Discussion
rdjohn said:
It may not be expensive in comparison, but it will be a drain on resources. If Coca-Cola were funding a full season’s racing for Fernando and dedicated team, then I would be inclined to view this slightly differently.
I spent an hour or so with the Chairman of Coca Cola the other week, very interesting views on F1, he spoke very highly of Lewis who they sponsor (monster)Shame I didn't think to ask about Alfonso and Indy.
tight fart said:
...he spoke very highly of Lewis who they sponsor (monster)...
I didn't realise Monster was a Coca-Cola brand. But then I'm probably not their target market, indeed they probably don't care that people don't realise it's their product just as long as they drink it. p.s. What is it, a sort of Red Bull type thing?
ralphrj said:
I've had a quick look through the latest investor update.
Income from the F1 team fell by 41% from £165m to £98m for the 9 months. Then they have the cost of the Renault engine on top. Yikes.
Group turnover and EBITDA were boosted by Automotive (but year on year comparisons are difficult as practically no cars were delivered in the first quarter of 2017).
Cash burn remains horrendous. In the last 15 months the company has borrowed £560m+ through a bond issue and received £100m additional capital from Michael Latifi. At the end of September they only had £6m left in the bank but received £50m of additional investment from Latifi 2 weeks ago. However, at current spending that will have gone before next season starts.
I haven't read the investor update, from which you have obtained those figures, BUT from what you have written, I do wonder how long McLaren can keep burning cash at the rate that they do.Income from the F1 team fell by 41% from £165m to £98m for the 9 months. Then they have the cost of the Renault engine on top. Yikes.
Group turnover and EBITDA were boosted by Automotive (but year on year comparisons are difficult as practically no cars were delivered in the first quarter of 2017).
Cash burn remains horrendous. In the last 15 months the company has borrowed £560m+ through a bond issue and received £100m additional capital from Michael Latifi. At the end of September they only had £6m left in the bank but received £50m of additional investment from Latifi 2 weeks ago. However, at current spending that will have gone before next season starts.
Do you think that McLaren will be able to survive, at this current rate of cash burn?
Fortitude said:
I haven't read the investor update, from which you have obtained those figures, BUT from what you have written, I do wonder how long McLaren can keep burning cash at the rate that they do.
Do you think that McLaren will be able to survive, at this current rate of cash burn?
If investors like Latifi keep putting cash in then they could go on indefinitely.Do you think that McLaren will be able to survive, at this current rate of cash burn?
However, I think that in the next 5 years one of three things will happen.
1. The financial performance of Automotive and/or Racing will improve so that the company ceases to burn cash,
2. The results carry on at the current level and current investors continue to pour cash in/new investors join to keep it afloat,
3. The results carry on at the current level and no investors will be prepared to put cash in resulting in collapse.
The business plan is presumably 1. followed by a public flotation on the stock market.
Looking at the trading price of the bond they issued last summer it looks like investors are losing confidence that McLaren will succeed (with the business plan, I don't think they are abandoning all hope, yet).
ralphrj said:
If investors like Latifi keep putting cash in then they could go on indefinitely.
However, I think that in the next 5 years one of three things will happen.
1. The financial performance of Automotive and/or Racing will improve so that the company ceases to burn cash,
2. The results carry on at the current level and current investors continue to pour cash in/new investors join to keep it afloat,
3. The results carry on at the current level and no investors will be prepared to put cash in resulting in collapse.
The business plan is presumably 1. followed by a public flotation on the stock market.
Looking at the trading price of the bond they issued last summer it looks like investors are losing confidence that McLaren will succeed (with the business plan, I don't think they are abandoning all hope, yet).
Thank you for replying and adding your thoughts.However, I think that in the next 5 years one of three things will happen.
1. The financial performance of Automotive and/or Racing will improve so that the company ceases to burn cash,
2. The results carry on at the current level and current investors continue to pour cash in/new investors join to keep it afloat,
3. The results carry on at the current level and no investors will be prepared to put cash in resulting in collapse.
The business plan is presumably 1. followed by a public flotation on the stock market.
Looking at the trading price of the bond they issued last summer it looks like investors are losing confidence that McLaren will succeed (with the business plan, I don't think they are abandoning all hope, yet).
TWO observations;
[1] McLaren is now NOT the destination for top F1 drivers and that is REVEALING, in the loss of confidence or prestige, surrounding the McLaren team.
[2] Ron Dennis MADE the RIGHT decision to sell ALL of his McLaren shares when he left McLaren, after a ‘reshuffle’, which 'in effect’ OUSTED Ron from the McLaren Board.
