The last few weeks have seen several long-running F1-related sagas slipping out of the spotlight, but that does not mean that the problems have gone away. The first is the question of whether Formula 1 should go to Bahrain; the second is about the funding of Force India. I should say straight away that Force India is not the only F1 team to have question marks about its money supply. Teams will always sound confident if you ask them about cash, but a handful of the current crop need/could use more than they currently have. This is why cost-cutting remains a priority, as burning money – in what amounts to an arms race of irrelevant technology – is really not the intelligent answer in the current economic climate. However, as this is a question of business, rather than sport, and there are some teams who can afford whatever is needed, the teams cannot agree on how to set sensible budget caps.
The situation at Force India is worrying in that it is a team with no visible means of support. It has been funded by Vijay Mallya’s various companies for the last few years, and has made significant losses, which have meant that he has been forced to seek assistance from elsewhere. Officially Subrata Roy Sahara is supposed to be bringing $100 million to the team in the next three years, in exchange for a percentage of the shares, but whether this is real money or virtual money (which is what Mallya seems to trade with) remains to be seen. Sahara and/or Mallya need money to pay bills in order for the team to have the freedom to do the job. This they have done very well in recent times, but the worry is that Mallya’s credit seems to have run out in his other businesses and no-one really understands what it is that Sahara does that earns him the kind of money that he seems willing to invest in Mallya’s businesses, despite them being anything but solid.
Late last year, the Toronto-based research group Veritas questioned Mallya’s accounting practices with Kingfisher Airlines, the way in which Mallya does business, the support he seems to be getting from the Indian government and concluded that “we do not believe that Kingfisher’s antics would have found any takers in a responsible credit market and that the airline would have been liquidated by now.” That may sound harsh, but one can see how that conclusion has been reached. It is impossible to say exactly how much money Kingfisher owes but there are secured loans of around $2.5 billion and perhaps the same kind of figure in unsecured loans, debts and tax arrears.
India’s Directorate General of Civil Aviation (DGCA) has warned Kingfisher that “a reasonable case exists for withdrawal of their airline operator permit (licence) as their financial stress is likely to impinge on safety”and issued a stern warning to the airline to take immediate action to resolve the lapses. The airline has been in trouble paying salaries, plane leases, fuel bills, interest on its debts, not to mention taxes and has been scaling back its operations rapidly, while the government (keen to avoid the embarrassment of a collapse) has been quietly helping out, changing the law to allow foreign carriers to buy up to 49 percent of the shares of its domestic operators. India is one of the world’s fastest growing markets in terms of passenger traffic, but the airlines lose money with every passenger. It is hoped that a large international company such as British Airways might use the opportunity (and its expertise) to get control of the business and then turn it around. This is all well and good, but is not going to mean money going into the F1 team. That will save Mallya’s face but is unlikely to feed his F1 habit.
I have touched on the question of Bahrain a few times and the signs are that this will once again become an issue for the F1 world as the opposition (no matter how small it may be) will be trying to use the planned Grand Prix in April as an opportunity to draw international attention to its complaints. The Bahrain government is working hard on its international PR and seems to be trying to win over hearts and minds amongst moderate Bahrainis with reforms, but what it cannot do is change what has happened in the past. The opposition is working hard to stir up trouble and the government has no choice but to react and this leads to renewed claims of government violence. The race is an obvious target for such activities, and was used for this purpose long before the current problems really began. It is naive to suggest that going ahead with the race will be possible without such a reaction. At the same time one can see the problem that the authorities have got themselves into. This week there are major problems being reported with the national airline Gulf Air, which has been hit by falling passenger numbers. It is scaling down its operations and hoping for government money to keep it afloat. One can feel a little sorry for the moderates in the government as they are trapped because of the radical actions taken last year. It may be that Bahrain cannot get rid of its extremists until there is a regime change, but even then there are no guarantees that the extremists will stop. They do not seem to be very interested in coming to the table to negotiate, despite claiming that all they want is peace. Be that as it may, this should not be Formula 1’s problem. F1 is a powerful marketing tool and a formidable money-making business, but it is only a game and the FIA has rules that should remove the sport from such troubles. The FIA Statutes state that the federation “shall refrain from manifesting racial, political or religious discrimination in the course of its activities and from taking any action in this respect”.
I do not want to see the Bahrain GP disappear from the F1 calendar, but at the same time the country is what it is and it must deal with its problems, and F1 should not be getting involved in trying to be part of a programme of national salvation. One can argue that there are abuses everywhere in the world and F1 still goes to these places, which is true, but it is not the point. In Bahrain the F1 race has been politicised, in most other places it has not. And where it is a political issue (such as in Melbourne) there are parliamentary debates rather than tear gas grenades versus Molotov cocktails.
