How does one explain the bizarre story that is floating around the Internet at the moment about the majority of the Formula 1 circuits getting together and rejecting Formula 1 racing and doing a deal instead with IndyCar?
You can say it is daft, or you could say that it comes from Ron Walker, who is one of Bernie Ecclestone’s closest allies. It is further tied to Mr E by the fact that it has been reported by his pet website, which he likes because he gets whatever he wants into the public domain, without any hint of analysis of hidden agendas. Mr E brushes the crumbs off his table and the journalist who sits below like a baby bird with his mouth open, swallows everything and then regurgitates it to the fans, with a metaphorical oompah band marching in front of the story.
So let us explain this latest article. It comes from Walker, the race promoter of the Australian Grand Prix in Melbourne, who happens to be Mr Ecclestone’s best buddy and often business partner in countless money-making schemes over the years. These guys are super-clever and spin great plots wherever they go. Walker, for example, seems to have been the man who invented the idea of a Grand Prix on Staten Island, New York, in order to convince Australian political Muppets that they needed to support the race in Albert Park lest a rival big bad city comes along and steals Melbourne’s prime event.
With the likes of Walker and Ecclestone if one hears a bang off to the left, one must look to the right to know what is really happening. They are magicians and manipulators of World Championship standard. What is quite amusing in this scenario is that the idea of organising the circuits into a political force – traditionally rather like trying to herd cats – is also the last thing that Ecclestone wants as there is a very real danger that one day a leader will come along who realises that the race promoters have the real power in the sport, as the owners of the venues are the real owners of the TV rights.
The aim of the IndyCar story appears to be to try to create yet another reason for the F1 engine regulations to be changed in 2014. The goal of this idea, as with the recent kerfuffle with the engine manufacturers, appears to be to create the impression that FIA President Jean Todt is weak and to have him replaced by someone else (read Max Mosley or someone who will be controlled by him). To understand why this is the case one has to go back to the 1970s when Ecclestone and Mosley were team owners and were battling for control of the commercial side of the sport with the FIA.
The main player against them was an eccentric Frenchman called Jean Marie Balestre. Despite their best efforts and undoubted intellect, Balestre managing to thwart their ambitions and the result was a peace treaty called the Concorde Agreement, which defined how the sport would be organised. After that battle was over Ecclestone and Mosley realised that if they wanted real power in the sport in the longterm they needed to control the FIA as well and so Mosley worked his way through the committees, pressed the right flesh and tickled the right egos and was duly elected FIA President. This enabled he and Ecclestone to conclude a deal to lease the commercial rights to Ecclestone for 100 years, at minimal cost to Bernie. After that Ecclestone cashed in his chips and became a billionaire, but retained control of the business by various complicated means. Unfortunately for the two men Mosley’s unusual extra-curricular activities appeared on the front page of the News of the World and demolished his stature as a global politician. He managed to win sufficient support to avoid immediate resignation, but it was clear that he could not stand for election again. The best man available for the job was Jean Todt, who Ecclestone and Mosley felt would be an ally. There has been some disappointment in that he has not been the ally they expected and has agendas of his own. The attitudes have been hardening of late and the impression one gets is that Todt is now the fly in the ointment, which is a problem because of the need to renegotiate the commercial arrangements of the sport in a new Concorde Agreement. Although the Formula One Teams Association (FOTA) is making a lot of noise, there are signs elsewhere that the chess pieces are being moved to make that organisation irrelevant and thus the only obstacle in Ecclestone’s way to getting what he wants is Todt, who (ironically) has the right to veto any change of ownership of the F1 commercial rights. This has put him into the firing line.
There are some who feel that the recent debacle over the Bahrain Grand Prix was just such a move. In that circumstance the FIA made the wrong decision to support putting the race back on the F1 calendar. Todt was then hung out to dry when Ecclestone did a rapid U-turn, having previously supported the idea strongly in the World Council meeting. In the end Mosley said sensible things and came out looking good. Todt came out looking weak. This was followed by an Ecclestone-driven move to get the engine rules for 2013 changed by whipping up opposition to the FIA from Ferrari and Mercedes. This bullet was dodged as Todt managed to get everyone to agree to the new idea and thus presented it to the world, with everyone (bar Ecclestone) singing harmoniously from the same song sheet. Using the circuits to stir up further trouble with the engine rules is a rather desperate move, but this is the only issue around at the moment to be exploited.
Students of F1 politics see the hand of Ecclestone in all of this and reckon that the goal is to get Todt out of his position and put Mosley back in. At the same time there are clearly moves afoot to get Flavio Briatore into Ferrari.
