CART FEDEX CHAMPIONSHIP SERIES: GI JOE'S 200

June 16, 2002

Ian Bisco

Emerson Fittipaldi

Chris Pook

Jimmy Vasser

Keith Wiggins

CHRIS POOK: Well, good morning. Thanks for coming this morning. As you know, there's been a lot of speculation about where we're going with our engine program. I will get into it in a little more depth as we move forward in this discussion with you this morning. But we are today going to balance the company out, stabilize the company, and going back to join one of CART's old, old friends in the supply business, and that's Cosworth. And we will stay with the turbo-charged engine for the next two years on an exclusive basis with Cosworth, and lower the costs of racing in this series, and remove any barriers to entry into this series by using that engine for all of our competitors. Ian?

IAN BISCO: Obviously, we're very pleased about this. This is obviously great news for Cosworth. I think that I personally have been involved with Cosworth since 1980, in the days when we had the DFX engine, and it was pretty much the exclusive engine for somewhere 'round about 10 years. I think a lot of our current teams today grew with that engine. The CART series grew with that engine. We're probably one of the only manufacturers, engine suppliers out there that actually has supplied engines to CART every year since the beginning. So I think it's really positive that we can put this together and look forward to the two-year agreement that we have in supplying a version of the engine that we're currently running to all of the existing competitors. Hopefully we think we will bring in new competitors now, as well. I think the price has been made really attractive so that we look forward to going in the series. We look forward to providing our competitors with equal performance power plants, reliable power plants. We think that we can provide a product that basically will give CART the ability not to worry about the engine program and the engines, and concentrate on all the other aspects of the series. So I think this is a win-win situation for everybody.

CHRIS POOK: Well, what's happened here in this series over the last three to five years is that there's been a lot of money put into the series, and the price of the cost of racing has escalated to a level that is really very high. And we need to bring back under control the cost of automobile racing in this series, but we need to maintain the level of competition and sophistication that the series has enjoyed. So by entering into this engine relationship and supplying a support package for entrants, we can achieve both goals, and we can create stability for our series.

JIMMY VASSER: Well, I mean, with a program like this, you know, teams can prepare for next season, new teams are going to enter into the series, I'm sure, you know, reducing the costs, creating a platform where you don't have to jockey for positioning with the engines. It's going to make it a lot more clear picture for the future. I know there's some friends of mine, some drivers, that are out wearing out their tennis shoes this weekend looking for opportunities. I think under the current situation, opportunities have been going away. So this is a very refreshing new approach and outlook. And I think that the car count is going to rise next year tremendously. This is the kind of stability that CART needs to go through this rocky time and to grow for the future.

JIMMY VASSER: Absolutely. I feel a car like that should win the championship this year, so (laughter). That's my goal. You know, it's a fantastic package, and I think Cosworth has shown to have top power in the series over the last four, five years for sure. I think with the one-make supplier, with Cosworth doing all the engines, it will be a lot easier for CART to control potential speed problems at certain tracks and make it the same for everybody. And the politics of juggling the interests of all the engine makers, you know, at least for the time being, will be one less headache for the administrators in CART. Although I think over time, with the series stabilizing again, that manufacturers are certainly going to want to come back in.

JIMMY VASSER: I love the turbo engines. I think they've been the -- one of the cornerstones of CART since inception. You know, the sound, it's the power application, it's a great part of our formula. I'm personally pleased to see it stay and I think the drivers will echo that sentiment. You know, again, I think the main reason for CART and Chris to make this decision is for stability, not so much for the love of the turbo.

JIMMY VASSER: Thank you.

EMERSON FITTIPALDI: Well, first, I would like to say good morning to everybody. I'm going to announce my comeback to driving with the new Cosworth (laughter). Anyway, my reason to be here is not many people knows, but when I come to CART in '95, Chris Pook was doing all my management, my personal, you know, contacts. He was my business manager in America. I had fantastic relationship for seven, eight years with Chris. And I'm hundred percent behind Chris. I mean, he's the man to do the job. CART needs someone strong like Chris Pook to carry on. Is a tough time worldwide, not just for CART. I was in Monaco a few weeks ago for the Monaco Grand Prix. As you know, they have a budget problem, Formula 1. Talking to the midsized teams and to the smaller teams, they are really struggling. As you know, the world has changed after September 11, and we are facing a lot of difficulties in TV rights, sports worldwide. The World Cup soccer in Brazil has been very difficult to sell on TV because of lack of sponsorship. And I think the new package, the new way that CART's going to go now, back to the Cosworth engine, I mean, my experience with Cosworth, going back to the Formula 1 time, and then on the '80s as a driver, I think was the most balanced racing that I ever experience. And that's going to happen the next two years here. We are going to have the best quality of racing. The racing fans are going to enjoy more because it will be more even, the cars. The drivers' talent is going to make the whole difference. I think it will be a great show. We have the fastest car in the world. We have the best category. I'm here to support Chris, to support CART. And welcome to Cosworth again to continue support motor race and give us opportunity to be the most competitive formula in the world. Thank you very much.

