So what next?

The news that Michael Andretti and General Motors are putting together a bid for a Formula 1 entry is great for the sport as it will help to increase interest in Grand Pix racing in the US for the years ahead – if the bid is successful.  This will build on the momentum established by the Miami GP, the Netflix series “Drive to Survive” and the forthcoming race in Las Vegas.

It is logical to suggest that once the FIA heard that GM was part of the Andretti bid it agreed to unlock the door into Formula 1, although there are believed to be other bidders with similar ambitions, although we do not know for definite who they might be. If there are other manufacturers involved, the fight for the two available slots is going to be intense. What is very clear is that nothing is going to happen before the 2026 season because the entry process is not the work of a moment, the Formula 1 group also needs to be convinced that more cars are a good idea.

It is unlikely that the other teams will be involved in these discussions because the process is laid out in the secret 2021 Concorde Agreement, which allows for newcomers only if they are willing to pay a $200 million anti-dilution fee which is then divided between the existing teams to balance the revenues they will lose by allowing one or two more teams to share the pot. This is in addition to other substantial entry fees, and the investment required to build up a team over a period of time. This is why buying teams has been the recent trend because setting up a team is more expensive than buying an existing one. However the value of the teams is rising rapidly (and will rise more when the 2022 revenue figures are published in a few weeks) because the team’s revenues are rising, and the cost cap means that the expenditure is reduced and thus teams can be profitable. With no-one willing to sell at the moment (although minority stakes seem to be available for investors who move quickly and are happy to make money, rather than being involved in the day-to-day business).

The FIA selection process to identify possible candidate teams does not means that there will definitely be new teams because the candidates most show that they bring value to the World Championship. To register an expression of interest, bidders must give details of what they are planning and pay a registration fee. The expression of interest must include all the legal documentation required, plus details of the project, including a full list of all shareholders (and beneficial owners), plus CVs of the officers and directors of the companies and details about the technical experience, racing experience, facilities, equipment and engineering resources of the bid. Those who produce complete packages will then move on to the FIA’s due diligence to see whether the candidates have the ability of the team to raise and maintain sufficient funding to allow take part at a competitive level. The applications will be studied not only by the FIA by also by the commercial rights holder and must be considered suitable by both parties. There will be no official announcement about entries being accepted until probably the end of 2023 at which point the successful candidates will need to get to work putting everything together. So there will be no cars built in time for 2024 and to get cars built for 2025 would be a challenge given that teams need people, equipment and facilities. Thus the only sensible target is the 2026 season, when the playing field will be a little more level as the engines will change as well.

If Andretti has a signed engine deal with another manufacturer, it must be with a company which will be there in 2026 and thus it is really not important if the November 15 deadline for engine manufacturers has been missed. This is important in that those who did not register will not be involved in the formal discussions with the FIA, but if one is partnered by someone who is involved in negotiations, one will be represented. If at a later date, a company wishes to rebadge its engines, or produce its own product then the FIA is not going to refuse as the sport is healthier if there are more manufacturers. It is already too late for manufacturers to try to start their own engine programmes from scratch because of the lead teams involved in such programmes, but if one is piggy-backing off another manufacturer, a project is still possible. GM says that its engineers at its Technical Center in Warren, Michigan, will be involved. This is a vast campus with 38 different buildings on a 710-acre site, and something lke 20,000 employees. There is also the new GM Charlotte Technical Center in Concord, North Carolina, which is close to completion.

At the same time, Andretti is busy building a $200 million headquarters on a site in Fishers, Indiana, around 15 miles to the north-east of the team’s current facility in the Indianapolis suburbs. The facility will be 54,000 sqm and will sit on a 90-acre plot of land, next to Indianapolis Metropolitan Airport. The team says that the new campus will create up to 500 new jobs by 2026. The Indiana Economic Development Corporation (IEDC) has committed to invest up to $19 million, in the form of conditional tax credits and additional money in grants for training, while the city of Fishers has also approved additional incentives. If all goes to plan the goal is to for the new facility to be operational in 2025.