When it comes to negotiating the next Concorde Agreement, Ecclestone has a problem if FOTA remains strong and allied (albeit loosely) to the FIA. Mr E has long understood that there are only three elements that really matter in the defining Formula 1: the FIA, the Monaco Grand Prix and Ferrari. The FIA owns the right to use the name Formula One and the right to declare World Champions (which are both of vital importance). One could start a rival GP1 World Series but even if it had Monaco and Ferrari, it would not be as solid as World Championship. It would more likely be like the Intercontinental Rally Challenge when compared to the FIA World Rally Championship. The upshot, however, is that neither F1 nor GP1 would be successful as a split would inevitably result in a mess similar to that which destroyed IndyCar racing in the 1990s and 2000s.
The problem with FOTA is that it only has a real value if Ferrari is involved. Right now FOTA has Ferrari support. It was dreamed up by Ferrari boss Luca di Montezemolo to counter-balance the power of the FIA and the Formula One group. It was a great idea and seems to be doing at least some of the things that need to be done to ensure that the sport achieves the maximum that it can, rather than the maximum Ecclestone wants. The key question is what will happen when Montezemolo leaves, which is going to happen sooner or later, either when he goes into politics to be the next Italian Prime Minister or is pushed aside by the people who actually own Ferrari. Ferrari ownership is firmly in the hands of Fiat, which is controlled by Exor, which is an vehicle owned by the Agnelli Family. The scions of this clan are John and Lapo Elkann, two of Gianni Agnelli’s grandsons. Montezemolo’s position of power within the Fiat empire has been on the wane for some time. He was chairman of the company from 2004 until April 2010 but was then replaced by John Elkann, although the real power in the company lies with the chief executive officer Sergio Marchionne, who is leading the car company in its bid to create a new force in the automotive industry by merging Fiat with Chrysler. In order to achieve this goal Fiat needs a great deal of money and for that it must turn to the banks of the world, although some of this cash will probably be raised by floating part of Ferrari on the stock exchange.
The signs are that when Montezemolo goes Lapo Elkann will become the chairman of Ferrari. The 33-year-old has had a rather colourful past, tainted by scandals, but in recent times he has become a creative consultant with the Ferrari Styling Centre in Maranello. The Elkanns will be the front men for Fiat and Ferrari and they will no doubt be convinced that Flavio Briatore is the right man to run the competition department in Maranello. Briatore is a staunch Ecclestone ally. The fact that such an appointment would not be good for the sport’s international image does not seem to worry any of those involved. John Elkann is supposed to be the force behind the combined Exor/News Corporation bid for control of the Formula One group, which has been portrayed as a force to counter Ecclestone. Others believe that it is in league with Mr E with the goal of getting CVC Capital out and having the sport controlled by Ecclestone-friendly forces. Some think it could jump either way, depending on who would cut the best deal for Ferrari.
The real power behind the two businesses will be Marchionne, although he will always have to listen carefully to what his bankers tell him to do. I have heard it suggested that the architect of the Exor/News Corporation idea is a Monaco banker called Marco Piccinini. His father Arnaldo was an electrical appliance billionaire who sold his empire and went into banking. In 1977 Marco Piccinini was thrust into the limelight by Ferrari when he was appointed sporting director of the team. It was always assumed that this appointment was based on the fact that Piccinini money financed Ferrari’s expanding automobile business. He would remain in charge of the F1 team until Enzo Ferrari’s death in 1988 and was the third architect of the Concorde Agreement with Ecclestone and Mosley. He has been on the board of Ferrari SpA since 1983 and thanks to Mosley became FIA Deputy President (Sport) between 1998 and 2008. For a period he was also deputy chief executive officer of FOA and FOM, working with Ecclestone. Since 1981 he has been a member of the board of the Automobile Club de Monaco, the organiser of the Monaco Grand Prix, and from 1998 until 2009 was on the board of the Société des Bains de Mer (SBM), the resort and luxury hotel operator on Monaco. Piccinini and his financial friends at Mediobanca and other financial institutions, have long been loaning money to Ferrari and Fiat, indeed they have owned shares of both businesses whenever that was deemed necessary. In January this year Piccinini was appointed Minister of Finance in Monaco. At the same time it is probably not a coincidence that Piccinini’s longtime assistant Pierpaolo Gardella went to work for Ecclestone in London at the same moment.
Money is power and thus it would be fair to say that the only way that FOTA can really compete with such financial muscle is if it is able to raise more money than Exor/News Corporation and buy the shares owned by CVC Capital Partners – and in the current financial climate that is not going to be easy. They might try to convince CVC to work with them with a different fund in the future, but that would be expensive. The other way that the plan can be stopped is if the FIA vetoes a change of control… which takes us back to where we started.