The signing of the Concorde Agreement last week means that this week is a good week to be a Formula 1 team. As part of the deal it seems that the Formula One group is committed to paying out in the region of $250m to the signatory teams, with the payments having to be made within five days of the deal being adopted by all concerned. The money that will be paid out to the nine signatory teams was earned by them between the May 2006 Memorandum of Understanding and the end of the Concorde Agreement in December 2007. It was not paid to them because they did not convert the MOU into a new Concorde Agreement. For this 18-month period it was agreed that the teams would be paid 50% of the F1 revenues generated rather than the 25% that was previously the case. With the group boasting revenues in the region of $1.5bn in this period, the additional money amounted to around $360m. The deal that was agreed was that to aid the group with its cash flow half of this would be paid when the new Concorde Agreement was signed and the remaining $180m would be paid out annually between now and the end of 2012. With only nine teams that were in operation at the time signing up to the Concorde Agreement this means that the Formula One group must now pay each around $20m. In addition, it is understood that the Formula One group offered an incentive of $70m if teams signed the new Concorde Agreement and so each will also receive an additional $7.7m. There have been suggestions that Williams and Force India may have already received this money but even so the total payout is going to be in the region of a quarter of a billion dollars. This will be a great help for teams that have been running short of budget this year.
The situation with BMW Sauber is interesting as the team signed the 2006 MOU and is thus committed to racing until 2012. It did not, however, sign the Concorde Agreement itself and so is not eligble to the money, despite the fact that it raced throughout the period in question. The Munich firm will, in all probability, now face demands for compensation from the Formula One group for failing to honour the commitment made. This could be expensive although if BMW was to help to keep the team going – difficult without being a signatory of the Concorde Agreement – this could be avoided. BMW will find little sympathy in F1 circles.
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Wow, had BMW Sauber signed the new Concorde Agreement, any buyer would have immediately had the budget to compete in 2010, 2011 and part or most of 2012 in place.
Very thorough Joe, thanks.
Makes BMW’s actions look even more stupid though doesn’t it?!
Geeze,
I never thought I would see someone handle a team sale worse than Honda did last year. These actions by the Munich boys make Honda’s management seem more and more humanitarian by the day.
BMW…congratulations. You take the cake. I would be more glib but the fact that they’ve basically sold out hundreds of Swiss and German jobs because of… well their stupidity and lack of understanding the F1 environment really gives a black eye to the company, raises questions on how it is run, and the character of the people who run it.
Makes me not want to buy a beamer… then again, it isn’t like I won’t be able to afford a M5 any time soon.
Presumably BMW knew about the payout before it announced it’s decision to withdraw. This suggests it was not a financial decision. Perhaps more a face saving excercise?
Good stuff, as always Joe. “No sympathy from the other F1 teams”, I bet the other teams indeed will not sympathise one single iota all due to KERS. This is nothing more than a million of dollar costing marketing ploy from Mosley to give F1 a green image and was all done with BMW as strong proponent. Both should be binned ASAP and will reduce budgets.
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Dont understand BMW ! surely they could have tried to help Sauber in one way or another, to get the funds …
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