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Mercedes Acquires Brawn GP

Brawn GP - next year Silver Arrows

Brawn GP - next year Silver Arrows

Brawn GP has confirmed a majority acquisition of the team by Mercedes-Benz.  The Stuttgart giant will now control a 75.1 percent share of Brawn – henceforward to be known as Mercedes GP.

A press release on the team’s official website reads as follows: “Mercedes-Benz will enter the Formula One world championship with its own team, beginning with the 2010 season, and Daimler AG and McLaren Group will change their form of co-operation with effect as of 13 November 2009. This was announced by Daimler AG today.  Daimler AG together with Aabar Investments PJSC will take over 75.1% of the Brawn GP team, with Daimler taking 45.1% and Aabar 30%. The rest of the 24.9% will remain with the current stakeholders.”

Aabar Investments PJSC, a public joint stock company listed on the Abu Dhabi Securities Exchange, is the primary shareholder in Daimler AG, with a 9.1% stake in the German company.  Daimler AG is the parent company of Mercedes-Benz Cars. This makes ownership of the team a bit convoluted, as Aabar will own 9.1% of the company that owns 45.1% of the team, in addition to the 30% stake they own in their own name.

The remaining 24.9% stake in the team will be retained by team principal Ross Brawn and chief executive Nick Fry.

As reported in The Guardian, Ross Brawn said of the deal, “We are honoured to be representing such a prestigious brand as Mercedes-Benz in Formula One next year and will be working together to do our best to reward their faith in our team.”

Meanwhile, Ron Dennis, the executive chairman at McLaren, made the following statement via McLaren’s offical website: “This is a win-win situation, for both McLaren and Daimler. Because the engines they produce are very competitive, we’re delighted that Mercedes-Benz has committed to continue not only as an engine supplier but also as a partner of ours until 2015 – and perhaps thereafter. The next few years will be a very exciting time for McLaren, during which period we intend to become an ever-stronger technological and economic force.”

In conjunction with Mercedes’ acquistion of Brawn, the German company will divest their current 40% stake in McLaren.  These shares will revert to McLaren in a phased buy-back over an undisclosed period of time.

As indicated in Ron Dennis’s statement, however, Mercedes will continue to be McLaren’s engine supplier and “partner” until 2015. Under their previous arrangement, it was thought that Mercedes contributed approximately 80 million euros per year to McLaren’s operating budget.  Surely their future “partnership” will not be so lucrative.

With their new acquisition, and their continued involvement with McLaren, Mercedes seems to be bucking the current trend of the manufacturers’ retreat from Formula 1.  However, Dr. Dieter Zetsche, CEO of Daimler AG, has justified their expanded involvement in the sport on fiscal grounds.

As reported in The Telegraph, Zetsche said, “Due to the new Formula 1 environment, we will face the competition in future on the most important motor sports stage with our own Silver Arrow works team.   The background to this decision are the new terms and conditions for Formula.  The ‘Resource Restrictions’ set by FOTA and FIA effectively limit expenditure for the design, construction and running of the racing cars. In addition, there will be a significantly higher income available for a Formula 1 team generated by the commercial rights of the racing series following the signing of the new Concorde Agreement.”

Zetsche indicated that the company intends to reduce their Formula 1 budget to 25% of its current level within the next two years.  This will be an impressive achievement if they’re able to meet their goal.  In the statement quoted above, it seems that they’re counting on two factors to make this feasible: the “resource restrictions,” i.e. budget caps, recently agreed upon by the FIA and FOTA; and a more liberal commercial payout to the teams allowed by the new Concorde Agreement.

Certainly, a return to a privateer-dominated grid will in itself will have the effect of lowering the bar for team expenditures.  Much as an influx of manufacturers created the equivalent of a cold war arms race, with all the major teams increasing their budgets to remain competitive, the withdrawal of the manufacturers should have an inverse effect.  Undoubtedly, the prospect of this is not lost on the brass at Daimler AG.

While all the major players are calling the Brawn acquisition a win-win situation, one wonders where this leaves Jenson Button.  Although the move was not unexpected, it’s clear that a Mercedes badged team will be anxious to feature their German driver, Nico Rosberg (although Rosberg has yet to be officially confirmed for the team).  And Ross Brawn hasn’t exactly been falling all over himself to retain Button next year.  It’s possible that the new center of gravity in the team would be Rosberg.

Meanwhile, additional reports indicate that Mercedes is anxious to see another German pilot, Nick Heidfeld, sit in front of a Mercedes lump next year.  This could mean a seat for “Quick Nick” either at Mercedes GP or McLaren, with Button taking leftovers.

While Button might be troubled by the ascendancy of Rosberg, it now seems that the person who should be most concerned about the Mercedes deal is Kimi Raikkonen.  If the Mercedes and McLaren drives end up being slated for Button and Heidfeld (not necessarily in that order), where does that leave the Finn?  It might be, Hello rally cars, goodbye Formula 1!

Image by David Tolnem, licensed through Creative Commons.

{ 3 comments… add one }
  • Vettel Fan November 18, 2009, 1:25 pm

    Jeez. I think McLaren’s days are over! Brawn will have more money to play with and keep his team alive. I wonder how the livery will be on the next year car? Silver?

  • Craig Scott November 19, 2009, 1:57 pm

    I suspect Mercedes will adopt the traditional Silver Arrows livery. McLaren took a silver color scheme 15 years ago when they began their partnership with Mercedes. They’ll still have Merc engines, but since they’re buying back Merc’s share of the team, they might adopt a new livery in deference to their title sponsor, Vodafone. On second thought, Vodafone’s color is red, and I can’t see McLaren in the same color scheme as Ferrari.

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