Ron Dennis and McLaren

Yesterday, finally, there were two press releases sent out regarding the situation at McLaren. The first, from Ron Dennis, announced that he was relinquishing his duties as chairman and CEO of the McLaren Technology Group. It was not a happy press release and made the point that he had “been required to stand down and confirmed that the decision “to place him on gardening leave” had been taken by the majority shareholders. Dennis will remain on the boards of both MTG and McLaren Automotive and said that he will launch a new technology fund next year when his commitments to McLaren have been honoured. The statement said that Dennis was “disappointed” that the representatives had forced through the decision, “despite the strong warnings from the rest of the management team about the potential consequences of their actions on the business”. Dennis said that the grounds stated were “entirely spurious” and argued that his management style was the same as it always had been and that he was the one who enabled McLaren to become “an automotive and technology group that has won 20 Formula One world championships and grown into an £850 million a year business. Throughout that time I have worked closely with a series of talented colleagues to keep McLaren at the cutting edge of technology, to whom I will always be extremely grateful.

“Ultimately it has become clear to me through this process that neither TAG nor Mumtalakat share my vision for McLaren and its true growth potential. But my first concern is to the business I have built and to its 3,500 employees. I will continue to use my significant shareholding in both companies and my seats on both boards to protect the interests and value of McLaren and help shape its future.”

Dennis’s statement was followed by a release from McLaren itself, saying that “as of this afternoon Ron Dennis no longer holds the position of Chief Executive Officer of McLaren Technology Group (or its subsidiaries). However, he remains a shareholder and a director of McLaren Technology Group.

“Over the past 35 years Ron’s contribution to the success of McLaren has been colossal. During his tenure the team won 17 World Championships and 158 Grands Prix, making him the most successful leader in Formula 1 history. Like the company’s founder, Bruce McLaren, Ron is and will always be one of the true greats of the sport.

“McLaren Technology Group is now in the process of seeking a new Chief Executive Officer. Until such an appointment has been made, the company will be run on an interim basis by an Executive Committee comprising the Group’s majority shareholders, in close collaboration with the Board of Directors and the senior management team, all of whom remain utterly committed to the company, its partners, its employees and its fans, and share a passionate determination to build on our many strengths towards future prosperity.”

As a matter of reference, the bizarre difference between the two totals of World Championships in the above statements is explained by the fact that three of the 20 titles won by McLaren happened before Dennis took control (the Drivers’ titles in 1974 and 1976 and the Constructors’ title in 1974). This is not an important point, but when one looks at the list of titles, what clearly stands out is the fact that with the exception of Lewis Hamilton’s title in 2008, McLaren has won no championship since 1999, a period of 17 years. All of Ron’s success (apart from the Hamilton crown) was achieved in the 16 seasons between 1984 and 1999.

Dennis took over the team towards the end of 1980, when Marlboro promoted (one might say “insisted”) on the idea of a merger between the old McLaren Racing and Dennis’s Project Four. A new company, called McLaren International, was established with a variety of shareholders from both sides. They were all bought out by Dennis in the years that followed. By 1983 Dennis owned all the shares, but there was then a big change when Ron sold half the shareholding to TAG and its boss Mansour Ojjeh, who had funded the celebrated TAG-funded, Porsche-built turbo engines. Their partnership remained unchanged at 50-50 until the start of 2000 when Daimler AG (the parent company of Mercedes-Benz) exercised an option it had been granted as part of an engine supply deal, dating back five years, and they purchased 40 percent of the team, with the two shareholders each parting with 20 percent. There was talk in 2006 that Daimler might increase its shareholding to 60 percent, but that did not happen and at the start of the following year, Mumtalakat, a new holding company set up by the government of Bahrain, bought half of the shares that were still owned by Dennis and Ojjeh. Thus, Daimler owned 40 percent, Mumtalakat 30 percent and Dennis and Ojjeh 15 percent each. However, Ojjeh and Mumtalakat had covenants to vote with Dennis, which meant that, in effect, he still had control of the company – and money in the bank.

Things changed, however, and in 2009 Brawn-Mercedes beat McLaren-Mercedes to the World Championship. Daimler decided that it would be best to leave McLaren and buy Brawn, in order to create its own factory team. The McLaren shareholders thus bought back the Daimler shares with Mumtalakat taking an extra 20 percent and Dennis and TAG each taking 10 percent. Thus, Mumtalakat owned 50 percent, but dispensed with the agreement to vote with Dennis. Dennis and TAG owned 25 percent apiece and continued to have an agreement to always vote together. There was a change, however, as the McLaren road car company was carefully separated from the racing team.

That year, Dennis stepped away from the racing team after the supposed Spygate scandals and he left the running of the McLaren Group to Martin Whitmarsh, while he concentrated on developing the road car business. This began to do well, but the racing team continued to struggle to win and at the start of 2014 Dennis convinced the McLaren board of directors to oust Whitmarsh, his chosen successor, and give full control back to Ron. He proposed that he would buy back control of the company and win again in F1. Whitmarsh was kicked out and others were brought in. The road car business has done well, but the racing team has been hamstrung by its difficult Honda engines. The dream of reviving the great years of McLaren-Honda remains a dream. In commercial terms, Dennis refused to budge from his rate card demands to sponsors and this resulted in several of the company’s long-term backers departing. Hugo Boss, Diageo and Exxon Mobil have all gone elsewhere because they don’t believe that a McLaren sponsorship is worth what Dennis believes it is worth. There was a chance that Apple might buy the entire McLaren business, back at the start of this year, but no deal was struck.

There was, in any case, a problem between Dennis and the other shareholders. In 2012 there was much debate as to whether the Grand Prix in Bahrain should go ahead because of unrest in the country. Obviously, Mumtalakat felt that the race should go ahead. Dennis was in favour of cancelling the race because he felt that it was best for F1 to avoid such situations. Ojjeh supported the argument that Bahrain should go ahead, but he had to vote with Dennis, as per their agreements. In truth, although the Bahrain GP hurt F1 in some respects, largely in relation to image, the political situation in the country did not warrant cancellation. And so, in a way, both sides were right. The problem was that a decision had to be made. As I understand it, the role of chairman at McLaren rotates between the shareholders and on this particular issue, Ojjeh was chairman. He was obligated to vote with Dennis but, in that particular meeting, he was chairman and had the right to cast the deciding vote. He did what he felt was right and voted against Dennis (and himself). Dennis took this as a betrayal and the relationship was broken. Ojjeh was a very sick man at the time and there are many confusing stories about what was going on, but the reality is that the problem came down to a matter of opinion over the Bahrain GP – and, in many ways, both sides were right. F1 probably should not have been there, but things were nowhere near as bad as they were portrayed.

In many ways, therefore, the current situation at McLaren is a tragedy of Shakespearean proportions. No-one is really to blame. It is a matter of opinion. The problem is that there seems to be no possibility of compromise, although to be fair the Bahrainis and TAG have given Dennis the chance to take back control and buy them out. But this has not happened. It is nearly three years now since Martin Whitmarsh was ousted and Dennis has been running the business and no answers have been found. Dennis wants to buy the company but the bid he has made is not sufficient, for whatever reason. The controlling partners want an amicable solution, but that does not suit Dennis.

And so we are where we are…