Saturday, February 6, 2010

Alternative Plan to a Single Chassis Provider

As you've read and seen by now, there are now a bunch of different angle images of the three Dallara 2012 chassis concepts.  The Delta Wing group will show their design on February 10.  Swift and Lola will be showing their designs in the next few weeks.  The more I see of the cars from Dallara, the more I like all three.  They all have angles that make them look fantastic, and I really would like to see all three on a race track.  Even the most radical one (the bright red one) looks fast and exciting.  Having seen cars from Swift and Lola for other series (in particular, Swift's Formula Nippon car), I have no doubt they will bring some interesting designs to the party.  The Delta Wing could go either way, and anticipation is certainly high.  But we keep hearing that the IRL and the various builders all want to go the single-supplier route, in order to keep costs down.

The quick version of why is that by supplying the whole field, a manufacturer can charge a given price for the chassis and still make money.  For every entry that doesn't buy their chassis from that supplier, they need to charge more in order to make the same money.  If they supply half the field, they need to charge twice as much.  The math isn't exact, but you get the idea.  I understand this, and as long as there is engine competition, I can certainly live with a single chassis, if it's a good one and fosters exciting racing.  I do wish there was a way to have multiple designs, though, particularly now that we're seeing a bunch of really cool concepts being presented.  Along those lines, I have an idea for how manufacturers can make money while still containing costs in a multi-chassis environment.  One common point for all of the chassis proposals (Dallara, Swift, Lola, and the Delta Wing group) is that the cars will be built in central Indiana, either right in Speedway, or at least in the region.  That's certainly a real outlay of cash up front.

So why not follow the engine-builder model?  Cosworth builds race engines based on or badged by a variety of manufacturers, including at various points Chevrolet, Ford, Mercedes, and Mazda.  AER has had similar arrangements.  If chassis manufacturers want to build chassis for the IRL, let them help fund a manufacturing facility in Indiana (something they've already expressed a willingness to do), and have that factory serve as the factory for all IRL-approved chassis.  That way the IRL has a single point of production through which all chassis must pass, making it easier to ensure that no safety corners are cut, and it bring jobs to Indiana and alleviates the currency exchange rate problems with the current chassis.  That factory could then produce chassis for multiple manufacturers.  It would absolutely increase costs for the factory to have tooling for multiple designs, but they would save costs by effectively outsourcing R&D to the designers (Dallara, Swift, etc).  Those designers have a mitigated up-front cost (only pay part of the cost of setting up the factory), and then remove themselves from managing the factory, which will by definition be far removed from their primary facilities.  They then get a cut from the sale of each chassis.  They also then have some access to an assembly plant in Indiana, which makes it cheaper if they want to get involved in other US motor sports formats (F2000, ALMS, Grand-Am, etc).  The factory gets its cut, but isn't in the business of designing race cars, so they become a contract manufacturer who can (over time) develop relationships with other motor sports companies that have the design know-how, but lack the facilities of funding to manufacture their product on the necessary scale.  Under this system, the designers would still benefit from some of the economies of scale that they would have as the sole supplier, and mitigate some of the up-front costs.  The IRL still gets to deal with a single point of manufacturing that is local to them.  The Indianapolis community gets a new factory that increases the city's role as one of the capitals of American motor sports.  Best of all, IndyCar fans get to see multiple chassis without driving costs through the roof.

I'm almost certain I'm missing a big, glaring reason why this just wouldn't work, or at least wouldn't produce the effect I want.  I also haven't addressed would would own the factory in Indiana.  This isn't intended to be a complete proposal.  I'm hoping some folks can comment and point out the flaws, because otherwise this idea is going to stick in my head and really bother me.  Comment away!


Edward said...

I like your idea. The concern I have is this: Why would a group of chassis manufacturers want to band together to form what basically amounts to a clearinghouse for the chassis? That doesn't make much sense to me. The companies are all in competition with each other for business and on the track, why would they come together for this purpose?

On a slightly different note, I just found your blog and really enjoy reading it. I have added it to my growing bookmarks list.

Fred Hurley said...

I was envisioning a separate group running the factory, perhaps even the IRL, though they're in cost-cutting mode. Each company would then contract with them to have them build the cars locally. Since they're all talking about building a factory in Indy anyway, why not just out-source it, or in this case in-source it. Apple doesn't actually own the Chinese factories that build their iPhones. It's easier to hire an existing factory. Some of those factories also build other electronics. And a race car factory in Indy could also contract to build NHRA chassis, since those teams are also local. Basically, "Bring us your design, and we can build it."

All that said, it does indeed require competing companies to all buy in. I doubt it'll happen. I just think it could make financial sense if managed correctly.

Thanks, by the way! I appreciate the comment!

Fred Hurley said...

I do think you pointed out the glaring problem with the idea, though. You'd need to get bunch of competing companies to agree to it. And I strongly suspect that just isn't going to happen.