Sleepless in Shanghai

The clock says 03.15 and here in Shanghai it is pretty quiet. The elevated freeway that stretches away into the darkness is almost empty. There are only 30 cars at the intersection below my hotel window where normally there are 200. It is all 21 floors beneath me but I can still hear the occasional hooting, the sonar of Chinese driving. I find it amazing that the people do not think that hooting at three in the morning is a selfish thing to do.

Even in the darkness the city is still hazy with pollution. As I am up and unable to sleep I decided to read up on the Chinese car markets (lack of sleep does funny things to people). The country accelerated through 20 million sales last year, up nearly 14 percent on 2012. China has been the leading global market for cars for the last five years and continues to extend its lead over the United States, which registered only 15.6 million sales last year.The Chinese Passenger Car Association says that sales for the first three months of the year (the quiet period) are up 9.5 percent to 4.6 million. As a result of this boom, more and more cities are clothed permanently in smog. Six big Chinese cities now have laws to curb sales, with number-plates allocated by auctions and lotteries. The latest is Hangzhou where at the end of March the government announced plans for just such a restriction. The following day 70,000 vehicles flew out of the showrooms in the city. One need not weep for the car dealers of Hangzhou.

For those of us who travel a lot, one trend that has been obvious in recent years has been the number of Chinese and Russians travelling the world. Perhaps there will be fewer Russians now that President Vladimir Putin has donned his black hat and gone out to meet the West, with his six-guns loaded. He is pretty isolated politically but he clearly thinks that he can be a Clint Eastwood-like figure in a world that is now filled with men in white hats.

On the way over here I was reading at some point remarks made by Russia’s Finance Minster Anton Siluanov, who was warning that Russia is in a very delicate situation at the moment. In the first three months of the year the country has seen $63 billion fly out of its economy as currency traders dump their roubles.

“Continuing capital flight lowers the opportunities for economic investment and creates risk of an unbalanced budget,” Siluanov said. “The main reason for capital flight is instability in the way the geopolitical situation is developing.”

By that he means the Ukraine Crisis and he reckons that Russian GDP growth could hit zero this year as a result. And that is the crazy thing. More than anything else, Russia needs to move away from its dependence on oil and gas and yet messing in the Ukraine is driving away foreign investment in diversification – and costing Russia more money. The only kind of sense it makes, is that it gets nationalistic feelings going in the country. And maybe that is what this is all about. In theory a strong government keeps everyone under control and that allows for growth. The trouble is that a punchy government pisses off the money men.

In recent days I have been wondering more and more about the logic of holding a Russian GP in the wake of the Ukraine Crisis and I have reached the conclusion that it is best for F1 that the race does not happen because an event will upset western sponsors and will add to the unfortunate image that F1 is willing to do anything for money. One might even argue that it is also better for Russia not to have a race because all it will achieve is to promote the man who is harming his country’s economy with his actions. I know that some Russian readers will probably get upset by that suggestion and there are always going to be those with odd views such as the concept that the West is somehow to blame because it was encouraging Ukraine to do more business with the EU. What’s wrong with that? It is called the market economy. Still, I guess it is all about subtlety. If the West is the bad guy then he is a very subtle bad guy, whereas Putin’s pushing back is about as subtle as a juggernaut through the window. I think it would be better if we could all learn to live together without needing to get into such fights. It is simply a question of giving people their own space.

Oddly, I encountered the same basic problem on the plane from Dubai to Shanghai as I found myself sat next to one of those people who cannot sit in an airplane seat without spilling over into the personal space of the people beside them. Maybe he cannot help the fact that he is fat, but he should know the rules of aviation etiquette. You keep yourself in your own space, even if it uncomfortable. You do not have the right to invade the space of others. I had to bite my tongue to stop myself saying: “Excuse me, but I don’t believe you bought two tickets for this flight.” In the end, being English, I indulged in a little appeasement and made an allowance for him rather than making a scene. No doubt he will go on spreading himself around too much until someone tells him how to behave. I know that I would be embarrassed if I was spilling into someone else’s space, but I guess it goes back to the hooting thing. Some people just don’t think.

We all like getting more than others, don’t we? I am a little old-fashioned in that I think we should earn our perks. That is my philosophy and now and then it actually works. When I got the airport in Paris there was a vast queue at the check-in. I was delighted. Why? Because endless travel means that I have earned gold card status, so I can check in quickly and efficiently. And a big queue means a full plane and a much better chance that I will be kicked upstairs. It is the reward one gets for being loyal to an airline.

