SEPTEMBER 30, 2002

Ford looking at Formula 1 options

The Ford Motor Company is expected to have on a major rethink of the structure of its Formula 1 activities. The Detroit manufacturer is acutely aware of the lack of success of its Jaguar Racing program and the recent in-depth study into the problem has revealed the need for the entire operation to have more autonomy to avoid the team being dragged into politics of Ford hierarchy. The team has suffered from having too many bosses in quick succession and from a lack of technical stability which has meant that it has not achieved as much as had been hoped. Having said that the program has been very good at changing the image of Jaguar but it has not obviously produced any major boost in sales. Ford analysts think that in order for there to be a big impact in the markets the program will need to run for at least another four or five years so that the competition culture can filter down to the general public around the world.

The problem is that F1 is expensive and Ford is not doing very well at the moment. The company announced massive losses in 2001 and is expected to shortly announce new quarterly results which are expected to see another $1bn loss. This cannot continue and Ford is looking at ways to make savings throughout the company. We hear that the Formula 1 program is not going to get away without making cuts - and that is another problem which needs to be taken into account.

It has now emerged that Eddie Jordan's deal, flagged by Jordan as being a factory supply of engines, is actually not quite as it seemed in Hungary. Jordan was being rather quieter than usual in Belgium and the implication was that Ford bosses were less than impressed by what had happened in Budapest. However a deal is in place between the team and Ford Europe which will involve a commercial deal with Jordan sponsor DHL. This will help to pay towards the $60m which will be needed for the Jordan engines. These will be badged as Ford RS Cosworths.

This is all well and good but it does not really fit in with Jaguar Racing and in order for Ford to get any real marketing value out of the Jordan deal there is going to be the need for further investment in such things as VIP hospitality and advertising on the tracks, on TV and in the written press. When all this is taken in to account it would seem to make more sense for Ford to cut costs by running the Ford brand on its factory team as well. Otherwise the costs are duplicated.

This raises the question of whether or not it makes sense to continue with Jaguar or whether Ford should take advantage of the fact that Red Bull is willing to buy into the team. Our sources in Austria say that Red Bull wants to own at least 75% of the team and would like Ford to retain 25% to ensure that the engine supply was not disrupted in the long term. This would reduce Ford's overall costs in F1 while retaining a factory involvement and creating thge potential in America for big new sponsorship deals, US drivers and more coverage for F1 in general. It all makes a great deal of sense.

According to our sources, the plan is for Jaguar Racing to run an all-new 90-degree Cosworth V10 engine next year. The plan is for Jordan to have the current 72-degree V10 engines being used this year by Jaguar and any other customers would have the engines being used this year by Arrows.

Ford bosses have so far said that the company will stay in the sport but have not made any predictions about the branding. These discussions are expected to take place in the days ahead.