The global economy remains troubled and increasingly that is filtering through F1’s buffer zones and beginning to have an effect on the sport’s money supply. Now, more than ever, the teams should be united and working towards a common goal, rather than quibbling over whether the team with the red hats should have more power than the guys in the grey hats.
joeblogsf1 
There is another big question out there about F1…. Bernie & his alleged bribes?
As for the Bahrain, I hope it does go. I don’t like the track, it wasn’t popular as an event to go to for locals, and I’m yet to hear people say, ‘I don’t know which GP I should go to, i was thinking of Abu Dhabi, but I might go to Bahrain instead’.
I frequent several forums and speak to others in actual life and I’ve heard of people and spoken to people wanting to go to other GP’s, not only their countries but other locals GP’s, e.g. Aussies (where I am) wanting to check out Singapore or Malaysia.
I’m yet to hear however of anyone wanting to go to Bahrain. Abu Dhabi yes, Bahrain no.
I don’t care for Bahrain.
What glitter? Dissapointing, I thought this article was going to tackle the real issues. F1 promised Bahrain its GP, so it should just go. Will they cancel the race in Australia if there were local riots and uprisings? I doubt it. Bahrain is and stays a political ally and friend of the VS and the west. So, there’s no real gamebreaker here if F1 decides to go there.
About Mallya? I couldn’t care less where he get’s his money from or where he decided to get’s the sponsor-credits.
“shall refrain from manifesting racial, political or religious discrimination in the course of its activities and from taking any action in this respect”. > This is code talk for: ‘We’ll do anything that suits our and ‘the’ agenda’.
Jess,
well on the theory all money is as good, I forget who, but a Fed Reserve director once commented that forged notes were just fine, once they had passed through one worker’s hands. That was in the big petro-dollar printing press push. So, not much different today. But, and this is a big but, having marginal characters in F1 who are up their own rear is damaging to careers. Even for that, I wouldn’t mind so much, if there was a free flow of teams coming and going, so reputations can be salved, even for outliers. How did the current big names get in? Not the case, though, is it. Take Tonio Liuzzi. I’m not actually smitten by him particularly, but how hard is it to be a fan, when the guy is passed about like he smells, when actually who passes him about coated him with that stink? Even following him with interest is a exercise in disappointment and distraction nothing to do with him. He’s not going to freelance it and try to PQ the next weekend. No such luck for him. The whole thing is denigrating to anyone who wants to see drivers get going.
I can’t get any hints as to what is up in Bahrain. Attention really is elsewhere for all sorts of reasons. If I did get any hints, my friend who goes there regularly would not necessarily be talking with the opposition, he really goes to play chess and hang out more than for work. Clever, though, having Damon speak up. We’re all inclined to give him benefit of doubt.
Oops, I just got the finger and “go read the internet”, possibly for my above comment! Oh, well, normal, then. Obviously people clam up when there is a case ongoing. So, I’ll spill a tiny bit of context: I coached someone through doing a deal with what was then Bayerische Landesbank, which though small was a bit of Hail Mary. I got a very good sense of their directors, second hand. Because it was me furnishing the questions. Grib was Golden Boy, which always goes hand in hand with resentment, compounded by just what Bernie calls out [sic] “loving the F1 lifestyle”. I’ve never met anyone like my friend so good at getting people to talk, nor so awful at working out why they talk. Maybe even The Mole would not tame this one 🙂
Incidentally, the stall seems to be about disclosure and hammering out translations. Also Bernie is accused of stalling. That would fit with how wide I understand disclosure is being requested. The prosecution had the gall to accuse the defense of preventing a fair and swift trial, presumably to end run the inevitable ECHR appeal. Michaela Welnhofer seems to be in charge, but little known about her. I hope Grib at least gets a decent cuppa whilst banged up. If not already clear, instinctively I think he is being hung out to dry. Even if he is convicted, it will be very interesting to read the full decisions.
The Grib case appears to be timed out until April after Easter break.
You’re comparing the Arab spring to a non-existent riot in Melbourne? Pull your head in!
Believe you me, APASPASPAPAS, regarding Grib, it’s clear as mud out there. There’s a freaking Omerta going on. Now some of this I put down to how the German legal system cranks along. But after a lot, okay I am being nice, but with theatrical menace, of twisting arms, I hear color now how everyone dumped Grib, who thought him pretty cool beforehand. That’s one jump to who Grib worked with. And I only heard the color after a quite big and unasked favor was accidentally traded. And what I did hear, from someone who stands to suffer nothing if the whole thing goes to Hades, was through clenched teeth, and I am very sensitized to their moods. I’m not going to take one for the boys, when I’d rather call out plain lack of judicial transparency, and that wouldn’t work anyhow. But consider this: if you cannot be hurt by something, why the clenched teeth? I sense no other reason than there is a very heavy atmosphere going on. Something big, maybe something enough for scorched earth. But in reality again, the more I look how they go about things, including recently looking at the Sutil affair, the less I like the general legal habits over there. The pressured on Grib must be immense, even if the whole thing ends up just an embarrassment.
