The McLaren Group has announced a £175m drop in first-quarter earnings for 2020 compared to 2019, but has targeted major cost savings and £275m of financing to improve its position.
McLaren reported total revenues of £109m for Q1 2020, down from £284m last year, mainly because the COVID-19 crisis has closed car dealerships and suspended automotive production.
Revenues from its Racing division dropped £4.4m compared to 2019 because the pandemic means new season is yet to start and McLaren has recorded no Formula 1 prize money, and McLaren had also sold three heritage cars in 2019.
McLaren finished fourth in the constructors’ championship last year, up from sixth the season before.
The £4.4m drop for McLaren Racing is mostly offset by £4.1m in increased sponsorship.
McLaren has now outlined “cost rationalisation measures” that aim to save up to £185m by significantly reducing capital expenditure (around £110m), furloughing staff, reducing salaries and eliminating bonuses (around £45m) and reducing operational expenditure including racing costs (around £30m).
And McLaren is also looking at “a number of potential financing alternatives, secured and unsecured, of up to £275m equivalent to strengthen its liquidity position”.
McLaren’s Q1 numbers were published 48 hours after the announcement of a proposed restructure that is expected to result in around 1,200 redundancies across its Applied, Automotive, and Racing businesses, plus support and back office functions.
Around 70 F1 staff are expected to be part of the Racing redundancies.
As well as the Covid-19 crisis, the incoming F1 budget cap – still $45m higher than McLaren had pushed for – was cited as one of the reasons for its restructuring.
“McLaren Racing has been a proponent of the introduction in 2021 of the new Formula 1 budget cap which will create a sustainable financial basis for the teams and lead to a more competitive sport,” said McLaren Group executive chairman Paul Walsh earlier this week.
“While this will have a significant impact on the shape and size of our F1 team, we will now begin to take the necessary measures to be ready to run at the cap from 2021 onwards, in order to challenge again for race wins and championships in the future.”
McLaren Racing CEO Zak Brown has also said F1 “wins” from a raft of cost-saving initiatives approved on Wednesday.
The likes of Mercedes, Ferrari and Red Bull will suffer more from the new spending limit, and it is hoped this – plus a new aerodynamic development handicap – will present McLaren with an opportunity to return to fighting for wins and titles.
However, team principal Andreas Seidl acknowledged the business had a difficult period ahead of it.
“Adjusting the way we work and right-sizing the team to this new cap over the next months is a massive and painful task and, highlighted by our news earlier this week, will sadly mean losing team members,” he said.
“But our aim is to be the best-sized and most efficient team in the future.”