MAY 12, 2009

The battle begins

The dispute over the Formula 1 budget cap has turned into a full blown crisis, with Ferrari announcing today that it will not enter the Formula 1 World Championship in 2010 unless the budget cap is revoked. This is a rather short-sighted view as without a budget cap there are likely to be several teams going out of business. It remains to be seen whether the other members of the Formula One Teams' Association (FOTA) will stand with Ferrari. If they do, then the FIA and the Formula One group have a real problem, as they will have to try to organise a World Championship without suitable entries.

The FIA talks about there being eight new teams ready to step in if the established names do not want to compete. From what we can see this is at best an optimistic assessment of the situation. It is clear that the USF1 team has money behind it, rumoured to be from a Silicon Valley investor. Others are out looking for cash and the only other potential team which we hear has anything is iSport International, which is thought to have some money from former sponsor Den Bla Avis, a Danish newspaper company. This is not thought to be sufficient money to get very far.

There have been several FOTA meetings in recent days to try to decide what should be done, but for the moment the teams seem to be unified and unwilling to be bullied into accepting things that they do not want. They know that if they are split, then the teams will lose all power and the Formula One group and the FIA will be able to do as they please. The FIA argues that it is not for the teams to dictate what happens.

The fundamental problem is not therefore to do with the budget cap but rather who governs the sport - and, as an aside to that, how the sport's revenues are divided up. The teams want not only power, but also a bigger share of the money and no longer seem to care whether Bernie Ecclestone and his friends from CVC Capital Partners are involved or not. The Ferrari announcement is a major blow to Ecclestone, who said that he would not allow for a situation in which Ferrari was not in the World Championship. Ecclestone may play a legal card and remind the teams that they are committed to a contract until the end of 2012. He can take legal action if he likes, but without teams he will have no show to sell to race promoters and TV companies. He can try such things as padding the grids with GP2 cars but this will do little but damage the credibility of the sport. FIA President Max Mosley made a clear statement last week that the sport does not need Ferrari and this did not go down well in Italy.

It is in the best interest for all concerned to forget about who is pushing who and all other questions of ego, and concentrate on what is important: making sure that the sport stays strong in these difficult times. Mosley is right that about the need for cost-cutting. He is not right when he says such things as "F1 can live without Ferrari".

This may be overplaying his hand and it is interesting to note that over the Barcelona weekend we heard the first serious suggestion that Mosley may face an opponent in the FIA election in the autumn. Whether this is true and whether there is a serious campaign to unseat him remain to be seen, but it seems that everyone has finally understood that to effect change in the sport teams needs to have a good relationship with the FIA. In F1 circles the alliance between Mosley and Ecclestone is seen as being too strong and there is a feeling that Mosley ought to be pushing Ecclestone and his allies to accept less money, for the good of the sport.

Setting up a rival championship is not really an option for the manufacturers at the moment, but that means that the only real choice if they are not willing to accept Mosley's plans is to withdraw and walk away, or convince the FIA to back down on the budget cap.

The bad news is that although F1 is a great marketing tool for the car manufacturers, they do not need F1 if the sport makes life too difficult for them. There are lot so other ways to sell their products. They want to show that their cars are better than those of their rivals so technology is important but in the current climate they also need cost-cutting. Formula 1 needs the manufacturers because they bring not only credibility but also considerable funding from companies that might not otherwise be involved.

To keep everyone happy and together, there need to be compromises on all sides. It is so much more intelligent for F1 to stop wasting its energy on his such disputes and instead use it all to help protect and grow the sport.

F1 generates plenty of money. It may be that we are now seeing the inevitable showdown between the old ways of the sport and the new corporate people who are coming in.

It is time for a new Concorde Agreement which addresses the issues of rule-making, the division of revenues and other such matters that need to be resolved, such as the venues chosen, the price of the races, strategic planning for the long-term and so on.

A civil war will help no-one. In the end, however, it may clear away some of those who are causing the problems. The big question is which of the characters involved become victims...