Petronas deal to sponsor Mercedes GP was a business decision

KUALA LUMPUR, Dec 28 — The controversial decision by national oil company Petronas to sponsor the Mercedes Formula One team instead of the Malaysian-backed Lotus F1 racing team was not made without sanction from the administration of Datuk Seri Najib Razak, The Malaysian Insider understands.

Since last week's announcement of the Mercedes sponsorship, speculation has been rife about the future of Petronas chief executive Tan Sri Hassan Merican.

Conservative hawks within Umno have also been questioning the patriotism of the move by Petronas to back Mercedes instead of Lotus F1, which has been touted here as the 1 Malaysia F1 team after the prime minister's political slogan.

But according to industry sources familiar with the deal, Hassan, who is slated to retire in February, had made a strong argument for backing Mercedes to the government.

"Tan Sri Hassan would not have done this without sanction," a source told The Malaysian Insider about the decision.

It is understood that Petronas had considered the relative value to the company's future plans and decided Mercedes would fit into its plans better than Lotus.

Petronas is hoping that through its collaboration with Mercedes Formula One, it will be able generate business growth in the lubricants market.

Hassan and the Petronas management are understood to have argued that while the Lotus brand had huge historical significance, it did not sell many cars compared with Mercedes.

The Malaysian Insider understands that Petronas, which has been involved in Formula One for more than a decade now, was not looking at just establishing a brand presence through its motorsports sponsorship.

"It is about building a market for lubricants, and that can be achieved better with Mercedes and Michael Schumacher," a source told The Malaysian Insider, in reference to the return to racing of the legend in the Mercedes team.

Another factor that was considered in Petronas' decision was the fact that despite the government's backing, the Lotus F1 team would not be known as the 1 Malaysia F1 team. It has been officially entered as the Lotus F1 team.

The Petronas decision has piled the pressure on Lotus F1 boss Datuk Seri Tony Fernandes, who also controls AirAsia, to bring in the funds needed for his team.

Fernandes had hoped to bring Petronas on board given that his team has government support and his airline is a major purchaser of aviation fuel. The Lotus car company is also owned by Proton.

With no other local company either having the funds or seeking a global presence, Lotus F1 is likely to have to go global in its search for a major sponsor.

Lotus F1 was understood to have been seeking US$85 million (RM297 million) in funds from Petronas.