The decline in McLarens F1 fortunes has been remarkable. TWO early indicators to that decline in 20/20 hindsight and retrospective thought, were the switch away from the Mercedes engine and the loss of Lewis Hamilton.
Fortitude said:
The decline in McLarens F1 fortunes has been remarkable. TWO early indicators to that decline in 20/20 hindsight and retrospective thought, were the switch away from the Mercedes engine and the loss of Lewis Hamilton.
The one which set alarm bells ringing for me was 2014, where a Merc engined Williams was third in the wcc, but McLaren were 5th. Their podium in the first race flattered them, and they blamed their oil supplier and lack of Works status.In fairness I think the switch to Honda was philosophically sound, but their veto over sharing the engine both betrayed a lack of confidence and hid their own/their engines deficiencies.
Fortitude said:
Thank you for replying and adding your thoughts.
TWO observations;
[1] McLaren is now NOT the destination for top F1 drivers and that is REVEALING, in the loss of confidence or prestige, surrounding the McLaren team.
[2] Ron Dennis MADE the RIGHT decision to sell ALL of his McLaren shares when he left McLaren, after a ‘reshuffle’, which 'in effect’ OUSTED Ron from the McLaren Board.
The decline in McLarens F1 fortunes has been remarkable. TWO early indicators to that decline in 20/20 hindsight and retrospective thought, were the switch away from the Mercedes engine and the loss of Lewis Hamilton.
You're welcome.TWO observations;
[1] McLaren is now NOT the destination for top F1 drivers and that is REVEALING, in the loss of confidence or prestige, surrounding the McLaren team.
[2] Ron Dennis MADE the RIGHT decision to sell ALL of his McLaren shares when he left McLaren, after a ‘reshuffle’, which 'in effect’ OUSTED Ron from the McLaren Board.
The decline in McLarens F1 fortunes has been remarkable. TWO early indicators to that decline in 20/20 hindsight and retrospective thought, were the switch away from the Mercedes engine and the loss of Lewis Hamilton.
I agree with both of your observations. Until they show signs of competiveness drivers McLaren won't be top choice of any driver. McLaren very publically offered Danny Ric $20m over the Monaco weekend and he opted to go to Renault, most likely for less money. My gut feel is that neither Sainz or Norris really want to be there next year. Sainz had no other options and I think it was Norris (or his manager) that was pushing for the Toro Rosso seat instead. McLaren's history of discarding young drivers for not performing when the team have been producing dogs to drive must cause Norris deep concern.
Beyond the drivers we must also consider how much harder it will get for McLaren to attract or retain top Engineering staff. They have managed to sign James Key although it is still unclear when he will join the team. The latest comment is that he will join "in 2019 but not early enough to contribute to the 2019 car" but given that he was under contract with STR until late 2019 that might not be saying much. I always understood that design work on an F1 began in the previous summer so it is possible that Key won't even be at McLaren in time to properly contribute to their 2020 car. Pat Fry has joined but he was out of work since the collapse of Manor and was let go by Ferrari 4 years ago so can't really be considered a major coup.
Ron Dennis was absolutely right to cash in completely. In order to buy him out and repay their debts McLaren issued £560m of bonds. Since then they have had a cash injection of £100m from Latifi and yet they still only have £6m in the bank. How will they repay the bondholders in 2022 if they can't generate cash? If they have to do another bond issue the chances are it will have to be at an even higher rate than the current 5% (Ferrari's must recent bond was at 1.5% and trades at 101.5, their debt is considered less risky than the Italian Government's).
Lewis Hamilton is, in my opinion, Nostradamus for making the decision to leave McLaren for Mercedes! In 2012 they were competitive (3rd in WCC, 82 points behind Red Bull) but even with the loss of works status who could have predicted that McLaren would have their worst season for 33 years (5th in WCC, 474 points behind Red Bull, 193 points behind 4th placed Lotus)?
I think times were very different in F1 pre-2013.
From the mid-1990s to 2009, McLaren had Mercedes' sole focus and backing, plus they had huge sponsorship $$$$ coming in from West, Johnnie Walker, Vodafone etc to compliment their massive top-three spending budget.
From 2010 onwards they were no longer Mercedes main priority and lost Vodafone from 2012 onwards. I think Hamilton saw the writing on the wall, Ross Brawn's genius and focus on the 2014 regs, more key personnel joining Mercedes and their insanely high budget going into the hybrid era. To succeed in this hybrid era you need to be in a Manufacturer team
From the mid-1990s to 2009, McLaren had Mercedes' sole focus and backing, plus they had huge sponsorship $$$$ coming in from West, Johnnie Walker, Vodafone etc to compliment their massive top-three spending budget.