If you haven’t yet flown upstairs on an Emirates A380 I do recommend it highly. It really takes the sting out of long haul flights. It gives one the chance to relax and think about Vladimir Putin, rather than wasting energy wondering if one should tell the fat bloke to shift his leg…

A very smart view

I don’t know John Leicester, but I do know that he is what we call “an agency man”, with more than 20 years experience with the Associated Press, a venerable institution that is generally trustworthy. For the last five years Leicester has been a sports columnist and he has just produced a very good column called “Fuel-careful F1 less of a guilty pleasure”. I think it is something that all F1 fans should read and so I am reproducing it, in full below.

“As Earth’s atmosphere warms alarmingly and fills with heat-trapping gases, and the writing on the wall – “People, we’re in trouble!” – looms ever larger, Formula One has steadily become a guilty pleasure, the motorsport equivalent of blue whale burger or wearing panda fur. All that precious fuel going up in smoke, speed, and outrageous noise. Unsustainable and increasingly unjustifiable. So F1 deserves a pat on the back for now doing its little bit for the planet. Let’s not kid ourselves: Strapping drivers into combustion engines can never be a “green” sport. Polar bears on retreating ice sheets shouldn’t dance with joy -”We’re saved!” – simply because F1 downgraded this season from monster 2.4-liter, V8 engines to somewhat less viciously thirsty 1.6-liter, V6 turbo hybrid engines. But it is something. More than that, it recognizes that if we are to have much of a collective future, then everyone must make and accept compromises, eke out and protect resources and learn to do more with less. To cover a meager 190 miles, the length of all F1 races except the shorter Monaco Grand Prix, the V8s guzzled around 50 gallons of fuel – sometimes a bit more, sometimes less, depending on the track and conditions. That was just on race day. Now add practice and qualifying sessions, and multiply all this by 19 races a season, for a truly staggering fuel bill. In the real world, a midsize Toyota Prius hybrid might cover about 2,500 miles on those same 50 gallons, almost enough to cross the United States from Washington DC to Los Angeles, according to fuel economy figures for that model from the U.S. government’s Environmental Protection Agency. F1 wouldn’t be F1 without excess. Fans worldwide wouldn’t tune in for World Champion Sebastian Vettel driving a Prius. F1 boss Bernie Ecclestone got fabulously rich with the sales pitch of bigger, faster, costlier, noisier equals vroooom. “Rush,” director Ron Howard’s glorification of 1976 world champion James Hunt has the notorious bad boy of F1 mouth-rinsing with champagne and puffing on an illegal-looking cigarette before races in his early Formula Three days. Swap the risk and glamour of F1 for quiet-as-a-mouse electric engines and showers of dandelion tea on the podium and you can be sure that petrol-heads would walk away. But as road cars become more fuel efficient, with electric and hybrid-engine technology making increasing inroads, F1 needed to reconnect with its time or risk becoming an anachronism, racing on regardless the costs to the environment. This season’s switch to fantastically complex hybrid engines puts F1 back ahead of the technological curve. That is exactly where the sport must be to retain fans and stay relevant in today’s energy-challenged world. The engines still generate most of their power from burning fuel but also recuperate and reuse far more energy from braking and exhaust gases than the previous V8 cars and their KERS energy-recovery systems. New rules slash by about one-third the amount of fuel that teams use in the cars and also limit the rate at which they burn it. Again, that doesn’t make them anywhere near green. The 100-kilogram-per-race allotment of fuel would still get a Prius from Paris to Moscow. But at least F1 can now argue that it is going in the right direction. If improvements in fuel economy, engine technology, energy recovery and hybrid-power know-how also bleed over into future road cars, F1 will be able to stick that feather in its cap, too. Critics who loved the fiery crackle of throaty V8s complain that the new engines are too quiet. But that nostalgia over-plays the supposed link between engine noise and the appeal of F1. The V6s certainly sound different, with a top-end squeal like a dentist’s drill. That will take getting used to. Ultimately, however, what makes F1 watchable – or not – isn’t noise but the quality and closeness of the racing. V8 races may have been loud. But many of them were boring, too. Also misleading is the argument that F1 drivers shouldn’t need to economize fuel or tires and instead should be able to race flat-out from first lap to last. Ferrari President Luca di Montezemolo is in this camp – itself a good indicator of how poorly his team has adapted to the new regime. But not every race needs non-stop wheel-to-wheel action to be interesting. In fact, you’d be naive and sorely disappointed if you expect that. The unfolding chess game during races of teams balancing the need for speed with the need to make tires and fuel last, the strategies they employ and adapt to squeeze the most out of those resources, make F1 a more cerebral sport. Fuel economy isn’t beside the point – for F1 or for any of us. It is the point. It must be.

