Notebook from Sochi

NotebookThere was a lot of paddock chatter in Sochi, much of it relating to the predicament that Red Bull Racing has fallen into. The handling of the relationship with Renault has been almost as ham-fisted as Kimi Raikkonen’s attempt to overtake Valtteri Bottas on the last lap of the Russian GP. Since telling Renault that it did not want the engines next year, Red Bull has been turned down by Mercedes, Ferrari and Honda, which means that the only choice for 2016 is… Renault.

The French, naturellement, are not keen to slip back between the sheets with the lover that spurned them, but no doubt they can be convinced because Bernie Ecclestone is keen to keep Red Bull in F1 and wants Renault as well, so he can simply suggest that being nice to Red Bull would be a good idea if Renault wants the thumping great nine-year prize money deal that is on the table, which will enable the French to clear up the mess at Lotus. The word in Sochi is that Scuderia Toro Rosso already has a deal to run 2015 Ferrari engines next season, which is perfect for Ferrari as it will provide them with all the data from a youngster called Verstappen, which will enable them to assess whether or not he is a better bet in 2017 than Raikkonen. Incidentally, with Romain Grosjean driving for Haas, Ferrari will also have access to his data as well… So Kimi will need to keep himself sharp next year.

Lots of Red Bull people (and others with vested interests) are flogging the idea that Red Bull will pull out of F1 if it does not get what it wants – which is not an engine from Renault. There is no sympathy at all for the Red Bullies, but the sport would be poorer without them. Or would it? You see, the word is that in the super-secret deals that were signed by the big teams and the Formula One group there are clauses that involve a $1 billion guarantee over the 10-year term of the deal. Bernie Ecclestone, quite rightly, felt that if he was going to give these teams vast sums of cash, he wanted undertakings from them that they would not bale out when the going got tough, as happened in 2008 with Honda, Toyota and BMW. Big companies generally do as they please and so you need something eye-waveringly painful to get their attention. I hear, but I could not prove it, that the deal is as follows: the penalty for an early departure reduces by $100 million each year, so that if Red Bull quits F1 in 2015, it would be required to pay $500 million to the Formula One group. This might not be sufficient to stop it happening.

However, Red Bull could simply keep up appearances for another five years.The team name and the livery could remain much the same as it is now but the company could cut back to virtually nothing, while the team ownership could be slipped across to Christian Horner. Thus, Red Bull Racing would remain for the term of the deal. Alternatively, it could reduce its spending and look for a buyer, so as to get some money out of the sport (not that money is a commodity that Red Bull needs).Remember that back in about 2001 Sauber and Red Bull fell out over whether to hire Enrique Bernoldi or Kimi Raikkonen. Red Bull own the team and was the primary sponsor but Peter Sauber held all the voting rights. In that case, Red Bull remained on the cars until the end of 2004, although the relationship was broken. Dietrich Mateschitz went on shopping around to buy a new team (the end result being Jaguar Racing), while his Sauber shares were passed on to Credit Suisse. My feeling is that Red Bull needs F1 as much as F1 needs Red Bull and so all the sabre-rattling is simply an attempt to get a better deal in the short term. Red Bull and Renault is not going to be a long-lasting marriage whatever happens and so Red Bull needs to find a suitable long-term alternative. The answer is for the drink-maker to fund the engine development for someone else and the obvious choice in this respect is still the Volkswagen Group, even if the firm is still reeling with the punches raining down on it from the diesel emissions scandal in the United States. What Volkswagen needs now is a quick way to rebuild its credentials as a tree-loving kind of firm and one can imagine that strategists will be saying that the answer is probably to be seen as the market-leader in forms of automotive activity other than diesels. Super-efficient hybrids are a good alternative and F1 is the perfect place to push that message. However, this cannot be done overnight and it would take Audi a couple of years to have all the equipment and people required to take on the big guns of today. However, it would be possible in 2018 and so Red Bull really only needs some donkey engines to get them through the next two years at as sensible a level as possible. The team might lose a few people, but if there is a long-term goal and ambition and money, then most will stay.

