NOVEMBER 30, 1998

Zakspeed and Arrows

IN the last few days there have been serious moves by a German consortium of businessmen, led by Peter Zakowski - the boss of Zakspeed - to buy the Arrows Formula 1 team.

IN the last few days there have been serious moves by a German consortium of businessmen, led by Peter Zakowski - the boss of Zakspeed - to buy the Arrows Formula 1 team. The deal is rumored in Germany to be worth only $18m, but we believe a more accurate figure is $44m. We hear that Zakowski and his partners have $14m available and that the rest is being guaranteed by the government of North-Rhine Westphalia - one of the 16 states which make up the FederalÊRepublicÊofÊGermany. North-Rhine Westphalia is the most influential state in Germany with nearly one quarter of the German population.

The regional government changed earlier this year and the new Minister President Wolfgang Clement is hoping to create jobs through new industries and replace some of the jobs lost because of cutbacks in the steel and mining industries.

The confusion over money may have been caused by the fact that Arrows boss Tom Walkinshaw is only selling the team's "franchise" - the team's membership of the Concorde Agreement.

Walkinshaw and partner Peter Darnbrough may not own the 51% of the team they control, but may simply have leased the shares from the original Arrows owner Jackie Oliver for a three-year period. Owning the team and controlling the franchise are not necessarily the same thing.

If Zakowski and his backers buy the franchise from Walkinshaw they would also have to work out a deal with Oliver, either to buy the entire team - which could cost $30m - or negotiate a new lease arrangement. An engine lease deal would also be necessary because although Brian Hart Ltd. is controlled by Walkinshaw, Brian Hart retains a significant shareholding.

If Walkinshaw sells the franchise he will be able to clear the debts incurred this year - rumored to be around $18m - and a tactical withdrawal from F1 would allow Tom to regroup - keeping his equipment and staff - and then go after another F1 franchise with new backing.

This would mean that Zakspeed would have to establish its own headquarters. This would not be a surprise as the team has impressive facilities near the Nurburgring and the Arrows F1 operation is housed within TWR headquarters and could not be used by a different owner.

The move makes sense for Zakspeed. In recent years it has been involved in the German Touring Car Championship with big budget operations. The collapse of the series in recent months means that the team needs to find a new activity and F1 is a good opportunity.

Zakspeed enjoys a good relationship with BMW - which could result in customer engines in the future - and the factory is located conveniently close to Cologne, where Team Toyota Europe is gearing up for a possible F1 program. TTE might decide to cut corners and buy Zakspeed out.

It should also be noted that the Zakspeed group includes a number of car dealerships in Koblenz, including a Peugeot concession.

Peter Zakowski is the son of Zakspeed team founder Erich Zakowski who ran a Formula 1 team without much success between 1985 and 1989. The team started 54 Grands Prix with drivers such as Jonathan Palmer, Martin Brundle, ChristianÊDanner, Bernd Schneider and Aguri Suzuki but scored only two World Championship points.

A delegation of Germans visited the Arrows factory on Monday last week.