I read that some talking head from the Italian Olympic Committee has come out and talked about Formula 1, in support of Ferrari’s campaign to have Fernando Alonso and Kimi Raikkonen ride dinosaurs around the Circus Maximus. I have some advice for him: Go away, shut up and worry about your own sport. If that seems uncharitable, I can only say this: What would his reaction be if Bernie Ecclestone or Jean Todt got up and started spouting on about doping in international athletics? I gave up watching athletics and cycling years ago because I did not trust anything about either sport. It would be nice to believe in them because athletic endeavour and physical achievements can be inspiring, but too many champions have tested positive over the years…

So, Mr Malvolio, or whatever your name is, slide away somewhere and do something positive for your own sport and don’t mess in Formula 1.

I think Ferrari is a great thing for the sport. It a legend and its fans are filled with passion. All over the world there are Ferrari fans. Terrific. However, I really do not like the current attempts to manipulate the sport simply because the Italian team cannot compete with Mercedes Benz in terms of engine design. Sorry, if that does not quite fit the Ferrari image of great engineering, but if you live by the sword, you have to be prepared to get stuck in the ribs as well.

Ferrari competes in F1 with a number of unfair advantages and if there was some logical thinking going on down there someone would have realised that if there is one team that would gain from a cost cap, it is Ferrari. Why? Because it is smaller than the big manufacturers like Renault and Mercedes Benz, so when it comes to ramping up costs to win, it cannot compete. It even struggles against the soda pop manufacturer Red Bull.

So, if Ferrari was being sensible, it would be in favour of a cost cap…

But, of course, if there was a cost cap, Ferrari would probably need to give up its advantages. We don’t know for certain what these are, because these things are secret, but we do know that under the terms of the last Concorde Agreement that ran from 2009 to 2012 that the Italian team got 2.5 percent of the F1 prize fund, off the top, before anyone else got a taste of anything. While some argue that this is grossly unfair, Ferrari says that it should be rewarded for the power of its brand, which is synonymous with Formula 1. You can be absolutely sure that the new deals that last from 2013-2020 will not have given Ferrari any less money – and the likelihood is that the company got a bigger slice of the pie, straight out of the oven.

What does this advantage actually mean? Well, folks, it means that in 2011, for example, the prize fund was around $682 million. That meant that before this was divided up Ferrari was handed a cheque for $17.5 million. If you do the numbers based on that year’s prize fund: Red Bull Racing earned $98.8 million for winning the championship. McLaren got $88.6 million for coming second and Ferrari made $95.8 million for coming third. How is that fair?

These days there is no such thing as a Concorde Agreement and the sport is based on bilateral agreements between the Commercial Rights Holder and each individual team. The deals may be based on the terms of the old Concorde Agreement but the numbers involved are not known. The details are locked away in safes.

What we do know is that until 2020 Ferrari has a right of veto in respect of the introduction/modification of any technical or sporting regulations (except for safety requirements). There are some conditions that must be met in order for this veto to be used including the proviso that the veto can only be used if it is not prejudicial to the traditional values of the championship and/or the image of the FIA, and that Ferrari considers that the new regulations are likely to have a substantial impact on its “legitimate interest”.

Let us not just blame Ferrari for this because this situation was not arrived at without the complicity of others, looking after their vested interests, and it is fairly clear that Red Bull Racing has some kind of similar financial deal, and probably others have had their deals sweetened as well, either with a signing bonus or a year-by-year deal.

Is that the right way to run the sport? Would it not be so much better if all of this was transparent and in the open and everyone got the same? I am in favour of success being rewarded, but I think it would be better to have a prize fund that operated on the basis of points-per-dollar involved, rather than just World Championship points. That way the smaller teams would be rewarded from their efficiency and the successful smaller teams would be legitimately rewarded for success achieved. It would also be an incentive for the bigger teams to bring down their spending.

