By DAVID PEARSON
WOKING, England—McLaren is an iconic brand to any fan of Formula One Grand Prix motor sport, but the ambitions of co-founder and executive chairman Ron Dennis go well beyond the sphere of high-testosterone racing cars.
Mr. Dennis wants to grow McLaren Automotive into a billion-pound company within five years by applying the technological savvy gleaned from decades of Formula One podium finishes into new fields like pharmaceuticals and transport management.
Reuters Ron Dennis, McLaren's co-founder and executive chairman, with British Prime Minister David Cameron, right, during a visit to the McLaren Technology Centre in Woking, U.K., in November.
"We are a car company, but we're first and foremost a technology company," said Mr. Dennis in a recent interview at McLaren's futuristic headquarters—which could easily serve as a set for a James Bond movie.
Running a Formula One team with top drivers like Lewis Hamilton and Jenson Button is glamorous, but the sport's regulations limit a team to two cars in any race. "From a business standpoint, you quickly come to the conclusion that you are limited in growth if you stay solely and exclusively a Formula One team, as it's not scalable," said Mr. Dennis.
Yet successful Formula One racing has long ceased to be just about cars and drivers. Technology increasingly makes the difference between winning and losing.
When McLaren's Formula One cars are hurtling round circuits at 360 kilometers an hour in faraway places like Singapore or Melbourne, some 20 technicians monitor every one of the cars' functions in a mission-control center at the company's headquarters south-west of London. Analyzing race dynamics is key as technicians try to judge the right moment for their drivers to come in to the pits to change tires or refuel without getting caught behind other cars when they rejoin the circuit.
McLaren The McLaren Technology Centre in Woking, U.K.
McLaren's supercomputers are capable of handling 3,000 Grand Prix races a second to analyze performance. Programmers also write predictive software of the sort developed by the gaming-software industry. "Gambling software is a very good ingredient that we use in our overall software package to simulate luck," Mr. Dennis said.
McLaren is starting to apply this expertise in new fields. It has tied up with pharmaceutical giant GlaxoSmithKline
PLC to help develop more efficient planning processes, data-modeling tools and high-speed process control. GSK is building a mission-control unit along the lines of McLaren's race-strategy center.
The sports-car maker also has a partnership with the U.K.'s National Air Traffic Services to use McLaren's predictive technology and simulation software to increase efficiency at busy airports to get planes as quickly as possible from runway to parking stand. McLaren's telemetry know-how helps remotely monitor the health of locomotives in California.
Mr. Dennis sees McLaren as "technology flying doctor" service, offering bespoke solutions to companies with urgent problems in complex areas such as electronics, pneumatics, fluid dynamics, kinematics and material sciences. And for people too. McLaren is conducting a clinical trial with U.K. clinical consultants Seahorse Scientific Services to use its telemetry software to monitor patients' bodily functions remotely, providing real-time safety alerts and near-real time support.
Reuters The new McLaren MP4-12C.
As McLaren builds up its technology arm, it will benefit from a steeply growing revenue stream from its super-car business. Around eight to 10 McLaren MP4 12Cs, a $270,000 super car aimed at buyers who might otherwise opt for a Ferrari 458, roll out of its factory every day. McLaren aims for production of 1,000 next year and up to 4,000 in the medium-term once it has launched two new models—an even higher-end hyper car likely to retail for more than $1 million and a less-exorbitantly priced vehicle costing about the same as an average Porsche sports car.
McLaren's revenue this year will be around £350 million ($457.5 million). Revenue will rise steeply next year thanks to full-year production of the MP4 12C and could approach £600 million, Mr. Dennis said.
While the company's 50-meter-long motor racing trophy cabinet attests to years of podium finishes, McLaren is up against heavyweight competition in the global super-car market for which annual demand is typically no more than 140,000 vehicles.
And some competitors have deep-pocketed parents. Ferrari, McLaren's arch-rival on the Formula One circuit, is 90%-owned by Italian car giant Fiat
SpA. Ferrari shipped 5,165 cars in the first nine months of this year. As well as Porsche, Europe's biggest auto maker Volkswagen
AG owns Automobili Lamborghini SpA and Bugatti, two super-luxury brands.
If Mr. Dennis' growth strategy comes off, McLaren's recently spun-off automotive activity could go public. "There is a mechanism for McLaren Automotive going public; it can be triggered several years down the road," says Mr. Dennis. He owns 25% of the parent company alongside investors that include sovereign-wealth fund Bahrain Mumtalakat Holding Company with 50%. The other shareholder is Tag Group (Holdings) SA, a Luxembourg-based investment company founded by Saudi businessman Akram Ojjeh.
McLaren isn't the only company thinking there might be investor appetite for shares in a luxury car maker given a spate of recent luxury-brand listing like Italy's Prada
SpA and France's L'Occitane International
SA. Fiat Chief Executive Sergio Marchionne
has toyed with floating Ferrari which investment bank UBS reckons might be worth up to €4.3 billion ($5.62 billion) based on a 5% stake Fiat bought back from an Abu Dhabi investment fund last year.
"I quite like the fact that [going public] imposes on the group as a whole very strong corporate governance," he said.
The downside is that "going public would be pretty unattractive to management that's used to the dexterity and flexibility that being a private company allows," Mr. Dennis says.
"You don't have the dreaded analysts all over you and you're not driven by quarterly returns, which isn't attractive at all," Mr. Dennis said.
David Pearson at [email protected]