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For those of you who are interested, I have done a new podcast, chatting about the current goings-on in the sport. Click here to hear it.

There is a break point coming up in the British GP contract, at which point either side can walk away from the deal, if they think that is the best course of action. The 17-year deal, signed in 2009, began in 2010, with a break clause after 10 years (thus after the 2019 race). In order for those involved to make suitable alternative arrangements, however, this break clause must be actioned in advance and it is believed that the window for doing this begins shortly and closes after the 2017 or 2018 race.

Both sides are considering what to do. The Formula One group, inevitably, wants more money because the current deal is worth only $23 million a year (with a five percent increase per year). Many other races are paying in excess of $40 million with a 10 percent increase per year. Silverstone also gets around half the money generated by hospitality, while other F1 promoters have to sign all of that over to the Formula One group when they agree to host an event.

The problem is that both sides need a British Grand Prix. Ecclestone because the teams insist upon a home race, and Silverstone because of the prestige such an event brings, which helps to drive other business. Having said that, Silverstone also knows that Ecclestone would struggle to find an alternative and that the halo effect of the F1 race would continue for a number of years before impacting on Silverstone’s reputation. Cancellation would however have an economic impact on the circuit and on the region.

Ecclestone knows that there is no permanent circuit able (or willing) to afford the upgrading work required and the race fees to host the British Grand Prix and it remains clear money is not going to come from the British government. There might be money from Europe, but then Britain is about to decide whether to leave the EU and so that is not going to happen for a while (if at all) and it is hard to argue the case for Silverstone to get European money when neither Northamptonshire, nor Buckinghamshire are deemed to be poor areas.

Bernie’s only choice therefore is to try to find someone to pay for a street circuit. The only city that could afford to do that is London, hence the stories that have been circulated about a possible London Grand Prix. 

Such an event is unlikely because of the bureaucratic hurdles, such as public enquiries, that could be thrown into the way by those opposed to the idea.
However there is an advantage in that a new law has been passed to allow local authorities to close roads in order to host motor races, without an Act of Parliament, as was previously the case.

This all probably explains why Bernie Ecclestone is thumping the drum about a race in Central London, but what is not clear is where the money could come from to pay for such a race. The city is not going to pay the fees for a race, but might be willing to pay for infrastructure work (which would be significant).

The fees would, at best, be a public-private partnership, along the lines of the model used in Singapore GP. The cost of the race is offset in Singapore by an additional tax on hotels, levied by the government. The remainder is funded by private investors, mainly Ong Beng Seng, who owns hotels, restaurants and fashion franchises in the city. Ong has similar holdings in London, including three hotels, the Four Seasons, Metropolitan and Halkin all around Hyde Park Corner. Another Singapore firm, glh, is the biggest hotel chain in London these days with a number of West End hotels, while Britain’s richest people, the Reuben Brothers, own The Grosvenor House. The Dorchester is owned by the Sultan of Brunei. Some of the landowners might kick in, on the basis that they will be able to charge higher rents as a result of the race. The Grosvenor Estate owns much of the land around Knightsbridge, while the Crown Estates own Regent Street and much of St James. This group was involved in the F1 street demonstration in 2004, but it is worth noting that the event was not repeated.

The obvious location for an event in  London would be Hyde Park itself. This can be rented from The Royal Parks organisation for big events, but F1 infrastructure would not be an easy fit for the venue. Putting together an alliance to pay for a race might be possible, but time and bureaucracy is not going to help, not to mention the fact that a lot of wealthy and highly-lawyered individuals are resident in the area and might choose to block such ideas – and you only need one of them.

The key question really is whether London needs a Grand Prix. Between 2009 and 2014 the number of visitors to London grew by 22.5 percent. It is reckoned by some to be the top tourist destination city in the world, with 17.4 million visitors in 2014. This generated $36 billion in revenues and 470,000 jobs. On the surface that means that London is doing just fine without F1. Hotel occupancy rates are 83 percent and the average room rate is $195 a night. However these figures come from before the Paris terrorist attacks and this year some key attractions are reporting falls in numbers of around eight percent. This is likely to be only a temporary drop.

There are rumours coming out of Italy suggesting that Ferrari chairman and CEO Sergio Marchionne could axe team principal Maurizio Arrivabene as the managing director of Ferrari Gestione Sportiva, and replace him with James Allison, the team’s technical director. At the moment these are just rumours and so may not be true as such a decision would need to be announced very quickly as Ferrari is now a listed company and changes can affect the share price.

I suppose it is inevitable that there would be rumours about changes in the management of Ferrari in the days after Marchionne was appointed CEO of Ferrari. Prior to his appointment, a few days ago, he was only the chairman and did not have the same executive powers.

