Category Archives: Oh Dear…..

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Missing In Action

2000 Le Mans 24

In an outburst of the festive spirit the ACO have launched a competition to mark the 90th Anniversary of the race, assuming that we get to next June that is. Three cars have been selected for each decade that the race has been run and the public is encouraged to vote for one from each set and in return there are some big prizes.

2001 Le Mans 24

The competition can be accessed HERE

2002 24 Hours of Le Mans

However a quick glance at the contenders raises a few questions. Why the Porsche 908 that failed in both 1968 and 1969? Why the Renault Alpine A442 or Rondeau M379 instead of the three time winner (and twice second) Porsche 936? No hint of a Tricolour being waved then.

2004 24 Hours of Le Mans

The same logic is at work when the Peugeot 908 is included but not the Audi R8, a five time winner and arguably one of the greatest endurance racers of them all.

2005 24 Hours of Le Mans

Sacre Bleu! And including the Delta Wing…………..bandwagons and jumping methinks. Still it is the Season of Goodwill to all Men and the prizes are well worth having, just salivate to the top one.

Winner: prizes with a value of 3 570 Euros
Two pitwalk passes for the 2013 Le Mans 24 Hours plus the complete collection of the Le Mans 24-Hours Yearbooks from 1978 to 2012 plus the book of the Le Mans 24 Hours 1961-1973, as well as the 2-volume set celebrating the centenary of the ACO, and two invitations for the exhibition whose theme will be the winning cars.

I have the Yearbooks, well all bar 1983, and can attest to them being an essential part of any Le Mans fan’s library. So enter and hopefully enjoy. Just thought I would remind folks of the R8’s record at La Sarthe.

John Brooks, December 2012

The Cupboard is Bare

From today’s Daily Telegraph

The challenges facing car makers were also laid bare by Peugeot which has accepted state aid for its lending arm.

Peugeot said it was close to an agreement on €11.5bn (£9.3bn) of refinancing and had secured state guarantees on a further €7bn for Banque PSA Finance,.

In return for the funds the French group said it would suspend dividend payments, scrap stock options for its top executives, and appoint government and union board representatives.

Anyone still think that they may go racing any time soon?

John Brooks, October 2012

Financial Reporting

La Route est Dure

It would appear that Peugeot’s sudden withdrawal from its Le Mans campaign has provoked a state of ire amongst the motorsport mavens of the UK’s journalistic community. As I noted recently, Autosport ran a piece last week purporting to the REAL reasons behind the Lion’s retreat. Of course, it did nothing of the sort and I was surprised at the reaction of those who took the time to peruse and reply to my piece. Some of what was written would not make comfortable reading for the magazine’s leadership, as they appear to have alienated a significant section of what should be their core market. Maybe only the cranks write to me, an unrepresentative selection; it would make perfect sense.

This week Damien Smith, editor of Motor Sport, gets into the act in his monthly editorial “Matters of Moment”. Mr Smith correctly declares that the stuffing has been knocked out of FIA WEC and Le Mans as a result of Peugeot’s withdrawal and Audi having little or no opposition, except a small Japanese company called Toyota. However getting the bit between his teeth he veers away from the rational.

“Peugeot is likely to return one day, if finances allow. But for now the best thing about a company that produces dull road cars is over. What a shortsighted and plain selfish decision, totally in keeping with a corporate bean-counter boardroom mentality.”

What??

What??

Motor Sport has been one of the recent success stories in the motoring print media. Since being sold to an independent publisher by the Haymarket empire, it has put on circulation, bucking the trend in the market and I would guess that advertising revenues are also on an upward course. The secret of this performance is simple really, well written content matched to top level production values; it is a premium product. This is why I take issue with the statement quoted above. It is completely at odds with the customary intelligence displayed throughout the magazine.

PSA Peugeot Citroën is Europe’s second largest car manufacturer, employing around 200,000 directly, though recent events have seen that number cut by over 5,000. So perhaps up to a million or so people are directly affected by the company’s performance, a number that is amplified many times when one considers those employed in the supply chain and other related businesses. Then there is the huge amount of tax that these people pay, directly or indirectly. These are big numbers.

