INTERVIEW Part 4: Why McLaren Rejected Audi Takeover Effort

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McLaren Racing will soon be a profitable business

McLaren has remained silent during the long saga surrounding Oscar Piastri, Alpine and Daniel Ricciardo. Now that the dust has settled, McLaren Racing CEO Zak Brown spoke at length with Speedcafe.com Formula 1 Editor Mat Coch in conjunction with RacingNews365 on a range of topics for a series of articles which will be published in the next few days.

McLaren Racing has reversed its financial situation after struggling for survival as cash flow problems threatened the company to be on the verge of turning a profit.

The saying goes in motorsport: to make a small fortune, you must first start with a big one. This was certainly the case in the past, although the introduction of financial regulation in Formula 1 has radically changed this landscape.

For the first time in living memory, no team is in serious danger of collapse, and F1’s commercial position is strong with a number of blue-chip companies forcing their way into cars at prominent positions.

This includes McLaren Racing, which for a time as the COVID-19 pandemic also held, looked seriously under threat.

McLaren Racing is an entity that technically falls under the McLaren Group and is the company that runs the Formula 1, IndyCar Series, Formula E and Extreme E programs.

It is 70% owned by the McLaren group and 30% by MSP Sports Capital. That slice of the pie was sold in December 2020 in a deal that valued the team at £560million.

McLaren Group is the sole owner of McLaren Automotive, the company that builds luxury road cars. Its majority shareholder is Bahrain’s Mumtalakat holding company.

McLaren’s 2018 car had virtually no sponsorship

“Before investing in Racing, it was economically difficult,” McLaren Racing CEO Zak Brown said of the financial situation the McLaren Group found itself in at the start of 2020.

“But now that we have the investors, we are doing very well.

“We have positive cash flow, we are self-sufficient, we are in great shape.

“Hence our previous comment; be able to make performance-based decisions (see part 3 of our interview).

“Obviously I have a business to run, which I have to be economically responsible for, but I’m in a position to be able to make investments if I think it’s going to be a performance driver.

“We are our own company, our own entity,” Brown continued of Racing’s position within the larger group.

“What’s in the automotive business is a totally separate business. We’re a self-sustaining, cash-flow-positive, soon-to-be-profitable racing team, so we’re in excellent economic health.

Although there is a commonality between McLaren Racing’s board and that of the wider group, Brown’s operation is free to walk at its own pace.

There is a deep relationship with McLaren Automotive, but it is, in a corporate sense, at arm’s length from the racing team.

“We share a brand, and Michael Leiters, who is CEO [of Automotive] and I have an exceptional relationship,” Brown explained.

“So there’s a lot of cross-marketing that we do because we have common customers; people who buy McLaren Automotive cars are passionate about Formula 1, and Formula 1 fans are usually passionate about sports cars, so there’s a huge synergy there.

However, this synergy does not extend to shared budgets, with Racing’s revenue remaining firmed in this silo; Brown described it as a “strategic alliance” between the two entities.

The automotive side of the business recently launched the Artura, a car that only entered production this year after being delayed late last year – due to the global ‘chip shortage’.

The Audi-branded F1 show car was unveiled during the Belgian Grand Prix weekend

Last November, the McLaren Group denied reports claiming it had been sold to Audi. Discussions took place, but no agreement could be reached.

As a showcase for McLaren’s road products, retaining the Racing business (and its overall control) is therefore essential for the Group.

While she can afford to sell a stake any way she can, raising money for the business, she can’t afford to lose overall control.

“McLaren Group and its majority shareholder, Mumtalakat, and second largest shareholder, TAG Group – Mansour Ojjeh’s family office, if you will – are very passionate about the racing team and had no interest in giving up majority control.

“And ultimately that’s what Audi was interested in. It was a level of ownership that McLaren Group, and for that matter MSP Sports, had no interest in. That’s ultimately why those conversations ended. .”

Audi has confirmed it will enter Formula 1 in 2026 as a powertrain supplier and is widely known to be in the process of buying Sauber, which currently competes under the Alfa Romeo banner.

This will see the brand be on the grid as a full factory effort.

McLaren, meanwhile, will continue to design its own cars and, in all likelihood, buy its power units from Mercedes – a partnership that has been extremely successful for both parties in the past.

The dark days of early 2020 are a distant memory, and with the ugly public split with Daniel Ricciardo now largely behind it, the future looks bright for McLaren Racing.

It will field two bright young pilots in 2023 and has significant infrastructure investments that should come online in the medium future, namely a new wind tunnel and simulator.

Add to that a healthy financial situation that will soon see the team turning a profit while operating at the Formula 1 cost cap, and it’s no wonder Brown’s businessman is excited.

The challenge now is to drive that point home with a return to winning ways on track.

Part 5, the final episode in the series of interviews with Brown, will be released tomorrow morning, in which he examines the wider health of Formula 1 from an economic and business perspective.

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