Turning the Lotus Renault GP story on its head
September 27, 2011 by joesaward
The immediate future of the Lotus brand is about to be settled – and not just in Formula 1. For some months there has been speculation about what will happen with the Lotus Renault GP team with a number of different scenarios being discussed. To begin with one must look back to when Genii Capital, run by Gerard Lopez and several partners, bought the team from the Renault car company, using Renault’s own money, borrowed from Renault’s in-house bank DIAC, to fund the acquisition. This meant that Renault did not have to shut down the operation and saved a lot of money while also being able to get rid of the team quickly, thus ending the embarrassment that it had caused with the Singapore Scandal. Genii had a date by which payments needed to be made but, unable to find a suitable partner, the company took a loan from Russian banker Vladimir Antonov’s Snoras Bank and paid the Renault bill. The team’s sponsorship changed accordingly at the time. To complicate matters while all this was going on Lopez agreed a long-term sponsorship deal with Group Lotus, with Group Lotus CEO Dany Bahar being appointed a board member of the team, which suggested that there was more to the deal than just money. The word was that Bahar had an option to buy Genii’s shares. Later there was talk of a second option that Bahar had acquired from Antonov if Lopez failed to find the money to pay his debts. For a while, therefore, it looked very likely that Group Lotus would take over the team but there were problems with Team Lotus and two legal actions have failed to solve the problem. So even if Group Lotus does buy the team, there will be problems changing the name of the chassis from Renault to Lotus because of Bahar’s previous relationships in the F1 world, which have not all gone swimmingly. Bahar had the money to fund the team thanks to a consortium of Asian banks which agreed in April to loan the group $440 million. This is believed to have been guaranteed by the Malaysian government, which controls Proton, Group Lotus’s parent company. With Bahar’s plans stuck because of the fight over the Lotus name, Genii then started to look for alternatives and concluded that it might be worth asking the French government to help out in order to keep the team with a French flavour, with funding from Government-linked companies such as Renault and Total, with the goal being to relaunch the French motorsport industry, which has been largely moribund for the last decade, since the disastrous Prost GP. This was a good idea as there was also talk of a revived French GP and no fewer than four young French drivers on the way up: Romain Grosjean, Charles Pic, Jules Bianchi and Jean-Eric Vergne. The problem with the idea is that bureaucrats are by nature frightened by politicians and politicians are frightened by the electorate and there is a French Presidential election coming early next year and no-one in the government wants to be seen to investing in motorsport in the run-up to an vote.
The other options for the future of the Lotus name were for Proton to offload Group Lotus from the Proton books, which would help it improve its miserable finances and get rid of the debt load. But who would take over a company with $440 million of debt and a strategy that promises only the possibility of success. There were no guarantees and in the automotive world there is little faith that such a strategy will work. Lots of people have joined up to bang the Group Lotus drum in recent months, but will they still be there if the loans run out? The only likely buyers for the firm were private companies: one option was obviously Tony Fernandes; the other option was Genii itself. The third option was to sell the whole thing to Bahar, and let him try to sort it all out with a management buyout.
Failure would in many respects help the Malaysians because someone else would take the blame for the poor performance of the company over the years. Ironically, there is a certain element of political danger in selling the business to Fernandes because he might, given his record, turn the business around and make it successful – which would not reflect very well on the previous ownership. That may sound unlikely, but he did exactly that with AirAsia and was recently handed a great deal of influence in The national airline MAS, in the hope that he would do the same thing again…
Thus in terms of damage-limitation, Genii is the best bet. Lopez’s risk would be to take on the debts of the firm, but a bigger business plan gives a good salesman a better chance to hook investors. In gambling terms, it would clearly be a case of double-or-quits. With Bahar out of the way, the Lotus name change could go ahead as well…
In that scenario Team Lotus would switch to become Team Caterham Air Asia, runnings cars called Caterhams and Lotus Renault GP would become Team Lotus, running Lotuses.
It is not clear which of these scenarios is the most likely but the matter could be settled by Malaysian politicians in the course of the next few days. The knock-on effects of all of this in F1 is relatively limited, although the identity of the drivers will largely depend on who owns the team.
If Genii buys Group Lotus the links with Russia will remain strong, so Vitaly Petrov’s future would be more secure. If the French government steps in the team would almost certainly employ Romain Grosjean. Bruno Senna is well-connected and can raise money with his name so he is in with a good chance if he can perform well on the track. The problem is that no decision can be made until Robert Kubica has had a chance to test a simulator (and perhaps later a car). He must be accommodated if he can return from his injuries. At the moment no-one knows if this will be possible.
Lopez said in Singapore that he hopes that the team will break even.
“We’re involved in a lot of businesses,” he reported. “This one is one that we hope is going to be break-even at some point in time. It’s not, but it’s not one that needs to make money for us. We make money somewhere else. I think the team that we took over had about 480 people. We saved those jobs and added about 40 jobs to those. Facts speak for themselves. We are investing, we’re adding sponsors. We get on with the things that we have to do. We make the investments that we have to make and at the end of the day we will see – in terms of results – what will be in the future.”
Indeed we will…
The smart money is on Lopez becoming an automobile executive.
Credit: JJOE (joesaward.wordpress.com)
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