The two parties in the Caterham debacle have now descended to throwing accusations at one another, while the Administrator has impounded the cars and locked out the staff. By blocking the team from using the cars the Administrator is basically destroying what little value is left in the business. The staff is not going to hang around hoping that the team will be revived and everyone will be out looking for work with immediate effect. The good people will be snapped up. The good news is that the franchise is not owned by the insolvent company and as long as the holding company 1MRT remains solvent, the franchise will survive until March, when the first race of 2015 begins. However, that will only happen if someone lodges an entry with the FIA before November 1. And that will cost a considerable sum of money. The owner of the 1MRT franchise will need to do that, which appears to mean that Tony Fernandes and his partners (who wanted to get out of F1 at all costs in June) will have to invest more to keep the franchise alive. Given that they do not want to run a team and that they would, in any case, have to buy their assets back from the Administrator (once it is worked out who owns what), it is unlikely that they will do this.
If the Administrator will not allow the team to go to Austin, then he is hardly going to invest in an 2015 entry. However, the way things are going everything looks likely be locked up in a legal dispute for years to come, which will only serve to waste money and damage reputations. In consequence, unless something that moves the story forward emerges, I see no point in further comment on the matter.
One could say that it might be an idea for Bernie Ecclestone to buy the whole mess for a dollar, let the Administrator give the suppliers a nasty haircut and then buy the assets before giving the whole thing to someone to run next year. The franchise will survive until March next year, so long as someone makes an entry in the weeks ahead. If Ecclestone was to do this, the most likely person to get that job in this scenario would be… Colin Kolles.
Then perhaps the people behind Engavest (which is actually now called Caterham CF1 Grand Prix Holding SA) can prove that they do have money to run a team and were not paying because the shares had not been signed over.
However, when you stop and think about it, it would probably be more efficient to let it die. The Formula One group needs only 20 cars to keep the FIA happy. Without competition for 10th place in the Constructors’ Championship, the F1 spending “arms race” can now stop for the next two years, at least in the midfield. As the demise of Caterham will create a sort of unofficial budget cap because the lack of an 11th team means that all the small teams at the back can back off on spending because their prize money is no longer under any threat. Not having an 11th team means that the pressure is off and all they need to do is turn up with a couple of cars to make up the numbers. This will give them time to repair their finances and prepare for the future. Haas will (in principle) turn up in 2016 but the rewards structures in F1 means they the new team will not be eligible for prize money until the end of 2017, at the earliest, and in any case the new team is unlikely to get anywhere close to the others for a while, so the tail-end teams will get at least two full seasons to cruise and collect before they need to ramp up performance in 2017 just in case Haas is competitive. Thus if Bernie was looking to help anyone, it would be helping Marussia, Sauber and the others to sort out their messes, getting new investment in place and moving on… It is not quite “start and park” but it is the same principle.
Ironically, the demise of Caterham would also mean that the rival teams will all have a guaranteed value, of at least $90 million and that means that their franchises are suddenly worth more than a token sum…
Strange world we live in.
joeblogsf1 
Isn’t that logic only sound if there were a Concorde Agreement in place, not the current glut of shady (and shaky) secret deals between the parties involved? Is there a statute that all teams are jointly signed too saying that Bernie can’t just move the goalposts and make it ‘the top 9’?
Think about it: how can you have different rules for different teams? You can change the financials but the clauses have to be the same, otherwise it would be chaos. Thus it is in effect the same as a Concorde Agreement but with different financial agreements.
That is actually a really good idea. Let one fall to stabilize the rest. Problem is; does Bernie read your blog? 🙂
I don’t suppose he needs to…
He probably does and he posts comments, but not under his name…
Joe paints a simply formula that one team fails and the others survive. What if several others go over the edge in the coming weeks and then three car teams is the scenario. Have to be careful what you wish for.
As I have explained on a number of occasions, running a third car offers no benefit to the team. They do not score points and do not pay prize money. The only benefit is their possible use for strategic activities, such as taking points away from others. If used in this way there would almost certainly be complaints to the FIA. Teams that cannot afford third cars are entitled to claim exemption and as far as I can tell, third cars would rotate between the teams and not be always the same teams. However as the details are secret it is impossible to say who would have to do what.
