The big news in the automotive world, of course, has been the Volkswagen debacle, with the German multinational admitting to US Environmental Protection Agency accusations that it has been deliberately falsifying emissions tests, using clever software that detects when a car is being tested and changes the emissions accordingly. The company has lost around 35 percent of its value on the various stock markets, while the company chairman Martin Winterkorn has been forced to resign. The firm is expecting a massive financial impact, with estimates of around $25 billion in damages and further losses from loss of trust in the brand and damage to the VW reputation. There are also likely to be criminal charges against those who perpetrated the fraudulent behaviour. VW has already filed a complaint with German prosecutors against unnamed employees. The changing of the guard in Volkswagen could, perhaps, bring in new executives who are excited about F1, but it must also be said that two of the biggest motorsport fans in the company – Ulrich Hackenberg and Wolfgang Hatz – are both expected to be out. It is impossible to say what the long-term impact will be, but it is likely that all of this will change the motorsport strategies of the company, but no-one knows what those changes will be. It might even be good news for the sport because a high profile hybrid programme might be deemed the best way to rebuild the company’s environmental image. Having said that motorsport is not going to be a priority at a time when the knives are still flying. The company has a string of different brands, notably VW, Audi, Porsche, SEAT, Skoda, Bentley, Lamborghini and Bugatti. In addition, there are other dormant brands that might be used if really radical change is considered a good idea. These include AutoUnion, Wanderer, Horch and DKW. The timing of the disaster could not be worse for Red Bull, which has apparently been busy trying to get Audi to agree to go into partnership over a Formula 1 engine. The rumours suggested that Red Bull would be willing to pay Audi $80 million dollars a year, while the Ingolstadt firm would shut down its Le Mans programme, which makes little sense these days now that sister brand Porsche is now up to speed in WEC. The departure of Winterkorn may also end the company’s fascination with football, with sponsorship of VfLWolfsburg, Ingolstadt FC and a shareholding in Bundesliga champions Bayern Munich. The firm also has smaller sponsorship deals with more than a dozen other clubs, including Hamburg SV, Schalke 04 and Eintracht Braunschweig.
Red Bull was up the proverbial gum tree prior to the scandal as the company made the daft decision to terminate its Renault supply before it had a new contract in place. That happened in Hungary in July and with Mercedes saying no in the course of the Monza weekend and Honda showing no interest, the only available choice is Ferrari. The Italians are happy to provide Red Bull with two customer engine supplies, but these are going to be expensive and the resulting package is unlikely to be as competitive as the factory Ferrari, because the best packages involve design compromises on both sides, while customer supplies do not. The important question is how this has occurred. Most people think that Red Bull was simply too arrogant, while the conspiracy theorists suggest that the firm was stitched up. Dietrich Mateschitz has been walking in the Austrian woods and has been considering pulling out of F1 but that is unlikely to happen because, in exchange for large sums of extra prize money from the Formula One group, Red Bull agreed to stay in the sport for 10 years (until 2020) and there is believed to be a penalty scheme, which means that the penalty for pulling out reduces from $1 billion by $100 million per year. This means that Red Bull can walk away from the sport if the company is willing to pay the Formula One group $500 million. Given the bill, it is best for Mateschitz to keep his money and make the most of the mess the team is in and try not to screw up so monumentally in the future. The other option to save face would be for Mateschitz to dig even deeper and buy control of Delta Topco, the parent company of the Formula One group. He could then sell his teams without being red in the face. Bernie Ecclestone would probably like that as Matechitz would no doubt keep him on…
The Red Bull mess has been a nice little bonus for Ferrari boss Sergio Marchionne, who disguises a ruthless streak beneath avuncular pullovers. This means that he can insist on expensive long-term deals and that future revenue can be compounded and added to the Ferrari financials, resulting in a higher valuation when the firm goes to the markets. With a revenue multiplier for the IPO in double figures, two $40 million engine deals, each for three years, could add $2.4 billion to the value of Ferrari… The Ferrari racing team personnel may not like the idea of Red Bull getting the engines, but when you look at the kind of numbers involved, one can see that Marchionne is in a position to be “generous”.
