Daimler, the parent company of Mercedes Benz has today announced a £1.1 billion loss for the first quarter of 2009. Last year in the same period it made a profit of £1 billion.
This frightening result is partly as a result of writing off a large sum from its failed investment in Chrysler. But it is also because sales are down 34% and the outlook for the rest of the year is bleak.
And the scary bit from the point of view of the company’s involvement in F1 is that it is now committed to slashing costs. “We want to limit our cashflow to the absolute minimum,” said chief financial officer Bodo Uebber.
According to the Financial Times, Daimler has set a target of slashing £3.6 billion this year alone. Workers’ hours and pay are being cut back.
There have been noises coming out of Germany in the last few days questioning Mercedes’ involvement in F1 and suggesting that if the FIA were to punish the team heavily tomorrow at the FIA world council hearing, they might follow Honda and quit the sport.
Whatever some people might say about Max Mosley wanting the manufacturers to leave the sport, it would be foolhardy at a time like this for F1 to seek to lose any team or major supporter.
The feeling is that McLaren has been seen to have done enough to satisfy the FIA that it has reacted to the events of Melbourne and of the Ferrari dossier case 18 months ago and made real, deep and long lasting change to the way it goes about its business. It has changed its governance, replaced the chairman, issued an apology from the driver, Lewis Hamilton and written a letter pleading guilty to all the charges.
A loss of 30 points or a possible suspended two race ban seem the likely outcome tomorrow.
Meanwhile Ferrari seems to be the team shaping up to make threats about leaving F1. Its president Luca di Montezemolo made a flying visit to Bahrain and met with other FOTA members and with Bernie Ecclestone and made some suggestions to the Italian media that Ferrari is not interested in F1 controlled by a £30 million budget cap, nor by standard engines.
Although it has a seat on the world council, Ferrari was not planning to attend tomorrow’s extraordinary meeting because it had been called to hear the McLaren case. But as it seems likely that Max Mosley will use the occasion to vote through the budget cap and rules for 2010, Ferrari is reviewing that decision.
Everyone goes on about the FIA and Ferrari being hand in glove, but in 20 years in the sport I have never seen them as far apart as they are now.
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If they have to slash costs surely it would be cheaper to axe the DTM project as thoses cars are still very expensive and they have about 8 in the championship along wiht 8 drivers. Would RD or MO buy the 40% back from Mercedes if they decided to pull out??
other thana 40% stake in the team they only supply engines so surely a team of McLarens standing would still continue in some form. It also doesnt make sense for the FIA to let/make Mercedes pull out when they supply 6 cars with power plants
If McLaren want light punishment, then public relations backpedalling is not the answer – removal of the rot is. By their own admission, McLaren have been caught cheating twice in just three years – and in both instances have tried to cover up the cheating after they were caught. Neither event could be painted as simple bending of the rules – intellectual property theft and lying to the stewards even after your actions have caused a rival to be unfairly punished for something they didn’t do are as blatant as it is possible to get. There seems little question that there is a culture at McLaren that has caused its employees to believe cheating is acceptable behaviour.
Instead of getting rid of the rot though, what we have so far is a public relations damage control exercise from Hamilton, a scapegoat firing of Ryan, an insistence that Dennis’ departure had nothing to do with the affair , and still to date no acknowledgement that anybody except Ryan and Hamilton knew of the cheating. I don’t think anybody outside McLaren truly believes a team of this caliber didn’t discuss their plan of action at all either before or after they were first called to the stewards, nor before their second call to discuss the matter in front of the stewards.
So – what’s more important to F1? Mercedes presence in the sport even if that’s via a team that repeatedly cheats and then doesn’t take action against those responsible for the cheating? Or a fair sport where cheaters are not tolerated? Me, I’d much rather see a fair sport – particularly given that Mercedes are unlikely to see value in remaining involved anyway unless they’re dominating, given their financial situation.
If McLaren want to make right on this situation, they need to do a few things pronto (and if Mercedes are concerned about their image, they should be insisting their partner takes appropriate action rather than trying to bury their heads in the sand):
* Honestly disclose who knew of Ryan and Hamilton’s lying to the stewards in advance of either the first or second instance.
