The impact if the novel coronavirus pandemic on the global automotive industry is forcing the Formula One team owner and maker of supercars, McLaren Group, to cut 1,200 jobs.
The Surrey-based company had a total workforce 4,000 people and there for the job cuts is equivalent to more than a quarter of its total employee strength. The company said that the layoffs will be spread across the Formula One, road-car and applied technologies business divisions of the company.
The company identified a number of factors that contributed to it taking this drastic measure which included the cancellation of motorsport events across the world, the suspension of manufacturing and car sales, the drastic reduction in demand for its technology solutions and the new cost cap on Formula One expenditure that is to be implemented starting next season.
With the Formula One season and sales of supercars coming to a halt because of the spread of Covid-19, the disease caused by the novel coronavirus pandemic, the company had already furloughed a significant number of its employees.
“We deeply regret the impact that this restructure will have on all our people, but especially those whose jobs may be affected,” said Paul Walsh, the executive chairman of McLaren Group.
“It is a course of action we have worked hard to avoid, having already undertaken dramatic cost-saving measures across all areas of the business. But we now have no other choice but to reduce the size of our workforce,” he said.
These job losses were announced at a time when the group is planning to raise £275 million from investors which will be backed against the value of the company’s classic car collection and the state-of-the-art Norman Foster-designed headquarters building of the company in Woking.
Even with the suspension of production of the company being suspended at its Woking plant since March, McLaren has burned through £257 million in cash in the year till 20 April.
But with the pandemic hitting its balance sheet very hard, McLaren sought to shore up its finances with £300 million of equity investment in March being pledged by the existing shareholders of the group.
It has been reported that the efforts of the company to secure a £150 million emergency loan from the government has yielded no results.
“This is undoubtedly a challenging time for our company, and particularly our people,” Walsh said. “But we plan to emerge as an efficient, sustainable business with a clear course for returning to growth.”
The hope for McLaren now is on the tentative restart of the Formula One season. About 12 per cent of the total revenues of the group is accounted for by the prize money and advertising deals it gets from the race series.
“McLaren Racing has been a proponent of the introduction in 2021 of the new Formula One budget cap which will create a sustainable financial basis for the teams and lead to a more competitive sport,” Walsh said.
“While this will have a significant impact on the shape and size of our F1 team, we will now begin to take the necessary measures to be ready to run at the cap from 2021 onwards, in order to challenge again for race wins and championships in the future.”
(Adapted from TheGuardian.com)