McLaren gambles by branching out into road cars

McLaren's decision to diversify into supercars during a recession is bold, to say the least...

This’ll please Lord Mandelson: Formula One racing team McLaren unveiled its flashy new road car this morning. It’s planning to make 4,000 of these a year (eventually) at a new plant in Woking, employing some 800 people – so it’s good news for the beleaguered UK auto industry. And with all the cut-backs in Formula One lately, it might make sense for McLaren to diversify into the consumer market. But you’d be forgiven for wondering: with the UK still mired in recession and global car sales still in the doldrums, how many people are going to be shelling out 150 grand for a new supercar?

It’s not the first time that McLaren has built a road car – back in 1998 it launched the F1 (at the time the fastest production car ever made), and more recently it’s been part of a joint venture with its engine partner Mercedes to design sports cars. But this time round it’s going the whole hog, aiming to take on the likes of Ferrari, Aston Martin and Porsche with its own brand. The not-very-excitingly-named 12C - which sounds like it should be on the back of a pencil case, not a supercar - has been designed and built entirely in-house (partly thanks to a design director poached from Ferrari). So it’s an ambitious undertaking, particularly since it involves a big capital investment: McLaren is building a new factory next door to its existing HQ in Woking.

On the other hand, Formula One is on a cost-cutting mission at the moment – and as one of the sport’s biggest operations, this could have a major impact on McLaren. Diversifying like this could help make the business more resilient, not to mention allowing the firm to redeploy some of the staff who might otherwise lose their jobs into the road car division (British jobs for British workers, and all that). And as brand extensions go, this seems a sensible one. McLaren’s experience with racing cars gives it the perfect credentials to branch out into this area, and it’s a sufficiently high-end brand to attract the kind of punters who don’t think it’s utterly insane to be spending this much money on a car. Many of whom will be too rich to care about the recession anyway.

Besides, McLaren is starting production on the 12C now, but they won’t hit the road until 2011 – by which time it’s likely that the economy will have recovered slightly and the world might be a more optimistic place. So it can invest now when prices are low, and hopefully reap the rewards as the market picks up. Fingers crossed, anyway…

In today's bulletin:

Pick-up in job market adds to recovery hopes
McLaren gambles by branching out into road cars
Dresdner traders demand £30m in bonuses
Editor's blog: Putting the squeeze on the booze industry
Late payers get creative with the truth

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