* Immediately and permanently dismiss every individual who was not directly ordered by a superior to cover up the affair, and place any team member who was simply following orders on warning that if they don’t blow the whistle in the future, their own jobs will be at risk.
* If Dennis’ departure is somehow supposed to make up for the cheating (implying that he knew of the cheating and/or cover-up), then he should be publicly named and shamed, not allowed to insist he left of his own volition to pursue a favored opportunity. Why should his treatment be any different to Ryan’s if he was involved, and if he wasn’t even involved then why should his departure lessen McLaren’s punishment one iota?
James, couldn’t you have chopped knoxploration’s comment? It’s almost a blog in itself, and I have to admit I’ve not got the time or inclination to read it all…
You didn’t miss anything.
knoxploration gave a very accurate analysis of an extremely dishonest and unscrupulous team
I think that this blog is excellent, with many informed and interesting comment(s). Which may mean that sometimes various comments are…voluminous.
I was rather hoping that this dynamics of this blog wouldn’t expand to the point scoring / knit picking amongst contributors that sadly permeates other forums.
Comments as in the above create the crack, by which general discourse amongst contributors may fall to the lowest common denominator and then lead to abuse etc.
Let’s just focus on motor racing issues, and the comment(s) in itself, rather than directly criticise the nature or form of the contributor’s comment, and the contributor please.
I haven’t have a feeling either way about his post, it’s an opinion just like everyone elses.
I’m glad he was allowed to voice it though, just because someone has a different viewpoint from your own does not mean it is not valid.
knoxploration has hit the nail on the head.
Incidentally, everyone seems to think Lewis has done his apologising, yet I’m sure in his apology speech he re-iterated that only he and Dave Ryan knew what was said to the stewards, yet the now infamous BBC interview suggests that is far from the case even without considering that they’ll have all discussed it in a de-briefing.
So I’m waiting for Hamilton to apologies for telling fibs in his apology speech, hence I feel a race ban for his side of the team (and of team points) would be a fair and just outcome today.
@The Durrant:
It’s worth the read, unless you’re a Hamilton or McLaren fan in which case the home truths may hurt a tad.
“Mercedes are unlikely to see value in remaining involved anyway unless they’re dominating” – um, what powerplant is in the cars at the top of both the driver & constructor’s championships at the moment?
One which is not branded on the cars, and which they have stated no intention to brand as such.
Yes, I understand your point – but how much coverage does Brawn GP winning a race get for Mercedes? Very, very little compared to Vodafone McLaren Mercedes winning, because their name’s not right there in the title.
The only trouble with making threats is that your bluff may someday be called.
I get the impression that Max would risk the loss of Ferrari if it allowed him to get his own way where otherwise he would not.
On the other hand, look at the lengths that Max and Bernie went to in order to get Ferrari to sign up to F1 until 2012 when the previous Concorde agreement ran out a few years ago. By doing this it scuppered the plans of all the other manufacturers who at the time were threatening to pull out of F1 and start their own series because they knew that for a grand prix series to be considered the pinnacle of motorsport it had to involve Ferrari.
Remember that Ferrari was foundered as a grand prix team and started to sell cars only as a means of funding its racing activities. They weren’t a manufacturer like Toyota who were successful at selling cars and then decided to go racing one day.
The Ferrari team is quite possibly the closest team or player in any sport in the world that comes close to being bigger than the sport itself. If a team won the championship with Ferrari sitting on the sidelines, would it really be considered as great an achievement as winning the championship by beating Ferrari on the road? I don’t think it would. Max and Bernie know this and it’s why Ferrari’s threats of pulling out of the sport down the years have been taken so seriously.
Max may want the manufacturers to leave the sport but I very much doubt that he would class Ferrari as a manufacturer. I think they’ll meet in the middle over the budget cap and the single engine supplier idea will disappear pretty quickly.
Listen, this is classic Max and Bernie
Divide and Rule – we have seen it for near 30 years from Bernie and Max has been at it for almost as long
Ferrari will not leave F1 – but the £30M budget cap will not exist either.
