FIA introduces £30m budget cap

[ISLAMATRON]

who is to say that the breakaway series could get bridgestone tires? But then again it might open itself up a tire war.

You don't think that Bridgestone would follow Ferrari? And if the teams were to offer to purchase the BS 2009 (or 2010) F1 spec tyres, I don't see BS saying "No".

contracts and courts of law are a nasty thing.

[Conceptual]

who is to say that the breakaway series could get bridgestone tires? But then again it might open itself up a tire war.

You don't think that Bridgestone would follow Ferrari? And if the teams were to offer to purchase the BS 2009 (or 2010) F1 spec tyres, I don't see BS saying "No".

contracts and courts of law are a nasty thing.

Are you implying that the tyre spec that Bridgestone supply to the 2009 F1 grid are under ownership of the FIA/FOM? Are the compounds and costructions patented and trademarked by the FIA/FOM?

If a sponsor donates a part to a race series in return for TV exposure, that is done with the intent of generating sales of their product. I think it would be rather presumptious to think that the FIA/FOM could sue for Bridgestone selling tyres to a comercially competitive race series. That is, of course, only if Bridgestone hold 100% ownership rights to the tyres that they supply to the F1 grid...

[ISLAMATRON]

i dont presume to know the contractual obligations or motivations of the players involved... all i know is that BS has a contract with F1 in some capacity.

Non compete clauses are often included in such contracts.

[gridwalker]

I have to ask : Is anyone actually surprised by the number of teams threatening to walk away from F1?

I always thought that this was the inevitable path that the sport would take once the manufacturer teams became the majority amongst constructors.

In my teenage years, Ferrari were the only car manufacturer involved in F1 as a constructor : All other teams were privateers.

During 1996, the International Touring Car Championship collapsed, as the car manufacturers that were supplying the championship realised that the cost/benefit ratio of competing in the championship wasn't sufficient to justify their continued participation. For me, this was lesson number one in what happens when running a championship that is overly reliant upon the whims of corporations who are primarily involved as a form of self-advertisement.

Slowly but surely, manufacturers started buying their way onto the formula one grid, throwing money at problems that their engineers could not fix (which soaked up huge sums as the field struggled to keep up with the mighty Schumacher/Ferrari powerhouse).

For a while, this appeared to be great for formula one. The sport found itself revelling in an era of unprecedented popularity and wealth, however this could only last as long as the good times kept rolling : As soon as the consumer started tightening their belts, the corporations bankrolling the teams would have to do likewise.

Considering that the Red Bull teams became involved for a similar reason to the car manufacturers (advertising) and have also been fairly lavish with their spending, albeit in a different way (running a double team for double exposure), their relative lack of success indicates that direct corporate ownership simply pushes up the costs whilst the overall benefit will always remain the same (although Red Bull are certainly getting better value for money than Toyota, simply through the additional exposure that 2 teams will inevitably receive).

Unfortunately, once so much money has been spent, it is incredibly hard to allow the authorities that regulate your activities to push through a set of regulations that not only devalue all of your previous investment but could also be seen to make your a prior business model a disadvantage for future competition.

"Thanks for competing, but now you've got to run in shackles to give the new boys a chance"???

The cost/benefit analysis can only point in one direction under those circumstances : straight out the door.

Privateer entries exist solely for the racing & will continue to support a championship for as long as they exist. Corporate entries exist for as long as they favour the bottom line & can be written off at the drop of a hat (the most recent example being Honda).

Needless to say, after having watched the ITC debacle, I always believed that increased manufacturer involvement could only lead to fragmentation of the only sport I love & I've been watching these forces build for a decade now ...

To quote my favourite TV show : All of this has happened before & all of this will happen again.

[xpensive]

A to my mind excellent excellent analysis, gridwalker. Welcome to F1Technical!

[andartop]

You do have a very good point gridwalker, however, I believe the truth as always lies somewhere in the middle: some big bad corporations are in it not just for the money but for the racing as well (ie Ferrari), and some good old privateers are in it not just for the racing but for the money as well (ie Jordan, Arrows, Midland, Minardi etc)..

[gridwalker]

I didn't say the corporations are inherently BAD, however I do believe that their modus operandi can be very harmful within a sporting context (well, any context, but let's stay on topic) if not strictly regulated from the very beginning.

Nor did I say that the corporations were in F1 solely for the money (Dietrich Mateschitz, the owner of Red Bull, is BLATANTLY a petrolhead) however that doesn't change the fact that their primary reasoning behind their presence in F1 (at least for their shareholders) is as a means of extending their brand identity.

Unfortunately, competition between adversaries with vast resources almost always leads to spending spiralling out of control. Just think "cold war".

