Features - Financial
MARCH 16, 1999
Reynard Motorsport: America's Formula 1 manufacturer.
BY JOE SAWARD
It is a little-known fact that, a few blocks up Georgetown Road is the headquarters of an automotive company which designs and builds Formula 1 racing cars. Never heard of it? Well, that is because everyone thinks that Reynard is a British company. It used to be, but it is not any longer. In September last year Adrian Reynard's company was incorporated in the State of Delaware. A few months from now it will be floated on the New York Stock Exchange.
The americanization of Reynard reflects the company's success in recent years in CART racing although it is somewhat ironic that it is based next to Indianapolis Motor Speedway as CART no longer races there. Reynard, however, has won the Indianapolis 500 twice in the past and will be back at the Speedway when Formula 1 rolls into town in 2000.
Reynard Motorsport owns a 15% shareholding in British American Racing. It also supplies the technological know-how for the new F1 team - and is paid to do so. Last year BAR handed over $3.5m as part of the deal. One day BAR will probably become an independent entity, but right now it is very much a Reynard operation with Reynard's technical director Malcolm Oastler calling the shots. For the next three years Oastler will spend all his time on the BAR programme. Adrian Reynard and the company's ace salesman Rick Gorne will spend half their time this year ensuring that BAR gets its act together.
At the moment Reynard says that there is no intention of increasing its shareholding in the team and that it will eventually become a way of keeping up-to-date with the latest F1 technology. In the long term - with a little success and with British American Tobacco bowing out because of tobacco advertising bans - one can imagine that Adrian Reynard might decide to increase his company's shareholding in the team. That may sound expensive but for Reynard money is really not a problem these days. In 1996 Reynard made a profit of $15m. In 1997 it was $24m and last year a cool $29m tumbled into the company coffers. With profit margins running at around 50% of turnover, Reynard is on course for another $25-30m profit this year, as it already has orders for more than $50m worth of cars.
When the company floats on Wall Street, 25% of the shares will be offered to the public. This will bring in another $40.5m.
Reynard has had its ups and downs in the past - and has nearly gone to the wall on several occasions - but Adrian Reynard has learned from his mistakes. The company may be awash with money but he is investing heavily in other businesses to strengthen the company and provide financial stability if the lucrative CART market comes under threat.
The chief purchase planned is that of Gemini Transmissions. For a cool $12m, Reynard has bought itself a state-of-the-art precision engineering company, specializing in advanced gearboxes and transmissions. Gemini has business outside racing but it will also enable Reynard to provide customers with a complete car and transmission package. And with Reynard controlling research and development, breakthroughs may be found.
Research and development have long been a keyword at Reynard. Introducing new ideas is a good way to beat the opposition. Reynard has always believed in recruiting young engineers directly from university to tap their fertile brains.
Reynard spends a lot of money on research and development work. In the last three years over $15m has been invested in R&D and the process never stops. The company is currently upgrading all of its computer equipment and has earmarked $4.3m of the money from the flotation is to be spent on computational fluid dynamics (CFD) development.
CFD is an area in which Reynard reckons it can make profits in the future, by allowing racing teams to use the programmes for a fee. It is still only a small business but last year Reynard made over $800,000 from selling its CFD technology. The company is also making money from windtunnel work at the new Auto Research Center (ARC) in Indianapolis - of which it owns 59%. ARC has a 50% rolling road windtunnel facility in which racing teams can buy aerodynamic testing time. British American Racing has done all of its windtunnel testing at the facility.
This year Reynard is planning to expand ARC to include a seven-post test rig for static testing. This too will be available to racing teams - at a price. In addition Reynard says it wants to construct a composite manufacturing facility in Indianapolis so it can move some of its production to the United States. The fastest way to achieve that is to buy an existing company - which explains the recent rumours about Reynard trying to acquire Riley & Scott which, conveniently, is also based in Indianapolis.
If this sounds expensive, that's really not a problem as $14.4m of the money from the flotation has been set aside for acquisitions...
Riley & Scott is most famous for its successful range of sportscars - which have been highly competitive in the United States for the last five years. In recent months the company has begun working on a design for a Cadillac sportscar which will be run at the Le Mans 24 Hours in 2000.
