The announcement that Ferrari is not going to enter the 2010 FIA Formula 1 World Championship unless there is a change in the regulations, is a major political move in F1. The Italian team said that it is not willing to accept “the introduction of two different sets of regulations based on arbitrary technical rules and economic parameters”. This is a clear challenge to the power of the FIA and it will be interesting to see whether or not the other teams back Ferrari’s stance, or whether they decide to cut the Italian team loose. I doubt Ferrari would have made such a move without knowing it had the teams with it.
Whatever the case, the F1 world is in for several months of disruption and bad publicity at a time when teams are looking for money for the future. The instability may well result in several of the teams failing to find backing and going out of business or being sold, if indeed there are any buyers out there. It may also result in some of the sponsors and manufacturers deciding to walk away. These could include companies such as Toyota, Renault and Red Bull. Such decisions would knock large holes in the F1 field and could produce a situation that the Formula One group would be unable to fulfil its obligations to the promoters. There may be attempts to either pad the grid with GP2 teams, or indeed adopt GP2 as the World Championship. This would not be easy because of the contractual obligations that exist but as GP2 is owned by CVC Capital Partners it is certainly an option to be considered. However, it remains to be seen whether the fans, sponsors and TV companies would be interested in this.
There is an option of the teams starting their own series and if this turns out to be the case, the promoters will become much more important. When all is said and done, however, they are unlikely to agree much between themselves because they have no charismatic leader. In many ways, however, there is only one promoter who really counts: Monaco. The Monaco GP is one of the major keys to the credibility of the World Championship. If Monaco and Ferrari get together and the teams follow, the FIA has little choice but to sanction that series if it wants to remain a credible governing body. One man who is therefore going to have an important role to play will be the president of the Automobile Club de Monaco (ACM) – whoever that may be. At the moment that job belongs to Michel Boeri. To date he has failed to show himself to be a great political player. He was widely tipped as a successor to the previous FIA President Jean-Marie Balestre in the early 1990s but failed to capitalise on that position and while he is a major player in FIA politics he has failed to make any stands and has fallen in as a Mosley supporter. He is not as young as he used to be and has never shown much real energy in F1 politics. If he was to be taken out by an ambitious new club president (anything is possible at the moment), the whole structure of F1 could change.
The race promoters would follow Monaco, the teams would follow Ferrari and the FIA would be forced to follow them all. There are other good reasons why Monaco might want change because the Monte Carlo Rally is as important in the WRC as the Grand Prix is in F1. One should, therefore, watch for a possible putsch at the ACM.
Even if that was to happen, the manufacturers would be hard-pressed to start their own championship. They have more important things to worry about. They almost all have financial troubles and need a budget cap in F1. The problem is not the concept of a budget cap but rather how it is implemented and who is calling the shots. FIA President Max Mosley says that he believes that a $58.8m budget cap is absolutely vital to save the sport. Is he right in insisting on this, with immediate effect? And is it not more practical to have a phased change? He may not be willing to compromise on this, but that does not mean that he will necessarily get the support of all the FIA clubs. There could be an uprising inside the federation if a suitable leader has been found. We have heard quiet rumours that something is happening, but we do not know who is behind it at the moment, nor whether they are credible challengers.
Mosley’s arguments about money are sound. The car manufacturers are in dire trouble. The first quarter financial figures made shocking rading, with the Toyota Motor Company, the world’s largest car company, announcing a loss of $7.7bn, which translates to around $85m a day. Toyota is reckoned to have $30bn in cash in the bank but even so this is a terrible blow to the firm, even if it has been loading all the losses into one quarter before a new president comes in. The company told investors that it will remain loss-making for the rest of this year and reckons that it will sell only 6.5m cars, one million fewer than last. Whether this will have any effect on its F1 programme remains to be seen. The new president believes that competition is an essential element for the firm, but only if the results are decent. After eight years in F1 without a victory, the Panasonic Toyota Racing team is under scrutiny.
Mercedes-Benz’s parent company Daimler announced very disappointing results with a first quarter loss of $1.86bn. This compares to a $3bn profit in the same period a year ago. The company says that it is going to slash its costs by around $5bn and hopes that the launch of the new E-Class will improve sales. It has, however, warned that it expects to make a big loss in the second quarter but hopes that it will be profitable by the end of the year, although it will not rule out a year-end loss. It said that its sales had dropped by 34% compared to the same three months in 2008. The results were improved by the fact that Abu Dhabi’s Aabar Investments provided $2bn for a nine percent share in the business.