Furthermore, in common with virtually the whole motor industry, PSA has strategic alliances with other giants such BMW, Chang’An, Dongfeng, Fiat, Mitsubishi, Renault and Toyota, either producing models under licence or developing new technologies. So even more people around the world who are directly affected if there are problems at PSA. New legislation is being introduced throughout the world is aimed at reducing emissions from motor vehicles, a costly process with all the expenditure and risk front loaded, a major financial headache for the management of any car manufacturer. Consideration must also be given to the social responsibilities that large corporations are bound by, particularly in Europe. The fortunes of PSA have potentially a major impact on the financial stability of France, Europe and the rest of the world. The Supervisory Board of PSA have on their shoulders a heavy responsibility. Many people depend on them doing the right thing; peoples’ future prosperity is at stake.

I wrote last week of the catastrophic losses in the second half of 2011 suffered by Peugeot.

Desperate times call for desperate measures. In last October PSA planned a reduction of annual overheads amounting to €800 million, coming at a cost of 6,000 jobs. Subsequently further cost cutting of around €200 million from annual overheads has been considered necessary. A race programme consuming a rumoured €50-60 million per annum would be an obvious target for both management and unions, given that any easy options had already been exhausted.

The losses will have also drained the cash reserves of PSA, so assets are being disposed of. The company raised €440 million from the sale of car rental company CITER and there is plan to dispose of real estate which is anticipated to raise a further €500 million. Perhaps the most significant sale is that of an undisclosed shareholding in wholly owned transport company GEFCO. Even in the difficult market conditions of 2011 GEFCO accounted for 16% of the PSA Group’s profits. Furthermore, disposing of these assets in the prevailing economic climate and in the circumstances of a fire sale is hardly likely to maximise potential returns. The PSA Group is hoping raise €1.5 billion from these transactions, a tall order.

What I had not looked closely at until now was the cash flow statement. Cash and liquidity are the life blood of any business. You can be profitable but if you run out of cash then you will go out of business. Even I can understand that.

The PSA Group had net cash and cash equivalents at the 2011 year end of €5.7 billion, a drop of €4.7 billion from the end of 2010. This massive decrease can be attributed to several factors, some planned, some not. On the planned side of the ledger the accounts reveal investment in new plants and ventures in India and China, markets that are expanding while Europe contracts. In addition there are the development and launch costs anticipated in 2012  of the Peugeot 208, the Citroën DS5 and the introduction of four other diesel hybrid models. During the first quarter of 2011 PSA also repaid €2 billion to the French State, the balance of a financial assistance package agreed in 2009.

What could not be foreseen at the time of budgeting for 2011 was the calamitous effect that the European Sovereign Debt Crisis would have on trade, particularly in PSA’s major market sectors. There are several problems affecting cash flow that manifest themselves in these circumstances, lack of profitability as margins are eroded, the holding cost of inflated inventory levels and the difficulty of hedging against currency fluctuations. The cost of raw materials was also increased unexpectedly by the instability on the currency exchange market. The ability to raise finance is also under pressure as sovereign nations struggle to meet their own liabilities. Put simply, borrowing and lending are a matter of trust and that is in short supply right now. Another unforeseen event that had an adverse effect was the Great East Japan Earthquake and Tsunami, causing a costly interruption of the supply of vital components.

So taking all of these factors into account it is difficult to see how the Supervisory Board of PSA could have done anything but axe the Le Mans project. If they are to continue to raise finance in an adverse market, then they need to demonstrate that they are willing to make difficult decisions and what better way than making a substantial cost saving in a high profile manner? There is also the small matter of the powerful French Trades Unions. There is no way that are they going to allow a non core activity such as racing to continue while their members are faced with possible redundancy. The argument that the new technology necessary to provide personal transport in the future will be developed faster in the heat of competition is a valid one, but all the technological advances in the world are pointless if the business has gone bust. The development will go on, perhaps at a reduced pace, but we live in an imperfect world.

Most people do not have as the centre of their universe a small city 120 miles to the west of Paris. Motorsport will not bring the cure for cancer or save the universe; it is part entertainment, part technological development and to those, like myself who are lucky to being involved in some minor capacity, mostly hugely enjoyable. Like all children I do not want my toys taken away, but just occasionally it has to happen. Who is being selfish now?

