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MICHELIN RESPONDS TO PR DISASTER

Offers $12 Million in Formula One Race Ticket Refunds

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NEW YORK (AdAge.com) -- In an unprecedented move, Michelin Tire Co. has decided to offer fans who attended the June 19 Formula One U.S. Grand Prix race in Indianapolis a full refund, the company said.
Photo: AP
On the day of the race, Michelin discovered a design flaw in its tires and deemed them unsafe for drivers to use.
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At an average ticket price of $100, the gesture will cost the Paris-based tire company $12 million -- plus another $5 million that Michelin has pledged to buy tickets to the 2006 U.S. Grand Prix.

Public relations disaster
The move follows a public relations disaster for both Formula One and the tire company on the day of the race when Michelin discovered a design flaw in its tires and deemed them unsafe. It asked the sports governing body to allow a change in the rules which prohibit teams from changing tires after qualifying, and also asked the Indianapolis Motor Speedway to install a chicane, or curve, that would slow speeds and make the track safer. Both requests were denied, and Michelin advised its teams not to compete.

Michelin and Bridgestone are the only tires used in Formula One racing.

Fourteen of the 20 drivers boycotted the race, leaving only six cars to compete and more than 100,000 fans in disgust.

"Michelin deeply regrets that the public was deprived of an exciting race and therefore wishes to be the first, among the different groups involved in the Indianapolis race, to make a strong gesture towards the spectators," the company said in a statement.

Chasing Nascar
Formula One, which runs mostly in Europe and Asia, has been desperate to find an audience in the U.S. that will draw the type of TV ratings -- and, in turn, lucrative sponsorships -- that Nascar receives. But the events of June 19 might have endangered those partnerships.

“We’ve already been re-thinking our commitment,” said a marketing chief for one U.S.-based sponsor, who asked not be identified. “Even before [June 19], we talked about taking a long look at a sponsorship where, of the 19 races, only two were in North America [Indianapolis and Montreal] and the popularity of the sport didn’t seem to be growing that much. Now, I would say, yeah, what happened has kind of hastened those discussions.”

Photo: AP
One of the Formula One race cars in action during a pre-Grand Prix qualifying round.

Frank Williams, the British owner of the BMW-Williams team, draws more sponsorship money from American companies such as Hewlett-Packard, Anheuser-Busch and Federal Express, among others, than any other Formula One team. His was also one of the teams using Michelin tires that declined to participate in the race.

“I hope our sponsors will forgive us,” he said.

Formula One had a contract to run the U.S. Grand Prix at the famed Indy course through 2006.

Five years of marketing and planning
“We’ve been building this sport for five years, aggressively promoting and marketing it,” said track president Joie Chitwood. “All that might have been thrown away.”

Even Formula One president Bernie Ecclestone admitted as much, saying: “The future for Formula One in the U.S. is not good.”

The competition between Michelin and Bridgestone is as bitter as any of the rivalries between racing sponsors, including the car companies. A Bridgestone spokesman said, “Formula One was knocked sideways by what happened [June 19] and in our opinion now is not the time to be trying to gain ground as a result of the very unfortunate series of events that took place. ... We would rather have won the race with a full field of cars so we’ll be saving any ad campaigns for a victory taken on an even playing field.”

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