MARCH 25, 1996
Tobacco - danger ahead?
FORMULA 1 bosses are beginning to worry about the effects of the legal onslaught on the tobacco industry currently going on in the United States.
Tobacco companies are the major source of F1 funding with almost all the teams enjoying large tobacco deals. Philip Morris (Marlboro) is a major backer of McLaren and Ferrari but also contributes to the Arrows budget; Rothmans funds Williams; Japan Tobacco (Mild Seven) pours money into both Benetton and Tyrrell, while American Brands (Benson & Hedges) is the major sponsor of the Jordan team. These investments amount to hundreds of millions of dollars every year in F1.
The escalation of attacks on the tobacco companies in the United States comes in the wake of a decision by Liggett & Meyers (which makes the Chesterfield and Eve cigarette brand) to break ranks with the other big five US cigarette manufacturers and agree to devote 5% of its pre-tax profits for the next 25 years to anti-smoking campaigns. It is the first time a tobacco company in the United States had agreed to pay out against anti-smoking law suits, and the reaction of the stock markets has been catastrophic with Philip Morris and RJR/Nabisco shares plummeting 18%. These share prices are already estimated to be 30% below those of companies of similar size because of concern among shareholders about legal actions.
In addition there are currently five major legal actions from individual states (Florida, Massachusetts, Minnesota, Mississippi and West Virginia), seeking to recover billions of dollars spent by them treating smokers. We understand that Louisiana, New Jersey and Texas are working on similar actions. Further legal actions are expected based on the fact that the FDA last August decreed that nicotine was a drug.
There are also criminal suits being considered against tobacco executives who told Congress in 1994 that nicotine was not addictive.
While it is difficult to imagine that governments will ban the sale of cigarettes - because of the potential losses in tax income and increases in unemployment - there is going to be increasing pressure on the tobacco companies to scale down their advertising, and if this happens motor racing is going to find itself with a very large hole in its annual budget.
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