Recent deals for Swiss privateers Sauber and Genii-owned Lotus look to have at least solidified two of F1’s ‘non-premium’ teams – but where do those new investor agreements leave F1 and its financial future?
Earlier in the year, McLaren boss Martin Whitmarsh openly claimed in the FIA press conference in Bahrain that “there are maybe four teams that have financial stability” – instantly implicating the other seven on the grid as being in not such good health.
A Resource Restriction Agreement (RRA) has been in place to control costs since 2010, but few believe it has legal legs if anyone were to challenge any team suspected of not playing the game.
Indeed, there has been much talk this year about discord in the ranks when it comes to cutting costs.
The teams are starting to realise they can’t rely on each other. Understandably. This is a competitive environment, and who wouldn’t want to spend a few extra dollars to compete, especially if they believe others are doing so already.
So while cost-cutting remains a priority, it is not moving forward fast enough for some of the smaller teams.
You can place a pretty confident bet that all seven of those squads alluded to by Whitmarsh (which means all except Ferrari, McLaren, Mercedes and Red Bull) are constantly on the look out for investors.
And so two, it appears, have now found their gold.
Lotus may be up there challenging for wins and even a glimpse of a championship, but they are still only on the grid thanks to the investment fund from Genii Capital.
Led by Luxembourg-based entrepreneur Gerard Lopez, Genii stepped in when Renault pulled out, saving hundreds of jobs in Enstone. It was a gamble. And the long-term plan, as with any investment, was to build it, make it stand alone, then sell.
Securing the Lotus name (the team is only sponsored by Lotus, not owned) was a masterstroke, as was signing Kimi Raikkonen. And with the engineering nous at Enstone, they have done what they wanted to achieve.
Now, 35 per cent is expected to go to a conglomerate (confusingly known as Infinity Racing) comprising investors from the US and Middle East.
At Sauber, meanwhile, it’s the Russians moving in – but that’s a different kind of deal, with no ownership changing hands. And it came when the team was apparently very close to the limit.
In mid-July, Peter Sauber admitted he was struggling to pay supplier invoices (and later admitted to bailing the team out from his own pocket, as he has done on several other occasions).
But he is a survivor. He survived in the early days when others fell, he survived when BMW pulled the plug on a partnership at short notice in 2009, and he survived when Mercedes stole his partner of 15 years, Petronas, in 2010.
And it appears he has survived again, at least for now.
The deal, with three Russian companies including the National Institute of Aviation Technologies, is believed to deliver enough cash to clear current debts but also to put the team on a good future footing.
But the key to both the Sauber and Lotus deals is more than just the financial investment; it’s the investment in technological development.
The Sauber deal mentions “opening up new perspectives and revenue streams by commercialising jointly developed technologies” while Lotus says its investors offer “technological expertise and global reach.”
Just as McLaren and, to a lesser extent, Williams have proven, F1 is the perfect base for developing technological expertise and feeding it in to other fields (something of a no brainer really).
That now seems to be the acknowledged solution to long-term survival for teams – particularly now the F1 business itself has become a rival in the sponsor procurement business.
It is surprising that FOM has really only recently sat up and opened its eyes to group sponsorship and it now offers brands an alternative option in the partnership matrix.
The front-running teams can deliver exposure and premium experiential elements and the F1 group guarantees exposure (because they control TV) and offers many different experiential options – so suddenly smaller teams seem less enticing.
Sponsors tempted with small team investments in the past – remember Eddie Jordan luring both Coca-Cola (with 7-Up) and Mastercard onto the Jordan? – are now considering bigger priced but better offers, or looking elsewhere.
So it seems the smaller teams need to turn to their own USP – technical expertise – when it comes to balancing the books.
If the Lotus and Sauber saviour deals deliver what they promise, then five allegedly ‘unstable' teams remain.
The RRA supposedly extends to 2017 but there is little sign of stability in its operation - Red Bull pulled out of FOTA because of it and the FIA don’t want to include it in future regulations – and it’s upper limit does little to help the smaller teams anyway.
At that Bahrain press conference, Whitmarsh warned: “When the emergency happens and teams start to fail, it’s too late to react and I think that will go like dominoes.”
Fundamentally, F1 needs to find a cost control solution.
But in the meantime, someone, somewhere may need to lend a helping hand to some of the other teams in the lower grid before it’s too late.
F1’s ringmaster Bernie Ecclestone knows that all too well. He’s seen it before. And he’s done it before.
There is no doubt he will have had an involvement in how the recent deals for Lotus and Sauber went down - but whether there are another five deals in his pocket, well that’s a tough ask even for him...