Red hats versus grey hats, the pusuit of power and paddock politics.
All life in microcosm that is Formula One. Shakepeare would love it!
“However, as this is a question of business, rather than sport, and there are some teams who can afford whatever is needed, the teams cannot agree on how to set sensible budget caps.”
Given that many things in F1 seem to be resolved by arbitrary decree, could not Bernie or Todt or Charlie (in some combination) institute limits by fiat? Is there not some intentionally ill-defined clause which authorizes decisions “for the good of the sport” which might permit them to do pretty much anything they feel like doing?
Am not suggesting they would, am only asking if they could.
If they cannot, what is the line between what can be decreed and what cannot?
You mean like Max’s Budget Cap?
Hand waving this, because can’t put my finger on the memory, but I am pretty sure some expensive alloys have been banned on technical grounds, to effect cost reduction.
I’m willing to bet that if you sent in some hardened auditors with say defense project experience, you could force costs out left and right, dint of form filling. Or you might rule that some exotics go through separate scrutineering channels, make the lead time impractical. Or make a rule stipulating the percentage of COTS components. What really hobbles cash strapped teams is the knock on with lead times that impecunity effects, all the time the front iterate and iterate with if not in house then closely knit suppliers.
One of the side effects of parts longevity rules has been to iron out so many distractions with say engines, that teams who had the budget to run specials and throw them as scrap after a run, just moved that effort elsewhere. Maybe there is a way to quota who works on what by a accreditation program.
I’m emotionally against red tape, but Dennis proved that knowing where your cheese is works in F1 too. Get really good auditors, and I bet it would even have a positive effect on straggler teams, because they would be asked real questions how their processes are laid out. There must be a spectator stand full of retired guys with the experience who would love to get involved and deploy expertise. Hire absolutely no-one my age or heaven forfend, younger, who might try to play career building games. Oh, and you could have a wicked fun press conference if you allowed commentary on best and worst findings!
“burning money – in what amounts to an arms race of irrelevant technology – is really not the intelligent answer in the current economic climate”.
How true Joe, how true.
Only development of ugly and wackyraceresque aero designs… I really hope the new engine regulation and more Kers can be a field for real differentiation and technological competition.
At the end we might need to agree (partially) with Signore Montezemolo on his constant complaints on how irreleveant F1 is becoming as an R&D investment for his road car division.
gond,
Luca di’ must be channeling his inner tax accountant! No-one would give a toss if it were not that big outfits can do crazy things to amortization numbers. Get rid of that little bean counting peccadillo, and some of the grandee advantage evaporates. I’ve just been perusing – very casually – how such treatments affect oil deal prices, to engage my buddy in hopefully useful chat for him. I don’t have hard facts or data pertinent to F1, but I have a strong feeling that this aspect would be a informative part of necessary root and branch reorg for the sport.
Joe, I enjoy your blog, and the comments it receives. How do companies justify opening an F1 team?
Red Bull for example make soft drinks. The technology does not bleed into their drinks. Lotus sell about a car a day. What impact has F1 had on their sales?
The costs appear to be high. The rewards from a technology and sales perspective appear to be questionable.
Toyota and Honda have withdrawn. Renault are now ‘only’ technical partners.
Caterham and Lotus are newcomers.
Large car manufacturers seem to find the risk outweighs the reward. Ferrar and Mercedes being obvious exceptions.
No, the rewards easily outweigh the risks if the company is big enough to afford it.
One screaming exception to the rule, Joe, might be Beatrice Foods. Compare with how Parmalat did so well, a natural competitor. In a little twist, a certain Jeff Beck was at the root of the deals that created Beatrice in the form it was then in, about the time they did F1, and was also madly truly deeply against the way they blunderbussed their marketing spend. Therefore he was (you can say this for everything he set up) sidelined, whilst the company spanked the cash and so were snapped up cheap by who else worked that deal . . They needed someone who understood F1 too, but money simply wasn’t the problem. Being careful with that assertion, they had money, and were squandering it randomly, hence their brief and rather unsteady dalliance with Haas – Lola. I think they were a head-case at the time. Pity.
John,
whilst there are all sorts of agencies who calculate equivalent values for airtime advertising for sponsors, the hard bit to calculate (we’re into funny numbers from the start and all the way on this subject) is what the company themselves can make out of it.
Red Bull had years of perfecting their promotions and sports / extreme risking of necks associations, so they make it work for them. That’s a bit harder if you sell dairy, but not impossible. I don’t mean copping out and simply taking your board room mates to the paddock club either. I would argue that companies who moan about value for money in F1 are either there for the wrong reasons, or aren’t doing it right. A decent budget for a F1 team really is not a lot against larger marketing budgets.
