The Geox-TMC team looks set to stop at the end of the year after its main sponsor pulled out at the eleventh hour. The squad’s management have been filing paperwork with the UCI as part of the registration process to ride in 2012 but when the matter of depositing the bank guarantee for the 2012 season arose the sponsor Geox refused to provide the necessary funding. Without this the team cannot continue.
As a reminder, the UCI imposes conditions on teams wishing to register for 2012 to ensure various things are in place. There are administrative tasks to complete and perhaps the most formal of these is the bank guarantee. This involves the team placing money in escrow under terms agreed with the UCI. The funds are there to cover a problem mid-season, to ensure riders wages are at least paid in part should the sponsor quit or have cashflow problems in the middle of the season.
The sums involved are big. Here is the relevant UCI rule for a team wanting a Pro Tour licence:
The amount of the guarantee shall represent one quarter of all the gross sums due for payment by the UCI ProTeam to riders and persons under contract for the operation of the team during the registration year plus the amount of CHF 15,000. In no case may the amount of the bank guarantee be less than CHF 975,000
975,000 Swiss Francs is close to €800,000 or US$1 million, a considerable sum to find and park in a bank account. As for the lower Pro Continental status, the sum is CHF 300,000.
This places the future of the squad in doubt. Geox has now told cyclingnews.com that it wishes to leave the sport. But Bike Live SA the holding company behind the team says it is mulling taking the Italian shoemaker to the Court of Arbitration for Sport, saying it has contractual commitments to fund the team. This sounds odd as the CAS is usually reserved for disputes over the rules of sport rather than financial or contractual matters undertaken in the business of sport.
When the team says in public that its sponsor won’t pay then things look irretrievable, surely the relationship between sponsor and team has collapsed?
The squad includes Vuelta winner Juan-José Cobo and, amongst others, Colombian Fabio Duarte, Italian Fabio Felline and Russian Dennis Menchov but the demise could see all the riders and support staff lose their jobs on the very day the transfer window closes. Other teams will be able to recruit riders but it is now late with many squads having finalised their rosters and budgets for 2012.
Geox itself is a well-established Italian shoemaker and seemingly in fine financial health. It spends more on being the shoe sponsor of Formula 1 driver Sebastian Vettel than it does on the entire cycling team and in the first half of 2011 had sales of €448 million and earnings of €24 million.
Pulling out late is awkward for Geox, they don’t look good. It now seems Geox is determined to quit the sport. We will see what legal means the team has to keep going, whether it can claim funds from its sponsor. But such a step is the last resort and the prospect of a Spanish team suing an Italian business brings to mind courtroom delays and more. Were it to go to court, this could take many months, perhaps years.
The sponsor and team have had an awkward relationship from the start. When the squad was started Geox hoped to be in the World Tour and ride the Tour de France, indeed it signed Dennis Menchov and Carlos Sastre for this purpose. But when the team didn’t get a licence late in 2010 they were reportedly furious and threatening to walk away from the sport. But they continued only to, seemingly, pull the plug at the end of the season.
In order to survive the team will need to find alternative funding. And fast. The UCI is in the process of allocating teams licences for 2012 right now and the money needs to be in place now, if not in the next few days. Unless funding is found urgently then the team will cease at the end of the year. The sponsor pulling out is bad enough but the timing only makes this worse.