The groundbreaking ceremony for the facility took place just before Christmas and Andretti thanked Mark Walter, the CEO of Guggenheim Partners, an investment firm which has made a number of moves into sport, including buying into the Los Angeles Dodgers baseball team and Chelsea FC.

The Andretti organisation currently has two teams running in the UK, headquartered in Banbury (for Formula E and Extreme E) but this does not appear to be a big enough facility for an F1 team.

There is a British registered Andretti Racing Ltd, a subsidiary of the US empire, which was set up in June last year, but the only named director thus far is Dan Towriss, who is the president of the insurance firm Group 1001, which is behind the Gainbridge sponsorship.

39 thoughts on “So what next?

  1. The Andretti saga illustrates the folly of competitors having a voice in a team’s entry. Of course they’re opposed. How could it be otherwise?

        1. …which is irrelevant in 2026.
          A 2026 entry can be accepted without the teams having any say at all…
          As the story says, there will not be a team before 2026, even if that is not what they are saying at the moment.

          1. Of course, but the ADF for 2026 – under the next Concorde Agreement – is going to be miles higher than $200m, obviously.

      1. Nor should they have a say!
        It’s the FIA F1 World Championship, not the Toto and Christian cartel series (although they do act like they run it!)
        This 200m entry bond nonsense came about at a time when no one else was interested in joining cause it was too expensive and FIA were worried about losing entrants.

        Now the opposite is more the case?

        1. Actually, the FIA function is to ensure that the rules & regs are adhered to, aren’t they?
          They may behave as thought it’s *theirs* – but is it really?
          Taken fro mthe FIA website ‘…As the governing body of motor sport, the FIA ensures that fair, capably regulated and above all safe events are conducted in all corners of the globe.’
          Nothing about *owning* the series or who should/shouldn’t be allowed to enter.

  2. Thinking about the Team 11 maths and the answer is tricky:

    Currently $600 million of the F1 income is distributed to the 10 teams, average $60m each. When that gets split 11 ways, the average drops to $54m – a loss of $6m to each team. The $200m entry fee gives $20m each as compensation – which covers three years of that $6m loss.

    After that, the $600m needs to have reached $660m just for each team to be back at the opening $60m each distribution.

    So would the addition of ‘Team 11’ really deliver an additional $60m annual income from gate (already maxed), ticket price (already maxed) or TV fees?

    Above the current 10 Teams trajectory? Seems doubtful.

    1. “So would the addition of ‘Team 11’ really deliver an additional $60m annual income from gate (already maxed), ticket price (already maxed) or TV fees?”

      Yes it would and more TV: audiences in the USA alone have tripled since 2018, and yes, higher TV numbers filter down into the prize fund which has already grown this year and last.

      Even taking your figures, that drop of $6 Million is offset for 3 years by the fact that the $200 Million ADF gives each team another $20 Million.. Burgeoning sponsorship deals from the US will add more. as well as driving up mass viewership income from sponsors.

  3. Good grief. Can’t they get something on the grid by 2025 at least? You have get the excitement sooner than later.

  4. The desire to fast track an American brand into F1 is strong.

    Makes me wonder why Stellantis don’t use Chrysler or Dodge branding on Haas’ engines, as they’ve done with Alfa and Sauber.

    It’d be a quick route to help Haas chase the dollars….

      1. Why not? Ferrari engines have been branded as Petronas & Acer….and used by Alfa Romeo. Dodge and Chrysler are part of the same Stellantis family as Alfa and the old Fiat group,

  5. Does the encouragement of increasing American interest have the potential of ‘careful what you wish for’. Could the tail start wagging the dog?

      1. The Mercedes Benz – Toto Wolff model works well though, wouldn’t GM and Andretti want to replicate that?

    1. Probably not.

      And Andretti will only hold a small minority of the Group 1001 SPV – as they don’t have much money.