That way there would be a solid field of competitors, no dodgy side deals and a feeling that there was a level playing field.

As I mentioned the other day, the small teams in Formula 1 are becoming rather more active as they struggle to survive without a cost cap. The four – Caterham, Force India, Marussia and Sauber – wrote to the FIA last week saying that they want to have a voice in decision-making and hinting that the F1 Strategy Group, which features only the six biggest teams, is almost certainly anti-competitive under European law. The process, they argue, is neither democratic nor transparent and should not have been agreed to by the federation, which was keen at the time to complete its financial dealings with the Formula One group (before the FIA election) and so agreed to what the Commercial Rights Holder wanted. The letter was clearly what caused the World Motor Sport Council to call all the teams together on May 1 for a meeting about costs. Bizarrely, at least two of the “big teams” have significant financial problems as well and would welcome some form of cost control, but clearly did not want to be out of step with the others on the F1 Strategy Group.

The best way to get the big teams to agree to a cost cap is for the smaller operations to come out and announce that they have agreed a limit (the number being something akin to the biggest budget they have between them). If this is given sufficient publicity and one of them is still beating the big teams – Force India being the obvious candidate this year – then it is inevitable that eventually someone on the boards of the big teams will start to ask questions about why they are investing so much in the sport and being beaten by teams spending a fraction of that money. That will create pressure from above for the big teams to reduce their costs and with a few more recruits the small teams and the FIA could write some form of control into the rules. Once this was done the big corporations would not dare to spend more than the limit as the risk of being found to have cheated (and even the accusation) would be sufficient deterrent. It would also be a good opportunity to showcase efficiency for all concerned and thus make F1 more attractive to others who are scared away by the lack of financial limitations. The current situation is being maintained by the teams that are running at the front for purely selfish reasons and none of them really care what happens to the sport in the longer term as they all have other core businesses and will depart if they do not like the rules and regulations. If Formula 1 has to lose a few of these selfish big players then so be it, but all of them are in F1 because it offers them significant gains and so, in the longer term, it is logical for all of them to agree to a cost-cap and to stick to it.

Once there is a sensible cost cap in place and there is an FIA-administered policing system, the teams will start to produce profits. Once that begins to happen each of the entities will suddenly acquire considerably more value than is currently the case, which means that there will be a new generation of team owners who like the limelight but do not want to have to pay for it. This would also help the sport grow in the United States where there are a large number of sports billionaires who would jump at the chance of such global opportunity.

All things considered, there is no sensible argument against a cost cap, unless you have a vested interest in keeping the current status quo and winning by out-spending the opposition. Just as the technical rules have moved towards efficiency, so the commercial side of the sport should head in that direction in order to create a better future for the sport. It will not be an easy route to take, but the current path is not a good one. We have already seen (in the 1930s) what happens when one or two teams can outspend everyone else and it does not bode well if nothing is done.

The FIA Senate has increased its membership to 16, in accordance with the new FIA Statutes, which give the FIA President the power to nominate four candidates. This means that there are now eight elected members, four members by right (included on the President’s election ticket) and four presidential appointees. Todt had chosen Gerardo Braggiotti, an Italian banker; a French lawyer Jean-Michel Darrois; the former French Prime Minister François Fillon and Sir Lindsay Owen-Jones, the former chairman and CEO of L’Oréal, for “their independence and expertise”.

The Senate is responsible for decisions relating to the management and general policy of the FIA, in particular its financial, budgetary and commercial matters.

The Senate President has the casting vote which means the eight elected members can always be outvoted by those nominated by the FIA President.

Stop and think about it for a moment: have you ever seen a Ferrari advertisement in a newspaper or a magazine? You won’t find one, because the company policy since the very beginning has been NOT to advertise. Enzo Ferrari was not really interested in building or selling road cars. As far as he was concerned the production lines were there solely to fund his beloved racing cars. This is why back in 1969 he sold the car business to Fiat, on the understanding that he would go on running the racing team until he no longer wanted to do so. He remained in charge until his death in 1988, at the age of 90.