My suspicion of nearly all big co. directors is they tend towards expecting it on a silver platter, and my experience is extensive struggling to get attention for new things in a way that engages. The worst deals seem to me to be when you get a spark of interest (marketing and ad people do seem to be butterflies, and I’m no exception in default mode) and then when you explain *how* it really works, you get asked the price, and cut short “meh, oh, not bad, alright then, do it” and they somehow become run away dads.
Thanks John (and Joe). With some of the larger Car Manufacturers leaving, I thought the question relevant.
I’m not a marketing person. Appreciate the time.
F1 is exactly the kind of marketing that Red Bull wants. High speed, risky and exciting. They are synonymous with extreme sports which propels their huge sales. Red Bull are not risking much getting into F1. Don’t forget they started up a 2 car NASCAR team, which has now folded (due to lack of results and not having marketable drivers). If Red Bull were still a mid to lower mid-level team in F1, I suspect they may have pulled out of F1 as well.
well they persist with Torro Rosso season after season – maybe Nascar viewer is not target maket?
Can’t help thinking that in spite of appearances, globalisation will not be all that good for Mallya, or for India. Or for F1. But that’s the world we’re in.
Mallya probably isn’t the only businessman whose affairs seem to involve a great deal of ‘hot air’.
Sorry to digress, but whenever Mallya comes up I can’t help remembering the high point of the Force India team, Spa 2009, when the BBC coverage treated Fisi as the winner. The real winner of course was Raikkonen who drove a brilliant race to keep the much faster car behind him. Some, including Fisi, declared that it was easy for Kimi cos he had the Kers button. This particular hot air balloon burst when Fisi himself tried to drive the Ferrari soon after!
Not sure it burst, many drivers have struggled when switching cars mid-season. But 2009s disparate use of KERS did allow drivers an easy defence – who cares if your cornering speeds are low due to lack of grip? You can just accelerate out of the corner fast enough to stay ahead.
Don’t get me wrong, Kimi pulled off a great win in a dog of a car in 2009, but without KERS he wouldn’t have managed it. Having said that, if Ferrari hadn’t bothered with KERS, the 2009 car might not have been such a lump…
Hi Joe,
FYI, Mallya’s core business is in the alcoholic beverages industry — he has an almost monolopolistic share of the Indian market. Kingfisher Airlines is small change for Mallya, and one of the main purposes it serves is as a surrogate to market Kingfisher beer (in a country where alcohol advertising is banned). I agree that the airline is on shaky ground — but I doubt it would even so much as dent his wallet if the airline goes down. Force India is just an expensive hobby for this flamboyant 60 something playboy . . .
Have a look at the results of the great empire. Margins are very low on beer. It turns over a lot, but it does not make that big profits. Certainly not enought o pay airline-style debts.
Joe – long time lurker but thought I shall let you know some things about the margin on beer that VJ makes. Back in 98 a couple of my friends did internship as part of obtaining their Engg degree at VJs beer factory near Bangalore. I was told that the cost of beer itself was around 6 Rs and that the bottle itself costed the company 3.5 Rs and other ancillary stuff 1.3 Rs. All in all it was estimated that the cost to make 1 bottle of beer was around the 10-12 rupees. VJ sold his beer at that time for 45 rupees. The tax on liquor is surely high in India, but it is safe to assume that VJ made some healthy profits.
These were the profits in 98 and the beer now sells for around 70 Rs, surely the costs have gone up but I would assume the profits are still there. VJs beer is very very popular in India
So Mallya sells for about 4 times his manufactoring cost?
Maybe you should consider the price of a cola at mcDonalds to see that it’s not that much: their cola costs 3 cents, including the cup! And those refills are only in USA. In Europe you pay I think at least one euro. So that’s about 30 times!
I’m afraid Joe’s right. An airline guzzles up money while you’re still earning nothing!
grabbed at random:
“Governments have supported airlines as if they were local football teams. But there are just too many of them. This is the only industry I know that has lost money consistently and makes money infrequently.”
— Richard Hannah, airline analyst with UBS in London, Fortune magazine, February 1996
. . .
“I think historically, the airline business has not been run as a real business. That is, a business designed to achieve a return on capital that is then passed on to shareholders. It has historically been run as an extremely elaborate version of a model railroad, that is, one in which you try to make enough money to buy more equipment.”
— Michael Levine, Executive VP Northwest Airlines, 1996
. . .
Those may be old, but there are still few exceptions.
verstappen is bang on about the booze trade. Much of retail gets 60 to 80% markup just to flog you your aftershave or whatever, basically handling the object – and what Amazon digs into successfully – but in mass manufacturing you want 1000s of points. Much of this is because setting up factories on spec is extremely risky. My late business partner liked to quip in grumpy moments he only talked to me because he sniffed at a local license to manufacture the Frisbee, just before it got big. It would have been insane returns, but sunk him for good if it went south.
Just reconfirming from my friends on the cost of producing a bottle of beer. The actual cost apparently was 1-1.2 rupess (sorry my bad to have mistaken cents for dollar). But I was told that the govt taxes on it is as high as 60-80% and that 45 rupees is the selling price from retailers.
