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McLaren Formula One engineers set to cash in on winning formula

Category : Business

F1 manufacturer McLaren is applying its world-class expertise to new markets – and not just racing cars

Secretive billionaires, princes and superstars might supply the Formula One circuit with its brash glamour and pageantry but when the season returns with a roar in March, two of the cars tearing round Melbourne’s Albert Park will have been constructed in a sleepy corner of Surrey.

The McLaren Technology Centre (MTC) in Woking, exemplifies the quieter fortune being made by the UK motor sport industry: the Norman Foster-designed building is the centrepiece of a sector worth around £6bn to the UK economy. Eight of the dozen F1 teams who competed in last year’s championship are based in the UK, and McLaren, which came third in the constructor’s league, is one of its most successful participants.

At McLaren’s headquarters, the relentless pressure of the F1 calendar is distilled to a zen-like focus. Long white corridors and glass lifts take visitors to an indoor boulevard: historic McLaren vehicles are lined up on one side, and an artificial lake can be glimpsed through a glass wall on the other.

Ron Dennis, executive chairman of the group, which is majority owned by Bahrain’s sovereign wealth fund, describes the atmosphere as “a reassuring hush”. The new racing car is being built behind frosted glass at one end of the boulevard. But McLaren is looking beyond motor sport: last year it opened a production centre next door, where it builds the 12C and 12C Spider sports cars – offshoots of decades of competing in the upper echelons of F1.

Production of the £200,000 12C model is overseen by Mike Flewitt, who managed production of 8,500 vehicles a day when he was vice-president of manufacturing at Ford of Europe. McLaren produced a total of 1,552 cars in the whole of last year. “We are a road car company that has developed from a race car company,” he says. “This is McLaren standards applied to state-of-the-art vehicle manufacture.”

At Ford, Flewitt operated to a cycle time – the time taken by a production line task – of 45 seconds. At McLaren it is 45 minutes. There is no conveyor belt, no noise from stamping machines or robots. The only sound is the squeak of tyres as completed models are driven across the white-tiled floor into testing booths.

Flewitt says: “If you have a white floor, it creates an imperative to keep it clean. It looks like this because we want it to be a great working environment. I also believe the aesthetic is vital. This gives you confidence in the quality of the product. It is difficult to give people that confidence if you work in a tatty facility.”

In contrast with mass-market manufacturers, the paint finish is applied manually by specialist staff rather than by robots. I watch Flewitt submit a finished 12C Spider bound for Singapore to a minute inspection. He praises the way the volcano-orange paint has been sprayed on to the contoured vehicle. “Paints have different compositions,” he says. “The sprayer’s art is to understand the model so you get an even finish.” There would be no financial or aesthetic gain from spending millions of pounds on paint-spraying robots, he adds, instinctively flicking away a dust mote. Like their mass-produced counterparts, the majority – eight out of 10 – of McLaren sports cars will be exported. Four dealerships are opening in China this year.

Elsewhere in the building are other examples of McLaren excellence, overseen by its McLaren Applied Technologies (MAT) arm, which supported Team GB in cycling, canoeing, rowing, kayaking and sailing at the 2012 Olympics.

The rationale behind MAT is that McLaren should make more financial gain from its world-class abilities in design, analysis and production. At one end of the boulevard, propped next to an F1 car, is the £25,000 Specialized S-Works Venge bike ridden by Mark Cavendish in the 2011 Tour de France, which McLaren helped design. The director of MAT, Geoff McGrath, says McLaren’s skills in telemetry, or monitoring a car’s performance through accumulated data, are the key. This allows McLaren to simulate how a car, or any product, will perform by building a computer model of it.

McGrath says: “We took a formula that worked very nicely for racing car design, then applied it to road car design, then bike design. We take the knowhow, the skills that we never commercialised, and hundreds of millions of pounds of research, and apply it to new markets.”

The healthcare market is the company’s next target, he adds.