Running a third car. Real time, in season testing although not the intended purpose the sport has evolved into exploiting the rules and it’s a possibility for the leading teams.
Just like the mess the receivers did with Arrows. Déjà vu. Receivers messing up the assets Xxx
If this is the real Martine rather than an alias, it must be particularly and personally galling to watch again. 😦 Our sympathies are with you.
I always thought that Arrows went racing the right way for a small(-ish) team. They most often didn’t finish [although this was much more common at the time for all teams] but they always had a fantastic chassis as I remember it, and didn’t they build their own engines? Google suggests they were at least involved in that.
It is the real Martine.
The curse of Leafield?
Could the administrators be sued?!
Also is the current entry and likelihood of an entry next year is worth something to someone?
Administrators can and have been sued, but these actions are very rarely successful.
They tend to operate very much within the legal framework even when what they are doing is blatantly unfair or has negative repercussions for the company..
In this case, the administrators are yet to do anything which would suggest they are in a position to be sued. They cannot rightly incur any further avoidable costs or take on further credit except for their own often hideously expensive fees and consultancy fees if required to assist in running the business in administration.
In fact, if they opened up the factory, allowed items to be removed and flown to Austin and incurred further costs without bringing in some kind of revenue, then they might actually be opening themselves up to be sued later for mis-administration.
In this scenario, I suspect that the business is going to fold completely, and that it will be the administrators who end up suing the owners or former owners possibly in combination with the auditors.
I am not sure I agree with that. Seizing the cars could end up being deemed an illegal act, if these vehicles actually belong to 1MRT, rather than Caterham Sport Ltd. Logically this is the case, as CSL was a service company and 1MRT owns all the IP. I’d be very surprised if CSL owns the cars. There would be a decent case for damages because by not letting the cars go to Austin, 1MRT could lose the chance to compete for $90 million.
I am also curious about the ownership of Leafield. Is this really owned by CSL, or would not a wise company structurer place this in a different company? Keeping people off the premises may not be legal either.
It is a funny one, because of the complete opacity in ownership. But they will say they acted in good faith due to confusion in ownership. If the companys registered headquarters [of the company in administration] is Leafield, then regardless of whether it is leased or owned doesn’t matter too much. The administrators are now effectively running the company and can prevent access to the company headquarters and any other company locations as it sees fit. You only have to go back to Blockbusters in the UK to see that in effect, where the administrators instructed individual site management to close the premises and stick up a legal notice to show the premises were closed for trading. Blockbusters very likely owned very few if any of their sites.
Joe
Insolvency legislation states that in the absence of any evidence to the contrary, an administrator may legally assume that the assets in question belong to the company over which he or she has been appointed.
having said that, it is usually quite easy to establish ownership in such curcumstances when payment for assets has been made. What I suspect (from many years of experience of such matters) is that CSL has not been paid in part or in full for the cars, parts or other services provided) in which case CSL will retain legal title to them. Additionally, it would be quite common for a manufacturer to retain the intellectual property rights to protect its positio in the event of non payment.
Reasons an administrator will “shut the doors” is generally two fold:
1) To protect/safeguard assets. If the cars and equipment do belong to CSL then to allow access which may result in the loss of those assets woudl be negligence on the part of the administrators.
2) Because the administrators have no funds with which to pay staff wages and continue the trading operations of the company in question.
It may be that the value of CSL is enhanced by the F1 team continuing to trade, but it is equally liikely that the costs to CSL of so doing are such that it is simply not possible.
Administrators cannot allow the asset position of an insolvent company to worsen through trading over that which exists at the date of their appointment, unless they are funded on a non recourse basis to do so. Such funding would usually be provided by the appointing bank and generally on the basis that to trade on will enhance value. The issue here, as I see it, is that CSL does not own the F1 entry and therefore any enhanced value is entirely down to the entry holder which is a separate, foreign registered, legal entity which itself appears to have insuffcient resources to meet its own financial obligations, let alone pay for 2015’s entry.
Another point of misinformation from Engavest is this statement as quoted
“The shares have not been transferred and therefore Mr Fernandes remains the owner of Caterham F1 and is fully responsible for all its activities.”
A company’s directors are, by law, solely responsble for a company’s activities, not its shareholders.
Which probably explains why Engavest (SA) have now handed over control of the F1 team to the administrators.
