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MWR co-owner says organization no longer ‘commercially viable’

Irwin Tools Night Race - Practice

Irwin Tools Night Race - Practice

Tom Pennington

BRISTOL, Tenn. - The man seeking to change the business model for NASCAR owners admits it no longer was “commercially viable” to operate Michael Waltrip Racing after this season.

Rob Kauffman, who would not reveal how many millions of dollars he’s lost since partnering with Michael Waltrip in Oct. 2007, said the team’s equipment will be sold after this season and that the shop’s “best use is as a housing development … instead of a race shop.’’

Kauffman has agreed to purchase a stake in Chip Ganassi Racing.

The move allows Kauffman to keep from losing money with MWR. He also can spend more time in his role as chairman of the Race Team Alliance, which seeks a way to provide long-term equity for owners. Team owners have little more than equipment, a race shop and car owner points to sell if sponsorship goes away and they must close.

The sport’s history is littered with mergers or owners selling the remains of their teams at auction because they lost sponsorship and could not continue. Former drivers Darrell Waltrip, Ricky Rudd and Rusty Wallace all closed shop after sponsorship went away.

“Michael Waltrip Racing really wouldn’t have existed through today without substantial and continued financial support from me,’’ Kauffman said Friday at Bristol Motor Speedway. “I think just from a business standpoint that didn’t make sense any longer. You can’t have a top-10 budget and top-10 resources and not be in the top 10 for a sustained period of time.

“It’s a performance-related business. It’s a great sport, but a very difficult business model. From a business decision it just made sense to not go forward with that organization because it isn’t really commercially viable.’’

Kauffman, co-founder of Fortress Investment Group, was estimated to have a net worth of $1.8 billion in 2007, according to Forbes. Kauffman retired from the private-equity and hedge-fund group in 2012, cashing out his shares for $180 million.

Kauffman has repeatedly said that the car owners face significant financial challenges.

He is hopeful a new program can be in place next season for car owners to have added value - similar to franchising as is used in other sports. In April, the Atlanta Hawks of the NBA were sold for $850 million. The team was purchased, along with the arena and an NHL team that has since moved for $250 million in 2004.

Kauffman is looking to have the RTA and NASCAR devise a program that will provide car owners with similar growth in value over time.

“I’m quite optimistic on the discussion with the folks of NASCAR regarding a variety of the things around the sport,’’ he said. “The competition side, the long-term equity program are all initiatives well under way. I’m pretty optimistic we’ll make some good progress in the next number of months.’’

With Michael Waltrip Racing’s departure, all three of the original teams with Toyota in 2007 will no longer be in the sport after this season. Bill Davis Racing closed in 2008 and Red Bull Racing left the sport after the 2011 season.

Kauffman admits the 2013 scandal at Richmond - where NASCAR penalized MWR for attempting to manipulate the results for Chase considerations - played a significant role in the organization’s downfall. As a result of the penalty, Martin Truex Jr. did not make the Chase after originally doing so.

Shortly after the penalty, NAPA announced it would break its contract with Michael Waltrip Racing and leave the organization after that season. That forced Michael Waltrip Racing to go from a three-car to a two-car team in 2014 and it never recovered.

“Certainly that was a pretty heavy body blow to the organization, caused a big restructuring; 2014 was at some level a large reset year, competitive and financially,’’ Kauffman said. “As we got into the late spring, April and May 2015, really from a performance standpoint, the company wasn’t where it needed to be. That kind of forced some decisions. That’s where we wound up today.’’

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