Extending the Dream

Verity Craig, Associate, Carmichael Birrell & Co. and Director, The Empire Club of Canada; Matt Wood, OAC Student, Nelson High School; The Reverend Kim Beard, Rector, Christ Church, Brampton; Carl Tupper, Special Events, Speed Channel (in Canada); Ken Wilder, Professional Racing Car Driver and "3 Time" Canadian Champion; Vic Bernardini, President, Aston Martin Jaguar Land Rover Canada; Sean Webster, Manager, Provincial and Professional Affairs, Eli Lilly Canada and Director, The Empire Club of Canada; Andrew Baird, Partner responsible for the United Kingdom, Corporate Development International; and Richard J. Hanchar, President, Too Fast Consulting and Professional Race Car Owner.

Introduction by Ann Curran

We have all heard about the American Dream--the risks, the rewards. Well, ladies and gentlemen, you are about to hear one man's story.

In the days of multi-nationals it is heartening to hear that the entrepreneurial spirit is alive and well.

May 16, 2002

Chances are Dr. Panoz has indirectly touched your life and you do not even know it!

Donald Panoz was born on February 13, 1935, in Alliance, Ohio, the son of a first-generation Italian-American and featherweight boxer, so it's not hard to imagine where his determination and approach to life comes from.

The Panoz story goes back to the first company Don formed in 1960 which was Mylan Laboratories in Morgantown, West Virginia--a small, pharmaceutical, packaging and distribution company. By the time his favourite baseball team, the Pittsburgh Pirates, were winning the 1960 World Series, Panoz had a small group of Mylan investors. Many of the players invested their Series bonus checks in their ardent fan's business. The athletes never had cause to regret the gesture--$5,000 invested in 1960 was worth o$3 million in 1992 and continues to grow today.

In 1969 he brought his wife and five children to Ireland and set up a new company called Elan Corporation. Elan developed several groundbreaking medications and technologies, the most famous being transdermal technology used to deliver nicotine to the bloodstream, which evolved into the nicotine patch. Elan Corporation's market capitalization is US$12 billion.

Not content to rest on his laurels, Dr. Panoz sought out other business opportunities in North America and Europe, which has seen him rise to the top of several industries including world-class resorts, golf courses, a winery, and now motorsports.

In 1997 he discovered a new passion--racing! That was the year in which he formed the Panoz Motor Sports team to build a new heritage in auto racing. Not surprisingly, in five short years he has established himself as one of the most influential leaders in the world of motorsports.

Dr. Panoz is the owner of the Trans-Am Series, North America's oldest annual road racing championship, which is now entering its 37th year. Many of you will recognize the name "Trans-Am" from the stylish North American muscle car. Its name was derived from this series. The Trans-Am Series will visit two Canadian venues--Mosport Park and the Grand Prix de Trois-Rivieres--during its 12-race 2002 season. Panoz is also the founder of the American Le Mans Series, which has established itself as a flourishing championship in the tradition of one of the world's most famous motorsports events--the 24 Hours of Le Mans. Dr. Panoz has also acquired three racing complexes--Road Atlanta Motorsports Centre, Sebring International Raceway and Mosport Park Raceway.

Don Panoz is recognized worldwide for his business acumen and, after receiving honorary degrees from both Trinity University in Ireland and Lynn University in Florida, can justifiably prefix his name with the title Doctor.

In his address today, Dr. Panoz will discuss his motivation in joining the motorsports industry after finding great success in completely unrelated fields. He will also share his vision for the future of the fastest growing spurt in North America. For Dr. Panoz, the ambition and drive to succeed in motorsports is a perfect analogy for success in the world of business.

Ladies and gentlemen, Donald Panoz.

Donald Panoz

I'd just like to begin by saying what an honour it is to be here today, and to be included among the distinguished list of guests who have been invited to address the Empire Club. Thank you very much for offering me the opportunity to become part of that tradition. After reviewing the famous speakers that have been here before me--Winston Churchill, Prime Minister Trudeau and Ronald Reagan-I'm delighted that my topic today is motorsports not politics.

The story I'm going to tell you today is a bit unusual in that it differs from the standard expectations of a motor-sports saga, if there is such a thing, in a number of ways. To begin with, I am not one of those people who were born with motor oil running through my veins. Indeed, given that I made my name in the pharmaceutical industry and later the resort and winery industries, you could make an argument that I was born with drugs, wine and hospitality running through my veins, although I'm reasonably sure that isn't the way I'd prefer to be remembered. Prior to my involvement in motorsports, I had spent 37 years in the pharmaceutical industry, founding two NYSE companies--Mylan Labs and Elan Corp.--and 12 years in the resort and winery business building Chateau Elan in Georgia and St. Andrews Bay in Scotland along with the development of Diablo Grande in California.

