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Archive for May, 2013

In the modern era the engineering challenge in Formula 1 is to micro-engineer racing cars over and over again. The sport used to be about making the fastest car without any major restrictions but since the widespread application of ground-effect aerodynamics to F1 cars in the early 1980s, the art of design has been continually frustrated by the rules, which are designed to slow the cars down.

“I suppose it probably started at the end of 1982,” Patrick Head said to me about 10 years. “If we were running unrestricted rules, we would probably have to spend two hours getting the driver into his G-suit or something before qualifying. So I don’t find it surprising. The only thing is the point at which it is felt the cars get excessively emasculated in order to maintain lap times.”

If you give engineers money they will find ways to spend that money. And they will ask for more. It is in their nature to do so. Even if innovation is nigh on impossible, it is winning that is important. Having said that, the smart F1 engineers still argue for cost-control.

“Engineering is all about resource management,” says Geoff Willis, with the Mercedes AMG Petronas. “If you remember the old definition of an engineer: he is the person who can do for a pound what any fool can do for 10. We have always had resource limitations, whether it is money, time, material properties, whatever. So it doesn’t really matter what the regulations are, there is still an engineering challenge. You are competing against others in an arbitrary set of regulations. So I don’t really mind what regulations we have. We have got to get the balance between technological interest and competition and television spectacle. The only problem we have is trying to come up with a set of technical regulations that avoids typecasting the cars. If you painted all the cars exactly the same colour and you all asked yourselves, honestly, could you actually recognise which car was which?”

Some argue that a budget cap is the answer. Some say that F1 should move to standard chassis; others that a standard rear wings would be a good halfway house. But such things will never be decided upon because teams are always looking to gain an advantage if they have more money than the others.You can argue that it is crazy to waste huge sums of money on research and development programmes which deliver a tenth of a second per lap but have no relevance to the real world outside racing – but no-one listens. The big teams spend, the small teams complain that they cannot spend. Usually it is the automobile manufacturers who outspend everyone else, but in this day and age even they are baulking at the costs and the spending spree is being led by Red Bull. The involvement of the automobile manufacturers in motorsport has always been a balancing act between the need for the car manufacturers to achieve clearly-defined marketing objectives and what is best for the sport. The most successful forms of racing involving manufacturers have been when there are very tight controls, such as NASCAR-style rule-making or homologation quotas that have to be met. The problem with this is that an escalation of costs or domination of one or two manufacturers drives out the smaller operations. Inevitably this leads to the collapse of a series when the last manufacturers withdraw. The result is that in many series where big spenders are involved there tend to be clear boom and bust cycles.

In the early years France dominated the industry but the spending quickly got out of control and in 1909 Grand Prix racing actually stopped because there were not enough competitors left. It did not revive until a new wave of car builders emerged in voiturette racing. By the mid-1920s the manufacturers were back in the sport but there was then a good illustration of the danger of relying on them when Alfa Romeo, Delage and Talbot all withdrew because of the economic climate leaving only Bugatti and a few Maserati customers. Ettore Bugatti for a while abandoned running his own teams and let his customers do the racing and the sport recovered.

The manufacturers returned in the 1930s but very quickly there developed utter domination from the German government-funded Mercedes-Benz and AutoUnion teams which pushed all other competitors out of the sport. Alfa Romeo survived the longest but Bugatti gave up the fight and smaller firms like ERA never had a chance.

The war ended that phase but only Alfa Romeo was left in the immediate post-war period until Ferrari got up to speed, at which point Alfa Romeo quit. The result was that the World Championship collapsed and had to be held for Formula 2 cars. That led to the growth of the British teams and the successes of the 1960s and 1970s and the status quo remained fundamentally unchanged until the turbocharged era of the 1980s although other manufacturers came and went without much success: notably Aston Martin, Porsche, Honda and Matra.

The turbo boom of the 1980s allowed small teams to invest and grow but as costs increased so the manufacturers began to drop out again. As development costs increased so those without engine deals fell by the wayside. The response of the FIA was a change of rules to normally-aspirated engines and this opened the way for new engine manufacturers, new specialist engine-builders and more new teams, but gradually the costs increased as the competition became more and more intense and manufacturers began to buy into teams to protect their investments in the sport. They then upped and left in 2009 when the global economy went wrong.

