APRIL 23, 2004

GPWC pulls out of Formula One agreement

The GPWC has cancelled the Memorandum of Understanding which was signed with the Formula One Group before Christmas.

"Despite all reasonable efforts to implement the Memorandum of Understanding between GPWC Holdings BV and the shareholders of SLEC Holdings, the GPWC has decided to end negotiations on the future structure of Formula 1," the GPWC said in a statement, adding that this was "due to SLEC shareholders' failure to comply with key points agreed in the MOU."

In a private letter to the teams GPWC chairman Jurgen Hubbert went further, saying that "due to continuing delays and a lack of commitment, particularly from FOA Ltd, GPWC had has to come to the conclusion that pursuing the negotiations would not lead to the implementation of the MoU."

The GPWC refuses to admit defeat however and informed the team owners that it "will not compromise its strategy of securing a stable and transparent platform for the sport. Significantly increasing payments to teams through a fairer division of the revenues, identifying opportunities for cost-saving and ensuring a transparent platform remain priorities for the GPWC."

The problem however is that there does not seem to be that much support for the GPWC and with the new FIA proposals for the rules in 2008, there is little interest for the manufacturers to stay in the sport. They know that Max Mosley's proposals are not negotiable if Mosley chooses not to deviate from his path. There is not need for the FIA to ask the teams about the rules in 2008 because by then the Concorde Agreement is over. The federation can simply produce a set of regulations and ask the F1 teams if they wish to be part of the World Championship.

The engine manufacturers may think that they are essential to the sport but that is not actually the case because customer engines can be made available fairly easily by those who do wish to take part. For some months there have been questions being asked about what Mecachrome is doing hiring F1 design engineers and investing heavily in Heini Mader's old factory in Switzerland and it does not take a genius to work out that within a couple of years this could be turning out cheap customer F1 engines for all the teams that want them. Cosworth also could revert to its old role of a supplier of more teams than is now the case.

The problem for the GPWC is that at least six of the current teams will support the new FIA series on the grounds of cost. They cannot survive if current trends continue and do not see the GPWC as offering them a better deal than the Formula One group. The details of the MoU, leaked to the teams some weeks ago, revealed that the big teams were going to take most of the available cash and leave the small teams with just the crumbs. This drove them into the arms of Ecclestone at a meeting in Bahrain and undermined the GPWC's boasts about transparency.

A cheaper version of F1 will allow new teams to come in and there are several interested including, we believe, Arden International and Carlin Motorsport. The GPWC, on the other hand, needs cars and there are serious doubts about the commitment of number of the GPWC members, not least because the average automobile executive knows that his career is based on an ability to sell cars. If there is an effective World Championship costing a fraction of what the GPWC wishes to spend, the pressure is going to be on the managers to do what makes the most commercial sense. With 2.4-litre engines and common ECUs, F1 is less attractive to motor manufacturers.

What is also interesting is that Mosley's proposals are more than just a technical package because hidden away in the small print is what amounts to a mini-Concorde Agreement, outlining how decisions will be made in the future and how teams will enter the championship. This means that in the future there will probably be not one all-encompassing Concorde Agreement which governs all aspects of the sport but rather two separate deals: one an organisational deal between the teams and the federation and the other a commercial deal between the teams and the commercial rights holder. The triangle is then complete with the deal that exists between the FIA and the Formula One Group.