Ron Dennis profile: Driven to succeed
Steeped in F1 history, McLaren’s road car business has won a 14 per cent share of its market in 18 months. Its chairman, Ron Dennis, talks to Peter Curtis about growth, diversification – and Lewis Hamilton
'Industry as a whole in this country has got to be driven by technology. We've always been innovative and pioneering'- Ron Dennis
This article appeared in the December edition of Business Voice, the CBI magazine
Walk down the broad, curving boulevard at the McLaren Technology Centre on the outskirts of Woking in Surrey, and you get an immediate sense of the company’s sporting heritage and obsession with technical excellence.
Every detail of the Foster & Partners-designed facility has been meticulously considered. The bays where engineers work on its Formula 1 cars have white-tiled floors to show up the merest speck of dirt. A wall made entirely of glass overlooks an artificial lake outside that cools the building. The effect is undeniably impressive: more high-tech lab than factory.
The boulevard is lined with some of the racing cars that have made the team so successful. Among them are Emerson Fittipaldi’s M23, which brought McLaren its first F1 constructors’ and drivers’ championships in 1974, and the red-and-white MP4/4, in which Ayrton Senna and Alain Prost won 15 of 16 races in 1988.
A large trophy cabinet contains the spoils of the 182 grand prix, eight constructors’ titles and 12 drivers’ titles it has won since entering F1 in 1966.
But it’s perhaps John Watson’s MP4/1 of 1981 that epitomises the innovation that makes this privately owned company tick – and the way in which the expertise of its racing team has informed the growth of a business empire that ranges from high-performance road cars to data analysis.
It was with this car that McLaren introduced the first carbon-fibre chassis to the sport. Its combination of strength and lightness revolutionised the design of F1 cars.
And it is the evolution of this technology over the past three decades that enabled the creation of the iconic McLaren F1 supercar in the 1990s and an independent maker of road cars, McLaren Automotive.
The company’s range, which so far features the MP4-12C coupé and its convertible Spider variant, is based on a one-piece carbon-fibre structure.
Thanks to a process innovation, this takes four hours to make, as opposed to hundreds for the F1 sportscar chassis. And that brings greater affordability: the Spider costs from £195,000 compared with $1m for the F1.
I’m here to meet Ron Dennis, the man who has been synonymous with McLaren for more than 30 years and whose obsessive attention to detail is behind the firm’s HQ and its drive for technological supremacy.
Today he is executive chairman of both McLaren Group and McLaren Automotive, having ceded day-to-day control of the racing team to Martin Whitmarsh in 2009. But he’s keen to stress the links between the team and the rest of the organisation.
“I can’t foresee a time when McLaren and Ferrari aren’t going to be on the grid – it’s just part of our core business,” he says. “You could argue that it’s the advertising budget for the car group.”
The automotive business has certainly grown fast in the 18 months since it made the first MP4-12C. It expects to sell 1,500 cars this year and 1,700 in 2013, all made in the production centre that opened next door in late 2011, and has established a retail network of 38 dealerships in 22 countries.
This expansion forms part of a broader diversification that includes McLaren Applied Technologies, which uses IT and data management expertise from motorsport to help companies and elite athletes to improve their performance.
Given the state of the global economy, it seems rather counterintuitive to be making such big investments.
But Dennis explains that the firm is sticking to a long-term strategy to establish high-quality facilities that will allow it to respond instantly to demand. “The fact that the economy isn’t where we’d like it to be affects us and people’s appetite to buy ad space on a racing car.
But it doesn’t actually have an impact on a plan that will unfold in three years’ time,” he says. “The economy will come back and we want to be ready to take advantage of that.”
He acknowledges that McLaren Automotive has been hit by the woes of its core European market in particular. “I don’t think there’s any car company that’s not wrestling with this,” he says. “It slows the growth of our company to a certain degree and of course we’d like more sales.
"But we look at market share: we believe we’ve got 14 per cent of [the luxury car] sector, which after 18 months isn’t so bad. It’s 14 per cent of a lower number than we would have liked, but that’s the way the world is.”
A bonus has been the product’s popularity in the US, currently the destination for nearly half of its sportscars (80 per cent are exported). “Even though we’d won the Indianapolis 500 three times and numerous Can-Am titles, we thought we’d struggle to reactivate our brand in America,” Dennis admits. “We’re delighted that they’ve really got it.”
The plan for 2013 is to open dealerships in mainland China (it is already in Hong Kong) and other Asian markets, including Indonesia. “We’re not expecting huge quantities of cars to be sold there, but certainly enough to compensate significantly for the softness of the European market,” he says.
