There have been some worried noises coming out of Renault staff in recent weeks and delving around it’s not hard to see why. The staff have had to take a pay cut, they have acknowledged that there will be a round of redundancies and the title sponsor, Dutch banking and insurance group ING is laying off 7,000 people.
Although the sponsorship has been brilliantly effective for ING and has been exploited very well by its marketing team, it is hard to see how that deal can be renewed when it expires at the end of this season. That could leave Renault looking for a new title sponsor in a super tough environment.
And find a sponsor it must because the Renault parent company is living a nightmare at the moment. At the peak of the business cycle in July 2007 the Renault share price was 120 euros per share, valuing the company at €34 billion. In September 2008 it had fallen to €57 per share and today the share price stands at just €14, valuing the company at just €4 billion. In other words it has lost virtually 90% of its value in 18 months or so.
Last week the French government weighed in with a €6 billion bailout for the French car industry, after a meeting with Renault chairman and CEO Carlos Ghosn, who had warned them that the European car industry was about to fall off a cliff.
Ghosn said yesterday that “It may take more than seven years for car sales to return to 2007 levels.”
Against that backdrop, the company has to be thinking of its F1 programme with the same affection as Honda had for theirs. The cost saving package agreed before Christmas was vital, but given that Renault’s estimated spend on F1 was around €300 million last year, you can see that FOTA and the FIA are going to have to cut the costs of competing a bit more seriously still if Renault are to have any chance of carrying on as a competitor in 2010. Hence the rumours about the customer engine deals not carrying on next year. And hence the reason Alonso has done his Ferrari deal, with a potential 2010 start date.
I’m one of life’s optimists, not at all partial to the doom-mongers, who are having such a field day at the moment. But it’s not hard to see where this story is headed.
And then what? I don’t think that the team would be lost to the sport. Seasoned F1 watchers expect veteran Renault F1 boss Flavio Briatore to pick up the team if Renault pull out. The model the FIA has in mind will make the future viable for independents operating on a budget of around £50 million per year so there is plenty to play for there. And knowing Flavio, he’d be able to sell it on again once the business cycle starts picking up. Let’s not forget that the last time Renault pulled out, in 1997, Flavio took on the customer engine supply business through his Supertec concern, which supplied engines to Williams.
Let’s hope we are wrong, but the numbers are definitely right and very worrying.