How McLaren became a winning team again in Formula 1


McLaren‘s recent success at the 2021 Italian Grand Prix didn’t come without its fair share of pains. Here is a look at their decisions which allowed them to reverse a downward spiral and become a fighting force into the future.

Management

Zak Brown’s appointment as McLaren’s CEO has not only allowed the rapid turnaround of McLaren, but the establishment of a more stable and efficient team for their future in Formula One. As United Autosport’s co-founder in 2009, his management skills saw his team bed into multiple championships and see immediate success. This was enough to warrant him to be placed as executive director in 2016 and CEO of the McLaren group in 2018. Since then, McLaren has been able to reverse their downturn from the infamous ‘Honda era’ and push back up to the sharp end of the grid. His marketing prowess is renowned, as he has been able to collect a multitude of big-name sponsors these last few years: Coca-Cola, Dell and Hilton. In the world of Formula One, he is second only to Toto Wolff in his natural ability to draw together the realms of business and racing.

Andreas Seidl joined the Porsche LMP1 team in 2013 and was promoted to team principal in 2014. Following this, the team won three back to back Le Mans races, indicating his ability in reshaping the team in a short amount of time to achieve success. This contribution to Porsche’s Le Mans success earned him the spot to fill in the vacant role left by Éric Boullier. Since then, McLaren’s efficiency and motivation have increased. He’s been able to breathe new life and determination into the team, bringing them up to where they stand today. It’s also worth noting that current McLaren driver, Daniel Ricciardo, highlighted Seidl’s management as a major draw point to the team, enticing him to join for the 2021 season. 

Bringing in Torro Rosso’s technical director, James Key, was another crucial signing to fill in the empty role. By bringing him in for the 2019 season, McLaren started their long work to repair the damages of the poorly designed car, whose faults were laid bare after the switch from Honda to Renault power units. 

Financial Backing

As Covid-19 ramped up in early 2020, McLaren announced that it would lay off 1200 employees from their automotive, technology and racing teams as part of a restructure. Understanding that they would be unable to support them through the pandemic, this was a logical decision. It also supported their smoothening of the hierarchy and attempts to limit inefficiencies coming into the cost cap. This helped simplify and sharpen all three divisions so that similar outputs could be achieved with less.

To further protect the team during the pandemic in 2020, McLaren acquired 150 million pounds from the Bank of Bahrain. This was likely supported by the Bahraini sovereign wealth fund, Mumtalakat Holding Co, which holds a 56% stake in McLaren and 44% of the Bank of Bahrain. This financing likely kept their developments and facilities on course, while still supporting their current employees.MSP Sports Capital also provided an investment at the tail end of 2020. The US-based investment firm acquired a 185 million pound investment into the racing brand, highlighting that McLaren’s “history, management and cutting-edge technology capability” as major draw points to their decision. While debt financing provides an immediate injection, it can lead to difficulty in trying to meet profitability requirements and return on investment. However, McLaren has displayed fantastic development through this last year and will likely continue their trajectory upwards, limiting stress levels for their investors.

Earlier this year, McLaren announced a “sale-and-leaseback” strategy with their iconic Woking factory. By selling the building, McLaren was better able to repay their past loans and buy out the previous shareholder, Ron Dennis. This also better allowed the team to allocate the sudden cash boost not only into leasing the building itself, but also the other factors of the business itself.

McLaren is also not open to the possibility of having a title sponsor, as it would detract from the identity of McLaren itself. General partnerships and sponsorships are the current priority and help generate a healthy amount of income for the short and medium-term. This would help pad out the funds to maximise the cost cap in the coming seasons, reducing their liability from debt financing and more from the directly generated cash.

Their past trajectory

Ultimately, it was realistic goal setting that allowed McLaren to perform a fast recovery without a major technical overhaul. They set aims to simplify their business hierarchy and did so. They aimed to bring in new management personnel and did so to their benefit. By continuing this iterative process of pointing out areas of improvement and subsequently achieving them, they’ve been able to gradually push themselves forward. All of this without holding out until the cost cap or new generation of cars, which their rivals Renault/Alpine and Racing Point/Aston Martin stated.

Their future

With McLaren’s entry into Extreme E and their continued participation in the Indycar championship, the British outfit is increasing its brand image. By tapping into the growing American market, as well as the efforts for global ecological sustainability, McLaren has placed their brand firmly in both, aiming to cement themselves as a household name in multiple areas. More eyes on the brand mean more interest and more interactions.

The upcoming wind tunnel, planned to finish in 2022, comes in as a major upgrade to the team. Rigid and extensive tools, like wind tunnels, help identify areas of airflow improvement. This will become a significant point for the upcoming season, with the base 2022 car model definitely requiring several tweaks to ensure that it maximises the package’s performance and helps the drivers bed in better. With their progress, lineup and stability going forwards, McLaren has every tool on hand to solidify and grow their legacy in motorsport.





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