OCTOBER 16, 2004
Why would anyone start a new F1 team?
There is not much logic in Formula 1 circles these days but it seems that outside the sport there are a similar number of illogical people. There are at the moment at least three F1 teams for sale: Jaguar Racing, Jordan and Minardi. Others might be sold if the right deal came along. In the last few days, however, we have seen two groups come forward and say that they are willing to put down a deposit of $48m with the FIA and start their own F1 teams from scratch. Neither group appears to have thought the process through because starting their own teams in 2006 is not only a hugely costly and time-consuming business (as we saw with Toyota and BAR) but also shows a wanton disregard for logic. The Concorde Agreement, which continues to govern the sport until the end of 2007, does not allow new teams to share the available TV money for the first three years. This means that anyone wanting to get into F1 right now who buys an existing team can have access for $45m. Jaguar Racing may cost more than that but both Jordan and Minardi would be sold tomorrow if someone offered the team owners $40m. Both would probably sell for $25m. Thus, in effect, the teams come free and all that is really needed from an investor is the running budgets for 2005. This year Jordan ran the team for about $47m and Minardi's budget was about half of that. Any new investor unwilling to spend that kind of money to keep a team going until things are ready to improve does not have the money it needs to go anywhere in F1.
Team Dubai F1 is the latest team to announce its plans for 2006 but the fact that this is related to Grand Prix Investments, a company which until recently was trying to buy Jordan, would seem to undermine the credibility of the announcement still further. The claim that the team is in exclusive negotiations with Mercedes-Benz is laughable given the number of people who have talked to Mercedes about engines in the past and indeed the idea that McLaren will be involved offering technical assistance was being discussed 12 months ago by Jordan when the team was trying to put toegther a deal with Roman Abramovich.
We are delighted to see Dubai stepping forward to fund an F1 team but we do not believe that ultimately it is wise to do what they are planning to do. It would be much wiser to acquire all or some of the Jordan assets.
It is only a matter of price.
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