Mercedes-Benz and McLaren

The presence of a lot of heavy-hitters from Stuttgart was noted in Abu Dhabi with the whole board of Daimler AG rumoured to have been present, in addition to Manfred Bischoff, the head of the company’s supervisory board. There were also a lot of lawyers. This was not a tea party. Although everyone was wandering around smiling like game show hosts, it is clear that there some serious meetings going on about the future relationship between Mercedes-Benz and McLaren and my sources tell me that the purpose of all of this was to terminate the special relationship as quickly as possible so that Mercedes-Benz can paint the Brawns silver and take a more important role in the team. The word is that they are fed up being junior partners in McLaren. This all makes sense, given that McLaren blocked Mercedes-Benz from advertising Brawn’s success this year – and launched a supercar straight into one of the major Mercedes markets. A supercar with a McLaren-branded engine. Some of my German colleagues have come up with figures being asked for a settlement with McLaren hoping to recover its 40% stake for free, be paid something in the region of $300m and be given free engines for two years. This may sound wildly expensive for Daimler AG but these are the kind of figures that one would expect given the company’s apparent desire to get out of the arrangement.

The financial windfall for McLaren would give the team the money it needs to invest in its own engine programme so that it can continue with its strategy of becoming a totally independent car manufacturer, promoting its products in Formula 1.

I would not expect anyone involved to say anything at all until the deal is done but my German colleagues say that this is now close and that we may be getting an announcement by December 1. They are generally pretty good at sourcing information so watch out for that happening.

29 thoughts on “Mercedes-Benz and McLaren

  1. Ah so that’s why Ron was there. Lovely to see him back though, and I thought he looked years younger.

  2. That would be a major deal for McLaren, for Mercedes-Benz (Daimler) ánd for Formula One. It’s especially interesting that, with the influx of independent teams (Brawn in 2009 and Manor/Virgin, Campos, US F1 and Lotus in 2010), a McLaren-Mercedes seperations effectively creates 2 new factory teams.

  3. You make D-B sound completely stupid and devoid of legal/strategic advice ever to have got itself into an arrangement in which it was the donor all along, and yet it has to pay so much to get out of it. So you pay a lot of money to buy some shares, and then you have to pay even more than that to ‘sell’ them again? Crazy.

    I don’t recall any reports of it costing BMW anything much to get out of its arrangement with Williams, did it?

  4. Also, I was amused that Ron was there at the first race since Max left the presidency. Mansour Ojjeh was there too, as you might expect for a race in the Gulf but I hadn’t seen him on the TV for a while. So all the bigwigs were there.

    I’m looking forward to McLaren being an engine builder, maybe it’ll prompt Lamborghini to get involved again, they’re all in the same market.

  5. That seems a pretty crazy deal to end the relationship, I can’t imagine what kind of wording would have to be in the dozens of contracts between the companies for Mercedes to have to pay up that kind of money.

    I imagined more likely Mercedes selling their stake to the other McLaren owners (Mumtalakat Holdings, the Bahrain investment co., or Ron Dennis himself ?) for $300 million than paying that amount to get out of it.

    If I was paying those kind of figures, I’d be more likely to spend $600 million on buying McLaren outright, they’re a much more desirable team than Brawn, despite this season’s results.

  6. Is Mercedes *really* going to throw that much seed money into an established competitor in F1 and a fledgling competitor in the automotive real world? If your figures are correct, it’s a stonking deal for McLaren, and Ron’s going to bite their hands off. But I’m struggling to see any value for Daimler. Am I missing something here? Bernie and Slavica’s divorce was certainly a lot cheaper!

  7. There seems to be a lot of reasons why Mercedes would want to go their own way, especially after Stepney in 2007 then Melbourne this year.

    The two companies appear to have different long-term plans so divorce may be the only answer, a shame nonetheless to break up such a long-standing partnership.

    I wonder how Hamilton fits in with Mercedes long-term plan, it could result in a bidding war for him when his McLaren contract expires.

  8. Fantastic!! I am so happy to see that taxpayers’ monies used to bail out the carmakers are being spent wisely ! They surely put one over Fiat with the payoff, Honda will be happy too, now that the press won’t make fun of how bad it move it was to pay for Brawn this year and get none of the credit…

  9. I suspect that the rumors of Jensen Button to McLaren may just be that, rumors designed to upset Mercedes, again, at the thought of a new world champion going away from the company they are just buying into.
    There is so much more to F1 than racing cars around crap tracks in the middle of a desert.

  10. Joe,

    I have just read a piece by Allan Bladwin (Reuters)

    And it is at complete odds to your post.

    There is a very firm decision that we have a long-term commitment to our partner McLaren,” Mercedes motorsport vice-president Norbert Haug told reporters before the season-ending Abu Dhabi Grand Prix.

    And Martin Whitmarsh reinforced Haug’s position.

    I believe what your saying to be honest, it makes sense However I’m slightly confused..

  11. There was a Merc advert in the back of Autosport congratulating Brawn. It showed Jenson celebrating on one side of the page, with Lewis driving on the other side. But it read as a Brawn-related piece of Merc marketing to me.

  12. It didn’t cost BMW to get out of its Williams deal because it did not own any Williams shares. Mercedes owns 40% of McLaren.

    Clearly McLaren have a veto on much of what Mercedes can do in F1 and there is no reason why from their point of view they should give that up. Why would any McLaren shareholder pay $300 million to lose the best engine in F1 and the backing of Mercedes next season? That would be an insane deal.