The British automotive industry has delivered a strong performance in the post-crunch doldrums. But although Nissan added a further 280 jobs at its plant in Sunderland last month, carmakers are unlikely to open new sites here; what is more probable is that they will follow the example of home-grown Jaguar Land Rover, which recently started work on a factory in China. Instead, the hope is that suppliers – the makers of nuts, bolts and components – can spur domestic growth. There is an estimated £3bn worth of unsatisfied demand for UK-made components.

Flewitt says about 50% of the McLaren sports car’s suppliers are UK-based. But the key, state-of-the-art component, its carbon-fibre chassis, is made in Austria. Flewitt believes that could change – McLaren has already done much of the hard work by designing the kit.

“It is a technology where we in the UK can be very competitive,” he says, adding that the government can help by bringing in production partners and wooing potential customers.

Nick Henry of consultancy ICF GHK says Britain’s F1 industry has dominated the sport for more than 30 years despite attempts to develop rival hubs in Bahrain, Malaysia and South Africa: “The history of F1 is continued UK success in the face of globalisation, which is chipping away at it but feeding its growth at the same time. These are flexible small and medium-sized businesses doing high-quality engineering. There has been churn in [team] ownership but behind it this core of British engineering creates products the world pays for.”

Amid the clamour over the need to rebalance Britain’s struggling economy, the long-term success of the country’s motor sport industry offers a quiet lesson in how it can be done.

Formula One teams get £115m windfall

Category : Business

Concorde Agreement commits teams to racing until the end of 2020, paving way for a $10bn flotation of the sport next month

Formula One’s teams will share a one-off $180m (£115m) windfall from agreeing to sign a commercial contract which paves the way for the $10bn flotation of the sport on the Singapore stock exchange next month.

All eyes will be on F1′s superstar drivers in Sunday’s glamorous Monaco Grand Prix, but the deal makes their bosses the real winners as it will be the biggest single payment they have received from the sport.

The Concorde Agreement commits the teams to race until the end of 2020, and getting them to agree to the contract has been a crucial part of billionaire F1 boss Bernie Ecclestone’s plans to float the business. “It’s a good deal for the teams, it’s great,” said Ecclestone.

Around 30% of F1 will be listed. Private equity firm CVC, which took over F1 in a debt-financed buyout in 2006, will remain its controlling shareholder. Ecclestone, who owns 5.3% of F1, worth $530m, said he may increase his stake through the flotation (IPO).

The present version of the Concorde Agreement expires at the end of the year but in March Ecclestone announced most of the teams had already committed themselves to the extended contract. A senior industry source said: “There’s some signing fees for the teams of around $180m.”

Peter Brabeck-Letmathe, the chairman of global food group Nestlé, will become F1′s chairman and will be given an additional 0.2% of the business to add to the 0.3% he already holds for being one of its independent directors.

Representatives from McLaren, Ferrari and Red Bull will also join F1′s board, providing the teams with a greater say than before. To tempt them further, Ecclestone has inserted clauses into the new contract which favour the best performing and most loyal teams. It convinced them to sign and the rest had little choice but to follow suit.

The biggest risk to F1′s finances would be the departure of the teams, but under the new deal, teams can only quit if their prize money fund falls substantially. Ferrari can only leave if there is a change of control and profits drop 25% over the next two years.

Under the current deal the teams share 47.5% of F1′s underlying profit, with Ferrari getting an additional 2.5%.

“The current deal pays the teams 50% plus some extras which means it pays them about 59%. The new deal is basically 60% plus a little bit more so it is going to be about 63%,” says a person with knowledge of the IPO.

The prize fund will stay at 47.5% but the top three teams from the past three years will get an additional 7.5%, which will come to a minimum of $100m. Ferrari will get a further 5% due its historic status. On average it means that every year “the teams are going to get around $70m more,” said Ecclestone.

In 2011 the teams received $686m in prize money as F1′s underlying profits came to $1.17bn on turnover which had grown 6% to $1.5bn.

The new agreement will also allow Ecclestone to set up more races. There is currently a limit of 20, which has been reached this year. However, the F1 boss said under the new deal “we have flexibility to go beyond 20 races. We have got four or five places waiting to do something.”

