Armstrong's Cycling Team Going Broke

[zippyjuan]

Lance Armstrong may be riding for free, his teammates do not like not getting paid and paychecks have been coming late recently. Due to the poor economy their main sponsor, the Kazakh state holding company Samruk-Kazyna is not doing well and cannot support the team like they promised to. The Cycling body, the Union Cycliste Internationale, is giving them until May 31st to secure more sponsorship or be dropped as a team. May 31st is the end of the Giro d'Italia and would mean no Tour de France for either Lance Armstrong or the rest of the team. Lance says he would be willing to put in some money and is in talks with other potential sponsors. They need some $10 million by the end of the month to avoid being terminated.

Rider Alberto Contador, who would be one of the favorites in the Tour this year and rides for Astana decided earlier this year to skip the Giro to focus on the Tour. Last year he won the Giro and the Vuelta (Tour of Spain) and he won the Tour de France in 2007. If financing does not come though he won the Vuelta but may miss the other two races. Armstrong is recovering from a broken collar bone he injured in the Vuelta and is not in the shape he hoped to be at this point in the season but is riding in the Giro. They put in two plates with seven screws if I remember correctly.

http://sports.yahoo.com/sc/news?slug=ap-astana-crisis&prov=ap&type=lgns

UCI gives Armstrong’s Astana team May 31 deadline
By ANDREW DAMPF, AP Sports Writer
May 11, 3:43 pm EDT

Buzz up!4 votes PrintVALDOBBIADENE, Italy (AP)—Lance Armstrong’s Astana team must straighten out its financial crisis by May 31 or risk being suspended.

Astana team manager Johan Bruyneel said Monday that the International Cycling Union sent a warning letter to Kazakhstan’s cycling federation.

“That’s the deadline to arrange the whole financial situation. If it’s not taken care of by then, the letter says that the team will be suspended,” Bruyneel said. “At least we’re going to be able to finish the Giro.”

The Giro d’Italia, which Armstrong is racing for the first time, ends May 31.

Astana receives most of its financial support from Kazakh state holding company Samruk-Kazyna, but the Central Asian nation’s economy has been badly hit by the ongoing global financial crisis. The team has not paid its employees lately.

UCI president Pat McQuaid was expected to visit Kazakhstan this week.

Armstrong indicated last week that he was talking to U.S.-based sponsors about taking over the team himself. That might be his only solution if he wants to go for an eighth Tour de France title in July.

“I’ve already said all I know about Kazakhstan, Astana, Borat. I don’t know anything more,” Armstrong said when last asked about the issue. “It’s not my team, it’s not my sponsor. I’ve got nothing to say about it. I would love to give you an answer, but I don’t have one. I would be speculating.

“It’s difficult to go to any major corporation and say in the middle of the calendar year—the fiscal year—and say, ‘How about we start in 20 or 30 days?’ But we’ll see.”

[VTGreg]

This has been out there for a while. The financial backing for the team has been on shaky ground since the global economy tanked. Astana had actually exhausted their "escrow" a few months back and have been on shaky ground with the UCI ever since.

As dire as it sounds, it's expected that Bruyneel will be able to step in and raise additional funding for the team. His organization actually owns the cycling license so there likely wouldn't be any issue that could keep Astana out of le Tour.

I read a more detailed article that goes through timeline on bicycling.com last week.

[cheapie]

i'm guessing we'll see a livestrong/astana team by the end of the giro.

[smeakim]

Its actually really complex but in the end will work out. Bruyneel actaully owns all the equipment and sponsorship deals. The Kazakhstan Cycling Federation actually owns the UCI license. So what is expected to happy is that becuase of Bruyneel contacts and support of UCI the thought is he will take over the license or Lance with UCI approval. Then he will own everything and probably be the moster powerful guy in cycling. Then my guess is Nike will come in and pick up the main sponsorship as they have no inroads in the cycling world. Maybe SRAM since Armstrong is a part owner will step up or maybe discovery again. Who wouldn't want to sponsor the best team in cycling. You will have your logo plastered all over TV for a month during the Tour and have the odds on favorites to win both the Giro and Tour. As savy as Armstrong is maybe this will all happen this week and then they will come out guns blazing with their new Kits and blow it all apart. Levi is well within reach and with Horner, Popo, and Lance as domestiques what more could you ask for. It would be so cool for an American to win the Giro.