    From Mercedes point of view they want their name on the number one car next season and that is worth spending some money on. The two most successful people in F1 in recent years have been Ross Brawn and Adrian Newey. It has to be worth a lot of money to Mercedes to supply engines to both of them. McLaren has already vetoed the Red Bull engine supply deal and the last thing Mercedes want is to miss out on the chance of tying up Brawn and Newey.

    So looking at the facts you have to see that it makes more sense for Mercedes to pay up to get the top two teams of this season on board and the two most successful engineers in recent history locked in than it does for McLaren to spend $300 million to lose Mercedes.

  13. > If I was paying those kind of figures, I’d be more likely to spend $600 million on buying McLaren outright, they’re a much more desirable team than Brawn, despite this season’s results.

    Merc WANTED to buy McLaren outright, having already bought 40% – then Ron and his business partner turned around and sold half the remainder to someone else.

  14. Just how bound are Mercedes after two years anyway? Isn’t that when the current agreement runs out and they are free? And why would they sell or divest any equity stake they have in Mac unless it is for fair market value? It is a stock like any other.

    I see MB holding all the cards. I can see there being some motivation for MB if Mac offered to get out before the two years remaining on the current deal expires but that seems to be the only card that Mac holds and they can’t play it unless they have a new engine in the wings. Surely the Ford/Peugeot days of 93/94 can’t have left their memory that fast.

    Orange Macs and silver Brawns do seem to be on the cards though. I also foresee Mac beating Brawn in 2010 but that is another matter.

    And if Mac can get the entire BMW plant for a price, claim to the FIA that they are building a “new engine” from scratch as a “new manufacturer” whereby they get to recast the BMW block to fit their chassis and gearbox while making a few other tweaks ala Cosworth’s FIA dispensation, they could do it before 2010 easily since they are 99% of the way there with the present BMW as a basis.

    Only this could induce MB to want to get out before the current deal expires because of MB branding clauses in the existing Mac/MB agreement that reserves the Mac to be the primary, exclusive and most prominent MB title sponsored car.

    I should note that all of this would be impossible without the FIA freeze as the factory teams enjoyed a great advantage over the customer teams both in having the latest spec engine and not having to pay for them.

    Was Whitmarsh’s entreaties to the rest of the FOTA teams to allow Qadback the 14th spot sincere because they would be using Ferrari power? And Martin’s carefully worded denial in this article
    precludes nothing. It seems to permit a world of possibilities for the current BMW engine resources/facilities. As a matter of fact simple rebranding without any modification or alterations to the BMW engine architecture is within the scope of Martin Whitmarsh’s non-denial denial.

    As to MB’s equity stake in Mac, well it has a fair market value, generates a proportionate share of Mac profits and MB can sell it to whomever they wish unless Mac has a “right to first refusal”. They could discount it back to Mac (for a figure far more than zero) as an inducement to divorce. Or they could just sit on the shares and collect their proceeds. What is the rush?

  15. And the irony is that Max Mosley’s nutty engine freeze could help make Ron Dennis a modern day Enzo Ferrari. LOL LOL LOL Will wonders never cease?

  16. I know why Mercedes-Benz are called Silver Arrows, but the Brawns looked great in white and that was the original German racing colour. Why not keep the Mercedes-Brawns white?

  17. Woaw just can’t believe what I read! If this turns to be true your blog will deserve the title of “Worldwide best source of F1 information”.
    Are McLaren so vain they believe they are worth all that money, and are Daimler so stupid they are going to give it to them? I am flabbergasted… to say the least!

  18. James Allen’s blog has an article which is counter to your posting. Pretty much stating that McLaren want a 1 year extension to their deal to take it up to 2012, at which point the engine regulations change.

    I’m with James on this one – the ideas hold more water than Mercedes paying McLaren money to do the dirty on Mercedes (which is effectively what you are reporting).

    All that said, great blog, except for using an American term to refer to the English game, football.

    1. Snail,

      Believe what you like. As to the football thing, this is because I have American readers and wish to diffentiate between soccer and football. This is why they call it the World Wide Web. Otherwise it would be EWW for England Wide Web.

  19. My current bible in Autosport. A Blog is not a news site indeed…
    I’ve been reading this blog for a while and I started reacting on a few articles only recently. I must say Joe does a good job and I like his style, and the quality of the bloggers (well most of them…)
    So, if a frenchman is welcomed, I might stick around here 😉

  20. Thank you very much sir! I live in the UK as you have probably guessed from my email address….
    Vive l’Entente Cordiale
    BTW if somebody could explain me how and why Mercedes can be stuck with 40% of McLaren shares. Why is it that they cannot sell -or it looks like they cnnot sell- their shares to whoever they want? (OK if there is somebody that want to buy them…)
    Can the other owners block the sale? The only thing I can figure out is for them to have their say first and “force” MB (DB in fact) to sell the shares to one of the owners if he can pay the price that somebody else will be willing to pay… Is there anything special that you know of?

    The only thing I know -but it has nothing to do with ownership and sale- is that there seems to be an agreement between RD/MO/BMHC that gives the BMHC’s rights of vote (30%) to RD+MO and an agreement between RD and MO to always vote together on any decision so that Mercedes has no chance to force any decision…
    Many thanks in advance.

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