Lotus in wind-up proceedings over creditor debt

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Formula 1’s financial crisis stories continue to unfold as Lotus was involved in a winding-up order in the Companies Court in the UK. The Judge in proceedings has adjourned the hearing for two weeks to allow the team and creditors to seek resolutions to alleged outstanding debt.

Chief executive of Lotus, Mathew Carter, played down the proceedings saying:

[quote_box_center]“A number of suppliers are feeling a little negative because of what happened to Caterham and Marussia, and they felt they had to go down this process,” Carter said. “We’ve had dealings and agreements with the companies that are taking part in the process, and it’s being dealt with in a normal way. It’s been adjourned while we deal with it, and we always knew it was going to be adjourned. There are a couple of suppliers using it to try and claim monies that aren’t owed, and that’s obviously being dealt with as well.”[/quote_box_center]

Carter said the proceedings would not impact the Formula 1 team however one of the creditors, Xtrac, who provides transmission systems for the team has spoken the press saying:

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“Throughout the past 15 months, Xtrac has manufactured a significant quantity of parts in good faith to ensure the cars can keep running. We’ve worked with the Enstone organisation under its many different guises for many years, so I really hope we can find a resolution.

“We hope to resume this once the now significant debt has been reduced and a positive outcome agreed. We really do hope we can sort this out and there will be a resolution because they are lovely people.”

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One has to assume that Xtrac may stop or has stopped supplying product to the team until a resolution has been arranged.

Carter says that some creditors are alleging debt that simply isn’t true:

[quote_box_center]“Things are being dealt with. As I say, some of the creditors have tried to use it as a way of claiming some money that is not necessarily owed, or due at the moment. It’s perfectly under control. It is just part of the process.”[/quote_box_center]

The continuous rumors of Renault’s intentions with F1 still swirl with some saying that Lotus is a viable option for the manufacturer to purchase as a works team. The complication is that Lotus has a Mercedes engine supply contract until 2020 and this would make things a little more complicated should Renault be serious in acquiring the team making Toro Rosso a seemingly more obvious choice.

Regardless of how downplayed the issue is, it is a very serious process and could spell serious doom for the team even though Cater says everything is fine. It shouldn’t be taken lightly if Xtrac and others are all involved in their application for a wind-up proceeding.

Hat Tip: Sports Business International

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Paul KieferJr

So, if this were the case:
1. Should any manufacturer of any part of a car ewer fear going into Formula 1 given the uncertainty of any team’s survivability? After all, it’s certainty of income that every business wants given that it’s crucial to its own survival.
2. Is the overall structure of Formula 1 (CVC, Bernie, FOM, FIA, etc.) have a duty to guarantee that there will be survivability of any team and any component of that team, including creditors?

MIE

The concerning thing is if this causes suppliers like XTRAC (or other creditors) to fail. These suppliers provide parts to many of the UK based racing teams. This could ultimately affect many teams.

runnah

Lotus’ team accountant, Mr. Stavropoulos, has no idea what happened.

FerrariF1fan

Sadly the penalty of not getting any gearbox due to lack of payment is roughly equal to the penalties incurred for changing parts beyond the prescribed amount. Don’t start the race or start the race from a different zip code….potato potodto

MIE

It was encouraging to see new sponsors at Silverstone for Williams, McLaren and Manor. Whether they were one off deals for the sell out crowd at the British GP, or deals for the rest of the season, I don’t know. Unfortunately Sure, who appeared on the side of the Williams, used to be a Lotus sponsor not too long ago.

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