MAY 27, 2009

Once more unto the breach...

The Formula 1 teams are meeting again today to try to find a solution to the ongoing problems with the FIA. Williams F1 has entered the 2010 World Championship, saying that it is contractually bound to do so and that its survival depends on racing and that it cannot risk not doing that. There is much talk of what the other teams will do with much attention focussed on McLaren and Mercedes. The team is the other big non-Ferrari name in F1, along with Williams and as part of the team is owned by Mercedes-Benz that would, in effect, mean that Mercedes-Benz customers Force India and Brawn GP would probably be wise to follow. The FIA has a certain amount of leverage over the team as it is on its very best behaviour as a result of the recent unhappiness regarding Lewis Hamilton and the FIA Stewards in Melbourne. While it would be unethical for the FIA to use this to put pressure on McLaren, it is clear from the way the team is now operating that it just wants a quiet life so it can get on with fixing the problems with the cars and not being dragged into more political fights.

Another key player in this game will be Red Bull's Dietrich Mateschitz, who was once a close ally of the FIA, but is now less than happy because suggestions that he could run two teams using the same cars have not translated into reality and he is now paying for two teams to develop two different cars. Everyone thinks that Mateschitz has more money than he knows what to do with, but this does not mean that he has lost the understanding of what it is worth. He is an important figure in this dispute because he has four cars and a decision not to enter the World Championship would knock a very big hole in the side of the sport. However, it would utterly illogical for him to pull out right now. He finally has cars that are competitive and to stop now would be to throw away all the investment that has been made. F1 still does a good job for Red Bull.

BMW is unhappy with the FIA in Formula 1 and in the World Touring Car Championship, where the rules this year have caused all manner of trouble over a turbo-equivalency matter which rendered the BMWs uncompetitive against the SEATs. If the board of BMW wishes to save money and give the FIA a slap it could simply decide to close down the WTCC and F1 operations and go into DTM and the ALMS, where Bobby Rahal is running factory-backed cars this season. This would reduce the power of BMW's marketing punch around the world and it maybe that the board in Munich will simply decide to bite its tongue in order to enjoy the benefits of F1, while working to reduce the costs as much as possible. The company needs to expand its sales in the markets that F1 is developing in Asia and the Middle East. The company is planning to restart twin-shift production at its factory in Leipzig shortly and reckons that there is big potential with premium vehicles in Asia. BMW Chief Executive Norbert Reithofer told shareholders this week that premium cars make up just one percent of the market in China and that will increase considerably in the years ahead.

Renault has enjoyed government help in France and hopes that sales will pick up, but knows that if the trends continue passenger car production could decline further as business customers reduce their buying. Export growth in emerging markets is important, particularly in Asia and Eastern Europe so F1 needs to deliver in these regions. Renault will soon need to decide what to do if a title sponsor cannot be found to replace ING. Will the company pay the extra itself? That is doubtful. However there is la strong possibility that Renault will lean more on energy group Total, which is keen to expand its global business, notably in Russia. The oil company came on to the F1 cars this year and may have decided to expand further in this direction. Carlos Ghosn, the boss of Renault, says that F1 must be valuable to the company, and has been pushing for cost-cutting. Having said that the factory team has been embarrassed by customer Red Bull Racing this year. Flavio Briatore would no doubt be happy to take the team off Renault's hands and run his own operation.

Toyota has had a very hardline attitude in the recent talks and this has led to the feeling that the Japanese firm may wish to use the dispute as a way to get out of F1 without losing face, after eight years of failing to win a race. the company will face major changes in June as a new president takes office and it will be interesting to see what he decides about the F1 project. Toyota has a contract to supply engines to Williams next year and it might be an idea for go down that route and give Williams the money it needs to do the job properly. Renault learned the hard way back in the 1970s and early 1980s that running your own team is tough, but in the 1990s enjoyed huge success by providing engines and money to a solid F1 player.

The important question is really what Ferrari intends to do. The company is threatening to pull out of F1 and this should not be taken lightly. Ferrari sales are holding up for the moment, particularly in the Middle East and Asia and so F1 has great value for the company, spreading the word and building the reputation in new markets. Staying in F1 makes sense, but clearly Ferrari chairman Luca di Montzemolo wants to see changes in the way the sport is run and in how the revenues are distributed.