Porsche Motorsport and Team Penske Sign Contract to field an LMDh Prototype

NOTE: This blog includes discussions and explorations of legal issues. The content is intended for educational purposes only, and is not intended to be legal advice. You should always consult with a licensed attorney before taking any action that could affect or impair your legal rights.

Timothy Cindric, President Team Penske, Fritz Enzinger, Head of Porsche Motorsport, Oliver Blume, CEO of Porsche AG, Roger Penske, CEO of Team Penske, Michael Steiner, Member of the Executive Board for Research and Development of Porsche AG, l-r, 2021, Porsche AG
Signing of the contract between Porsche and Team Penske. © 2021 Dr. Ing. h.c. F. Porsche AG

Porsche Motorsport and Team Penske inked a deal to join forces and enter a new Le Mans Daytona h (“LMDh”) prototype vehicle into competition in 2023. This new vehicle will be able to compete in both the IMSA WeatherTech SportsCar Championship and the World Endurance Championship (WEC).

The team, which will race as Porsche Penske Motorsport, will field two LMDh prototypes, but we might ultimately be able to see even more of the vehicles out on track, as the press release noted that Porsche customer teams could begin entering their own vehicles in both series the same year as the factory team. Dr. Michael Steiner, Board Member for Research and Development at Porsche, noted that “[t]hese partner teams will be given [Porsche’s] full support. Whatever insights we gain from our factory effort will also be shared with them.” These partnerships will likely require contractual terms ranging from purchasing agreements to warranties to non-disclosure clauses.

We knew as far back as 2019 that some new and interesting competitions were on the horizon (see Toyota v. Aston Martin), and a joint agreement between the Autombile Club l’Ouest (ACO) and the International Motor Sports Association (IMSA) that was announced shortly before the start of the pandemic would allow a single car to race in both series in the Hypercar class. At the time, it was even suggested that Porsche might be one of the manufacturers to throw its hat into the ring. Confirmation that Porsche would field an LMDh prototype in WEC, IMSA, and at Le Mans in 2023, came at the end of last year.

At this point, three manufacturers (Audi, Porsche, and Acura) have confirmed that they will compete with LMDh prototypes, and there are rumors that other manufacturers might also enter into the competition: Cadillac, Lamborghini, Bentley, and McLaren. On top of those programs, Graham Goodwin recently reported that Alpine, the sporty sub-brand of Renault, and BMW are also considering LMDh or LMH programs. These two would be in addition to the four programs committed to enter Le Mans Hypercar (“LMH”) prototypes: Toyota, Glickenhaus, Peugeot, and Ferrari.

But you might be asking, where is the law in all of this? For those not captivated by the excitement of on-track competition, look at the vast collection of homologations and technical regulations on the website of the Fédération Internationale de l’Automobile (FIA). Their Technical List #33, lists at least ten manufacturers of helmets that have been approved as having met FIA Standard 8860-2010. Technical List #05 offers up seven approved manufacturers for “Connectors for taking fuel samples.” Technical List #15 covers “FIA Approved Test Houses for Extinguisher Systems” and lists five businesses, #16 provides more than 15 manufacturers in its list of “Extinguisher systems homologated by the FIA,” and #17 provides seven manufacturers that offer “Headrest materials specified by the FIA.”

I want to make one thing clear: I am not making fun of the FIA, here. Their lists are the results of countless hours spent researching and developing ways to make motor sports safer. The work done behind the scenes provides tangible benefits for all of us, and can be credited for the innovations that saved Romain Grosjean’s life during his fiery crash at the 2020 Bahrain Grand Prix.

Readers might say, “well those sound like wonderful lists of businesses that help to make motor sports what it is today, but….” If you’re continuing on with that sentence, stop. Go back and re-read the eighth word uttered in that statement: businesses. None of those businesses listed operate in a vacuum; every single one listed, is an entity in need of parts and people to make what it makes and do what it does. Those lists hardly scratch the surface of all the information that the FIA compiles. Is the business law aspect beginning to come into view? There are so many different requirements in order for motor sports to operate as it does today, and each one of those requirements corresponds with a need, and everyone of those needs is an opportunity to establish new relationships and develop new business.

In order for any of the manufacturers mentioned above to have any shot of success on the racetrack, all of them will have to rely on hundreds, if not thousands of agreements, be it with their employees, their partners, or their suppliers. Sure, someone might give you a bolt, and a friend might volunteer to help you change your oil, but to succeed at this level of motor sports, the teams will need more than a single bolt and a firmer level of commitment than “any time this weekend works.” That’s not to malign generosity or slander friendship, but the shortest race of the WEC is six hours, with the longest running up to 24 hours — uninterrupted (after days of practice and qualifying). These races aren’t always won by the fastest car; sometimes, the winner is determined simply by which cars are still out on track at the end of the race. Not only do teams need parts and people that can service and maintain the vehicles on race weekend, there are also parts and people that must be invested in planning, designing, and manufacturing these vehicles away from the track and during the offseason. All these of preparations require teams to not only know what they need, but they must also figure out a way to acquire all of it. So the teams might need to reach an agreement with the owner of a wind-testing facility that allows the team to use the space (and hopefully, the contract includes non-disclosure terms for anyone working at the facility that might become privy to non-public details about the car). But the teams might also have to contract with a transport company in order to move the car from the development facility to the wind tunnel, but that’s just local travel. Once the season starts, the teams have to have a plan in place for international transportation, so there will be a contract that covers the logistics of ensuring that the teams have their vehicle, parts, and people arrive at various places around the globe, on specific dates and at specific times. To help pay for all of this, teams will contract with partners and sponsors to receive financial backing in return for adequate promotion, which means there needs to be agreements covering expectations and responsibilities between the teams and their financial backers. Teams may need to sign a contract with a graphic and design shop to prepare and adhere all of the stickers of their sponsors onto the vehicles. And these are just some of the higher-level considerations that teams will have; the only way to make as certain as possible that all of those things happen, is for a contract to be signed between the racing team and all of those other parties.

Ensuring that expectations are clearly expressed and plainly understood in each of those agreements, is an important part of setting each team up with the best chance to succeed. But remember, most, if not all of those agreements, in some fashion or another, will have to be orchestrated by each team. If given a moment to realize it, it is sort of neat to recognize that a contract is behind most, if not all, of the parts of a car out on the racetrack, as well as all of the people that keep it running. At first, that might sound intimidating, but don’t let it be — look at this new knowledge as instructive; and when you are ready, reach out to Berger Law for help reviewing, negotiating, drafting an agreement, and to help you get in gear!