Red Bull Racing hold the cards on Renault‘s works team acquisition plans

 

renault

What will Renault do regarding its involvement in Formula One? This has been the question on everyone’s lips for some time.

Well the options for the French manufacturer are simple. Quit Formula One, continue supplying engines only or buy a works team and sell engines to anyone else who wants to buy them.

Renault has contracts with the Red Bull family to supply the Toro Rosso team and Red Bull Racing with F1 engines to the end of 2016. Though whether the French manufacturer – who is third on the all time F1 engine race wins table – wishes to continue being slagged off repeatedly by Christian Horner, Helmut Marko et al. for another season, is questionable

Red Bull Racing have clearly indicated they would be happy to bail out of their engine supply arrangement with Renault which runs to the end of 2016 and have been courting Mercedes recently but so far – to no avail.

However, the Daimler Corporation and the Nissan Group (which owns Renault) announced at the end of July that they were about to invest $500m each in a new production facility for the next generation of premium compact Infinity and Mercedes cars.

Given this joint venture, Mercedes are unlikely to upset Renault by supplying Red Bull Racing with their F1 engines whether in 2016 or from 2017 – unless Renault give them the green light.

Due to Renault’s success in Formula One, it would appear tat to throw away its affiliation with the sport and quit – is for many unthinkable. Yet Carlos Ghosn, who is chairman of the Nissan-Renault alliance, stated in 2010 he saw Renault’s involvement in Formula One as a ‘profit centre’.

This is clearly not the case for Renault at present. They now have revenue from just two engine customers and have to spend more than planned on engine development to try and catch up with Mercedes.

Maybe Mr. Ghosn now sees Renault’s involvement in F1 from a different financial perspective, after all Mercedes clearly view their spend in Formula One as part of their marketing budget for the road cars.

Alain Prost began the speculation the Renault would reconsider owning a works team in an interview he gave to Sky Sports back in June last year. In a rather coded conclusion, he stated:

“You need to analyse and change the situation in terms of organisation and the way you organise yourself. We have four teams but maybe [Renault need to] do something a little bit different. I know what to do, it would be the best, I don’t know if they are going to make it [the changes].”

Earlier this year, Franz Tost fueled the flames of this story by offering Toro Rosso for sale. However, the Toro Rosso team principle admitted following the Hungarian GP that the talks had faded away and revealed, “I assume that they have decided to buy another team.”

The natural home for a re-born Renault F1 works team is obviously Enstone, though Vijay Mallya made what for some – were surprising comments during the recent F1 event in Spa.

“Yesterday was a conversation from their side to update me on the fact no decision [to buy Force India] has been taken, they haven’t made a proposal about the board of Renault.”

Mallya went on to reveal the detailed discussions included the current Force India owners retaining a minority stake in a potential Renault buy-out.

As Joe Saward suggested, this level of disclosure is unusual because F1 bosses tend to keep this kind of detail close to their chests. Therefore Mallya’s revelations to the media may indicate Force India have other suitors who were being publically informed that time for their F1 investment opportunity, may be limited.

Of course, when buying an F1 team it is prudent to discuss the opportunity with more than one party, however, Renault could be being driven away from a deal with Enstone (Lotus) for other financial reasons.

Both Force India and Lotus are short of cash and have debts, so Renault is in the driving seat as they look to strike a deal.

Yet the Lotus debt structure is primarily to the investors behind Genii, and it may well be they are refusing to take a significant haircut to sell the business to Renault.

This is unlike the Marussia situation earlier this year, where suppliers agreed to slash the debt in return for some level of payment. The suppliers were a disparate group of individuals, each concerned they would receive nothing if Marussia went belly up.

Genii investors are however the owners, and may feel they can withstand the pressure to offer a significant cut price sale agreement, which is why Renault have made it known they are talking to Force India.

It appears certain Renault will buy a works team now – one way or the other – but when this will happen is uncertain.

Interestingly it may be the influence of Red Bull Racing which will decide when this deal is done.

TJ13 learned last weekend that Red Bull Racing has a clause in their engine supply agreement that prevents any other team receiving ‘preferential treatment’ from Renault. Milton Keynes clearly believes a Renault buying works team is in breach of that clause, and is confidently expecting to be allowed to do a deal with Mercedes for 2016.

Renault would obviously like to retain the income from Red Bull for one more year, and could well be hoping if they can delay as long as possible buying a works team, Red Bull will run out of options.

So for now the speculation over who and when Renault will buy as a works team, will run and run.

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15 responses to “Red Bull Racing hold the cards on Renault‘s works team acquisition plans

    • We are currently rebuilding so to speak. I’ve only just come back from illness that started back in June and we’ve lost a few regular contributors who could no longer afford to spend so much time on the site or got caught up in personal problems. We’re currently not in the best shape, but we’re trying to rebuild a strong team.

