McLaren acknowledges its 'fragile business model' and articulates solution

It is not only Mercedes that is undergoing a change in its corporate structure with INEOS' new investment: McLaren has also confirmed to welcome a new investor. The buyers, led by MSP Sports Capital, now own 15% of the company, eliminating a major cash problem for the team, says McLaren Executive Chairman Paul Walsh. 

Walsh explains that while McLaren's car sales and racing business used to be more closely linked and interdependent, the new investment will give the F1 team the necessary financial leeway. To Autosport.com, Walsh testifies: "I think McLaren had a fragile business model, because fundamentally the cash flow from automotive was then deployed into racing. …. You have two fundamentally different drivers.”

The coronavirus crisis made this dependency even more of a problem, Walsh explains in connection with the decline in car production and sales at McLaren. "If you don't make cars you don't sell them. If you don't sell them, you don't get the cash flow. … Yet, equally, we have our racing team which was continuing to spend money, as it should. That tension made everyone acutely aware that the fundamental model needed adjustments.”

Lowering ambitions

Another option, Walsh admits, was to cut back on the expenses of the McLaren racing team, in order to fill the financial gap that had arisen. Walsh says the following about this: "We could have just trimmed our sails. And we could have just dialled Zak [Brown] back on the money that he could spend. But then we would also have had to be true to ourselves that we would have been dialling back on our ambitions. And we didn't like that.”