AUGUST 15, 2006

Why Mercedes might buy McLaren

There has been speculation for a long time that DaimlerChrysler, the parent company of Mercedes-Benz, will eventually complete the purchase of the McLaren company. This began in July 1999 when the German company acquired 40% of the team and the two remaining shareholders, Ron Dennis and Mansour Ojjeh, redistributed the remaining shares so that they would each have 30%. In addition there is a shareholders agreements which mean that these sharesholdings can only be sold together and not independently of one another.

The arrangement followed a decision by DaimlerChrysler and McLaren Cars to jointly develop and produce the Mercedes-Benz SLR McLaren super sports car which was launched at the Frankfurt Motorshow in 2003 and is now being manufactured at the McLaren Technology Centre in Woking and at the company's second production factory in Portsmouth, where the SLR carbonfibre bodyshells are built.

The plan for the SLR was for a seven-year programme with around 3500 cars being produced. The company passed the 1000 mark in February this year which means that in 2010 it will be looking for a new project. Given the preparation needed, a decision over a new car must already be in the pipeline and since the arrival of the new DaimlerChrysler boss Dieter Zetsche there has been talk of producing different variants of the SLR and the first of those is the 722 Edition, which was launched in July. There were six different versions of the original McLaren F1 between 1992 and 1998, including a number of racing versions. There has also been talk of the company building a less expensive supercar to follow the $450,000 SLR, in order to compete with Ferrari's F430, which is retailing at $225,000.

If Zetsche intends to expand McLaren production in the future it may be wise to complete the purchase of the business, in order to bring the technology in-house and have greater control of all projects. It should be added that Mercedes is the only major manufacturer involved in F1 not to control its works team and there is no doubt that McLaren performance in recent years has been generally disappointing, despite a strong World Championship challenge in 2005.

McLaren has long been a company that does not rely on one individual and while some question the logic of its management theories in F1, it is clear that as a company it can now run itself quite successfully without Ron Dennis.

At 59 Dennis is already a multimillionaire and has no real need to go on working unless he wants to - and he has said as much on several occasions.