Unfortunately I doubt Mr E’s motive in letting Caterham die is as benevolent towards the other backmarkers. He seems to be the only one that really wants three car teams. It’s an interesting consequence of an unfortunate affair and hopefully it’ll solidify the mid-field and prevent any three car or customer car nonsense from him for a few more years.
Three car teams, in my opinion, was simply a device designed to divide the teams. He doesn’t want them all ganging up on him and so he is constantly in search of ways to split them up – he always has been since he stopped trying to get them all to work together!
Fascinating are the ways of Formula1. Is there any other high level sport where the prize money is unknown? Or that debutants will be unable to claim any even if they finish in the top-whatever?
It is unknown because it is based on revenue which change from year to year. The percentages are known.
I still don’t see the HAAS team happening……… USA + F1 = disaster!!!
What happened to the American dream? If this is the attitude over there then nothing will ever happen.
Unfortunately the USA and certain sports don’t get on, they seem set in their ways……. I mean a ‘world series’ that doesn’t involve the world
I don’t really know, but I wouldn’t be surprised if there is a higher percentage of non-USians in MLB than there are non-UKians in F1 garages 😉
Be fair, GR, the Toronto Blue Jays Have won the World Series TWICE in my lifetime 😱
“What happened to the American dream? If this is the attitude over there then nothing will ever happen.”
For the average guy, the American dream is just that-a dream.
Between the addiction to debt, regulations, litigation and taxation, it is much, much harder to build a business.
It can be done, but I fear the ‘Obamacare’ debacle will make having full-time employees prohibitively expensive.
I used to have 65+ employees and saw the writing on the wall years ago. I got out. It’s nice to not have to pay 52%+ of my income in taxes and fees anymore…
I suggest you steer clear of France
France is a nice place to visit, though!
Except if you’re on a train to and from Le Mans when unions(s) wish to make a point. Or waiting for an Air France flight when unions wish to make a point Or… oh well, you get the point… (sigh)
Unless you run John Lewis of course!
Oh, dear…
As an American, Chris, I suggest we not go there as yours is not the only view. I’m biting my tongue, let’s stick with F1.
“I suggest we not go there as yours is not the only view.” Nope, it’s not the only view, but It’s the only view I have. Your milage may vary…
Opportunity for Ferrari/McLaren (i.e. more Honda miles)/Mercedes to have a B-Spec team on the cheap? Or am I just living in cloud cuckoo land…
Customer teams are not allowed
Of course, however an arrangement similar two Red Bull and Torro Rosso would not go amiss.
Well I’ve just collected my tools from the factory this morning as have many other employees, we still don’t know if we are employed or unemployed and wether we will get paid or not! What a mess!!!!!
I am sorry to hear that. What people in F1 often forget is that there are real people who are suffering because of their games. I think the whole thing is a disgrace.
This.
@ Jack Halford – I’m glad that you were allowed to get your stuff out. I’m sure a lot of F1 enthusiasts don’t realize that even though the cars weren’t fast enough, there are (were?) folks like you (and your better half) busting your butts and doing your best.
I’d buy you a pint or two if I were in the U.K.
Jack… having you stop by and say that just makes it all much more real, in human terms. It’s one thing to think about the cars and the idea of the team, but it’s something quite different when it comes down to real people. I hope you land on your feet while getting to do something you love. How long have you been doing this?
I feel really sorry for you. Chin up and good luck – takes the edge off the spectacle somewhat.
This is where the real issue lies. I hope things turn out ok for you, Jack.
Good luck Jack and thanks for your contribution to our F1 entertainment. Even though Caterham never managed to put any points on the board they were always in there fighting like hell and there is a lot to admire in that.
It is sobering to realise that what is just entertainment to us is the livelihood of a lot of good people. They deserved better.
What an utterly ridiculous situation: Teams not spending on development because there is no competition requiring them to (that’s how your comments ‘lego brick’ together in my mind, Joe). Madness, and so sad.
It is called pragmatism and survival
Hardly an enticing prospect for followers of the sport – knowing that half the grid are there simply to circulate and pick up their appearance pay cheque. I can see that’ll push up those declining tv audiences no end..
‘Hardly an enticing prospect for followers of the sport – knowing that half the grid are there simply to circulate and pick up their appearance pay cheque.’
