Bernie Ecclestone says that the Serbian government is behind the rather eccentric Stefan Grand Prix project. This will presumably make it rather more professional an organisation than it was when it was creating first impressions. If there is money there will be sensible people involved, although having bases in Germany and Serbia is going to make it tough to attract people from the UK – the same problem that plagued Toyota F1. Still, if the money is right there will be decent people involved, although the whole thing is so late in the day that it will be rather thrown together. There are so many details in running an F1 team.
The next question is how to secure an entry for the team. The FIA President Jean Todt has made it clear that the FIA grants the entries but if Stefan GP buys the Campos entry then all that really will be required will be an agreement for a name change from the other teams, which will happen if there is no reason for it not to happen. It is in everyone’s interest that there are as many teams as possible on the grid. The new teams get their own fund from the Formula One group and the other teams will all be taken care of for the time being as the top 10 share the money. In other words, all 13 will have funding from the rights holder to a lesser or greater extent. Getting hold of the Campos entry can be achieved in two ways: a deal can be struck directly between Campos and Stefan GP. This will help Campos to recoup some of the losses that have been accrued and may help to settle the outstanding bills with the suppliers. The second route is that Stefan can buy the design from Dallara, which would leave Campos without a car, even if it had an entry. The entry would then be worth nothing. Campos would have to settle for whatever was on offer. The real question therefore is whether the Campos route or the Dallara route is the most cost-effective. If Campos can get together a deal to save the day – with money from Tony Teixeira for example (money, rather than promises) then it can go ahead and Stefan will be in trouble. There is no proviso for a 14th team. It seems that USF1 will be there despite all the negative chat although the real test is not who turns up in Bahrain and in China (if they need to miss races) but rather who is still around when the teams head off to Singapore in the autumn.
There is also a question about the Serbian money. The news that the government will pay for the Formula 1 team came on the same day as a delegation from the International Monetary Fund arrived in Belgrade to review the way in which its loans are being used. This far Serbia has received €1.12billion of the promised $4.3bn. The money will only be paid over to the government if the IMF is happy that the reforms agreed are taking place. This involves massive cutting in government spending, wage freezes in the public sector and job cuts to make the administration more efficient by getting rid of layers and layers of civil servants. This is tough in an economy where unemployment is running at 18% and where the economy contracted four percent last year. One of the IMF conditions is that Serbia constrain the use of stimulus efforts to revive the economy. It is an interesting discussion as to whether the funding of an F1 programme would be seen as that or not. In recent years the government has spent around $900m in support of small and medium sized business.
After the horrors of the 1990s, the Balkans are recovering well. Serbia’s economic growth has averaged 6.5% a year since 2000. The economic downturn and the drop in the value of the local currency took the country to the brink of insolvency but the IMF stepped in and helped out. The country needs to be financially restructured. There is a huge trade deficit, there are low salaries, there have been huge hikes in the prices of essentials and the standard of living has suffered accordingly. If the government thinks that an F1 project will help power Serbia toward recovery by changing the international image of the country then all well and good.
In a interview to the local newspaper, Zoran Stefanovic denied that Serbian government is financing his F1 project. Instead, he said that government is helping him with logistics, but didn’t want to give more details.
It all sounds pretty fishy and if I was the FIA I’d seek to distance the sport from anything remotely dodgy (I realise what I just said there but I hope you get my drift). This is the somewhat blurry edge of F1 that I’ve never found that agreeable..
I agree. Government could finance such a project, to promote a country and improve it’s image, if only they didn’t spend similar amount of money on wages for inefficient bureaucracy.
So, it’s safe to assume money comes from private investors and it’s origin should not be inquired about….
For Mr Saward,
Nice one on picking up on what’s really going on with respect to Serb govvy funds from the intra-govs! I was half aware (it’s a fair guess ain’t it?) there was a set of covenants for aid finance, but didn’t know what the status had been recently.
However, i find it somewhat disconcerting you link, however this is by inference, the Serb economy, with wider Balkan revival. It hardly needs much thought to consider that much of the Balkan diaspora (i’m using that word to include micro states in flux to this day, such as Montenegro) wouldn’t feel warm and fuzzy being lumped into the same sphere of influence, or even the same para as (again, this is only an inference from your prose, not any assertion or suggestion) an agressor which is, and who are at many levels, barely reconstructed in any sense of that word.