Not sure whether it adds any value to the actual discussions by Joe above.
Joe, Is there a reason you don’t fact check your posts?
1. In reference to Sahara – “……and no-one really understands what it is that Sahara does that earns him the kind of money that he seems willing to invest in Mallya’s businesses, despite them being anything but solid.If you ”
If you really do want to know what sahara does, their website will give you all that information (www.sahara.in) Furthermore, it also gives you a view of their financial position and hence perhaps will help you better answer address your readers.
2. In reference to Kingfisher Airlines – “It is impossible to say exactly how much money Kingfisher owes but there are secured loans of around $2.5 billion and perhaps the same kind of figure in unsecured loans, debts and tax arrears.”
Its not impossible to say Joe? Its a public listed company regulated by the Securities and Exchange Board of India and hence it is mandatory to provide financial statements to the market regarding the financial welfare of the company. Secondly, i am not sure where you get your numbers from but you are insinuating that Kingfisher Airlines has a debt of close to $5 billion in secured and unsecured creditors? That is so far from reality its mind boggling that you would publish such numbers.
If you would like to know the real numbers once again, its all available on their website. (http://www.flykingfisher.com/investor-relations/information-packs/financial-information.aspx)
If you review the investor presentation from October 2011, it shows a debt as of March 2011 at INR 6347.76 Crores, which at todays exchange rate would equate to $1.281 Billion dollars. Granted these numbers are dated and the debt numbers may have increased since then but even if you take that into consideration do you feel its plausible that Kingfisher Airlines is carrying a debt load of $5 Billion??? Also if one really wanted to know the current debt position, those numbers are out there and i am sure one could get them but i feel i have illustrated my point sufficiently.
Joe, i don’t quite understand your brand of journalism, on the one hand you provide some very insightful, detailed views on the world of F1 that other journalists don’t and it certainly makes interesting read wether i agree with it or not. On the other hand on a number of occasions your facts simply don’t stack up? I think you are doing a disservice to your average reader if you aren’t diligent with your facts and hence creating a false impression of situations based on parroting other less credible sources.
Just because you cannot what are facts and what are not facts does not mean that I cannot do it. You can read what you like, but I do my best to make sure that my stories are factual and insghtful. OK, sometimes people do not like the conclusions, but I don’t care. These are my opinions. This is my blog.
You certainly are entitled to your opinion and can write whatever you want because it is your blog. I am not questioning your opinion, i am questioning your facts. If you are trying to tell me i don’t know how to decipher between what is fact or reality when it comes to reading a financial statement then i am sorry to say you are completely mistaken. Thats what i do for a living and hence am certainly competent to do so. Perhaps you are, i can’t say but you would do yourself a favor by reading the Annual reports. Are you trying to claim that Kingfisher Airlines financial statements are fraudulent and hence you have better insight than the government and market regulators that lead you to believe they have $5 Billion in debt?
If you actually cared to look at the information i have sent you can check for yourself if the numbers you have quoted are right rather than getting all defensive.
you know why hardly anyone reads accountant blogs?
No point. It’s All made up 🙂
I am not an accountant but it would appear that kingfishers bank debt restructuring, off axis government investment and UB prop indicate figures far closer to Joes figures than those of the limited (and unaudited) kingfisher prospectus from October.
The Times of India produces a more accurate account and even here the structure is murky.
I dont always agree with all of joes opinions – but this is his blog and he has likely forgotten more people in F1 than the rest of us have ever even encountered.
You’re entitled to your own opinions but not your own facts.
Either way FI are busy spending money at the factory so it seems life isn’t quite as bad as some would paint. Plus the proposed expansion plans are impressive so money is coming from somewhere
If the guys with the red hats started thinking a little beyond their own nose maybe they could be more united.
As about FI. No problem, even if the money are virtual that gives them the position to take control if the other fails.
I guess the announcement of Jules Bianchi as reserve will help Force India’s bank balance?
Well put the f1 brand should not be used as a political tool in bahrain and eccles should think about the credibility of the sport not money. Its a shame that some of the teams are feeling the pinch but then they were warned, and its the same for us all. Well done joe keep up the good work, your most apprieciated in the powell household……
love Eccles – hope it sticks duuuuuurrrr – or however Peter Sellers said it
Sorry, but can’t resist: Eccles was played by Spike Milligan (except for one episode, so Wikipedia tells me)…
you’re right – sorry – I am old but obviously not old enough – not a dig by the way
Neither am I, being a child of the mid-sixties! However in the mid-70s I found a copy of More Goon Show Scripts going cheap, and I and some schoolfriends took great delight in performing them during school lunchtimes. I’ve still heard hardly any of the real thing; however this discussion has prompted me to investigate getting hold of copies…
Apologies, if needed, to Joe for the derailment.
