The news in the last 24 hours has been dominated by the goings on between the Formula 1 world and the powers-that-be in Austin, Texas, where the plan to hold a Grand Prix has been going off the rails. It looks like a right royal mess and if they do not sort it out quickly one can see the whole thing descending into a legal mess that will take years to unravel. The gist of it seems to be that Bernie Ecclestone did a deal with Tavo Hellmund, a brash sales type who was a son of an old friend. It is said that Ecclestone used to bounce Hellmund on his knee when he was a youngster and so thinks fondly of the bloke. Hellmund promised to deliver a large amount of money to the Formula One goup over the term of the contract. The state of Texas agreed to pony up some cash to get the ball rolling, on the basis that the race would generate a great deal more. Some wealthy folk got together and agreed to build a circuit, without state money. Unfortunately, the contracts then got into a mess. The state now seems to be back-pedalling in an effort to save embarrassment and is using the race in New Jersey as an excuse to ask for a better deal. Hellmund seems to have ceased to be a player, but Ecclestone still has his promise of vast sums of money so he needs to find someone to help him out because the only kind of bouncing Mr E is going to do today is to bounce Tavo out of his office (he has to because, lest we forget, he is working for CVC Capital Partners) and he cannot just say: “Never mind, old bean” when he has a bunch of Koreans keen to bail on their contract as well. The rich folk have a half-built racing circuit and that will not make them happy. All things considered it is a mess and will take time to sort out. The proposal is to delay the race to 2013 with new contractual terms, presumably dealing directly with the government
Mr.E has offered Austin a new contract starting in 2013. They now want a deal that is cheaper than the original $25 million a year (which was a good deal in any case). This sounds like a negotiating position. What they need to remember is that Mr E has no great attraction to anywhere and while they might think Austin the centre of the universe, he would happily take F1 to Papua New Guinea if they paid more money. So Texas needs to pay up or ship out. They have spent fortunes working out how good it will be for the regional economy, so having convinced themselves of its value they need to get the job done. Governor Rick Perry, who is somewhere in the background in all this and will be embarrassed, although not half as embarrassed as he was the other evening when he appeared on a televised debate involving the various Republican Presidential candidates, of which he is one, and could not remember the three government agencies that he intended to axe if he becomes President (which the gaffe pretty much guarantees will not now happen).
Ecclestone is the meantime has troubles of his own. It is reported in no lesser publication than The Financial Times that Britain’s Serious Fraud Office is looking at whether or not to conduct an investigation into the bribery allegations surrounding the sale of the Formula One group to CVC Capital Partners in 2005. Ecclestone told a German court a few days ago that he paid Gerhard Gribkowsky to stay quiet about tax questions when he was organising the sale. Ecclestone said that he had no reason to worry about tax, but paying out a vast sum of money is an odd way of expressing this lack of worry. Britain’s attorney-general Dominic Grieve confirmed investigation in a letter to the Shadow Attorney General Emily Thornberry.
CVC is the news in Australia where it has been asking lenders for an extension on refinancing its $2.6 billion debt relating to the Nine Entertainment TV network, amid worsening financial markets and reducing advertising revenues in the region.
Williams, in the meantime, has announced an official partnership with insurance provider, Ingenie. This is a new “fresh-thinking car insurance brand for young drivers, aged 17 to 25, which uses advanced telematics to assess individual driving styles and help lower the cost of car insurance”.
“The Ingenie proposition immediately stood out because we liked the idea of sharing technology, similar to that used in our own Formula 1 cars, to help young drivers improve their skills and be rewarded with cheaper car insurance,” said Adam Parr. “We also have an interest in road safety, not least because our Founder and Team Principal, Sir Frank Williams broke his neck in a road accident.”
It should be noted that in the team’s prospectus prior to its flotation it was revealed that Parr is a director of Ingenie and that Ingenie already had a three-year marketing agreement with Williams under which it was allowed to describe itself as a partner of AT&T Williams and would have specified access to the team and its drivers for promotional activities. So it is hard to understand why this announcement was necessary.
In the meantime the FIA has announced that it has awarded its World Prize for Road Safety to Archbishop Desmond Tutu, the award being presented to Tutu by FIA Academy President Rosario Alessi in Cape Town. Tutu has been a very vocal advocate of the need to address road safety in Africa, raising awareness of the problem, which he calls “a new health emergency for Africa”.
joeblogsf1 
Joe,
I won’t dare suggest any sense of naivety on your part, because you are not, and I can read between the lines. Important for everyone to remember that Mr. E is Karun Chandhok’s Godfather, so he’s likely to have bounced that lad on his knee a lot more than TH, and in spite of that he’s been prepared to watch Chandhok dumped mid-season by Kolles. I pray that Tavo Hellmund doesn’t overplay ‘the historic relationship’!
