Reports this week show that Mercedes, while presenting a loss for the 2015 of £22.3million, made significant improvement from the year previous when it reported a loss of £76.1m.
It does make you wonder about the overall expense the team incur to reach this level of performance. One could argue that they are making a massive amount from the prize money that Formula One Management pays out, and they are, but in order to have dominance over the past three years, lock up the titles in those years and still show a loss is quite staggering.
Toto Wolff explained the better performance and loss:
“In any business, you need a clear-sighted analysis of what makes you successful,” said Wolff.
“In Formula 1, there are a number of key factors: the drivers, the chassis, the power unit, the right technology, the necessary budget and the best people.
“You need to make the right decisions in these areas and make sure they are all aligned.
“But there is one factor that money cannot buy: time. Our key stakeholders have given us the time for the building blocks to come together and gel. That has been a vital factor in our success.”
“We are in a very fortunate position because our key stakeholders understand our business.
“They know that if you try and run an F1 team like a corporate multi-national, it doesn’t go.
“You need to be independent, agile and capable of taking quick decisions. The board of Daimler, led by Dieter Zetsche, understood that.”
This means that for some investors/stakeholders—and here is speaking of Mercedes mainly—you have to be in for the long term and forget any notion of making a quick Pound. IT takes time and serious commitment of resources to hire, gel and coagulate as a team in order to win titles.
There is a complete balance sheet that Mercedes looks at and if you consider the increase in sales of Mercedes road cars, it becomes a slightly grey area as to if the F1 program has, in theory, been a loss at all given the recent sales performance of their consumer products.
There is the other side of the comprehensive program to consider as well as Christian Sylt pointed out at City A.M. The fact is, this program employs hundreds of people and infuses significant capital into the British economy.
The Mercedes V6 hybrid power unit development alone contributes £130m to the British economy from the Northamptonshire’s Motorsport Valley.
“the company now employs 550 staff members and contributes over 90 per cent of its expenditure within the United Kingdom”.
It may be easy to question a 20 million Pound loss but you have to take the entirety of the business plan, employees, healthcare provided, prize money awarded, cars sold, and titles won into account. This is why I have been vocal about one driver, be it Nico or Lewis, placing their personal interests above all else. When doing so, you are impacting hundreds of people that work tirelessly to deliver the best car they can. The system is bigger than any one driver and yet that driver can be key to the system succeeding so it’s a symbiotic relationship that needs to work and this translates to sponsor sensitivities, press management, PR and brand building.
Nico’s world is his entire world, if you will, but it isn’t the entirety of Paddy Lowes world and both Lewis and Nico would do well to remember that. Nor is Toto Wolff’s world the entirety of every employee at Mercedes working to build the best car they can. It’s all about perspective and context. If you consider Ferrari’s current issues, Sergio Marchionne has made his position and actions the entirety of the organization in some ways and that’s having an impact, albeit not a very positive one according to news reports.
If you look to the alleged boardroom battles over control of McLaren, you can piece together a scenario where the rank and file at Woking are struggling to navigate the politics as much as they are the prickly Honda engine in a chassis that is temperamental.
I’m sure Red Bull Racing are not above the intra-team issues but they do have a singular goal and commitment from the stakeholders and some of that was called in to question last year over the engine row and threat to leave as well as Adrian Newey’s desire to step back from the program. All these challenges are additive and it’s clear, after securing their third constructor’s title this week, that right now Mercedes is doing it better than anyone else…even while losing money.