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Renault's reversal of fortunes

NEWS STORY
06/07/2008

Renault's team colours really should be red. For a team which was once famous for its cost control and ability to extract success from small investment Renault has had quite a u-turn in recent years. Its latest financial results are no exception as Pitpass' roving business reporter Christian Sylt explains.

Just a few months ago Pitpass reported that in 2006 Renault racked up a £3.6 million loss, down from a £1.5 million profit the previous year. Funding its back-to-back world championships was clearly taking its toll on the team's bottom line and even though it has been starved of victory for well over a year, it is still on the spend.

In 2007 the team's after-tax loss doubled year-on-year to £3.9 million and its turnover crashed 16% to £110.8 million. It isn't hard to work out why this happened. Renault lost a slew of Spanish sponsors in the wake of their home hero Fernando Alonso leaving to drive for McLaren last year. Spanish insurance company Mutua Madrilena and telecoms giant Telefonica were two of the biggest and together were contributing around £14 million to the team.

Finishing third last year with just one podium during the season put the brakes on lucrative success-linked bonuses paid by sponsors but cut staff bonuses too. Accordingly staff costs were down 10% to £33.9 million. However, despite this, the salary of its highest-paid director, believed to be flamboyant team boss Flavio Briatore, accelerated 8% to £940,000.

Renault is the first of the UK-based F1 teams to file its accounts for last year so comparisons of financial performance can't be made with the other teams. However, in 2006, Renault had the highest total costs, at a whopping £134.3 million, of any of the UK-based team - more than even McLaren and Honda. The days of Flavio working with a tight budget are over but how long they will last is another matter.

In 2005, Carlos Ghosn, boss of the team's ultimate owner the Renault car company, said "Formula One is a cost, if you don't have good results but Formula One is an investment if you have good results and you know how to exploit them." Provided that Renault doesn't mind racking up the cost, Flavio should have nothing to worry about. Otherwise, the team had better hope for a win pretty soon.

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