Not sure if Parr may be seen as self-serving (heaven forbid) in his promotion of Ingenie! Also worthy of note in respect of Ingenie, it’s a newco founded by Richard King, Chairman of the Chelsea Pitch Owners group, and as such, VERY much in the hotseat for his perceptional poor management of that role and its stakeholder needs.
Joe,
Apologies if this seems like too much of a crackpot theory, but I was wondering something that I wanted to share here wih you all…
What if all of these shenanigans with Austin were all just a big plan to get a Grand Prix off the ground in New York/New Jersey? We have heard many times that this is where Bernie really wanted the USGP to be … could this well be a situation similar to what happened between Donington and Silverstone?
Could Bernie just have used the idea of the race in Austin in order to facilitate things in New York/New Jersey?
rubbergoat,
No two races are definitely better than one
On the Williams ‘announement’, it’s typical of the sort of thing we can expect from Adam Parr – F1 Entrepreneur.
The major events trust fund works the way it works ole man Bernie thinks the rules for him wait he thinks there are no rules, don’t apply. Enjoy the race in the sespool that is known as New Jersey which given their economic and political climate will probably not happen either.
Surely the Williams/Ingenie arrangement represents a significant conflict of interests and while a private company might have the scope to get away with such mutual back-rubbing, surely a quoted company listed on the Frankfurt Stock Exchange demands more transparency?
I am sure companies such as AT&T who pay millions for their sponsorship entitlements with Williams must be delighted to see one of Parr’s pet projects getting the same attention presumably for a tiny proportion of the cost….
How about Petrov mouthing off at Renault? It seems a little odd when they have no shortage of drivers that could replace him.
Do you think there’s any chance of him perhaps being offloaded to Marussia, with the Russian connection, and a trade for Glock, who could fit the role of an experienced team leader that Renault want?
Joe
These wraps on F1 on a friday work beautifully!
Thanks
I would be surprised, shocked even, if Mr. E. had made that statement about the tax blackmail without being squeaky clean (as far as the records show, at least). He must have been aware of the ramifications or known which would be the easier issue to deal with.
As for the Williams announcement, well, after Abu Dhabi, they need something positive to raise their profile as they continue to try to generate sponsorship and up the share price.
“So it is hard to understand why this announcement was necessary.”
Perhaps to distract from the brewing disquiet in Venezuela where the sponsorship money which comes via Maldonardo is being called into question, since it seems it is effectively government money, which needed proper government or parliamentary approval, while in fact it has neither, but was a whim of Mr Chavez.
Money. A USGP is cool concept but I enjoy attending the Canada Grand Prix.
“Tutu has been a very vocal advocate of the need to address road safety in Africa, raising awareness of the problem, which he calls “a new health emergency for Africa”.”
It desperately needs someone like him in India as well, someone acceptable to all castes. There seem to be no sort of rules about junction priority or anything else in India, they have a massive daily death toll on the roads. A major cause being no kind of training, license, or road sense appearing necessary to be a bus driver, just go a s fast as possible and you get more pay. Still anyone surviving a few years as a professional driver could be put on a par with motorcycle couriers in London.
Bernigate lives!
How long before Bernie is dumped by CVC? He lost his immunity clause in the new (and now suspect) deal so he is vulnerable. But could we do without his organisations? There is a lot he does that we do not see, he has special deals with airlines all over the world, nothing some other organisation could not do, but has anyone got that kind of mix of people in the right places. Apart from transport there a host of other things that we punters never see.
Ironic that in considering handing control back to the teams, that was how Bernie got control in the first place. Don’t worry lads, I’ll do all that stuff for you.
Who ever could have predicted epic fail for Austin???
Oh, wait… 😛
Saying that $25 million is a good deal for a sanctioning fee is like saying that it is better to drown in fresh water instead of salt water. There have been plenty of American motor journalists: Ed Hinton and Ryan McGee of ESPN, Curt Cavin of the Indianapolis Star and Kevin Lee of Versus who have right from the beginning expressed severe doubts about this race ever happening, knowing the shenanigans that F1 and Bernie have pulled for 30 years (his first act was to destroy Watkins Glen). Too bad, it looked like Tilke may actually have built a good teack. some dirt bikers will enjoy it.