On the subject of credentials, there were some funny goings on in Sochi relating to people using VIP passes while apparently working as journalists. The folk in question are unable to get media accreditation but have managed to score some VIP passes this year. They try to convince readers that they are proper media by tweeting pictures of credential envelopes with their names on them. Rather rashly, having got into the paddock in Sochi using these techniques they then began tweeting news stories from the Paddock, which the average Russian Immigration official might confuse with the job that real journalists do. Going to Russia as a member of the media is a complicated business, involving all kinds of forms, documents and invitation letters, not to mention listing the birthplaces of your parents and (my favourite) all the countries you have visited in the last 10 years (the computer programme they have gave up with my list). We all go through this pain because anyone who goes to Russia without the right paperwork and then starts behaving like a journalist is thought to be taking a rather big risk. However, if some can get away with it, perhaps we will all be doing the same next year.

Getting into trouble with the authorities is not something that most people want to do and poor old Force India have had more than their fair share of grief with the Indian authorities of late. Team partner Roy Sahara has been in jail in India for 18 months, trying to raise a mammoth bail bond that will convince the authorities to let him go. They are insisting that he do this by selling his foreign hotel properties, notably the Grosvenor House in London and the Plaza in New York. The word is that there are Qataris interested (but then that is true with most financial transactions in F1 these days). If Sahara does get the bail bond he is expected to retire to live quietly in the Republic of Macedonia (I’m not joking) as his days in big business in India seem to be over. Vijay Mallya, for his part, has filing cabinets full of legal actions that have to be dealt with, in relation to most aspects of his crumbling empire, notably Kingfisher Airlines, but also United Spirits. He owes money here, there, everywhere and everywhere else and several banks are trying to get him declared a wilful defaulter, which will mean that the only money he can borrow in the future will be extraterrestrial. Now, to add injury to injury (with insults likely in the future) Vijay and his associates have had their houses and offices raided by India’s Central Bureau of Investigation (CBI), the country’s premier law enforcement agency, in connection with an alleged criminal conspiracy involving them and officials of the Indian government’s financial service company, known as the IDBI Bank. It is claimed that they colluded to sanction credit limits in violation of banking norms.

Elsewhere, Ferrari has been showing how big business should be done with plans for its IPO going ahead, with a valuation expected of around $10 billion. This will give the Fiat Chrysler Automobiles a payout of about $1 billion and it will stay in control as well. The word is that FCA boss Sergio Marchionne will announce plans as soon as the IPO is over to push supercar production up from the current 7,000 to around 10,000. There have also been suggestions that Ferrari may try to emulate Porsche and add some more vehicles to the range, in order to become more profitable and to meet US emissions limits which are calculated across the range of each car company. As Ferrari will be independent of FCA, it will need some very efficient machines to offset the gas-guzzlers. There is even talk of an SUV… Some fear that this might affect the company’s image of exclusivity, but Porsche has shown it can be done. Marchionne believes that the Ferrari brand can be developed into more luxury goods, which would help its market value.

The news that Prema Powerteam is to enter GP2 should also be taken seriously because behind Prema is the Canadian fashion billionaire Lawrence Stroll, who has made massive amounts of money by developing brands such as Tommy Hilfiger and Michael Kors. He has a long record of F1 sponsorship with brands such as Pepe Jeans, Hilfiger and even Asprey. He has sold most of his fashion businesses now and is concentrating on other things, including his son Lance’s racing career and owning the Mont Tremblant racing circuit. There is always a lot of talk about Stroll and often nothing much happens (he was rumoured to be buying into the F1 Group not long ago, not to mention Sauber and Williams). However Prema has now taken over the GP2 entry from Lazarus and it is quite likely that in a year or so, the younger Stroll will pop up there in GP2. After that, perhaps we will see Dad buying into an F1 operation.

Elsewhere, Hong Kong has become the latest city to try to emulate the success of the Singapore GP. It will host a Formula E race in just over a year from now, on a street circuit that will include the Central waterfront area and the Star Ferry terminal.

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.

64 thoughts on “Notebook from Sochi

  1. Did Sauber go for Enrique Bernoulli for his knowledge of fluid dynamics or did Word autocorrect Bernoldi for you?

  2. This Red Bull-Renault situation is staggering. Great you brought up Sauber and Reb Bull. The situation was similar with Renault as well after 2008.

    The best example is still Lotus vs Lotus: as Lotus Cars tried to force Team Lotus (which was then the legal successor of Chapman’s team – as the right was bought from David Hunt) in court to drop their name, but eventually settled with Team Lotus not referring to their cars as “Lotus” by any means, only “Team Lotus”. “Team” then went to buy Caterham (who, incidentally make a living of producing aftermarket Lotus 7s) and they even had a “Team Lotus” special edition Caterham road car.

