Formula One Team Makes Golf Clubs, Auto Parts With Sponsor Money Dwindling

Frank Williams has struggled to keep his Formula One team going since 1969. As success eludes it and sponsors abandon the sport, he may have found an elixir: selling racing-car technology.

The nine-time champion Williams team, whose home race is this weekend’s British Grand Prix, says it expects to make tens of millions of pounds a year in sales by developing an energy- saving flywheel for road cars and is also using aerodynamic expertise to make golf clubs. Sponsorship revenue of the 12 series teams fell 8 percent to $771 million in 2009, according to researcher Formula Money.

“It’s a perennial concern,” Williams said in an interview. “We felt it was necessary to have a more commercial background.”

The team, whose former drivers included champions Ayrton Senna and Alain Prost, is changing its business plan of relying on sponsorship and prize money as the most popular car racing series is jolted by an economic slump. Carmakers Honda Motor Co., Toyota Motor Corp. and Bayerische Motoren Werke AG quit in the last two years, pulling as much as $1 billion of backing.

Williams, now 68, was paralyzed in a 1986 car crash. He’d kept his team going in the 1970s by selling second-hand racing car parts, calling it “hand-to-mouth stuff.” In 1974, he had the phone line to his office in Reading, England, cut off because of unpaid bills, and he sold the team’s Falcon jet five years ago to help pay for a wind tunnel.

Disappearing Sponsors

In the fiscal year ended Nov. 2006, income plunged 30 percent after it lost BMW and Hewlett-Packard Co. as backers, the accounts of Williams Grand Prix Engineering Ltd. show. While the team has returned to profit, the value of sponsorship deals continues to swing, depending on the economy, team chairman Adam Parr said. Net income fell 50 percent to 4.5 million pounds ($6.8 million) on sales of 108 million pounds in 2009, the company’s latest accounts show.

Williams has “almost been forced” to diversify after failing to win a title since 1997, Tony Jardine, a former assistant manager of the McLaren team, said. Williams, based in Grove, England, has won 113 races, although its last victory came in 2004.

“They are spreading their bets,” Jardine said. “They’re one of the old school Formula One teams but their performance has declined since its zenith.”

New Opportunities

Williams changed tack two years ago. It bought a stake in start-up Automotive Hybrid Power Ltd. as it began developing a flywheel that recoups energy from braking to comply with rules aimed at making Formula One more environmentally friendly. In April, it paid 1.6 million pounds to increase its holding to 78 percent even as the flywheel is shelved by teams this season because of costs.

Williams is working with Porsche SE and Tata Motors Ltd.’s Jaguar Land Rover on a flywheel that aims to reduce fuel consumption by 25 percent in road cars at a cost of $1,400 per vehicle, Parr said. It is setting up a research center in Qatar with the government to build flywheels for subways as well as simulators for road cars, Parr said.

The team started a company in City of Industry, California, with executives from the golf-equipment industry to sell high- end clubs. Formula One aerodynamicists helped design several products including a set of $50,000 gold-plated clubs with 19 percent less drag force than other brands, the team said. The clubs are being marketed in China, Japan and the U.S.

“Our strategy is to explore areas relevant to what we do,” Parr said. “We’ve got 500 very, very clever people and we’ve got a facility that can make almost anything. The golf clubs are pretty cool.”

Diversifying

The team expects to make “many tens of millions” of pounds in three to five years from the flywheel, Parr said. He declined to give financial details of other projects. In diversifying, Williams is following Woking, England-based rival McLaren, which in the 1990s built a 240 mile-per-hour road car and is now making a model that will sell for about 150,000 pounds.

Williams’ struggles aren’t unusual in the sport. USF1, based in Charlotte, North Carolina, failed to start the season as scheduled in March. Hinwil, Switzerland-based Sauber, whose former backers include Credit Suisse AG, is seeking deals on a race-by-race basis this year after taking over BMW’s team, marketing executive Alex Sauber said.

“The model has to change,” Tony Fernandes, chief executive officer of AirAsia Bhd. who manages the Lotus team, said. “Just having sponsors to fund your team is pretty tough.”

Williams said side projects like making golf clubs risk distracting the team and his priority remains making a faster race car. The team is seventh in the constructors’ standings with 20 points after nine of 19 events.

“We have got to get back to where we were,” Williams said. “We have just got to use our technology to make the world’s best racing cars rather than very average ones.”

To contact the reporters on this story: Alex Duff in Madrid at aduff4@bloomberg.net.

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