Standing in the shadow

Rick Hendrick is a winner, a czar of car sales and tycoon of race teams. But behind both is a man haunted by loss.
By Edward Martin

As evening comes to the hollow at the bottom of Stowe Lane, a crowd gathers. Under red canopies, tables bulge with burgers, chicken, corn on the cob, boiled new potatoes, desserts. A master of ceremonies hops on a low stage painted in a checkered-flag design. “Dale, Jimmie — y’all come up here.” Race driver Dale Earnhardt Jr. takes his place beside teammate Jimmie Johnson. “Would you guys lead us in the birthday song?” Earnhardt begins in a cracking voice, then Johnson joins in, both so off-key the crowd cackles. Employees with recent birthdays spin a wheel and collect checks based on where it stops, from a few hundred to a thousand dollars.

It’s the annual family night at Hendrick Motorsports LLC. Rick Hendrick watches from the side of the stage. At 59, his hair has gone gray, the once athletic body rounder, the result of medication and a taste for sweets — especially ice cream. Here, on the Mecklenburg-Cabarrus county line within earshot of Lowe’s Motor Speedway, the things that matter most surround him.

Up the hill is a sprawling gray building, its glass front and oval columns raked forward. Newly built race cars and exotic technology crowd its 600,000 square feet. Computer-driven stereolithography creates precision mockups of complicated race-car parts. A $2.2 million dynamometer simulates racing conditions for 700-horsepower engines that propel Earnhardt, Johnson, Jeff Gordon and Mark Martin around tracks at 200 mph. Vintage cars are on display along Papa Joe Hendrick Boulevard, named for his late father.

Linda, his wife of 36 years, is at his side. He cradles a grandchild. They’re family — and reminders of family. Many of his more than 500 racing employees and drivers consider themselves family of a sort, too, bonded by the unrelenting pressure of building and racing cars. Hendrick lost his son to racing. Earnhardt lost his father.

Rick Hendrick’s passion is automobiles, driving, racing and selling them. Parked here are his 599 Ferrari — $302,000 list, 200 mph top speed — and his 620-horsepower Corvette ZR1. Cars have made him so rich he “could burn a wet mule with hundred-dollar bills,” former racer Buddy Baker jokes. Hendrick doesn’t discuss his net worth, but Forbes estimated his closely held Hendrick Motorsports cleared $21 million in 2007. Hendrick Automotive Group was profitable last year on sales of more than $3.7 billion, down from $4.3 billion in 2007 but still ranking as the nation’s second-largest privately held dealership chain and seventh overall. In a year when 900 dealerships nationwide closed — including 25 in North Carolina — Hendrick bought nine, bringing his total to more than 80. Johnson won his third NASCAR championship, Hendrick Motorsports’ eighth in 14 years.

As a spinning carousel with its laughing children bobs behind him, Hendrick shakes hands, pats shoulders and poses for photographs with employees with the ease of an executive whose accomplishments are cause for celebration. But there is another Rick Hendrick, the one whose success has been shadowed by tragedy as unrelenting as mortality itself. He gave up his championship boat racing team after a crash killed best friend Jimmy Wright in 1981. His star NASCAR driver Tim Richmond died of AIDS in 1989. In 1996, Hendrick was diagnosed with a rare form of leukemia only days before being indicted on charges of bribing Honda to allocate him more cars. He pleaded guilty, he says, because he was so ill that fighting it would have killed him. His father, whom he revered, died of lung cancer in 2004. Three months later, a plane crash took his son, his brother, twin nieces and several business associates — 10 in all.

Now, as car sales plummet and empty seats gap-tooth racetrack grandstands, another shadow, less personal but real, looms. Is America’s love affair with the automobile fading? And how will Rick Hendrick fare if the public’s ardor for cars cools like the evening air in the hollow at the bottom of Stowe Lane?

His roots help explain how he has weathered more than 35 years in these fiercely competitive endeavors. “Some people can sell cars, groceries, you name it,” says David Carter, director of the University of Southern California’s Sports Business Institute in Los Angeles. “But you feel better doing business with someone who cares about what they’re selling. Rick Hendrick delivers authenticity.”

