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Drivers impacted by NASCAR’s new economic realities

With organizations reducing budgets, drivers are having to take pay cuts to remain with competitive teams.

Monster Energy NASCAR Cup Series Overton's 400 - Practice
Matt Kenseth stands in the garage during practice for the Overton's 400 at Pocono Raceway on July 29, 2017.
Photo by Jonathan Ferrey/Getty Images

Matt Kenseth is a free agent. So is Kurt Busch. As is Kasey Kahne, who found out Saturday that Hendrick Motorsports won’t require his services beyond this season.

Three big-name drivers, each possessing talent and marketability. Kenseth came within a bumbled restart of qualifying for the Championship Four last season. Busch won the Daytona 500 in February, while Kahne won the Brickyard 400 last month. Normally each would be in high demand, able to essentially name his price and have no shortage of new teams to join.

Those days are gone, though. Replaced by widespread belt-tightening within NASCAR where teams are reluctant to take on big contracts that financially strap them long-term as they adjust to an economic climate where big-dollar sponsorship packages are significantly fewer.

“I’d love to have Matt in one of our cars. He’d help us a lot in a lot of areas,” a team executive told SB Nation on the condition of anonymity. “But unless he’s going to come for cheap or bring sponsorship with him, we can’t afford him.”

Organizations have been finding ways to save money since the Great Recession hit NASCAR hard, leading to several cost-saving measures.

Times remain tough, however, with many teams lacking sponsorship to subsidize budgets that in many instances are still too robust. Now owners are focusing on slashing expenses by trimming their No. 1 expenditure: driver salaries, which in some instances constitute up to 40 percent of the budget for an upper-echelon team.

“You can’t pay a driver $5 to $8 million dollars a year if you ain’t got but $10 million worth of sponsorship. That ain’t going to work,” Dale Earnhardt Jr. said. “[Drivers] aren’t getting $20, $30, $40 million a year on sponsorship. Owners aren’t getting that anymore.”

The market correction has created myriad situations where teams are favoring youth and potential over experience and proven results, as the former is cheaper and the performance drop-off is minimal.

Over the past year Kenseth (age 45), Earnhardt (42), Casey Mears (39) and Kahne (37) have found themselves replaced by counterparts all 25 or younger. Among this group, only the retiring Earnhardt was able to decide for himself to move on and not have that decision made for him by outside forces.

“These sponsors aren’t giving teams the money that they used to,” Earnhardt said. “So, the owners and everybody’s got to take a little cut. Everybody’s got to dial it back. Everybody’s got to realize that they have to accept some of that fallback and difference.

“And that’s the same with the drivers’ contracts. A lot of these veteran drivers are getting paid multi-million dollars, and a lot of these guys coming in are getting a fraction of that.”

The harsh reality is that drivers no longer hold the bargaining power when negotiating new deals. When NASCAR and its teams implemented the charter system prior the 2016 season, it meant the majority of driver contracts were restructured with many going to a purse-base structure.

NASCAR organizations are in many respects now operating similar to how NFL teams manage the salary cap. Frequently, Cup Series teams are having to make hard choices between keeping a veteran who’s still highly productive but commands a high salary, and a young driver who can give close to the same level of productivity at a greatly reduced cost.

Almost every time, the veteran loses out and finds himself unemployed. Kahne and Kenseth are facing uncertain futures after Hendrick and Joe Gibbs Racing are replacing them with William Byron (19) and Erik Jones (21), respectively, next season.

“You’ve got a guy that you think has got a lot of talent, very young, a lot of potential,” Earnhardt said. “Then, you’ve got a veteran who is established. But he wants three, four, five, or six times the amount of money. You’re going to go with the younger guy because it’s a better deal financially.

“A lot of young guys coming in being offered and accepting contracts that are a fifth to a tenth of what veterans are getting paid — that’s money that can go into the team.”

The free-agent market has a glut of capable drivers available and not enough teams with open rides to match their talents. Even when a top-tier organization does have a seat to fill, in many instances the sponsorship isn’t in place to put a deal together.

Furniture Row Racing is a thriving team that added a second car in 2017 for Jones, teaming the rookie alongside veteran Martin Truex Jr., whose four wins and 1,315 laps led this season are series bests. But with Jones leaving to take Kenseth’s spot at JGR next season, FRR is in need of a new driver of its No. 77 Toyota. And considering Truex’s success, the Denver-based team would seemingly be in the catbird seat to choose from the luminary of drivers available.

That hasn’t happened. Instead, FRR needs funding to keep the No. 77 car afloat beyond this season. If not, team owner Barney Visser told SiriusXM Radio on Wednesday, he’ll have little choice but to shutter the No. 77 car.

“We’ve got to find something,” Visser said. “We don’t want to give up that car, but if we don’t get sponsorship, we’ll have to. We’re doing everything we can to get that to come together.”

Truex signed an extension with FRR last summer, a deal Visser said pays his driver less than someone who’s been a consistent winner and championship contender over the past three years. Wanting to stay with a superior team, Truex agreed to the reduced contract.

That’s the economic reality currently within NASCAR. If you want an opportunity to win, you’ll likely need to accept a base salary lower than in years past.

“We’ve got something going with Martin that has just worked out very well,” Visser said. “I can’t speak to what the other guys have got going on, but I would think that there are going to be a lot of jets sold. The money just won’t support what some of these guys have been making. The sponsorship just won’t carry it right now.

“It’s a pretty tough business right now.”