    • I would wager that not only does he have more of an insight into this than this site, but that he knows more than he has actually reported at present

  1. “…Red Bull Racing has a clause in their engine supply agreement that prevents any other team receiving ‘preferential treatment’ from Renault. Milton Keynes clearly believes a Renault buying works team is in breach of that clause, and is confidently expecting to be allowed to do a deal with Mercedes for 2016.”

    I’ve known about that preferential treatment clause with Red Bull for a while. In a way, it makes Red Bull Racing Renault’s “works” team. I would think that Renault would terminate or modify their supply contract with Red Bull if they were to buy a team and turn it into a Renault works team. As of right now, Renault wouldn’t be in breach of that clause because they have bought a team yet. Once they buy a team to turn into a works team, they will be in breach of that clause.

    If Renault buy a team and turn it into a works team, then they can have their own staff in place and have complete say in how things are run/done. Right now, they have to deal with Red Bull’s input, complaints, etc. whether they like it or not if Renault want to advance their Formula 1 project.

    Whether the team that Renault buy will be Lotus or Force India may depend on how each team’s debt is structured, how much financial and/or legal risk Renault would take on when they acquire it as part of the deal.

    The way the financial markets have been recently I am wondering if the Genii inventors might be thinking about putting their money in more secure, less risky investments rather than a Formula 1 team. Also, I think that, at some point, the financial troubles in China will indirectly effect Formula 1 because of all of the world’s financial markets are connected. What is happened there will eventually spread to other regions of the world and there may not be as much disposable income personally and on corporate level to spend on sponsorships, hospitality, etc.

    I think that the joint venture between Mercedes and Nissan is going to be a bad one for Mercedes in the long run. Nissan cars are thought of as not have much horsepower and basically being “grandparent cars” here in the United States. Mercedes did some brand damage to itself and went slumming when it made this deal.

    • I think nobody knows about the link between Nissan and Mercedes. But ask any kid in any country to name some car brands and Mercedes will be mentioned 100%.

      Here you have these bumper stickers: “if I want to drive Mercedes, I call a cab” (taxi’s / cabs are mercedes most of the time. Mercedes hasnt suffered from those stickers…
      😉

  2. One aspect you did not cover is what happens to the Merc/Lotus engine deal if Lotus is acquired by Renault.

    Here are 2 quotes from the press release…

    ” Lotus F1 Team utilizing the Mercedes-Benz Power Unit from the start of the 2015 season until the end of the current Power Unit generation.” So this is a long term deal and not just for 2015. If would be a complex situation for Merc to supply PU to a team that is owned by another manufacturer. Same goes if the acquire Force India.

    “It was strategically important for Mercedes-Benz to continue to supply three customers throughout this generation of Power Unit”. So if they decide to drop Lotus does that open the door for Red Bull and where does that leave Toro Rosso?

    If the on track racing is not entertaining enough, then these off track developments do provide additional entertainment.

    • Given the relation between Mercedes and Renault they will swap the engine deals from Lotus to RBR and vice versa. (After some legal battles between RBR and Renault of course). If Lotus cannot get rid of the Mercedes deal, than you will get a McLaren situation. Hardly any support and engines sealed or taken away by Mercedes after every race with limited data insight.

    • The rumours this weekend were Manor has been having discussions with Merc. Red Bull will have to agree an amicable exit with Renault…

      • @thejudge13

        And Sauber were supposed to be talking to Renault, according to BBC commentary team. Where are Manor going to find the money, and why would Sauber want an inferior PU – (current version).

  3. Mercedes can only supply power units to a maximum of four customer teams. I think that as soon as Red Bull can they will try and work out an agreement with Mercedes once they get the issues with Renault sorted. I think that the divorce will happen soon than later because Renault will buy Lotus or Force India to use as their works team. I think that it will be Lotus. I think that Toro Rosso could end up using a Ferrari power unit once the divorce from Renault happens or possibly using a Honda power unit.

  4. I would like to propose a different approach for Renault. Buy part of a team now/soon, with an agreement to purchase the remainder share before the end of 2016. Then they will not be in breach of contract with RBR.
    Though personally I think their best option is to drop out of F1, to get rid of the negative publicity, and then return in a few years time with a new, hopefully world beating power unit – still want to call it an engine!! Just as they did in 1989 with Williams.

  5. @Jamie: Keep checking back. This site is a good one. I’m working on some new posts that will be ready shortly. Every site goes through it’s peaks and valleys. Lately, Joe’s site doesn’t have any news that I didn’t already know. It’s TJ13 that has the new news and insights.

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