06/04/2012
NEWS STORY
 |
Various websites are reporting that the Lotus F1 team has terminated its sponsorship deal with the Group Lotus car manufacturer. As often happens when sports journalists communicate business developments in F1, the latest reports fail to present the full story. According to Pitpass' business editor Christian Sylt however, in reality very little has changed. That said, a lot could change as a recent development has put Group Lotus' owner Proton in a position where it could take over not just 50% of the team, as was previously thought, but as good as all of it.
Just last week Sylt revealed that two months ago Proton, the Malaysian-based owner of Group Lotus, had given the Lotus F1 team an estimated £35m loan. Any of the sports journalists who wrote the latest reports could have easily found the corresponding company documents to verify the existence of the loan from Proton to the team. Now we hear that Gerard Lopez, owner of Genii Capital which in turn owns Lotus F1, says that "the sponsorship agreement and the obligations of Lotus have been terminated." However, he adds that "we are happy to carry the Lotus name as we believe it is a good name for F1."
So, let's get this straight: the team will continue to be known as Lotus F1 and, unless it wants to throw away the brand equity which has been built up since the start of 2011, it will presumably retain the famous black and gold branding which is associated with the car manufacturer.
In short, from the outside it looks like very little changes and, on the inside, although Group Lotus is not making sponsorship payments to the team, the car manufacturer's owner has given it a loan. One can excuse the sports reporters from failing to dig up the relevant loan documents since they are not specialists in covering the business of F1. However, Lopez' comments give the impression that, except for using its name, the team has severed all of its ties with Group Lotus. It should be stressed that Lopez does not say this but one of the reporters who wrote about his comments alleges that the team has "ended its formal relationship with the marque."
Adding weight to the impression that all ties have been severed, Lopez confirmed that Group Lotus did indeed have an option to buy 50% of the team - something that Sylt revealed back in September - but does not have it any more. The "option was taken over by us. There was one, but we have taken it over now," he said. Presumably, given that "the obligations of Lotus have been terminated" the team will also be removing from its board the group's chief executive, Dany Bahar, and Syed Zainal Abidin Tahir, Proton's managing director, who were appointed last year.
What wasn't revealed by Lopez' comments is that the loan includes a very important clause stating that the team gives Proton "full title guarantee" to "all plant, machinery, show cars, computers, office and other equipment... and... Whiteways Technical Centre [Lotus F1's headquarters]." What this means is that if (and there is no suggestion that this will happen) the team fails to repay the loan then Proton will be entitled to take over all the property listed above which effectively constitutes the team itself. So although Lopez was keen to say that Group Lotus no longer has an option to buy 50% of Lotus F1, what wasn't revealed is that Group Lotus' owner could end up owning much more than that as a result of the loan it has given to the team.
It is unclear just how much of the team Proton would own if it defaults on the loan. However, what Proton would get is worth at least £44.9m. This comprises property valued at £12.9m, the plant (Whiteways) which is valued at £27.5m, a huge number of HP and Cisco computer equipment, laser etchers, electro microscopes, test rigs, milling machines and air compressors as well as its windtunnel and 33 show cars worth £3m. They include 29 static show cars including two in France on loan to Lotus' sponsor Total, one on loan to another Lotus sponsor TW Steel, Lopez' personal show car in Luxembourg and the race team pit stop car. There are also four running show cars - two in the 2009 livery and two in the 2010 livery. If the team fails to repay its money this would all give Proton quite a stash.
The existence of the loan gives a completely different context to Lopez' comments that "we would prefer to have sponsors up to the full amount - but if [Genii] have to fund [the team] then we will fund it." The Proton loan of course makes the loss of sponsorship from Group Lotus easier to bear. Perhaps tellingly, Lopez adds that "if we sign a title sponsor now, we will end up with a better cash flow situation than this team ever had before." Although the team does not have sponsorship from Lotus, it has the loan from Proton so obviously if it were to get a title sponsor as well it would be quids in as Lopez says.
He adds that the team is looking up on the commercial front and says "we signed Microsoft, which is huge news as it is a brand that has never been in F1 before." This also surprised Sylt and not only because Microsoft has partnered with McLaren on the Electronic Control Unit in F1 cars. Until 2009 Microsoft was also a Ferrari supplier so it would seem to be a stretch to say that the brand has "never been in F1 before." It's a bit like saying that Lotus F1 has "ended its formal relationship" with Group Lotus when in fact it is in receipt of a loan from its owner.
It will be interesting to see how the relationship between Group Lotus and Lotus F1 develops. As Pitpass recently reported, it has been suggested that Genii will make a bid for the car manufacturer after a controlling 43% stake in Proton was recently sold by the Malaysian government to local business DRB-Hicom. When asked about Genii taking over Group Lotus Lopez says "we don't know yet, because we really do not know what the new owner wants to do with it."
Others seem to know better as one of the directors of Caterham Cars claimed in a statement that "the due diligence is likely to continue for at least another couple of weeks, after it is complete DRB-Hicon [sic] will decide what to do and whether it wants to sell the company...Lotus has been a serious drain on Proton in the last few years and there is little chance of an upturn in fortunes until at least 2014." Obviously Caterham is a rival company so it would be no surprise if its director is biased. However, if his prognostication is based on anything more than guesswork, Group Lotus has a long road ahead of it.