Hey Ambient,
you seen The Naked Truth a.k.a. Your Past Is Showing?
You now have your link, but Dennis Price is tops.
best from me – j
Having checked out the Wikipedia synopsis, I may have seen it as a child, as some of the scenes described do ring a bell. Perhaps I should check it out again? Thanks.
Ambient, it’s a screamer. I don’t even want to lift a quote and spoil anything. But Sellers is borderline too hammy / terrible, and comes across as a one man Goon show. Which is all right too. I don’t think you’ll be disappointed. Also anyone who ever has plowed the furrows of the magazine trade really ought to view, says me spilling my little secrets 🙂
Hi Joe,
Do you think Tony Fernandez might be doing business with Mallya. The both own Airlines, and Air Asia seems to be doing a better business at the moment. I don’t know what such a deal would look like.
Not really an F1 issue but on the assumption that Tony Fernandes can run an airline profitably maybe he could help out somehow. The future of one of the major Indian airlines has surely got be more important than its impact on Bernies F1 show?
And Joe, if your response to a post you don’t like is going to be “OK, sometimes people do not like the conclusions, but I don’t care. These are my opinions. This is my blog.”
Then why bother having a comments section? Why bother interacting with your readers? Are you not capable of an intelligent debate? Is that the best response you can come up with? Throw your toys out of the pram?
No te best response would be to say no mpre commenting, but the last time I did that, the silent majority spoke and told me to ignore the trolls. I try to be patient, but soemtimes people write such unpleasant things.
So K, what exactly is your role within Kingfisher? 🙂
Okay, Ender, I have a theory:
my mom when she was little, her family owned pubs, and her first job was to go get the bottles (the off sale) back, because they were used as a kind of banking, cash the deposit in later, the wives held on to something from their husbands wastefulness. She had to scrape off the wax, and got through the door because they were brewery property. She was about knee high at the time.
See where I am going?
My pop once bailed out a quite big brewer, not long after the war. Two, I think, including a better known cider maker. He got the recipes for kicks, boy that smelled good. In modern days he’d have been a LBO artist, or a PE tosser. Funny thing is he was a devoted commie. Didn’t like people going without jobs.
Nah, unfair, take the mickey out of me instead, but race you for it!
yours, – j
Thanks Joe.
BCE is Mallya’s F1 financial lifeline,if he wants to be…he’ll advance money just like he did to FW.
Why would he want to?
’cause he’s committed the sport to being in India (with the expectation Indian commercial interests join the circus,sooner or later) and SFI has a real team infrastructure in place. He’d keep them afloat until he/they find a buyer, just like he did with Stoddart/Minardi/Mateschitz.
can i also suggest you can do amazing things with even a modest debt instrument. Like Mike Milken once pointed out, from my fuzzy memory, “miss one payment and i take the company away”. I must bother to read the Mauritius companies act, if there’s much difference, only there’s this lovely looking French territory nearby called Reunion which just looks much nicer for what might be my first ever holiday. . .
“This is why cost-cutting remains a priority, as burning money – in what amounts to an arms race of irrelevant technology – is really not the intelligent answer in the current economic climate. However, as this is a question of business, rather than sport, and there are some teams who can afford whatever is needed, the teams cannot agree on how to set sensible budget caps.”
This has been a concern for a long time. The voting power of the constructors in the F1 commission has lead F1 into a situation where their core competency of aerodynamics is the almost exclusive source of competitiveness. The aerodynamic configuration is irrelevant to the real world and it has to be changed in relatively short intervals to avoid stagnation. Every time they do that another billion of dollars is wasted to provide the leading teams with new opportunity for their superior research resources.
The failure to agree to cost caps or resource restrictions that include the drive train will almost certainly lead to a new cost race – or even worse – the continuation of the V8 engine freeze and abolishing the turbo engines planned for 2014.
F1 cannot really afford any of those two alternatives. If the engine plan blows up it gets into the real danger of loosing the last two automotive players instead of attracting new brands as it should. It cannot be over emphasized that F1 is on the brink of committing suicide unless the big four teams work out a way to limit cost and that would obviously need to include a solution to limit spending on both aero research and engines.
I am in agreement. F1 needs to limit cost. However, I don’t see that happening unless there is some form of Budget Cap. I realize there a practicalities to consider in this.Perhaps, F1 needs to tip into a serious recession.
Steve,
I hope I am not a lone voice in hinting at the correlation between recession and innovation. Certainly there was a lot of it going on in the 70s in F1. Never knowing what sort of beast I would be looking at (or how it would sound, this “sound” argument now abducted from it’s happily varied origins) captured this boy’s heart. (is there still a scale model business, or is it only for semi grown-ups my age who feel the pang?) But I wonder how much could happen without a relaxation of the rules.