Renault is probably the weakest of the F1 car companies and lost 22% of its sales in the first quarter. It had revenues that were down 30%. The good news was that the French government and the European Investment Bank came to the Regie’s help and lent the company considerable cash to weather the storm, creating controversy as rival firms argue that this was anti-competitive protectionism. The French government is unlikely to pay much attention to these complaints. However Renault is further threatened by a plan being put together by Fiat president Sergio Marchionne, who hopes to save the Italian company by creating an alliance involving Fiat, Chrysler and the European offshoot of General Motors. If this works, the pressure will be on Renault and rival Peugeot to merge to create global economies of scale that are deemed essential these days. Renault has been slashing budgets across the board and in F1 there have been layoffs and the top management of the team has taken a 20% pay cut, the middle management 10% and the entire staff five percent. At the end of the year ING will walk away and the team will have to find a new title sponsor. The need for a budget cap is thus very important to Renault if it is to maintain its presence in F1.
Fiat’s move to grab Chrysler and GM Europe is a colossal gamble. The firm has $8.8bn in debts but wants to create a new ginat, second only to Toyota, with government money helping to fun the idea, because the nations in question need to preserve jobs. If that deal goes ahead, Ferrari would remain with the Fiat parent company and is likely to be able to stand on its own two feet. It is expanding its sales in Eastern Europe, Asia and the Middle East, while also building up its non-automotive products. However, if the idea fails Ferrari may end up without the comforting presence of a big brother company that has kicked in money as and when it has been needed since 1969. Ferrari, however, is one of the few car companies that has not lost sales.
BMW is also doing quite well and announced a loss of only $73.7m in the first quarter. The stock exchanges and industry analysts had been expecting worse figures. This has been quite an achievement given that sales have dropped 20%. This is mainly due to the fact that the company took cost-cutting measures last year and scaled back production by nearly a third before the demand collapsed completely. The Munich firm has cash of $8bn in hand to help keep the business going but admits that there are no signs to suggest that the market will recover until at least next year.
Of the rest, it is fair to say that the American firms are in a bloodbath.
Ford lost $1.4bn in Q1 was not a great result but the company is at least in charge of its own destiny, having decided not to go the US Government for help. Its two rivals Chrysler and General Motors both needed Treasury cash to survive the winter and they are now paying for that as the government is pushing the companies around. Ford’s loss for 2008 was a massive $14.57bn but chief executive Alan Mulally had managed to secure $23bn in new funding before the credit crunch began and is using this to shore things up, in effect buying Ford time to slash costs, cut production and get the company into a healthy position again.
Chrysler, the weakest of the three, was pushed into Chapter 11 bankruptcy recently by US President Barack Obama’ administration, after the management failed to come up with sensible restructuring plans.It is hoped that the assets can be sold before the end of May and that a revived company will be ready to go soon after that. This will be propped up by loans from the government but if all goes to plan, Fiat will get a majority shareholding once those debts have been paid. Chrysler’s creditors will get only a fraction of the money they have invested. In the interim Chrysler has stopped all production and will remain out of action until the dealing is completed.
General Motors has until the end of the month to devise a workable restructuring plan or the government will put it into administration as well.
The only other big firm is Volkswagen and while it has reported a drop of 74% in its profits, but still made $314m in Q1, although the numbers were skewed by the profits from the sale of its Brazilian truck and bus division. The firm has lost only 11% of its sales but has cut back on production to avoid having more cars than it can sell.
The situation is thus one of uncertainty. Ferrari might lead the way to a new championship, perhaps trying to build something out of A1GP (over which it has a major hold as engine supplier) but this would provide no real structure because the current teams and rules are irrelevant and the venues are weak. The series has some TV deals in place but has not made any real money to date.
The best solution to all of this is some form of compromise but it is hard to see how that can happen unless some of the people involved disappear.
“I doubt Ferrari would have made such a move without knowing it had the teams with it.”
The other FOTA team principals elected LdiM Chairman for a reason. If they were in his shoes,they’d expect respect (and the same financial consideration for participation in F1)
“The instability may well result in several of the teams failing to find backing and going out of business or being sold.