    “Team Lotus” was more “Lotus” than Lotus Cars at this point. They went to court again, only this time Lotuc Cars won, Team Lotus had to change their name to Caterham.

    A few months into 2012, Lotus Cars pulls out of sponsoring the Formula 1 team. So there’s an uber-Lotus team forced not to use their legally adopted name – going out of business at the end of 2014 – and a team called “Lotus”, not related to any Lotus venture in any shape or form except the name and the badge.

    I’m throwing my hands up.

  3. Hi Joe,

    I personally believe Red Bull has ways to get around the 500 million fine. The team holding the license, Red Bull Racing Limited, holds a negative value. That entity is nothing more then an empty shell, with Red Bull Technology being accountancy wise seperate from the team while having all the staff and resources, but crucially not the license.

    Nothing keeps Red Bull from defaulting the team, go into liquidations and what little, if anything, is sold goes to the suppliers. It’ll leave Ecclestone with empty hands.

    1. You’d think that if Bernie is as clever as everyone says then he’d have realised this and sought out a guarantee from the more liquid parent company.

    2. As Alex below mentions, I think Bernie is well aware of the fact that an agrement with the team itself holds little value (that was what happened with the previous round of big dropouts) and instead had the owners of the teams sign up (Red Bull, Mercedes Benz etc) to make sure.

  4. ..And if VW came in in 2018, built engines for Red Bull and those turned out not be up to scratch on the first day (ala Honda McLaren), Redbull would finish off VW by thrashing what is left of their reputation publicly.

  5. As for visa application form UK and Canada has the same ‘list countries you visited in last 10 years’ question.
    You can trick UK visa application site to add one more country after filling 10 with saving application form and reopening it. It will help you to reach the new limit of 20 after 10 attempts.

    And you have to provide your finger prints and retina scan in particular office before UK will start 40 days long processing of your visa application.

    Canada has no tricks to go beyond 10 countries in its PDF form. But in addition to list of countries they need stamped visa/entrance page scans for all visits during 10 year period. And file has to be under 3megabytes. And it should be uploaded from internet explorer.
    On the good side they are willing to give you 10 year visa after that, so they don’t need to store a copy of your traveling record over and over again. All the traveling data stored in 10 years chunks on their servers.

      1. Frequent business visitors from EU starts with visas valid for 3 months. Next one is valid for 6 month, then 12 and 24. But as receiving party we state what are the next events.
        Probably one of supplementary documents for next visa application should highlight that after 2016 race there will be a race in 2017 and 2018.
        Sometimes such small hints to custom officer is all you need to get 10 years long visa instead of regular 2 years.

  6. I know beggars can’t be choosers et al, but why is Torro Rosso getting a Ferrari ’15 engine when Haas is getting ’16? Seems a bad deal for Torro Rosso and for Ferrari harder to asses Ramain, Kimi and Max against each other.

    1. I read that Ferrari have stated they do not have enough properly trained engineers to support more teams using 2016 engines, and can only add the one (Toro Rosso) as a 2015 customer (and even that might no longer be the case). Haas would have been penciled in for that 2016 engine a while ago, whereas the RB issue is fairly new.

      And Haas will likely be getting a de-tuned 2016 engine so that the junior Ferrari team won’t accidentally beat them in a race (cars will be similar enough otherwise, and I’m sure they will already have been told that shouldn’t happen).

    2. Under the principles of homologation, I don’t know how a manufacturer could distribute engines built to varying specs. Yes, it was done for Manor this year, but as I understand it, that was an incredibly unique circumstance (based solely on the fact that they were using a 2015 chassis) and FIA indicated that it was a one-off decision.

      If FIA do allow it, then homologation really means nothing.

  7. I did notice Sergio’s race suit was lacking in the Sahara and Kingfisher names – haven’t noticed before… it could be my poor eyesight of course.

  8. Joe , again ( ! ) I saw you walking behind DC on the grid , together with indeed
    the ( starting to get famous ) Green Notebook , while watching the BBC live coverage – for me ; spotting you during a GP weekend ; it is becoming more
    of a thrill than watching a race , although Sotchi this year was not bad at all.

