Bosses across Britain are scrambling to stop the wheels coming off their businesses. But not Toto Wolff, the suave chief executive and part owner of Formula 1’s most successful team Mercedes, whose ambitions could be about to reach new altitudes.
Like everyone else, his Northampton-based team and its 1,000 staff face the likelihood of a global recession. The pandemic means a complete absence of spectators when its superstar driver Lewis Hamilton begins racing again next weekend at the Austrian Grand Prix and, perhaps more devastating for staff, it is also contending with a painful budget cap next year.
But the 48-year-old Austrian, himself a former racing driver turned entrepreneur worth an estimated £460million, reveals that he’s working on a deal that could put the Mercedes F1 team at the centre of a new space race – and save jobs.
Entrepreneur: Toto Wolff is also part owner of the Mercedes F1 team
‘Space is a very early-stage discussion,’ reveals Wolff. ‘We are not going to build a rocket but we might provide services to somebody who wants to build a rocket.’
He says that a space travel operator has expressed an interest in partnering with the team to apply its F1 know-how to a rocket programme. Mercedes already works in a similar way with the Tour de France winning cycling team and the America’s Cup sailing team Ineos, backed by billionaire Jim Ratcliffe, whose chemicals company is also a Mercedes sponsor.
‘We see ourselves as a high performance engineering boutique,’ Wolff explains. ‘What we do is enhance performance on land, sea, air – and possibly space.’
Staff from the Mercedes F1 team may be relocated to these projects, its electric-powered Formula E team or to Daimler itself.
It’s an intriguing prospect and comes after the launch of Elon Musk’s SpaceX first manned rocket to the International Space Station last month – the first time Nasa astronauts had gone into orbit using a commercially built and operated spacecraft.
Other companies racing to send people into space – including, potentially, paying customers – include Blue Origin, a company set up by Amazon founder Jeff Bezos, and Sir Richard Branson’s Virgin Galactic. The Virgin tycoon’s outfit last week signed a deal with Nasa to take private citizens to the International Space Station.
Meanwhile, motor racing is spluttering back to life after lockdown.
Just eight of the scheduled 22 races are so far slated to take place. However, Wolff says: ‘I think we are going to get to 15 [races]’ and adds that provided at least 12 take place, no additional funding will need to be injected by Mercedes’ parent company Daimler.
The German car giant owns 60 per cent of the team with 30 per cent in Wolff’s hands and the remainder controlled by the estate of late F1 champion Niki Lauda. ‘We will still be in an OK place if we get a dozen or more races in so I don’t expect that our operational planning will take a massive hit,’ he says.
He adds: ‘Discussions that we are having with potential sponsors are at a high,’ adding that none has pulled out since coronavirus put the brakes on the F1 season in March.
It meant that the reigning champions didn’t need to put any of their 968 staff on furlough – including Hamilton who will finally get his title defence underway next weekend.
However, job cuts are in the pipeline. Mercedes will need to lower its headcount next year to comply with a £115million ($145million) cap on F1 team budgets. Its costs came to £321.5million in 2018 according to its latest accounts and salaries represent 29 per cent of the total. McLaren recently announced that the budget cap has driven it to lay off around 70 of its F1 personnel and Wolff says that cuts are inevitable at Mercedes too.
‘The cost cap means there will be redundancies but we are giving it our utmost efforts to find interesting opportunities for the people we won’t be able to accommodate.’
He adds that this is still at the ‘decision-making stage’ as ‘the restructuring needs to be terminated by the end of June 2021. This is when these people need to be off the F1 payroll.’ He doesn’t even think that this will slow the team down.
Mercedes bought its F1 outfit from its former management for £137.3million in 2009 and has gone on to demolish virtually every record in the book. It has won the F1 drivers’ and constructors’ titles for the past six years running, with Hamilton steering it to five of them. Last year alone, it scored five consecutive one-two finishes at the start of the season which is more than any F1 team has ever achieved. Radical new aerodynamic regulations will be introduced to F1 in 2022 in a bid to curb this dominance. Wolff says it could have the opposite effect.
He says that, when he took control of the team in 2014, ‘we defined for ourselves that the best situation for Mercedes would be for the rules to change every three years because… keeping the regulations the same leads to a certain contentment. It’s the old industrial logic of diminishing returns.’
Wolff has been an entrepreneur from an early age and has always been driven by racing. When he was a teenager he convinced his mother to pay for lessons at racing school in exchange for his next ten birthday and Christmas presents. That ambition hit the skids when he had a severe accident at Germany’s famous Nürburgring.
He studied at the Vienna University of Economics then took an internship at a Warsaw investment bank. He then moved into sales management at Austrian steel company, Koloman Handler AG, and soon set up his first business acting as an agent for the company.
Once that was on track, he took a sabbatical in San Francisco as the dotcom bubble ballooned, inspiring him to invest in early-stage tech companies. This kick-started his venture capital firm Marchfifteen which emerged just as interest in the tech sector was surging. It made a string of high-profile deals including an investment in Austrian content delivery software provider UCP, sold in 2006 with a value of $275million.
On the back of this success, Wolff founded Marchsixteen which invested in more mature Austrian public companies in the internet and tech sectors. He made an exception with a 49 per cent stake in German company HWA which raced Mercedes cars in Germany’s DTM Touring Car Championship. That introduced Wolff to both Daimler and DTM driver Susie Stoddart – who he married in 2011. In 2007, he helped HWA float in Frankfurt and repeated the trick two years later when he bought 15 per cent of the Williams F1 team, which also later listed in Frankfurt.
Wolff was soon headhunted by Daimler. He is still investing and recently bought a 0.95 per cent stake in struggling luxury auto maker Aston Martin.
He insists that it is purely a financial investment and explains that he is ‘not playing any operational or executive role’. ‘I’m not going to be the CEO and I’m not going to be sitting on the board. I am just in there as one of the investors who believe that this could fly. I believe that the Aston Martin brand is undervalued, even considering the financial metrics of a relatively high debt rate and slow car sales. The SUV will be a game changer.’
Although Wolff’s contract with Mercedes reaches the end of the road in December, he says ‘my intention is to stay’.
Mercedes too is reaching a crossroads as its F1 contract expires at the end of this year. The company has been badly dented by the coronavirus but Wolff says there is light at the end of the tunnel.
‘What we are seeing in the auto industry with Covid-19 is that the youth who normally say, ‘I don’t need my own car, I can rent one or I will take public transport’ are now saying, ‘I don’t want to go on any public transport and I don’t want to take a plane to fly somewhere.’
‘It is almost like being back in the 1970s where owning a car meant freedom. And there is a pretty big chance that these potential clients are looking for a Mercedes because it is winning in Formula 1.’
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