…such as Toyota, Renault and Red Bull”
With a restructured profit participation,this concern disappears. They all know F1 can be self-sustaining, even without $75mm primary sponsors.
“There may be attempts to either pad the grid with GP2 teams, or indeed adopt GP2 as the World Championship.”
I can the a lock-out happening. BE loves to refer to contracts and I can see him saying “well,you haven’t signed the newest contract…”
“There is an option of the teams starting their own series and if this turns out to be the case, the promoters will become much more important”
I think Normand Legault has spoken publicly & forcefully about the future w/o BE and I wouldn’t doubt he’s spoken to other Euro promoters who are on the same page.
“…because they have no charismatic leader.”
This is unneeded now. You need strong management, and it’s readily available. Besides, charismatic leaders can lead you over the cliff against your better judgement.
“…the FIA has little choice but to sanction that series.”
Actually,according to the EC it’s mandatory.
“They almost all have financial troubles and need a budget cap in F1.”
again,F1 generates more than enough money…
“Mosley’s arguments about money are sound.”
but they’re not the real issue…
“…unless some of the people involved disappear.”
this sounds like a solution proposed by…
If I was involved in FOTA I would do everything I could to make sure none of the teams entered by the deadline. They have to stop Max pulling stupid stunts by announcing that teams must make major strategic decisions in 10 days. There are reasons why F1 is totally screwed up and a lot of it is due to knee jerk decisions.
Max is clearly trying to force everyone to enter under the budget cap but as ever his logic is flawed. For example there is a limit on how much the teams can spend developing next year’s car during 2009. McLaren for example said that they started design of their 2010 car 2 months before they launched their 2009 car. How can anyone now go back and calculate remotely accurately what they have spent on that design? For all we know they may already have gone over the the budget cap.
F1 or an independent championship needs to be run by someone capable of some form of strategic thinking rather than by the current knee jerk reaction and divide and rule mentality. Max wants KERS to showcase how F1 develops green techonlogy but when it was first introduced he banned it as being against the ethos of F1. We now have cars with increased mechanical grip and reduced aerodynamical grip to give us better overtaking. These cars replaced cars with the opposite characteristices which were introduced for the very same reason. There is no aspect of th operation of F1 where you cannot see Max (& Bernie) flip flopping between extremes.
Why is it not possible to set the F1 calendar 2 or 3 years ahead? Circuits are signed to multi-year contracts so why is the calendar always published so late? How many club racing meetings happen on F1 weekends because the clubs had to commit early? Surely the FIA which is responsible for all racing not just F1 should be setting out the F1 calendar well in advance to prevent clashes and get the maximum number of people out to see racing. I know I miss several meetings a year at my local track because F1 is on. It is yet another example of bad management reducing the amount of money going into motor racing.
F1 needs clear strategic thinking to stop repeating the same disasters every few years. Bernie and Max for all the plaudits they receive have proved themselves incapable of running the sport properly. It would be in the best interests of the sport if they could both be removed.
It has always been my opinion that a budget cap was the best route to take to cut costs and maintain innovation within F1. The question was always going to be what is an appropriate figure and how do you implement it. After reading your post, I can further see that Max Mosely is correct in being adamant that a budget cap is necessary as soon as possible. Where he is dead wrong and I think this is where the teams (manufacturer and “independent”) are concerned, is in the methods with which he makes his decisions. I (and I trust many others in and out of the sport) fail to understand his obsession with brinksmanship. Commonsense would suggest that they phase in the budget cap: maybe $150MM in 2010, then $120 in 2011 for example, perhaps with a commitment from the manufacturers of their involvement with the sport through those years. Maybe he tried something similar and many or all wouldn’t or couldn’t agree to the terms. But observing over the years (with disdain) the methods to which he attempts to reach his aims, I fail to believe he tried to be so reasonable. OR maybe he was reasonable in his negotiations, but I am willing to wager there was the figurative loaded gun with the safety off being held to his counterparts’ heads in the process. It seems that is what the Ferrari board was referring to in their letter.
F1 and motorsport needs new leadership for their regulatory body. There is no plausible reason why the FIA president should be a source of such division (and derision). The Man needs to be put to pasture, however noble his aims.
Having read everything I can on the budget cap I am left wondering a few things.