    Just curious ; the blue polo hat you wear ; Is that anything special ; so like
    one of your websites on it ? If Yes can we buy it too ? If No ; wouldn’t that be something to sell ( wearing such a polo , so with your website of whatever on it
    during a GP weekend really informs all other people around that you KNOW what you are talking about ; I would more than happy to do this for you .

    1. I have lot of hats. I used to wear a CIA cap quite often, but it is not wise to use that in Russia and Muslim countries. In recent years I have tended to buy hats when I go on holiday. The two in Russia were the Goose Hummock Shop and the Mattakeese Wharf restaurant, both of then being on Cape Cod. I also have some Nantucket and Martha’s Vineyard caps. I really should get one from Chappy as well…

      1. Speaking of hats, those Russian winter caps worn by the top three on the podium were quite funny! But the podium interviews weren’t. Eddie Jordan did a great job of entertaining as well as enlightening though even his repeated questioning didn’t get Lewis to spill the beans on the tyre issues he was radioing about…

  9. Maybe offtopic, but it never ceases to amaze me how well read you are on matters pertaining to one Vijay Mallya and Force India. The words – para’s spent on him in your blogs and his affairs in India, happen to be the best summary on the subject. its concise, to the point and usually bereft of all emotion.

    1. I was thinking that too. Being in India, even I wasn’t aware of the fresh IDBI scandal and the current state of Roy Sahara (I should catch up on current affairs), but Joe is just exhaustively enlightened on the goings on here. It shows his passion and commitment to the task since I am learning about what’s happening in my country from him!

  10. I love the piece on Mr Sahara and Mr Mallya. How do these people sleep at night! Admittedly, Mr Sahara probably sleeps on a straw mattress.

          1. Joe, will Force India ever be able to mount a title challenge. When Mallya bought it as Spyker, it moved from back of the field to the mid-field. When is the next step likely to come? It should get some cash boost then…

            1. It needs massive infrastructure and staff investment to get to even Williams/McLaren levels and there is no guarantee that it will win at that level.

          2. From what i read recently, VM was intelligent enough to invest his ill gotten personal money through an off shore company that holds SFI and not through USL(His spirits company). SFI is safer than say his IPL cricket team from being sold to recoup some losses. There was a story in an online publication today about how he has siphoned off bank loans to tax havens.

  11. My thinking regarding Volkswagen is that everything and anything they do from here on, must be spotlessly clean. There can be nothing negative about anything they do. Red Bull, as you have so accurately called them as , “Red Bullies”, sums them up perfectly, in regards to public perception. Because of this, I feel Volkswagen would not want an association with Red Bull. I can see the headlines now “The Caniving Cheaters Volkswagen, Have Now Teamed Up With The ‘Bullies”.

    1. Volkswagen already has a very successful association with Brown Cow^w^w Red Bull as the latter are the major sponsors of the former’s all-conquering team in the World Rally Championship.

    2. The situation at Volkswagen is positively toxic. Further light on the affair was shed by a Professor at Cranfield Business School. The cheat software was developed by Porsche engineers back in 2010 for TESTING purposes only. What it is then doing on production vehicles is a question for senior management.
      Matthias Muller stated when addressing the Wolfsburg factory that a time of consolidation ( read reduncies) is in the offing. To square that circle of cost saving with an F1 program might prove hard to swallow.

      1. Especially for the trades unions’ representatives on the Board.

        If it fails to walks like a dodo and fails to quack like a dodo…

  12. If I have to guess, I’d say there is only one solution for RB. Re-kindle the romance with Renault.

    He is a bully sometimes, but tbh he made a perfect husband for 4 happy years. More thoughtful, clever, attentive than the rest. Brilliant cook. And very rich. Much richer than that Mr Lotus the newsagent she’s been thinking about lately. So move back she will. (In F1 as in life….. 🙂 ) She may even get to keep both, at least for now.

    But she’ll have to spruce up. Renault let herself go. Now her legs are hairy, her old jumpers are stained, her breathe smells like her armpits. Better buy some razors, bath foam, deodorant and the rest. The neighbours are all glamorous liz hurleys. No spare sisters at the minute, but that won’t stay the case forever.

    You gotta keep sniffing the wind to see how its blowing. Keep looking about. Watching. Anticipating. Otherwise someone may make a dicey move you never expected and like the unfortunate un-watchful Bottas, you will find yourself out of it. I’m sure Renault is too smart for that !!