From 2010 onwards they were no longer Mercedes main priority and lost Vodafone from 2012 onwards. I think Hamilton saw the writing on the wall, Ross Brawn's genius and focus on the 2014 regs, more key personnel joining Mercedes and their insanely high budget going into the hybrid era. To succeed in this hybrid era you need to be in a Manufacturer team
TobyTR said:
I think times were very different in F1 pre-2013.
From the mid-1990s to 2009, McLaren had Mercedes' sole focus and backing, plus they had huge sponsorship $$$$ coming in from West, Johnnie Walker, Vodafone etc to compliment their massive top-three spending budget.
From 2010 onwards they were no longer Mercedes main priority and lost Vodafone from 2012 onwards. I think Hamilton saw the writing on the wall, Ross Brawn's genius and focus on the 2014 regs, more key personnel joining Mercedes and their insanely high budget going into the hybrid era. To succeed in this hybrid era you need to be in a Manufacturer team
Minor point but McLaren still had Vodafone sponsorship in 2013. Their income that year (£191.8m) was only surpassed last year. They made a comfortable profit that year, actually spending less than they did in 2012.From the mid-1990s to 2009, McLaren had Mercedes' sole focus and backing, plus they had huge sponsorship $$$$ coming in from West, Johnnie Walker, Vodafone etc to compliment their massive top-three spending budget.
From 2010 onwards they were no longer Mercedes main priority and lost Vodafone from 2012 onwards. I think Hamilton saw the writing on the wall, Ross Brawn's genius and focus on the 2014 regs, more key personnel joining Mercedes and their insanely high budget going into the hybrid era. To succeed in this hybrid era you need to be in a Manufacturer team
From memory, 2013 was around the time that the Automotive company was performing badly. It may be that the cash requirement of the Automotive business meant that there was insufficient cash available to spend on developing the F1 cars.
Then add the costs of:
Paying off Martin Whitmarsh.
Developing a car to the new hybrid regulations.
Paying off Mercedes to exit their engine contract.
Developing a special version of your car to run the Honda engine in the end of season test.
Paying off Honda to exit their engine contract.
You can start to see how much of a hole they have dug themselves into.
When anyone denies anything in F1 they are usually not telling the truth, maybe they have they done a Brawn and spent this year (from May) on next years car. - https://www.crash.net/f1/news/911535/1/brown-denie...
McLaren have confirmed Chevrolet power for Alonso's Indianapolis 500 next year - https://www.crash.net/indycar/news/911551/1/chevro...
I have quoted two relevant sections of your last two posts;
I do wonder, how much leeway they have now got in terms of;
[1] Maintaining their cash flow?
[2] Increased Expenditure compared with their reduced income?
With regards to your point in our discussion, “Lewis Hamilton is, in my opinion, Nostradamus for making the decision to leave McLaren for Mercedes!”
Having given it some thought, there have been other moments too, that have, IMHO, been cumulative in that decline;
[1] Adrian Newey leaving McLaren.
[2] $100 million fine, imposed by the FIA over the 2007 Formula One espionage controversy.
https://en.wikipedia.org/wiki/2007_Formula_One_esp...
max mosely after the F.I.A. decision to fine mclren
https://www.youtube.com/watch?v=vpGttlNAgcc
ralphrj said:
Ron Dennis was absolutely right to cash in completely. In order to buy him out and repay their debts McLaren issued £560m of bonds. Since then they have had a cash injection of £100m from Latifi and yet they still only have £6m in the bank. How will they repay the bondholders in 2022 if they can't generate cash? If they have to do another bond issue the chances are it will have to be at an even higher rate than the current 5% (Ferrari's must recent bond was at 1.5% and trades at 101.5, their debt is considered less risky than the Italian Government's).
ralphrj said:
From memory, 2013 was around the time that the Automotive company was performing badly. It may be that the cash requirement of the Automotive business meant that there was insufficient cash available to spend on developing the F1 cars.
Then add the costs of:
Paying off Martin Whitmarsh.
Developing a car to the new hybrid regulations.
Paying off Mercedes to exit their engine contract.
Developing a special version of your car to run the Honda engine in the end of season test.
Paying off Honda to exit their engine contract.
You can start to see how much of a hole they have dug themselves into.
IMHO, you have succinctly explained HOW the ‘once mighty’ McLaren have fallen from pre-eminence.Then add the costs of:
Paying off Martin Whitmarsh.
Developing a car to the new hybrid regulations.
Paying off Mercedes to exit their engine contract.