Titus Pullo,
I was talking about F1 journalists, of which the two names you mentioned are not experts.
I find it astonishing that these apparent high value, multi million dollar ‘contracts’ appear to be little more than gentlemans agreements – rather like Apple sketching the ideas for a new iPhone onto the back of an envelope. Bernie continues to make the F1 world seemingly into a bit of a laughing stock when it comes to contract negotiations.
We have an octagenarian (sp?) CEO of FOM, owned by CVC (??) who is trying to do deals with the son of an old chum who probably has little knowledge or interest in F1 other than the $$’s he can earn.. That’s how it appears to me if you step back from what is happening. I suppose I find it hard to understand as I work in the pharmaceutical industry where NOTHING is left to chance in terms of contracts, deals and agreements and everything is thrashed out in minutiae.
I think the most interesting aspect of the Austin mess is that Bernie appears to have allowed Hellmund out of his contract without any penalty based on last night’s press conference. If this is true it has to be a first. Perhaps it is a temporary situation and will change if no new contract can be agreed for that race.
I was stunned to here during the press conference that there were gas lines running under the site of the track and no-one knew. How can they be so ill informed?
Salt pepper and bbq sauce are back in the cupboard. Pity, was looking forward to meeting you and having a giggle or ten.
Some positive news on there but…seems like the house (of cards) the BE built is starting to teeter a bit. As far as Texas politics are concerned, Perry has stayed well away from the Austin kerfluffle, leaving it to local and state politicians to deal with. Meanwhile, they’ve been cutting meals for inmates in the state prison system to save money. Gonna get weird.
Tavo should be happy that Mr E has let him off the hook and take whatever COTA is offering and go live a happy life. I don’t see Mr E having any trouble tossing him under the bus if it meant the deal will be completed with the other folks. For the COTA guys whats the point of risking the hundreds of millions that has presumably already been spent on the track to try to talk down the price by a couple, just get on with it.
“It is said that Ecclestone used to bounce Hellmund on his knee when he was a youngster and so thinks fondly of the bloke.”
Amazing how Mr. E can now busy himself with doing harm to Tavo’s backside. A mercenary is a mercenary regardless of past associations.
Re: Texas, Austin, if you have a look about their ARS – Auction Rate Securities issues, you see a financing glitch which is causing municipalities to go Chapter 11. Right unhappy mess.
I am sure this is a gubernatorial digging heels in thing, for show. 25MM is a middling to good fee, and if something is worth it now, it is worth it later, when inflation has eaten into actual values. The New Jersey race got a better deal because BE always wanted that. Just no state cann finance easily now, because well they dabbled in what almost certainly were mis-sold derivative securities, which have punitive exit fees. Nobody was alone in that mistake. Therefore, if i were in Bernie’s shoes, i would discount hard cash from a magnate and think that better than state promises which compound political risk. That’s why they get a different price, in my book.
On the state governance thing, i wish someone would write up some flash cards to explain to these people the difference between budget trimming, and budgetary efficiency. Maybe the OWS lot could do a Dylan tribute there . . better than getting forever moved on by coppers on an empty stomach, all wound up.
This has to be election campaign collateral damage in part. Personally, so far this nomination race has been superb entertainment, i think. “Vote for None Of The Above” 🙂
Bernie’s been so clear with his statement, which surely always was going to get him in trouble, i don’t think it can be other than a deliberate mistake. I have tried, and i cannot twist his words into anything which would not cause the revenue boys to jump his corporate bones.
The FT is certainly a Record publication, but even the best get things confused lately. Just saying. (no MSM reports disk drives hit a 300% hike, now, or they try to salvage the factory machines with scuba divers)
Movie ref: Brewster’s Millions, from the quote above. Any version, but the Richard Pryor one is super fun. (I think the generation who could do meaningful but light-hearted films, has departed us.)
Sounds like the damp squib silly season is rolling on, in the PR depts.
– j
Better call Saul !
Joe, I could understand your continued optimism about Austin if a “half-built racing circuit” actually existed. Were that the case, I agree the backers would have tremendous incentive to make the race happen, but do not believe this is the case.
From the recent video and photos I’ve seen of the site, they’ve dug some holes and graded some dirt, but they haven’t actually ‘built’… well . . anything. Not one permanent structure.
Given that they haven’t actually built anything expensive, most of the expenditures to date can probably be assigned to the land purchase. Unfortunately for the prospects of this race, that is one expense that definitely can be recouped.