[VTGreg]

Its actually really complex but in the end will work out. Bruyneel actaully owns all the equipment and sponsorship deals. The Kazakhstan Cycling Federation actually owns the UCI license. So what is expected to happy is that becuase of Bruyneel contacts and support of UCI the thought is he will take over the license or Lance with UCI approval. Then he will own everything and probably be the moster powerful guy in cycling. Then my guess is Nike will come in and pick up the main sponsorship as they have no inroads in the cycling world. Maybe SRAM since Armstrong is a part owner will step up or maybe discovery again. Who wouldn't want to sponsor the best team in cycling. You will have your logo plastered all over TV for a month during the Tour and have the odds on favorites to win both the Giro and Tour. As savy as Armstrong is maybe this will all happen this week and then they will come out guns blazing with their new Kits and blow it all apart. Levi is well within reach and with Horner, Popo, and Lance as domestiques what more could you ask for. It would be so cool for an American to win the Giro.

Only second time ever right? Andy Hampstead in 1988?

I thought Bruyneel already owned the cycling license and the Kazakhstan Cycling Federation just handled the funding via a few partners. I'll have to go back and read the article again.

Here's the article I was talking about:

http://bicycling.com/blogs/boulderreport/2009/05/04/will-the-giro-be-astanas-last-race/


Giro d’Italia 2009: Is This Team Astana’s Last Race?

Persistent rumors put the team’s Kazakh sponsors in trouble and the UCI threatening to revoke its ProTour license. If that happens, what will Lance, Bruyneel and Astana do?

by Joe Lindsey

Lance Armstrong is, if anything, a careful man.

So when it was reported in Gazzetta dello Sport that he is strongly considering starting his own team in 2010, and will even make an announcement about it in July after the Tour de France, it was significant.

Armstrong is among the most media-savvy members of the pro peloton and rarely speaks without considering the impact of his words. And this time, those words may not have been spoken in a vacuum.

Last month, Astana was reported to have missed paying salaries for riders and staff. That problem was reportedly fixed but recent reports out of Kazakhstan indicate that, if anything, the financial crunch at the team has worsened and may cause it to fold with little warning.

Astana features a non-traditional team structure, which takes a bit to unravel. The team is really two separate entities, born out of the destruction of the former Liberty Seguros-Wurth team and the old Discovery Channel team that folded at the end of 2007.

When Liberty Seguros-Wurth collapsed in 2006 during the Operacion Puerto scandal, then-pro racer Alexandre Vinokourov managed to carry on the team by bringing together Kazakh sponsors and a management group headed by his agent, Marc Biver, a longtime player in pro cycling. But when Vino and his teammate, Alexander Kashechkin, tested positive for blood doping in 2007, Biver’s group was out and Discovery Channel manager Johan Bruyneel was brought in to assume management of the team.

As with Discovery, Bruyneel brought racing experience, credibility and connections with pro racing’s movers and shakers and the service course, or logistical means to field a team. Bruyneel’s holding company, the Belgium-based Olympus sarl, owns the team buses and support cars, negotiates the equipment sponsor deals and holds the legal rights on contracts with riders and staff. It’s the sporting side of the equation.

The financial side, though, rests with the Kazakh national cycling federation and its powerful, politically connected head, Daniel Akhmetov, a former Defense Minister and Prime Minister of the resource-rich nation of Kazakhstan. In the original Vinokourov deal, seven co-sponsors collaborated to support Astana, named for the country’s capital. The sponsors paid regular installments to the federation, which then bankrolled the team. Significantly, the federation also owns the ProTour racing license that allows the team access to the sport’s top tier of races.