Cost control is at least in its infancy but it needs to be extended not just to save the small teams, but also to make sure the manufacturers come back again.

Action is required to stop the next bust cycle. If only Red Bull is standing in the way of such a change then the sport must accept that Red Bull must go, although that is not likely as it could still gain just as much exposure from the sport at a much lower price.

It is just a question of resource management…

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NBC’s coverage of the Monaco Grand Prix was watched by nearly 1.5 million viewers in the United States, making it the most watched Formula 1 race in the US for six years. According to the Nielsen Company, the live coverage of the race (the first time that the race has been aired live) was watched by 1.456 million viewers. The last race to get that kind of coverage was Fox’s 2007 coverage of the United States GP. This was an increase of 241 percent compared to last year’s coverage on Speed. The F1 races that have been shown on the NBC Sports cable network have not rated as highly, with viewers numbers at around 400,000. In 10 days NBC will air the Canadian GP live.

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Williams has announced that Mike O’Driscoll will become Group CEO with immediate effect. This is a new position which will see O’Driscoll overseeing both Williams F1 and Williams Advanced Engineering, with the two companies united under one management. Alex Burns will leave the company. The announcement makes no mention of Burns beyond this, which suggests that there is some bad blood in the affair. We hear that it is almost certainly related to the question of Paddy Lowe joining the team, which was on the cards late last year but evaporated soon afterwards. Lowe later signed for Mercedes.

Mike O’Driscoll, who was formerly managing director of Jaguar Cars from 2007 to 2011 and prior to that the head of Aston Martin Jaguar Land Rover in North America from 2001 to 2007.

“Mike has been a valued member of our Board since 2011 as a Non-Executive Director and I am delighted that his day to day involvement in the company is to significantly increase,” said Frank Williams. “This new role strengthens the company and will help us achieve our goals both on the race track and in diversification. Mike brings with him significant skills and a wealth of experience. Working with Claire, I am in no doubt that the future of Williams is in safe hands.”

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Fans who attend The Audience with Joe in Montreal (click here for more information) will benefit from a special deal at F1 Boutique Canada, which is located close to the Pub Saint Paul in the old town. All those attending will be given a special “VIP $10.00 OFF” voucher for any F1 merchandise at F1 Boutique Canada, an official licensed motorsports store. The store is also organising an outdoor fan-friendly event on both Friday and Saturday in league with the “Grand Prix de Montreal Fan Club” (http://www.facebook.com/gpmtlfanclub). This will feature the Red Bull Wiiings Girls and the Red Bull Live DJ Booth, with an “F1 drummer” Montreal artist set and many other “Bienvenue à Montréal” surprises. The events will run from 6pm to 11pm on both nights. For more information click on the logo below, or go to www.fb.com/f1boutiquecanada or
www.twitter.com/f1boutique

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The F1 Boutique Canada, is located at 28 St-Paul East, Vieux Montréal, H2Y1G3

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The FIA statement after the Monaco GP that suggested that Pirelli and Mercedes-Benz might not have had proper permission to go testing after Barcelona rang alarm bells on Sunday night in Monte Carlo. The original stories about illegal testing were clearly a storm in a teacup, but the FIA announcement that evening raised eyebrows.

Firstly, the FIA rarely does anything quickly when it comes to Formula 1 and the press release came out with such alacrity after the stewards ruling that it seemed decidedly out of character. The statement seems to have taken Mercedes and Pirelli rather by surprise as well, as they clearly thought that what they were doing was OK. There is, logically, no reason for either organisation to do anything to get themselves into trouble with the federation and while other teams may have squawked about the test that took place there was no obvious reason to suggest that any advantage had been gained. It was just another opportunity to squawk, just as Red Bull did after the Spanish GP.

So what on earth, if anything, was going on? An FIA Tribunal will examine the matter at some point in the next few weeks, although it will probably not happen before Canada. We will see in Montreal whether Mercedes has really made such a huge leap forward in terms of tyre performance, or whether the win in Monaco was more to do with the nature of the track than the tyres. It will still be hard to judge because teams make progress all the time, but if the cars fade in the race as they have at other tracks, then there will be indication.

