It is not news to suggest that Aston Martin cannot really afford to get into Formula 1. The glamorous Britsh sports car firm, now under the control of the Italian private equity firm InvestIndustrial, controlled by financier Andrea Bonomi, believes that Aston Martin could (and should) be a rival to the likes of Ferrari and Porsche. The company produces around 3,500 cars a year (about half the total of Ferrari), but Bonomi believes that this can be increased to 7,500 by 2018, with a range of new models. In an effort to achieve this goal, Aston Martin has gone into an alliance with Mercedes-Benz, which will provide engines and expertise to help Aston expand its range of cars.
The project will obviously require a great deal of marketing, but the budget is small and while the firm would like to be in Formula 1, the best it can hope for is a relatively small technical partnership with an F1 team. There have been conversations with a number of teams in recent months but with limited cash little progress has been made. However, the sexy image that Aston enjoys, created largely by the lengthy association with the fictional British secret agent James Bond, in the spy novels of Ian Fleming, can be leveraged if other companies want to be associated with the Aston Martin name.
The word in Mexico City was that there will soon be an announcement regarding a deal that will see the Force India team rebranded as Aston Martin. This may sound rather unlikely, but it seems that a rather unique deal is being put together to achieve this goal. It stems from the $2.7 billion purchase of India’s United Spirits Ltd (USL) by the Diageo company in 2013. United Spirits was previously owned by Vijay Mallya, the owner of Force India, who was forced to sell USL after he ran into financial trouble as a result of the collapse of his disastrous Kingfisher Airlines. He negotiated a deal that resulted in Diageo taking control of USL, but he remained as chairman. However, after the deal went through, Diageo looked at the financial situation of the business and asked Mallya to stand down, because it said it had “lost confidence” in him as a result of what it claims were transactions that diverted money from USL into other Mallya companies, including Kingfisher Airlines. Mallya refused to stand down and a legal fight has begun to get him out. Ironically, as this has been developing, Diageo’s Smirnoff brand has been sponsoring Mallya’s F1 team, and enjoying the benefits of Force India’s good performances.
At the same time, the huge B2B benefits from Diageo’s Johnnie Walker sponsorship of McLaren are now lessening and the team has not been enjoying good performance and the word is that the company has now decided to finish its relationship with the Woking team, but to increase its activities in F1, in an official supplier role, and as a sponsor. The obvious choice for a partner team is Force India, but Diageo does not want to sponsor a team with the Force India name. Thus, it seems, the company is looking to kill two birds with one stone and to promote its products, while at the same time solving the dispute with Mallya. The exact details are not yet clear, but it seems to be related to a loan of $135 million that was made to Mallya’s company Watson Ltd by Standard Chartered Bank, for which Diageo acted as a guarantor, in exchange for Mallya agreeing to release USL shares. Diageo has recently agreed to pay that debt, subject to the transfer of the shares, but it seems that as part of the settlement Diageo may become involved in Mallya’s F1 team. He has been looking to find ways to refinance the team because his partner Roy Sahara is in jail and is not going to be involved in F1 any longer. But a change of name is needed in order for a deal to go ahead. Enter Aston Martin, a sexy name.
Thus, expect to see a Johnnie Walker-sponsored, Aston Martin-branded team in the future. Mallya’s interest in F1 seems to be waning, so it may be that he will take the opportunity to bow out of the sport. As to the detailed ownership and management, we will have to wait and see, but there is no reason that the team will change at operational level.