You cannot police it and it will force the heritage of the sport to disappear. Anything you cannot audit will be a nest of vipers
I think what will happen instead is more functional based limitations like the way Testing has been limited and number of Engines and Gearboxes is limited
We will probably see restrictions on more visible items – not just on the car but also at the Team’s HQ’s, like less Wind Tunnel use and various number of equipment.
knoxploration, i agree with most of what you say, however i would like to expand on it somewhat. If all this is true then why weren’t the other teams, found to be doing the same thing punished in the same way? Renault admitted stealing information from McLaren..no punishment, in Melbourne Toyota consiously designed an illegal wing, tried to deceive the stewards in a premeditated way but were not accused of bringing the sport into disrepute, were not witch hunted, did not have to sack everyone involved…there are many examples of blatant McLaren bashing by the FIA, how sad is it that a personal feud between Max and Ron has lead to Ron being driven out of F1 by a deviant like Max by bullying and bashing Rons’ business….the sooner Max leaves the FIA the better I say!
What McLaren did, which I think was particularly galling, was sit quietly on the sidelines whilst Toyota / Trulli suffered a penalty, and at no point did McLaren seem to mind or remedy the injustice.
I agree that on oft occassions other teams have been caught cheating. And on oft occassions, McLaren’s penalty has been disproportionately severe, e.g. vis a vis Renault and stolen IP. However in this latest instance McLaren sat idly by, whilst another wholly innocent team was punished. That is the distinguishing feature of this case and what most disappoints me re McLaren’s conduct.
A suspended sentence looks like the most likely outcome.
Question – were McLaren to receive another insane fine of say 200 million euros – who is it that actually gets this cash?
Furthermore, is the fine legally payable by McLaren?
I don’t understand how essentially lying to a “referee” can land you an enourmous cash fine. It’s like fining Christiano Ronaldo 10 million for being a diving fairy.
Max has got to let f1 run its course. A budget cap is one thing but 30million pounds is ridiculous. F1 without Ferrari or Mclaren is not f1. It is like getting rid of Arsenal and Man United from the Premier League.
I have no doubt in my mind Bernie won’t let Ferrari leave. Both Bernie, Max know that there is no signed Concorde agreement and if the teams want to they can leave as see fit. Without any agreement the FIA would go broke and Bernie would be in trouble as BBC and all the tracks would be suing the pants off him. (I would suggest there would be clauses in contracts that would state the presence of FERRARI and MCLAREN given their status and attractions to a Grand Prix.) F1 and Ferrari go hand in hand.
If the FIA want to slash cost so badly they can do several things before a budget cap. Standardise parts across the board, this will reduce cost significantly. Engines are standards, standards rims, standard building materials, (carbon fibre, and no exotic materials, standard gearbox, same wheels across the board, etc etc. They can standardise more then 50% of the car and still remain competitive. The FIA doesn’t understand there is a human toll in all this. I hope max and Bernie disappears. These new rules are crap and the FIA are the ones to blame.
knoxploration said: “I don’t think anybody outside McLaren truly believes a team of this caliber didn’t discuss their plan of action at all either before or after they were first called to the stewards”
Do you not think that, if McL had discussed lying to the stewards beforehand, wouldn’t they have discussed the issue of Hamilton having told the media that the team instructed him to let Trulli past?
maybe lewis forgot? like he forgot that the stolen data existed? 😛
knoxploration – Hyperbole.
Who outside of ‘Ryan and Hamilton knew of the cheating.’
Specifics please not opinion (that means evidence). And remember they have expensive lawyers.
Er definitely Martin Whitmarsh…
There is maassive evidence to the fact that the lie was wider than Lewis and Ryan
Mr. Tom Johnson wrote :
“Specifics please not opinion (that means evidence).”
Here’s a bit of circumstantial evidence for you :
1) Ron Dennis’ departure.
2) The absence of any comments by Ryan, most likely because he has been silenced
by the contractual agreements he signed upon
his departure.
And then Mr. Johnson went on to make the proclamation : “And remember they have expensive lawyers.”
