Lights Out - Chequebooks Out - Mercedes
So, the start of a new season beckons and with 2020 the last year before the budget cap is introduced the teams have their chequebooks out. In this series, I will look at the ownership and funding of the teams in F1 and maybe uncover a dark secret or two.
“Right are we all agreed petty cash items under £1 million don’t count?”
The budget cap of $175m has of, course, exceptions like driver salaries and you have to wonder if the teams who employ the best engineers money can buy will also employ the best lawyers and accountants money can buy to well let’s say be “flexible” in their spending.
We start this series with last season champions the Mercedes-AMG Petronas F1 Team.
In the close season, it was speculated that Lewis Hamilton would sign for Ferrari from 2021 onwards. Daimler the majority shareholder of the team would quit F1 evidenced by their arrival in the all-electric Formula E series in 2020 and lastly, Toto Wolff would move to Liberty Media to take over from Chase Carey and run F1.
Well, recent events seem to discount all of this.
Firstly, Ferrari claims to be no longer interested in signing Hamilton and instead wish to resign Vettel alongside Leclerc who has signed a five-year deal.
“I thought our spaghetti Bolognese would seal the deal”
Wolff has stated that he will 'give 100%' to keep Hamilton at Mercedes and reports estimate a new deal will be offered to Hamilton worth £60m-a-season up from the current £40m-a-season making him the highest-paid driver in F1 history. Wolff justifies this stating, "You need to respect that a sporting superstar at the peak of his ability, and at the peak of his career, has a limited lifespan where he is able to earn this kind of super money.”
So with Daimler announcing effectively a third profit warning with earnings halved in 2019 amid a turbulent car industry not to mention the small matter of charges of up to €1.5bn (£1.269bn) related to the diesel emissions scandal – naughty naughty, where is the money coming from?
Well, step forward one Sir Jim Ratcliffe the richest man in Britain with a fortune of £21 billion and his Ineos group. It was announced Ineos would become “principal partner" with a £100m investment as well as a tie-in of expertise over 5 years.
Ratcliffe is the chairman and chief executive officer of the Ineos chemicals group, which he founded in 1998 and of which he still owns two-thirds, and which has been estimated to have a turnover of $80 billion.
So, what do we know about the man and his company?
Well in true F1 Billionaire fashion Ratcliffe owns a 256ft superyacht called Hampshire // and in 2018 he announced a move to Monaco to allegedly avoid paying huge amounts in taxation all perfectly legal, but if it is moral is another question. He will, of course, be in good F1 company in the principality with a host of F1 drivers living in Monaco all claiming it's easier for the commute to the European races – nothing to do with the sunshine or taxes then!
Ratcliffe has a history in this area as in 2010, Ineos shifted its HQ to Switzerland to slash their tax bills in the UK by as much as £300 million between 2010 and 2014.
Ratcliffe has embarked on a frenzied spending spree into sports sponsorship with interests in sailing, cycling and football. He purchased the cycling outfit Team Sky in 2019 and owns football teams in Switzerland and France, FC-Lausanne-Sport and OGC Nice respectively. It has been rumoured he wants to buy Chelsea football club.
Ineos partnership will not trouble Mercedes as it has no issue being part-funded by the petrochemical industry with their title sponsor being the oil and gas multinational Petronas even if Petronas are mired in alleged war crimes in Sudan!
So why has Ineos become involved in F1?
Well, Lobbyists describe Ineos as a “planet-wrecking” company which is only interested in using sport for “green-washing”.
It’s worth noting Ineos is one of the largest plastics manufacturers in Europe, while Ratcliffe is a vocal advocate of fracking in the UK.
Professor Simon Chadwick, Professor of Sports Enterprise at Salford University in Great Britain explains thus,
‘Greenwashing’ “Is using a sponsorship or relationship with sport as a way of essentially deflecting away from concerns about that organisation or that sponsor and possibly a way to changing people’s perceptions.”
“Can you get Lewis to drive me home after all this drink”
I’m not so sure that’s the real reason, Ineos is privately owned and free from a lot of constraints imposed on publicly held companies and for an organisation of its size it has been involved in relatively few accidents or scandals albeit they had a very acrimonious industrial dispute at their Grangemouth refinery in 2013 and in March 2016, Ineos’s Port of Runcorn ChlorVinyls facility was found guilty of releasing caustic soda into the Manchester Ship Canal.
No, I think the real reason for the deal is entirely different.
Let’s look at the two questions that remain.
Will Daimler pull out of F1? Will Toto Wolff go to Liberty Media?
The Chief Executive of Daimler Ola Kaellenius claims they are here to stay,
"Participating in Formula One is one of the greatest returns on investment within the whole Daimler group. This is an exercise that costs little in comparison to the billions of marketing value that are being generated."
That’s all good and well but the world is changing, and Daimler's future is in the manufacturing of Electric vehicles. I think the plan is to establish themselves in Formula E which like their entry back into F1 took some years to achieve. Then when the time is right sell the team to Ratcliffe whose future is dependent on oil, shale gas, plastics etc.
This, of course, will also coincide with Toto Wolff ever the shrewd businessman cashing in and moving on to new challenges which may, of course, be with Liberty Media. The difference is in a few years’ time Liberty Media may decide to sell up after finding that owning F1 was not as easy as they had imagined. Toto will, of course, have his bucket load of cash after selling his 30% stake in the Mercedes F1 team and this will mean he won’t just run the show he will own it.
Meanwhile, Ratcliffe will be in good company in the paddock alongside the other billionaire owners, drinks all round with Mateschitz, Ojjeh, Haas and Stroll. Time will tell.
On a footnote I’m not sure Mercedes PR people would have been pleased with Ratcliffe suggested that "15 or 20 years ago Mercedes was a taxi or an elderly gentleman's car, and I would never have bought one". Maybe he was just trying to talk the price down!
In the next column: Scuderia Ferrari Mission Winnow.
Garry Sloan is the author of “In the pit lane - F1 exposed” details at inthepitlane.com. Copyright ©2020 Garry Sloan
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