Is F1 a good idea for Virgin?

Honda has now confirmed that it is talking to the Virgin Group about the possible purchase of its F1 team. With six weeks to go before the start of the new season, time is short but clearly the team must now be building parts that will fit the Honda chassis to the available Mercedes-Benz engines. One must assume that an engine deal is close to being agreed and that production of the car is underway. Jenson Button is one driver and the signs are that Bruno Senna will be the other, although this will probably depend on who ends up owning the team. The signs are that the team will be saved but the future of the team will not be secured until a deal is done.

The big question being asked this week in F1 circles is whether or not F1 is right for Virgin.

Sir Richard Branson, who founded the Virgin company as a mail order music company nearly 40 years ago, has always been a gambler. He was able to raise enough money for a shop on Oxford Street in London and that generated the finance to acquire the manor house in Shipton-on-Cherwell in Oxfordshire, where he established the Manor Studio. Virgin Records was launched with Mike Oldfield's Tubular Bells, which went on to sell 16m copies worldwide. Virgin went on to sign such famous acts as the Sex Pistols, XTC, Human League, Culture Club, Simple Minds and Genesis. Virgin Records was eventually sold to Thorn EMI for $1bn, Branson using the money to move into the airline business with Virgin Atlantic. His investments since then have spanned many different industries ranging from various airlines to trains, holidays, concerts, mobile phones, health clubs, television, radio, the Internet, publishing, financial services, cosmetics, drinks, corporate entertainment and even alternative fuels. More extreme investments have included balloon flights and space travel.

Branson has often used unusual challenges to publicise his activities, notably trying to make the fastest Atlantic Ocean crossing by boat with the "Virgin Atlantic Challenger" in 1985 and the successful "Virgin Atlantic Challenger II" a year later. He then moved on to balloons with the "Virgin Atlantic Flyer" achieving the first hot-air balloon crossing the Atlantic. This was followed by crossing the Pacific and eventually in a round the world flight. As recently as last year Branson made an unsuccessful attempt at an eastbound record crossing of the Atlantic in a sloop called Virgin Money.

The Virgin brand stands for challenging conventions, value for money, good customer service, fun, innovation and creativity.

The company says that when it enters a new industry it puts itself into the shoes of the consumer and asks what can be done to improve the industry. It asks whether there is a good opportunity to build the brand and add value to the Virgin Group, whether the new business will interact with existing Virgin enterprises and what is the balance between the risk and the rewards.

Formula 1 in its current state offers little in terms of direct financial return. But cost-cutting measures could make F1 teams profitable by 2010 or 2011. Thus acquiring the Honda F1 team, with its state-of-the-art facilities and experienced F1 people, for a nominal sum is an investment that may pay dividends in a few years from now. It will require up-front investment to keep the team alive until the cost-cutting kicks in. However it is an obvious opportunity to add to the Virgin brand worldwide, particularly in the developing markets of Asia, the Middle East, Latin America and Eastern Europe. F1's high profile, particularly on the television, will provide the company with a chance to spread the word about Virgin. An F1 team can be used to promote many different Virgin products - and indeed can be funded by different parts of the business, if that is necessary. It can also be used to send out messages about Virgin, such as its desire to be associated with the development of renewable energy technology.

Early in 2007, Branson announced that he was setting up of a global science and technology prize - The Virgin Earth Challenge - offering $25m to the individual or group who are able to demonstrate a commercially viable design which will result in the net removal of anthropogenic, atmospheric greenhouse gases each year for at least ten years without any harmful effects.

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