KEITH WIGGINS: Well, first of all, from a completely selfish point of view, obviously, having the Cosworth and the Lola, which most people are running, seems great to us because we want to expand to a two-car team. We all know that budgets are difficult to achieve. From a selfish standpoint, it's very good because we can just expand. We already have what we need to run. But I think more importantly, the longer term is what's right for CART. Because what's right for CART will help us develop, as well. And I think we have an ability now for various reasons to have our own identity and follow our own direction. I want to repeat what Emerson just said, that Chris is the right guy to do the job. We made a decision where CART is, CART is the best series. We do have the best venues, the best racing. And to maybe go down a path of trying to go to be calling with other people is a mistake. Now we're going to go in our own direction and develop. We could have easily gotten into a situation I think where we would have ended up with something not right for where we are in terms of technology. Now we've got the right time to plan. We've got two years to decide what are the right cars and the right engines to attract the right manufacturers for where we should be in the market, which is high tech. It's a more sexy car. You know, I think this now will give us time to plan. And Chris has had the guts to say, "Let's get this sorted out. This is where we want to go." So I think it's great for the series. I think it's great what we're going to have. Selfishly, the incentives they're giving the teams, whether it be a small or a big team, for us obviously it's a great relief not to have to pay a large amount of money for engines. Some teams are going to have to pay money where they've had free engines in the past. But now they've made it such a platform that for the big teams, the money isn't going to be a huge expense. For us, it will save us significant. It's no secret, but it's going to save us in order of $3 million. So we're already well towards our second car. If we have the cars in the series, it becomes healthy series. Formula 3000 in Europe, virtually everybody runs the same cars, but still the good guys are at the front and there's still two seconds between the front and the back. And I don't think most people would notice if we all have the same engine or not. So I think the fans will have what they want. We'll still have good quality technical equipment, but we all go racing. Once the grid is healthy, we have 18 to 20 good drivers, then we can move forward in the right direction. In turn, that will obviously make our sponsors happy and bring more money into the sport.