Finally calling the members of the PSA Supervisory Board “corporate bean-counters” is not polite nor strictly accurate. The Vice Chairman of the Managing Board is one Jean-Philippe Peugeot. He is definitely a motorsport enthusiast, having raced in 2010 in the Nurburgring 24 Hours in a Peugeot RCZ HDI. He also took part in four rounds of the 2005 Le Mans Endurance Series, driving a Pilbeam MP93 in the LM P2 class with Pierre Bruneau and Marc Rostan; he scored points in two races, including a podium place at Spa. However much Mr Peugeot enjoys motorsport, as senior management at PSA, he has responsibilities that must be discharged. A lot people are depending on him and his colleagues. I suspect that others in high places are “car guys” too.

So Mr Smith, withdraw your remarks. They are not in keeping with the brand values that are proclaimed on Motor Sport’s front covers:

Passion, Independence, Perspective, Opinion, Authority.

John Brooks, February 2012

Missing In Action

V24 Goodness

The news that came down the mojo wire yesterday was not good. An announcement that Risi Competizione would not be racing at Sebring was exactly what we did not want to hear. The press release went on………..

Team Principal, Giuseppe Risi, spoke of the difficult decision:  “Unfortunately the current economic climate has not allowed us to approach the 2012 season as we would have wished.  None of us want to go into an event such as Sebring feeling less than 100% ready and prepared, and we aren’t at that point.

 

“Risi Competizione, racing with Ferrari, has been a stalwart of the Series for the last decade and we fully recognize the extremely high level of competition it supports.  To race a Ferrari is to enter into a partnership with history and legend.  The standards are so high that commitment must be total and complete.  Risi Competizione knows better than many what it takes to win the 12 Hours of Sebring, and I feel that, right now, we wouldn’t be representative of our best.”

The 2012 12 Hours of Sebring will be a poorer place without the Team, Giuseppe, Beaky and the Contessa, come back soon.

Happier Times in 1999 with a brace of fabulous 333SPs.

John Brooks, February 2012

 

Hold The Presses

Friday morning’s mail for once includes the latest issue of Autosport, arriving a day earlier than of late. The cover features a snap of the Kimster looking “slightly foxed” as Private Eye would say. The accompanying headline screams “Kimi – I’m not in it for the money. I won’t give up, even if I’m not winning races”. Yeah, whatever.

Further down the page another headline really caught my eye, “Why Peugeot has REALLY quit Le Mans”, a non F1 feature making the cover, now that is special. Then the story of a major manufacturer quitting a new World Championship and the World’s greatest race without notice really is news.

Turning through the acres of pre-season F1 stories I reached page 34 and settled in to read the feature penned by Gary Watkins. As one might expect of such an experienced and skilled journalist, the piece was well written, stacked with quotes and facts that were relevant, a succinct summary of “five years of the 908”. Unfortunately that was not what had been promised.

Nowhere in the article was vulgar subject of money mentioned, no attempt to answer the question as to why the total cancellation of this high profile project without notice was considered necessary by the Supervisory Board of PSA Peugeot Citroën. As one of my highly respected colleagues put it, the piece read like a retrospective that might run in Motor Sport in a few years time. Certainly there was no commentary to support the promise of the headline on the front cover.

So what really happened at Peugeot to force such a draconian measure? About ten minutes on the Internet gives all the answers. Peugeot cars made an operating profit in 2010 of €621 million. In the first six months of 2011 a further profit of €405 million was accrued but when the year end was reached this had fallen to an overall loss of €92 million, a six month loss of €497 million, that is not sustainable for any enterprise in the long run.

It would appear that the company has still been turning out cars as normal but selling them in the tough market conditions at a loss. Chief Financial Officer Jean-Baptiste de Chatillon admitted inventory levels of assembled vehicles at the end of 2011 were “unsatisfactory”. That is a way of saying that potentially, further financial pain is on the way. Back in the last century when I had a real job, the accounting convention was to value Stock and Work in Progress at the lower of cost or net realisable value. It was a fantastic accountants’ equivalent of advertising industry’s weasel word, as an element of subjectivity is introduced under the cover of  objectivity. Valuation of stock has a direct affect on the profitability or not of a company’s accounts. A perfectly reasonable judgement, made with all due diligence, can, with the passage of time, turn out to be erroneous. To be fair predicting the future is an inexact science and you have to do the best you can with the information available.  I am not in a position to judge whether the value of Peugeot inventory held at the year end remains valid today. All that can be said is that car sales throughout Europe have plummeted in January 2012 and the expectations for the next few months are no more optimistic.