In sharp contrast to the way things are generally done today, when interest in and passion for motorsports is handed down from generation to generation, in my case it was handed up, thanks to the interest of my son, Danny.

When Danny came to me in 1989 and said that he wanted to build cars, I tried to talk him out of it. Hadn't he heard of Tucker and Delorean? Like most fathers, though, I wasn't particularly successful when I tried to get in the way of my son's aspirations.

And so, in 1990, Danny's vision became a reality when the Panoz Roadster made its debut. Almost immediately, the car received praise for having some of the best performance characteristics of any hand-built roadster that met safety standards established by the United States government.

The Panoz Roadster served as the foundation upon which we ultimately built our motorsports empire. In 1996, a new model, the Panoz Esperante, was on the drawing board, and it was then that I told Danny that he needed to build a heritage in motorsports if he wanted to be successful in the sports car manufacturing business. His response, basically, was: "Gee, Dad, I'm kind of wrapped up in the development of this new car. Why don't you do it?"

At that point, I was in my early 60s, and I had attended a grand total of four races. in my entire life: a Formula One race at Barcelona, a NASCAR race at Charlotte, a sports car race at Road Atlanta, and the 1998 Indianapolis 500--and I had only gone to the 500 because my wife had been given tickets that entitled us to seats on the top deck of the front straightaway.

It was at about that time that I had a conversation with Adrian Reynard, who had become a very successful chassis builder in open-wheel racing. When I told him of my interest in getting involved in racing, he asked, "What type of racing were you thinking of?" Well, largely because I had seen the movie Le Mans with Steve McQueen and I thought that type of sports car racing looked exciting, I said, "Le Mans."

That's how it all started, and 1'd love to be able to say that the rest is history! But the truth is there were a number of significant challenges and roadblocks along the way. We built our first Grand Touring Prototype or GTP car for the 1996 race season, and it was voted best in show at the Amosport Fair in Birmingham, England. It was shortly after that I ran into my first experience in the politics of racing.

We had been told that the car had to be homologated, or certified roadlegal, by the Federation Internationale d'Automobile, or FIA, before it could be entered in competition. So, it appeared that the homologation process was to be completed by the start of the 1997 season.

Then, in January of 1997, due to Mercedes wanting to compete before homologation was issued, the organization then known as FIA reversed itself and said that cars could compete while they were going through the homologation process. So, we'd lost the ability during late '96 to test our race car because we had to have the road car homologated first.

Our first race car was delivered at the end of February, 1997, just prior to the 12 hours of Sebring. We put the car on the race track following a mere five days of testing

with Eric Bernard, a former Formula One test driver, behind the wheel. During practice for the 12 hours, Andy Evans, the track owner at Sebring, owner of the Professional Sports Car sanctioning body and sports car racer, got on the radio for all to hear and said he'd been chasing that damned Panoz for three laps and that he couldn't get around it, and that the car would have to be penalized with the addition of 150 pounds of weight and the order of the drivers would have to be changed. During the subsequent race, we moved from 38th to eighth place before the engine failed. We still hold the track record for GTPs at Sebring.

As we prepared for our next race at Road Atlanta, we were told that we couldn't run carbon brakes and that we had to run steel brakes which necessitated radical changes in the setup and preparation of the car.

By this time it was obvious that we weren't being welcomed with open arms. By the time we arrived at Mosport at the end of August, we'd been winning some races and we were one race away from leading the manufacturer's championship, and it was during this week that Professional Sports Car once again reversed itself and decided that carbon brakes would be permitted, thus giving us five days to set up a car. How ironic was this decision when Porsche was shipping a new driver line up and a new GTP which had carbon brakes from Germany?

But we did, and over the next three years we won six championships and basically brought an end to the GTP careers of McLaren, Mercedes and Porsche. More recently, the Panoz has been the only marque that has been able to beat the Audi during the years of its recent dominance.

At the end of the 1997 season, when sports car racing was really in disarray, I agreed to take over operations at Sebring International Raceway and Mosport Park. It was my feeling that sports car racing should have stable rules. In my view, racing was about going faster, not slower, and I wanted every competitor to be able to build cars to a stable set of regulations that would remain the same from the start of the season to its finish. So I licensed the rights to use the Le Mans name and rules from the ACO (Automobile Club de UQuest).