Quit denigrating NASCAR like this! Oh wait, you weren’t… 🙂
The recent Caterham ‘start and park’ controversy (not sure if it was or not) reminds me of the 60’s era (before BE) where F1 had all sorts of start and park low budget teams who would lease a DFV from FORD (or Nicholson) and shove them in the back of a modified F2 chassis’s and show up for F1 events as track promoters were paying ‘appearance or start fees’. Some smart people crunched the numbers and found that putting the bare amount of engine time on the leased engine could turn them a profit. I could never figure out why a driver would agree to come in early – what was in it for him but the lure was being able to get your name out there among the other team owners and perhaps show some good form in practice and qualifying – maybe a half decent grid position as a demonstration of skill.
NASCAR went through a period where if it were not for the start and park teams, (eight of them at one point) the grids would have been a lot smaller. Phil Parson’s was the world champion at start and parking until NASCAR changed its financial payout formulas two years ago. It still happens but to a lessor degree – mainly to support the other ‘real’ team entry. There are reports where several teams in 2011 went the whole 36 race season on ONE engine. One could argue that this is fantastic efficiency. Or not!
Its a terrible way to go racing and I hope it doesn’t become something of the norm in F1 instead of the exception – but I fear these engine use rules are starting to make teams think about parking a car early – more so if we go down to 10 teams and the bottom teams have a guarantee of money at the end of the year… Why try so hard?
Hardly the survival of the fittest or F1 as the ultimate entrepreneur spirit we have been seen in the past.
I’ve thought for a long time now that with the current points system and engine/gearbox change penalties it will eventually make better (economic) sense for teams that find themselves in out of the points and not likely to get higher to simply call it a day, box and go home. Not in the racing spirit perhaps but … Wasn’t it Einstein who said “the definition of insanity is doing the same thing over and over and expecting different results”?
I seem to recall (F1 stats gurus here will surely correct me if not the case!) that one of the arguments for extending the points from top six to top ten was that one or other Sauber (in their blue and yellow livery days) came 7th something like 23 out of 27 races – all that hard work for no points! I think I would be in favour of points for all finishers – even if the payouts for a few points was miniscule – at least it would be some sort of reward! When the difference between getting one point and none for an entire season is so huge, it has to be so dispiriting for those tail-end teams.
Joe, I’m also seeing rumours that Marrussia are effectively insolvent, and that there are multiple late fees to creditors which may prevent them from getting to Austin/Sau Paulo without an immediate cash injection.
Any truth to these do you know?
Sources: Auto Motor und sport, and some Russian sites I cannot effectively translate so may be same source cyclically.
You would want to hope that the owner was not that stupid.
Stupid because Caterham’s collapse (if it happens) would gift Marussia a viable business model for the first time?
They made a big mistake by not changing to wets. Also with the instructions to go faster, if true.
I can confirm that Russian sites are for the most part quoting AMuS, from what I’ve seen they don’t have any other sources on the matter at this moment.
Quite worried about Marussia, don’t want to see them go like that, especially after what happened with Jules.
This has been one of those stories where I have been aware to a degree what has been happening, but not really wanted to know too much.
All in all it just seemed too sad really 😦
The simplest solution would be to discard the ‘corrupting’ historical payments. I would rather see that money equally divided allowing reward down to a thirteenth team. That extra money would be manna for midfield / tail end teams. It would serve to provide some reward for their investment.
The other disappointing aspect is there is no affordable PU for struggling teams. If only Cosworth could receive some financial support bringing their unit to market. Teams lime Marussia, Caterham and Saucer are all chassis limited. It’s just pointless them spending half their budgets on PUs.
It is not that simple. The payments are all justifiable the way they are devised.
Joe, I did say back in Sept 2012 when Cyril Abitboul was appointed CEO/Team Principal of Caterham F1 it would all end in tears. Cyril and his sidekick Mia Sharizman were way out of their depth. You just can’t bluff in F1 ITS TOO DIFFICULT!
I suspect Cyril’s plan of flipping Group “Renault” Caterham to the Qatari’s for hundreds of millions tainted Tony’s better judgement .
Tony should have probably left the original management team of Riad, Mike and Nino get on and run the show. For them it was more then just business.
Well the cars did perform worse and worse once Cyril Abitboul took charge which i felt was okay in 2013 tbelieving that they were concentrating on the 2014 car, but then being proved completely wrong come testing.
