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Outsourcing Keeps NASCAR's Smaller Teams In The Race

Daytona 500 winner: Trevor Bayne
Daytona 500 winner: Trevor Bayne

When I saw Trevor Bayne taking the checkered flagat the Daytona 500, I immediately wanted to know the business story that made this possible.

How does a 20-year old driver, in only his second Sprint Cup start, get in a car for a have-not team and even have the chance to beat the likes of Jimmie Johnson, Kurt Busch and Carl Edwards?

Perhaps the most amazing thing I've ever seen in sports was from the pits of Morgan Shepherd. At 63, I saw Shepherd tinker with his car himself, race on used tires (and that was to start the race) and work with a makeshift pit crew that had met the day before. Morgan Shepherd was a talented guy, but he had no chance of winning this Sprint Cup race.

Sure, it was a car and not a foot race, but there's a lot that can go wrong with these machines and if you don't have the manpower, the engineering, the teamwork, there's just no shot of getting in victory lane.

So how did Trevor Bayne do it while racing for NASCAR's oldest team, the Wood Brothers, who hadn't won a race since 2001?

The answer is outsourcing.

The Wood Brothers had been doing their own engineering, along with the help of their long time sponsor, Ford . But they decided that doing it all on their own wasn't going to make the cut.

"No matter how much money you spent, no matter how much work you did, you just couldn't quite get over the hump to get to the point that you were competitive every week," co-owner Eddie Wood told the press after the Daytona 500 win.

So what did they do?

They reduced their workforce by half — from about 32 employees to 18 — and paid Roush Fenway Racing to do the work for them. Under the agreement, Roush would build the cars and service them and the Wood Brothers would pay a fee that would cost them less than building the cars themselves and having their own employees build them.

This isn't something entirely unique to NASCAR.

Joe Gibbs relied heavily on goliath Hendrick Motorsports when they first entered the sport years ago. So too has Tony Stewart since he made the move to driver/owner a couple years ago.

I called up Len Wood to find out exactly how much the team can get for its payments to Roush. I was surprised. He told me that not only do they pay for the car and the labor, but they also get the right to share information with Roush.

Roush, which had already maxxed out with four Sprint Cup teams, NASCAR's limit on team size, actually allowed the Wood Brothers to subcontract Bayne for Sprint Cup races. Roush was using him for the Nationwide circuit.

Seeing the details of the relationship allowed me to better understand how a have not could even be in the position to win the Daytona 500.

Turns out, if the cars are engineered the same and they have a decent crew chief and pit crew, and a driver on top of his ride, there's a shot to win it all.

What the Wood Brothers do with Roush gives them the most economical chance to win races. Of course, there are unexpected losses when you win the Daytona 500. The Wood Brothers had to donate Bayne's car to the Daytona Experience as part of the terms of winning the race.

They'll get the car back after a year, but, for the trouble, they only get $100,000, which is lower than what the car costs.

Said Len Wood: "I'll take that loss any day."

Questions? Comments? SportsBiz@cnbc.com
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