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DECEMBER 7, 2015

What the Renault deal means


Romain Grosjean, Japanese GP 2015
© The Cahier Archive


We are just one week away from Renault finally completing the buyout of the Lotus Formula One team, after a gestation period of about eleven months, with the good news being that one of the historic Formula One outfits will not only remain on the grid but will have a good enough budget to return to the front of the field in the near future.

Unlike Ferrari, McLaren or Williams, the Enstone-based outfit has raced under different names since the start of 1981, when Toleman joined Grand Prix racing. Toleman gave way to Benetton, before the Italians sold the team to Renault and, eventually, the French sold the team to Genii Capital, who ran the team under the Lotus banner. For 2016 Renault will be back with its works team, the third time in nearly 40 years the Regie will be running a Formula One team and that has to be good news for the sport, for a committed manufacturer is always a plus for Grand Prix racing.

While it was widely anticipated Renault would buy Lotus and take over the team before the end of the year, it's the length of Renault's commitment to Formula One that has surprised most of us. While Ferrari, Mercedes, Red Bull, McLaren and Williams have signed up to be in Formula One until the end of 2020, Renault has committed to Grand Prix racing for nine seasons and has guaranteed Bernie Ecclestone they'll be on the grid until the end of 2024.

It's not a secret that it was the negotiations between Renault and Ecclestone that delayed the announcement of the deal to buy Lotus. As far as I know, Genii and Renault had agreed terms around mid-October and the French had started paying debts to former drivers, to suppliers and technical partners even before that, so there was no doubt, from either side, the deal was going to happen. But Renault wanted to have the best possible deal from the Formula One Group and getting money out of Bernie Ecclestone is, at best, a very difficult task. On top of a one-off payment of 100 million dollars, to save Lotus and prevent Formula One from losing yet another team, Renault wanted to have access to the same fixed bonus Mercedes has and once that was granted the story goes that Ghosn asked for a few million dollars more per year and Ecclestone lost his cool and stopped negotiations on the spot.

In fact, as we arrived in Abu Dhabi for the final Grand Prix of the season, there was a sombre mood in the Lotus camp. "The deal is off", told an Enstone veteran, "Bernie is mad and won't sign a deal now", another one explained. And this is where the story becomes interesting, for Renault had sent one of their top men, Jerome Stoll, to the UAE to negotiate with Ecclestone.

Monsieur Stoll may be an unknown for the regular Formula One fan, but he's President of Renault Sport F1. In addition to his duties as Chief Performance Officer and Executive Vice President Sales & Marketing of the Renault Group, Jerome Stoll is also the link between the Renault Executive Committee and the F1 hub at Viry-Chatillon. And he had a full mandate from Renault's Board to negotiate the company's deal with the Formula One Group, so he was not in Abu Dhabi to get away from the cold in Paris.

Ecclestone, though, was upset with the French, for he had done a verbal deal with Ghosn a while ago, had shaken hands on it and, as we know, for him that was as good as a written contract and perceived the French's new demands as going back on their word. So Ecclestone was not willing to play ball and the whole deal was in danger of collapsing. Renault felt strong on the knowledge that if they'd pull the plug on their Formula One investment not only Lotus would collapse but Red Bull wouldn't be able to race next year, for lack of an engine, and that would also lead to the demise of Toro Rosso for it would make no sense to have a junior team if the main team was gone too.

But Ecclestone was not budging, being fully aware Renault had a deal in place with Red Bull and Tag Heuer was paying for it, so it seemed we were going down a dead end, until CVC Capital Partners' Donald McKenzie intervened. Being the man that represents the fund in the Formula One Group board, McKenzie was not willing to see the value of his investment plummet on small change - ten million dollars per year represents a life changer for you and me but it's peanuts for a company that takes home more than 900 million dollars per year... - and agreed a deal with Stoll, costing the Formula One Group more than Ecclestone had initially agreed with Ghosn, but less than what the French were demanding. In exchange for the extra bonus money, he got Renault to agree to stay in Formula One until the end of 2024, adding value to CVC's shares as it's rumored the fund is trying to finally sell them and leave Formula One - having made an estimated profit of around 500 per cent on their initial investment!

Now that Renault has a really good deal, we can expect Mercedes, Ferrari, Red Bull, McLaren and Williams to knock on Ecclestone's door, demanding better deals for them in exchange to extending their commitment to Formula One for another four years, until the end of 2024. And if Aston Martin really gets to run Force India, even as a minority shareholder with Diageo controlling the company, there are solid enough foundations to go and do a similar deal, guaranteeing seven good teams will stay in the sport for another nine years. That would be good enough basis for new buyers to come and finally remove CVC Capital Partners from the sport and one can only hope the new owners will have some knowledge and respect for Formula One and its fans, rather than coming around just to suck as much money as possible out of Grand Prix racing.