Until this current debacle the new management had already managed to improve performance and start treating the team as a racing team and not something to solely advertise the rest of the Caterham group.
If this F1 team does go under I’ll definitely be disappointed as I’ve supported them since 2010 and was hoping they would eventually get into the midfield.
It’s also such a pity for all the staff also as after all the efforts they have put into running this team they may very well end up unemployed soon.
For me F1 is better with more teams including the guys at the back.
The 20 car thing isn’t an issue, is it really? Don’t the teams just have to present 2 cars for scrutineering? They don’t have to race them.That’s what it appeared that Marussia did in Sochi. I know Arrows did it , way back when, but the rules may have changed since then.
The same thing would apply to Caterham.
Thanks Joe! Hopefully one or other of the parties involved will do the right thing by the employees and creditors! Also not forgetting the employees that were dismissed without reason or pay (my wife being one of them), I hope they too can have their situation resolved asap so we can all get our lives back to some sort of normality.
Sorry to hear about everything that’s happened. Couldn’t care less about the shady owners (new or old) but I’ve always had a soft spot for the team and will still wear my Trulli Lotus baseball cap with pride!
I’ve been viewing this from holiday away, I feel really sorry for you, your wife, your family and your workmates. I know in the past there were some tricky team owners, and some hard ones like Chapman. However the modern version of the sport seems just full of Gordon Gecko types and spivs, who use the sport as a way of making cash and devil take the hindmost. It sucks, and doesn’t cover the sport in glory. I thought the FIA was supposed to have laws that covered areas such as bringing the sport into disrepute, some of the Team Directors/Shareholders seem to do that as a matter of day to day fact. It won’t get better till Bernard goes.
What a complete mess, what ever happened to due diligence.
My thoughts are with the Caterham staff and the suppliers who are owed thousands…will be a tough winter for some.
We don’t know that due diligence was not done.
If it turns out that Caterham is kaput, would the subsequent absence of Marussia put Bernie’s empire at risk? Or is there some obvious way to get around the problem of having less than 20 on the grid?
Bernie would then have to call for non-scoring third cars.
And that would require unanimous approval from the teams, yes?
If so, might a the owners of a team or two be motivated to stick it to him?
Changing the rules to have three cars for all the teams would require unanimous approval, or a legal action to stop it happening if they went ahead anyway (which cannot be discounted). However the emergency measures allow some teams to run third cars. I believe it was done by ballot with the team previously selected not included in the next ballot, but as we do not know the rules for certain we don’t really know.
I still can’t believe the rules are secret. I know they are, but I still can’t believe it anyway… drives me nuts…
Joe, I have no idea who is and who isn’t trustworthy. Is Jonathan Noble at autosport.com to be believed?
I ask because he says that the FIA will not ask teams to run a 3rd car even if the grid shrinks below 20 cars. He cites unnamed “high level sources”.
He goes on to say, “with agreements believed to state the teams will get 60-days’ notice to run a third car, and clarification about the livery, driver qualification and points-scoring capability of an extra machine still needed, such a move has been ruled out for now.”
It all sounded pretty firm until the “for now” at the very end.
Ref: http://www.autosport.com/news/report.php/id/116477
Johnny is reliable. And I believe he is right about the 60 days although it is all shrouded in meaningless secrecy…
OK, thanks for that…
If the FIA won’t let them use use any 3rd cars this season, might Jean Todt encourage Marussia or Sauber to misplace their cars for a while? (After all, nothing but the control of the sport is riding on it…)
It seems to me that Fernandes leaves a trail of destruction wherever he goes. Prior to this we have had the Lotus naming rights debacle, his installation and subsequent removal of himself as Caterham team principal and, not to forget, he owns the basket case that is QPR. Now he is claiming that Engavest is liable for the debts of a Caterham whilst in the same sentence he admits he has not transferred ownership of the company to Engavest. Perhaps Fernandes should stop seeking reflected glory through his sports investments and tiresome twitter pronouncements and instead stick to running his budget airline.
it looks like the administrator has reconsidered his approach to the team competing – perhaps he took your free advice Joe
sorry not quite right – the administrator, Tony Fernandes, and the bank it seems
Was China still interested?