Growing up in the sun-seared tobacco fields of Palmer Springs, a Virginia crossroads just over the state line near Kerr Lake, he would walk plant to plant, harvesting heavy green leaves that coated his hands and arms with tarry black gum. “I dreamed about doing something — anything — off the farm.” His mind wandered to cars. “I was a gearhead from the time I was 8.” His father, a racer himself, could make anything run. On their way to a drag race in Richmond, they passed a primer-covered ’31 Chevy coupe outside a service station. The teenager paid $250 for it, and he and his dad used junkyard parts to turn it into a drag racer with a souped-up V-8. “I set some speed records with that car. I realized I had a real love affair with automobiles.”

That relationship had a rival. Hendrick excelled at sports, and while attending N.C. State University on a work-study program, he played on a Pittsburgh Pirates farm team. But he quit college in 1973 to work for Mike Leith, a Raleigh businessman with a string of car dealerships. Hendrick knew how to make cars run; Leith taught him how to make money selling them. Soon he was a sales manager, living in a new house, with a Mercedes for him and a BMW for his wife. In 1975, Chevrolet offered him a tiny dealership in Bennettsville, S.C. To raise $50,000 to buy the assets, “we sold everything — the house, furniture, everything — and moved.” He pumped thousands more into upgrading the dealership, backed by George Shinn, a Charlotte businessman who ran a chain of business schools and would later own the Charlotte Hornets. At Leith, Hendrick had sold Shinn cars, including a Jaguar “that laid down on him.” When Shinn threatened to sue, Hendrick sold him up into a Mercedes.

“In Raleigh, I was selling 300 cars a month. Bennettsville sold 200 a year. Back then, the only thing that ever became available through Chevrolet was something small or something broken. This one was both, but Chevrolet told me, ‘If you can turn this around, we’ll give you bigger opportunities.’” He was 26, Chevy’s youngest dealer. The local Pepsi bottler brought in a delivery truck with a worn-out clutch. “He said, ‘I’ll buy trucks from you if I can get them worked on in a hurry.’” Hendrick repaired it himself that night. By the end of his first year, he had boosted sales to almost 1,000 cars.

That was the genesis of Hendrick Automotive Group, but City Chevrolet shifted it into high gear. In 1977, again with Shinn’s backing, he bought the big Charlotte dealership, hustling to make it work. “I would go to an auction and buy a car with a bank draft. I had a week before I had to pay the draft, so I’d sell a lot of cars without having to pay for them.“ Chevrolet had a program to seek new owners for dealerships that were poorly run. “They’d say, ‘We’ve got this deal in Greensboro, or wherever, that’s not doing well …’” By the ’80s, he had more than a dozen, from the Carolinas to California and had begun diversifying, adding Honda, Nissan and Toyota. Chrysler and other makes would follow.

With each acquisition, he mastered more of the arcane world of automobile sales. For a glimpse at why he’s good at it, look here, not at one of his dealerships but at Hendrick Motorsports, where shop floors glisten and mechanics hover over rows of unfinished cars — DuPont’s rainbow hues on Jeff Gordon’s ride, the greens of Amp, an energy drink that sponsors Earnhardt, Lowe’s blue and silver on Johnson’s cars. Hendrick walks from car to car, peering under hoods and chatting with mechanics, suspension and body men. Team members roll one of Johnson’s Chevrolets outside, hood up. Its open exhausts thunder, causing the pavement to tremble. Hendrick grins, for the moment a gearhead again. “Rick Hendrick is passionate about cars,” says friend and rival team owner Felix Sabates. Both were minority partners in the Hornets until Shinn bought them out after the team’s first season.

”I’m a simple person,” Hendrick says. “I eat at Wendy’s a lot — I like hamburgers. And I go to Dairy Queen once a week with my grandkids — or two or three times. I like a beautiful day on the ocean fishing, when it’s nice and slick, but I couldn’t do it every day. But I just love automobiles and being around cars. I love the challenge.” It’s more than just a passion for automobiles. He understands the inner workings of his trade as well as he does the inside of an engine. “I knew the used-car business. I worked in shops and knew how to fix cars. But Mike Leith taught me a lot about the financial side of the automobile business.