  6. It’s hard to believe the Formula 1 group really needs to be convinced that more cars are a good idea. For the sake of the pinnacle of motorsport, for the fans, for the increased competition, for the increased media content, and at the very least for the additional seats to support upcoming new driver talent.

    One of the biggest names in motorsport aligned with one of the biggest auto manufacturers, both American, in a sport growing in that market where the American owners understand the profit potential. I don’t totally get the “less-than-enthusiastic” response from F1 with this announcement. It seems less and less like a conservative, measured response and more and more like some kind of arrogance/elitism.

    1. Not really. If the new candidates are not going to survive, what is the point? This looks like a solid bid…

      1. Exactly, the last genuine new entrant who has survived was Jordan in 1991. Red Bull (as Stewart) was backed by Ford and Haas had so much collaboration with Ferrari and a good financial base. Even Jordan you wonder if they would have got through 1992 without the Yamaha deal, it may have constrained performance , but it eases cash flow.

        The 3 teams that joined in 2010 joined with a promise of a cost cap from “Jack’s” Moseley and in real terms probably had a more solid financial backing with Lotus and Manor, less so with HRT could not survive.

        I would love to see a 24 car field, it’s just how F1 was. But we want 24 solid entries, not like in 1987 when Allen Berg (I think it was) used to trundle around the back many laps off the pace. It was a different sport then, but now it’s a business.

          1. I didn’t say Haas was not a genuine entry, just that compared to Jordan he had a lot more backing, such as the supply agreement with Ferrari. Haas could not have made it without them. In the Jordan days you could build a ‘kit” car to an extent whereas now it’s so much more integrated around engine – drive chain – gearbox. And the associated electronics. As has been pointed out you cannot even use different lubricants as the engine you supplied with is optimised to a particular product. Although when Jordan was sponsored by Sasol there were rumours they didn’t actually use Sasol petrol. After all in 1987 the burnt out the Kremer Porsche 962c engines with defective fuel allegedly at the Yellow Pages 500 at Kyalami. They sounded like sewing machines as I remember before they went pop.

            When Pacific was following the same journey as Jordan you got the impression they could make it in F1 but couldn’t. By then the financial model was different, now to enter F1 like Jordan did is impossible, that was the point I was making and even with the financial muscle behind Andretti there is no guarantee they can make it as GM will need to be in it for more than a 3 year programme.

            And I am not a cheer leader for Jordan, I was just worrking back to the last team that has made the step up and survived, the one before that was Minardi and Toleman before that. Three teams in 40 years or with Haas and Stewart, half the grid

            Almost every entry is genuine, but just like say AGS or Coloni were never going to make it, a team like Forti was the same. Without the 2008 crash you wonder if Aguri could have taken the next step, but as Murray used to say “if is F1 backwards”.

  7. Looking through Cadillac’s racing history, I don’t see anything that makes them a serious racing company. Their endurance car was a Dallara/Ilmor, so all that was needed from Caddy was money. There operation was more on the Haas model than that of the big three F1 teams.
    It’s my feeling that F1 is not going to be short of sponsorship money sources and it should be, that if an auto manufacturer wants to be involved with F1, then they must build a PU, a chassis or both. Manufacturers must manufacture to have their name on the car or PU.
    F1 is a series that calls for the best in engineering. In this modern era, as a fan, I want to know that those companies that actually produce the goods are given all the credit. I realize badging has been done in the past but there is no need to now. Andretti/Renault sounded like an F1 team. Andretti/Cadillac sounds like a dealership.
    Cadillac. I can’t think of anything less F1, …maybe Jeep.

      1. For me it matters because Cadillac isn’t actually bringing anything to the table that any large company couldn’t provide. They call them partners these days but they are really just sponsors that will put their sticker on another companies engine, a company that actually has facilities to design and build an F1 engine.

