Q1: Lotus’ Financial woes and Imminent buy-out by Renault: what are the implications to F1, to Red Bull Team, their engine choices, partnerships and sponsorships?
PA: There are two questions to ask ourselves; (1) whether it makes sense for Renault return to Formula 1 and (2) Is Lotus the best team to acquire? In my opinion, both questions can be answered “Yes”. Yes, it makes sense for Renault to return to Formula 1 - to be fully involved in Formula 1 for the full benefit and full cost of its participation. Also, Renault as a team will become more visible in Formula 1. At the moment, its involvement with Red Bull has not given the company the right level of visibility especially as the RBR team also advertises the Infiniti brand (part of Nissan). It makes sense for them to acquire Lotus because the capabilities that Lotus has are those that Renault had when it was involved in F1 till a few years ago.
Acquisition of this type would have higher risk in terms of technological integration, development and capability and I have a feeling that this would mean for people at Lotus, a more sustainable position. It would also be the possibility of not being insolvent as Lotus is at the moment. And if there’s any company in a position to this, it is Renault. If they want to get full involvement in F1, they need to be back as a fully fledged, branded team.
There is no future in F1 for constructors to hang around providing engines without being involved with a team i.e. the business model might not be profitable in the long run. We have some studies at the moment on profitability of F1 Teams about pushing competition in the long run and from what we can see is that for teams that only want to engage as suppliers, it is not sustainable. A team needs to be free to develop its technology and development of drivers, and to build alliances. Renault is not in a position to do this right now, but will be if it becomes a fully fledged team.
[ Aversa, P., Furnari, S., & Haefliger, S. 2015. Business model configurations and performance: A qualitative comparative analysis in Formula One racing, 2005–2013. Industrial and Corporate Change, 24(3): 655-676 ]
CN: I agree with Paolo when he says if Lotus were going to be bought out by anyone it would be Renault. Renault know the processes and procedures of the facilities at Enstone. They more or less built it up, and until a few years ago they were matching Red Bull on development, so if Renault are going to come back into the sport, that’s how they would come back in. Lotus’ financial woes from what I read is that it is all hinging on the Renault deal. The negotiations revolve around Maldonado’s sponsor PDVSA releasing the funds to the team, which is halted while the team negotiates a deal, and without that money Lotus will drop of the grid, which would be a shame. And also you have Renault’s situation with Red Bull which sees them divorcing from four World Championships. So you have Renault,
who forced the 1.6V Turbo engines
in more than any other
manufacturer, and came
up with a poorer product
than their rivals without
any works team to utilise.
It was the strongest customer deal that was out there, but they painted themselves into a corner by only being with Red Bull teams for this season. So you could have an engine manufacturer that could end up with no customers next year if the Lotus deal does not go through, so it really is make or break for Lotus and Renault in F1. The lesson is if you don’t have good relationships with all three engine manufacturers or if you have good relationships with just one and that relationship goes sour, or if that manufacturer decides to withdraw you can’t really pursue many other avenues.
If Renault were to go altogether thanks to Red Bull being critical of what is happening there, and you’ve still got the Mercedes deal that Lotus have for 2016, so they have an engine back-up. Renault could delay the deal by a year - they did that with Benetton 10-15 years ago. Lotus could have this Mercedes deal honoured, and then you’d have Renault Lotus Mercedes as a constructor! Renault could come back and bring in Alain Prost; be a Works Team and only manufacture engines for themselves.
Sign Romain Grosjean, with TOTAL as an engine oil supplier and it all becomes a
French super team. On a related note,
Prost is well involved with
Edams Renault Formula E
team which to me it seems
like a really odd role. He is
present at every FE race
and tests and is helping Renault raise their profile once they bought into Formula E. They have avenues to fall back on rather than F1 – which they are indecisive about at the moment. So they might pull out completely and focus on Formula E.
RZ: Late June 2015, the Renault deal was “never ever” going to happen but now it is! On the surface, it seems like a logical choice. To me, what happens with this deal will be informative as to what happens in next couple of years and how important it is as a negotiating tool.
PC: Although the prospect of Renault returning is fascinating, perhaps it is better to understand what their “unlock” mechanism is. At the moment, Mercedes doesn’t want to provide Red Bull with an engine because they are a main competitor. Also because Renault is involved with the RBR team and is a commercial partner at an automotive level with Mercedes. So if Renault buys Lotus and Lotus doesn’t go into administration, this would be great for Mercedes. At the moment, Lotus owes Mercedes money and what this would mean is Mercedes can supply Red Bull, Renault will have its own team and there will no more excuses for Mercedes not to supply RBR. For me what is fascinating is what is going to happen in the chaos.
Moderator: With regards to the current Lotus debt, it seems there is a problem with the amount of Due-Diligence (or lack of!) involved in selecting sponsors or investors for some of these teams.
BW: My view is that it doesn't make commercial sense for Lotus to continue as a Lotus-Mercedes package anymore. F1 was never going to stack up for a non-works team as a commercial venture. F1 is a branding exercise for manufacturers to sell more road cars. Clearly Mercedes are doing a fantastic job of that. They have a lot of resource and finance in F1 and clearly they have taken the view that F1 is the platform they want to use to market their road cars and brand. Craig made the point about having a French super team and I think the future of F1 is going to be a full works team supported by their own engine manufacturers. Lotus do have success with Mercedes engines, but they can’t fully leverage this exposure for best promoting the Lotus brand. So a manufacturer like Renault taking on the team for the purposes of F1 is there for, is more viable.
As Craig said, Renault has a strong heritage in junior formulae like in Clio cup and World Series so it could be argued that perhaps they could promote their brand without F1. But with F1, Renault have the prestige of competing at the pinnacle of motorsport and technology and clearly they want to be involved in that space to sell more cars. In summary, I don’t see the Lotus-Mercedes deal as “surviving” but having an OEM works manufacturer team is the way forward, whoever that might be.
Images: Octane Photographic