Dale Earnhardt Jr.’s Contract Negotiations with DEI


The recent contract negotiations between NASCAR star Dale Earnhardt Jr. and Dale Earnhardt Incorporated (DEI) have been discussed plenty by the media so I thought I would give my opinion on the matter as I was and still am a Dale Earnhardt fan. A quick summary of the negotiation: the driver contract for Dale Jr. is up for renegotiation this year and the main stumbling block to Dale Jr. getting a new contract apparently is his insistence on having majority ownership of DEI, which currently is held by Dale Earnhardt’s widow, Teresa Earnhardt. The latest rumor is that Teresa is willing to sell Dale Jr. the 51-percent ownership for between $55 to $75 million dollars. Apparently, Dale Jr. is not considering paying for the ownership.

I can’t see Dale Jr. maintaining the focus that would be required to take over the reins of such a successful company and trying to win races at the same time. He thinks that by him running the company it would be better for his team. I can see why he is stressed by the team performance. Since his start in 1999 in Winston Cup\Nextel Cup racing, he has only won 17 races with 2004 being his best season at 6 races won. However, since 2004 he has won only 1 race each in 2005 and 2006 with no races yet won 8 races into 2007. As a comparison, since 2001 Jimmie Johnson has won 26 races and a championship along with the wins. I doubt Johnson is in any hurry at the moment to run his own team, not to mention a whole company that does more than just one team.

Drivers who own their own teams do not seem to have a habit of making successful runs of them. Michael Waltrip is struggling to survive this year and has only entered in one race himself at Daytona. There were such high hopes for him and Toyota but it all hinges now on Dale Jarrett and his championship provisional starts. Ricky Rudd tried his hand at it from 1994 to 1999 but only had 6 wins during that time to show for his efforts. The last driver that was successful as an owner/driver was Alan Kulwicki, who won the Winston Cup championship in 1992 and if not for his death in 1993 probably would have won additional championships since then.

For the next contract, Dale should ask for a bigger say in running his team if that is what he wants to do, but leave the management of DEI in the hands of the person best capable of running the entire company. Teresa has made a lot of money for DEI and Dale knew what she was capable of doing not just for him and his family, but for all the employees and their families that depend on DEI. DEI was started by Dale and Teresa in 1980 and Teresa was the first person on the payroll of the company. Even Dale Jr. was quoted on NBC as saying the following:

Dad always said that before he met Teresa, he owed the bank money. By the time they got married, the bank owed him money.

Dale Earnhardt drove for Richard Childress, not DEI. He didn’t want to run his own team as he knew Childress was very capable of providing him with a team that could win races and championships. DEI was a Dale and Teresa Earnhardt creation to manage the large amount of money made from Dale or his cars’ image on t-shirts, die-cast cars, toilet seat covers, etc. If it has a number 3 or a likeness of Dale in his shades somewhere on the product…. Cha-ching! Another boat for Dale and Teresa to play with on Lake Norman. Eventually, they had enough boats so they started up their own race teams to supplement the merchandise money with other revenue streams. This way they could make even more money to buy more lake houses to store the boats. I’m sure Dale Jr., Kerry, Kelley, and Taylor have gotten a little bit of an allowance along the way.

Dale Earnhardt knew there was always a risk of dying in his chosen profession. Teresa for one would definitely have made sure to insist that Dale have a legal will to specify how DEI would be handled in the event of his death. I don’t know the terms of that will but it doesn’t really matter as whatever the will specified was his decision based on his beliefs at the time. If he believed that Teresa could manage DEI better than his children, then so be it. Dale Jr. can’t contest the will now, six years after Dale’s death.

If Teresa’s offer of $55-75 million for the majority ownership stake is true, then that is fair seeing as that seems to be the going rate for a stake in a team such as the Fenway deal with Roush Racing. I like to believe that she threw that offer out there knowing that Dale Jr. wouldn’t be able to afford it. Dale Jr. is very popular but surely can’t be making that much from Budweiser.

To me, I think Dale Jr. needs to win more than one race a year before he can think himself capable of running a multi-car operation like DEI.

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