At a typical dealership, wholesale lenders such as GMAC put up money for “floorplan” — inventory. GMAC finances about 80% of the cars sold at General Motors’ 6,500 dealerships, using the vehicles as collateral. That ties up a dealer’s capital in new-car inventory, so profit has to come from elsewhere. According to the McLean, Va.-based National Automobile Dealers Association, new-car sales generate 58.6% of a dealership’s revenue but much less of its income. Most dealers barely broke even or lost money on new-car sales last year. Used-car sales, service, warranty repairs, parts and bodywork are what bolster the bottom line.

At a typical dealership, repair and service generate 12% of revenue but 81% of operating profit. Dealerships built on high-volume, low-margin sales might thrive in flush times but not when buyers become scarce. Atlanta-based, 13-dealership Bill Heard Enterprises, the nation’s largest seller of Chevrolets, folded in September. Hendrick Automotive Group doesn’t operate typical dealerships. “Dealers refer to fixed coverage, or how much of your fixed expenses such as rent you can generate with parts and service,” he says. “The industry standard is about 52%. We’re 82%.”

As his network grew, Hendrick combined his passions. Racers began calling him at City Chevrolet. “I knew some of the factory guys, and I could get high-performance parts. I’d always raced something — a drag car when I was 14 or 15, then boats.” Dale Earnhardt Sr. won a Late-Model Sportsman event at the wheel of one of his cars in 1983. But NASCAR’s top ranks were hard to crack until a hotshot Yankee driver whose career had stalled down South turned up later that year.

Geoffrey Bodine, from upstate New York, paces the hall outside Hendrick’s office at City Chevrolet. It was Harry Hyde’s idea, coming here like this. Hyde had described Hendrick as an emerging megadealer yearning for a race team. The irascible old crew chief — Robert Duvall’s character in the movie Days of Thunder would be based on him — was coming out of retirement to run it. He had told Hendrick how things worked: “You find a guy with money and a crew chief with experience, and in five years the crew chief will have the money and the other guy will have the experience.’’

They need a driver. Hendrick thought he had a deal with Richard Petty. “But he changed his mind — he had to run Pontiacs, and I had to run Chevrolets.” Bodine had dominated short-track racing in his home state and had been NASCAR’s top rookie in 1982. But he hadn’t placed since. As he and Hyde finish their pitch, Hendrick nods at the door. “Thanks for coming by.”’ Fearing a brush-off, Bodine asks, “Do you mind if I wait outside for your answer?” Five minutes later, Hendrick comes out and extends his hand.

Bodine ran well in the City Chevrolet car, but Hendrick stewed as expenses mounted. “In racing, there’s a fine line between staying profitable and staying competitive. I told Harry several times that without a [major] sponsor, one more race and we’re going to have to shut down.” In April 1984, Bodine won the Sovran Bank 500 at Martinsville, Va., Hendrick’s first top-tier NASCAR victory. Two years later, Bodine handed him his first Daytona 500. “From that point on, the racing and automotive group developed in parallel.”

Since then, Hendrick cars have won more than 200 races in NASCAR’s top three divisions, and Hendrick Motorsports has become a magnet for top talent. The flamboyant playboy Richmond joined in 1986, winning 13 races before dying at age 34. Other big names — Ricky Rudd and Darrell Waltrip among them — carried Hendrick’s banner in the early ’90s. Then he hired another outsider, a Hoosier named Jeff Gordon.

Hendrick discovered that, as a business, racing bore no resemblance to running dealerships. “With cars, revenue comes from sales. In racing, you don’t have sales. You just have income and expenses.” About 70% of a team’s income comes from sponsors and winnings. Hendrick declines to give details but says teams generally spend $20 million a year to keep a car on the track. He fields four at NASCAR’s top level. Driver salaries and other costs pump Hendrick Motorsports’ total budget to an estimated $200 million a year.