Lesser known is the company's single-seater Mk V which has struggled to make an impression in the Indy Racing League for the last two seasons. Reynard's experience in single-seaters should open the way for the company to invade IRL, taking on Dallara and G-Force which currently dominate. Reynard is also squaring up for bids for the one-make Formula 3000 and Indy Lights (both of which are currently supplied by Reynard's rival Lola) and the Toyota Atlantic series (which is supplied by Swift Engineering).
Reynard knows that making profits and growing in motor racing is often about finding new markets, rather than trying to expand old ones. The company's Sales Director Rick Gorne is an expert at that. Back in the early 1980s he saved Reynard by selling 12 racing cars to the United Arab Emirates, having convinced the government there that the machines would keep the country's fighter pilots happy when they were not flying. Gorne pulled off another coup in 1991 when Reynard was struggling to survive after an abortive attempt to enter F1. He sold 40 Formula 3 cars to Mexico, having talked the Mexicans into establishing a national F3 series.
In recent years Reynard has flirted with the automotive industry through its Reynard Special Vehicle Projects company. This designs and manufactures vehicles which are not badged as Reynards. Back in 1994, Chrysler decided to build a gas turbine-engined car called a Patriot. Reynard was commissioned to design the car. That project was shelved in 1996 but Reynard went on working with Chrysler, building the racing version of the Dodge Viper and developing the Chrysler Stratus for the North American Touring Car Championship.
There was a similar relationship with Ford. In 1996 Reynard was asked to design and build the Indigo concept car and this was followed up by a deal for the company to develop the Mondeo for the British Touring Car Championship.
All these projects have now ended but Reynard hopes to create similar opportunities in the future and is planning to establish a design office in Detroit in 2000 so as to be closer to the big US car manufacturers: General Motors, Ford and Chrysler.
In the meantime, Reynard is working with a couple of smaller car companies. In January 1996 Don Panoz approached Reynard and asked them to build him a series of GT sportscars, based on the road cars Panoz was producing in the US. The result was the Panoz GT1, which won last year's Professional Sports Car Racing Championship in the United States. Reynard has also designed the Strathcarron sportscar for the Honorable Ian Macpherson, who wanted to produce a basic, affordable sportscar for road use. Strathcarron Sports Cars PLC has since ordered three prototypes to be built by Reynard.
Reynard has also dabbled in other areas, notably the design of airline seats for Virgin Atlantic. This was the result of a friendship between Reynard and his neighbor Richard Branson.
Reynard is a big fan of flying, although he has been taking things a little easy in recent years after emerging unscathed from a crash which destroyed the World War II Harvard plane he was flying, near Witney in Oxfordshire.
The success of his company has enabled Adrian to enjoy such toys. If you look at the books you can see why. In 1996 Reynard's salary was $4.7m. It went up to $10m in 1997 but last year dipped back to $7.9m. Admittedly, Reynard has loaned the company $10m of this money, but he will get that back when the flotation goes ahead. But the days of vast salaries are over for the moment. A few months ago Reynard agreed to restrict his salary to $1.5m a year until the end of 2001. This will keep the shareholders happy. Reynard does not really need the money and, even after the flotation he will own 57.5% of the shares. At the going rate these are worth $93m...
Neither Reynard nor Gorne have much experience running an industrial empire and so last autumn Reynard signed up one of his pals, Alex Hawkridge, to run things for him for the next three years. Longtime fans of Grand Prix racing will remember the name from the early 1980s when Hawkridge ran Toleman Motorsport. This organization won the 1980 European Formula 2 Championship and between 1981 and 1985 tried to win Grands Prix. In the end the team was sold to the Benetton Family and became Benetton Formula. Hawkridge stayed on as Managing-Director of the Toleman Group, a vast manufacturing empire which employed 12,000 people at its facilities in Britain, the United States and the Philippines. At the same time he oversaw Toleman subsidiary Cougar Marine, which won 13 consecutive World Powerboat Championships.
Hawkridge left Toleman in 1992 and, in semi-retirement, ran a small company called Garland Management until recruited by Reynard last year.
Despite the success, Adrian Reynard and his team remain remarkably ambitious. Their goal is to dominate every race and to win every championship in which it has cars competing. Reynard's proudest boast was that cars bearing his name had won the first race in every Championship they had entered.
Of course, Adrian Reynard might try to argue that the Grand Prix car that raced recently in Melbourne was a BAR, not a Reynard...