Eventually, I took over the sanctioning body and changed its name back to IMSA to invoke the tradition and heritage of the International Motorsports Association. We are now the most successful road racing series in the United States. Our ratings and demographics are better than those of Cart and the IRL, which many thought that type of sports car racing looked exciting, I said, "Le Mans."

That's how it all started, and I'd love to be able to say that the rest is history! But the truth is there were a number of significant challenges and roadblocks along the

way. We built our first Grand Touring Prototype or GTP car for the 1996 race season, and it was voted best in show at the Autosport Fair in Birmingham, England. It was shortly after that I ran into my first experience in the politics of racing.

We had been told that the car had to be homologated, or certified road--legal, by the Federation Internationale d'Automobile, or FIA, before it could be entered in competition. So, it appeared that the homologation process was to be completed by the start of the 1997 season.

Then, in January of 1997, due to Mercedes wanting to compete before homologation was issued, the organization then known as FIA reversed itself and said that cars could compete while they were going through the homologation process. So, we'd lost the ability during late '96 to test our race car because we had to have the road car homologated first.

Our first race car was delivered at the end of February, 1997, just prior to the 12 hours of Sebring. We put the car on the race track following a mere five days of testing

with Eric Bernard, a former Formula One test driver, behind the wheel. During practice for the 12 hours, Andy Evans, the track owner at Sebring, owner of the Professional Sports Car sanctioning body and sports car racer, got on the radio for all to hear and said he'd been chasing that damned Panoz for three laps and that he couldn't get around it, and that the car would have to be penalized with the addition of 150 pounds of weight and the order of the drivers would have to be changed. During the subsequent race, we moved from 38th to eighth place before the engine failed. We still hold the track record for GTPs at Sebring.

As we prepared for our next race at Road Atlanta, we were told that we couldn't run carbon brakes and that we had to run steel brakes which necessitated radical changes in the setup and preparation of the car.

By this time it was obvious that we weren't being welcomed with open arms. By the time we arrived at Mosport at the end of August, we'd been winning some races and we were one race away from leading the manufacturer's championship, and it was during this week that professional Sports Car once again reversed itself and decided that carbon brakes would be permitted, thus giving us five days to set up a car. How ironic was this decision when Porsche was shipping a new driver line up and a new GTP which had carbon brakes from Germany?

But we did, and over the next three years we won six championships and basically brought an end to the GTP careers of McLaren, Mercedes and Porsche. More recently, the Panoz has been the only marque that has been able to beat the Audi during the years of its recent dominance.

At the end of the 1997 season, when sports car racing was really in disarray, I agreed to take over operations at Sebring International Raceway and Mosport Park. It was my feeling that sports car racing should have stable rules. In my view, racing was about going faster, not slower, and I wanted every competitor to be able to build cars to a stable set of regulations that would remain the same from the start of the season to its finish. So I licensed the rights to use the Le Mans name and rules from the ACO (Automobile Club de UQuest).

Eventually, I took over the sanctioning body and changed its name back to IMSA to invoke the tradition and heritage of the International Motorsports Association. We are now the most successful road racing series in the United States. Our ratings and demographics are better than those of Cart and the IRL, which many consider the premier open-wheel racing organizations in this country, if not the world.

The growth of IMSA's American Le Mans Series over the past six years has been such that we drew a record crowd of more than 190,000 for the 12 hours of Sebring this year. The ALMS has been an international success as well, drawing more than 162,000 fans for its first-ever event at Adelaide, Australia on December 31, 2000.

I got involved in racing in 1997, the year when Tommy Kendall won 13 Trans-Am races in a row to set a record. I followed the Trans-Am on television throughout the season and it always provided close, exciting racing. But for a number of reasons, most having nothing to do with what was happening on the race track, it seemed as if the series had fallen on hard times.

I didn't feel that a series with that much tradition and history should just fall by the wayside, so in 2000, in partnership with Ralph Sanchez, we purchased the rights to the series, which continues as the longest-running road racing series in North America.

I was attracted to Trans-Am racing because in its style it represents the image of what many people consider "American" road racing. As our marketing campaign states, it's "American Muscle Versus the World." Trans-Am Series racing is probably a more aggressive type of racing than the American Le Mans Series, but it's a series the fans can relate to every bit as much.

