November 16, 2009

Power Means Nothing Without Control

As was rumored and expected for months, Mercedes bought Brawn GP and dropped Mclaren from a quasi-works team to customer status. Mercedes is citing the "new economic climate" and "cost cutting" but like with Toyota, BMW dropping out, it's likely deeper than that.

Manufactures don't mind spending money but what they cannot justify is footing the bill without controlling, well... everything if they could. Bridgestone is leaving because the FIA put them in a situation where they have to produce "bad" tires artificially, what's their incentive for staying? It's not quite as bad for auto manufactures yet but you see where Ferrari was going with its "12 little indians" press release.

Mercedes "married" Mclaren when the Woking team was hot. They built a fantastic new house, they had great success but then things began to go sour. Shoplifting, SLR, economy, take your pick, Mercedes has found a new younger and less "complicated" mistress and I'm sure it's thinking that as long as it is paying the bills it might as well have her wear silver and call the shots, something they could not do with Ron Dennis.

It's not a cost cutting measure, I'm sure the pre-nupt with Mclaren was ferocious. Mercedes will sell back its 40% Mclaren stake in 2 years and had to commit to supply engines until 2015 and beyond (one might wonder how the 40% sell back and the engine supply are tied) yet from the wording of the Mclaren press release, Mclaren is not obliged to stay with Mercedes engines. Mercedes is also getting flack from its unions who are complaining that at a time when workers are getting their hours cut, management should have done a "Toyota" and use the excuse to drop out rather than go out and buy a whole new team. It's an expensive move for MB.

Engines is where it gets interesting. Ron Dennis wants to be Enzo Ferrari and had seen the writing on the wall long ago, at least as long ago as the plans to produce the MP4-12c road car with a Mclaren built engine started. Mclaren is banking on a future as a self contained manufacturer more or less like Ferrari or Porsche are/were. They already build standard ECU's for other teams and I'm sure the idea of becoming an engine supplier has crossed their minds, with teams likely to come and go in the next few years an alternative engine supply should be welcome once the FIA lifts its idiotic requirement that new teams buy powerplants only from Cosworth.

Brawn proved this year that a superior car will make up for lack of driver "star power". This is a line of thinking beloved by manufactures, BMW, Toyota and at times in the past, Ferrari have gone down that road, historically with resounding failures. Brawn's pulled it off this past season but they also had the double diffuser advantage in part to thank. It will be interesting to see where Mercedes is going with Button, Heidfeld and Raikkonen.


  1. Good article AC. In my view its all about money. Manufacturers don't necessarily need control but they do need to see that all the $ the pour in every year gets put to work for their future brand equity; otherwise they are better off by just paying Ad $ and branding any car (without any expensive R&D or hundreds of employees in the payroll). Basically, just what cigarette companies did in the past.

    Mercedes would have love to own McLaren, but 30+ years of franchise value, deep pocket shareholders (same as TAG) and a a redundant (with Mercedes) new car operation would have come anywhere cheap.

    On the other, one can say that Brawn sold his soul, but he too is a business man, and basically, what he sold was 1yr worth of work!! (All his Benetton and Ferrari cash is still untouched at his Private Bank account). I wish I could be as successful in selling a Startup after only 1 year with the claim of being #1 in the world in its industry!! I guarantee you that the cash paid to Brawn makes it worthwhile for him; plus MB knows they have to keep him happy b/c after that non-compete (there has to be one) expires, he can do it all over again. Just brilliant!!

    In other words, Ross Brawn is worth more than any driver on the grid. period.

  2. But they are keeping Ross Brawn on as team manager...

    I was thinking about Mclaren building their engines and I wonder what happens now to those BMW (and/or Toyota) blocks and machine tools, parts, spares ect. that will be perfectly legal till 2012 and just sitting there, unused....

  3. nice post!! boy the landscape is a changin.....

  4. Precisely AC. RB made a Gazillion out of a years work. Has new partners that put ALL the $, gets to keep his job and still runs the show!!
    What would this business be worth when RB leaves beyond his current term commitment?

  5. Ac, very thought provoking. Very interesting to see you lump Raikkonen in with the Buttons and Heidfeld's of this world. I've always viewed Kimi as being a worthy champion. A lazy, grumpy bastard, but a class act behind the wheel.

    I think Lewis would beat him in the same car though.

  6. CG brought a good point up. Did they buy Brawn GP or Ross Brawn himself? Honestly, if Brawn walked away - what would keep the team from being the same one Honda had before Brawn stepped in? Not much if you ask me.

    RB was smart, getting a big chunk of money for most of his team plus a salary. Who wouldn't take that after one year of success? If your biggest commodity is yourself then what else can you do?

  7. CG do you want to make some calculations considering Ross bought the team from Honda for... $1 !?!

  8. Exactly AC! Just one small highlight of how shortsighted manufacturers are b/c as BIG public companies they respond to short term reactions from the Public markets, pressures from the Unions, suppliers, government and there's no real owner that cares about medium/long term real value.

    Guess why the only manufacturer that has never left the sport and has the most successful/valuable franchise is Ferarri? B/c it is essence a Private Company, and although partially owned by Fiat still makes decisions as a Private entity (only cares for its value).

  9. How many of you figure Mclaren will end up with Hamilton and Button in 2010? Marketing dream team and the end of Button's career? No way either MClaren OR Mercedes is going to pay Raikkonen's asking price but if MB goes for the "cheap" alternative of Rosberg and Heidfeld .... hello BMW/Toyota.

  10. The unused engine blocks will make perfect coffee tables.

  11. Crid from L.A. says:

    First of all, I like the helmet art. Your banners are always good.

    Other blogs are talking about how Keke was taking contract offers for his son in recent times, and it occurs to me that we never saw Keke walking around the track or being interview like other retired drivers this year... At least not on the BBC. Does anyone know why? All the usual suspects made appearances... Stewart / Lauda / Hill / Villenueve, but no Rosberg Sr.


  12. Looks like it's a done deal now for JB to go to McLaren. That surely leaves Kimi high and dry? Surely no one can afford to pay him more than he gets for his year off.

    Looks like it's Rally or Relaxing!

  13. Wow. I'm gonna go ahead and make a wild prediction.
    Jenson Buttons move will go down as one of the worst career moves in F1 history. He's the number 1 driver at currently the number 1 team which just got infused with hundreds of millions of dollars of additional resources and funding and retaining the best brain in the business; Ross Brawn.
    And he leaves....for McLaren? A team now without major manufacturer backing and legendary for it's complete bias towards the number 1 drivers and subjugation of the number 2 drivers. The cars are now basically built around Hamiltons style and he gets the upgrades several races before the teammate. Notice that this year Heiki had a great deal more mechanical and strategical failures than his famous team mate.

    We now know that Button accepted less money, to go to a substantially poorer team, to be number two.

    *head scratch*


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