MARCH 20, 2000

Renault buys Benetton

THE Renault car company says it has spent $120m to buy the Benetton Formula 1 team.

THE Renault car company says it has spent $120m to buy the Benetton Formula 1 team. The price is what would have been expected although Benetton has extracted extra value from the deal with an agreement to remain on the cars for the next two years. This will be worth around $40m in advertising exposure although it is doubtful that the company will actually be paying. Renault will take over the management of the team immediately but will not take over the color scheme until 2002. This will give the team the chance to develop a new Renault V10 engine which is expected to appear at some point next year.

Why Benetton should want to end its successful association with Grand Prix racing remains a mystery as less than two years ago the Italians refused to sell any equity when the Ford Motor Company made an approach. One can only conclude therefore that the Benetton Family decided that it had to sell the team because there were no other obvious buyers and with results unlikely to improve without a factory engine the overall value of the organization would inevitably slide in the years ahead.

Benetton says that the decision to sell came about as a result of the rising costs of Grand Prix racing and the need to have a manufacturer behind the team. This makes sense but it does not explain why the family did not sell only a part of the team to Renault (as McLaren did recently with Mercedes-Benz) and continue to reap the benefits of the advertising the team has provided for the Italian clothing company.

The only obvious reason for Benetton not wanting to be involved with Renault is the French company's extraordinary decision to put Flavio Briatore back in control at Enstone. The Benetton Family dumped Briatore at the end of 1997, apparently because of his failure to make the team successful after the departure of Tom Walkinshaw in 1994 and Michael Schumacher in 1995.

Briatore has enjoyed an amazing influence over the Renault Sport management since Benetton and Renault first did a deal for engines back in 1994. Renault Sport bosses Patrick Faure and Christian Contzen appear to do whatever Briatore advises, which is testament to the Italian's persuasive talents if not to his long list of successes in F1.

Renault Sport will be expanded to form a new division of the main company but Faure remains in charge and Contzen continues to head the engine development program at Viry-Chatillon. Briatore takes over as head of the chassis department at Enstone and will become Benetton team manager with immediate effect.

Contzen is due to retire in March 2004 but Faure may be hoping that success in F1 will help him get to the top job in Renault when current chairman Louis Schweitzer retires in 2007. Faure will then be 61 and will have four years before he has to retire. However, there are younger men than Faure on the Renault Management Committee, including Carlos Ghosn (currently in charge at Nissan), Francois Hinfray, George Douin and Shemaya Levy.

Faure says that taking over Benetton will be a lot less expensive than Renault acting as an engine supplier. "Teams benefit from substantial sources of income," he said, "with revenue from sponsors, FOA TV broadcasting rights and points bonuses."

Faure added that the decision to buy Benetton was an easy one "Williams was not for sale so the obvious choice was Benetton," he said. "As for other potential partners, we ruled them out through a lack of results as they are all still trying to win their first world title."