A rumor is now circulating through the F1 paddock that French carmaker Renault is considering making a buyback offer to regain controlling interest in their F1 team. As you’ll no doubt recall, last year, in the wake of the scandal surrounding team managers Flavio Briatore and Pat Symonds, and the general economic malaise that was affecting car manufacturers at the time, Renault sold a majority share of the team to Genii Capital, a Luxumbourg-based investment capital firm.
At the end of the 2009 season, Renault’s sale of the team seemed prudent, if not inevitable. Most of the sport’s manufacturer team owners had already skulked away with their tails between their legs. Ford/Jaguar, Honda, Toyota and BMW had already discovered that throwing buckets of euros at the sport doesn’t ensure success, and without race wins participation in Formula 1 becomes difficult to justify as part of a corporate marketing scheme. In fact, if anything, running a losing F1 team merely tarnishes the corporate brand, and at great expense, into the bargain.
Renault finished the 2009 season eighth in the points standings, in a field of 10 teams. Lead driver Fernando Alonso pronounced the car the absolute worst on the grid. After the loss of Briatore and Symonds, the team seemed rudderless, and with the loss of the team’s marquee sponsors, including ING, the team no longer seemed fiscally viable. It was crunch time for Renault. They could either bring in a new management team, and pour fresh capital into the venture, or they could opt out.
In the end, they chose a compromise, by selling a 75% stake in the team. Genii owns the Enstone factory, and Renault continues to supply engines and technology. The sale price was said to be in the sweetheart range, from a buyer’s standpoint.
While both parties to the deal were apparently eager for a name change to take place with the sale (considering the team’s 2009 performance, Renault probably wanted to protect the brand from further damage), Bernie Ecclestone is said to have persuaded them to hold station on that aspect ownership transfer. Ecclestone makes no secret of the fact that he feels F1 needs active manufacturer participation to add luster and commercial relevance to the sport.
But that was then, and this is now. What’s changed in the past year? Perhaps first and foremost, Renault is enjoying a respectable resurgence in performance. This year’s car is better than last year’s, and while lead driver Robert Kubica isn’t contesting for wins, he has been in contention for podiums, and is frequently quicker than the Merecedes cars of Rosberg and Schumacher. In fact, Kubica currently lies seventh in the drivers’ standings, behind the six drivers who pilot the Red Bulls, McLarens and Ferraris. In other words, Renault is currently the leader in the “best of the rest” category. So owning the Renault team no longer looks like a curse.
Secondly, as part of their takeover, Genii apparently agreed to commit a certain level of funding to the development of the team. They never intended to do this solely out of pocket, but instead made assurances that through the acquisition of new sponsors, and some creative commercial and technological partnerships, the team’s treasury would be healthy. According to various stories, this hasn’t gone exactly as planned, although new sponsors (most notably French oil and gas conglomerate Total) have been brought on board, a trend which will presumably continue as long as Kubica can attract TV coverage by nipping at the heels of the F1 pack leaders.
Finally, the economy has stabilized somewhat in Europe (or really hasn’t, depending on which economists you believe), and Renault now sees active participation in the sport as a fiscally viable enterprise. Remember too, the economics of ownership by a manufacturer are rather different from those of a privateer. Ultimately, Genii Captial must justify their participation in the sport on the basis of return on investment. Renault, on the other hand, as long as their board signs off on it, have the luxury of viewing Formula 1 as both a research platform and a marketing vehicle.
My own prediction is that, eventually, Genii Captial will decide that running a privateer team is no bed of roses, especially if Renault starts charging them full retail price for their engines. (Earlier reports indicated that during the first year or two of their partnership with Genii, Renault would be supplying their powerplants at no charge.) If that happens, they might well decide to flip their stake back to the previous owner. And it could work in their favor. If they make a case that they’ve added value to the team during their stewardship, they might make a tidy profit on the deal. It’s the type of transaction that Flavio Briatore would appreciate.