What the latest Mercedes F1 exit rumour means for its future - The Race
Formula 1

What the latest Mercedes F1 exit rumour means for its future

Sep 15 2020
By Scott Mitchell

The future of Mercedes’ record-breaking Formula 1 team is the subject of renewed speculation, this time a reported sale to principal partner Ineos, but it has been strongly refuted.

Mercedes revived its works F1 entry in 2010, ending an absence of more than 50 years as the long-time engine supplier took over the title-winning Brawn GP team.

A new era of engine and car rules in 2014 transformed Mercedes into a dominant force and the team is on course for its seventh consecutive championship double this year.

Speculation suggesting Mercedes could withdraw while on top began even before the 2020 season had started, and has continued throughout the year.

The latest rumour stems from a British newspaper report supporting a claim from ex-F1 team owner Eddie Jordan that Mercedes’ new-for-2020 principal partner Ineos will buy the team for £700million and rename it, in a similar fashion to its takeover of the Team Sky cycling organisation.

Could Mercedes leave?

Valtteri Bottas Mercedes Italian Grand Prix 2020 Monza

Daimler boss Ola Kallenius and Mercedes F1 team principal Toto Wolff have frequently moved to deny the speculation that the manufacturer’s works team will disappear.

Even Mercedes signing the new Concorde Agreement, defining F1’s commercial terms for the next five seasons, has not quelled rumours as the new deal affords all signatories the opportunity to withdraw with enough notice.

The theory is that Mercedes has no further value to gain in F1 and will therefore remove itself from the team by selling the organisation it has moulded into the most successful in the championship’s history.

“People pick up bits and pieces and construct a story around it” :: Toto Wolff

Six months ago, the buyer was supposedly Lawrence Stroll. Now, the buyer is apparently Sir Jim Ratcliffe, billionaire owner of Mercedes’ principal partner Ineos.

Mercedes would remain involved as an engine supplier, the stories say. It would also retain a stake in team, or sell it completely. That detail has been reported inconsistently, but Wolff is adamant any version is incorrect.

“People pick up bits and pieces and construct a story around it,” he said at the Tuscan Grand Prix.

“Daimler has no intent in giving up the team, and Ineos has no interest in buying a majority of the team and calling it like this.

“And I have no reason to depart from our shareholding so plenty of things that are made up.”

Why F1’s a no-brainer for Mercedes

Mercedes wins 2019 constructors' championship

But Kallenius and Wolff insist that F1 remains a priority to Mercedes and it is clear there is still scope for the value it provides to increase.

Mercedes’ record-breaking sixth consecutive F1 title double last year came at a net cost to the manufacturer of under £30m as sponsorship and prize money took care of the bulk of the team’s £363m spent.

Mercedes-Benz AG provided £44.4m to the team in 2019 but £16m was returned for the cost of engine supply, reflecting a net cost of £28.4m. In return, the F1 team made “an important contribution” to the ongoing growth in value of the Mercedes-Benz brand.

Mercedes Grand Prix’s 2019 financial report states the team enjoyed 23.86% of F1 television coverage during the season, generating a cumulative television value advertising equivalent of $5.4bn for all its partners.

Wolff has an ultimate ambition to make the F1 team cost neutral to Daimler and it is founded in reality. When the budget cap comes in and expenses drop, that will surely be a formality.

Mercedes’ most recent accounts note that there’s never 100% guarantee that financial support from a parent company will continue endlessly. This is particularly sensitive in F1.

But the return on investment in brand value terms is a ringing endorsement for ongoing investment. There’s no reason for the organisation not to continue being successful. And it’s soon going to require no budget contribution from Daimler whatsoever.

It would seem ill-timed for Mercedes to relinquish its works team just as its already absurd value reaches a new level.

So where does Ineos fit in?

Valtteri Bottas Mercedes Spanish Grand Prix Barcelona 2020

When Ineos’s presence on the 2020 Mercedes and its increased partnership was revealed earlier this year, Ratcliffe played down a suggestion it was the beginning of a team ownership move in the vein of Ineos’s cycling endeavour.

Ratcliffe, who also owns French top-division football side Nice, told the BBC earlier this year he had enough on his plate and said of F1: “We have only just got the name on the car. I think that is enough for now.”

Whether it remains enough, only those directly involved can say. Unsurprisingly, Mercedes is not excluding greater Ineos involvement in the future. But there has been an emphatic denial this will come at the expense of Wolff’s shares or Daimler’s.

So, this could be an enhanced sponsorship arrangement. Perhaps Ineos will pick up the late Niki Lauda’s vacant shareholding. Maybe Wolff or Daimler will change their mind and accept a slightly reduced stake.

What is clear is that Ineos is embedded within the Mercedes GP family.

Mercedes GP expenses increased last year as the company recruited for and invested in its Applied Science business division. That was formed last year and will be an important way for the team to reallocate staff ahead of the incoming 2021 F1 budget cap.

Ineos is a key part of that with the Mercedes-affiliated Americas Cup project the main area that the team’s staff investment has been directed.

“We have a magnificent relationship with Ineos, we work together on several high-tech projects on Americas Cup, and the cycling team, and the partnership is very complementary,” said Wolff.

“We have the same ambitions with our sports teams and that’s why Ineos is a partner of ours.

“Beyond that, everything is just speculation.”

What about Hamilton’s future – and Wolff’s?

Toto Wolff

One connection in the wake of the Ineos rumour is whether Hamilton, who pushes an eco-friendly agenda, would feel uncomfortable driving for a team that was outright owned by a company that produces petrochemicals and plastics.

But there’s been no public indication that Hamilton is unhappy with anything regarding the team’s future, or opposed Ineos’s arrival as a team partner. And given the steadfast denial of Ineos’s interest in a takeover, it is also just a hypothetical question.

What is known is that Hamilton is yet to commit to the team beyond 2020 but he and Wolff have made it clear new deals for each of them are the plan.

Negotiations have been postponed by the delayed start to the season and the intense schedule of nine races in 11 weeks since the championship began.

Wolff hopes the upcoming gaps in the schedule will provide an opportunity to get things nailed down on Hamilton’s side.

As for his own future, the Ineos takeover rumours suggest Wolff could be moved into an advisory role clear of the day-to-day running of the team.

Wolff’s said emphatically he expects to be at Mercedes next season but the exact position he occupies is to be defined.

He also insists the future of the team is “absolutely clear”, “nothing is going to change that”, and contract talks really are just a matter of time.

“We had simply three triple-headers, one after the other, and now it’s about sitting down and carving it out,” he said.

Mercedes signing a deal governing its own F1 future wasn’t enough to kill a never-ending rumour, though. It therefore seems unlikely a resolution over Wolff’s next move and Hamilton’s new contract will either.

Lewis Hamilton Mercedes Tuscan Grand Prix 2020 Mugello

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