JANUARY 19, 2005

Money wins the day

If Formula 1 was a board game, solely about the exercise of power without any need to account to its fans, then there would be much applause about the deal that has just been announced by the FIA, Ferrari and Formula One Management.

If Formula 1 was a board game, solely about the exercise of power without any need to account to its fans, then there would be much applause about the deal that has just been announced by the FIA, Ferrari and Formula One Management.

Alas, Formula 1 is not just a business, it is a sport which carries with it the aspirations of millions of people who care nothing about money and want only to see F1 being run well and producing a good show. They want to see fair competition and drivers fighting one another without having to worry about whether or not one team enjoys an advantage.

It is a widely held belief that the credibility of the FIA Formula 1 World Championship is dependent on whether or not Ferrari is competing in it and thus the news that there is a deal between FOM, Ferrari and the FIA would seem to spell the end for any rival series. Thus the deal that has been announced (if it has been signed) must be seen as a torpedo for the Grand Prix World Championship (GPWC), an organization to which Ferrari was a party and which aimed to ensure the long term stability of the sport, improve the economic benefits for all teams participating in the sport and operate the sport and the business around it on a fully transparent basis.

There is no escaping the fact that the management at Ferrari will be viewed by people in the sport as having betrayed the principles established with the GPWC and of having sold out to Ecclestone because he was offering Ferrari a good deal. The fact that none of the other teams were involved in the negotiations simply underlines the fact that Ferrari does not appear to care about the economic benefits for ALL teams nor about operating the sport in a transparent manner. And it is arguable whether the new deal will do anything about stability.

"It is important and also pleasing that the FIA, which is the governing body and FOM, which represents those who have organized Formula 1 in these past years and Ferrari, which is the only team to have taken part in the World Championship, without a break, since its inception, have put out a strong message of stability for the future of Formula 1," says Ferrari's Luca di Montezemolo. "This agreement is in line with what Ferrari had hoped for for a long time."

Last September Montezemolo declared Ferrari to be 100% behind the GPWC and opposed to the ways things had always been done in the sport.

"A certain era is finished," Montezemolo said. "We have to look at something new which is totally acceptable to the players who at the moment get only 47% of the money from the TV rights and nothing from the tickets, advertising and other sources of income. It is not possible any more. We are in favour of a company taking 20% to promote the sport but we want 80% for the teams."

The decision to do a deal with Ecclestone and desert the GPWC is not really surprising given that Ferrari's attitude on the race track and in its dealings with rule changes have highlighted that the team does not seem to care about the sport beyond what it can get out of it. And while Montezemolo, Mosley and Ecclestone may harp on about the deal being good for the stability of F1 it is fair to say that the new deal will probably do more for the long-term instability of F1 - as there will remain rancour between Ferrari and the other teams because the Italians will be getting more money than its rivals.

The other teams and the car manufacturers must now decide whether they wish to continue and accept whatever terms Ecclestone is willing to give them. We expect there to be pressure to get things sorted out quickly and some of the smaller teams will sign simply because of the offer of immediate cash. Those that decide to stay in F1 know that the only way to stop the current Ferrari domination and wipe out Ferrari's power is to increase spending to the point at which the Italians can no longer afford to compete. The FIA can try to stop that happening but it is impossible to stop teams spending if they have the money and are willing to spend it.

The good news, if there is any in the new announcement, is that Ferrari has committed itself to racing until 2012 although as Ford recently proved a car company can do pretty much as it pleases when it comes to F1. Ferrari could withdraw tomorrow as long as it sold the team to someone.

`"Formula One Management are delighted that this agreement is in place and that the future of Formula One has now been stabilised," said Bernie Ecclestone. That may be true for his Formula One company but it is not necessarily true for the sport of Formula 1 racing.

Ecclestone told the BBC that he had spoken to other teams and they were positive about the deal but when we asked around the response was not quite a glowing as Bernie seemed to be suggesting and opinions about Ferrari were rather less than complimentary. The teams now accept that they must negotiate deals with FOM.

But while the GPWC may not offer much of a threat, Ecclestone still has to deal with the three banks which own 75% of the shares in the holding company of the Formula One group. Yesterday they launched the next round of legal action to try to take control of the business from Ecclestone. The only hope left to the GPWC is that the banks win this action and then decide to hand the management of the sport over to the GPWC and its sub-contractor ISE, which has been formulating its plans recently. That could happen although bankers are easily swayed by large sums of money and it could be that Ecclestone will now be able to borrow enough money to buy them off as well.