Now what do you make of this? Proton’s wholly owned subsidiary Group Lotus plc is tying up with the Renault F1 team.
We should learn the lessons from Honda, Toyota and BMW quitting Formula One. See this BBC report:
Toyota has confirmed that it is pulling out of Formula 1 racing after posting its worst financial loss.
The world’s largest car manufacturer will concentrate on its core business.
Toyota president Akio Toyoda said the Japanese team had no option but to pull out citing “the current severe economic realities” affecting the world.
The team failed to win any of the 139 races it entered after making its F1 debut in 2002 but was fifth in the 2009 constructors’ championship.
Toyota’s withdrawal leaves the sport with no Japanese team after Honda left F1 at the start of the 2009 season. They become the third manufacturer to quit the sport in the last 11 months after BMW announced it was leaving in July.
Apart from this, if we are serious about curbing climate change, preserving depleting oil reserves and promoting green technology and public transport, an oil-guzzling motor racing sport may not be the most appropriate choice for a GLC to be involved in.
The Edge featured an article ‘Proton’s expensive taste does not favour its finances’ in its 13 December edtition. This prompted Proton to respond that the deal will not result in additional outlay for Proton; it’s all part of a RM2.3 billion five-year business turnaround plan for Lotus – to be financed by internally generated and external sources of funds:
We refer to the Article Entitled: “Proton’s expensive taste does not favour its finances” appearing on Page 8 of the Edge Malaysia for the week of 13 December 2010 to 19 December 2010.
The Board of Directors of PROTON Holdings Berhad (“PROTON” or “the Company”) confirms that the Company’s wholly owned subsidiary, Group Lotus plc (“Lotus”) has entered into an agreement with Renault F1 Team Limited (Lotus and Renault F1 Team Limited hereinafter referred to as “the parties”) in relation to the title sponsorship of the Renault F1 Team (“RF1”), to be renamed “Lotus Renault GP”, that will participate in the Formula One (“F1”) World Racing Championship season beginning 2011 onwards.
However, we would like to highlight various inaccuracies as reported in the said article in particular the following paragraphs which are reproduced below:
1. “The sports car maker’s transformation will cost it £770 million (RM3.81 billion) over 10 years, and turn it into a serious player”
2. “But doesn’t the move by its subsidiary to buy a majority stake in an F1 racing team warrant an announcement?”
3. “As for Proton, will it be able to sell its cars globally just with Lotus’ entry into F1 if its products are not improved in terms of design, quality and technology?
And if it spends big bucks on Lotus and F1, will it have sufficient resources to improve its models sold in the local market?”
4. “Ultimately whether or not Lotus is successful in F1 or its revamp, Proton’s shareholders, and the Malaysian car buyer, are footing the bill”
Kindly be informed that the said sponsorship is potentially for a period of seven (7) years. However, Lotus will initially be paying a sponsorship fee, which is part of its approved GBP15-20 million per year marketing budget, to be spread over a period of 4 years, in its ordinary course of business as part of Lotus’ branding and marketing plan. This budgeted marketing spend forms part of the five (5) year business turnaround plan approved by the respective Boards of PROTON and Lotus. Lotus will further endeavor to reduce the said amount as a result of the flexibility of the terms of the agreement between the parties. There is no additional outlay from PROTON to Lotus to finance the deal.
The sponsorship will then come with the privilege of an equity participation at a nominal value. Equity will allow Lotus to maximise and exploit its marketing and branding to its full potential. The equity deal will also allow Lotus an opportunity to manage further financial exposure by having a say in the way the team is managed.
As evidenced by PROTON’s improving product line-up, sales and market share, PROTON has and will continue to strengthen the design, quality and technology of its cars. Lotus’ entry into F1 is not undertaken to the exclusion of fundamental business activities of either PROTON or Lotus. As stated, Lotus’ participation into F1 is part of Lotus’ business turnaround plan which has already been budgeted for. The question of reducing PROTON’s investment in strengthening the PROTON cars business therefore does not arise.
Total forecast capital expenditure for the Lotus business turnaround plan is approximately GBP480 million which will be secured via internally generated and externally secured funding during the turnaround period. This is expected to deliver substantial returns on investment as deliberated and approved by the respective Boards.
RF1 is an established, successful F1 team whose operations are based in the United Kingdom. The Team’s current drivers are Robert Kubica and Vitaly Petrov and the Team is headed by Eric Boulier. It achieved 5th. place in the F1 constructors standing in 2010.
Renault F1 Team Limited is a private company incorporated and registered in England and Wales. It is principally owned by Gravity Racing International SA which in turn is wholly owned by Genii Capital SA (“Genii Capital”), a company incorporated in Luxembourg and has offices in North America, Eastern Europe and Asia. It has a number of notable clients including Skype.
Genii Capital is part of a larger group of companies which are owned, operated and administered by entrepreneur and real estate expert, Eric Lux and entrepreneur, business developer and technologist, Gerard Lopez. Genii Capital holds key expertise and competency in numerous fields including brand management and development, racing and driver management, hospitality and automotive technologies.
Lotus is a company incorporated and registered in England and Wales in June 1958. Lotus manufactures high performance sports cars and provides high technology engineering services to global OEMs. It was founded by Colin Chapman as a motorsports and racing company. Through constant innovations in technology, Lotus became associated with one of the most admired and successful racing teams in history, winning seven world constructors titles and six driver championships in F1.
The partnership between Lotus and Genii Capital paves the way to quickly incorporate new technologies from F1 cars into Lotus road cars including hybrid technology, Kinetic Energy Recovery Systems (KERS), aero advancements and lightweight materials. Genii Capital, with a portfolio of automotive technologies, also brings non-F1 technologies such as lightweight braking systems, variable compression engine technology and on board software systems to the partnership.
In addition, Genii Capital is also offering PROTON the ability to leverage on its existing business relationships in Russia and other parts of the world as a means to expand PROTON’s global reach. Through Genii Capital, PROTON can also potentially access advanced automotive technologies by virtue of Genii Capital’s association with Mangrove, a venture capital group.
For Lotus, access to F1 opens up new marketing opportunities and a major platform for business exchanges and development. Genii Capital possesses shareholdings in and direct access to cutting edge companies in the automotive industry.
The above partnership will not have any effect on the share capital and substantial shareholdings of the Company nor will it have any effect on the earnings per share, net assets per share and gearing of the Company for the Financial Year ending 31 March 2011.
None of the Directors or Major Shareholders or persons connected to the Directors and/or Major Shareholders have any interest direct or indirect in the above partnership.
The sponsorship agreement is not subject to the approvals of the shareholders or regulatory authority (ies).
The Board of Directors is of the view that the partnership heralds the return of a highly successful F1 association between Lotus and Renault going back to the 1980s and results in an equal partnership between Lotus and Genii Capital and signifies the beginning of a more comprehensive strategic alliance between two organizations and as such is in the best interest of the PROTON Group”.