Mercedes GP - Inauguration and 1st season

[raceman]

a WCC winning team still without confirmed drivers, shame

or they are just hiding it from the world and enjoying the show??

[Raptor22]

Button i showing the same moneyhungry qualities that led him to Honda in the first place. If money was less his god then perhaps he would be more successful. However he alwyas shoots himself in the foot.
He's the most overated champion since Damon Hill.

He should shut up and sign with Mercedes. He would be a fool not too. McLaren may offer more money but will they be a winnin team in 2010? PErhaps but I doubt Button has the talent to put one over Hamilton. Button will go from hero to zero in a few races, then he will start blaming McLaren and then Hamiltonand the the pattern continues

[Rob W]

I tell you one thing - a winner in this is Honda.

They'll be getting a chunk of the money from Mercedes. It worked out as a very good way to exit F1 with dignity when you think about it. They pulled the plug but agreed to underwrite the team for a year to prove the results of the car they'd developed and direction they'd moved under Brawn. Effectively a one year period with a "for sale" sign on the team (and cars - possibly the reason why no significant sponsorship deals were pursued - they were instead aiming for a sale with a clean slate). Well, it worked.

Honda's willingness to underwrite the team for a year is the only reason it was able to be sold (in-full or in-part) and they would certainly be the recipient of a slice of that pie.

Now Brawn/Fry and co can move on with their new partner, effectively now owning approx 25% of an F1 team without having to actually fund it themselves.

The deal worked out pretty good for everyone. Honda, Brawn & co, Mercedes and a large number of staff.

So, kudos to Honda and Brawn for making a risky plan like this work.

[ISLAMATRON]

What makes you think Honda will see any of the Merc money?

[WhiteBlue]

What makes you think Honda will see any of the Merc money?

It would be logical for Honda to have a clause in the contract to participate in a quick profit. It is equally logical for Brawn not to accept such a clause. We cannot know what was in the contract.

[Chaparral]

Honda will not see a cent from the buy in by Mercedes - Honda forfeited those rights at the end of 2008 when it left the series. Honda fully funded the 2009 season for Brawn in lieu of paying approx $100 million in redundancies that they would have incurred if the team folded at the end of 2008 and the loss of face associated and from what I know the funding was around $120 million for Brawn this season - to be honest Honda were lucky to get out of the mess so cleanly.

[CHT]

There are 1001 ways corporate lawyer can construct the deal between Honda and Brawn, hence I dont see if there is any point in making specific assumptions without any facts. Maybe is might be good to look into the balance sheet of HONDA INC when it is made available to the public.

[ISLAMATRON]

perfect oppurtunity to use one of my favorite lines...

They lose more than that running for the bus.

Honda isnt worried about that chump change anymore

[Rob W]

What makes you think Honda will see any of the Merc money?

It would be logical for Honda to have a clause in the contract to participate in a quick profit. It is equally logical for Brawn not to accept such a clause. We cannot know what was in the contract.

For sure. We can't but it's a safe assumption that Honda aren't all complete idiots and that Brawn wouldn't think he could get an F1 team and IP basically for the ongoing staff/wages bill.

Honda says to Ross Brawn last year: It's over.

He says: I think this car is a winner, could we come to an arrangement where you underwrite the team and keep many of the people employed? It would be good PR for Honda too.

Honda says: Good idea. Your aim is to be self-sustaining within a year: either to be selling or finding a partner. but for us spending more money and taking on the risk (with no PR reward anymore) we want X.

Brawn: OK (he had no choice really.. it's this or find a new job)

This is absolutely a best result for both parties (Brawn and Honda) and when you think about it. Everyone is basically happy and can keep their head up high because Honda trusted Brawn when he said: give me 2009 to prove this car is good and then we can get an investor instead of selling the assets in a fire sale as was the alternative.

Anyone who thinks Brawn got the team designs/chattels from Honda for *basically* walk-away rate is dreaming. The fact they got cars to Melbourne this year is evidence Honda still had a fair interest in the team at a financial level.

[Rob W]

Honda will not see a cent from the buy in by Mercedes - Honda forfeited those rights at the end of 2008 when it left the series. Honda fully funded the 2009 season for Brawn in lieu of paying approx $100 million in redundancies that they would have incurred if the team folded at the end of 2008 and the loss of face associated and from what I know the funding was around $120 million for Brawn this season - to be honest Honda were lucky to get out of the mess so cleanly.

This doesn't seem quite right to me though. The industry and numbers don't stack up to these kind of numbers. Most people are on contract in F1 = Redundancy is nil or very little. At least the significant bulk of essential people. (I have two good friends who've worked in F1 for many years and they've never had big payout clauses - teams just don't sign up to restrictive payout clauses for most people)

I seriously doubt 500-ish people were in line to get an average of $200,000 each redundancy. Nothing even close.

The saving face part I agree with you.. which is why I stand by my above post - this was a much better offer for both Honda and Brawn than folding the team... and since they held all of the cards including the car designs and IP, they would have asked for something in return.

One thing that makes me think this even more is a) people in teams saying Brawn would have to give a portion of any sponsorship gained in 2009 to Honda to off-set their continued expenditure and b), the fact they didn't seem to pursue any significant sponsors even after winning most of the first half of the season races. Maybe this was a deliberate aim to get the attention of any would-be investors/partners.