On one side of the debate you have the safety and testing, which work far better within a tight envelope, and the other no way for a scrappy team to steal a lead. I still believe man hours of attention are more critical than compute hours of simulation, in terms of scarcity of resources. As hinted at above, I’d like the FIA to bulk up on these skillsets, because it could be used to open possibilities, not red tape everything. Then again, I’ve had my nose firmly stuck in Ben R Rich’s book Skunk Works, for a review, at every opportunity lately.
Werner,
I believe thawing the engines would re-balance the aero team advantage. I very much agree with your thinking, but am woeful at the idea that the big four can sort anything out. You need Newey class people on the other side of this argument. This is something Max could have done, but Todt likely will not even contemplate. I often think Max was constrained in many ambitions by Bernie, or political sensitivity to the connexion as perceived by others.
If money can go back to engine development, well engines get sold more widely that aero designs. You can’t even trade aero and chassis goodness, as it breaks the Constructor rule. But engines can be sold, even with works / privateer differences, which again can often be mitigated by smart people. The engine freeze does not I think benefit the wider field. Like eco lightbulbs, which fail after a fixed low number of cycles, diminish to a fraction of output half way, are measured only for impractical for domestic 24/7 use, and make claims of output efficiency based on narrow and psychologically damaging spectra peaks, it’s a false flag sale.
. . .
The problem with rearranging money sharing, is that this has to be a first past the post game. How can a sport be any different? And how can dishing out equity do anything but lock in possibly forever under performing teams, which now included sadly Williams, and lock out the rest? Maybe on my third re-reading of Moneyball by Lewis, I might retrace the thoughts that provoked in me. That book already gave a good shake up to my trading views. I do mean to come back on that.
Well, you make me think as you often do. I think there are good points here, but maybe not only the one you intended.
> I hope I am not a lone voice in hinting at the correlation between recession
> and innovation. Certainly there was a lot of it going on in the 70s in F1.
How to best bolt a DFV to the rear?
Let’s see… they discovered wings… and when wings were rule-i-fied, then Colin thought hide his aero underneath the car… and, well, what else?
Seems to me it was the early “discovery phase” of aero that fueled much of what innovation there was. So, what might the next decade be the “discovery phase” about? Beats me. Making batteries sound right?
Perhaps the main 70’s freedom was that a team could make whatever decision it wanted re: buying, renting, or making their own. One could mix and match in whatever way one wanted. If that were true today, I bet the distance from the back to the front need not require either decades of slow progress or hiring Mr. Newey.
What if every team who made anything could/would sell to other teams? Personally, I’d like to see a RB with a McLaren or Mercedes bolted to the rear… with Tonio driving it. I expect it would make for better racing while also giving the cockpit talent more of a chance.
I agree with your idea that freeing up rules would untie creative hands. Just not sure that engine metallurgy is the place to do it. Seems to me that engine longevity rules combined with engine sharing gives new teams the best possible route to good powerplants. Don’t see why that approach should be limited to just the metal bits. Let them share the carbon fiber parts too, and lets see what happens then.
And in turn, as usual, you have me thinking, RShack!
I wish I knew much more about what went on to create the current restrictive constructor rule. It’s often my thought that practical men in backwaters leave no books behind. Well, try to find a book on how to trade ad slots 🙂
My ill formed idea, straight off the edge of your point about buying renting and build options, is that maybe aero ought to be a component to purchase. [swift edit / backtrack for next sentence] As you actually said, the carbon bits. Since this is a very unformed reaction, and thinking of the era, kit cars come to mind. Will it be long before additive materials printing can churn out a good safe wing? I remember banging on about this last year, that maybe the modern and future garagistes could yet be a bunch of college kids. I could be hailing my childhood fantasies, or maybe the idea could usher in a vibrant new scene. Clearly, making aero parts work, manner of Johnny Cash singing One Piece at a Time, would be pretty hard. But if the additive manufacture became feasible, iteration starts to be cheap. Because the idea suggests possibility of even small outfits reaping profit from sales, I think it would draw more people towards the sport. If you permit the imagination that additive manufacturing can actually work for production parts in F1, and there is definitely some going on already, you might then also be in a short turnaround game that attracts outside speculative capital and energy, yet not demanding vast commitments.
There would then have to be, I think, some kind of separate testing arrangement, maybe on a older chassis / mule. Or maybe even proper testing allowed, because the idea to sell a new component involved marketing it, which can involve releasing data, so the field might be kept level in some way like that. Independant data release of any kind would create feedback, and in turn positively pressure the grandee and wealthy teams. I bet the computer games people would snap up a license, too.
I wholeheartedly agree with your sentiment that trade in parts, components and designs ought to be freer. Although we do not see this happening now, as people realize just how little growth we have in the economy, I think closed shops will loose public favor. The trick is to work out how these technologies will pan out, and people do exist with the skills to make very good predictions as to time scales. Before F1 gets called out as stagnant, and this time around doesn’t maybe have a mass following of one or a few drivers to rely upon.