Sidebar: Reynard's path to glory
Founded in 1973 Reynard Racing Cars was originally known as Sabre Automotive and it designed a series of moderately successful Formula Fords which were raced by Adrian Reynard and a few customers, notably Rick Gorne. In 1981 the company nearly closed down and Reynard went to work for the RAM March F1 team while Gorne ran the company. Reynard eventually quit RAM and began to design a groundbreaking Formula Ford 1600 car. The Reynard 82FF made an astonishing debut at the Formula Ford Festival in 1981 and as a result 50 cars were sold for the 1982 season. Success in FF1600 led Reynard to Formula Ford 2000 and the Reynard 83SF was a dominant car in 1983. For the next six years Reynard enjoyed enormous success in Formula Ford, and by the time production of Ford Fords stopped in 1989 Reynard had sold 661 chassis around the world.
In 1985 the company built a carbonfibre Formula 3 chassis and entered the British F3 series. Andy Wallace gave Reynard a win in its first race and between 1985 and 1993 Reynard built 360 F3 chassis and won all the major national titles.
In the same period Reynard was selected to supply the chassis for the Formula Vauxhall Lotus series. Between 1987 and 1992 Reynard built 204 of the cars for the one-make single-seater series.
In 1989 and 1990 Reynard was appointed chassis supplier for the Toyota Atlantic series, using cars which were based on the successful F3 designs.
After enormous success in Formula 3 Reynard decided to enter Formula 3000 in 1988 and Johnny Herbert gave the company victory in the first event of the year. Between 1988 and the end of 1995 Reynard sold 220 Formula 3000 cars, and it still sells developments of these machines to Formula Nippon competitors in Japan.
In 1989 Reynard planned to enter Formula 1. The project failed and the company was left struggling to survive. Further success in Formula 3000 brought stability and in 1994 Reynard entered CART. Michael Abdretti won the first event of the year and by the end of 1998 Reynard had sold 148 CART cars and won four consecutive CART titles.
Reynard's success have resulted in two prestigious Queen's Awards for Export Achievement in Britain in 1990 and 1996, the company being the only racing car company to twice win such recognition.
Since 1997 Reynard has produced all the cars for the Barber Dodge Pro Series in the United States, while also being involved with motorsport projects with Chrysler, Ford, Dodge and Panoz.
Who is who at Reynard Motorsport
Bruce Ashmore, 39, Technical Director, Reynard North America. A design engineer at Lola, he became chief designer in 1988 when Nigel Bennett moved to Penske. His Lola Indycars won CART titles in 1990, 1991, 1992 and 1993. Joined Reynard to design the company's first CART car.
Rick Gorne, 44, Vice-President, Sales. Former racing driver and Competitions Director of British Automobile Racing Club. Joined Reynard in 1981 and has controlled sales every since.
John Gower, 43, Chief Financial Officer. A chartered accountant, Gower was the Benetton Formula accountant between 1985 and 1991 and then joined Reynard.
Alex Hawkridge, 53, Chief Executive Officer. Former managing director of the Toleman Group and head of Toleman F1 team between 1981 and 1985. Joined Reynard in September 1998.
Peter Morgan, 44, Production Director. A former racer, Morgan worked as engineer and manager of Madgwick Motorsport between 1984 and 1994. He then joined Reynard. His former Madgwick boss Robert Synge now runs the British American Racing test team.
Malcolm Oastler, 39, Technical Director. Australian-born designer who has worked with Reynard since 1985. He is now a shareholder in the company and is paid nearly $1m a year.
Paul Owens, 57 Composites Director. Veteran racing car designer who worked with the Chevron marque between 1956 and 1980. After the company went out of business the assets were sold to German Willy Maurer and Owens ran operations with some success. A F1 programme flopped and Maurer lost interest and the company closed in 1983. Owens then joined Reynard as production and technical manager. He has been in charge of Reynard Composites since 1985.
Adrian Reynard, 47, Chairman. A graduate of Oxford Polytechnic, he built his own racing machinery in the early 1970s. Established Sabre Automotive with Bill Stone in 1973 and has headed the company ever since.
Jeff Swartout, 46, Operations Director, Reynard North America. Experienced racing car mechanic he won three national titles and the Indianapolis 500 as a chief mechanic. Took time out to study business administration and joined Reynard in 1993 to run Reynard North America.<\#026>