Why is the FIA (Max) putting so much importance on these new teams coming into F1? It seems these new teams are struggling to come up with budgets at this low level, how are we expected to beleive they will be in business next year or 2011.
How will these teams be able to afford facilities to build a wind tunnel, CFD facilities to design, etc. Are we going back to seeing pre qualifing of the new Eurobrun, Forti and Andrea Moda? Plllease.
It is not possible to take F1 back to the 70s, 80s, 90s.
I do believe pandora’s box needs to have the lid placed back on with some sort of cap but the FIA just cannot expect what got out of the box to go back in. Mercedes, BMW, Ferrari cannot just say okay we will chop 300 jobs and close 1/2 the facilities.
Again why are the new teams more important than the teams that are now in the championship and helping to bring in millions of viewer & dollars.
A palace coup me suggests.
A few years ago there was similar talk of the teams creating a breakaway championship. For (no doubt) many reasons it all fell through and they complied to the demands of the pupetteers.
One of the contributing factors of the failure then was lack of strong leadership to strengthen the team’s position. Maybe this time it will be different, who knows.
Unfortunately, we have already seen that the powers that be are capable of ensuring that a team remains compliant by hanging a sword of damocles over it. This ensures that the team will not go against their wishes because it knows that a minor misdemenour will be greatly punished.
Circuits have “lost” races because they cannot bring their facilities up to the required standard, and those that have been chosen to replace them can’t complete the works required in the short time frame given. Thus the potential loss of a historically significant race.
The problem with dealing with unpredicatable people is that one never knows what scheme or dictate they will come up with next…
Let’s face it, Ferrari have held the whip hand in F1 politics for years, even if it has been unsubtly hidden…
I like the idea of the alliance between Ferrari (with the other teams backing them) and the ACM.
This would surgically remove the FIA from the equation (together with their appalling decision making and flair for either knee jerk reactions or conversely sitting on their hands) whilst also removing the FOG (how apt) who are simply money grabbing suits with no interest in F1.
The issue seems to be whether the current ACM incumbent has the stomach for this political fight. Perhaps I should suggest an alternative leader. You might think I would suggest Jean Todt? After all he likes political machinations such as these. But no. He has too much Ferrari history already.
How about this for a heady alliance; Ferrari & The ACM headed by Ron Dennis. Let’s face it, he knows the sport pretty well and he’s a clever man without a direct role in F1 for the first time in four decades. Why not? You never know that might also be the olive branch that binds Ferrari & McLaren back together making the teams alliance just that much more powerful.
I have to disagree with Jodum that a budget cap is the best way to achieve any objective. The application of the budget cap will be subjective and is yet another means for the FIA to influence who wins the championship.
Many of F1′s problems are caused by the technical regulations and it is not beyond the wit of man to write a set of technical regs that seriously reduce the performance gained from throwing money at the problem. As an example we currently have every possible part of the car made from very sophisticated carbon composite materials. This adds expense not only due to the higher purchase price of these materials but also because of the fact that the materials can be shaped in ways that conventional materials cannot many more iterations can be developed and tested. It also costs a lot more to bond and cure these materials than it does to cut and bend metals.
So we should mandate that all suspension members must be made of a fixed metal and must be round in section. This is going to make no difference to anyone but immediately eliminates a lot of aero testing and related costs.
We have very complex shaped wings and bodywork because of the same composite materials. While I would never suggest banning carbon from chassis manufacture because of the obvious safety benefits I can see good reasons for banning its use elsewhere on the car. If the bodywork and wings were made of a specified aluminium alloy several benefits would result. First material costs would be drop as would processing costs. Second due to the inability to form such complex shapes from aluminium the aero testing would reduce. Third we would not have thousands of razor sharp carbon shards all over the track evey time there is a minor bump. It would also allow cars to continue with bent wings as they used to do rather than pit because their whole front end is smashed.
There are many similar modifications that could be introduced that would allow a team to become competitive without costing a fortune and without the FIA having a team of accountants in each team. It should be pointed out that there are European laws that prevent companies disclosing some of the info that they would be required to under the budget cap.
It should be remembered that all a budget cap is going to do is allow teams to be able to enter F1 and not be 10 seconds off the pace as happened before. New teams are not going to be instantly competitive at the front of the grid. The top people and teams will be at the front in general regardless of the rules.
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