He adds that the business has bedded down after some early technical problems and that its shareholders (which, apart from Dennis, include Bahrain sovereign wealth fund Mumtalakat, Mansour Ojjeh’s Tag Group and Singaporean investor Peter Lim) recognise the need to introduce new models at a variety of price points, albeit not as fast as had been planned. “We have to give our dealers the ability to have a product range,” he explains. The latest variant, the Spider, will be delivered to customers from early next year.
Dennis says that the Spider has brought “a degree of growth” in orders – something that the company hasn’t had in some time.
And he’s delighted by its press reviews. “The headlines are better than you could possibly imagine.
The Daily Telegraph called it the best car in the world,” he says. “I said to our marketing and sales guys: ‘Our engineers have done an incredible job of building the car and you have done an incredible job of getting across to consumers and the media how great it is. You haven’t got any excuses, so get on and make sure you sell it.’”
The right environment?
Turnover in 2011 for the McLaren Group – which includes the F1 team, McLaren Applied Technologies and several other businesses – rose 19 per cent to £239m; pre-tax profits were up 64 per cent to £19.7m (2011 results for McLaren Automotive have yet to be published). Overall, the organisation employs around 2,000 people.
McLaren’s work is a striking example of what British high-tech engineering can achieve – a topic on which Dennis has been increasingly vocal over the past couple of years. “Industry as a whole in this country has got to be driven by technology,” he says.
“We’ve always been innovative and pioneering; we’ve always been alternative in the way we solve problems. There is a mentality that has to be fed – we’ve got to protect our entrepreneurs.”
As one of the UK’s most successful entrepreneurs himself, he argues that this means getting the balance right on personal tax. “I understand very well why most of our population would wish wealthy people to be taxed severely.
But, if you are an individual trying to give your very best and working really hard, the psychological impact of paying back over 50 per cent of your income is vast. I think 45 per cent is the right number in this climate.”
Dennis believes that the government is demonstrating strong leadership and “doing a pretty good job in very difficult circumstances”. The formulation of a new industrial policy is positive, he adds, even if fiscal constraints sometimes limit the government’s ability to help. “The fact that it has the same vision at least means that you’re not pushing against a locked door.”
But he’s concerned that the ongoing scrutiny of Britain’s banks risks hampering their ability to lend and impeding the recovery. “Some banks have got such a high percentage of their workforce distracted by non-productive measures,” he says. “We need to make sure the future is controlled and not spend huge resources on the forensics of what happened.”
And he thinks that more could be done to encourage industry to invest – by introducing a 12-month write-off on machine tools, for example. “The R&D regulations at the moment are better than they were, but they could be enhanced.”
The appliance of science
One area of significant investment for the group is McLaren Applied Technologies, which is leading its diversification into new sectors including healthcare and defence.
Its expansion plans entail the creation of 400 jobs (it currently has 45 employees, up from three just three years ago) and the construction of a 60,000sq m base on adjoining land.
Dennis says that he wants this business to “become a very strong pillar” in the McLaren group. “This is what we see as the future,” he says. “Even if we did the most perfect job in F1 racing all the time, the fact is that we’ve got only two customers and, up to the end of this year, they are Jenson Button and Lewis Hamilton.
And there’s nothing you can do to scale up that business. Revenues and margins have gone up, but it’s still trapped by the fact that you can run only two cars.”
The division’s projects include the development of high-performance equipment. For example, it collaborated with bicycle-maker Specialized to optimise the design of the carbon-composite bike on which Mark Cavendish won the 2011 Tour de France green jersey and World Road Race Championship.
It is also using data management expertise developed in F1 to help organisations improve the performance of both people and equipment.
Over the course of a race weekend, more than 500 sensors on each car transmit over a billion data points, which must be analysed and acted on in real time in order to develop race-winning strategies.
McLaren Applied Technologies has worked with coaches of Team GB cyclists, rowers, sailors and canoeists to collect and process performance data from each athlete to fine-tune training regimes and race strategies.
In cycling’s team pursuit event, for example, coaches can use McLaren technology to collect more than 1.2 million items of data in a race lasting under four minutes. The company believes this could be used in healthcare to create user-friendly diagnostic systems for managing long-term conditions.
In addition, it is working with National Air Traffic Services to map aircraft ground movements at Heathrow.
It has also formed a partnership with pharmaceutical giant GlaxoSmithKline (GSK) to help it streamline manufacturing procedures and improve its real-time monitoring, scenario planning and forecasting.