[WhiteBlue]

I do agree to a great extend with gridwalkers reasoning. His weakness is the lack of a vision that would lead the way out of the crisis. I have no doubt that the mechanism of generating international exposure for brands has worked very well for motor sports ever since cigarette packages began populating the grid decades ago.

F1 has managed to attract advertising money - which isn't a bad thing - and has also applied some control over the corporate spending habits. To do a away with tobacco sponsorship and sucessfully move to a bunch of other products has been proof that there is enough attraction to brands seeking global recognition. F1 can wean itself of the excessive side of automotive corporate spending.

If you ask Bernie every dollar spent is a good dollar, but Max has listened to the concerns that gridwalker talked about since so many valuable competitors were pushed out of business eight years ago. To me the demise of Jordan and the existence of the Toyota team will allways be a signal of the problem of automotive corporations abusing their spending power.

Jordan was able to rise through all formulae to F1 and managed to win races as a privateer. He contributed something to F1 beyond the success on track with their unique way of entertaining the fans. When they went under nobody could say that the bunch of cheaters heading the team in Cologne were worthier to be on the grid. It was a blatant example of something being rotten in F1.

The FIA started to apply some cost curbing back in those years by introducing long life engines and regulating engine trading towards affordability and availibility. They have been at loggerheads with the exponents of automotive corporate spending (Ron Dennis/Merc) for many years until the power of the GPMA was broken by terminating the Concord agreement in 2006. It was clear since that power struggle that the participation in the championship would not buy a corporation a veto right.

The present crisis is only the culmination of that development. What is not clear is the right way out of the crisis. All parties seem to agree that budget control is the way to go. Unlimited spending isn' t the way for F1 to go. But how to get to a point where worthy new entrants from other formulae are attracted and traditional wealthy teams like Ferrari, McLaren and Toyota will stay is the big question.

I believe that the solution is a tight budget control with a very rapid reduction of budgets to a level that will enable the new entrants to compete effectively. That level will be under 100 mil $ and will have to be achieved in two or three steps. Let us hope that the posturing of the past months will give way to some sucessfull negotiations shortly. Monaco would be a good place to announce a compromise and get on with racing and the 2010 design instead of politicking.

[xpensive]

"His weakness is the lack of a vision that would lead the way out of the crisis." You have a way with words WB.

I think most people involved agree that a "budget-cap" would not only be an infringement on every team's integrity, but also virtually impossible to police without some Stasi-like organization at the FIA.

Agreed that spending needs to be limited, but so does the uncontrolled profiteering organized by the EvilTwins.

As things are today, 50% of the money generated by F1, goes to pay interest on a loan taken by CVC in order to pay MrE and his family for 99 years of commercial rights, which in turn were GIVEN to him by by MrM at the FIA for a token sum.

[WhiteBlue]

The commercial situation is a reality based on valid contracts. It may be lamentable but all parties have areed to the contracts and nobody was ever forced to live with it. The teams had ample opportunity to buy the commercial right themselves and they simply did not do it. Bernie got it very cheap, we all know that, but the deal opportunity was public and he was in the dream come true situation that nobody else made a bid. Many people could have gone in with hindsight but the fact is they didn't.

If Didi Mateschitz had been involved beyond sponsorship at that time I believe he would have done something. You have to remember that he was the first super rich individual to get involved in this. None of the players of that time would have had the idea to make a competitive bid. Only when the Hoffa brothers and Kirch with their leveraged schemes based on huge debt arrived could crazy valuations pass the books of any auditor. The huge profiteering by the creditors we see today is the result of the high risk that F1 runs on the commercial side.

A break away would be very messy in legal terms and would not benefit the sport or the show. So lets hope they sort it out.

[WhiteBlue]

dp

[xpensive]

I can't for my life recall hearing of any bidding procedure, let alone some logic reasoning why the commercial rights should be sold for 99 years in the first place?

Transparency on the dealings between an old UBF activist and a used-car dealer? You wish.

[WhiteBlue]

I knew about it. It was in the papers since the FIA was taken to European courts for a double role as governing body and a business exploiting the F1 series. They agreed to divest themselves of the business interest and shortly after that the deal was published. I am sure you will find plenty of reading in the Grandprix.com archives if you want to make a historical study of it. The online archive goes well back to the nineties and will cover the story in detail.

[xpensive]

Surely I wrote "any bidding procedure", didn't I? Can anyone find proof there ever was one?

[WhiteBlue]

Why do you think a private company should do their business deal by bidding if they choose otherwise? Compare the sale of the RAC (Automobile Club in Britain). Those who wanted to deal certainly had the opportunity.