Allison was hired by Ferrari back in 2013 by the then team principal Stefano Domenicali, before he departed in April 2014. Allison was able to start work in September 2013 because Lotus had broken his contract by not paying him properly and so there was no requirement for “gardening leave”, although he served six months, apparently as part of a settlement between the two teams. Many engineers today have contracts that specifically require a year between leaving one job and starting with a rival.

It was too late to have any real influence on the 2014 car but Allison went to work to change the mindset at Ferrari, working in much more of a management role. He admitted in 2015 that he had not designed a single part on that year’s car, but instead had directed engineers on the question of what the focus should be. Crucially, Allison was given overall technical control, including the engine department, a position of power that had not been seen at Ferrari since the days of Mauro Forghieri in the early 1980s.

As this was happening, things were moving fast at Ferrari. Marco Mattiacci was appointed team principal in April 2014, ostensibly an appointment made by Luca Montezemolo, the then Ferrari chairman. It was a very quick decision following the unexpected departure of Domenicali, who had realised that the team was not going to be successful in 2014 and decided to step down. Mattiacci looked to be doing a sensible job. He called Fernando Alonso’s bluff and let him go while quietly doing a deal with Sebastian Vettel that left Red Bull scrambling for ideas. He also began arguing for change in F1, notably in dealings with the fans.

When Montezemolo was pushed out of Ferrari by Marchionne in September that year, it might have been expected that Luca’s lieutenants would also be taken out. This seems to have been what happened to Mattiacci, although the Ferrari CEO Amedeo Felisa remained. At the time Marchionne felt the need to explain his decision to dump Mattiacci in favour of Philip Morris man Arrivabene, as this was a very odd appointment. Arrivabene had been around F1 for a long time, as a sponsor representative, but he did not have any experience running a racing team. The answer seems to have lain in the politics, because Arrivabene was close to Bernie Ecclestone and had been a member of the Formula 1 Commission from 2010 onwards, representing the F1 sponsors. Marchionne said that he was keen to maintain Ferrari’s strong position in the governance of F1 and Arrivabene fitted the moment in that respect. Mattiacci, as well as being a Montezemolo man, had had a less than comfortable relationship with Ecclestone.

Since he gained full control of Ferrari, however, Marchionne has played a bigger role in F1 politics, leaving Arrivabene in his shadow, and this may be why another change is now being suggested. While never a team principal Allison, working with Eric Boullier, played an important role in holding the Lotus F1 Team in 2012 and 2013 when the owners failed to deliver the funding that was required. In the end both would leave the team when better offers came along but they fought hard before throwing in their towels.

Running Ferrari is not an easy job because it is still a very Italian company, even if there are many non-Italian team members. Allison, it should be remembered, was there before, between 2000 and 2005, and so integrated easily into the team and the Italian lifestyle. He is a man who inspires team spirit with his hard work, his no-nonsense attitude and his passion for the sport.

Let’s see what happens… if anything.

 

There is much talk at the moment in F1 circles about what the sport has to do when the moment comes (whenever that may be) to replace Bernie Ecclestone, now 85 years of age. Bernie does not want to be replaced and would like to go on running the F1 business, but big wheels are turning and it may be necessary for a change in order for the Formula One group (the holdings of Delta Topco) to be sold, particularly as in recent times the decision-making process of F1 has been a log-jam with no-one able to break through. It has become a world of compromise and that is not good for the sport.

There is, of course, a natural sense of security in inertia, and a fondness for Ecclestone’s idiosyncratic ways, but more and more people are saying (off the record, of course) that things need to change. Some find it difficult to imagine an F1 without Bernie, but the Ford Motor Company survives without Henry Ford, Walt Disney was replaced by men just as clever, and so on and so forth. Some in F1 also have the rather blinkered belief that the sport cannot be run by anyone who does not know the ins and outs of engine tokens and who does not know who hates whom and why. Others see a complete change in attitude as being a much better way to shake F1 out of its current way of thinking, so that it can become a more functional international business. An outsider with good advisors might be a good choice. However some of those currently in powerful positions are only there because they do what they are told to do and so may not be the best qualified to be the advisors.

To a large extent it will depend on the personality of the person chosen, just as much of F1’s current success depended (and depends) on Bernie’s many talents. Bringing in an outsider might not work if it is the wrong person. One thinks of Randy Bernard at IndyCar, who arrived from the world of Professional Bull Riders and was something of a CEO in a china shop with the old guard of motor racing. Perhaps he did not consult them enough. It is obviously a balancing act, but if the business can be developed in obvious ways, this would soon shut up the critics.