Figures from the European Automobile Manufacturers’ Association (ACEA) show sales of passenger cars fell 7.1% to 968,769 in January compared to the previous year. Sales in Portugal collapsed, falling 47.4%, while France saw sales drop 20.7%, Italy was down by 16.9%. This makes it even more unlikely that Peugeot, already suffering, will be able to trade its way out the hole that it finds itself in. Will the inventory even make the written down position as at the end of December 2011 and what will be the likely effect on margins?

Desperate times call for desperate measures. In last October PSA planned a reduction of annual overheads amounting to €800 million, coming at a cost of 6,000 jobs. Subsequently further cost cutting of around €200 million from annual overheads has been considered necessary. A race programme consuming a rumoured €50-60 million per annum would be an obvious target for both management and unions, given that any easy options had already been exhausted.

The losses will have also drained the cash reserves of PSA, so assets are being disposed of. The company raised €440 million from the sale of car rental company CITER and there is plan to dispose of real estate which is anticipated to raise a further €500 million. Perhaps the most significant sale is that of an undisclosed shareholding in wholly owned transport company GEFCO. Even in the difficult market conditions of 2011 GEFCO accounted for 16% of the PSA Group’s profits. Furthermore, disposing of these assets in the prevailing economic climate and in the circumstances of a fire sale is hardly likely to maximise potential returns. The PSA Group is hoping raise €1.5 billion from these transactions, a tall order.

 

As has been proved time after time, manufacturers only go racing when it suits them, it is not part of their core activity and while bragging rights are great for the marketing department, they mean little to the employee on the shop floor whose livelihood is under threat. I have been told, but cannot possibly confirm, that the competitions department was shut as part of the horse trading that went on between the PSA management and the very powerful French trade unions. Suggestions that the programme might reappear in a year or two are wide of the mark. The factory and equipment are being liquidated as part of the asset disposal plan, I know of teams that been given the opportunity to purchase the inventory. The personnel are being redeployed within the PSA group, or so we are told. While the high profile drivers and team bosses scramble to find another role, the real tragedy lies in the fate of the foot soldiers. For over 30 years Peugeot have been a major force in motorsport, successful in pretty much everything they have attempted. The wins have been founded on the efforts of the Jean-Michels and Jean-Philippes of the factory floor, for the most part anonymous but vital to the result. In recent years they have taken on the might of Audi and for the most part beat them comprehensively, two high profile defeats at Le Mans in 2010 and 2011 being the only black marks. Those who toiled at Peugeot Sport can look back on their achievements with pride, it is not their fault that the department has been closed.

Which brings us full circle to the Autosport feature, which has a very good explanation of the recent racing history of Peugeot, without any mention of the financial issues that killed off that activity. I would have expected both inter-related areas to have been covered, especially from the headline on the cover or indeed the banner above the piece. Insight – Peugeot’s Pull-Out. Anyone might surmise that the sub editor writing the headlines had not read the piece.

But what do I know?

John Brooks, February 2011

Look on my works, ye Mighty, and despair!

 

La Route est Dure

Ozymandias

I met a traveler from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them, and the heart that fed;
And on the pedestal these words appear:
“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

    Percy Bysshe Shelley (1792-1822)

John Brooks, January 2012

Ten Years Gone

Hi, Guy!

January 3rd 2002, I was in Florida. Why? Well somehow I had convinced myself that it would be cool and profitable to shoot the Grand Am pre-Daytona 24 Hour Test. Profitable? I don’t need to tell you about that.

Handy Andy

Cool? It was bloody freezing…………I recall ice on the inside of the windows at the flea-pit motel I was staying at…………….it was warmer back in Surrey.

Mad Max

And if that was not enough, I had camera failure on my DSLR, less than a year old………..and no spare………….so two days of shuffling about………clients grumbling (no change there then)……..OK maybe more from Florida tomorrow.

John Brooks, December 2012

Pee Oh Tea whY?

We are in that annual period of limbo, as the old year crawls away and the more credulous amongst us convince ourselves once more that somehow next year will be better. If past performance is anything to go by, that optimism is sadly misplaced………….

Two Stops Over Exposed

Another sign of this time is the need for some photographers to remind the public of their work from the past 12 months…………..most, but not all, would do better to keep quiet and hope that the thin fare that they served up would be forgotten in the passage of time…………..even more ridiculous are those who “explain their art” and in the process display their utter cluelessness…….

For my part one image I snapped at the tracks stood out…………..it shows all that is wrong with motorsport photography, but what do I know?

John Brooks, December 2011