    1. Your apologia for domestic abuse seems heartfelt, if a little off topic.

      And in truth, abused partners often do return to their abusers, provided that the latter have succeeded in their efforts to destroy their victims’ self esteem.

      I rather suspect however that you underestimate Mr. Ghosn’s resilience. And that your small efforts to twist the knife will have little effect on that.

  13. VW have announced that they are cutting spending by $1Billion and are pressing their suppliers to save a further $3.4 Billion. It makes me glad to be retired from the oem supplier market. It does not seem to me very likely that they will enter F1 for some considerable time. 8 million cars to fix in Europe alone. Expect some major name supplier to go bankrupt in the next two years.
    In an air of desperation it seems VW are now pointing fingers at individual engineers to take the blame for the emissions saga.

    Ferrari is apparently to be floated with a valuation of just short of $10 Billion, how much of this will go toward the cash deficit at FCA is not clear. Nor is what percentage of the shares are to be floated, though with the majority remaining in traditional family/FCA hands it cannot be very much . Any definite info on this Joe? It looks to me as if FCA will still have control.

  14. Joe, I applied for a Tier 4 Student Visa to the UK not too long ago and had to fill the same details out as well – parents’ dates and cities of birth as well as ALL trips made out of my home country over the last 10 years, among other ridiculous requirements.

  15. Given the embarrassing difficulties Honda are are having, I can’t see another manufacturer entering the sport anytime in the foreseeable future, particularly one that is facing civil and criminal investigations in at least two countries today with potential financial liability soaring into the tens of billions of dollars.

    As has been pointed out, even if a manufacturer were thinking about entering F1, would you partner with a team that so publicly humiliated an engine partner that provided it with four world championship winning engines? Probably not.

    It would be a shame to see Red Bull exit the sport not just because of the team’s rich (recent) history, but also because their two teams are financially solid (which is an increasing rarity in the sport) and the grid is already a bit sparse. But, they’ve burnt so many bridges, which is additionally complicated by an engine formula that is an insane barrier to entry for other engine manufacturers, it’s hard to see how this is resolved in a way that keeps all four cars on the grid.

    1. +1 to all of the above.

      And if all that doesn’t put off VAG, then one wonders if they’ve noticed the unfounded rumours that one only get screen time in this sport if you do the right favours for the right people. Major global corporates just *love* that stuff. Not. Sure, it’s not an absolute barrier (because if good governance and the rule of law were that critical, no foreigners would invest in Russia at all); but you need a *very* compelling reason to deal with that shit. How compelling a reason does F1 offer right now?

  16. I’m an old romantic who would love to see race cars buzzing around HK island again. There was sports car racing many many years ago, and of course, the legendary Teddy Yip lived in Hong Kong for awhile.

  17. The more I think about RedBulls predicament, the more a simple, yet elegant solution comes to mind.

    In essence, RBR ceases to exist as an independent Formula 1 racing team. Instead third cars from Mercedes and/or Ferrari are on the grid in RedBull livery, driven by the Kvyat’s, Sainz’s and Verstappen’s.

    Yes, I know this well beyond current regulations (BAR original livery plans comes to mind, as well as the customer team discussion). But it fills the grid and F1 doesn’t lose a well known brand…

    1. Loose a well known brand ? I dont care if the brands in F1 are fizzy drinks, banks, booze companies, internet moguls or whatever, they should probably be legal and not be “imoral” products though.

      Look at NASCAR and NHRA to see the most diverse range of brands in sport. I mean they even have an Army sponsored team. We need to differentiate between the racers and the sponsors, so what if Red Bull leave, Milton Keynes racing is still a damn fine bunch of engineers and designers, they are racers at heart sullied by their management being drinks moguls, Paint the cars red and white and you have Daz Milton Keynes Racing, paint them Blue and White( I think) and you have Milton Keynes, Team Samsung

      To me you need to be able to differentiate between the race team and the sponsor, sponsors owning a team that is not relevant to their business just seems daft to me. Williams Martini Racing, you know who the team is even if the sponsor changes, Marlborough McLaren you knew the difference between team and sponsor. From memory I think Benetton was the first to go down this route, I mean why would an Italian jumper company know how to build a racing car? Look at who they brought in to run the team…….

      Let the racers run the race team and leave the sponsors to the paint and hospitality suites.

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