I once had some very unpleasant run ins with a company which turned out to be Serb controlled at a extremely nasty and one-time high level. I can only offer the suggestion of analysis that, based on what i experienced, the Serb interest in F1 is about as agressive and wholesome as their politics, and backed by little more than bluff. It sure comes with plenty of bluff, whichever way you slice it. The ones i met and dealt with were extremely smart buggers, working corridors of power which left me flabbergasted. Combine that with the fact BE has many an axe to grind, and i think they’re working an advantage in the confusion.
Take over Campos as they may, i don’t see bills getting paid.
For sake of record, my impressions are confined to a business and political enclave of Serb men. I grew up with Belgraders, close fiends at school, who are the utmost apposite of such n’eer do wells as i’m hinting at here.
As I was reading this I had a somewhat unrelated thought and a question for Joe.
What type of visa/work documents do you need to do all the travelling you do? I’m guessing you have been travelling for so long you take it for granted, but I’d be interested in the logistics/paperwork needed to get in and out of the flyaway races.
Which leads to my next question. How on earth do you deal with the emplyment laws/work rules/taxes for all the different jurisdictions you are in over the course of a season? If you work on and post a story while on a layover in New Jersey, do you earn income in the United States?
A this point, I would think your tax records alone must fill a decent sized warehouse someplace.
I have to do visas for a number of countries. I have a British passport and so there are not too many problems but some other nationalities spend a lot more time doing than I do.
sillyseason:
see “place of business” – in the EU and much of the world you file and pay taxes in the jurisdiction of your domicile. EU work rules are based on freedom of movement.
as far as i’m aware Joe Saward isn’t a multinational, and any competant personal accountant could file his returns promptly and correctly.
your speculation Joe is as as complex as a funny F1 team is a bit absurd:-)
John
Yes, that sounds about right…
Re John’s comments–
Certainly the ploy of buying the rights to the Dallara chassis in order to mothball it (and thereby deny Campos a car to go racing in), if true, shows that, whatever his sporting credentials, Stefanovic doesn’t have anything to learn about the application of power in F1 circles.
And there remains the question of where the money is coming from, and why it has suddenly appeared now, after being absent in November when Toyota was available for purchase outright, entry and all.
On the other hand, not everything is a conspiracy, and F1 does make rich men do silly things. Maybe Stefanovic suddenly realised in December that he could make a go of it, and here we are. Still, many more unanswered questions than answered ones…
I am getting the feeling that F1 is becoming more nationalistic. With Indian teams and Spanish teams and Serbians teams and American teams appearing. Now we are hearing about all-German Teams and all-British Teams.
This recession really puts people back into their nationality boxes. And F1 really is the best example of this.
It gives you a bad feeling for the future. But that might be best suited for a different blog. (Or maybe not…)
John, Joe,
Thanks for the reply. I had a freind here in the states who worked in oil exploration as a summer job. He worked in 8-9 different states, and in some cases different counties within the state. Even though he only got paid once or twice in each state, he had to fill out state and local tax returns for each location, even if the taxes were zero, to get his withholdings back. Each state has their own separate laws and forms regarding what was and wasn’t taxable. It was a major headache for him to get all the paperwork together.
I just thought you might face similar complexities when travelling and working internationally. Given the size of the salaries the drivers are paid, I figured local governments might want to try to find a way to collect an additional chunk of money from the F1 crowd. Thanks for enlightening me otherwise.
Joe,
of course, i was not saying you’re not personally as complex as a “funny F1 team”, i mean, you’re too close not to have picked up some traits by osmisis (!?), but i did think it worth suggesting there was a definite distinction at the accounting level, in a discussion about Serb businessmen!
– j
For Ash,
it’s piece of pie to buy reversionary or underlying rights, for peanuts and a contingency, if the seller thinks they might want a bit of money on a fall back position. (this is the kind of thing i can turn to good profit with media assets: don’t compete, just run the models, keep quiet and be next in line when the incumbent blows up)
It’s also tortuous interference with (3rd party) contract to go about mongering stories which might bring about or influence the circumstances which cause a breach of the original privity.
This is all case study, actionable, strong – arming. Bottom dollar, there would be suits flying were it not for jurisdictional problems. (i.e. if all parties were in US or UK)
It reminds me (if you can ignore the later history) how another Bernie, Ebbers, this time, muscled into telecoms with WorldCom.
What did he need?
1) whopping junk bond placed by ex- Drexel salesmen (ex- Milken associates*)
2) 2 execs
3) some sub contracted engineers / consultants
4) 6 attorneys
That was, to the best of my knowlege, the original team line – up for WorldCom at their commercial incept. It actually was a good business, until the founders started out on a fraud for their own purse. Picked up for pennies as a result, and was still a good underlying business.