The argument that only Bernie can get engine parts through Russian customs is not really a valid one either, as the real question is not whether the boss knows the right people, but rather whether the sport should be involved in places where knowing the right people is the only way to get things done. The image of the sport is important and that requires strategic thinking. If the sport is really going to transcend politics, then it should treat national leaders with the same kind of behaviour and not have Vladimir Putin using the Russian GP as a photo opportunity, and being granted the right to do things that no-one else is allowed to do. That simply comes across as a sport that is allowing itself to be used as a propaganda tool.

Strategic thinking is more than just a question of where the sport goes, it is also about what the sport is and what is the audience that it wants. An outsider would perhaps better understand that screaming cars are not necessarily the biggest draw because the noise drives away the kind of demographic that the sport wants to have. Similarly, the location of the circuits and the facilities that they have are important. Welcoming people with better facilities and cheaper tickets is something that F1 promoters cannot currently do because they have to pay so much to get a race. The recent $400 million rebuild at Daytona highlights the fact that the audience is changing and the sport needs to adapt. Giving the sport global relevance is something that is currently ignored, but a new CEO might understand that the current F1 engines are incredibly efficient and that such development could make a huge difference in the world today. If that was promoted heavily, technology would draw in people, particularly if the action is spectacular and properly promoted on social media, which is rapidly knocking holes in TV viewing habits.

A new CEO would also likely see the value to the sport of the cinema and rather than trying to squeeze money from film-makers, would use this medium to sell the F1 message around the world. Merchandising would be dealt with properly and not in the cack-handed way it is done today. Computer gaming and virtual activity would be developed better and so on.

It is crystal clear that leaving the decision-making to the competitors is not the way to do it, because they always argue for what is best for their own interests, but dividing and conquering has always been the Ecclestone model, and it has worked well for him, and for the sport in many ways. You do not want rule by committee because F1 needs to move quickly.

It is very clear despite months of hot air being pumped into the media about buyers, that there is no-one willing to buy at the price on offer. It is too high and CVC Capital Partners  cannot reduce it because of the debt and the commitments that they have made to other partners. To do otherwise would mean a loss of face in their own industry, which is a tough thing for egotistical financiers to be able to accept.

The people who are interested in buying the sport (there are some) might, however, pay the price being asked if the whole thing is functioning properly and I believe that they have told CVC Capital Partners that they will take the plunge if things are changed. Paying all the money and then having to sort out the mess is not an attractive option. However, like a house that needs a little redecoration, it might be worth the price tag if the plumbing works properly and the window sills are painted.

This is only really a sound business practice. All of those who are currently quibbling would be better off if there was a new governance structure and new commercial ideas. The car manufacturers don’t want to run the sport, they just want to use it to sell their products. The small teams want better business models and the race promoters want to be able to survive. Governments can help and perhaps more would if things changed.

The key to the problem is to figure out who is the right person to do this complex job and whether they need to have motorsport qualifications. If that is deemed to be important, one might look to someone like Lesa France Kennedy (54), the chief executive officer of the International Speedway Corporation and a member of the board of directors of NASCAR. She’s smart and has great experience and there is no reason why F1 and NASCAR cannot work more closely to achieve their different goals. There are other smart people who have passed through F1 and have learned without sticking around. One thinks of an Adam Parr or a Marco Mattiacci, both of whom showed that they were smart and had vision when they were involved in the sport.

Car industry executives are people with big global vision but most would see F1 only as a retirement job and the sport probably needs someone more dynamic than a retiree.

If one looks beyond the immediate sport, the question is really whether this is a marketing job or whether it should be viewed as being in the mass media and entertainment sector. If marketing people are what is required then there are some very good people, including Sir Martin Sorrell, the advertising mogul, who is someone who knows the sport well as he has been on the Formula One board for the last few years. The trouble is that he is 71. There is no shortage of folk in their forties and fifties in the advertising industry who might be lured into the role. Plucking names out of the sky, one might imagine that it might be an attractive job for Robert Senior, the 51-year-old boss of Saatchi & Saatchi, an advisor to the Association of Tennis Professionals. There is also France’s Arthur Sadoun (44), a rising star at Publicis, although he has his eyes on the top job there. There is even Tamara Ingram, the new CEO of J Walter Thompson, who is celebrated for her team-building abilities. There are many others as well.

If it is mass media and entertainment, the best place to look would be in a firm such as the Walt Disney Company which has a raft of executives who understand the business on a global scale, one obvious choice might be Thomas Staggs, who recently quit as COO at the age of only 54.