This will involve the construction of the McLaren GSK Centre for Applied Performance, a state-of-the-art learning facility, at Woking.
It’s a tie-up that Dennis says has already delivered “clear-cut, measurable performance enhancements that mean this relationship is working and is going to grow”.
In part, he adds, it’s about transmitting the winning mentality that drives the racing team. “We’ve been able to bring some of that cultural understanding to part of the partnership and I think it has worked very well.”
Goodbye to all that
This mentality was on display in the final two races of the 2012 F1 season, with wins for Hamilton in the US and Button in Brazil. But it was an up-and-down season overall, with McLaren finishing third in the constructors’ championship and Hamilton’s ability to challenge for the drivers’ title hampered by technical problems when in the lead at both Abu Dhabi and Singapore.
Hamilton also announced that he would be driving for Mercedes in 2013. So is Dennis, who signed him for the team as a teenager, disappointed by his departure?
He replies that “disappointed” is the wrong word to use. “Whatever people choose to do at the end of a contractual period, the professional thing to do is to be supportive of the other side,” he says. “We don’t wish him every success at Mercedes – that’s understandable, as he’s obviously going to be a competitor – but we don’t wish him anything negative.”
While things could have been different, he says, neither party was prepared to make the changes needed to maintain the relationship. “That applies in both directions.
"I think it’s wrong to portray that Lewis left this team. At the end of the day, you end up with a situation where you’re going to separate if the circumstances aren’t right.”
He adds: “Life isn’t about one person deciding anything. It’s never that way. It’s about circumstances. Everybody says: ‘Am I bitterly this or bitterly that?’ What? I’m a realist. Did we have the ability to create a situation where we could have stayed together? Categorically, yes. Would that have been the right thing to do? We didn’t think so.”
How to catch a spider
The £40m McLaren Production Centre is linked by a tunnel to the McLaren Technology Centre and shares its architectural styling and clinical feel.
The two-storey, 32,000sq m building produced its first MP4-12C only 18 months after construction work began in spring 2010. About 300 people work there now, making about eight MP4-12C Spiders a day.
It’s strikingly quiet and clean for an industrial facility, with heavy machinery and cabling hidden under ground. McLaren’s trademark precision and attention to detail are carried through to the production process.
Parts are electronically tracked to ensure quality control, while assembly work is checked at each stage to allow faults to be remedied immediately.
Once it’s assembled, each sportscar is tested on local roads and at a nearby circuit and then subjected to a final audit lasting three to four hours.
One car each day is checked for eight to nine hours to pick up the smallest problems.
All components are designed by McLaren and 50 per cent are made by British suppliers. The engines, for example, are manufactured by Ricardo in Sussex.
The building has been designed to allow for 15 years of expansion. Production is set to be ramped up to reach 4,500 vehicles over the course of the next decade.
McLaren’s next road car
When McLaren Automotive unveiled the designs for its latest car, the P1, at the Paris Motor Show in September, it announced the ambitious goal of making the P1 (pictured) the world’s most technologically advanced supercar, with much higher levels of performance than any current road car.
So is the P1 the spiritual successor of the acclaimed F1? “It’s a very different car,” says Ron Dennis. “It is, of course, a car to halo the brand. It’s about showing how competently we have managed lots of new technologies and brought them together in something that should be exceptional. Some of our competitors are making comparable products but we feel there’s a very good chance that we’ll emerge on top.”
Only 106 F1s were produced and the P1 is also set to be exclusive: no more than 500 will be made, says Dennis, who adds that the project’s low volumes and high costs mean it’s “not driven by economics”, although it will need to break even at the very least.
“If it generates more sensational headlines than the Spider, you could argue that the project is an advert for what we can do. We don’t want to be thought of as having the same brand values as those of our rivals,” he adds.
The Dennis CV
- 1966 Starts work in Formula 1 at Cooper Cars.
- 1968 Chief mechanic to Jack Brabham at the Brabham team.
- 1971 Launches Rondel Racing, an F2 team.
- 1976 Founds Project 4 Racing, an F2 and F3 team.
- 1980 Acquires equity in McLaren, taking control of McLaren Racing two years later.
- 1988-91 McLaren wins both constructors’ and drivers’ F1 titles for four consecutive years.
- 1992 Company launches F1 supercar (which wins Le Mans on debut in 1995).
- 2004 McLaren Technology Centre opens in Woking.
- 2009 Dennis steps down as F1 team principal.
- 2011 McLaren Automotive begins production of MP4-12C