€66 million in losses for Lotus in 2012

This fact was revealed by the British newspaper The Telegraph, but it is not necessarily a surprise for our loyal readers. Indeed, during the past season, we had commented on the particular situation the Enstone team is in: even though it still carries the Lotus name, it no longer receives any funding from the subsidiary of the Malaysian group Proton.

One of the main reasons for this strange situation is that Lotus is now the name of the chassis, which determines the payments of prizes related to television rights. If Genii Capital, the owner of the team, decided to change it, it would automatically lose the tens of millions of dollars linked to its very impressive fourth place in the 2012 constructors’ championship. The disappearance of its title sponsor has therefore caused a significant drop in its revenue, to which must be added the loss of the personal sponsors of the 2011 season drivers, Bruno Senna and Vitaly Petrov, who were very richly endowed. In total, revenues thus collapsed by 19.8% to reach just over 108 million euros.

At the same time, expenses also rose significantly compared to the 2011 season. The first factor is naturally related to the hiring of Kimi Räikkönen. The 2007 world champion settled for a relatively modest fixed salary compared to his track record (three million euros) but managed to negotiate a very good performance clause: 40,000 euros per point scored in the championship. With his 207 points, this represents more than eight million euros in additional income paid to the Finnish driver. Adding Romain Grosjean’s salary, estimated at one million euros, and the spending on research and development, the costs incurred during the 2012 campaign amounted to 171 million euros, an increase of 9.1% compared to 2011.

The financial situation of the team led its investment fund owner to take out a loan of approximately 41 million euros from… Proton, which had nevertheless withdrawn its financial support as the parent company of Lotus! This brought the team’s total debt to 93 million euros, of which it must repay 71 million by the end of the current season. This means that a large portion of the funds paid by Bernie Ecclestone will solely be used to cover the debt installments.

Nevertheless, while some media outlets may suggest that this severely questions the very future of the team, the financial situation of the team is not as dire as it might appear at first glance. Since the beginning of the season, the team has signed agreements with a significant number of major multinationals and is awaiting a title sponsor. Gérard Lopez’s statements in April 2012 remain valid: « When we changed from Lotus Renault to Lotus, it opened the door for a title sponsor. If you take into account that we have signed with Unilever, probably the biggest sponsorship deal this year in F1, and with Microsoft, which is huge news since it is a brand that had never been in F1 before. We therefore have a lot of space for sponsors. If we sign with a title sponsor, we will end up with the best cash flow in the history of this team. »

The team has therefore implemented investments (€7.5 million for the factory) and hiring (twenty more to reach a total of 500) necessary to ensure the future. This makes the 2013 season all the more essential from a performance standpoint since it determines the revenues for the next season. Once rid of most of the debt burden with performance on track that remains at a very good level, the team would present an attractive face to new sponsors as well as investors. However, for a typical investment fund, an exit from the capital after three or four years is the norm…

A first step was taken this year with the sale of 2% of the capital to promoter Andrew Ruhan for one million euros, valuing the team at 50 million euros. However, this could increase in the coming year with the repayment of debt and returns on investments made over the past seasons.

With the participation of www.Racingbusiness.fr