. The commitment is there, no surprise though to me to see Pollock perhaps bail on PK Racing. That guy doesn't seem to stick with anything for long and KK may be better off without him, certainly he's ready if he goes.

So lets see how the judge and the board thing plays out. If OWRS gets what it wants though I believe we will have some very rich and well thought out businessmen on our side. And they obviously believe CART is repairable, else they wouldn't have bothered.