[WhiteBlue]

BrawnGP's failure to attract significant sponsorship in 2009 was caused by having the same incompetent sorry person on the job who blew it the previous 5 years.

[Chaparral]

This doesn't seem quite right to me though. The industry and numbers don't stack up to these kind of numbers. Most people are on contract in F1 = Redundancy is nil or very little. At least the significant bulk of essential people. (I have two good friends who've worked in F1 for many years and they've never had big payout clauses - teams just don't sign up to restrictive payout clauses for most people)

Rob Im just getting clarification on the deal structure as I was given from the journo so bear with me - will post when he replies which could be a few days if hes willing to have me publish it. Having worked for a Japanese company for a period yes they do have to comply with strict redundancy policy - I believe Honda had 700 employees but a fair whack of the redundancy would have been paid to Button ($25 mil pa) Barrichello (who knows what the salary was but lets say $6 mil pa) Brawn (possibly $8-10 mil remembering Gascoyne was on $8 mil at Toyota) and Fry god knows why they paid him anything but lets say he was on $7-8 mil - on those numbers alone and dependent on how many years were left to run on their contracts that takes up the bulk of the $100 mil in redundancies (remember with the top mgt and drivers its not redundancy payout you pay out the contract and Button for instance had just signed a new 3 year deal) - does that make sense

[Richard]

It is not uncommon to have "sell on" clauses in corporate contracts, and also in contracts for sportsmen, esp in football/soccer. So I wouldn't be surprised. Equally, if Honda wanted to get out as quickly as possible, they may have had a clean break.

As for $100m redundancies, if the F1 company was set up with a fire wall to the parent company, then the F1 company could have folded and staff only get whatever was left in the till (and the value of the assets). We see that regularly in football. Even if the parent company were liable, I can't believe the $100m figure for 500 staff.

They would have been regulated by UK law and staff would typically get 4 weeks pay, a few senior guys could get 6 to 12 months? Still hard to add up to $100m.

AFIK If the drivers are contacted suppliers rather than staff, then they would be behind the staff in the queue for a payout.

Perversely, football has some loopholes whereby the players have to get pad in full first, so players insist a £m payout before the cleaner on minimum wage can get a penny.

[Rob W]

Rob Im just getting clarification on the deal structure as I was given from the journo so bear with me - will post when he replies which could be a few days if hes willing to have me publish it.

Cool. Please do. I'd like to know. Although I'm not really sure a journalist could tell use anything surprising which any number of people working in F1 (like my friends) could. Respect to your friend but I rarely hear anything from journalists in F1 which isn't primarily about getting attention for their articles and with accuracy and fact verification resigned to a distant second in priority.

Having worked for a Japanese company for a period yes they do have to comply with strict redundancy policy.....

...a fair whack of the redundancy would have been paid to Button ($25 mil pa)...- does that make sense

OK.. I hear you on Japanese companies. For that reason alone there is zero chance they operated as one. Since most of the employees were based in Brackley in the UK we know they didn't.

Re: Button being entitled to a 25 mill redundancy etc. Sorry but on this point you're making stuff up. Drivers are not employees nor are many of the key staff in all teams. They are contractors and like contractors in all walks of life they are entitled to basically nothing if a company closes up shop (other than what is due).

If a team folds, it folds. They can walk and not pay anyone anything if they like - same as any other company in the world. As Richard_Leeds correctly pointed out in the above post, F1 teams are arranged as separate entities, 'fire-walled' from the parent company (Even McLaren and Ferrari's team are) as anyone who'd done first year commercial law would advise for a multitude of reasons - one of which is mitigating potential liabilities of the parent company.

Also as Richard_Leeds mentioned 'sell on' clauses are commonplace in the sporting world. This would absolutely be the case when you're talking about one of the most long-term globally successful companies in the world. Since it is absolutely standard practice I'd say in absence of evidence otherwise we should assume it to be the case. I've yet to see a single piece of evidence or even a quote from someone involved which makes me think Honda walked and also offered a free lifeline of money while apparently expecting nothing.

[Chaparral]

Rob I take your point of view but there has been quite articles published on the whole sell off to Brawn in I think Motor Sport UK Autosport etc by credible journos ie Roebuck Hughes etc and even a cursory check on the net pulled this up which is reasonably comprehensive breakdown of the financial side of the deal and the obligations (see below).
Ive dealt with contracts for 25 years in my case artist mgt and record company contracts between both parties and they are very similar in make up/content to mgt or sporting contracts (no Im not a lawyer I was head of International marketing) - and contracts of that nature are water tight - if one party who for whatever reason
cannot deliver their part of the deal then the contract has to be paid out in full or its litigation via the court system. Button had just signed a new three year deal with Honda F1 and so if Honda had folded was entitled to the full 3 year payout thats how it works - same for Brawn Fry Barrichello. Brawn as part of the deal had to take on all the liabilities including staff redundancy now that is a huge risk which fortunately has worked out although there will have been some pain involved at certain staff levels. Anyway check this article out and hope it makes sense.

http://www.sportspromedia.com/deals/_a/ ... nd_assets/