More races would provide a substantial boost to F1′s revenue. Its biggest single revenue source is the fees from race promoters – who pay their hosting fees months in advance. More events would also boost income from trackside advertising and corporate hospitality.

Ecclestone said that over the next few years F1 was likely to increase its calendar to 22 or 23 races.

Since 2003, F1′s revenues have grown 10% every year on average and the business has a very low level of capital expenditure. It is understood to invest under $10m annually and, outside the team prize money, total costs last year came to around $350m. F1 only employs just over 300 staff with their total pay coming to approximately $50m.

Alan Mann

Category : Business

Motor-racing team owner who enjoyed remarkable success, particularly with Ford cars, in the 1960s

Alan Mann, who has died aged 75, was one of British motor racing’s most enterprising and successful team owners in the 1960s. Although never a participant in Formula One, Mann’s operation – based in Byfleet, Surrey – competed with great success in international sports and touring car categories when those two disciplines almost matched grand prix racing in terms of prestige and diversity.

Mann was closely involved in Ford’s global assault on international motorsport from 1963, having called time on his own modest racing career. This saw him compete in a variety of machines including a Jaguar C-type and even an elderly HWM-Alta single-seater Formula Two car in which he contested the non-championship 1957 Naples grand prix.

Born in Worthing, West Sussex, Mann attended Brighton and Hove grammar school before progressing to Brighton College. Much to his regret, injury debarred him from doing his national service, and he joined the motor trade, working his way up from the role of a straightforward junior salesman.

By the early 1960s, Mann was running a garage in Sussex before establishing his own Ford dealership. He approached Ford in 1963 to see if it might be possible to acquire one of the new Lotus Cortina saloons to field in races to promote his business, but the new car had not yet been made eligible for racing. Instead, Mann was offered a Cortina GT, which he fielded with some success; it was driven by Jimmy Blumer.

Capitalising on his links with the major motor company, Mann was then hired to prepare the huge American Ford Falcon for its European competition debut on the 1964 Monte Carlo Rally. Ford invested £1m in this programme and Mann’s company was given just 14 weeks to prepare the cars. It almost paid off, with the Falcons setting the fastest time on all the special stages and Bo Ljungfeldt finishing the event second behind Paddy Hopkirk’s Mini Cooper.

Finally, in 1965, Alan Mann Racing (AMR) got their hands on the definitive Lotus Cortina in which Sir John Whitmore stormed to a dominant victory in the European Touring Car championship. At the same time, the team got involved in developing a lightweight Ford GT40 sports car for endurance racing, and also oversaw the development of the AC Daytona Cobra coupe, which was bidding for the prestigious and hotly contested GT category in the World Sports Car championship.

Mann’s close links with Ford led to his receiving some unexpected technical commissions. Ford’s motorsport supremo Walter Hayes had fallen into conversation with the film producer Albert “Cubby” Broccoli, with the result that AMR suddenly found itself building a handful of Ford Zephyr-engined cars for Chitty Chitty Bang Bang (1968). Mann’s company was paid £80,000 for the job, one of the most profitable business ventures of the team’s six-year existence. AMR also built the Len Bailey-designed Ford F3L endurance racing sports car at the start of 1968, but much of the momentum behind this programme was lost after the British driver Chris Irwin crashed the first car heavily at the Nürburgring, sustaining head injuries from which he was fortunate to survive.

The high-water mark of AMR’s achievement came in 1968-69, when the rugged Australian driver Frank Gardner scored back-to-back victories in the British Saloon Car championship, as it was then known, in the team’s distinctive red-and gold-liveried Ford Escorts. But at the end of 1968, Mann was tipped off that Ford was planning major cuts to its international motorsport budget. He sold his racing team to Gardner and walked away from motor racing. He subsequently established a successful helicopter-leasing business, which he sold in 2008.

He is survived by his wife, Sharon, and sons, Thomas and Henry.

• Alan Mann, motor-racing team owner, born 22 August 1936; died 17

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