Well Joe … it now looks like Marussia’s head is on the chopping block [ and not making it to the USGP ] as well . With Bernie for what ever unfathomable reason rubbing his hands with glee and claiming this is all good for F1 . As far as Caterham even getting their cars out of the garage … never mind to the USGP … all evidence says a snow ball has a better chance of surviving a Southwest Texas Heat Wave 😉 For the record the entire US automotive as well as general press is now saying it’ll be an 18 car grid at Austin .
And then there’s Haas’s latest moment of delusion . Now stating in light of Bernie threatening to pull the plug on Haas’s F1 venture ;
” If I can make another billion in sales I’ll be in F1 ”
Yeah … that’ll happen … like never !
So Joe . A serious question . What in the ___ is Bernie’s deal of late anyway ? I mean .. taking genuine and public pleasure in others misfortune and claiming this is all good for the ‘ sport ‘ ?
Silly Season ; Gone from the ridiculous to the absurd .. as I said it would … unfortunately [ sometimes Joe I hate being right ]
You obviously don’t hate being immodest…
Reading between the lines here, possibly not a lot of delight taken in the suffering & misfortune of other working F1 folk in Joe’s world. Armchair quarterbacks get the credit that comes with no risk, bupkis. We’re observervers with all the answers, a broken clock is right twice a day.
Intended as a reply to Guitarslinger (sometimes Joe I hate being right)
What a mess. I must agree with Martin Brundle, who tweeted earlier today: “So F1 is being dragged in the mud by a guy who passed through using us a stepping stone and achieving nothing, and some faceless ‘investors'”. Maybe it is best, if Caterham would simply disappear, just a real shame for all the employees!
If memory serves me right than at the start of the season there was an announcement that Romanian team Forza Rossa was granted a F1 license for 2015 and onwards. Any news on that becoming reality? (it could have an influence on the ability of the back of the grid to take it easy and sort out their finances)
I do not believe that they found the money required to pay the FIA guarantee, but I may be wrong.
I’m surprised that nobody has asked Max Mosley’s opinion on the situation.
He did start the whole thing, did he not?
This Caterham story is very bad news. I find it very sad that so much discussion about F1 focuses on money and business issues, rather than the actual racing and the sporting side. Just a reflection of the never-ending spending race I suppose. It appears that quite a few teams are really in the deep end money-wise and that is very unsettling. You know F1 is in trouble when a wild driver like Maldonado, very fast yes, but staggeringly unpredictable and inconsistent, is signed up again for Lotus, when somebody like Button, Magnussen, Hulkenberg or whoever might be a much better prospect in performance terms in a Lotus-Merc. Of course they don’t have a sackful of dollars…..
The way F1 is going, we might have 8 top drivers at Mercedes, McLaren, Ferrari and Red Bull, whilst the non-works teams have to take whichever journeyman pay drivers they can get just to make it onto the grid.
Button and Magnussen are hoping for a McLaren seat and Hulkenberg signed with force India. Both teams are better than Lotus at least by looking at their recent results.
avoid F1 circus S.V.P. ….
??
Clearly the Administrator doesn’t understand F1 or Fernandes has just found a way to let go of his employees.
Arrows went through something similar and it was too late to buy them.
If they want to sell the team without any liability and “future” debt, they may find a buyer, but if the conditions are the same as when Fernandes pulled out, then I don’t see much point in buying the team.
At this rate, they may not even see it as important to renew their F1 license since they are not willing to spend any more money.
Don’t forget that in and among these suppliers are many small and medium sized businesses for whom a “nasty haircut” would cause much distress. Many of those would have been made bold promises of payment many times from men and company’s with theoretically deep pockets.
Regardless of who turns out to be telling the truth in this sorry debacle at Caterham it shows that the sport continues to attract these shady, dishonourable and spineless bottom-feeders.
To make matters worse, the Administrator, Finbarr O’Connell appears to be revelling in his 15 minutes of fame – referring to the team and its assets as ‘his’ property and appearing in front of news cameras with a uniquely self-satisfied air. As an officer of the Court, he should be behaving with dignity and humility, sticking to the most important matters such as payment of staff and creditors.
The entire sport is currently under the spotlight and the majority of us that work in it are decent, hard-working people who love to go racing. These people do nothing for the sport’s public image.
Is there a commercial relationship between Kolles and Ecclestone ?
I doubt it.