A Spanish mystery

There is a conundrum that I have been struggling with in recent weeks. It is as follows: HRT is a Spanish Formula 1 team (in principle). It has finally decided to set up a base in Madrid, and is cobbling together a headquarters in the middle of tennis complex. Its cars are being built in Germany and it will take considerable time and money before a suitable facility will be ready in Madrid. It will take even longer to fill this with experienced F1 engineers. It is a big challenge.

In the meantime, 350km to the north of Madrid, close to the French border and much nearer to the centre of Europe than Madrid, there is a full scale F1 factory sitting unused – and a Spaniard who has vast experience in running F1 teams successfully.

Spain has an unusual political structure. It is a constitutional monarchy with government by an elected parliament, although this has devolved much of its power to regional governments that are responsible for social services, education, health, development, culture and in some cases even policing. This means that government spending is largely at regional level, although the so-called “autonomous communities” have no jurisdiction over the law, foreign policy, defence or monetary issues. They do, however, have the right to spend their money to aid economic development in their region. The Basque regional government under Juan José Ibarretxe was keen to increase the region’s independence from Spain, and invested heavily back in the early Noughties to create a stronger regional economy. This was made easier in 2008 when the central government agreed to let the Basque region control its own research and development and innovation budgets. Other regional development had been seen with the opening of the Guggenheim Museum in Bilbao, which was designed to increase regional tourism, and even with a motor race on the streets around the city, which proved to be very popular while it lasted.

The region was the pioneer is establishing Spanish technology parks, with the aim of combining international companies with universities and research and development facilities, and create high value jobs and new industries. It was into this environment that Catalan Joan Villadelprat strode some years ago, looking to turn his Epsilon Euskadi team into Spain’s first proper Formula 1 team, working with the local government and the Mondragon University to create a high profile centre of excellence. It was a good plan. Grants, subsidies and loans helped to pay for a state-of-the-art F1-standard factory in the Parque Tecnológico de Álava Miñano in Vitoria. The team built a Le Mans sports car and had plans for F1, but the political scene changed and things began to go wrong.

In the regional elections of 2009 Ibarretxe’s Partido Nacionalista Vasco (PNV) won the most seats in the Basque Parliament, but he was ousted by a wildly unlikely alliance between the conservative Partido Popular and the Socialist Party, who are arch-rivals at national level. They agreed to to work together to stop the region pushing for too much independence from Spain. Villadelprat’s revenues began to dry up, despite being involved in Basque projects such as the Hiriko city car. A year ago the new Basque government under socialist Patxi López decided not to put any further money into Epsilon Euskadi. With little income, a loss of €7.8 million over three years, and loans of €38.8 million, the organisation was in trouble. Villadelprat tried to negotiate a moratorium on loans and some additional government money, but they did not want to know. He tried to find backing from the Middle East but that too failed and the company was put into administration.

The Commercial Court in Vitoria is now sorting out the mess and has raised questions in recent days about the legality of Villadelprat selling the organisation racing team to Epic Racing Santander in April last year for €200,000 when the division was valued at €1.1 million. Epic was headed by Mark Payne, who was previously Epsilon Euskadi’s financial director.

While this is being unravelled the Epsilon factory is completely wasted. Formula 1 teams may need good staff and location is important, but they also need a place from which to work and the better the facility, the easier the job is, as long as there is money to pay people and suppliers. The Basque government is in no position to be greedy and ask too much money for what is otherwise a fairly worthless asset, which might – with the right funding – become something of great value for the region.

HRT’s policy to set up in Madrid makes no real sense, given that the Epsilon factory has everything that they need, and programmes that could be revived to train young Spanish engineers. The HRT management might be ultimately sensible and hand the management of the whole thing over to Villadelprat, who knows how to run successful racing teams and is Spanish (albeit a Catalan).

The only conclusion that one can draw from all this is that either HRT cannot afford it (which would be worrying) or a factory in the Basque country is not considered to be Spanish enough for the owners (which is bonkers). Yes, Spaniards have a right to be Catalan-Spaniards, Valencians, Basques, or whatever, but they are all supposed to be Spaniards.

Bankers are not generally unintelligent people, nor are they without contacts when it comes to raising money. Nor for that matter do they much care about things other than money-making.

So there is the mystery. What are these people doing?