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Honda website

AUGUST 30, 2002

The situation at Arrows at 0800 CET

Tom Walkinshaw probably did not get much sleep last night. The supposed takeover of the Arrows team by an American investor Carl (or Cal) Smith remains a bit of a mystery as there are one or two people called Smith in the United States and working out who is who and whether the people in question are serious is not an easy task. The story we have heard suggests that the person in question is a metal dealer, with a particular involvement in the iridium market. Iridium is a rare and expensive metal which has specific uses in mobile phone technology and so it is possible that those dealing in it have made a lot of money in recent years as mobile phone sales have boomed.

Making money and spending it are two different things and while it would be a fairytale ending to see Walkinshaw rise like a phoenix from the ashes of Arrows to lead a reinvigorated team it is still hard to imagine how such a deal could have been struck given the financial and legal issues which surround the Arrows team. The key to the issue lies with Walkinshaw's partners Morgan Grenfell who have made it clear that they want money back before the team can be sold. And if that does not happen they do not care if the team lives or dies. Our sources have consistently mentioned the figure of $30m. If Morgan Grenfell had been willing to crumble from that position it would have happened a month ago when Walkinshaw and the bank were chin-to-chin "negotiating" the survival of the team.

However, assuming that this is not some elaborate ruse to avoid the force majeure rules, the team's new backer will have to pay out money to Morgan Grenfell, Cosworth Racing (the cars will not move without electronic control units), the numerous other creditors and Jos Verstappen. That little lot will amount to a rather large check. The staff have also to be paid. The minimum figure for all this would be $50m and that is just to get back to zero. Then there is the necessary investment for the rest of this year, for the design of next year's car (when the team has lost a lot of design staff) and, of course, a budget for the 2003 season. So any new investor has to be looking at a minimum potential investment in Arrows of $110m and that is working on the principal that Walkinshaw does not want anything for the assets and rights - and Tom is not know for being charitable in business dealings. The new buyer will have to do due diligence on the purchase and that job cannot be taken overnight. There are then only the procedural problems to overcome, legal actions, potential legal actions from other teams over whether or not Arrows has forfeited any rights in recent weeks and the lifting of an injunction to stop the team being sold without the agreement of a High Court judge in London.

It all seems like a vast investment and one reaches the point at which the whole business would seem easier if an investor simply started a new team...