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AUGUST 12, 1996

McLaren and Marlboro playing games

THE Hungarian Grand Prix paddock in Budapest was alive with rumors suggesting that the 23-year-old relationship between Marlboro and McLaren is coming to an end because the cigarette brand - owned by the Philip Morris company - will not pay the sponsorship being demanded by McLaren boss Ron Dennis.

Marlboro is arguing that the team's results since the end of 1993 do not warrant the expenditure of around $40m a year. Stories doing the rounds in Hungary say that Dennis is refusing to accept less than previously and has been to see a variety of rival tobacco companies in an effort to find the same level of funding as McLaren has enjoyed in recent years.

Marlboro is F1's biggest sponsor, and finding a replacement company willing to invest on the same scale is not easy. Dennis has been trying to convince Mercedes-Benz to kick in some more money and have the cars run in silver livery - the traditional Mercedes-Benz racing color scheme. Mercedes says that it is already paying enough.

The negotiations are by no means over yet because Marlboro is in a situation where there is no obvious replacement team. The company already backs Ferrari heavily but the Italian team is unlikely ever to agree to change the cars from their traditional red to the Marlboro color scheme. Pumping more money into Ferrari is the obvious choice but for a long-term relationship the Italian team is rather too volatile, particularly as Marlboro's F1 staff will probably recommend staying with Michael Schumacher if he should move to another team.

Benetton is under contract to Mild Seven for next year but its 1996 results have hardly been convincing enough to convince Marlboro that the team is a good long-term bet. Marlboro might choose to sit out 1997 and then sign a deal with Williams for 1998 and beyond. Williams and Marlboro have long links going back to 1973-74 when Williams ran the Iso Marlboro F1 team. The only other choice would be for Marlboro to take a risk for the long-term - as it did in 1980 when it engineered the merger between McLaren Racing and Dennis's Project 4 company. The obvious choice for this would be a deal with TomÊWalkinshaw - who is restructuring Arrows and has enormous F1 ambitions.

All this speculation, however, fails to take into account the fact that Marlboro would probably prefer not to destroy the Marlboro McLaren tradition. If that is considered valuable enough, Marlboro will pay what Dennis wants; if not he will be dropped. In an effort to convince Marlboro to raise its offer Dennis has been touring rival cigarette companies with F1 proposals. Rumors suggest that these include Benson & Hedges, RJ Reynolds (owners of Camel) and the Reemtsma company, which sells West cigarettes.

Benson & Hedges is currently with Jordan and is unlikely to want to spend the same kind of money as Marlboro is offering. RJ Reynolds would like to get back into F1 with Camel and had talks with several teams last year. Camel has been out of F1 since 1993 - when cutbacks were necessary because of a $30 billion leveraged buyout of RJR Nabisco by Kohlberg Kravis Roberts. In the last two years RJR has slimmed down and reduced its debts and it is now expanding again in international cigarette sales. The lure of a top F1 team might bring Camel back to F1.

West is also a serious possibility. Reemtsma is the second largest tobacco company in Germany and has plans to become Europe's leading cigarette company by the year 2000 with heavy investment in eastern Europe - which accounts for more than 40% of its sales. West, however, is keen on having a German driver and with Michael Schumacher tied up at Ferrari and Heinz-Harald Frentzen rumored to be on his way to Williams, there is no other obvious candidate, except Ralf Schumacher, Michael's brother, who last week tested for McLaren at Silverstone. Ralf has no experience in F1 but is believed to have a budget of $8m available for F1 from the Bitburger beer company.

Marlboro's decision is not expected to be taken until the Italian GP at Monza in a month.