It is probably a very sensible thing that Mercedes-Benz is keeping quiet about Concorde Agreement negotiations. That is the best way to get a solution that suits the German manufacturer.
Several of the teams have agreed basic terms for a new Concorde Agreement. Not all of them are happy with what has been agreed, but you get what you can get based on your importance to the sport. The Formula One group does not think that Mercedes is that important. The Germans disagree. This is the crux of the problem.
Having said that, there is little doubt that it would suit some of the other teams if the deal under discussion blew up and things had to start again. The details of the next Concorde Agreement, which is due to run from the start of next year until the end of 2020, are not in the public domain, if indeed they have been decided already. What is clear, from a statement made by the Formula One group, is that some of the teams have agreed “in principle” deals. In order to get this to happen there was no small amount of wheeling and dealing and some pretty advanced arm-twisting. The primary aim was to break up the unity of the Formula One Team Association (FOTA). Although Ferrari was central to establishing FOTA and the other teams tried to trust the Italian team, it proved – as has happened before – that there will always be a point at which it puts its interests ahead of those of the sport as a whole. Once the Formula One group offered Ferrari enough, it dropped FOTA like a hot potato. Ferrari on its own is not powerful enough and so the Formula One group needed other FOTA scalps. Red Bull was reportedly offered a very substantial financial incentive to break away from FOTA, while the Bahraini shareholders at McLaren were encouraged to get that team to agree not to fight and Frank Williams was encouraged to listen to his old mate Bernie Ecclestone, rather than to Williams F1 chairman Adam Parr. The remaining teams – with one exception – are utterly irrelevant and must take whatever deal they are offered. Once FOTA was blown up, they had no other bargaining power.
The fly in the ointment was Mercedes-Benz which is big enough not to be pushed around and annoyed enough not to agree to a deal that it does consider suitable. There is an argument that additional payments to Ferrari can be justified under the competiton laws of Europe because the Italian team has such a important heritage in F1. That is worthy of discussion, but a similar arrangement with Red Bull Racing is more difficult to justify.
If one looks at the numbers it is fairly clear that the best that Red Bull can claim as an active team owner is that it has a team that dates back to 1995 when Sir Jackie Stewart set up a new organisation called Stewart Grand Prix. The firm that bears that UK company number went on to become Jaguar Racing in 2000 and, after the Ford Motor Company had messed things up royally, it landed in the hands of Red Bull at the end of 2004. Thus the best Red Bull can claim in heritage in the sport is 17 years. In that time the team has won two Drivers’ and two Constructors’ World Championships, in 2010 and 2011. One can add that the legal entity has won 29 victories (Red Bull’s 28, plus Stewart GP’s one-off win).
When it comes to historical status, Mercedes is hard to beat in overall motor racing terms. The company first appeared in motor racing in 1901. It competed in and won the Gordon Bennett Cup, the competition that preceded Grand Prix racing, which in turn preceded the Formula 1 World Championship. It won the Grand Prix de l’Automobile Club de France – the biggest event in Grand Prix racing – as early as 1908 and finished 1-2-3 in 1914. It was one of the dominant teams in the 1930s, winning 14 races in five years and was utterly dominant when it joined the Formula 1 World Championship for the first time in 1954 and 1955, winning nine victories.
The current Mercedes F1 team began life only in 2010, but that entity can trace its roots all the way back to January 1964 when Ken Tyrrell established the Tyrrell Racing Organisation. This became British American Racing in 1998, Honda GP in 2006, Brawn GP in 2009 and Mercedes GP at the end of the same year. If one looks at the numbers, the firm that bears the company number has won six World Championships in total (three Drivers’ titles with Tyrrell and one with Brawn GP, plus the 1971 and 2009 Constructors’ titles). In terms of race wins it has accumulated 43 victories (Tyrrell’s 33, plus Button’s Honda win in Hungary in 2006, Brawn’s eight and the recent Nico Rosberg win in China).
Based on these numbers one can understand that Mercedes feels that it should get a better historical deal than Red Bull Racing and that any deal that does not take this into account is unfair.
But is an unfair contract something which is illegal? The lawyers can argue that one, but it is really not the key point. What is perhaps more important is what Mercedes may or may not have done about it. If, for example, the car company was to write to the Formula One group, indicating that it believed the deal on offer was anti-competitive, under the terms of the European legislation, there would be a problem created with the Formula One IPO in Singapore. The rules of transparency in IPOs generally require those who embark on a flotation to give details of risk factors involved. So if there is a document that states that there could be trouble, it must be made public when the Formula One group starts trying to flog shares to investors. This does not mean that the IPO cannot go ahead, but investors are generally very conservative people and the concept of impending litigation from one of the world’s largest car companies is not something that they will want to see. The only way that this can be avoided is if a deal is done with Mercedes and they are satisfied with the offer, but if that happens there may be other teams that are not satisfied with being offered less. So a deal with Mercedes needs really to be done after all the other horse trading is over. The problem is that the Formula One group is in a wild hurry to go to the markets in July and there is not much time to quibble for weeks on end. This may explain the presence of Mercedes boss Dr Dieter Zetsche in Barcelona.
The precipitous nature of the flotation does beg another question:
What is so important about doing a deal in July when it would be wiser to get the Concorde Agreement all sorted out first? There cannot be some unexpected event coming, as the risk factors known to the company should also be known to investors. Would it not be more logical to wait until the summer holidays are over and the financial markets are firing on all cylinders again?