Membership, of course, has responsibilities along with privileges, including the posting of a guarantee of 25 percent of rider and staff salaries (or 975,000 Swiss francs, whichever is larger) to an escrow account held by the UCI, and annual audits by Ernst and Young, the UCI’s independent accounting firm. In the event that a team’s riders go unpaid for a certain amount of time, the escrow account can be tapped to cover the shortfall. But the UCI also reserves the right to suspend or withdraw racing licenses for such financial difficulties.

And that appears to be precisely what is happening.

According to sports.kz, only three of the eight original sponsors have paid their full duty to the team (although that includes the largest individual backer, Samruk-Kazyna). One, Air Astana, has backed out entirely. The reasons are not firmly known but, it’s assumed that the financial crisis and, particularly, the collapse in commodities prices in late 2008 are partly to blame. Kazakhstan is a resource-intensive economy and many of the sponsors rely on revenues from oil, natural gas and mining, three sectors that were hit with incredible speed and ferocity by the recession and are only now beginning to rebound.

According to sources within the federation, sports.kz reported that the UCI has already drawn Astana’s $2 million bank guarantee reserve down to nothing. (That, incidentally, would fit with previous stories of the financial distress - the UCI account isn’t tapped until a month after lack of payment, which would’ve been mid-April. Now, the well is dry and there is nothing to refill it.)

The UCI has given the team an ultimatum to refill the account or it will at least suspend the team’s ProTour license (a suspension lasts at least a month). The deadline for that requirement comes next week, during the middle of the Giro d’Italia. Akhmetov has reportedly sent a letter to Prime Minister Karim Masimov outlining that if the government does not enforce payments from the sponsors, the federation will cease to back the team.

Team spokesman Philippe Maertens said that, as of now, all salaries are paid up but admitted that he “did not have all the answers and will not have them immediately.” He did not specify whether the UCI reserve had been used to pay salaries.

In a strange twist, even if the team’s ProTour license is revoked that won’t necessarily prevent it from finishing the Giro or racing the Tour - both events are part of the so-called “Historical” calendar and are not ProTour events. However, in the event the team lacks a ProTour license, it’s not clear what, if any, kind of professional license they would have, and that could be a significant problem in determining their legal right to enter top-tier races. If nothing else, lack of a license would prohibit them from using ProTour races like the Dauphine Libere and Tour de Suisse for pre-Tour preparation.

Given that financial conditions for Astana’s sponsors will probably not materially improve anytime soon, Astana may collapse by mid-May. In the event it does, here’s how I expect it to shake out:

-Armstrong will step up the timetable on his new team and sponsorship. (In fact, he may already have and the Gazzetta interview was forecasting that.) The most recognizeable and marketable cyclist in the sport, Armstrong can offer instant exposure in the 2009 Tour de France and, if not guarantee a win by one of the team’s riders, certainly guarantee the most high-profile presence at the race. The most likely candidate is, of course, Nike, but there may be potential sponsors who are not historically linked to Armstrong (and, no, AIG is probably not an option).

-Bruyneel will gain ownership of the ProTour license, which according to the rules can be transferred, as long as the transferee is a paying agent who can assume the financial liabilities - this is what happened in 2006 with Liberty/Astana. The ProTour already contracted by two teams from 2008 to 2009, and more teams may shutter this fall as sponsor agreements expire. The UCI desperately wants to prevent the ProTour from shrinking to the point of irrelevance, and Bruyneel is a longtime participant in the sport with excellent connections at the UCI. With financial backing from a sponsor, Bruyneel will own the one true “golden key” to racing’s upper echelon and, with it, access.

-With a few exceptions (Janez Brajkovic, Tomas Vaitkus, Assan Bazayev), everyone east of Andreas Kloeden is gone. Without Kazakh sponsors, there will be no strong geographical tie to Central Asian riders like Maxim Iglinsky and Aleksandr Dyachenko, who were essential to the team’s national identity. As for Kloeden, Bruyneel never had any particular affinity for him, a Vino-era holdover who brings a lot of baggage from the old T-Mobile team and complicates the trinity of Armstrong/Contador/Leipheimer. Technically, they can’t cut the riders until the end of the year to preserve minimum ProTour roster status, but they sure can renegotiate their contracts and send them to the Tour of East Podunk in the meantime.

