Formula 1 Manufacturers in crisis – While containment had already caused a drastic drop in the number of cars sold, the economic crisis that has followed the health crisis will plunge manufacturers into turmoil for many months to come.
Renault is in an even worse position than the others. Even before the crises, the old management board was already paying for the jolts of the Ghosn affair, and had to manage profits in free fall, while at the same time, the alliance with Nissan was surrounded by uncertainty.
Rumours are now circulating that Renault have had some talks with an interested party regarding selling the F1 team.
The coronavirus crisis has thus ended up plunging Renault into crisis (“Avis de tempête” was the title of Le Figaro). According to information from Le Canard Enchaîné, the group should find 2 billion in savings quickly. The savings plan in preparation includes the closure of four factories in France, including a recent one in Dieppe, as well as the abandonment of several models (Scénic, Mégane, Espace …).
TJ13 reported this breaking story just a few days ago, and that Daniel Ricciardo had likely considered this crisis looming in his decision to leave for McLaren. MORE DETAILS ON THIS HERE
Renault would also have to obtain a state-guaranteed loan of several billion euros (probably 5) to enable it to survive.
However, the conditions attached to this loan will have to be examined. The State is a 15% shareholder in Renault and the Prime Minister has already assured that he would be “uncompromising” with the company. One can imagine that the government will do everything to save as many jobs in France as possible. But what about the F1 project? Will it also be called into question?
If the speeches promise to be reassuring for the moment at Renault, one can question whether the termination of the F1 project would not be a possible solution based on three main factors in the eyes of Renault’s Board of Directors.
The first is of course the need to make savings. Not counting its engine programme, the F1 project swallows up nearly 200 million euros annually. 200 million a year, i.e. more than 15% of the savings to be found.
The second reason would be sporting: since its return to F1, Renault has been making slow progress and has not lived up to its ambition of aiming for the podium in 2019. Worse, last season saw a setback, as Renault lost fourth place in the manufacturers’ standings to McLaren. And the short 2020 season does not look radically different with the expected breakthrough of Racing Point.
Add to that the fact that Renault has lost its only engine customer, McLaren, to Mercedes – and Renault’s V6 will have less feedback and data to build on. Withdrawing from F1 would therefore be easier.
Finally, the third reason would be media-related: when thousands of workers could lose their jobs, how can public opinion justify continuing to spend 200 million euros a year?
However Cyril Abiteboul has some arguments to put forward to Renault’s Board of Directors. First of all, the 2022 regulation, in terms of performance, should help to level out performance between the teams. Progress will therefore be very likely. Performance is already there in terms of the engine, where the Renault V6 is almost at the level of the best.
Above all, in financial terms, the introduction and lowering of capped budgets (around $140 million) will limit and stabilize costs in the future, giving clarity and visibility for future spending. The development of engines could also be frozen or strongly restricted in the future. And the redistribution of income looks set to become fairer with the overhaul of the Concorde Agreements.
In terms of media and marketing, the need for global communication, sponsors, the need to show that Renault is surviving despite the crisis, could also provide positive arguments for Cyril Abiteboul. Let’s bet that a possible return of Fernando Alonso in 2021 will attract all the more light to Enstone.
Finally, let us recall that Brexit and its unknowns could also complicate the situation of the F1 team, based between Enstone and Viry.
If this rumour about Renault ditching Alpine is true, not only is it profoundly sad, it surely means the company has to leave F1. Which explains Danny Ric’s thinking these past few weeks.
— chris harris (@harrismonkey) May 20, 2020
It would also be possible that the Renault group might finally focus on Formula E (by renaming the current team “Renault-Nissan”), which has the advantage of being a cheaper championship, in full expansion, and of course turned towards what could be the future of the industry, the electric. Moreover, according to Le Figaro, the French government will ask Renault to make a greater commitment to reducing emissions in return for this loan. The same debate is currently stirring up in Germany.
Renault is a symbol of French industry, but Renault F1 does not have an equivalent aura in the world of sport in France. As the arguments for and against a withdrawal are somewhat balanced, the decision will not be easy for the Board of Directors of the former Régie.
It could potentially wait a month and a half for Luca de Meo, the new CEO, to take up his position. For the time being, no statement regarding the brand’s commitment to sport has been published. What is certain is that a drastic cost-cutting plan is being prepared at Renault. How drastic it will be, that is the question.
Renault selling the team?
The rumour is, however, that there have already been talks between parent Renault and a buyer who is actively seeking financing. And that Renault see a title push to cost as much as pulling the team entirely, so at best the future of the team is to remain in the midfield, perhaps a costly and pointless exercise paid for by the French taxpayer.
The source of this rumour is a UK based podcast (missed apex). A podcast that regularly interviews several paddock sources including Joe Saward, the F1 journalist, and former Enstone team boss Matthew Carter.
Missed Apex understands that Renault have actively reached out to at least one viable entity to sell their F1 team but any deal must involve keeping the Renault power unit
— Missed Apex Podcast (@MissedApexF1) May 20, 2020
Update 23/05/2020: “Renault can disappear…”
“Yes, Renault can disappear, you have to be realistic,” says Bruno Le Maire.
Bruno Le Maire, Minister of Economy and Finance, was the guest of Europe 1 on Friday morning.
He spoke about the situation of Renault, in a very bad situation following the coronavirus health crisis.
“There is an urgent need to act”, warns Bruno Le Maire, Minister of Economy and Finance, guest of Europe 1 on Friday morning.
“Renault may disappear, the major industrial manufacturers may disappear, we must be lucid”, he said, adding: “I have never hidden the seriousness of the crisis, and I do not hide the seriousness of the situation of Renault.”
Renault, France’s industrial flagship, is in a very bad situation, having seen its factories and sales network paralysed by the coronavirus crisis and the confinements decided upon, particularly in Europe, which caused the new car market to fall by 76.3% in April.
The group was already weakened before this episode, having suffered its first net loss in ten years in 2019.
“But I also know that Renault has exceptional resources, exceptional technologies, motivated employees and competent workers,” the minister said.
According to him, the company “can and will bounce back” if it defines a strategy. ” And the strategy that seems to us to be the right one for Renault, as a shareholder state, is to make it one of the most technologically advanced manufacturers on the planet,
“at the forefront of electric vehicles,” he explains.