DECEMBER 7, 2007
Strategies, philosophies and the use of power
The Formula 1 teams have all invested a great deal of money in building the infrastructure necessary to compete at the top of Formula 1. The investment in most of the teams runs to a minimum of $300m and in most cases considerably more. Much of this money has gone into windtunnels. The FIA's latest rule proposals mean that a large part of this investment will have no real value for the racing teams. They will be able to lease out the facilities to other people and thus get some return on the investment but they will not be using the facilities for what they were intended.
There is no doubt that at the moment the FIA is flexing its muscles and trying to create a new Formula 1. The fact that there is currently no Concorde Agreement means that there is a big opportunity to change the sport and there is no doubt that this is probably Max Mosley's last big chance to leave his mark on the sport. He is grabbing it with both hands. At 67 years of age, he may dream of another term of office in 2009 and he may have support within the federation to do as he pleases but he is still reliant on a body and a brain that is ageing and there is some resistance (it is arguable whether it is increasing) to the way he goes about wielding his considerable powers.
Mosley has done much for the sport, particularly in terms of safety, but there are other areas of the sport where he has failed. Selling the commercial operations of the sport for as small a sum as he did will always be seen as a rather odd thing to do. Bernie Ecclestone has gone on to make billions thanks to that one $300m deal and the FIA clubs are really the people who have suffered. More of the money generated by the sport has left the sport than has remained in it - and that continues to be the case. It makes no sense at all. If the clubs had any imagination they would understand that they are the big losers and that the federation should really be looking to find a way to get the rights back in-house rather than allowing the money to leak away for years to come. If CVC can borrow the money to buy the rights, is there some reason that the FIA could not do the same? The banks are simply there to make money although those involved in F1 sponsorships might look upon it as safeguarding their investments.
Mosley argues that the deal that he did was the only deal he could do at the time and that it guaranteed to financial future of the FIA. The latter point is true but why a 100-year deal when the rights could have been sold for shorter periods?
Mosley has done well in the automotive world as well with successes in crash-testing and lobbying but where he has done less well is in F1 where his attempts at reforming the sport as he wants it have not been successful, largely because of the power of the Concorde Agreement. Cost-cutting has proved to be much harder than had been hoped. This is mainly due to the fact that the money has continued to arrive in the sport and if it is not spent on one thing, it will be spent on another. Some would argue that the money will never be reduced unless the supply of it is squeezed as teams will always look for any tiny advantage and invest heavily if there is the chance of making progress. You can dictate many things but unless you destroy the very ethos of F1 you cannot stop this happening and even if Mosley gets all his new rules through and forces the teams to use standardised engines and to give up windtunnels and CFD, there is always going to be other areas where that money can - and will - be spent. Budgets will not come down if the rewards remain the same.
There is now a school of thought in F1 that believes that budget-capping is the future because the players are almost all corporate entities and they understand how to work with accounting constraints. They understand how to hit budgetary targets and they understand that being able to win with a restricted budget means that the emphasis will be on efficiency and that is a good thing in the automotive world and useful advertising. The idea of a World Championship which is based on how much you can do with a dollar is rather more sensible than the concept of who can spend the most money. It would also increase the ability of the teams to make money because if they can raise a lot more than they are allowed to spend they would get to keep the rest.
The problem with Mosley's current plans is that they are in danger of damaging the very ethos of F1. Grand Prix racing is not about racing standardised cars. It is about winning using technology. And the teams that have invested so heavily may well argue that the interference in their business is way beyond what a sporting governing body should be allowed to do. You can make complex rules about the cars but can you really make rules that stop companies using expensive tools they have invested in? Is that too much interference in the business of a team?
It is true that too much money is wasted on unimportant things and it is true also that the automotive industry is now worried about the costs of turning the industry into a more environmentally-friendly one. It is also worried about the number of engineers who are available for the development of new environemntally sound systems. F1 programmes are less important when one considers these things. F1 thus has to look at ways to give the car industry something that it wants - such as KERS or systems which will recycle the energy that is currently wasted in heat. Aerodynamic development is intensive, expensive and not much use to the automotive industry and so Max Mosley and his supporters have decided to go on to the attack to try to wipe out a lot of this but perhaps it would have been wiser to go to the corporate men and argue about budget caps. The old-fashioned Formula 1 cowboys (a dying breed these days) may say that it is impossible to police but that is not true in a world of corporate governance and strategic thinking.
That way teams can go on being inventive but will have to do it cheaply and that is just what the car industry wants at the moment.
Trying to stop teams using their assets is a far more difficult route.