It’s not exactly the best leadup one could imagine to the heart of the racing calendar and the events that are most important to the team and its star riders. But as with all things Armstrong, expect him to find a way out of the mess that somehow ends up better than it was. Leipheimer is ideally positioned for a run at the Giro overall. Armstrong can ride shotgun for his countryman, build his form and bide his time for the Tour. And for Bruyneel, the shotgun wedding of Astana and Discovery is dissolved and he is free to go his own way, with trusted partners.

[smeakim]

I think I used the wrong words I meant the Pro Tour License is owned by the Kazakh national cycling federation. Bruyneel owns it all but the PTL. We will see though.... We will see when the new kits arrive.

[VTGreg]

I think I used the wrong words I meant the Pro Tour License is owned by the Kazakh national cycling federation. Bruyneel owns it all but the PTL. We will see though.... We will see when the new kits arrive.

Heard they may be in new kits as soon as today or tomorrow. Haven't seen any Giro highlights to see if they still had Astana kits today.

[smeakim]

Still in Astana Kits today.

[zippyjuan]

Thanks for some more detailed information. Armstrong and Bruneel definately have some serious connections- both within the sport and also with potential outside sponsors. Timing is the more difficult issue- first the economic slowdown has companies less willing to put lots of money into a "secondary" (at least in the US) sport. It is also in the middle of their fiscal year where most of their budgets are probably already set. Secondly it is the middle of the racing season. Without Lance or Johann I would say the team would be dead and probably not even finish the Giro.

I could be wrong, but I think the UCI does not let you change colors of your jerseys during a season- certainly not without permission. You can change the sponsor's names if necessary. They have promo materials pre-ordered and printed long before an event takes place which would be costly to change.

I have only caught brief updates on the Giro. I see they have started on some of the climbing stages. Levi is in a good position and has been up in action at the front of the climbs along with at least two teammates. Lance is getting better but still struggling on them and he is being given two or three riders to try to keep him from losing too much time when he gets dropped on the climbs.

On a side note, I have met Andy Hampsten and seen him race. He used to live a few miles away. Very nice, low key guy. He did not get much of the recognition he deserved- riding in the shadow of Greg Lemond. He won the Tour of Switzerland twice and the Giro (1988- also claimed the King of the Hill climbers title that year- the only non-European to win that race). He won the Best Young Rider in the Tour de France on year and finished fourth in it twice. First American to win the Alp d'Huez stage in the Tour.

[smeakim]

Well this was an all for not. Faded out team kits. Well I guess it would have been too much to expect a new big sponsor to come in right away. Hopefully it gets resolved and they have new kits or their sponsors pay up.

[zippyjuan]

http://sportsillustrated.cnn.com/2009/cycling/wires/05/15/2080.ap.cyc.giro.2nd.ld.writethru.0961/index.html

Armstrong leads team protest over money at Giro

CHIAVENNA, Italy (AP) -Lance Armstrong commanded the spotlight again, and it had nothing to do with his seven Tour de France titles or fight against cancer.

Armstrong had a new role Friday: labor activist.

On a day when Norway's Edvald Boasson Hagen won a cold and rainy seventh stage of the Giro d'Italia and Italy's Danilo Di Luca kept the overall lead, Armstrong and all but one of his Astana teammates made a protest.

The riders, upset over not being paid salary by their Kazakhstan team, wore special jerseys that faded the sponsor names. The Astana lettering that had been clearly visible was now obscured beyond recognition.

"It's definitely not a good sign,'' Di Luca said. "It's the richest team in the world and the team that spends the most.''

Armstrong protested on behalf of his teammates. He is riding without salary this season after 3 1/2 years of retirement. Alberto Contador, considered cycling's top rider, also competes for Astana, although he is not defending his title from last year's Giro.



More at link.