Will McLaren survive their Honda contract?

[PugwasHDJ80]

ralphrj said:

cgt2 said:

This has been stated for awhile, in fact if I think all the way back to 2010 and the launch of the MP4-12C at MTC, Ron Dennis stated he wanted the road car side of things to be completely autonomous when financially viable. Since they have performed ahead of expectations in the past few years then it stacks up.

Having read their accounts I wouldn't necessarily agree that things having been going as well for them as their press releases would have you believe. They are heavily in debt and the company has been kept afloat by a series of loans.

For example:

McLaren say that they made a profit a year ahead of plan but their accounts show that they only made a profit because their investors converted their interest bearing loans into equity.

I'd be surprised if the original plan was to borrow money then after a few years say "we can't afford to pay you the interest, how about you write off the loan and turn it into shares which might be worth nothing".

flip it on its head

you invest in a business that is making 100k, and you need your loan repaid to the tune of £100k per year-at that point you pretty much control the destiny of the company (if you've made the loan under preferential terms- which you will have)

the business then starts making £1mm a year, but you only still get £100k per year- what you really want is £250k forever and a % of the business when it sells

so just before the business starts taking off you force it to convert your debt to equity- so now you own 30% of the business. you probably stilll get preferntial shares on top of Ordinary shares so your loan is still repaid but you also get a % of the profit and you get the debt repaid- you have your cake AND eat it.

its unusual for secured creditors to give up their debt position (which is probably secured by the assets of the company) in order to take equity which has no security.

[rubystone]

ralphrj said:

McKal aren't registered in the UK so I can't see details of who they are but on 3 May this year a Mexican businessman called Roberto Aguirre was appointed as a director of McLaren Automotive so I expect it is an investment vehicle for him.

You may just be correct. McLaren's accounts make interesting reading, particularly the parts that refer to the value of the heritage business.

[ralphrj]

rubystone said:

You may just be correct. McLaren's accounts make interesting reading, particularly the parts that refer to the value of the heritage business.

Yes, I had noted the value of the heritage collection last year (I might have posted something about it on here or possibly on Autosport).

I think that this years accounts will be interesting as the change in accounting standards will give them the opportunity to revalue the company's assets.

[ralphrj]

PugwasHDJ80 said:

flip it on its head

you invest in a business that is making 100k, and you need your loan repaid to the tune of £100k per year-at that point you pretty much control the destiny of the company (if you've made the loan under preferential terms- which you will have)

the business then starts making £1mm a year, but you only still get £100k per year- what you really want is £250k forever and a % of the business when it sells

so just before the business starts taking off you force it to convert your debt to equity- so now you own 30% of the business. you probably stilll get preferntial shares on top of Ordinary shares so your loan is still repaid but you also get a % of the profit and you get the debt repaid- you have your cake AND eat it.

its unusual for secured creditors to give up their debt position (which is probably secured by the assets of the company) in order to take equity which has no security.

I understand your point. In the case of McLaren the Bahrainis are gambling that everything will come good. They have switched from interest bearing debt to equity (but receiving nothing in dividends). However, at the same time they have gone from 20-25% shareholding to 55+%.

[Piginapoke]

Exxon Mobil now gone after 20 years

[Superbad]

Piginapoke said:

Exxon Mobil now gone after 20 years

BP not a bad replacement.

[Piginapoke]

Fuel and lubricant partnership, not a sponsor. BP will sponsor Renault

[CraigyMc]

Piginapoke said:

Fuel and lubricant partnership, not a sponsor. BP will sponsor Renault

Someone has been reading Joe Saward's stuff today...

[Leroy902]

Another sponsor moving from mclaren over to Red bull...

I knew Christian Horner hates driving through Woking, but I didn't realise just how deep it stems. .

On a serious note, I wonder how much of a problem a change of fuel supplier will have on their respective engines next year?

I don't think it'll help the situation.

Edited by Leroy902 on Thursday 1st December 22:26

[anonymous-user]

Renault have improved a lot this year, some of that gain will be from fuel, so it may be a good move if the fuel was not producing.

[rscott]

Leroy902 said:

Another sponsor moving from mclaren over to Red bull...

I knew Christian Horner hates driving through Woking, but I didn't realise just how deep it stems. .