Wealthy companies which engage in subterfuge usually do have such attorneys ( barristers ), because they know they will need those them. However, it’s unlikely those expensive lawyers can change facts, which is what McLaren will need in order to avoid any penalty.
Mr. Johnson, your arguments are far from compelling, and I’m trying to be charitable.
you left out the bit where Bodo Uebber said leaving F1 “would not save a cent” because they have long term contracts
Knoxploration :
Your comment is very well written and spot-on.
My compliments on an accurate and succinct
summation.
F1 doesn’t need Mercedes, nor does it need McLaren. What F1 needs is a cleansing, similar to that which has been in progress in the world of professional cycling for
some years.
penalties are imposed as a deterrent so one will not violate rules. a penalty being heavy or light is subjective. When mclaren was penalised 100 million for spygate, it did not deter them from cheating again, therefore that penalty was too light for them. I hope he FIA will impose a proper and just penalty this time that would clearly send the message that cheating is unacceptable in f1
To knoxploration and jed. You make your points well but miss the point that cheating IS acceptable in F1 provided you are not McLaren. Renault receiving data. And while we’re at it, we could argue McLaren were receiving – they did not organise a burglary at Maranello to nick the computers for example! There are numerous other examples (Benetton, Ferrari) so sure, McLaren were cheating – but so do the rest of them. And it still comes down to Max’s loathing of Ron. Well OK Max, you’ve won. Ron has gone so let it drop now.
And while we’re talking about cost saving, how about the FIA moving their offices out to one of those nice business parks by the airport and saving the money from the rent/business rates, etc on their lovely Place de la Concorde offices?
James, I have been reading your Blog since couple of months now and I always look forward to see some new insights from you. They are very interesting.
Couple of thoughts from me. I have been watching F1 for around 10 years now and I have been following Ferrari all these years. Many of my friends were asking the same question – why do I find F1 interesting as for them it was too boring. I took time to give them better perspective on what this sport is about and talked different teams, drivers, rules and challenges that all parties have to overcome. Many of my friends became faithful fans of F1 afterwords and we have great time watching F1 races together.
This year everything changed – nobody can understand anything. There is no clarity about rules and there is no trust that the Governing Body is able to come on top and judge things fairly. This is the first time during my short F1 career that I no longer find it exciting watching F1. There is no clarity about rules, there is no consistency and there is a general feeling that the entire show is being manipulated. I am afraid that many people feel this way and this is surely going to damage F1.
The reason I am writing this is because I think that Luca is absolutely right – what Ferrari is going to do in F1 with standard (maybe not Ferrari) engines, standard electronics, standard aero? Company exists to compete at the highest level, to define what is possible and what is not, to show where the limits are and to design the future of technology for racing. This is all about Ferrari’s equity and it is always going to be like this. There many other teams who might think this way, but I trust F1 is becoming pure business these days and is being manipulated by income more than anything. What if chasing this goal is going to kill to spirit and therefore the possibility to continue the business? I am a businessman and I understand all rules, but I also know that only a strong equity is going to survive and I need to say that F1 is starting to lose it’s equity.
Luca is right and I think there is no place for Ferrari in a sport with all standard….we have other series where we have this happening, but F1 should always be the sport with supreme technical and human potential clearly exhibited.
Alexander. Many thanks for your comment. I sense that a number of people are becoming rather weary of the polemics around the sport and have become rather cynical about ‘manipulation’, as you put it. Let’s leave aside the presentation of the issue and the tactics being used for a second and look at the core subject here, which is the revision of the business model of F1. The costs have got out of control, the grid is not full and there is a crisis in the motor industry. The costs were driven up by the manufacturers, like Honda, who targetted other team’s employees and doubled their wages. It’s unsustainable.
You race with whatever budget you have, if its £10 million or £100 million. F1 is well enough established now as a sport and an entertainment that it can adjust its scale quite easily and still look like a good show. To many it seems incredible that budgets could be cut to £30 million, but in the mid 1990s that was the budget of the leading teams, why should it cost five times more today?