And the series appears to be coming back. People are paying more attention to the Trans-Am than in years past, and we are excited about continuing in the tradition established by legends like Canada's own Ron Fellows, Mark Donohue, George Follmer, David Hobbs, Wally Dallenbach, Jr. and Tommy Kendall, whose record of four Trans-Am driving championships is being chased by Paul Gentilozzi this season.

By all the numbers, which indicate growth year after year after year, the future of sports car racing is extremely

bright. More than perhaps any other form of motorsport, sports car racing has become the platform to show off new cars and new technologies. I think our success has also demonstrated that it's a type of racing people can relate to, and providing our teams with a stable rules package gives them the opportunity to plan for an entire season of competition.

All of that will lead to higher-quality fields and better race venues, for both the Trans-Am and the American Le Mans Series. This year, for example, Miami and Washington D.C. have inaugurated city street races, where both the ALMS and Trans-Am Series will appear on the program. I think that shows that we have the type of racing that people want to see.

In addition, IMSA and the American Le Mans Series have added Trois Rivieres and America, which are already long-time Trans-Am venues and we look forward to racing on the streets of Chicago in 2003. In all, the 12-race schedule we will have in the future will have the spectators, fans and teams following the road to the icon of sports car endurance racing--the 24 hours of Le Mans.

Sports car endurance racing is not a new sport. The 24 hours of Le Mans has been running for 75 years and the 12 hours of Sebring celebrated its 50th anniversary this past March. It is different from other forms of racing--IRL, Cart, Formula One and NASCAR--in that the cars are the stars, not the drivers, providing the fans a look into the future technology of cars they can dream of owning and driving every day.

Le Mans style racing is the type of racing that fans can relate to--a mixture of four different classes, with the top class, the LMP900s, 100 kilometres faster than the GT class, and all competing on the same track at the same time, which is not so different from what one would experience on a motorway or country road. It is. racing for four championships at once.

In the years between the former IMSA or Camel Series until I entered the picture, sports car racing was in a downward spiral, to the point of only 2,000-3,000 fans on a good event day. The famous road courses were falling into disrepair and not able to meet the ever-improving safety requirements. A snap shot of 1997 when I started: the well known tracks like Watkins Glen, Road Atlanta, Mid-Ohio and Road America couldn't attract over 4,000 fans, while the renowned Daytona 24-hour race saw about 20,000 fans and Sebring was at about 50,000. In June of 1998 Professional Sports Car held a race at Road Atlanta which drew about 3,000 people. Just four months later, we held the first Petit Le Mans event at Road Atlanta under our new philosophy which attracted 35,000 people and we have grown the entry and spectator base every race and every year since. What caused this turnaround?

Sports car racing during its downward spiral was plagued by poor, outdated, non-performing cars and politics that punished those who succeeded, bringing about a lower standard, so those who couldn't compete in any other way were rewarded by making everyone go slower. Like Berlin, we tore down the phony wall, we rewarded technology and going faster. The fans, understanding they would get their money's worth, started to come back and the tracks with good racing and revenue started to rebuild. Mosport is a prime example of our success and a prime example of why mediocrity doesn't work.

Our fan base demographics are impressive. Taken from a Mediamark Research Survey:

1. American Le Mans Series has the greatest concentration of viewers with IEI of $75k versus other sports.

ALMS = Index of 156

College Football = Index of 138 NBA = Index of 128

NASCAR = Index of 95

2. American Le Mans Series has the greatest concentration of viewers who spent $40k or more for an automobile versus other sports.

ALMS = Index of 143
NBA = Index of 120
NASCAR = Index of 81

3. American Le Mans Series audience composition is the "Creme de la Creme" of all auto racing. Based on averages, American Le Mans Series fans tend to be in a higher income bracket, own stock and use a financial planner or money manager, own newer cars that tend to be luxury or sports coupe makes, and are decision makers on purchases such as computers and telecommunication equipment.

Our television ratings are second in motorsports only to NASCAR. We are attracting real sponsors, real and successful teams, professional privateers and manufacturers with a platform for their products and services.

Change the words in my story "teams that are not competitive" to "welfare," "fans" to "voters," "auto manufacturers" to "creators of wealth," "politics in racing" to "special interest groups," "control of the sport" to "political correctness" and we have a good example of "free honest democratic market" versus the hype and illusion of mediocrity.

The appreciation of the meeting was expressed by Sean Webster, Manager, Provincial and Professional Affairs, Eli Lilly Canada and Director, The Empire Club of Canada.