On a serious note, I wonder how much of a problem a change of fuel supplier will have on their respective engines next year?

I don't think it'll help the situation.

Edited by Leroy902 on Thursday 1st December 22:26

The rumours are it may well help a lot - Bp/Castrol have worked with Honda for many years in MotoGP with some decent results.

[Piginapoke]

Will be interesting to see if Zak Brown can attract some big ticket names.

[CraigyMc]

Leroy902 said:

I wonder how much of a problem a change of fuel supplier will have on their respective engines next year?

The f1technical people recon the fuel and lube will still be Exxon provided next year, irrespective of sponsorship.

[TonyToniTone]

Boullier thinks McLaren would have won races with best engine in 2016
http://www.autosport.com/news/report.php/id/127560...

Not sure I agree with him.

[GreigM]

TonyToniTone said:

Boullier thinks McLaren would have won races with best engine in 2016
http://www.autosport.com/news/report.php/id/127560...

Not sure I agree with him.

So why didn't they romp home in Brazil when arguably the engine deficit was eliminated?

I've said before and it gets largely ignored, why is Boullier escaping heavy criticism for McLaren's performance? It seems a lot of it was deflected onto Dennis, but surely it was Boullier's job to deliver F1 results?

[CraigyMc]

TonyToniTone said:

Boullier thinks McLaren would have won races with best engine in 2016
http://www.autosport.com/news/report.php/id/127560...

Not sure I agree with him.

He has more data than you do, but is obviously also biased.
Consequently I don't think the story is of much value.

FWIW, I think that McLaren's aerodynamic development has been hampered by a lack of power in races, which is in turn due to relatively poor fuel economy in the Honda.
The lack of TJI type technology in that engine has caused overconsumption during races compared to the field.
Having to fuel save so much during races has led McLaren's chassis team down a lower drag/lower downforce direction than is optimal, and their car has been running near the fuel/weight limit (100kg) compared to the cars with economical engines (I believe Williams often start with 15Kg less than the maximum) - which is bad for everything on the McLaren package: fuel, tyres, handling.

People have challenged me on this by asking why McLaren don't qualify better, as fuel saving isn't a factor there. My reply is that you have to qualify the car using the race setup and drag levels, so you're snookered without an economical race engine.

The MP4-31 is a product of those compromises. If Honda can come up with a TJI-type system for next years' engine (and the noises are that they've done so) then McLaren can get back to developing for downforce again, and start qualifying further up the grid. Honda are still about 3 to 4 years behind Mercedes though (the rumour is that Merc started on the V6 turbo engine in 2012, and had the TJI concept in the car in 2014, meaning they've certainly had bench engines running it from '13).

Even if Honda come up with something special next year, it will take at least one cycle for McLaren to get back to podiums and winning, because every time they haven't exploited a path of "downforce" rather than "reduce drag" in the last few years development, it'll hurt next year.

Just my tuppenceworth. There's a pretty decent thread on Honda engine development on f1technical.net if anyone's really interested.

Edited to fix a typo

[RYH64E]

GreigM said:

So why didn't they romp home in Brazil when arguably the engine deficit was eliminated?

I've said before and it gets largely ignored, why is Boullier escaping heavy criticism for McLaren's performance? It seems a lot of it was deflected onto Dennis, but surely it was Boullier's job to deliver F1 results?

No one man can deliver F1 results. There are several extremely well funded, very professional teams competing in F1, McLaren isn't currently one of them but even if it were the odds would still be stacked against them as they'd be one of maybe four teams in with a shout.

To beat Mercedes, Red Bull and Ferrari you've got to be very good, and McLaren Are struggling to raise their game to barely adequate.

[rev-erend]

The Mclaren team as a whole is massively demoralised. Things may actually get worse.

[CraigyMc]

rev-erend said:

The Mclaren team as a whole is massively demoralised. Things may actually get worse.

I don't want you to out yourself as a staffer in Woking, so all I'll ask is this: how are your sources?

[IanUAE]

rscott said:

The rumours are it may well help a lot - Bp/Castrol have worked with Honda for many years in MotoGP with some decent results.

With the factory HRC team sponsored by Respol. So not like a tin of Ronseal then..... (ah sorry about the pun there).