I think £50 million is more like it as that is low enough still to entice some new teams but to keep the existing ones happy. Force India operates on not much more than that and it’s a proper team with proper cars, only a second and a half off the pace. Ferrari, like all the well established top teams have the most to lose from this level of change. And they argue that the crucial element which must stay is research, because this makes the whole enterprise make sense in terms of the link to the road cars. But the money has to be brought under control.
It’s a tough negotiation and Max always takes a strong position. Ferrari are unhappy because they feel that as the only team that has been in the sport since the start, they are part of it’s DNA and have a protective feeling for it. I’m sorry that you do not find the races exciting, as I think this year the cars are able to race each other better than they have been for years.
Good reply James.
I disagree with 2 things though, first is the cost I think 60-100 million would be more reasonable for the first year, scaling down to the 50 number you said. For the top teams to have to cut so much out so quickly, it seems a bit unfair on them, compared to a scratch built team coming in, and planning everyone on that budget from the get go.
Second thing, about the racing. Bahrain was dissappointing in my opinion. There were more overtakes in 06 or 07 I think. The double deck diffusers + KERS can help overtake (if a car running these is doing the overtaking) but can also hinder it. With KERS, once everyone has it, it will be virtually a non factor. And the aero changes seem to have been nullified to an extent by the double deck diffusers.
Thirdly, both sets of tyres aren’t properly matched to the track. You have a lap or two to make a move, before you have to settle for saving fuel behind them, because it will screw the tyres in the dirty air. And Bahrain doesn’t even have super fast corners. It will be worse at Spain and Silverstone.
It’s “easier” to follow but even last Sunday, we had multiple cars at the front going into fuel saving mode instead of attempting an overtaking move. Bit dissappointing. I think the tyres are the biggest factor, but the reintroduction of ground effects with the diffusers doesn’t help either. And for KERS, I don’t think we have seen 1 KERS car overtake another all season in the dry.
Why does F1 needs new teams? I think they should use a relegation system where as the last three teams should be be relegated to GP2, and the first, second, and third teams from GP2 should be promoted to F1. There you are problem solved.
But how will the current big sprending teams deal with long term contracts from which they cannopt resile? I’m thinking of engines, drivers, staff etc. Also how will set up costs of new teams be approached?
Are McLaren not a profit making company? As such surely Mercedes 40% investment int them is probably the only profit making part of their business at them moment!
I would suggest that there are plenty of other racing series that Ferrari could contend – a couple of years out (maybe supplying engines only?)
Full Ferrari Le Mans campaign, anyone?
Full Ferrari Le Mans campaign with Schumi driving?!?!?!?
Does anyone know exactly how much Mercedes spends on Mclaren each year? and any details of engine supplies to other teams, do they make any money off this?
Thank you for responding. It is not that I do not like racing this year, but when I try to understand what and why is happening, I stop liking it.
We have cars with no DDD and no KERS, we have cars with DDD and KERS and we have cars with no DDD and with KERS. try explaining this to a person that is just starting his F1 venture:-)
Remember comments from Alonso about tires? I think that many things about F1 and a lot of insights are still a distant perspective for me, but for the first time I start thinking that maybe FIA and FOM doesn’t not know where F1 is heading and lost control over it.
But I do agree with you on many points and many things has to be addressed. Cost is super important, but again…Flavio gave some hints oh how cost is being reduced when he talked KERS and DDD. That alone is worth 20 Million….
2 of 4 races were interesting due to the rain effect – same as last year, a lot of action. First race is always interesting because we wait too long to see racing….
Bahrain had superb first part of it, so many things happening….but last past was all but interesting, nothing happened, no overtaking.
I try to look at F1 as a big picture and overall it is a great show, but….let’s see how it goes. Rules must be clear and I can’t imagine Ferrari car with not a Ferrari engine. Can you?
There is an incredibly simple and just solution to the Melbourne nonsense and that is to punish all those who brought the sport into disrepute by lying to officials, and thus broke the WMSC code. That would meant he culprits losing their jobs. In fact Ryan has done already, which is sad but appropriate in the circumstances. The question then is: why has the other frontline liar not lost his job, as well as anyone one else who lied?
