Honda hands Brawn US$200m in cash and assets

Honda Motor Co. Ltd has handed over more than US$200 million in the deal that saw the factory 'sell' its Formula One team to its former team principal Ross Brawn. The Japanese car manufacturer has given Brawn US$110.9 million of fixed assets, including US$38.4 million in leasehold land and buildings and US$36.9 million in factory equipment and machinery, as well as US$50.2 million cash to cover a year's staff wages that it would have otherwise had to pay in redundancy costs.............click headline for more

Honda Motor Co. Ltd has handed over more than US$200 million in the deal that saw the factory 'sell' its Formula One team to its former team principal Ross Brawn. The Japanese automotive manufacturer has given Brawn US$110.9 million of fixed assets, including US$38.4 million in leasehold land and buildings and US$36.9 million in factory equipment and machinery, as well as US$50.2 million cash to cover a year's staff wages that it would have otherwise had to pay in redundancy costs. The company has, additionally, written off significant debts owed to it by the team.

Brawn's new team has also received the cash Honda Motor Co. Ltd would have had to pay both him and driver Jenson Button to cancel their contracts, which were held directly with the car maker in Japan rather than with the British-based racing team.

Honda has done the deal as an alternative to putting the team into liquidation - it could have walked away with only US$100 million of losses. An insider said: "Effectively Honda has handed Ross a US$100 million cash dowry plus the same again in physical assets." It is believed that Brawn handed a symbolic dollar to buy the team and Honda deposited the US$100 million cash in the team's bank account. But it is far from a free ride for Brawn, who will now have to negotiate with the team's 700 employees and Button over their contracts. Brawn is believed to have made personal guarantees to keep the team running as a going concern for at least 12 months - important to Honda as it needs 12 months to legally absolve its liabilities to the team's staff, who are paid an average of US$75,260 per year.

Brawn is thought to be planning to ask all 700 employees to take a universal pay cut of between 30 and 40 per cent. If not, insiders say he will offer them statutory redundancy at a fraction of the sum Honda would have had to pay out. Most will likely take the pay cut. It is thought former Honda Racing chief executive Nick Fry was offered the chance to participate but declined to give the substantial personal guarantees to Honda that were required. Fry's future is now unclear.

Bernie Ecclestone's Formula One Management has also deposited US$40 million in back television fees in the team's bank account and, even after redundancy payments, the newly named BrawnGP will have a US$120 million budget to complete the 2009 season with. That is less than a third of what Honda spent last year. Brawn is believed to have signed a new extension to the Concorde Agreement with Ecclestone.

Honda Motor Co. Ltd appears to have accepted that the costs involved in redundancies and liabilities should the team fold meant that there was no option other than to hand the team over to the 54-year old former Ferrari technical director.

In addition, the Japanese company is believed to have written off debts of US$47.8 million owed to it by the Formula One team. A company statement thanking Brawn for agreeing to the deal points to the dire financial situation in which the car maker had found itself. Hiroshi Oshima, managing officer of Honda Motor Co. Ltd, responsible for corporate communications and motorsport, commented: "Since announcing our withdrawal from Formula One racing on December 5 of last year, we have conducted various studies and discussions so that the team can continue its activities as a new team. We are very pleased that we could sell the team to Ross Brawn, with whom we have been partaking in the challenges of F1 competition, and are grateful for his decision. We offer our sincerest wishes for the new team which will be led by Ross."

Brawn himself described the deal as a "very pleasing conclusion" to a turbulent few months for the team and its 700 employees: "Firstly, it is a great shame that having worked with Honda Motor Company for so long we can no longer continue together," he said. "I would like to thank Honda for the fantastic co-operation and support we have received throughout this process – particularly those members of the senior management who were closely involved with concluding our agreement – and for the faith they have demonstrated in myself and our team.

"I would also like to take this opportunity to pay due credit to our staff at Brackley. The levels of motivation and commitment that I have witnessed at the factory deserve the highest praise," he added. "The past few months have been extremely challenging for the team but today’s announcement is the very pleasing conclusion to the strenuous efforts that have been made to secure its future."

Brawn announced that Button and Brazil's Rubens Barrichello will be the team's 2009 drivers, providing some form of continuity for the team. It is widely reported that Button has accepted a 50 per cent cut in his salary to stay in Formula One. Insiders suggest it could be considerably more than that, but the Briton is still likely to earn US$6 million per year. Details of Barrichello's salary are unclear, but there is speculation that the former Ferrari driver could attract a significant amount of support from Brazil.