Both businesses blossomed, but in November 1996, the shadow that had stalked him since his friend died in his racing boat reached out again. A Charlotte doctor delivered a potential death sentence: He had chronic myelogenous leukemia. Two weeks later, he was indicted by a federal grand jury in Asheville on charges of bribing Honda executives to increase his allocations of the make’s hot-selling cars. He pleaded guilty. “I had to make a choice: if I wanted to live or if I wanted to die. I could barely walk. I was in chemo. I thought the deal was wrong — I still think it was wrong.” He was sentenced to a year of home detention rather than prison because of his health, followed by three years’ probation, and fined $250,000. President Bill Clinton pardoned him in December 2000.

It still frustrates him. “If there’s one hiccup in your life, the bigger your name, the harder they come after you. I’ve spent 50-some years trying to help people. Sure, it bothers me. I can’t live the rest of my life worrying about it, but my mother, when she reads this, she’ll go right to that and say, ‘Why bring that up?’”

Though he didn’t beat the rap, he beat leukemia. It took three years of chemotherapy and other treatments, leaving his body soft as a sponge. “It tore my immune system to pieces. Today, if I shake hands with someone during the winter, I get sick.” His brother, John, filled in for him, running the dealerships and the racing operation. But Hendrick turned the corner in 1999, returning to this secluded hollow, where his shops have more than 13 acres under roof. When he ventures outside the big gray building, race fans — more than 200,000 visited the museum and store at the bottom of the hill last year — thrust souvenirs at him to autograph. This business, he says, is like no other. “In racing, you’re never better than what you did in the last race. It’s a chicken-and-egg deal.” Without sponsors, teams can’t win. Without wins, sponsors won’t buy on. “I was fortunate I came along when I did. I couldn’t afford it today.”

By 2001, his leukemia was in remission. Car sales were good. He had plans for a new, young driver with a marketable smile and sandy hair: His son was 21 and had run well in NASCAR’s second-tier Busch Series, won the O’Reilly Auto Parts 250, a Truck Series race in Kansas, and had a head for business, too. “When Ricky came along and said he wanted to drive, I said, ‘I’m going to spend more time in the racing end.’ My plan was to work with him so he and I would have time together, to take it to the next level. He made it clear, racing was where he wanted to be.”

The sky over Felix Sabates’ mansion at Quail Hollow Club is finally clearing late Sunday morning when the phone rings. “Felix?” It’s former NASCAR Chairman Bill France. “I’m glad you’re OK.” Sabates is puzzled. “The airplane’s missing.” It’s Oct. 24, 2004. Sabates and Hendrick had intended to fly by helicopter together to Martinsville for the race. When the weather turned too nasty to go by chopper, Hendrick had offered Sabates a seat on his better-equipped Beech King Air 200 — he wasn’t feeling well anyway. Sabates had said no, the fog was just too thick.

Minutes later, France calls again. “You need to go over to Rick’s house.” Sabates drives past the manicured greens down winding Seven Eagles Road. It’s only a mile, and he could drive it with his eyes closed. He had sold Hendrick his house a few years earlier, moving to a slightly smaller place on the other side of the golf course. They are contrasts — Sabates, the voluble, devil-may-care Cuban, and Hendrick, the quiet, controlled country boy — but both are self-made millionaires. They’re like brothers. Sabates has known Hendrick for 25 years.

Sabates finds Linda and Rick Hendrick alone. He sits on the couch beside them, taking turns desperately scanning the television news. Rumors are spreading. Family and friends drift in. An hour later, Sabates’ phone rings again — it’s NASCAR President Mike Helton. Sabates puts his arms around the couple and slowly walks with them into the adjoining study. “There were no survivors,” he whispers. They pray.

A few evenings later, on the checkered-flag stage in the hollow at the bottom of Stowe Lane, hundreds of Hendrick’s friends, employees, drivers and others gathered for a candlelight memorial. Numb, he steeled himself for the service. “You ache so bad, you don’t know if it’s day or night. The leukemia was a walk in the park — nothing. The Honda deal — a pimple. My dad and I were so close, but I saw him enjoy life — he lived it to the fullest. Ricky didn’t get a chance.”

