THE MOLE

Coincidences

The Mole does not believe in coincidences when it comes to Formula 1. In the real world there may be conspiracies 20% of the time and mistakes 80% of the time, but in F1 those figures are reversed. Things happen for reasons.

The Mole always scoops up a pile of papers as he rushes out of the office on his way to a holiday at his villa on the Bay of Angels. This year's pile included a copy of the Concorde Agreement and a magazine about Formula 1.

The Concorde Agreement is a highly-restricted document but The Mole picked one up a few years ago. In truth it is a very dull document but this in itself is no bad thing because if The Mole is suffering from insomnia he begins reading "Concorde" and quickly slips into the arms of Morpheus. The Mole is happy to admit that he has never got beyond Clause 4.1(d)(vii).

Also buried in the pile of paperwork was a magazine with an article which purported to be a list of the most powerful people in Formula 1. The concept was an interesting one but The Mole felt that it was one from which no good could possibly come. Everyone in the sport thinks that they are more important than they actually are and so coming up with a list like that is a guaranteed way of making enemies. It is all very well to flatter people into thinking they are more important than they really are but it should never be committed to paper.

To pass the time The Mole did a list of his own top 10 and it quickly became apparent that Michael Schumacher (named as the most influential person in the sport by the magazine) was not even in The Mole's top 10. But the most telling thing was that Paddy McNally was third on the list.

There are some people in Formula 1 who have influence but cannot be fitted neatly into the accepted structures. John Hogan of Marlboro is one of them. Ron Walker of Melbourne is another. But McNally is the ultimate invisible man of influence. The Mole has sometimes even been accused of being McNally.

In recent weeks there has been much talk about finding a solution for the future of Formula 1. Bernie, the manufacturers, the teams, the banks, Kirch and, of course, the FIA have all been mentioned.

No-one has said anything about McNally.

McNally's Allsport Management is a very important organisation which dictates much of what goes on outside the paddock at Formula 1 race tracks. According to EuroBusiness magazine, this has made him a fortune worth around $400m. The Mole thinks it is more than that.

That may seem like a lot on money but McNally is a man who knows how to derive extra value from the sport. He charges more than a million dollars for each package of trackside signage (16 signs and a bridge). There are only eight of these at each race and McNally controls only the vast majority of the signage in the world. If one does a rough calculation you can see that for minimal costs he can generate at least $120m a year without too much trouble. Add to this the title sponsorships of a number of races which brings in another chunk of money and then add the income from The Paddock Club, which helps to convince the big names in sponsorship that Formula 1 is the place to be. With tickets costing anything up to $3,500 and around 2000 VIPs passing through each weekend you can add another $60m when costs are calculated. Add to that the official supplier programme for Formula 1 and various merchandising operations and it is easy to see that McNally is probably producing around $250m a year in pure profit. The whole operation has fewer staff than the average F1 motorhome and is operated out of a modest suite of offices in the decidedly unglamorous environs of Geneva Airport.

McNally cannot play much of a role in extricating the sport from its current mess with Kirch. The banks which are owed money by Kirch do not really want to know about F1 and they are worried about falling revenues and paying back the Eurobond. They have tried to sell the shares to the automobile manufacturers but nothing happened. The value of the shares is dropping all the time. Ecclestone is said to have offered $800m a few weeks ago but the Kirch people rejected it. The Mole feels the price will have come down since then.

But once Ecclestone has solved that problem he then needs to figure out a way in which he can stop the manufacturers doing their own World Championship. The Mole thinks that the answer is very simple. They need to be offered a number of guarantees, some incentives and a lot more money. In order to get any kind of deal, however, Ecclestone really needs Allsport Management to be part of the Formula One empire. The additional revenues would help the group financially and would create one company covering all aspects of "official" money-earning in F1.

McNally is not going to give the company away and Formula One would not appear to have the kind of cash needed to buy him out and so the obvious option is to offer him shares in the business in exchange for all the rights that he controls and the operations he has built up over the years.

If all the eggs were then in the same basket, Ecclestone could go to the manufacturers and offer them enough to keep them happy. This would keep most of the teams happy and the FIA would be delighted to have the manufacturers tied in to a new Concorde Agreement.

This thought process took The Mole back to the Concorde Agreement. There is a problem. The independent teams (of which there are only a handful) have a lot of power. In order to cancel the current Concorde Agreement and create another there has to be unanimous agreement and it is not in the interest of the small teams to give in. They are in a position to demand much better conditions.

The Mole has concluded therefore that the non-aligned teams are in the way of progress. By coincidence some of the independent teams are screaming about others talking down the sport and complaining that the recession has hit them hard. Last week several important people said they thought one or two teams are on the verge of going out of business.

Clause 14 of the Concorde Agreement states that if one of signatory teams stops competing in the World Championship because of "insolvency" its rights will cease immediately.

Coincidentally there are proposals to allow manufacturers to supply cars to two teams. Replacing any victims of "insolvency" will not be that difficult once there is a new Concorde Agreement in place.

Click here to read previous Mole columns: The Mole Archive

Print Feature