APRIL 20, 2003
Ferrari and the GPWC
The political scene in Formula 1 hotted up considerably over the weekend in Imola and while the general impression being given was that things are moving towards a settlement between the various parties involved there are clear indications as well that the problems are far from being settled. FIA President Max Mosley spoke of his fears of a split between the GPWC and the FIA Formula 1 World Championship, and Bernie Ecclestone of the Formula One group indicated that he had made his final offer to the F1 teams. The suggestion being put forward was that the GPWC could actually be a serious option for many of the teams, thanks to the signing of "a memorandum of understanding" at a meeting last week in Munich.
The big question raised was whether this memorandum has any real validity or whether it is just another piece of public relations from the GPWC. The general feeling in Imola was that if a deal can be made with the banks which own 75% of the shares in the Formula One group, an agreement might be reached between Ecclestone, the FIA and the GPWC. The banks have a problem in that they cannot easily write off the kind of money that they invested in F1 without there being serious ructions with shareholders. We hear that the two US investment banks involved will each settle for around $100m apiece but that the Bayerische Landesbank is showing no signs of doing the same thing.
The key issue in all the politicking is over which teams are going to sign up for which championship. Mosley said that the outcome of the fight may have to be settled by seeing which championship will survive and which will die. Mosley said that he hoped a solution could be found between the various parties but said that with several offers having been made by each side and all of these having been rejected, a negotiated settlement is less likely than ever.
Everyone in Formula 1 is well aware that the winner will be the series which features Ferrari. This is not disputed by anyone. In the past Ferrari has been very careful to play the different sides off against one another and over the years this has led to special arrangements for the team, based on the company's historical role in the sport. All this is very secret but what has always been clear is that Ferrari gets more money than the other teams. There are even rumored to be complex arrangements between Ferrari and the Formula One group in addition to the Concorde Agreement. This makes sense in that it is very clear that the future of the car manufacturer and the future of the sport are often seen as being inextricably linked.
The question being asked in F1 circles therefore is why would Ferrari agree to join the GPWC unless it had similar financial benefits from the planned new series. At the meeting of the GPWC in Munich it was made clear that Ferrari will get 4% of all GPWC revenues. This does not appear to have caused any upset. At Imola, however, there was talk that there would also be a $50m payment up front to Ferrari. We were able to confirm that figure with two highly reliable sources which gave the rumors credibility. But we also found several team bosses who had attended the meeting and knew nothing about it. This is decidedly odd given that one of the aims of the GPWC is to have financial clarity.
Is there really the intention to pay Ferrari a large wedge of cash? Or is it part of an elaborate attempt to torpedo the GPWC? For the moment we feel it is impossible to answer that question but such rumors will no doubt be discussed when Bernie Ecclestone of the Formula One group and Jurgen Hubbert, the leading figure in the GPWC, meet today at Imola to try to thrash out a deal.
Another issue which will have to be addressed is that the Formula One group has long-term contracts with many of the major events - notably Monaco (the epitome of F1 glamour and excitement) and Indianapolis. When it comes to circuits the GPWC is not in a strong position. There is also the thorny question of the rules and regulations. The GPWC has not yet created its rules but those who think that the new series can be a cloned version of the existing structure may have to think again as we understand that the intellectual property rights of the current rules and regulations belong to the Formula One group and thus anyone copying them too closely could face questions of infringement of copyright. In that case a new series would have to be appreciably different to F1 and that would obviously cost more money.
The GPWC is strong in that it seems that the teams are interested in the kind of money on offer with the car manufacturers apparently willing to invest 100% of the revenues in the sport with no dividend payments to shareholders and a fund set aside to grow the sport.
One way or another we feel that things are beginning to come to a head.
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