Williams told the world it had the budget in place to compete in F1 in 2009 and 2010 at the launch of its FW31 earlier this week.
But the true scale of its financial plight has been made clear as it emerged that part of that money came in the form of a ?é?ú14.5m advance from Bernie Ecclestone, as he struggles to prevent another team leaving Formula 1.
The Financial Times (reg. req.) claims similar sums of money are owed to each of the teams and are due to be paid when the new Concorde Agreement is signed:
A total of ?é?ú130m has been set aside as an incentive for F1?óÔé¼Ôäós nine teams to sign the Concorde Agreement, the contract that binds them to race in F1 but which expired at the end of 2007.
The teams now race in F1 under a Memorandum of Understanding (MOU) agreed in 2006 with CVC, the private equity group that has majority control of F1, but this is not legally binding.
The MOU increased the teams?óÔé¼Ôäó annual prize money from 25% to 50% of the sport?óÔé¼Ôäós underlying profits and these payments began last year. But the teams have not signed a new contract, prompting Mr Ecclestone to say: ?óÔé¼?ôWe have no contract and no invoice so why are we paying them??óÔé¼?Ø
The report claims the payments are worth 20% of Williams revenues, suggesting a total of ?é?ú72.5m ($99.7m). Williams had the eighth largest budget of the 11 teams that started the 2008 F1 season, with ?é?ú116.6 ($160.6m).
The Williams FW31 broke cover on Monday with several sponsors from 2008 missing. Three companies owned by the Baugur investment group – Hamleys, All Saints and MyDiamonds.com – have all left. Lenovo has moved its sponsorship to McLaren and Petrobras has also gone. One of its most prominent sponsors, RBS, saw its share price collapse this week.
Adam Parr, Williams?óÔé¼Ôäó chief executive, said the scale of the team?óÔé¼Ôäós borrowings in the past two years had reached a limit and that it would not have been able to borrow any more.
?óÔé¼?ôI think it would be fair to say we have reached a point where further borrowing is not acceptable to the board of this company,?óÔé¼?Ø Mr Parr said.
The financial health of Williams ?óÔé¼ÔÇ£ which employs 550 people in Oxfordshire and has supply contracts placed with 2,000 British companies ?óÔé¼ÔÇ£ and that of other teams have been closely watched in light of Honda?óÔé¼Ôäós shock decision last month to quit F1.
Having lost BMW as a partner in 2005, Williams has been forced to rely on sponsorship for two-thirds of its revenues. But it has recently lost Baugur, Petrobas and Lenovo as sponsors and its second biggest sponsor is the struggling Royal Bank of Scotland.
Mr Parr said more than 60% of its sponsorship target was committed for this year and that RBS was tied to two more years of a three-year sponsorship deal. Sir Frank said: ?óÔé¼?ôWe need to make a profit. To be successful and to be certain of staying in business, we need to be successful financially too. So, we need to make a profit every year. We?óÔé¼Ôäóve lost in the last two years, or three, I think, but we have the reserves and resource to manage that.?óÔé¼?Ø
Williams, whose team cost about ?é?ú100m last season, a threefold increase in 10 years, made a ?é?ú21.4m loss in 2007, on top of a ?é?ú27.7m loss the previous year, and its net debt for 2007 tripled to ?é?ú24.7m.
This week there have been fresh rumours about Toyota and Renault’s commitment to Formula 1 as the recession bites deeper. Regardless of whether or not those rumours are founded, F1 is going to have to make sure teams like Williams can continue to compete without concessions from the sport’s owners. Cutting costs in the rules is not enough – Ecclestone must be prepared to give more money to the teams.
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