The FIA says that while approval was given for the test, there are aspects of what happened that are questionable. There is no doubt that in the Sporting Regulations it says that teams are not allowed to test current cars during the season, except for a number of straight line aerodynamic tests and the Young Driver test. They are, however, allowed to run cars that are two years old or more. Pirelli says that in its contract, it is allowed to ask a team to supply a car for testing if there is a safety issue involved. There is an argument that this was required after some tyre failures in Bahrain, although Pirelli itself has said that safety was not compromised by the treads coming off. Ferrari did agree to do a test for Pirelli in Barcelona with a 2011 car driven by Pedro de la Rosa. Given that Pirelli says that old cars are not much use for testing 2013 tyres, it is an odd thing to have done, although it is always possible that Pirelli reached that conclusion during the Ferrari test. Whatever the case, plans were then made for Mercedes to do a three day test, between May 15 and 17 in Barcelona, using a 2013 car.

The tests were not announced because it seems that Pirelli was worried that any attempt to test would be met with the kind of uproar and bad publicity that was heard in Monaco on Sunday. It was a better idea to get the job done on the quiet and not have to deal with a storm of noise in the media. That argument makes a lot of sense.

The FIA is disputing that it agreed to the test that occurred, which suggests that Mercedes and Pirelli took advantage of the situation. However Pirelli argues that it did not inform Mercedes what tyres were being tested and that these were a combination of work that was useful for 2014 and in an effort to solve the problem of the tread coming off, as was seen in Bahrain. These tyres were likely to have been different constructions, profiles and compounds and as we have seen on many occasions this year the 2013 tyres behave very differently in different temperatures and so arguing that Mercedes will have gained an advantage is stretching the argument.

So it is fair to say that the problem is not about the tyres, but rather about how and why the test came about. The technical people at the FIA know that it is unlikely that Mercedes gained any advantage from the test, so if there is trouble it is for reasons other than those being stated by the rival teams.

All of this is occurring against a backdrop of negotiations for a new tyre deal for 2014-2015-2016. Pirelli is making the point that it is a bit too late to change and that the teams need to agree to the financial deals on offer or the sport could find itself without a tyre supplier, if Pirelli decides to walk.

So the real question is whether or not it is too late for another tyre company to replace Pirelli.

Turn back the clock three years to May 2010 and there was a similar story going on. The sport had yet to agree whether to use Pirelli or Michelin. The French company’s offer was attractive, both technically and financially, but there was a political game going on in the background. Bernie Ecclestone wanted Pirelli, FIA President Jean Todt wanted Michelin. The question was really over who had the right to decide.

Was it a commercial matter or a sporting one?

In some championships the FIA asks for bids from suppliers, in others it leaves it up to the commercial rights holder. It is not clear who should decide. In 2010 the deal for 2011-2012-2013 went to Pirelli. The FIA accepted the situation after Michelin backed away from the negotiations. It was in many respects a victory for Ecclestone but the FIA had no choice but to accept the deal in the circumstances. The announcement was made on June 23 after the deal had been signed off by the World Motor Sport Council. In the press release at the time the FIA noted that “the sole supplier will undertake to strictly respect the sporting and technical regulations implemented by the FIA”. It was an odd statement. Now that there has been a glitch it sounds almost threatening.

Conspiracy theorists in F1 circles are now suggesting that the minor kerfuffle in Monaco has become something rather bigger, not because Mercedes gained any great advantage as rival teams are arguing, but rather because it has presented the FIA with an opportunity to reassert its power on the question of who decides on the technical partnerships of the Formula 1 World Championship. Both the FIA and FOM claim the right, but the outcome is more to do with who plays a better political game at the moment the deal is done.

If Pirelli was able to bang out the right kind of tyres in 2010-2011 despite the decision not being made until the World Council meeting in June, the same must be possible for Michelin in 2013-2014.

The other elements of this so-called scandal can be written off as being a sign of the disjointed nature of the sport at the moment, with the teams fighting over anything and everything because they are unhappy with one another about commercial deals struck and other political games played.

It will be interesting to see what happens next.