I suspect they’ve spent less than 10% of the total needed to construct the world class facility they’ve planned. I don’t believe the backers are anywhere near the tipping point where they feel it financially necessary to go forward.
With Helmund gone, Bernie is likely asking for a much higher sanctioning fee, perhaps even with Bernie’s now-typical 10% annual (compound) fee riser. You’re absolutely right that Bernie won’t be held over a barrel, but I don’t think these Texas money men have enough skin in the game to be held over a barrel either.
The odds of a 2012 race are now as close to 0% as is possible. A 2013 race is still a possibility, but I wouldn’t bet a large sum on it.
Random,
There is a lot of underground “building” that has been done, such as pile-driving and so on. The upper structures go up quite quickly after that.
Bernie Ecclecstone did a deal with Tava Hellmund,who WAS a son af an old friend…..Joe,.what happened in the Hellmund family?
Joe,
From local reports, all major construction at the site stopped may months ago.
The unanswered question is, why did they stop? Presumably, had they paid Bernie’s fee those months ago they would have locked in the “sweetheart deal” arranged by Helmund and the State of Texas would have paid the 25 million as much as a year in advance.
The financial backers didn’t do this. They stopped construction, they didn’t pay Bernie, they allowed the contracts to expire, they set in motion the actions that caused the State of Texas to pull out of any advance payment.
Some were suggesting that Helmund had been holding the race ransom, but he strongly denies this. Just yesterday, Helmund said he would have agreed to walk away entirely for less than $4. A tiny sum in comparison to the funds needed to bring this project to a conclusion.
So why did the backers stop construction and stop payment? Two possibilities. 1. Cash flow problems 2. They reevaluated the profit potential of the venture and decided it wasn’t viable without steep discounts in the sanctioning fee.
We all know that Bernie is very unlikely to give these Texas backers the same deal he offered Helmund, let alone a better one. This is why I think the race is likely doomed, not just for 2012, but for all time. Because if the financial backers weren’t prepared to go forward all those months ago when a sweetheart deal was on the table, why would they be prepared to spend even more now?
Random,
No it began again about 10 days ago.
Bernie recently said the contract was breached over 6 months ago.
“We’ve waited six months for [Hellmund] to remedy the breach” -BE
Further, local reports strongly suggest there has been no heavy construction on the site for many months. Helmund himself seemed to admit this in his press conference yesterday.
Certainly the last straw was applied this week, but bales of hay have been piled onto this camel’s back for many months.
“We also have an interest in road safety, not least because our Founder and Team Principal, Sir Frank Williams broke his neck in a road accident.”
Oh! Not because of the FIA’s Make Roads Safe campaign then? Not for the greater good? Instead because of a 25 year old accident that cannot be changed but happened to your boss making it important? Okay, fine, so long as we see your priorities.
“It should be noted that…”
I’d hoped the next words would be “…Williams’ injury was self-inflicted, while speeding and not wearing a seatbelt”.
I don’t mean any hatred toward Williams, but you don’t campaign against knife crime by using an example of someone who cut their own throat.
attentive,
soliciting on the streets is illegal 🙂
If North America is such an important market to F1, why do you state that “he would happily take F1 to Papua New Guinea if they paid more money”? American F1 fans are – to my knowledge – the only group of F1 fans in the world who have endured four cars in a grand prix (due to the Indy debacle). The sport is usually aired on a smallish cable network, at odd hours. There are two entrenched racing series in the US as it stands. Isn’t there some thought about investing – even if it is not profitable now – in a market where the teams want to race? I think in retail it’s called a “loss leader”. F1’s behavior over Austin is off-putting to those of us who would like F1 back in the US. Given the context – a possible investigation of the Gribkowsky affair by the Serious Fraud Office – one might consider appearing a bit less ruthless.
Wot’s a “telematic”?
Bernie and F1, should just give up trying to do anything south of the Mason-Dixon line in the US, I’m sure they won’t get fooled again,
“fool me once shame on me, fool me twice..uh shame, well, I won’t get fooled again!”
@ Scott Bloom
If the commercial side of the sport were run by people with the best interests of the sport at heart, the tremendous value of the US market -would- be taken into account.
Sadly, that is not the case. Bernie and CVC have proven themselves to be overwhelming interested in short-term profits at the clear expense of the sport.
The US has such a large and established sporting market, it has had little appetite for Bernie’s excessive fees. Bernie’s fee structure is so outrageously high that he makes it nearly impossible for any grand prix to turn a profit. In fact, I’m not aware of a single grand prix that has ever turned a significant profit. They’re all heavily subsided, typically by taxpayers.
