The recent news that Buick will not provide courtesy cars at PGA Tour events this year, combined with the increasing buzz that Detroit automakers are next on the Federal Bailout list, raises some very interesting questions about possible effects on the PGA Tour and it’s ability to entice golfers with larger than life purses. The total purse amount for Detroit-based sponsors alone is $15.5 million. If Congress decides to bail out Ford, Chrysler, GM - will these sponsorships last? Can you justify having the US tax payer playing a role in Anthony Kim’s newest set of diamond-studded AK belt buckles? Or how about Tiger’s next yacht?
What a Government Bailout of the Auto Industry Would Look Like
It’s still to early to tell, but there seem to be a couple of routes Congress might take. In every case, taxpayer dollars are required to assist the struggling auto manufacturers in Detroit. Here are the options being floated around by various lawmakers:
1. New Stimulus Package
Under this plan proposed by majority leader Harry Reid, Congress would sign into law a $100 billion economic stimulus plan that would include $25 billion in loans for the auto industry. The plan would also include other tangentially related funding for roads, mass transit, public infrastructure, jobless benefits and (according to the New York Times) food stamp assistance. (Personally, it seems to me with such a supposedly dire situation, you would want to allocate more than 25% of the funding to solve the problem. But politics are what they are, and it looks less like a stimulus package and more like a bailout at that point.)
2. Use of Financial Sector Bailout Funds
If the stimulus package plan fails, Congress could expand the scope of $700 Billion bailout to include Detroit Automakers. At this point it seems unlikely the current lame-duck Congress has ability to execute such a plan, unless it were clear the automotive industry were on the precipice of failure (and there are certainly signs this is true).
3. $25 Billion Band-aid Solution
The White house proposes tapping into a $25 billion low-interest loan already approved earlier this year by Congress. Problem is, this loan was supposed to help Detroit automakers speed their transition to more fuel-efficient vehicles. There are very strict terms on that loan, but Congress could change those terms to allow automakers to use these funds for opeartional costs. It would only be a stopgap measure, though. The next Congress would almost certainly need to look at giving additional funds to Detroit automakers. And with that would almost certainly come some major conditions that could could change the entire landscape of the industry for the next decade.
Potential Impact of an Auto Industry Bailout on the 2009 PGA Tour
1. Change of Sponsors
Eventually Congress will probably get involved to some extent, because loosing any of the big automakers would be catastrophic on so many levels. But with any aid from Congress might come some major restrictions, including use of tax payer funding for such things as sponsoring PGA Tour stops. It’s unlikely anything would happen in time to effect the 2009 PGA (I’m sure these contracts are iron-clad), but if the situation were drastic enough (e.g. bankruptcy), you could see changes to some of the later tour stops like the Buick Open. If that happens, look to strong sectors of the economy to step in to sponsor tournaments, including more companies in the Energy and Technology sectors. Instead of the Buick Invitational and Buick Open, next year we may be watching the Constellation Energy Invitation and the Google Open (I would have said Yahoo Open, until recent news broke of avid golfer Jerry Yang’s departure as CEO).
2. Lower Purses
Well, not in the immediate future. This seems an unlikely course in the short run. Frankly, Congress has bigger things to worry about than the $5 million in purse money spent at a Golf Tournament. Not to mention the unlikelihood of contractual agreements allowing such a thing. But over the next few years, if fresh sponsors don’t emerge, this could become reality.
Do you think there will be sponsorship issues? One the one hand it does seem like it might be a good marketing/branding decision to continue with these sponsorships, because these tournaments do go a long way to promoting brands with an excellent image of trust, sophistication, etc. On the other hand, thanks to negative publicity surrounding companies like AIG, anything seemed “above and beyond” gets particular scrutiny (and deservedly so).
For reference, here’s a list of the auto-sponsored tour stops for 2009 plus their purses:
- Mercedes-Benz Championship: $5.6 MM
- Bob Hope Chrysler Classic: $5.1 MM
- Buick Invitational: $5.3 MM
- The Honda Classic: $5.6 MM
- Buick Open: $5.1 MM
- BMW Championship: $7.5 MM
Other bloggers are writing about this same topic. Golfblogger recently wrote:
What worries me about a potential bailout, though, are the strings that are sure to come with it. I have absolutely no faith that Congress—or the current or future presidents—have a better grasp of what needs to be done than the auto executives. The government will only wreck it beyond repair.
And when the automakers finally are no more, instead of the Buick Invitational, and the Chrysler Classic, we’ll have the Treasury Department Open and the Government Accounting Office Pro-Am.
Your thoughts: Will the next generation of sponsors emerge to reflect the new economic realities? Perhaps more international sponsorships?