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You can read today that Formula 1 is in crisis, because there is not enough money about. That is true, but only up to a point. In reality there are two problems: the F1 teams cannot agree on how to stop spending, and not enough money being created by the sport is finding its way back into the business.

The first problem is really just a question of 11 Team Principals being unable to agree on a cost cap, so they go on spending, even if they cannot afford it, as though they are in some kind of 1970s nuclear arms race. It is plain stupid. This could be solved by the FIA instigating a financial regulation that required the agreement of more than 50 percent of the teams. Without a Concorde Agreement, the rule-making process is not set in stone and the federation can do as it pleases, within the limits of its own rules. However, the federation is incredibly cautious in all matters relating to F1 so it is hard to see any decisive action in the short term.

Last year a team with a budget of around $145 million (Williams F1) won a Grand Prix, fairly and squarely. The team had the technology and the prowess to beat bigger organisations which have budgets that climb to atmospheric figures, the biggest being $344 million if one counts the holding company of a team that claims to have a smaller budget. Winning should not be about who has the most money to throw at the competition, but rather who is the cleverest. In this respect, racing with a budget cap would be a far better advertisement for the best team, as it would have achieved success in the most cost-effective manner, which is of course attractive to modern car manufacturers who are always looking for ways to create cars at less cost.

The major teams today spend around $240 million apiece each year, which Williams proved last year is about $100 million more than you need to do the job. A cost cap would turn all the money being spent above the $145 million limit into profit for the big teams, adding value to their businesses and allowing them to expand into other sectors and by doing so create more stable enterprises. The smallest teams this year are running on budgets of $100 million, and, judging by the track action this year, this is enough to keep them within reach of Williams.

TV money should provide for everyone, including the 11th team in the Constructors Championship, in an equitable fashion. It is daft not to make allowances for the tail-ender because if there is no 11th team then it will mean that the bottom four or five teams can cruise along and take the money rather than worrying about dropping out. It is in everyone’s interest that the 11th team gets something to help it survive, but not enough money to make 11th an attractive place to be… and, of course, all the midfield teams face the prospect of ending up in P11 if they make one really bad car.

The same basic problem has existed in soccer for some years with ambitious team owners spending wild amounts of money to buy all the top talent and to build bigger stadiums to capitalise on their success. The result was that by 2009 UEFA concluded that around half of the 650 or so teams in Europe were in deficit and that their combined debts were around $1.6 billion. Today, four years later, that figure is reckoned to be closer to $11.5 billion.

In consequence UEFA developed the Financial Fair Play Rules (FFP) for teams that compete in its competitions, hoping that the domestic championships would also follow suit. Britain’s Football League has done that with its own version of the FFP with the aim to enable teams to break even and control salaries. The wages for the Premier League clubs are now limited to a percentage of the team’s turnover and to ensure that the teams comply there are transfer embargoes that will be applied. The rules that will begin in Britain next season will mean that Premier League clubs cannot make a loss in excess of $165 million across a three-season period, and even then only if the loss is guaranteed by the team owners; the financial projections are shown to the Premier League and if almost all of the loss is covered by injections of equity from the club owners. There are also restrictions on the amount of Premier League Central Funds that can be used to increase player wages. If a club exceeds this cap then additional wage cost must be funded by increased commercial revenues that the club itself made during the season in question.

It is not exactly a budget cap, but it is a smart way to solve the problem and one that the F1 teams would do well to look at. Perhaps someone should hire Richard Scudamore, the CEO of the Premier League, to fix this problem. He is in his mid-fifties, he’s trained as a lawyer, he has done some stonking deals during his career and dealt very effectively with a bunch of competitors who cannot see the wood for the trees. And he’s done the same job for 15 years and might like a change…

The second problem that needs to be addressed by F1 is that despite the huge commercial success there is not enough money coming back into the sport. It is rather out of kilter with the normal sport/promoter split of the earnings. The private equity people who control the Formula One group have already made vast fortunes out of their F1 investment, and now they want to strip out even more cash before they depart. They do not care a jot about the sport, nor about any damage they do while they are involved. Their sole aim is to extract money and all decisions are made based on what will produce maximum returns for them. Private equity companies exist to exploit, so one cannot blame them for doing what they do, but it would be best for the sport that this be stopped in the future. With a change of control mechanism in the 100-year commercial deal between the FIA and the Formula One group, it should be possible for the federation to insist that any new owner is less profit-oriented and gives more back to the sport. A renegotiation might thus be possible because CVC will want to protect what is left of its investment. If that does not happen then the commercial rights must either be bought by the interested parties, or they must be taken away from the current lessee and given to a more benevolent organisation, which is not going to be easy to achieve, unless there is a good legal reason to terminate the 100-year deal.

