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 Post subject: Force India fallacy?
PostPosted: Wed Nov 28, 2018 1:00 am 
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It was often believed that the old Force India team achieved the most bang for their buck, coming 4th in the WCC on a small budget and garnering the most value from their supposedly meager spend. I remember them receiving a lot of plaudits for this.

However with them going busto this season, it seems apparent that they had been overspending for some time to get in such a financial crisis despite earning decent prize money over the last few years; so does this mean that the previous notion needs to be revised in that they weren't really spending well and providing value for money after all, and were actually 'cheating' us all in a way, by spending more than they should and fooling us all into the wrong impression?


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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:09 am 
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Did they spend more money than claimed or just didn't earn enough on sponsorships, prize money and FIA payouts to cover costs.

FIA payouts and finishing mid pack won't cover the costs without other sources of income.

You can be tremendously efficient and still go belly up if you don't bring in enough Euros.

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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:18 am 
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Mort Canard wrote:
Did they spend more money than claimed or just didn't earn enough on sponsorships, prize money and FIA payouts to cover costs.

FIA payouts and finishing mid pack won't cover the costs without other sources of income.

You can be tremendously efficient and still go belly up if you don't bring in enough Euros.


If it's not earning enough from sponsors, then that is still underperforming surely? Ron was criticised when he wasn't bringing in sponsorship money for McLaren for instance.

I think everyone assumed that Force India were not spending outside their means and that has been proven to be false, so I guess that means even Williams were doing better over that period as they haven't gone bust. I guess one could argue that FI were spending within their means during earlier seasons when they were truly overachieving, and had only started overspending recently and thus were only underachieving in 2017 and 2018, but that feels like wishful thinking to me as this kind of spending philosophy is likely to be inherent with the management over a long period of time.


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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:21 am 
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Mort Canard wrote:
Did they spend more money than claimed or just didn't earn enough on sponsorships, prize money and FIA payouts to cover costs.

FIA payouts and finishing mid pack won't cover the costs without other sources of income.

You can be tremendously efficient and still go belly up if you don't bring in enough Euros.


Exactly this.

There's a difference between getting bang for your buck and not having the buck to spend.

It's a bit like taking out a loan for a first class round the world trip on the QE2 for $10,000 but not being able to re-pay the loan.

The trips great value for money, a real bargain, but if you default on the loan because you don't have the funds to pay it back, you'll end up in the poo at some stage.

That analogy made sense to me anyways

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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:25 am 
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Jezza13 wrote:
Mort Canard wrote:
Did they spend more money than claimed or just didn't earn enough on sponsorships, prize money and FIA payouts to cover costs.

FIA payouts and finishing mid pack won't cover the costs without other sources of income.

You can be tremendously efficient and still go belly up if you don't bring in enough Euros.


Exactly this.

There's a difference between getting bang for your buck and not having the buck to spend.

It's a bit like taking out a loan for a first class round the world trip on the QE2 for $10,000 but not being able to re-pay the loan.

The trips great value for money, a real bargain, but if you default on the loan because you don't have the funds to pay it back, you'll end up in the poo at some stage.

That analogy made sense to me anyways


If you don't have the buck to spend then you don't spend it surely? This is what Williams do, and so Force India should have elected to do the same but instead they kept on spending regardless and looked more competitive than they 'deserved' to be as a result.


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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 6:29 am 
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F1 Racer wrote:
Jezza13 wrote:
Mort Canard wrote:
Did they spend more money than claimed or just didn't earn enough on sponsorships, prize money and FIA payouts to cover costs.

FIA payouts and finishing mid pack won't cover the costs without other sources of income.

You can be tremendously efficient and still go belly up if you don't bring in enough Euros.


Exactly this.

There's a difference between getting bang for your buck and not having the buck to spend.

It's a bit like taking out a loan for a first class round the world trip on the QE2 for $10,000 but not being able to re-pay the loan.

