McLaren Group, the holding company that oversees McLaren Automotive, McLaren Applied Technologies and McLaren Racing is shedding 25 percent of its workforce. Sales across the group have been significantly hit hard by the coronavirus pandemic lockdown, the job losses amount 1,200 out of a 4,000 strong workforce. McLaren like all other automotive companies have been forced to temporarily close factories and showrooms in a bid to halt the spread of Covid-19.

The 2020 Formula 1 season was suspended along with all worldwide motorsport events. This effectively cut off revenue streams generated by Formula 1. Company bosses attempted to raise capital to cover for the sudden shortfall in earnings by mortgaging the company’s collection of historic cars and the Norman Foster designed headquarters in Surrey, England.

However shareholders blocked the emergency plan because the site and car collection are already being used as collateral on $700 million of bonds previously sold in 2017. McLaren also applied for a £150 million government loan, but the application was rejected. Existing shareholders have already pumped in $374 million USD of private funding.

Job losses were already on the cards before the pandemic hit. McLaren F1 along with other Formula 1 teams recently united to agree a budget cap of $145 million USD from 2021 onwards. That’s down from the intended $175 million USD cap. Is McLaren on the brink? difficult to say, if the situation worsens McLaren will be forced to make more cuts. Obviously.

But with a sovereign wealth fund as the main shareholder, McLaren does have a get-out clause. But Sovereign Wealth funds are about making money not overspending. The coronavirus of 2020 is cold that will not go away, but the situation will recover. However, the recovery will be slower than expected and more jobs may be lost along the way.