The build-up to the Italian Grand Prix has, for the Lotus F1 Team, been dominated by sensationalised headlines claiming that the team wouldn’t even make it to Milan or that it was on the verge of being bought out by Renault.
Neither is exactly true, for the moment at least.
The team has been in the spotlight for all the wrong reasons in recent weeks over unpaid debts to a number of creditors who have had to take the team to the courts or send in the bailiffs in order to get what’s owed to them. It’s hardly the kind of PR the team needs when it’s actively on the market, but clearly indicative that the team is in serious financial trouble.
First there was the case with component supplier Xtrac, which applied for a wind-up order through the London courts unless it could get paid its outstanding bills that dated back to 2014.
That was sorted out in time for the Hungarian Grand Prix, but after the summer shutdown the antics started again: this time former test driver Charles Pic sent the bailiffs into the paddock to seize some of the team’s equipment and impound its cars unless he was compensated a rumoured $800,000 for the team’s failure to give him enough days behind the wheel of its car.
There were serious concerns that the team would have been blocked from leaving Belgium and unable to make it to the following Grand Prix in Italy, but the sight of the team’s black-and-gold transporters arriving in the Monza paddock would suggest that the Pic situation has also been sorted.
No sooner is that resolved that it seems two more creditors – Toyota and Bell helmets – are now wanting their money; the former for the supply of its old motorhomes, and the latter for the supply of helmets to the team’s pit crew. It just never seems to stop.
This week, Bernie Ecclestone made the very public and embarrassing admission that he wrote a cheque to pay the outstanding salaries of the Lotus team personnel, underlining just how desperate things would appear to be.
Added to this have been a succession of stories – leaked by Formula One Management and Renault – that the French car maker is waiting in the wings to buy back the team it previously owned. According to a number of outlets that didn’t check any sources, Renault has already pitched the offer and business plan to the Lotus executives – the executives have denied that any such meeting has actually taken place.
According to the leaked reports, Renault will offer a total of $100 million in order to acquire a 65% stake in the team, valuing the Lotus F1 Team (or, rather, grossly undervaluing it) at about $150 million. Other terms in the deal are believed to include ten percent of this stake being passed on to former F1 World Champion and once-failed team principal Alain Prost, who would assume a frontline role with the team in a similar way that Niki Lauda has done so at Mercedes.
Both Renault and FOM are keen to push this along, and periodic leaks to the media about Lotus’ financial plight can be seen as a tactic to scare other potential buyers into believing that the situation at Enstone is utterly dire.
There are a number of problems with the Renault-Lotus deal, and it is by no means as much of a certainty as Bernie Ecclestone, Renault and much of the motorsport press would like us to believe.
Firstly, Renault doesn’t have that kind of money lying around. The buyout would be a 10-year process where the payments would be drip-fed to the team’s owners while the car maker – still controlled by the French government, which can’t be seen to be funding something as ostentatious as an F1 team – tries to scramble the rest of the costs to cover the team’s day-to-day running costs.
Secondly, there’s the matter of Lotus’ long-term customer engine deal with Mercedes. That contract can’t easily be torn up in a great hurry, but it will be if Renault comes on board as the team’s owner. Mercedes will want compensation for the breach, but that could be offset should it agree to switch camps and supply Red Bull Racing – as Ecclestone clearly wants, but which the works Mercedes team is vehemently opposed – so it can get rid of its Renault power units. The drinks giant would probably be prepared to way whatever it takes to get out of its current contract with Renault, which runs until the end of 2016.
Thirdly and most importantly, there seems to be a great deal of complexity in Lotus’ current ownership structure. Finding a deal that will satisfy all of the stakeholders could be the ultimate stumbling block after all.
The majority of the shareholding in the team was sold to British real estate developer Andrew Ruhan in 2014, after he successfully turned his loans to the team’s then-major owners, Genii Capital, into equity in the team. Ruhan is believed to have invested more than a few hundred million dollars into keeping the team afloat, and a low-ball offer from Renault which amounts to far less than his own investment is not going to tempt Ruhan to sell up, despite the media spotlight being thrust upon him by other parties with vested interests.
What is clear in all of this mess is that the team’s very future remains extremely unclear. If the creditors keep queuing and the team’s owners – or a buyer – don’t give it a major cash injection, then the slippery slope towards administration and a number of winding-up orders becomes harder and harder to avoid.
The saddest fact in the entire mess is that the Enstone team is blessed a talented, dedicated and hard-working workforce who risk being the biggest losers in the entire affair. Formula 1 cannot afford for another team to be closed.
Image via XPB Images