The trips great value for money, a real bargain, but if you default on the loan because you don't have the funds to pay it back, you'll end up in the poo at some stage.

That analogy made sense to me anyways


If you don't have the buck to spend then you don't spend it surely? This is what Williams do, and so Force India should have elected to do the same but instead they kept on spending regardless and looked more competitive than they 'deserved' to be as a result.


There is more than one strategy. Sometimes you have to speculate to accumulate. By spending what they did they kept things operational and attractive to the new owners. Regardless they still out perform others on track who spend as much or more.


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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 9:37 am 
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What the OP severely missed was how the real world works and when a business requires such substantial finances in order the operate, mich of the raw materials and equipment is acquired via financing which means a lump sum of cash up front, and then its pay as you go. Eventually, if you’re not earning a portion of the prize money equal to your performance, then you end up cutting things close until close is being in the negative and from their businesses ask for greater lines of credit from every vendor, thus increasing their debt and therefore, the same prize money payout actually becomes less and less over time and you end up where force India found themselves.

They were withholding payment to vendors and using whatever money they had at their disposal to continue operating as if nothing was wrong with their finances until their was no more. Keep in mind that all those delayed payments and financial agreements they were defaulting on accrued additional debt daily. Taking all that into consideration, force India indeed punches above their weight and the biggest reasons for that was the continuity within the team, which allows them to continue to chip away at concepts that worked and work around those that fell short of the mark, and doing things that way results in emproved efficiency.

You really need a better understanding of business before arriving at a conclusion such as this.

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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:04 pm 
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F1 MERCENARY wrote:
What the OP severely missed was how the real world works and when a business requires such substantial finances in order the operate, mich of the raw materials and equipment is acquired via financing which means a lump sum of cash up front, and then its pay as you go. Eventually, if you’re not earning a portion of the prize money equal to your performance, then you end up cutting things close until close is being in the negative and from their businesses ask for greater lines of credit from every vendor, thus increasing their debt and therefore, the same prize money payout actually becomes less and less over time and you end up where force India found themselves.

They were withholding payment to vendors and using whatever money they had at their disposal to continue operating as if nothing was wrong with their finances until their was no more. Keep in mind that all those delayed payments and financial agreements they were defaulting on accrued additional debt daily. Taking all that into consideration, force India indeed punches above their weight and the biggest reasons for that was the continuity within the team, which allows them to continue to chip away at concepts that worked and work around those that fell short of the mark, and doing things that way results in emproved efficiency.

You really need a better understanding of business before arriving at a conclusion such as this.


Can you explain why teams that were supposedly doing 'worse' than the old Force India, (such as Sauber and Williams), have not gone bust? Is it not because they have spent within their means and taken out reasonable financing that they are able to repay? Couldn't Force India have spent less over the last few years and then this situation wouldn't have happened to them? Then if they had spent less then they might not have been coming 4th and 5th regularly in the WCC, hence wouldn't have had the plaudits that they had; that is my point.


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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:29 pm 
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A few years ago Force India wrestled with the decision to either keep on doing as before, or open up the piggy bank in the hope they can climb to the top tier. They did spend more, and they did improve their position in Formula One. But the cost was too much.

The team (racing operation) itself did wonders, they brought a competitive car and they had very good results. I am not as versed as others in financing, and business, but it is obvious that the business side of the operation was a classic cluster f--k.

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 Post subject: Re: Force India fallacy?
PostPosted: Wed Nov 28, 2018 2:34 pm 
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Blinky McSquinty wrote:
A few years ago Force India wrestled with the decision to either keep on doing as before, or open up the piggy bank in the hope they can climb to the top tier. They did spend more, and they did improve their position in Formula One. But the cost was too much.

The team (racing operation) itself did wonders, they brought a competitive car and they had very good results. I am not as versed as others in financing, and business, but it is obvious that the business side of the operation was a classic cluster f--k.


I agree, but by definition this means that we need to revisit the plaudits that we all incorrectly gave them back then right? Knowing what we know now I mean.


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