CHRIS POOK: The franchise board has approved it. The Delaware board approved it. The Delaware board instructed management to proceed with a business plan for the company that would stabilize the company and give us the ability to look towards the future. We are obviously in pretty serious conversations with the Ford Motor Company. I won't say anything more than that at this present time. But they're exciting and fun conversations. We are very optimistic about our relationship with that organization. But we'll talk to you about that later. If I may take the opportunity. I think it's really important for you all to understand the genesis behind this decision. For whatever reasons, CART changed its engine formula last October. It changed in October having said to the manufacturers over a year before that that by March of 2001 they would tell the manufacturers involved what the engine formula would be for 2003 onwards. They missed that date. Then they got themselves into a box as to what the formula would be. So eventually they decided they would go with the normally aspirated V8 engine, the same engine that is used in the IRL. That was in retrospect a bad decision. But be that as it may, that was the decision that was made. My administration decided to create a common chassis with the IRL to try and give our teams flexibility and good economics to be able to run in both series, and to give the manufacturers involved a greater quantity of clients, so that in turn would bring the cost down. We were summarily rejected on that. We put it out as an olive branch to try to form some type of compatibility with the other side to bring us closer together to see if we could merge the two together. But the olive branch was broken off in two pieces and we were slapped around the face with it and told to get out of town. So we did that. We've done that. We're now going to -- management now is taking this company under full control, and we're going to run the company the way we want to run it, the way of board of directors want it run, and the way the team owners want it run. That is the genesis behind this decision to go back. We went back immediately to one of the most reliable partners that this company has ever had, and that is the Cosworth group, owned by Ford Motor Company. And the leadership for that decision rests with Gerry Forsythe. He deserves all the credit and the praise for that. He tried very hard to convince his colleagues back last October this was the way to go. They didn't listen to him, for whatever reasons. He convinced me sometime ago this was the way to go. He reconvinced me in Milwaukee, when they were there, this was the way to go. We have had really, really good energetic and enjoyable discussions with Cosworth since that time, culminating in today's announcement to you. Going forward in the future, because it's no use making a decision for today and the next two years if you don't know where you're going after those two years. And where we are going is quite simple. In the next six months we will talk to the world's manufacturers, Ford obviously among them, and the other manufacturers around the world and decide what is the best engine maker for this series. Is it a V8? Is it a V10? Do we stay turbo-charged? Do we got normally aspirated? All the various things. We want to hear from the world's engine manufacturers, automobile manufacturers, what is the best situation for them, recognizing that they recognize what a great marketing platform this series has for them. We'll get their input, then we will arrive at the right engine decision by the end of the year, the 1st of January next year. We will talk to our chassis manufacturers and decide what is the right chassis for this series going forward. We'll put that out in the marketplace in the first six months of 2003, with a target start date of 2005. That gives plenty of time to the manufacturers. When these manufacturers told CART that they can't react in a few months to major changes, we need to recognize and respect what they're saying to us. And they can't. They need a year and a half at a minimum to get programs through their system. It's not just designing and building the engine, it's the whole process: it's the philosophy of the decision to go, it's the economics to fund the decision to go, it's the marketing department that has to be involved to understand how they can market and sell cars around that decision. And we need to respect that, and we will respect that, so that we can build the relationships that need to be built between this company and the automobile manufacturers. And then those that sign up in 2003 with us to start the 2005 season, in 2004, we'll start discussions about how we integrate the marketing programs for 2005 going forward with them. So this is not just a stop gap. This is a very clear-cut decision by management. I'd like to equate it to, if there's a racing car team that has lost its track and is not getting good times, what it's doing, it's running confused, what they do is they go back to a basic, they go back to a base platform and then they start again. Well, this is no different than that. We are going back to a base solid proven platform with friends we know and we trust at Cosworth, and we're going to build it going forward for everybody's benefit. And that includes Cosworth, CART, the chassis manufacturers, the drivers and the sponsors. And we're going to bring value back into this series and we're going to deliver value for everybody involved in this series as a result of bringing the costs down to a sensible investment level where people can see a direct return on their investment and they can measure that return on their investment. Very shortly you'll see another announcement from us concerning the increase of network television. That's where we are. Just one thing about television. I just looked over there and saw the man responsible, Terry Langer, for the quality of television that we have today. Terry and FOX have made a solid commitment to this company, and if you look at the quality of television that's been emerging over this year so far, that's the man responsible for it, that's a man who is dedicated and passionately believes in what he does. It shows on the television screen. Week after week this show gets better and better. And he has been given the mandate by FOX, who is by far the most aggressive and successful media company in the world, to deliver a solid quality product to the viewers. We're not after quantity. I keep saying this over and over again. Quantity will come; quality must come first. So quality television, quality engine program, quality racing that CART has proven it has over the years.

IAN BISCO: I think we're looking at bringing it down to a little over a million for the teams per car.

IAN BISCO: This year typically is in the three to four range per car, yes.

UNIDENTIFIED SPEAKER: How much (laughter)?

CHRIS POOK: We are getting our arms absolutely around John Judd. Again, with help from our good friends at Cosworth, we are in those discussions with John. We respect John very highly. Anyone know where his MG finished? He makes a very good engine. He won the 24 hours of Daytona. Makes an excellent engine. He's a solid citizen. He's well-liked in our industry, and he's well-respected in our industry. We absolutely are sensitive to that and conscious to it. As I said, we'll put our arms around him, embrace him into the program.

CHRIS POOK: It will be a combination of both, it's cash and in kind savings for them. But it is a totally level playing field across the board for 20 racing cars to participate in this series. Then when it comes to -- we want to really put 20 base out there with two more, so 20 plus two. 20 will participate in the incentive package you see on an equal basis. The positions 21 and 22 will participate in the overseas travel. So we won't penalize them from going to all the races, but they will not get incentives when they're in North America. And the reason we want to keep it at 20 and 22, 22 actually is quite simple, because many of the urban racetracks we go to, we have a space problem, we can't get everybody fit in in an effective, professional manner. So we want to respect those promoters who have those space problems in the key major markets to which we go. Secondly, when we fly, if we go above 22, it requires us to buy a third airplane. That doesn't make economic sense to anybody. That's where we are. Let me remind you, the word is "quality" and not "quantity".

CHRIS POOK: No haves, no have nots.

CHRIS POOK: Absolutely. Then it gets down to the ability of the team to extract the maximum from the engine and chassis package by using their technical expertise and their driver's ability.