The shadow nearly swallowed him. “My world went on a tilt. I wanted to drive right out of here and never come back.” But the people who work for Hendrick Automotive Group and Hendrick Motorsports weighed on him. “If you look at the automotive group and this place, we have 7,000 employees. Then with spouses, families, it’s probably 20,000 — maybe 30,000 — people who’ve bet on you.” Then, in a small way, he began his turnaround. “On the day of the funeral, we got a little surprise. Ricky’s fiancée told us she was pregnant.” Josephine “Ricki” Hendrick would be born the next June. But the shadow had not passed.

Three weeks after the memorial, NBC Sports Chairman Dick Ebersol quietly pulled Hendrick aside at a race in Florida and handed him a DVD, compiled from NBC archives — a tribute to his family. A few days later, Hendrick heard a news flash. Weather had been terrible. Ebersol’s plane had crashed in Colorado. He was injured. His 14-year-old son was dead. Now, when they meet at races, they’re like a club — Hendrick, Ebersol, racer Kyle Petty, whose son Adam died testing a racecar, and retired driver Bobby Allison, who lost sons Davey in a helicopter crash and Clifford in a racing accident. “We always talk about what might have been.”

After his leukemia, Hendrick had created the Hendrick Marrow Program to encourage volunteers to donate marrow. He ramped up his efforts. His brother had established the Hendrick Foundation for Children in 2004, just months before his death. Hendrick pushed fundraising for it and, the next year, contributed $3 million to Charlotte’s Levine Children’s Hospital in his son’s memory. His mother, Mary, became his concern — then his inspiration. “She lost seven people in 90 days — her husband, her sister, her brother, three grandkids and a son. Her life became a void. We were afraid we’d be burying her next. But she rallied. This is family, our company — we’ve got to survive.”

Hendrick sees himself as that — a survivor. In 2009, though, he might be facing his greatest business challenge — an economic assault on two fronts, racing and car sales. “I’ve lived through the Gulf War, through 21% interest rates, the stock-market crash. The one thing I’ve learned is, the guys out there just trying to put all the iron they can in the street without good fixed operations — they don’t survive.” Hendrick Motorsports and Hendrick Automotive Group, he says, will.

Paul Melville, a Grant Thornton partner in Detroit, says if auto sales drop to 11 million this year — other consultants place the number as low as 10 million — 20% of the nation’s 20,700 dealerships will close. NASCAR, a $4 billion-a-year industry in North Carolina, is wavering. The Concord-based North Carolina Motorsports Association estimates as many as 2,000 of the 27,000 Tar Heels working in racing-related jobs could lose them this year. Hendrick has laid off 19 motorsports employees.

Is Hendrick vulnerable? “Every time in the past there’s been a turnover, we’ve grown. The hardest part is not just jumping on everything that comes along.” Even if car sales dip as far as analysts predict? “We’d be OK at that level. We just have to stay sharp and stay on top of our inventory. People are going to drive cars, and we’re going to be there to sell and service them.” He might prosper even if GM declares bankruptcy, says Aaron Bragman, an analyst with Global Insight, a Lexington, Mass., consultant. “NASCAR in particular is one of GM’s best methods of getting its message to a large portion of America. You might see some dramatic cuts in how much they have to spend, but you’re still going to see them selling performance cars and cars that are fun to drive.”

Carter, the racing-business scholar at the University of Southern California, says sponsors such as Lowe’s received television and other exposure worth nearly $1.7 billion in 2008. “The way motorsports has delivered on sponsorships over the years is going to keep it from bottoming out as bad as it could have.” He compares Hendrick with Roger Penske, the Ohioan whose cars have won at Indianapolis, NASCAR and other types of racing but who has diversified into trucking, logistics, car dealerships and other businesses. “Penske is obsessed with details. At this level of sport and business, the guys who win are the ones who pay attention to detail. And the one thing they seem to have in common is a love of cars.”

It’s late afternoon in his conference room — the War Room, they call it — at Hendrick Motorsports. He rises from his chair and glances at the trophies, mementos and photographs: Papa Joe, brother John, grandchildren, a portrait of Ricky in sunglasses and driver’s suit, the initials GMAC blazed on the collar. Employees are gathering below in the hollow at the bottom of Stowe Lane. Once, he says, his life was 70% car business and 30% racing. Then Ricky grew up and the numbers reversed, until his death created a vacuum that can never be filled. “Now, it’s 100% both.”