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Away from the track Renault ask Bernie for a sub, as tensions increase

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Away from the track Renault ask Bernie for a sub, as tensions increase
Jul 24, 2010, 10:22 PM

This has been an enthralling weekend on the track, but there has been quite a bit happening behind the scenes too.

This has been an enthralling weekend on the track, but there has been quite a bit happening behind the scenes too. The teams are actively engaged on a number of discussions, but the eye catching story is the one about the Renault team asking Bernie Ecclestone for an advance on money due to it at the end of the season.

Normally this is something teams do when they have serious cash flow problems and aren't sure if they can make it to the end of the season. No-one suspects that this is the case with Renault, but team principal Eric Boullier has confirmed in the last 24 hours that the request was made because of a cash flow issue. He says he wants to accelerate development of the 2011 car and doesn't have the resources at present to do so, with payments from sponsors due after the August break.

Ecclestone will advance money as long as the other teams agree unanimously and that did not happen in this case as the support wasn't there.

There are several teams who are not in great shape financially, but it is a surprise for Renault's name to come up in this context. The team was taken over in December by Genii Capital, run by internet entrepreneur Gerard Lopez, who has featured on the JA on F1 site several times this season. Lopez was one of the original investors in Skype and Genii own many household name new media companies like Lumension (formerly Securewave) and Nimbus as well as businesses in alternative energies, like solar and variable compression engines.

I've had several meetings and interviews with him since last December. His plan for Renault F1 team is not to seek to make money out of the team itself, he plans for all the money that comes in to be invested into the team and into development. But he plans to use the team as a business platform to expand his business outside of racing, working with companies who are attracted to sponsoring the team.

Lopez owns 75% of the team, with Renault corporate owning the remaining 25%. The team has an innovative business model, whereby instead of selling stickers on the car, Lopez engages companies in joint ventures, either with one of his many companies in the software, tech, solar or renewable energies sectors or with Renault itself. There are deals like this with HP computers and Lada.

Genii has recently done a Renault F1 sponsorship deal with Trina Solar, a Chinese manufacturer of solar panels, whereby they are now building hardware for six solar projects with one of Genii’s solar power companies. Lopez is also giving them an entree into the US and European markets. And through activation of their branding on the F1 car, they are able to increase brand awareness globally.

“If you go to the CMO of a major corporate and ask for £10 million for sponsorship you will have a hard time, “ says Lopez. “But if you present a 360 degree package, where he gets to increase his business via a joint venture, gets access to the Renault group of companies, he can make the sponsorship fee back as well and then double it in value through the ROI in media value from the branding on the car.”

With a billionaire owner and clearly a very active development programme going on at the Enstone factory judging by the amounts of new parts they bring to the car at each race, it seems odd that the team should be seeking an advance on its FOM money.

But there is more to this than meets the eye and it comes at a time when relations between the teams are at an interesting point. FOTA has achieved some things in the sport and was tested last summer when it stood up to then FIA president Max Mosley and refused to accept his proposed budget cap. The stand-off took F1 to the brink and FOTA even announced a breakaway series during the 2009 British Grand Prix.

They did so without having every team under the umbrella; Williams and Force India withdrew from the Association shortly before the stand-off.

Today FOTA contains all the teams, including the new teams and they have even more conflicting needs and priorities than they had then. What is important to Hispania, for example, is quite different from Ferrari or McLaren. It is tough for established teams like Williams, McLaren and Ferrari to have to accommodate ideas on shaping the future from teams who have done only ten races and may not even be around in 2011.

Indeed I've had several conversations with team principals lately about the Resource Restriction Agreement, which came into force instead of the Budget Cap. Devised between the teams at the low point of the credit crunch, it calls for a serious reduction in manpower and spending by the teams by the end of 2011.

Now that the economic picture, while still threatening, is at least more positive, some of the leading teams are making noises about reviewing the RRA with a view to being allowed to raise the minimum staff numbers and therefore raising budgets again.

Teams at the other end of the scale are not so keen on this idea. There are also disagreements within FOTA on KERS and testing, but so far the union holds together because all are aware that there is a major negotiation coming up with FOM and the FIA about F1 from 2013 onwards, in which the teams will be looking to raise their share of commercial revenues from 50% to more like 75% or 80%, which will be very hard for CVC, the commercial rights holders, to deal with and service the debt the business has with the banks. The teams will only have a chance to achieve a result like that if they stay together.

So Bernie Ecclestone, who keeps saying that FOTA has no place in F1, will welcome opportunities to pick off some of the teams and the more financially vulnerable members of FOTA will be relatively easy targets.

The racing has been great this year, largely unspoiled by politics. But sadly I think we are heading into another difficult period for the sport. Mosley liked F1 to do its dirty laundry in public. Let's hope that with Jean Todt in the FIA president's office, there will be a different approach to getting things done.
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Series Formula 1
Teams Renault F1 Team