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Rocky road for F1 sponsorship

NEWS STORY
25/01/2009

Anyone who thinks that F1 has driven through the global downturn and emerged unscathed should take a look at an article in today's Telegraph by Pitpass' business reporter Chris Sylt.

The new liveries for the six teams launched so far reveal that fewer sponsors have joined F1 in 2009 than in any of the past five years, with just 1.5m ($2m) of new deals done so far (see below). In contrast, 100m ($138m) of new sponsorships were signed in 2007 when the ban on tobacco advertising saw a wave of new brands enter the sport including banking giants Santander and ING.

Crucially, F1 teams have shed seven times more sponsorship than they lost last year with Williams losing more funding than any other team.

Williams is the only team not owned by a billionaire or a car manufacturer and even before the downturn began it had hit hard times. Over 2006 and 2007 it lost a total of 50m and trebled its net debt in order to stay on track. According to figures from F1 industry monitor Formula Money, this year Williams has lost an estimated 33m ($45m) of sponsorship from Baugur, IT-firm Lenovo and Brazilian oil company Petrobras. It has yet to announce replacements.

This is a big cloud over Williams and the team's chief executive Adam Parr reveals the extent of it in a feature in the Financial Times which says that over 60% of the team's sponsorship target is already committed for this year. With just over eight weeks to go until the season-opener in Melbourne, Williams doesn't have much time to add sponsors to its launch livery.

A handful of its sponsors, such as recruitment firm Randstad and Philips, have upgraded their involvement and Williams has been advanced prize money by F1's commercial boss Bernie Ecclestone. Nevertheless, Williams still has the lowest sponsorship revenues of the top teams and Parr says "these are basic budgets to get the job done. There is no fat in this system."

Ironically, Williams' biggest backer is believed to be the beleaguered bank RBS which recently forecast an annual loss of 28bn - the biggest in UK corporate history. It is now majority owned by the British government and new chief executive Stephen Hester has asked his senior executives to make cuts of between 10% and 20%. Hester specifically highlighted F1 when he said earlier this week that "we have many, many items of cost. Let's take one: sponsorship of Formula 1." He didn't make a firm statement about the future of the bank's Williams sponsorship, which has two years to run, so Sylt pressed further.

An RBS spokesperson ominously told Sylt "we recognise the need to ensure that our sponsorship activity reflects the process of restructuring that the bank has underway."

The downturn has even dented sponsorship revenues of car manufacturer-owned teams. McLaren has lost several sponsors and not replaced them. As has BMW, which had the biggest sponsorship drop after Williams, losing 18m ($25m) from the departures of Dell and Credit Suisse. Despite its shaky status, finance companies still provide over 73m ($100m) to F1 teams.

Ferrari's 142m ($196m) budget is by far the biggest of any team but even it lost two sponsors. Over half of its revenues come from Marlboro which is F1's biggest-spending sponsor even though it doesn't display its brand on the car.

F1 has lost a total of 60m ($86m) in sponsorship this year and this doesn't even include the departure of the nine brands, including Ray-Ban and Seiko, which partnered the moribund Honda team. The Japanese car company pulled out of F1 last month but the team may be sold so its sponsors may stay in the sport.

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