Most businessmen who want to get involved in Formula One do it the easy way. They become a team sponsor. A brave soul might buy up an existing team. Few have the front to try to start a team from scratch, in an exclusive club that costs tens of millions of dollars a year to join. Add to that the risk of running it from outside the sport’s overwhelmingly European base. Step forward, Gene Haas.
Haas built a multimillion-dollar machine tool company from nothing and has run successful motor-racing teams in America. Now he has been granted a licence to set up a brand new Formula One team. It would be the first team since 1986 to be run mainly from the USA. His ultimate aim is to market his business to the world – he told Forbes he hopes the F1 team will double his machine tool sales to US$2 billion over five years. He is someone who’s prepared to take a risk or two in business life. One of these failed spectacularly when he was jailed for tax evasion in 2007. He has recovered from that episode and is now making a foray into the cut-throat world of F1.
Gene Francis Haas was born in California 61 years ago. According to his own website, he learned metalworking at an early age, working in local machine shops throughout high school and college. His degree from California State University was in accounting, but jobs in finance were scarce. So in the 1970s he worked as a mechanic for a motor racing team, and opened his own machine shop.
He went on to design a device that automatically positions metal parts for machining. In 1983 he formed Haas Automation to make and sell this device. The company eventually grew to be America’s largest machine tool manufacturer, based in Oxnard, California. Haas became a philanthropist, creating his own charitable foundation. But he had another goal – to race cars. In 2002 he formed a team in the NASCAR race series, the brash and quintessentially American form of stock-car racing.
Then in the middle of 2006 came an event which sent shock waves through Ventura County, where his factory is based. Gene Haas was arrested by IRS agents and charged with tax fraud, along with several associates. Prosecutors claimed he tried to evade tax to recoup the $8.9 million he had been forced to pay in a patent lawsuit.
In 2007 he pleaded guilty to one of 11 charges and agreed to spend two years in prison, paying $75 million in restitution and fines. After serving 16 months, he was released. Haas is nothing if not resilient. He returned to the business, of which he is the sole stockholder, and formed a new race team, with driver Tony Stewart, which won the NASCAR Sprint Cup championship in 2011.
Now he wants to make a splash in the uber-competitive world of F1, but he doesn’t want to spend the kind of money that big teams like Ferrari spend. Formula One mogul Bernie Ecclestone has suggested it costs around $1 billion to run a team for four years. Haas revealed his plan is not to spend hundreds of millions. In an interview with F1.com he said: “I think we can show people that you don’t have to go on such a spending spree to be successful.” In his favour, he already has the NASCAR team-racing base in Kannapolis, North Carolina – a $50 million wind-tunnel used for car design – plus experience of winning championships, albeit in a very different arena to F1.
Is it worth the financial risk? He told Forbes: “Quite frankly, I could have spent $100 million in advertising and I don’t think I would get as much bang for the buck as I would in Formula One.” And he believes there are potentially huge business-to-business benefits if he can sell machine tool services to rival F1 teams.
To win big on the track, he will have to buck a trend. The Marussia and Caterham teams that started out in 2010 have had small budgets and limited success. The last attempt to start an America-based team, called USF1, never reached the starting grid. And he will have to navigate the so-called ‘shark pool’ of the Formula One paddock, dominated by European giants such as Ferrari, Mercedes and MacLaren. Eight of the 11 F1 teams are based in Motorsport Valley in central England.
In July Haas reached a sponsorship deal with Ferrari. This might eventually lead to Ferrari providing engines for the new team, which is due to start racing in 2016. The launch will be a calculated gamble. But the doubters within Formula One might reflect on what American chutzpah can sometimes achieve.