My thought is this, tangentially: if you can expect to see novel cars appearing frequently, and experience tangible differences without subscribing to Racecar Engineering or taking seance with Scarbs, actually rolling up to the race in person is just more attractive. Anything which allows any introduction of small outfits who might punch above their weight, even if we are not talking teams, will add to attraction too. I can’t get my girl interested in rules finessing, but if I can point out “yeah, those guys over there, they just nailed that against all the odds” there’s human interest. Unlikely underdog winning, even for reasons which go whoosh above your head, is a natural sell. It could elegantly blend with a bit of mystery too, which is essential for the highest of endeavors.
Just being pedantic, but I didn’t mean to overemphasize metallurgy. My pal’s nephew aced his masters in metallurgy, got snapped up by a bank. Could F1 afford him now? I doubt. Nor either is it a two way street, missing out on real engineering experience made that a plain choice. Which brings me to the other side of my concern: how can we get innovation more frequent with less human investment? I mean this from POV that although I am adamant it takes many years to learn any useful skill, what can be thought through so that there is a learning curve which pays off on the lower slopes?
Anyhow, plenty of speculative mumbling from me already, so I shall bid you good health and thank you as always for your thoughts. yours – j
Damn those “extremists”, insisting on an elected government, freedom of expression and protection from discrimination. Truly, the barbarians are at the gates …
About the Bahrain GP, I think it should be mentioned more often that the kingdom and several members of the royal family are so deeply implicated within the FIA, F1 and motorsports that it represents a bigger issue (for motorsports) than currently portrayed. It isn`t just about this year’s race.
If we assume an hypothetical scenario where the ‘extremists’ would get what they want, ie a new regime; it may well mean significant changes for the FIA and F1 as the Al-Khalifas probably wouldn`t be willing and/or able to inject a vast amount of money and influence into the sport while in exile from their country, or something.
I wish the motorsport press could go to town on the issue, and not just gloss over it. How implicated are the Bahrainis with our sport? and what would it mean to ‘lose’ them?
Hi Joe
A thoughtful and interesting article. However I think your Bahrain observations do not get the whole picture. I as a UK newspaper photographer (and F1 Fan 2nd!) and have experienced Bahrain during its heightened troubles last year, 1st hand. Granted, given the fact that Bahrain hosts America’s 5th Fleet and is across the water from Iran, I did not see the actions of of so called extremists protesting against the government a cause for the repercussions that followed. Doctors and nurses are still under the Government kosh for treating opposition victims, Saudi and UAE troups were brought in to sovereign territory to help out, and a lack of free press (the appalling propaganda newspaper sheets made me especially proud to be British) has compounded a terrible state of affairs. The Shia Muslim want equality, yet the Sunni based government are a little resistant given the across the water paranoia with Shia based Iran. Unemployment is apparently high for Bahrain Shia people yet near the F1 venue I saw 100’s of cheap labour camps (chinese, india, etc, cheap labour). Really not sure that F1 belongs here at the moment, big money or not.
I agree. F1 should not be there, but try telling that to Bernie and Jean Todt.
Joe my dear friend, the government here is not winning any hearts.. and the opposition is growing and getting radicalized by the day..
this is a video of yesterdays funeral (26th) tell me if it’s considered “small” and yes all of them are in fact screaming “down down hamad” in arabic.
You cannot argue with that.
The annual F1 grand prix in Melbourne is not a political issue, it’s a social justice issue. Both major parties, Labor and Liberal/National support the event being staged in a public park and there are no meaningful parliamentary debates. The policy of the protest group, Save Albert Park, is ‘relocate don’t desecrate’ There is a site for a permanent, modern F1 circuit ready and waiting at Avalon outside the city of Geelong, 75 km souith of Melbourne, but the major parties prefer the current situation where the park is trurned into a noisy,dusty work site for a quarter of every year and $50-60 million of public money is lost on staging the F! race on an outdated temporary circuit. Operating losses and circuit costs on the event since 1996 now total around $400million. Meanwhile the state government is cutting costs in essential services such as mental health.
It’s worked out rather interesting ever since VJM lied to you Joe. His little fiefdom is up to it’s eyeballs in debt and it doesn’t look like it’s going to get better anytime soon. His airline is just killing the entire UB Group. I don’t think anyone in their right mind would buy that toxic dump without some serious concessions from VJM and co.
Shouldn’t be a problem. K’s doing the financial side of the due diligence.
🙂
Priceless! 🙂
Hahahaha 🙂
Packapoo just won the internet
Joe, IF the 2012 Bahrain GP goes ahead, do you think you are going to have any problems getting a visa?
Over the last 12 months you have been pretty critical of their government.
No, I have simply told the story as I see it. I have long conversations about these things with people who are high up over there and they have been fine with what I have been writing. They may not always agree, but they have been very sensible about it.
Well if it does take place you have got to give me the pleasure of buying you a drink at least!