Developing a special version of your car to run the Honda engine in the end of season test.
Paying off Honda to exit their engine contract.
You can start to see how much of a hole they have dug themselves into.
I do wonder, how much leeway they have now got in terms of;
[1] Maintaining their cash flow?
[2] Increased Expenditure compared with their reduced income?
With regards to your point in our discussion, “Lewis Hamilton is, in my opinion, Nostradamus for making the decision to leave McLaren for Mercedes!”
Having given it some thought, there have been other moments too, that have, IMHO, been cumulative in that decline;
[1] Adrian Newey leaving McLaren.
[2] $100 million fine, imposed by the FIA over the 2007 Formula One espionage controversy.
https://en.wikipedia.org/wiki/2007_Formula_One_esp...
max mosely after the F.I.A. decision to fine mclren
https://www.youtube.com/watch?v=vpGttlNAgcc
IMHO I think Adrian Newey leaving was much bigger at the time.
The $100million was effectively shared with Mercedes and was relatively small beer to them, then. Finding non-racers to buy-out Mercedes, was a mistake, but buying out Ron has had the biggest recent impact on their cash flow at a time when their income stream has collapsed.
Paddy Lowe taking over from Newey was Ron’s perception of strength in depth - but he did well to get the Mercedes job, and has not shown any great skill in turning around the fortunes of Williams. He is an analyst, rather that inspirational leader.
The Newey DNA was leaving the McLaren car by the time Lewis won his first title. Someone like Ross Brawn reading him his fortune cookies probably made his decision to switch not as difficult as we believed, at the time.
The $100million was effectively shared with Mercedes and was relatively small beer to them, then. Finding non-racers to buy-out Mercedes, was a mistake, but buying out Ron has had the biggest recent impact on their cash flow at a time when their income stream has collapsed.
Paddy Lowe taking over from Newey was Ron’s perception of strength in depth - but he did well to get the Mercedes job, and has not shown any great skill in turning around the fortunes of Williams. He is an analyst, rather that inspirational leader.
The Newey DNA was leaving the McLaren car by the time Lewis won his first title. Someone like Ross Brawn reading him his fortune cookies probably made his decision to switch not as difficult as we believed, at the time.
rdjohn said:
IMHO I think Adrian Newey leaving was much bigger at the time.
The $100million was effectively shared with Mercedes and was relatively small beer to them, then. Finding non-racers to buy-out Mercedes, was a mistake, but buying out Ron has had the biggest recent impact on their cash flow at a time when their income stream has collapsed.
Paddy Lowe taking over from Newey was Ron’s perception of strength in depth - but he did well to get the Mercedes job, and has not shown any great skill in turning around the fortunes of Williams. He is an analyst, rather that inspirational leader.
The Newey DNA was leaving the McLaren car by the time Lewis won his first title. Someone like Ross Brawn reading him his fortune cookies probably made his decision to switch not as difficult as we believed, at the time.
I think late 2000s Mclaren was a strong team, it was set up well to cope with the regulations at the time, and had plenty of resource.The $100million was effectively shared with Mercedes and was relatively small beer to them, then. Finding non-racers to buy-out Mercedes, was a mistake, but buying out Ron has had the biggest recent impact on their cash flow at a time when their income stream has collapsed.
Paddy Lowe taking over from Newey was Ron’s perception of strength in depth - but he did well to get the Mercedes job, and has not shown any great skill in turning around the fortunes of Williams. He is an analyst, rather that inspirational leader.
The Newey DNA was leaving the McLaren car by the time Lewis won his first title. Someone like Ross Brawn reading him his fortune cookies probably made his decision to switch not as difficult as we believed, at the time.
Losing the Works Merc is where really the rot set in, the money and associated brands than sponsor you because your with Mercedes gave Mclaren real fire power. They could build B spec cars with ease during the season for example.
It strikes me that since Mercedes resources and focus went elsewhere Mclaren slipped back. Remember much of the dominate F1 Merc techonolgy has come from deep within mercedes, impossible for independant teams to access, but a works team can.
Those numbers are horrific and must raise questions to the long term plans of the company. I would say next year is key to show a good turn around and start scroing points, allowing them to get more funds in. I am not sure automotive's future is as rosy as many think.
Nice to see McLaren are keeping focused on building a not-s
te car:
https://www.motorsport.com/f1/news/oneplus-6t-mcla...
https://www.telegraph.co.uk/cycling/2018/12/11/mcl...
te car:https://www.motorsport.com/f1/news/oneplus-6t-mcla...
https://www.telegraph.co.uk/cycling/2018/12/11/mcl...
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