A Formula One team runs between $100 million and $200 million annually to maintain.
Daimler AG plans to stick with Formula One racing despite the company’s need to conserve cash and in the face of ongoing controversies regarding the conduct of its McLaren Mercedes team.
Dieter Zetsche, Daimler’s chief executive officer, said the company will police the company’s Formula One expenditures more closely and watch budgets more closely, after he was pressed by stockholders at the annual meeting. The maintenance of a Formula One team runs between $100 million and $200 million annually, and several manufacturers have begun expressing doubts about the overall value of the Formula One racing circuit.
Honda pulled out of the 2009 season to conserve cash by selling its team, the automotive equivalent of selling the crown jewels. While Ferrari took the works title, McLaren driver Lewis Hamilton took the driver’s championship last year.
Several shareholders challenged Zetsche to justify his spending money on Formula One at time when it is losing money and more than one third of the company’s workforce in Germany is working short work weeks. In addition, Daimler is also asking the company’s works council for an additional $2.6 billion in concessions. Daimler has lost significant sums in the past two quarters and faces a liquidity crisis.
However, Zetsche, who considers himself a racing buff, said Formula One remained a valuable tool for the Mercedes brand, which has to spread its limited marketing dollars around the world.
Formula One races were on television last year for a total of 13,000 hours. In addition, the live and delayed telecasts are seen in every corner of the globe where Mercedes-Benz sells cars, noted Zetsche. In addition to serving as Daimler AG’s CEO, Zetsche is also head of the company’s Mercedes-Benz division, making him directly responsible for the company’s Formula One program.
How much racing actually helps promote the sale of mass market new cars is a hotly contested debate.
“We consistently receive from racing value far above what we spend on it,” Zetsche said in response to shareholders’ questions. We are going to continue to support Formula One,” added Zetsche, who estimated the net value of the advertising impressions created the Mercedes-Benz’s racing effort at more than $1.5 billion.
Mercedes-Benz Motorsport Vice President Norbert Haug said at the second race of the season in Malaysia last week that the future of support was uncertain.
Zetsche conceded that the Mercedes team was plagued by controversy and scandal last season. That won’t happen again, he said. But already there are allegations of McLaren using illegal devices. The sport’s sanctioning body will review the latest charges next week.