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The small teams get tough

The small Formula 1 teams have written to Bernie Ecclestone asking him to reconsider his position regarding the distribution of prize money and bringing to light some interesting figures about what it costs to run an F1 team today. The letter, signed by Bob Fernley of Force India, was sent to Ecclestone, the other F1 teams, the FIA and to CVC Capital Partners, the owners of the Formula One group. It says that Lotus, Sauber and Force India F1 “clearly see the direction of Formula 1 towards customer cars/super GP2″ and says that “it is equally clear that the Strategy Group has no intention at all to reduce costs”.

In order to highlight the scale of the problem the letter says that they received money from FOM this year ranging from $52 million to $64 million.

“The costs of the power unit together with the installation costs amount on average amongst us three to $43 million. This clearly shows that 70-80 percent of the FOM income has to be allocated to the engine.”

The letter goes on to say that “unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 percent is by far not enough to construct, enter and run a team over a 20-race season. The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams”.

The teams say that they have been focussing on the reduction of the costs but noted that allegations that they are not running good businesses are unjustified as all three teams have recorded podium finishes in recent times.

The letter says that Red Bull and Ferrari are receiving in the region of $160 million each and says that the 2014 Prize Fund will be around $835 million but around $412 million is going to the four teams in the Strategy Group.

“The current skewed position is a direct result of the massive increase of costs and the lack of willingness to reduce the costs.”

The letter goes on to say that “we cannot accept the current distribution of funds in view of the massive increase of expenses. We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula 1 and apparently, the distribution of FOM funds.

“Whilst the FIA are involved in The Strategy Group, they are impotent to act, as demonstrated in the recent cost control process which saw the FIA issue a media statement confirming their intent to impose cost controls and their subsequent climb down when over ruled by the CRH, Red Bull, Ferrari, Mercedes, McLaren and Williams.”

The teams say that F1 remains “one of the strongest global sporting platforms. However, circumstances within and around Formula 1 have changed, and our collective inability to react is damaging the sport. Pursuing a direction towards third /customer cars is creating fears. Such a move, representing a misuse of power, will not only change the DNA of Formula 1 but also damage the value of our enterprises and lead to job losses. A two-tier system can only be considered a short-sighted vision. It is evident that the current developments are dramatically reducing the value of Formula 1 and massively undermining its reputation as a sport.”

The letter adds that “our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus. The issues we are facing are related to financial matters which can only be resolved by financial measures. In our common interest and for a sustainable future of the sport, we request you, together with the other stakeholders, to implement a more equitable distribution.”

The teams have requested a meeting with Ecclestone over the Abu Dhabi weekend.

Points systems…

Before the World Championship decider kicks off in Abu Dhabi, it is worth considering the question of double points which may or may not help decide who wins the title. The first thing that must be said is that there is no such thing as a perfect system. You can take any close season in the history of the sport and say this would have happened and that would have happened if the points system had been different. There is not much point in examining all of them, because they are all OK and they are all flawed. However, the goal of a points system should always be to reward the man (or woman) who wins most events. Titles that are won more with reliability than with speed are never popular. And thus this year we have the odd situation of Lewis Hamilton having won 10 races, having to fight for the title with Nico Rosberg, who has won five. It does not seem right. Rosberg is still in the game because he has been second 10 times, to Hamilton’s three. Nico goes to Abu Dhabi 17 points behind, which would normally mean that he would need to win and Hamilton would have to be sixth to win the title. If his car broke down, Hamilton would still lose if Rosberg was first or second. Double points means that Rosberg has more chance, although he has no chance at all if Hamilton leads from the front and wins. If Nico wins Lewis needs to be second to guarantee his second title. Fans have railed against the double points idea, but one must look at why this came to pass. Last year the World Championship was done and dusted in India, with three races still to go. TV viewing figures plunged. Once the title is done, who wants to watch? The key point, one has to remember, is that F1 survives (or not) as a commercial entity. It is still a sport, but money comes from TV and so it is in the interest of everybody that the World Championship finale is a high-rating, prime-time, humdinger, along the lines of the great Sao Paulo showdown of 2008. It doesn’t get better than that.

Runaway success is all well and good, but it means that numbers are down. And numbers matter.

Look around the world at different sports and see that many of them have changed fundamentally because of TV. Cricket is barely recognisable to how it used to be, rugby games take place at all kinds of hours and so on and so forth. In order to keep the excitement up to the end, lots of sports have adopted the concept of play-offs, which are either a single game, a series of games or a tournament, with various formats to knock teams out of the running, rather than using simple point scores.

