Losing F1 teams is not good for most paddock folk. Even their rivals whio have one less competitor to battle with for constructors money, suffer when a Formula One team goes to the wall.
The fallout from Caterham and Marussia’s woes in 2014, was that suppliers have reduced their credit offerings and in some cases insisted on cash up front from the smaller teams before they are prepared to begin subcontracted work.
Shifting cash flow forward 90 days is a huge undertaking for an operation that spends even $70-90m a year. Particularly when the funding support from FOM for entrance and prize money is paid in equal instalments between March and November each year.
Lotus has been the latest team to suffer from cash flow problems. Unlike Force India they brought their 2015 car to the grid early in the season, but appear to now be paying the price.
A winding up petition was lodged 2 weeks ago in the High Court by a creditor who will be owed monies substantially beyond the credit agreement period.
The hearing has now been adjourned and this creditor has been satisfied according to Lotus.
However, there are several other unsatisfied judgements for payment against Enstone for monies varying from £1571 to £29,672 according to Autosport.
This numbers are not huge, and if the team cuts its cloth accordingly, Lotus should be able to satisfy their creditors in full by the end of the summer recess.
The fact that creditors are petitioning for payment of an F1 team when the sums are even less than £100,000 just demonstrates the nervousness amongst subcontractors of the industry that there is sufficient funds to pay for their services rendered.
If Lotus were getting 90 days credit terms they are doing better than many UK businesses – quite often 30 days is the norm with 60 days being very good. However, you also find that many businesses will push the boundaries as far as they can.
The sums may seem small but it depends on the size of the business which is owed – smaller businesses may themselves be on 30 days or even pro-forma so their cash flow can be messed up and they can be in danger themselves.
This will, however, not be a team management thing, it will be the accountants who are playing these games, possibly in conjunction with the owner.
What I guess this does highlight is that it isn’t just the jobs of the team employees who are in danger – I wonder how many of Marussia and Caterhams subcontractors had to shed jobs or even close due to the amount they lost, similarly for Force India who are known as bad payers. It is regularly stated that F1 supports many thousands of UK jobs outside of the teams themselves and they are dependent on the teams paying on time and in full.
It’s not just the size of the business, but also the industry. Different industries have different standards or accepted norms. I don’t know what the typical thing in F1 is, but I would guess given the nature of F1, with money coming from FOM, owners, sponsors, at various fixed intervals or whatever, the payment terms tend to be longer in order to accommodate. The suppliers may not particularly like it, but sometimes you need to accept terms that aren’t great if you want to have a shot at all in a particular market.
Of course this is all good as long as the terms are met.
In my line of business I have to accept 90 days on a regular basis, it’s just a fact of life.
How many millions do CVC/Dwarf make out of the interest they make from witholding the upfront money they receive from advertisers, circuit owners and tv companies, before passing onto the pittance to the teams? I wonder if that interest is added to the profits of F1 or just disappears into trust funds and Swiss bank accounts? Sepp Blatter and his mates are rank amateurs in comparison.
Interest on up front money? Ha ha ha! Good one. This money is from the what the teams actually earned the year before. That is the only reason Marussia/Manor came back this year. They were owed several million, but could not collect unless they ran this season.
If an F1 team goes under and cannot make the grid the following year, regardless of where they finished in the CC, their winnings get divided up.
You miss the point that you then go on to make in your own post.
Silly Phil, I missed nothing.
I was not only agreeing with Gregor, I was further pointing out how ridiculously in favor of FOM and the larger teams the payment system is.