Published on November 25th, 2014 | by Daniel Sherman Fernandez0
Formula 1, Is USD570 Million Losses In Five Years Acceptable?
It has just been made public by a few Formula One (F1) teams that there has been a combined net loss of USD561.6 million over the past five years. According to recently-released financial statements more than half of the total loss was made by one team alone, Britain’s Lotus F1 team which is controlled by the private equity firm Genii Capital. It lost USD308.8 million and is one of three small teams which are pushing for a greater share of F1’s prize money.
Caterham and Marussia, collapsed last month and did not make it to Abu Dhabi for the final round.
The financial statements reveal that the teams’ red ink was a high USD210.3 million in 2013 making it the fourth consecutive year that they have made a combined net loss. Financial performance has reversed since 2009 when F1 was still hanging on thanks to a booming economy and all but one of the teams, Force India which made a net profit. The combined total profit after tax came to USD190 million in 2009 but the vast majority of it came from one team which is the team run by Ross Brawn which was formed from a management buy-out of Honda’s F1 racing.
Brawn’s team 2009 financial statements showed that it had revenue of USD373.4 million which is still the highest-ever recorded by an F1 team. Brawn’s after-tax profit of USD156.9 million was more than the revenue made by the rival Williams team the following year.
Brawn’s financial success was fuelled by a USD147.5 million boost from Honda as the Japanese car manufacturer paid the team the money which would have been spent on redundancy payment if it had been closed down. Careful cost management led to the bumper profits and brought the team to the attention of Mercedes which bought it for an estimated USD200 million at the end of 2009.
Nine of the 11 outfits file publicly-available financial statements with only Swiss-based Sauber and Italian marque Ferrari not needing to do so. The financial statements show the true extent of the gulf between the rich and the poor in F1.