Maybe I am guilty of wrong thinking in terms of 21st century morality but I am at a loss to know what would be wrong with the above. Is the argument against punishment for busting the Sporting Code that it would be unfair? Perhaps you could construe it as a form of unfairness, being punished for something you’ve done and should have known better than doing, though personally I’d disagree. We do live in an unfair world, a world in which for example millions, nay billions of people in the third world are unfairly disadvantaged to a far greater degree all their lives. Such an argument precludes anyone ever being punished for any form of wrongdoing.
Simple justice also has the merit that it doesn’t punish many hundreds of others who are in no way responsible for this fiasco, and it is a mighty deterrent to anyone else stupid enough to contemplate lying to officials in the future, which is as it should be. Moreover it wouldn’t damage the sport, indeed quite the opposite.
Perhaps the main argument against simple justice is that without Boy Blunder at the wheel the whole sport would collapse in ruins. If that’s the case I can only beg to differ. No single individual is bigger than the sport and if they are deemed to be something is very wrong somewhere.
Further to my comments above I see that McLaren have got away with it, setting a precedent for the future governance of the sport, and unfortunately, a poor one. Has the era of the professional foul in F1 dawned already as a consequence?
A 34% overall drop in sales is not bad compared to most of the other MM’s (Motor Manufacturer’s)
I am aware that my old employer (a specialised component supplier) is more like 60% down and many of my old customers are 40-50-% down, some are in administration, some on extended holiday and some gone.
It is always to be expected that the top part of the market suffers less in any recession, simply because most of it’s customers do not feel the pinch nearly as much (if at all) compared to the vast middle classes and SME’s (Small and/or Medium Enterprises) that make up the majority of the market. If the bottom end of the market suffers it does not hit profits so baldy, simply because there is very little profit in low end cars to start with anyway.
However we have yet to see the next wave of catastrophe hit the motor industry. As one outfit fails, it does not pay it’s bills and that can easily affect it’s suppliers. In the motor industry most components are custom designed and not interchangeable, in fact one always strives to give the customer something that one’s competitors can’t, in terms of design, technology, materials, delivery, service etc. often devoting large amounts of money and effort to keeping other suppliers out. Thus it is most likely that if a supplier goes bust this will affect the MM’s production. One customer defaulting can bring down a chain of suppliers. Most motor industry component suppliers will probably have only a few maybe only one or two customers from whom most of their income derives. With the major MM’s allowing their suppliers to make only 5% or less profit (with open book accounting) and requiring ongoing annual reductions and savings it can be seen that many suppliers live on a knife edge. To make money you need serious volume, as soon as the volume drops you are in trouble, no profit and a warehouse full of product (or components or materials) only one customer can buy.
Major car dealers going bust will affect sales even more, but still Mercedes are one of those who will suffer least.
If the United States government gave the people of the United States the ‘stimulus package’ instead of the big corporations, the big corporations, like Daimler, would be stimulated as well. Every United States citizen that registers to vote on or before 30 June 2009 should be sent a check for $250,000. This package would stimulate the economy, stimulate the 2010 census and stimulate the democratic voting process; i.e. a win-win-win for everyone!
Personally, I’m interested in a Maserati.
Compared to manufacturers of smaller cars, Mercedes also draws very little profit from the current car-scrap bonus scheme in Germany, which favours smaller cars – and Germany is still Mercedes’ largest market.
Besides, when you compare a Mercedes of the early 1980s and one now, you will find a big difference between those thirty years ago, and those now. They felt like Mercedes back then. Nowadays, you might as well buy an Audi, or even a Skoda.
Like always the big teams like Mercedes get special treatment, as the news broke today that the 3 race suspension has been lifted. It always seems when Mercedes or Ferrari are involved they just get a little slap on wrist and set free. The full story on the race supesension being lifted can be found at http://www.paddockreport.com
Mercedes should drop McLaren and sellout, then back Brawn GP as it’s works team. They already supply the engines and the team look like world beaters this year, there is immediate advertising space on the cars available and advertising worth right now is big value.
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