There was also a lot of talk in Suzuka about Lotus and Renault. If all goes to plan the French firm will get a 30-day option to buy the team later today. It will then be able to get a financial package in place with most of the debt staying with the old shareholders (ouch!) but money coming in from Red Bull (the fee to cancel the 2016 engine deals), from Pastor Maldonado, from Total and form the Formula One group. The last-named entity was not keen to pay anything (CVC Capital Partners being too busy stripping money out of the sport to care about keeping teams alive). A compromise seems to have been struck that means that Renault will commit to F1 for five years, with small payments in addition to prize money for the first four years (2016, 2017, 2018 and 2019) After that the team would become eligible for much bigger payments if successful, with figures in the region of $80 million per year possible, if the team wins two championships. If this is all written down and signed up it would enable Renault to borrow against futures revenues and so come up with the cash it needs right now to settle all the non-shareholder debts and to invest. Getting rid of all debts and liens on property and equipment etc will cost about $55 million. Strengthening the team will cost more, but with these sources of money put together the team can have a budget of around $250 million next year, without needing the second driver to come with cash. This is a good bet for Kevin Magnussen, although if the French want the team to be more French it could open the way for Jean-Eric Vergne, as Romain Grosjean will be confirmed as a Haas F1 driver tomorrow, along with Esteban Gutierrez. The former shareholders will be left with about 30 percent of the shares and can make money back by either selling the shares or waiting for dividends (or both).
The long-term Renault deal with FOM would be very useful for Ecclestone as this would give him a car manufacturer committed beyond 2020. He would then need only Ferrari and the others would have to follow… Clever stuff. Having said that, Bernie will be 90 years old if he makes it to 2020 and he may find that his pace of life will have to slow down a little.
Bernie has missed the last couple of race this year and if his planned 2016 calendar goes ahead he will probably miss quite a few next year as the stresses and strains of global travel week-in, week-out, is probably not something that doctors recommend for the more mature members of society. The latest draft calendar was circulating (quietly) in Japan with the season kicking off in Australia on March 20, with four stand-alone flyaways to kick off the year: Australia, Bahrain, China and Russia all two weeks apart. This would be followed by Spain and Monaco as usual and then a very odd double-header involving Canada and Azerbaijan. This is apparently possible but would mean that the Baku race would clash with the Le Mans 24 Hours. However, if the race in Azerbaijan were in the evening, Le Mans TV viewers would be able to slip seamlessly into coverage of the new street race… There would then be a busy four races in five weekends in July before a solid August break and then an autumn involving Singapore, followed by a two-week break and then a Malaysia-Japan double-header. Good for the air miles if nothing else. The word is that Austin would be a stand-alone race followed by a Mexico-Brzil double-header, which would get the championship finished before the end of November with 21 races included.
On the driver front, the number of seats available is reducing rapidly with Sergio Perez having grabbed the second Force India. Alexander Rossi is hoping to secure a ride at Manor, as is Will Stevens, but both are wary of Indonesia’s Rio Haryanto who is believed to have a huge pile of cash from the government-owned Pertamina oil company, which is keen to lift its profile in Europe. Haryanto is racing in GP2 with Campos and has won some races. The other name being mentioned at Manor is that of Mercedes protege Pascal Wehrlein, although there is no plan for Mercedes to buy into Manor as has been rumoured in the wilder elements of the F1 press corps. The McLaren’s situation is confused with all manner of contradictory quotes flying about. There is talk of sabbaticals, but these sound rather far-fetched… However, the prize for the least likely story of the weekend goes to former FIA President Max Mosley who had some fun by convincing a naive journalist, who likes to think he understand the sport, that F1 cars could be fitted with ejector seats. The hack swallowed this story hook, line and sinker, clearly unaware of the operational restrictions of both Formula 1 cars and ejector seats. One idea suggested in the F1 Press Room in Suzuka was that the hack in question should do a test with the system on the circuit, just after the Degner Curve, where the track passes beneath the start of the 130R Corner – or in the tunnel at Monaco.
There was more going on, but the remainder of the good stuff is reserved for my Joe Saward Business of Motorsport weekly newsletter, for which you can sign up if you really want to know the ins and outs of the F1 Paddock. Check it out here.