Now, guess what proportions i think some of these new teams are getting incorrect, with their entry to this wonderful sport we all love?
*I am a die – hard supporter of Mike Milken. He almost single – handedly turned around the backward looking credit blindness of the USA and financed more sucessful startups that matter today than any other person. It wasn’t until he ran out of good startups to fund, and to keep a huge salesforce employed, started to fund vultures who attacked the establishment (repeat that word, with a languid drawl, over and over ’till you get my point) of corporate America, that he gained enemies. They were some enemies. If unconvinced, read Alan Dershovitz’s appeal trial transcripts when he got the man discharged.
– j
p.s. oooh, guess i’m coming across a bit hard – nosed. Que sera etc. In my defense I assure you you don’t survive long in any walk of life being a unreasonable or unfair bastard. Nah, don’t cite the obvious historical bete noirs – they all met sticky ends before their time. Sweet kisses then from me ;-0
For Ash again,
about the money:
McGuffin.
This is not Jaws in the third reel. BE keeps that kind of show stealer to himself.
Sorry, to clarify the WorldCom thing, to get interconnect and any kind of access to deliver service, post the US ’94 telecoms act, you simply had to be led by legal chutzpah*.
Does that sound familiar to anyone?
Gawd dang it, i gotta stop with these hints . . .
*WorldCom was not alone in the deregulatory mess. I’m sympathetic to the company because the moment they had cashflow, they built stuff which worked better than their competitors, which i used in my own company. In My Not So Humble Opinion, obviously
Oh dear, me again . . .
Ash,
i nearly let this one go:
“thereby deny Campos a car to go racing in”
is impossible.
Until you twist the circumstances.
Face of it, your comment is BS, simply impossible the way you speculate. But they way these guys are playing it, the defendant – respondant (under box model, if subpoena found BE’s statements true) is a pseudo – state!
But then i wish i could take any contract on the face of it. I know when i can, and it’s always been a single man (pity that bias, but hey ho) who can patently do what he says, on their own, and who i can look in the eye. Must Stop Fantasizing Now About Good Deals . .
ironic Mike,
“I agree. Government could finance such a project, to promote a country and improve it’s image, if only they didn’t spend similar amount of money on wages for inefficient bureaucracy.”
Nah, OSCE election observers get custom Boss brand leatherware stationery for their never – used notes.
I say, bypass the imaginary “state” and just bill the UN for promoting Peace and Good Overtaking In The EU.
Or is that bypass the UN and go to Boss? I’m confused . .
Much less conflict.
sillyseason,
Hi again,
The US IRS takes a quite different and very convoluted view on overseas appointments. As the first country to tax its citizens on their global income, only to be matched (and surpassed*) in the very first act of the 1997 Labour govt of the UK, it takes the matter of tracing income sources a little too seriously.
But you explained the problem yourself. Your friend was being paid in different states and locales. If that is how he was paid (i can only imagine how much savings his oilco employer could make by centralising payroll and axeing such a stupidity) then compliance would have to be conducted at the local level.
A peculiarity, as i understand it, of the IRS system, is it requires citizens to separately report out of state and overseas work income. I’m not fully certain as to that, but it was the drift i got when chatting to a long time American Londoner recently.
In comparison, most of the rest of the world allows the employer to deduct taxes, or the self employed to centrally report taxes. This makes a lot of sense. The US system evolved from psudeo – homogenous inter – state agreements combined at a federal level. That would be insane to try across language barriers and real borders. The problems are solved by tax treaties, which although headache inducing, are nothing compared with some of the US state – local tax codes i’ve read
* The UK will demand and require (enforceable under treaty) tax payments for up to 7 years _after_ you have ceased to be a UK citizen. And people wonder why the “dom, non – dom” resident for tax purposes debate has been so fierce . . i know many who would pay top tax rates, and honestly don’t care if they do or not, but who remain non domiciled on principle. “screw them, i’d rather the money went to my accountant” they say. In spirit, i agree, it’s an offensive line for a mother country to take. Unless you have massive income, it’s a zero sum game for most, a good tax accountant (one competant to actually ensure you are non domiciled properly) will cost more than the marginal tax difference up to some very handsome salary levels. Only big banks, who absorb that cost in their HR budget, make it sound appealing. (not to mention having attorneys available for HMRC reviews, which are ever more frequent)
Hope that, necessarily hand – waving and not – to – be – relied – upon, summary helps clear things up.
cheers,
– john