Honda F1 website

APRIL 28, 2006

Good news

It is great news that the FIA has issued what amounts to a sensible entry list for the 2008 Formula 1 World Championship and has not tried to force matters along by excluding any of the existing teams. There will, no doubt, be sighs of relief across the F1 world that this has happened. It now leaves the field clear for sensible negotiations over the commercial settlement and the rule and regulations for 2008 and beyond.

There is still much to be done. The commercial settlement remains open at the moment with the Formula One group currently offering teams 50% of the revenues generated by the sport, based on the EBITDA (earnings before interest, taxes, depreciation and amortization) figure of the group. The teams are pushing for a deal that will give them 60%. The Formula One group might counter with an offer for 60% but with the condition that the team's commit themselves for longer than five years. One way or another, however, the financial problems will be solved with a suitable compromise between the parties involved. The only alternative is a split that would be a disaster - and everyone knows it. There is too much money stake to allow that to happen.

The question that remains more difficult to solve is that of the rules and regulations for 2008 and beyond. The FIA says, quite rightly, that it owns the World Championship and can do as it pleases. This is fine but, at the same time, the federation must accept that if it fails to deliver the right rules, it could cause the World Championship - its best asset - serious damage. The World Championship has taken 56 years to build up and it would be unwise for the federation to be too radical, lest the major players walk away and do their own thing, leaving Ferrari fighting with a bunch of tiddlers. It is very clear from the recent exercise over entries that there could be two competing championships with full grids, but neither would be as good as the existing World Championship and both could not, in the longer term, survive at the same level. F1 team bosses are not idiots (although there have been one or two exceptions over the years) and they will understand the danger of going down the route that has demolished open-wheeler racing in the United States in the last 10 years. The problem in that case was one of rampant ego and that is the true danger for F1 in the months ahead.

It is not about whether one man is cleverer than another but rather about what is best for the sport.

The FIA says that it is fully aware of what the car manufacturers want and that cost-cutting is the most important thing. This is perhaps true when the top men in the car companies are talking with the FIA but to paraphrase Mandy Rice-Davies's famous remark in court in the 1960s when told that a leading member of London society had denied having an affair with her: "Well, they would say that, wouldn't they?"

The fact is that when it comes down to competing against the other manufacturers, the big car companies show no sign of backing off in their spending. As long as F1 delivers what they want, in a manner that they deem to be cost-effective, they are going to go on spending. Renault may be a little wobbly about its future in F1 at the moment but one can argue that it is competing with the wrong brand because success in F1 has never done much for mass-market cars. The sport works best for companies that are selling expensive luxury cars, which produce very large profits. Ferrari road cars cost absurd amounts of money but people pay the price because of the associations that the car brings for them. It is not quite the same when one is selling Renault Logans.

If the sport stops delivering what they want, the car manufacturers will sell up their teams and leave but that does not mean disaster for the sport. The manufacturers are unlikely to leave at the same moment and others might easily come in if a gap develops. Eighteen months ago the Ford Motor Company decided it had had enough of the sport and withdrew. Red Bull came in and took over the Jaguar team and is now investing huge sums of money is people and infrastructure to get what it wants.

When all is said and done the sport has always been for big spenders, right back to the days when French barons battled Belgian barons. As the sport developed the gentlemen were replaced by the speedy, with the best drivers employed by wealthy men or car manufacturers. Ultimately dictators Adolf Hitler and Benito Mussolini funded major Grand Prix programmes of the 1930s in order to show the world that their countries were the best.

In the modern era the fast drivers found their support from wealthy industrial magnates such as BRM's Sir Alfred Owen or whisky heir Rob Walker and it was not until the arrival of sponsors that the sport began to democratise a little. That opened the way for bright young engineers to start their own teams but since then things have evolved. In the 1980s we saw the car manufacturers becoming more and more involved and with them came bigger and bigger budgets. Cost-cutting measures never cut costs. The teams that invested most and used the investment correctly enjoyed the most success. Some invested hugely and failed embarrassingly. That is the name of the game.

Lowering the costs for teams wishing to enter the sport is a nice concept but it is largely unrealistic. A small team that has only the budget to buy cars and engines and service them with a small team of engineers and mechanics is not going to survive long unless it has a long-term source of finance to allow the structure to build up and thus challenge for success. It is fine if one has the kind of money and the promotional needs of a company like Red Bull but for a team like Midland the future is far less certain.

But there is no reason to be pessimistic. According to Forbes Magazines there are now 793 dollar billionaires in the world, worth an average of $3.3bn. There are a large number of companies that have the annual marketing budgets that could be used in the sport. There is no shortage of people for whom the sport is a logical place to invest. It is simply therefore a matter of the sport finding the right people - and that is more to do with the global reach of the business and whether the sport delivers what investors need.

Part of this process is improving the credibility of the F1 business in financial circles, an area where much work is still needed. The sport's reputation for buccaneering capitalism and its long association with tobacco is holding it back.

The sport must also learn to invest in its own promotion and not squeeze every penny from everyone else involved. It must accept that there is a need to invest in better technology to show in a better way just how exciting F1 is when you go to a race. The TV coverage at the moment does not do that.

It is a time for compromise and a time for new ideas but it is also a time for hope that the people making decisions will not mess things up.