Well, actually, the way Gibson Guitars came into trouble is quite similar to why McLaren is where they are.adrianjordan wrote: ↑Tue Jun 30, 2020 11:37 pmUntil McLaren starts fitting Robot tuners and brass zero-fret nuts on their cars I think they'll be fineJolle wrote: ↑Tue Jun 30, 2020 6:42 pmThe loan was to pay for short term creditors (so, basically, bills that needed to be paid). They still need around 200 million pounds within the next month to refinance another loan.Emag wrote: ↑Tue Jun 30, 2020 5:45 pm
Notice how it says "yet". This is very smart in my opinion. Not ideal, but understandable.
The situation right now is very unpredictable. Nobody knows what might happen later. Things may return back to normal, or the long lasting consequences of the pandemic may turn out to be much more "devastating" for the world. There's also the chance of covid having a second wave of infections. It probably won't happen, but it still needs to be considered, along with all the other negative effects.
It would be unwise for McLaren to use a big portion of their newly acquired finances for projects that do nearly nothing to help the business recover. Yeah sure, if the situation gets better, then the automotive business will start selling cars to make some money. But what happens if the situation gets worse and they spend a good deal of the money they currently have to advance the Wind Tunnel project?
They will be stuck on a nasty situation. As I said the wind tunnel does not generate income for the business to survive. It will only bring money implicitly if it helps the Formula 1 team to finish higher up in the standings (hence more bonus money from FIA). But until that time it's completely useless for the business.
It is wise to wait and judge the situation before committing borrowed money on big projects that do not guarantee a return of investment in the short term view. They will only start doing that when they are absolutely sure that the business is safe in terms of finances for the foreseeable future.
They, at this point, simply don’t have the credit to do large investments.
These large refinancing actions are something quite common, so nothing really to be worried about, until of course, the company value drops below a certain point and refinancing becomes so expensive that you can’t pay it off. Like what happened to Gibson Guitars last year.
Safe-ish, but certainly not out of the woods.
Gibson invested (with loans) heavy into new companies they bought, including parts of Philips electronics. This became such a pricy operation that they didn’t have the finances to make good guitars and failed to have the right innovations and slipped back in quality.
See McLaren racing as the once leading electric guitars they made and Automotive as their failed attempt to widen their market.