The current financial meltdown has been tough for practically every niche of the economy, but car companies have been particularly slammed. Renault is the latest company in the news and questions are being raised about its Formula One effort.
Renault is a French car company that is the equivalent of GM in the United States. Unfortunately, its current economic condition is about the same as well. The company just reported over a billion dollars in losses for the last half of 2008. Renault’s market is much smaller than most car companies, so these are devastating numbers.
Things are so bad for Renault and other French car companies that the French government has had to step in to help. It is providing the company a 3 billion Euro loan. It is also providing the financing arm of Renault with another billion to try to make ends meet while the current contraction takes place.
Given the current financial situation for Renault, rumors abound regarding whether the company will continue to fund its Formula One team. Renault has always been a bit ambivalent about its investment. One needs only look back to when Fernando Alonso left the team for McLaren Mercedes. The primary reason was it was unclear how committed Renault was to continuing the team. With money tight, a pull out may be inevitable.
Will we see Renault continue to field a team in Formula One? The clear answer is yes for the start of the 2009 season. If the economic hurricane sweeping the globe does not stop, it is hard to see the company continuing the team through the full season. If nothing else, taking billion dollar loans from the government is going to make it difficult to do so with taxpayers not particularly interested in going racing!
Renault is not the only team facing financial issues. Even with the cutbacks in budgets, it is important to realize many of the teams are like ducks. They look calm above the water line, but their feet are thrashing about below it. Mercedes and BMW are heavily reliant upon the US market for revenues.. If sales nose dive [and they are], one could see those teams in trouble. Toyota certainly has to be looking at its team. Has any company spent so much money for so few results?
The 2009 Formula One season is shaping up to be incredibly interesting. How will the new cars perform? Who will win the championships? Who will be left standing at the end of the season – literally.