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Formula 1

Why McLaren’s building a new empire so soon after its crisis

by Scott Mitchell-Malm
4 min read

McLaren’s expansion into Extreme E underlines the health of its Racing division, including the Formula 1 team, one year after the company was seeking to ease a growing financial crisis.

In response to the coronavirus pandemic the company made redundancies including among the Racing division, had a major cash influx from majority McLaren Group owner Bahrain’s Mumtalakat group, and secured a $150m loan with Bahrain’s national bank.

Last December, McLaren agreed a £185m buy-in from MSP Sports Capital, a consortium of US sports investors, that gave MSP an initial 15% stake in the Racing division rising to a maximum of 33% by the end of 2022.

McLaren has since sold its iconic Woking headquarters and leased it back on a long-term deal to raise more funds.

Now its Extreme E entry, announced on Friday, will be McLaren’s second non-F1 racing programme after joining the IndyCar grid last season with a full-time entry in collaboration with Arrow and Schmidt Peterson.

“It’s very significant,” said McLaren Racing CEO Zak Brown when asked by The Race about adding a new project given the context of 2020.

“Our challenges last year were well-documented and reported.

“When we brought in our new partners from MSP Sports that gave us the resources we needed to first and foremost invest in our Formula 1 team.

“As you know we have windtunnels and capital expenditure projects that are being put in place and accelerated.

“Ultimately, we want to grow our franchise, our fanbase, our sponsor portfolio.

Lando Norris McLaren Monaco 2021

“Now that we are halfway through our journey in Formula 1 – we’re not yet winning races but we are getting podiums – we feel that now we have a lot of momentum.

“We want to build on that momentum. We have the resources to do so. So I think things are extremely exciting inside McLaren Racing.”

McLaren admitted last year it would have been extremely difficult to keep making progress in F1 without that new investment.

The Racing division was still in a decent position itself but found itself vulnerable as part of a wider McLaren Group that was in serious financial difficulty with a fundamentally “fragile” business model.

The sale of a significant but minority stake in Racing, which obviously includes the F1 team, was an extremely important step within the process of addressing that.

It reduced pressure on the Group at a time of great financial sensitivity while also reinforcing the inherent strength of the Racing division.

“100% our financial situation at McLaren Racing is extremely strong,” said Brown.

Lando Norris McLaren Baku 2021

“Of course we have to be very diligent and get a return on investment anywhere we’re spending money, whether that’s entering a new racing series or funding a new windtunnel. But yes, we are financially very healthy.

“Our competitiveness in Formula 1 has allowed us to look into IndyCar, that’s allowed us to enter into Extreme E, because what we will never do is distract or detract from our Formula 1 efforts.

Felix Rosenqvist Arrow McLaren SP IndyCar 2021

“IndyCar and Extreme E, they’re all there to be complementary and they help accelerate our Formula 1 efforts.

“As an example, Arrow Electronics – our title partner in IndyCar – is now a big partner in our Formula 1 team.”

McLaren has essentially been able to take bigger and bigger steps. Its F1 revival allowed it to look at IndyCar. The success of that dual programme encouraged it to take the plunge on Extreme E with the knowledge these projects can be complementary rather than distract or detract from F1, which is still McLaren’s main focus.

To say success has bred success would be premature in this case given McLaren’s only on an upwards trajectory in F1, is still in the early stages of its IndyCar project, and hasn’t so much as tested an Extreme E car.

Extreme E

But an expansion of activities post-crisis is a clear step forward from being able to keep things running as they were, which was itself a victory in 2020.

After a year of painful contraction at times, McLaren’s intent to build a new empire is clear.

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