IAN BISCO: I think the cost related to the three and a half liter engine is something that will remain separate to the turbo program. What we do with that engine, we'll have to decide. Probably got a nice little street car it will fit in actually (laughter). I don't think that's an issue we're too worried about at the moment. I think we need to concentrate on the turbo engine and make sure that we're well-prepared and that we get that running, that it's to a stage, you know, where everybody can compete and be equal and we get the reliability that we're confident that we're going to get out of it.

IAN BISCO: The specifications, we're looking at reducing the rpms on the engine to what we currently run. Primarily the thing that controls the life of the components in the engine are rpms. You know, I don't think it's any secret that most of the manufacturers are running about 16,000 rpm at the moment. I think if we can reduce those rpms, then you can actually make the parts last longer. So one of our primary tasks will be to reduce the rpms, not sort of as low as the fact that the engine sounds bad or it loses its sort of glitz as a racing engine, but just so that we can get the life out of it that we need to get. Naturally, if you reduce the rpms, you bring the power band down a little bit. We'll deal with that by probably increasing the boost so that we can have a number that we feel that we can give good, safe racing on ovals, and also maintain the thrill that we have on the road courses and street courses that we race on.

EMERSON FITTIPALDI: As a driver, I was watching yesterday the cars going by. I mean, that's plenty of power. Even reducing the revv is going to be plenty of power and it's going to be great to watch and great to drive.

CHRIS POOK: We have not asked for commitments from new teams yet. What we're asking for is commitments to our existing teams, giving them the opportunity to sign up first, and then we will then pass on the application form to the new teams. Is there interest from new teams? Absolutely. Are these new teams funded? We're asking to see their funding before their application is given to them. A couple of them are already funded, one of them is very close to funding. So we feel very good about it. But I must say to you, the first thing we must do is respect the guys that are running in the series first. That is the most important thing to do.

CHRIS POOK: We would like to be able to publish our teams within 60 days. That's where we want to be. Can I just go back to the engine situation again, the normally aspirated engine, three and a half liter engine? With all due respect for Judd and for Cosworth with developing that engine, you've got to recognize that we are basically in July right now. We would be getting these engines to the race teams probably at the end of December - beginning of December. Then we have to go testing. If we had a hiccup with those engines, we have left ourselves with no window whatsoever. We have spring training starting the beginning of February, first race third week of February. We would once again be putting ourselves in a corner with not much out. So one has to be sensible about these things. One has to evaluate all these things. With all due respect to the engineering capabilities of Cosworth and Judd, I didn't feel it was a prudent risk with all the other unbalance that was going on. So, you know, you minimize your risk in these situations, and that's what we did.

IAN BISCO: I think that's absolutely right. I think the benefit of having the control of the engine and the power characteristics enables us in CART to work together with the chassis manufacturers to actually get the best package that suits different tracks and get the best type of racing. It's no secret that we go to some tracks and we have toe much power, we have to burden the cars probably in some ways that we don't really want to that affects the racing. I think will give us the opportunity to perfect both the engine power and the chassis package so that we can get the best out of the race and make the cars race better and give the drivers a better opportunity to pass. Once again, I think it's a win-win.

IAN BISCO: That is going to be quite likely, yeah. Although, what we don't want to do is get into different specs for every different track. I could well see a different specification for an oval versus a road course or a street course.

CHRIS POOK: At the end of the day, we're going to manage our business ourselves and not be managed by others. That's what we're both saying to you.

IAN BISCO: We'll do whatever it takes. We're probably looking at a minimum of one engine per weekend.

CHRIS POOK: We have to be sensible here. If we're going to bring the price of running a race car down to six million or six and a half million as a sensible budget for these teams, we have to put some disciplines in place. Again, we have to manage the business.

CHRIS POOK: Absolutely. Absolutely. This is a sensible business decision for this company. And you look at that business decision, along with all the other things we've been doing in the company with our marketing programs, the way we're approaching it and creating the right environment for companies to come here and do business and get a return on their investment, I think you can add it up that two and two will make four here. Lately it's been making three and five.

CHRIS POOK: It's absolutely in place for two years. As I said earlier, we're going to sit down here now in the next six months and start talking to all the engine manufacturers -- automobile manufacturers, not engine manufacturers, automobile manufacturers and listen and find out what works for all of them. We haven't done enough listening around here. We've done a lot of charging down the road, you know, falling flat on our face and wondering why we tripped up. We're going to do some listening. These people are in the business of making automobiles, and they're in the business of selling automobiles. And these people are in the business of making engines, and we're going to listen to them, what they've got to say. We're not in that business. We're a sanctioning marketing organization. We need to listen to people who are in areas of their business where they have expertise. We need to digest that. And we build from there.

CHRIS POOK: Why would there not be?