Going into 2001, the Prost team had reason for cautious optimism after the disastrous AP03 season. The Diniz family became shareholders and brought Parmalat sponsorship, giving the operation a degree of financial stability it had lacked. The AP04 ran a customer Ferrari engine from the 2000 specification, though the unit was badged as an Acer to reflect the team's title sponsor rather than the power unit's true origin. Prost also joined several other teams in switching to Michelin tyres as the French manufacturer made its return to Formula One that season. Initial impressions were positive: Jean Alesi set competitive times during winter testing, and the car appeared to have genuine pace.
The promise of testing did not translate cleanly onto the race calendar. The team settled into midfield obscurity once competitive racing began, and speculation arose that the car had been run underweight during pre-season testing to attract potential sponsors — a suggestion the team denied. Nevertheless, the AP04 proved markedly more reliable than its predecessor. Alesi finished all twelve races he started with the team, accumulating four championship points before falling out of favour with team principal Alain Prost. He was released after the German Grand Prix, joining Jordan in place of the sacked Frentzen, who then took on Alesi's role at Prost.
Frentzen could not add to the points tally but produced one of the season's memorable qualifying performances, placing the AP04 fourth on the grid at the Belgian Grand Prix in a mixed wet-dry session. The result came to nothing when he stalled on the formation lap and failed to start.
The second car brought more turbulence. Mazzacane was dropped after four races in favour of Luciano Burti, who had himself been let go by Jaguar. Burti showed more speed but was involved in two serious accidents that destroyed separate chassis, including a heavy incident at Spa-Francorchamps that ended his season. Czech driver Tomáš Enge stepped in as replacement, performed solidly, but lost another chassis in a crash at the Japanese Grand Prix.
By the end of 2001, the fate of the team overshadowed all else. A breakdown in relations between Alain Prost and the Diniz family, combined with mounting debts, left the team critically exposed. A proposed deal that would have seen Saudi Arabian prince Al-Waleed bin Talal invest as a major shareholder ultimately failed to materialise. With finances exhausted, Prost Grand Prix folded at the close of the season with debts reported at approximately $25 million.
The team finished ninth in the 2001 Constructors' Championship, with four points — all scored by Alesi.
After the team's collapse, the cars and physical assets were acquired by Charles Nickerson's Phoenix Finance, which attempted to form a new team for 2002 in partnership with Tom Walkinshaw. Plans included using the in-house Arrows engines from 1998, with Mazzacane and Tarso Marques signed as drivers. The new outfit arrived at the second round of the 2002 season in Malaysia intending to race, but was barred by the FIA on the grounds that Phoenix had not purchased Prost's FIA entry and had not paid the mandatory bond required of new constructors. A legal challenge in the High Court was rejected, ending the story of the Prost machinery in Formula One.
Paul Stoddart had also tried to purchase the Prost assets for Minardi but was turned down, despite reportedly submitting a higher bid than Phoenix Finance.