The McLaren Group is involved in Formula 1 and other motorsport, manufacturing luxury and high-tech cars through McLaren Applied. This British company is based in Woking, England. Ron Dennis founded the group in 1981, shortly after acquiring the Formula 1 McLaren team in 1981 as the TAG McLaren Group through a partnership with the TAG group of Mansour Ojjeh. Bruce McLaren, a New Zealander, created the Formula 1 team in 1963. In recent years, McLaren's bankruptcy has raised questions and concerns. Although the company never went bankrupt, it faced financial problems. In July 2020, Sky News reported that the owners of the Formula 1 McLaren team were considering selling a stake in the team as they tried to raise hundreds of millions of dollars to stay afloat during the COVID pandemic. -19. It was a surprise to some in the motorsport industry.
In June 2020, Forbes revealed that the McLaren Group was facing financial problems due to the days when suppliers were supposed to be paid. For this reason, it seemed unlikely that McLaren would be able to meet its Formula 1 team's ambitions to return to the top of the grid after several years of reverse results. Since its creation in 1963, McLaren has been the second oldest Formula 1 team, after Ferrari. In addition, it is the second most successful team with twelve driver titles thanks to some of the most famous names in Formula 1, such as Ayrton Senna and Alain Prost. Nonetheless, McLaren hasn't won the championship since Lewis Hamilton helped him win in 2008. Forbes also reported that McLaren's financial problems could be worse than people initially thought and could face the insolvency by July 17, 2020. During that month, there was news that McLaren was suing the owners of its bonds in court to obtain a declaration from the High Court that would allow the group to use its headquarters in Woking and the historic car collection as collateral for a loan.
McLaren could run out of time.
Days after the news that McLaren could sell his stake in his Formula 1 team to cover his expenses, news of the group's financial difficulties hit the headlines again as they sought legal assistance from the UK courts. . McLaren needed to find additional funds, which is why they chose to use their historic cars and premises as collateral.
The situation is dire.
Forbes reported the situation to be serious. The post said McLaren could go bankrupt if the noteholders did not allow it to release the collateral assets and secure a new loan on them or sell them. He added that the judge was due to issue a statement in favor of McLaren in 17 days.
Why McLaren could soon go bankrupt
Here are some opinions and facts regarding how McLaren may become insolvent in the future and what the group can do to avoid it.
The story
It is evident that McLaren Motors and the Formula 1 team flourished when Ron Dennis was the CEO. Under his leadership, the World Drivers 'and Constructors' Championships were won with Mika Häkkinen, Ayrton Senna, Alain Post, Niki Lauda and Lewis Hamilton. However, after Dennis fell out with other shareholders since he was forced to leave the company on gardening leave, McLaren Automotive began to face financial problems. Although McLaren Automotive has been making great vehicles for many years, its financial situation is not great.
Where it started
Modern McLaren vehicles are based on the development and experience the group has gained through the production of the McLaren MP4-12C. The 12C was an excellent vehicle, although it had a few flaws. After all, it was the first vehicle made by McLaren after the revolutionary McLaren F1. Therefore, in the years to come, it was going to be difficult for McLaren to frequently produce new vehicles. The MacLaren P1 and 12C performed well, with the P1 becoming one of the best supercars produced in the 2010 decade. McLaren produced many other cars besides the P1. However, the McLarens 720, 540 and 570 ended up costing the company a lot of money. While these supercars are the best when they perform well, the main issue is not the vehicles but the top management of the company. Company owners have a bad reputation for sending faulty vehicles to their customers. Some common complaints among consumers include transmission failures, cracked windshields, failure of suspension components, and a faulty infotainment system.
It's normal for supercars to have little issues here and there as most of them are handcrafted and assembled. However, if an automotive company has been facing the same problem for many years, something is wrong. McLaren executives could be aware of the problems with their vehicles and choose not to fix them. This may be a short-term solution for McLaren as the dealers pay them. However, this is not a long term solution. This ends up hurting the brand and the value of the vehicles. The problem is that McLaren is losing money. Cars depreciate quickly and the company builds more vehicles than its dealers can sell. The company is losing so much money due to its build quality issues and a large number of vehicles facing factory defects. A good example is the McLaren 720 which should have brought in a lot of revenue for the company. However, the car has lost half of its value in two years. Thousands of people who have purchased McLaren vehicles have faced this problem. It is one thing that can bankrupt McLaren.
The company is having problems selling the vehicles through its dealerships. Hence, this is why the dealers are ready to offer big discounts. McLaren dealers are also facing problems as vehicles are difficult to sell. To make cars cheaper for consumers, the company may offer discounts or increase the residual value of the vehicles. When the residual value of a vehicle increases, it offers Guaranteed Future Value (GFE). This means that once you've used the car (according to the contract), a certain amount of money is what McLaren predicts the vehicle is worth. If the vehicle turns out to be worth less than what GFE McLaren has stated, you don't have to pay the insurance company any extra money and you can return the vehicle. This strategy can result in the sale of many McLaren vehicles. McLaren may also focus on improving the status or image of the brand. The company should do its best to get rid of the bad reputation it has gained for the poor quality steps it takes to inspect most of its vehicles. Another possible solution is to produce many different types of vehicles.
