For years we have heard that Renault was one of the lowest-spenders of the car manufacturer-owned F1 teams. Just last May, when the FIA first proposed a budget cap which would limit team spending this year to €175m (£151m), Renault's flamboyant boss Flavio Briatore said "I already pay 40 per cent less than the cap." However, news which has been revealed today in the Telegraph by Pitpass' business editor Chris Sylt makes one wonder what on earth Briatore was talking about.
In fact, it turns out that last year Renault's costs were the highest-ever filed in accounts by any F1 team. Its costs in the year to the end of 31 December 2008 increased 38% to £158m and its after-tax losses doubled to £10.3m.
The costs include all the expenses involved with running the team except for the design and construction of its 2.4 litre V8 engines. These are not shown on the team's accounts because the directors do not believe that it is possible to provide a reliable estimate of their cost. However, F1's industry monitor Formula Money estimates that Renault spent a total of $121m on its team in 2008. Remarkably, despite the global recession, the accounts reveal that the car company increased its investment in the team.
The team's increased investment from Renault stands in stark contrast to the car company's reversing fortunes. During 2008 Renault's share price lost 80% of its value and its net income fell by €2.1bn (£1.8bn) as revenues dropped 7% to €37.8bn (£32.6bn). Whereas Renault announced plans in September to cut 6,000 jobs, its F1 team added 17 staff last year with the bulk of the additions in the engineering department. The team's highest-paid director, believed to be Briatore, even had a slight hike in his £943,000 pay.
The additional financial fuel from Renault, along with new sponsorship deals signed with Pepe Jeans and Spanish insurance company Mutua Madrilena, drove the team's revenues to £148m - a 33% increase on 2007.
Yet despite having a blockbuster budget the team failed to find success on the track as its star driver Fernando Alonso finished fifth in the 2008 standings. Renault spent €15m (£12.9m) on developing Kers last year so it is a big slap in the face that the technology failed to live up to its hype to such an extent that it has now been dumped. If Renault had not spent the money on Kers it would not have made a loss.
The team's hopes were also pinned on its opening of a new CFD design centre in July last year which added £5.3m to the book value of its buildings. Its tangible assets stand at £35.2m but shareholders' funds fell £10.2m as a result of its after-tax loss.
Bernard Rey, the team's president, confirms that the team is a going concern since "Renault Group will provide sufficient financial support for the company to meet its liabilities as they fall due for a period of not less than one year and to continue trading for the foreseeable future."
However, we have all heard this line before. Indeed, Honda said the very same thing in its accounts last year which, at the time, showed the highest-ever costs for an F1 team. Just weeks later it pulled out of the sport… so the news about Renault's spending is sure to reignite speculation that the car company could follow Honda out of the door.
Unlike Honda's predicament when its accounts were released last year, Renault faces a funding shortage. The team's biggest sponsor, Dutch bank ING, has announced that it will not renew its deal which expires at the end of this year. ING is believed to be paying $65m (£39.5m) annually and, in the current economic climate, Renault may well face an uphill struggle to replace it.