It is a concept that dates back almost 100 years to the days when American football had different geographical divisions, the winners of which would get together to decide who was the best team of the year. That developed into the Superbowl in the 1960s. Baseball has its World Series, the NBA has its post-season games and so on. They even exist in football these days in England with play-offs to decide who is promoted into the Premier League.

The problem with play-offs is that they can be manipulated as was seen last year in NASCAR when all kinds of shenanigans went on in the final pre-play-off race as team-mates assisted one another to get through.

This year NASCAR decided to go for a completely new system, designed to favour those who won races. Well, that was the theory. It was anything but simple and involved 16 drivers being selected for “The Chase” after 26 races, based on races that they had won and then the points that they had scored. Once that was decided, there was a system in which four drivers were eliminated in each of three different phases of three races. Race winners automatically went through to the next phase, the other positions being decided by points. The result of all of this was very bizarre because the four drivers remaining in the hunt after the ninth (and penultimate) race in The Chase were Kevin Harvick (Stewart Haas Racing), Joey Logano (Penske Racing), Denny Hamlin (Joe Gibbs Racing) and Ryan Newman (Richard Childress Racing). Of these, the most successful was Logano, who had won five races in the course of the season. Harvick had won four, Hamlin just one and Newman none at all. Those who had been eliminated included Logano’s Penske team-mate Brad Keselowski, who ended the year with six wins, and Hendrick Motorsports team-mates Jimmie Johnson, Jeff Gordon and Dale Earnhardt Jr all of whom won four victories.

So was the system really about rewarding those who won races?

The finale yesterday in Florida ended up with the scoring system just about getting away with it. Harvick won and so added a fifth victory to his tally and so the title does not entirely ludicrous. However, Newman was just half a second behind Harvick at the finish and could so easily have become the champion with one win (or perhaps with no wins if the two had been beaten by Keselowski, who was just a second behind in third place). It could so easily have been Keselowski winning the race with Newman second, which would have given one seven victories and the other the title without a single race win. And that would have been an absurd travesty of justice.

The key point, however, is that the fans watched the race all the way to the flag and the TV viewing figures will reflect the success of the system.

F1 cannot live in a vacuum, pretending that viewing figures do not matter. Despite the best efforts of Bernie Ecclestone to market the sport to retirees only, the numbers and the demographics are important, although perhaps given Bernie’s strategy it would be best to keep the excitement to a minimum lest fans drop dead with the excitement of it all…

Bits and bobs

Caterham announced that Kamui Kobayashi will be driving one of the cars in Abu Dhabi, which means that the other can go to the highest bidder, or to Roberto Merhi, who says that he has a contract to replace one of the regular drivers if that is required. He may not be the only one with such a contract given the recent mayhem with the team. One other name that should be considered is that of Rubens Barrichello as he was very close to getting a deal to race in Brazil, if the team had attended that race. Whether his deals will still work in Abu Dhabi remain to be seen.

Elsewhere Carlos Sainz Jr will be testing for Red Bull alongside Daniel Ricciardo in the post-race test in Abu Dhabi. This is interesting, depending on any announcement this week, but it could mean that the Spaniard is still being considered either for the second Toro Rosso seat, or for the reserve driver role at Red Bull.

In the meantime, McLaren is clearing the decks in preparing for its new driver announcement with the news that the team’s long association with Gary Paffett is coming to an end. Paffett is a Mercedes drivers and with McLaren switching to Honda, the relationship no longer fitted. Paffett has been a test driver and reserve driver for McLaren for eight years and has spent hundreds of hoursin McLaren’s simulators.

Gary will continue his association with Mercedes-Benz in DTM.

The Romanian F1 Team

The defeat of Romanian Prime Minister, Victor Ponta, in the country’s presidential election over the weekend appears to be a major blow to the ambitions of the Forza Rossa F1 project, that was aiming to enter the sport in 2015. The project, which was supported by Ponta’s government, has been very quiet since the summer, largely because of the messy election campaign, where a government-funded racing team might have caused unnecessary controversy.
Before the elections began in September, however, there was speculation that the purchase of Caterham F1 by new investors might have been related to the Romanian team. Recent investigations indicate that there was a connection, but not as obvious as was being suggested. From what we understand from Romania, the plan was for the new team to race with cars built for it by an independent entity called CF1 Manufacturing, under the leadership of John Iley. The company would not have used the Caterham base at Leafield but rather a different facility, into which much of the Caterham machinery and staff would have been transferred. The team itself would have been a separate entity.

