Team NZ’s challenge for the next America’s Cup is struggling to stay afloat. Phil Taylor discovers it’s not just about the money — there are scars from the last campaign that still haven’t healed

It's been a tough week for Team New Zealand. The syndicate that narrowly failed to prise the America's Cup from Larry Ellison's grasp found itself in a public relations maelstrom after team boss Grant Dalton appeared to give the impression they would have to close their doors by the end of the month if the Government didn't immediately give them several million dollars more.

Taxpayers provided $5 million late last year to enable the team to retain core members and recruit targeted design and software specialists. It now needs $11 million more to tide it over until after details including venue of the next Cup are known and sponsors are more willing to make decisions on large-sum commitments. Of the required $11 million, the team has said it has $6 million from corporate sponsors. It has asked the Government for the other $5 million.

At a press conference a week ago Dalton said that without an immediate cash injection the syndicate would be "gone by the end of the month". He indicated he had private money lined up but those donors first wanted the Government to put in more.

Some interpreted this as playing hardball with the Government and public support soured. Unscientific online polls went septic. Three-quarters of 8,000 responses to a Herald online poll were against putting more taxpayer money in.


Prime Minister John Key read the tea leaves, commenting this week: "My sense actually is the public is waning on the idea a bit. I think there's a few people saying 'we don't like the fact that this is a sport where the winner sets the rules'."

In the mix of disappointment, pride and great publicity for the plucky little country that almost took the America's Cup off multi-billionaire Larry Ellison, the Government put its hand up to potentially put in about $40 million again for the next challenge. Talk since has been cautious. Dalton has said the Government has been receptive privately but is nervous about a public backlash in an election year.

The syndicate's Black Friday press conference was a public relations disaster. Its intention was to get the message out that the rules set by the defender for the next Cup were not that bad and so buoy public support. Two boats to one, for example, wasn't the obstacle it might have seemed as the challengers could buddy up to test their boats on the water.

Talking money hadn't been the plan at all but Dalton did talk money, claiming that the syndicate was in the best shape ever, financially, in the long-term, though it was on the edge of going broke and needed the public's help.

Economic Development Minister Steven Joyce described Dalton's comments as "unhelpful", while some commentators reacted by portraying Team NZ as living large on taxpayers' money. It was reported that Dalton and skipper Dean Barker "are sitting on a property empire worth about $14 million on 2011 valuations".

The syndicate fought back. "We remain a strong believer in Emirates Team New Zealand, having been their title sponsor for over 10 years now," Emirates said in a statement days later. "We are working closely with them with the objective of renewing our sponsorship as soon as the team is in a position to finalise arrangements regarding the next campaign."

Campbell Live was invited to glad-hand staff, including designers at work on plans for the smaller multihulls that will be raced in 2017, and a software expert who chose Team NZ over a job with Google.

The syndicate then battened down the hatches. Dalton wasn't available for interview for this article. "We just feel quite battered and bruised," a spokesman said. "Time to call a halt rather than pour more fuel on it."

However, board chairman Dr Keith Turner agreed to be interviewed yesterday [Q&A below]. His message is not to lose sight of what was achieved last time with Kiwi ingenuity and less than half the budget of Oracle, which came from the dead to win 9-8.

"I think that the public has missed how spectacular Team New Zealand's achievement was."

Upfront costs are greater this time around due to surrogate boats up to 45ft — compared to 33ft last time — being used. "These will be highly efficient foiling test platforms that will ultimately scale to our 62ft programme, so they're very expensive and labour intensive," Dalton said at that media conference. "We see quite a heavy upfront on the campaign this time, with the need to bring in more sailors and certainly more shore crew earlier."

"We've been able to fine tune our design team and pick the nuggets. Some things aren't really known, like Neil Wilkinson, who was in charge of the foiling system for Oracle, now works back here. Out of Artemis we've got one of their programmers because we want to up our ability to analyse our testing, so we've been able to take lessons and enhance the people that we've got to get a more balanced design team.

Dalton is back as CEO and some believe multimillionaire Matteo de Nora will come to the rescue as he has done before. Photo / Abner Kingman

It may be that the syndicate is better off in terms of long-term corporate support, as Dalton indicated, and that the dive in public sentiment about competing again in such a bitchy event is part of an America's Cup cycle where the public goes from being cynics to rabid fans when racing begins.

However, research for this article suggests there are deep-seated and long-running concerns about how Team NZ was run last time, including Dalton's leadership style.