The plans to float the Formula One company are teetering (at best) and the uncertainty has led CVC Capital Partners to try to entice buyers with a $290 million dividend after the deal is done. In other words, if you buy shares you will get money back straight away. That is a pretty desperate step and an indication that the float is pretty unlikely to happen. It has achieved one aim, however, of putting a nominal value on the business and now it is a question of finding which investment firms will pay the most. The financial markets of the world are not peopled by idiots (for the most part) and investors are likely to be very wary. Perhaps there are some investors who are willing to take a risk on the commercial rights remaining with the Formula One group, but even they must consider what might happen if, for example, the situation in Munich gets any worse.

There have been signs for a while that the FIA is waiting for an opportunity to terminate the commercial agreement and create a new structure which will better serve the federation, providing money for club development around the world, road safety campaigns and assistance for talented youngsters to climb the racing ladder. The 100-year contract may have looked good 13 years ago (which is arguable), but today it looks like a very poor deal. There have been hints in recent weeks that there might be a second candidate in the FIA elections this autumn, but these have now faded away again as the problems in Munich are likely to reach a head before the FIA election.

For the moment the teams are not doing anything about this. The biggest teams have been pacified with larger payments from the Commercial Rights Holder, which means that it is not in their interest to rock the boat too much. However, everyone knows that F1 with only four teams is not a sensible option and the idea of customer cars is just padding the grid and disguising the problem. There need to be changes in the deals for the smaller teams, but all this is only possible if an earthquake occurs.

The key question therefore is whether or not there will be an earthquake.

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It is still very early in the process, but there is clearly a big push going on to make Bahrain the opening race of the 2014 season, at least if Melbourne does not rapidly agree to a new contract from 2016 onwards. Melbourne has played host to the first race of the season on most occasions since 1996, although in 2006 Bahrain managed to get the gig and Melbourne was pushed back to being the third race. The attendance in Albert Park suffered significantly and the remarks made when the Grand Prix was reinstated as the first race in 2007 were telling.

“Securing pole position as the first race of the year is important for Victoria because it always receives extra global attention and media coverage,” said the then Tourism and Major Events Minister John Pandazopoulos. “This is a great result for Australia’s sporting and events capital.”

Australian Grand Prix Corporation Chairman, Mr Ronald Walker, echoed the Minister’s sentiment and said the decision to award Melbourne the first race of the season reinforced the city’s reputation as the premier event on the global F1 circuit.

“To be reinstated as the Championship’s opening race is great news for the people of Australia,” he said. “There is much status afforded to the host city of the first event on the F1 calendar and this is nothing short of a splendid outcome for Melbourne.”

Three years after that, however, Melbourne was pushed back to being the second race again with FOM arguing that starting in Bahrain was more sensible in terms of TV viewing figures and the teams seeing the logic in sending their equipment out to Bahrain and then on to Australia.

In general, however, such date changes seem to be linked to contract negotiations and with Melbourne currently discussing the next deal from 2016-2020, with an option to extend to 2025, it is no great surprise that pressure in being applied.

The teams want to go testing at the start of 2014 in Bahrain or Abu Dhabi so that they can see their new machinery in action in warm conditions. This is important as the new engine rules and new tyres need to be assessed in sensible conditions. They are also keen that these tests are done relatively close to home so that modifications can be made more easily. There is no reason why there cannot be a warm weather test in the Middle East in February (except the cost) with the cars then going on to Australia and returning to Europe later after races in Australia, Malaysia, China and Bahrain. These days the cars spend very little time in the factories and much of the modification work is done at the race tracks, with new parts being flown out when needed.

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