Closer to home there is also Jean-Marc Huët, the former financial director of Unilever, who has retired and is on the Formula One board. There is also marketing man Zak Brown, who know the sport well. He is a clever and ambitious individual but perhaps he is better at commercial things rather than strategic matters. These are the kind of people who will provide potential investors with the confidence to take on the profitable mess that CVC wants to offload.

I should add that this is all largely speculation, but it something that needs to be thought about, even if one is not allowed to mention such things out loud.

  
Charles Leclerc has had his first runs in an F1 Ferrari (albeit an old one), as part of the Ferrari Driver Academy programme. The 18-year-old Monegasque will be racing for ART Grand Prix in this year’s GP3 championship, alongside McLaren Young Driver, Holland’s Nyck de Vries. Leclerc will act this year as a development driver with Haas F1 and Scuderia Ferrari.

F1 and London

The idea that F1 will race around the streets of London is fanciful at best. If the subject has come up again, it has done so because someone is trying to put pressure on Silverstone, or someone is trying to divert attention  from other matters. A London GP is like a Grand Prix in Las Vegas: a nice idea. Electric cars can race in city centres. Noisy F1 cars cannot. Yes, there was a demonstration run a long time ago on Regent Street, but times have changed…

F1 and Brexit

Britain is the home of eight of the 11 Formula 1 teams: Force India, Haas, Manor, McLaren, Mercedes, Red Bull racing, Renault and Williams. In addition to this, Scuderia Toro Rosso has a significant staff in Britain, working on its aerodynamic and design programmes. Thus, the idea that the country will pull out of the European Union would likely create a lot of problems in F1, not least with such things as transportation, visas, work permits and so on.

It really depends to what extent the British would decide to withdraw, if the vote went in favour of a break with Europe. Having said that, there is no real reason why the Europeans would be helpful in such a situation and thus there are questions about whether there would be tariffs on exports and imports in addition to much more difficult working rules and regulations. What would the impact be on Formula 1? Who knows?

Mercedes engines are built in Britain, others are built elsewhere, but Honda does not seem to have too many problems importing and exporting its engines, it is just a matter of paperwork. This would be the primary difference if there was no single political unit: things would take longer to do. Perhaps there would be more visas required to travel around the world; perhaps there would be less. Europe, for all of its faults, is quite efficient when it comes to the movement of people and goods.

The vote will take place on June 23 when Britons will answer the question: “Should the United Kingdom remain a member of the European Union or leave the European Union?” The justification for the referendum is that the British people have not had a say on this question since 1975. Fair enough.

The EU costs the country about 1.4 percent of its total public annual spending, which is less than the budget of the Department of Energy & Climate Change, but some of the campaigners for Britain to leave believe that Britain is being held back by EU rules. They also want Britain to retake full control of its borders and reduce the number of people who come to England to work.

There are 3 million foreign citizens living in the UK and they make up 10.5 percent of the British workforce. A lot of the people working in England in F1 are from aboard. At the same time there are 1.26 million British citizens living in EU countries.

In F1 terms, there are quite a lot at Ferrari, Scuderia Toro Rosso and at Sauber, although the latter is not part of the EU.

There are already problems with Sauber’s location, such as Switzerland’s law regarding the weight of trucks, which requires Sauber to build vehicles that are lighter than their rivals and thus more expensive. However, work permits do not seem to be a problem, once the paperwork has been waded through.

Business in the UK clearly favours staying in the EU and the country’s automotive sector, which contributes $22 billion to the economy and employs 800,000 people, could suffer if Britain leaves the EU. Europe accounts for 57.5 percent of the cars exported from the UK, the next biggest market being the US with just 11 percent. Toyota, one of the biggest car manufacturers in Britain, has warned it will be forced to make significant cutbacks if the country votes to leave the EU, while BMW board member Ian Robertson has said that the Munich company (which builds cars in the UK) believes that Britain would be better off if it remained in the EU. The Society of Motor Manufacturers and Traders (SMMT), which is the lobbying body of the motor industry in the UK, says that three-quarters of its members want to stay in Europe.

It is really rather difficult to predict the changes that will come if Britain does leave, but the one thing that one can say is that if the country does nothing, things will not change. In F1 terms that is probably good enough logic. Why create problems F1 doesn’t need?

However, it is perhaps worth noting that the referendum will be seen as a stroke of genius if the vote is to stay in Europe. It will deal with the problems posed by the right-wing UKIP in such a way as to render the party obsolete once the vote is taken. If Prime Minister David Cameron succeeds in doing this, he will end up as the only major European country that does not have worries about right-wing extremism, which is a quite an achievement in this day and age.

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