        I have been a fan for 50+ years and it seems to me that F1 is successful enough that it doesn’t need to allow manufacturers to pretend they are builders. The cars should be named for the constructor and the engine builder.

    1. They are part of GM and the badging is a marketing exercise largely. It would have been pointless to use the Corvette brand as that was / is already used in the GT class. The IMSA programme you mention was a spec chassis and then manufacturers aligned to one of the four licensed chassis by regulation but with some latitude on styling etc (Nissan and Ligier, Mazda and Mutimatic- Riley and Cadillac and Dallara) but the engine was developed directly. Oreca and Acura came along a year later run by Penske. How different is this to say Williams and the BMW Le-Mans car of the late 1990’s or in F1 terms Williams and Honda, Renault and BMW, or McLaren and Mercedes or Benetton and Ford and then Renault. Just because the subsequent Renault that Fernando Alonso won his championships in was badged a Renault they were two distinct programmes that were integrated. The car was designed and built in England and the engine development programme in France. Even the most successful engine of the last 10 years started out as a Penske /illmor / GM joint venture (not necessarily equally owned) and then when GM pulled the plug Mercedes stepped in with the CART engine which then developed the F1 engine for the Sauber-Mercedes. It was badged as a Mercedes and they paid the development, but it was developed by Illmor. If a F1 engine is going to be developed by GM internally to fit into a chassis possibly designed by an Andretti design team but built by a specialist manufacturer like Oreca, it’s similar to most of the cars currently in the field.

      The only our and out manufacturer entry of the last 20 years was Toyota and their spend to points ratio is probably one of the worst of any team to have scored a point

        1. Honda grew out of BAR which was Tyrrell and is now Mercedes, Ditto BMW wirh Sauber and Renault with Benetton. They were full factory teams that bought or backed into existing entries which were to a greater or lesser extent successful already and they changed the name on the door, BMW is now Alfa Romeo by that logic. Toyota was a start up with everything run out of Cologne. That was the point. I would say tbey were the most prepared team in terms of track time to enter F1 and despite all the money spent barely progressed. I read somewhere they spent more than 2 Billion (cannot remember if it was Yen or Dollars) where a billion is a huge amount of money in almost any currency, except Zimbabwean Dollars, where is was about twenty quid at the time Toyota entered F1. When they left they did not sell tbe team to someone for a peppercorn, like Ford (Jaguar) did to Red Bull. Even this team showed that racers with business acumen for the sport will triumph over suits with the management by committee. Christian Halliwell and tbe relatively lean Tin Can management have shown that.

          BMW did not move engine production to Hinwall, Renault to Oxfordshire or even Mercedes Benz the few miles from Brixworth to Bicester they were works teams clearly but to a different model to Toyota.

      1. According to the BBC, some F1 principals believe Cadillac is slapping its name on an engine prepared by another automaker, such as Renault. Andretti said that couldn’t be further from the truth, although he admits the Cadillac-prepared engine would not be able to participate until 2026.

        “It’s a rumor – it’s not true – Cadillac will be very much involved in the manufacturing of the car,” Andretti told me. “If we get in, in 2025, there won’t be a new engine yet, so we would have to go with a formula that is used now, but in 2026 there are various things we can do with another engine manufacturer. It would not be a badged engine, because there would be intellectual property from Cadillac in that engine, so that is not a badged engine.

  8. Sorry but this view that a wholly owned manufacturer outfit is the be all and end all is wrong.
    These businesses effectively hold the ‘sport’ to ransom and actually prevent the grid growing.
    One might argue that for the money they have spent and the ‘prestige’ they bring that they should be part of the running of the sport. But the makes are only in it for their own ends.
    This is the FIA F1 World Championship, not the World Manufacturers Club only series!

      1. Thanks Joe, it is an opinion based on observing the way F1 has developed and the influence (and entitlement?) certain entities believe they have.

        May I ask what you disagree with and why?

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