After Enzo was gone Fiat took full control of the business and its favoured sporting manager Cesare Fiorio was put in charge of the team. That lasted until June 1991 when Fiorio was dropped, amid much politicking by driver Alain Prost and the engineer Claudio Lombardi replaced him as sporting director. Lombardi soon fell out with Prost and fired him after he called the Ferrari 643 “a truck”. Fiat then decided that more change was needed and a few weeks later Gianni Agnelli appointed Luca Montezemolo as Ferrari chairman and CEO. His brief was to rebuild the car company and the F1 team. To start with Montezemolo decided to re-hire Englishman John Barnard, but he then hit on the idea of taking on Jean Todt. Barnard would continue with the team, working for a design office in England until 1997. At the start of 1996 Todt hired Michael Schumacher from Benetton and then, at the end of the year, they were joined by Ross Brawn. The Todt-Brawn-Schumacher triumvirate would finally make Ferrari successful again. There was a Constructors’ title in 1999 but it was 2000 before Michael win the Drivers’ title. The team then won five in a row. Montezemolo had done his job. During this period of success, in 2003, Agnelli died at the age of 81. His brother Umberto took over Fiat but within 18 months he too had died and Montezemolo, who had just been appointed head of the Italian employers’ federation Confindustria, was asked to be the next Fiat chairman. The Agnelli heirs were too young for the job.

As a result, in June 2004 Todt was appointed CEO of Ferrari. The success began to wane as Renault F1 came on song in 2005 and 2006 and by the end of 2006 the Ferrari dream team was falling part with Schumacher retiring and Todt edged out in the course of 2007. In the Spring of 2008 Montezemolo gave up his Confindustria role and returned to Maranello full-time, his goal being to make Ferrari more Italian. The decision to appoint Stefano Domenicali resulted in Brawn departing and Todt resigned in March 2009, his new ambition being to become FIA President.

Montezemolo would remain in his role at Fiat until 2010 when Agnelli’s grandson John Elkann took over the company. Montezemolo then began dabbling in politics, with the Italia Futura political movement. Ferrari remained a problem. The team won the World Championship in 2007 when McLaren’s Fernando Alonso and Lewis Hamilton took points off one another, and it clung on to the 2008 Constructors’ title when Felipe Massa just missed out on the Drivers’ title, but since then the team has failed to beat Red Bull Racing. And that is a problem.

Why? Because Ferrari is more than just a racing team. It is a legend. It has been involved in the Formula 1 World Championship since the start, it uses the sport to showcase its technology, but it requires success in F1 because it has no other advertising. Ferrari MUST win from time to time – for the good of the company. It is also more than just a racing team, being revered in Italy in much the same way as the Italian national soccer team. It is, in effect, the national racing team. It does not matter if this success is achieved by hiring the best people from all over the world. Montezemolo wanted to go beyond that and turn the team into a dominant force with an Italian face: Domenicali replaced Todt, Aldo Costa replaced Ross Brawn and on the engine side Gilles Simon was replaced by Luca Marmorini. There was massive investment in facilities to back up the project but the results did not come. In 2011 Costa was moved aside and a new generation of foreigners began to appear: Pat Fry, followed by James Allison.

The word from Italy is that the pressure has been increasing on Montezemolo. He has recently handed over the leadership of Italia Futura and there has been speculation that the Agnelli’s are ready to replace him with 38-year-old Andrea Agnelli, currently running the Juventus soccer team. Montezemolo is 66 and at retirement age for most people. The Ferrari road car business is doing well, but there has not been success on the track. Domenicali was very close to Montezemolo and while it is not clear whether he jumped or was pushed, it is entirely possible that Stefano decided his own fate. He has been with Ferrari for 23 years, working his way up the ladder, learning every aspect of the team and leading from the front. It is entirely possible that he decided to stand down because he was disappointed by what he had achieved and felt that it was best to go.

None of this will ultimately detract from the big game of the Agnellis and Montezemolo. It is clearly a case of watching and waiting.

Infiniti Red Bull Racing has lost its appeal against Daniel Riciardo’s exclusion from the Australian Grand Prix. No surprise there. The details are not available as the FIA has yet to put out a statement but Red Bull said that it “accepts the ruling of the International Court of Appeal today. We are of course disappointed by the outcome and would not have appealed if we didn’t think we had a very strong case. We always believed we adhered to the technical regulations throughout the 2014 Australian Grand Prix. We are sorry for Daniel (Ricciardo) that he will not be awarded the 18 points from the event, which we think he deserved. We will continue to work very hard to amass as many points as possible for the team, Daniel and Sebastian (Vettel) throughout the season. We will now move on from this and concentrate on this weekend’s Chinese Grand Prix”.


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