There is very little taxpayer enthusiasm in the US for paying multi-billionaire Europeans for the privilege of hosting their events. Nor in my mind – as a US taxpayer – should their be. This is why Bernie has a hell of a time keeping a grand prix in the US. Bernie had a good thing with Indy, had he allowed the circuit to make even a reasonable profit, he’d likely have kept Indy.
Bernie doesn’t work like that, Bernie runs a money pump. Bernie takes all the TV money, Bernie takes all the hospitality suite money, Bernie takes all the track-side billboard money. The circuits have to recoup everything from the gate.
Multiply attendance by average ticket price and you’ll have the circuit’s complete revenue stream for a Formula One event.. Doing those sums quickly makes apparent how impossible it is for any track to break even, let alone profit.
In my estimation, until the teams or FIA take over all commercial operations of the sport, Formula One will continue to put short-term earnings above all other considerations- and we’ll continue to see tiny Arab Emirates given precedence over the largest economy on the planet.
“What they need to remember is that Mr E has no great attraction to anywhere and while they might think Austin the centre of the universe, he would happily take F1 to Papua New Guinea if they paid more money.”
Joe, did you know that Papua New Guinea still has primitive tribes of indigenous peoples that practice cannibalism? Better hide the Hublot watches!
It’s all about what I used to call “smash and grab selling”. I have written and been chastised for saying that F1 is about money not sport as far as Bernie is concerned. Do you visit the customer again for more sales or is it a one off grab the money. (The old Xerox PSS course taught smash and grab.)
To have a good F1 fan base in the USA would be great for F1, it would mean a continuing income from the track for FOA CVC etc. However the Americans are used to NASCAR and Indy, the track actually making money and living off the income. F1 is very different, it makes virtually nothing for the track, they cannot sell advertising space or hospitality suites Bernie gets all that. The price of admission will be several times that for NASCAR and events at the track for the rest of the year will have to support the huge F1 fees. (Unless the state pays them) But it would be good for F1 if it endured and the race occurred there every year.
By contrast Papua New Guinea could perhaps fund a year or two in Bernie fees, build a track. ten people would attend and it would cease after the first year BUT Bernie gets paid in advance, so he would be fine and looking for the next new venue, any one with a bit of cash or a sovereign Wealth fund to spend.
If there were more major manufacturers in F1 who cared about US car sales this would never have happened. However, when there’s only one make with anything to lose (Mercedes), there’s not much the teams can or even care to do about it. Ferrari and McLaren don’t care. Their cars will sell out in the US regardless of whether F1 even exists. Renault is gone (not that anyone in American knew them or their connection to Nissa), except for engines and I doubt the Infiniti-branded engines will be a major boost to a marque that is really just known as a discount luxury maker. Had BMW, Toyota, Honda, Mercedes, Renault, Ferrari and McLaren-Mercedes all been in the championship this season, no doubt in my mind the Austin race does not suffer these absurd hiccups.
Austin would have been a better venue than NYC/NJ to get a permanent foot hold in American.
PS-Pirelli is quickly learning why Michelin and Bridgestone pulled out. Bernie allows all these biggest debacles to happen in a country that makes or breaks their companies.
Can’t wait to hear what Karen has to say 🙂
TJM,
telematics is roughly the study of any kind of signalling in motor transport.
It’s a mongrel word that makes me want to swear at my brother, who is no slouch at this kind of thing.
If you look up the definition as offered by http://en.wikipedia.org/wiki/Telematics
you can see it has some origins in the EC Europa DG initiatives.
Which are in my book all a fine way to piss off any vaguely intelligent chap into forgoing any sense of moral decency to commercialize technology, because the collaborative routes are so stupefyingly moribund, hide bound, political and suffocating of insight.
But that is how a vast auto industry has to play. Look up DGXIII, their multimedia initiative (whoopee! 1993 again!) and what is the first link on the left? “Regulation”.
Maybe if the aim was not to bureaucratize, we would not need a vast body of constrictive, rights infringing, law, to reign in the worst commercial offenders, who play the authorities who would be for the self appointed know nothings, jobsworths of their own impoverished imaginations, who they really are.
and, yes, i took a week and a half to calm down enough to make that reply 🙂
i think my point is, that we could do with a lot less legislation from the outset, and a honest assumption of personal risk. The correct signals are simply not sent by governments. But we could send the right message back, by not suckling at the nipple of their poisoned breasts.