The cars would have presumably started out as Caterhams because changing chassis names is not easy, although some teams these days do not call the cars after the team but rather use initials to make it easier to transfer ownership of the team later on. The Red Bull cars and those of Toro Rosso are actually known as RBRs and STRs but they are cleverly publicised as being Red Bulls and Toro Rossos. Thus, while 1MRT might have become Romanian-owned (as this entity held the entry), operations would have been run by independent companies, run by the buyers of Caterham. This is why they embarked on the purchase, as there was a clear business plan behind the idea. The Romanian government would thus only have had to provide funding and sponsorship. This would have been a neat way to get hold of an entry, and a modern chassis without having to build all the necessary infrastructure and without having to pay a vast non-refundable deposit to the FIA in order to lodge an entry.

The takeover of Caterham by the Administrators and the seizure of equipment was controversial some equipment and staff belonged to CSL and some to 1MRT. This explains why when bailiffs seized some equipment they were not allowed to auction it.
The fact that the man who was going to be supporting the idea has now lost the election suggests that the project will probably disappear.

However there is clearly scope for legal actions between the buyers and the previous owners and these might perhaps also involve the administrators, as there are questions not only over the sale terms, but also over who owned what assets, including the 2015 car design.

The Romanian project was being led by former health minister Ion Bazac, who is also the country’s Ferrari importer under the Forza Rossa banner, although the engines would have been supplied by Renault.

Ponta will stay on as prime minister for the moment, but the new President Klaus Iohannis will then appoint his own choice, which must be accepted by Parliament.

Caterham drivers

This year Caterham has used drivers Kamui Kobayashi, Marcus Ericsson and Andre Lotterer in races. An F1 team is allowed a total of four race drivers in a season. Marcus Ericsson has already terminated his contract and one supposes that Kamui Kobayashi is not keen to drive again, which would explain why the team has been in contact with Lotterer – because it needs a driver for the second car, assuming the first had been sold to the highest bidder…

Here is a message I have received. I have edited out a small section that I consider to be libellous. However, I think that the rest of the information should be made public.

“I am a former (as of yesterday) employee with Caterham F1.

“It is dismaying to see the amount of publicity surrounding the success of the crowdfunding on the same day that there entire workforce was made redundant while owed seven weeks salary. The cynic in me would suggest that the two are not unrelated and the good news has served as a convenient opportunity to bury the bad news. If this is the case then it seems to have worked as there hasn’t been a peep anywhere (unlike Marussia the week before who owed their employees “only” one week of salary).

“The employees have been made redundant from 1MRT (a company still owned by Mr Fernandes). This should be more widely known and Mr Fernandes should be encouraged to do the honourable thing and fund the owed salaries instead of hiding behind 1MRT’s orchestrated lack of funds.

“The present situation is the inevitable (and foreseeable) consequence of the manner in which Mr Fernandes sold Caterham F1. It isn’t good enough to claim that there were no other buyers. In that event the proper thing to do would have been to wind up the company gracefully while ensuring that employees and suppliers were fairly dealt with. Undeniably this would have been the more expensive course of action for Mr Fernandes.

“It is not right that Mr Fernandes should be allowed to profit from evading his responsibilities and suffer no adverse publicity.”

I should add that I am hearing that there are legal actions being prepared elsewhere for massive damages against the former owners of the team and, I have even heard the suggestion that the Administrator may also be the subject of law suits.

A sorry mess.

Unadulterated tosh!

The stories that have been widely reported about Carlos Sainz Jr joining McLaren are unadulterated tosh. The Red Bull-funded Spaniard is not in the running for a drive with McLaren, even if he decided to break his Red Bull contract. McLaren may have some Spanish sponsors in 2015 but that does not mean that they will be able to dictate an all-Spanish driver line-up, as Fernando Alonso is very clearly on the verge of being announced as a McLaren driver. This rubbish has been given wings by the usual sourceless bottom-feeders who need little introduction.

In the interim, the real news is that McLaren has been at Silverstone doing “a filming day” with Oliver Turvey at the wheel of a McLaren-Honda. Apparently the filming opportunities have been rather limited but the car has run rather more than some of the F1 teams did when they had new engines to play with last winter.

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