Some the people Herald spoke to had the view that Paykel became too close to Dalton to effectively challenge his decisions. Dalton alone made the decision to accept Oracle's request of a lay day when Team NZ led 7-1. He also rejected an approach by senior crew, including skipper Dean Barker and Olympic champion rower and senior grinder Rob Waddell, to Dalton electing to be one of the race-day grinders. It was suggested Dalton's ego may have affected his judgment and that it dated to being mocked during a charity debate where Oracle's Russell Coutts chided him about being on the boat.

"That made Grant [56] determined to prove that he was as good as a 30-year-old, 6ft 6, 120kg grinder," a source close to the syndicate said.

Dalton had been on the boat during training, which was accepted so he could monitor performance, but concerns rose when it became apparent he intended to on board on race days. During the Louis Vuitton Cup, Waddell went over his boss' head and approached Paykel and Jim Farmer, who had stood down as a director to take part in a review of America's Cup safety following the death of a sailor on challenger Artemis.

The Herald asked Waddell, who is currently chef de mission for New Zealand's Commonwealth Games team, why it was a problem that warranted him going over Dalton's head. He replied by email: "We all were working hard to make the boat go faster and everyday different tactics and approaches were discussed, including crew allocations. I'm not prepared to go into specifics. In the end we fought hard but were unable to bring the Cup back home."

Dalton is said to have been "outraged" when Paykel sought a compromise with him. Dalton was one of the grinders on board in nine of the first 10 races of the America's Cup series.

The issue is understood to have soured relations. Neither Paykel nor Farmer are on the new board.

Some claim Dalton was physically exhausted from juggling being on the boat and sponsorship duties, making poor decisions as a result. Whether they caused the loss can't be judged. A rule requiring races to be completed in 40 minutes robbed Team NZ of race 13 and with it, the Cup.

Joyce told the Herald he was aware of issues around leadership. "The Government and all the sponsors will be assessing whether this team has got the capability and has learnt whatever lessons they need to. I think generally they are well aware of that but obviously the proof will be when they bring in their proposals and tell the public what lessons they have learnt."

Taxpayers contributed $36 million, or about 20 per cent of the cost of the last Cup campaign and the Government was considering contributing a similar amount. Studies put the estimated benefit to the economy last time at $87 million.

A "proper governance structure" was a pre-condition of Government input this time and Joyce said he was satisfied with the new five-member board named in April. He confirmed the team made unsuccessful approaches to Sir Ralph Norris, a former chief executive of the Commonwealth Bank of Australia and ASB Bank, and Chris Mace, chairman of the Crown Research Institute, Niwa and founding trustee of the Sir Peter Blake Trust.

The Government has told Team NZ it would contribute another couple of million as bridging money, providing sponsors front up with more as well.

In San Francisco in September, Dalton hinted that he would not do another America's Cup challenge. Commentators said if he went, there were doubts that multimillionaire benefactor Matteo de Nora would continue. Dalton is back as CEO and some believe de Nora will come to the rescue as he has done before.

Additional reporting, Dana Johannsen

Q&A with Team NZ chairman Dr Keith Turner

Team NZ is now focused on getting funding. Photo / NZ Herald

Who conducted the review that this year saw a flatter management structure, with Grant Dalton still the boss but other members of senior staff, such as chief operating officer Kevin Shoebridge, taking a more hands-on role?

I don't know. It was before my time. I haven't asked. We came on as a board from the end of April to make a fresh start.

The board has done its own review about what lessons can be derived from San Francisco. That will be published in due course, in a form that won't compromise our competitive advantage. It contains intense intellectual property, for example. It will acknowledge that mistakes were made.

I can't give a timeframe because we are spending all of our time at the moment getting funding.

What is your response to criticism that the syndicate is a closed shop regarding personnel?

Team New Zealand is not a closed shop. As soon as the board was formed we assessed candidates and looked hard at the capabilities of the team. San Francisco provided lessons you cannot describe on paper, lessons that are intangible. The team derived enormous motivation from having come so close. I am confident the best designers are in the team.

Was Dalton's position a fait accompli by the time the new board formed?

No. The board had a pretty wide-ranging discussion about who was best to lead. There were varying views. America's Cup leaders are often polarising. They can be controversial people.

Dalton has been criticised for having an autocratic management style and taking controversial decisions without consultation. Is the board strong enough to rein him in when necessary?

Look at the individuals on the board. Not one would be in a state of mind of going in there to be a pussy. Collectively, they have a strong variety of skills. It is not an issue that they don't have sailing experience. We are all totally focused and we will function like a board.

Who owns the intellectual property of Team New Zealand?

The legal structure is that all the shares in Team New Zealand Ltd are held by directors (Turner and Gregory Horton) in a trust arrangement. [He was uncertain whether the trust or the company owned the assets.]