Formula 1 Insight

Power Shifts in Formula One

It is always a good feeling when one of the great and good says something that I pointed out some time ago. Not that it happens often - I am not claiming infallibility! So it was with some satisfaction that I read Luca di Montezemolo's latest utterance regarding the shift of power in F1 from the FIA to FOTA. Essentially, he is making similar points to those I made in my post, Has the Power Shifted?, back in October of this year.

GP crowd scene
Who pays the piper...

The recent agreement on regulations for 2009 and the future amounted to a significant change in the attitude of Max Mosley and the FIA. Previous suggestions from the teams have been contemptuously brushed aside by the FIA but this time virtually all of the agreed points came from proposals by FOTA. Whatever the reason for the FIA's sudden willingness to listen, the new atmosphere of collaboration rather than belligerence has given us all hope for the future. This is not about Mosley saving face, after all - it is about saving the sport of F1.

There is another battle still to take place, however: the struggle over the distribution of the income of the sport. With both teams and circuits finding it impossible to continue at the level of spending demanded by Bernie Ecclestone, FOTA is wanting to re-negotiate their share of the pickings. On the other side, Bernie is adamant that the teams already get as much as they are ever going to. It looks very much like the irresistible force meeting the immovable object.

Bernie's position is understandable; he has to ensure that his employer, CVC Holdings, receive enough income to service their debts and any reduction in their current 50% of income will make that impossible. But, if the cost of competing in and staging GPs is not cut quite drastically, F1 may find itself without circuits or teams to run on them. That would be an even more disastrous scenario for CVC and would ensure its bankruptcy.

The sport cares nothing for a group of investors who bought the commercial rights at a time when it looked as though F1 would remain a cow just asking to be milked. Any investment is a gamble and the current economic climate makes CVC's purchase seem a bit silly now. Essentially, the investment group made the same mistake as Prodrive - trusting that the powers that be in F1 were correct in their vision of the future. Max's promise that customer cars would be legalized proved empty in the event and Bernie's assurances of fat profits to be made looks equally ridiculous now.

There is a mystique about Bernie's financial acumen even so. Reading the comments on various blogs this morning, I detect a belief that Bernie will somehow finagle a way out of the mess he finds himself in. I beg to differ. It was fairly easy to arrange things comfortably when the FIA President was in his pocket and rights for a hundred years could be bought for a song; things have changed, however, and Max is no longer Bernie's compliant lapdog. Max has his reputation to rehabilitate, after all.

In fact, Mosley's need to side with the teams leaves Bernie in a very difficult position. Pressure for an adjustment to the profit sharing will continue and Bernie will have to talk eventually. If he is as clever as we have been led to believe, he must see that the only way to allow some compromise is to increase the number of races, thereby increasing the overall income by numbers rather than constant price hikes. I see little evidence of this in Bernie's statements, however, and he seems happy to let GPs disappear from the calendar while hoping for more circuits to appear in unlikely places in the world.

The coming battle over finance is going to be a struggle between titans, therefore, a fight none of the participants can afford to lose. And, just as the power has shifted in the balance between the FIA and FOTA, Bernie may well find that control of the sports's money is no longer entirely at his behest.


I've always felt that the F1 blogosphere (for want of a better word) has given Bernie too easy a ride and been too harsh on Max Mosley. I reckon they've both done their share of good and ill for the sport, but right now I have rather more faith in Mosley's ability to work with the teams to ensure that F1 survives than in Ecclestone's.

Personally, I can't help but think that the best thing that could happen to the sport would be for the teams to make a definitive break with CVC and go run the show themselves. What has happened with the Canadian and US Grands Prix just might be the straw that breaks the camel's back. After all, do the motor manufacturers, or the sponsors, or anyone besides CVC and Ecclestone really have anything to gain from the trips to such motorsporting nations as Abu Dhabi and Bahrain while the US, Canada, and now perhaps the UK and France get struck off the calendar because their governments aren't corrupt enough to shovel money CVC's way?
Date Added: 18/12/2008

Björn Svensson
Back and forth, and upside down.

This is whats going to happen to F1.

I believe that Bernie is going to find himself without a job i he continues in the way he has been playing around in the last year. With FOTA, the teams have grown up and have gotten a voice that can shout much louder than the likes of Bernie and the FIA.

And who actually cares for the CVC-part of the deal?
The only one who obviously does that is Bernie and the leaderboard of the group. But non of the fans, and certainly none of the teams care if F1 is run by CVC and Bernie or some other entity.

And one more thing i belive i have seen in the last year, is that Bernie seem to have run out of gas. He has none of his former stance to his back or the glow in his eyes.
He seem to be doing what he has to because he has to, and not because he wants to. And that is reason enough to let go, and let in some new blood in the sport.
Someone who has the visions and goals set straight.

One other thing i found interresting is that Mr. Montezemolo pointed out the races and the timing of them.
It is quite obvious that the teams finally have found the opportunity to make their voices heard, and to make their bidings for a different future.

Hopefully all this will result in some of the previous european races will return, because the prices of staging races had to be cut. And that this also gives the will of the current organisers to keep on staging F1 races on their tracks.

As for the future, i do think we are on a all time low right now, and it might continue for a year or so. But in time it will gett settled down ad taken care of, because we all love F1-racing and we want it to stay for ever.
Date Added: 18/12/2008

Björn Svensson
Patrick, that was a really good observation there.

And as i said on my comment, i hope that CVC will get kicked out the door, because they are costing to much money to sustain and to be able to keep the prices in F1 on a reasonable level.

If they have brought on them selves more loans and interests than they can handle, that should not be alid on the shoulders of the teams, manufacturers and the raceorganisers.
Date Added: 18/12/2008

Steven Roy
I am still far from convinced by the apparent schism between Bernie and Max. Max has become more outspoken since the alleged one off payment from Bernie but my belief is that the apparent separation between them during period that Max's extra-curricular hobbies were in the papers was simply a mechanism to manage the situation.

We have a situation now where teams are struggling to raise enough money to compete and circuits are making a loss on what should be their biggest earning event of the day. So in a sport that is massively profitable none of the participants are maing any significant money from the massive income.

When the FIA owned the rights it could be argued that at least the earnings were going into the association and therefore being fed in the sport at large or the road safety related work of the FIA.

When Bernie bought the rights the money was going to the guy who had built up the commerscial side of th sport and when things got sticky he could funnel some of it back to those who were struggling.

Now CVC have borrowed heavily and a huge amount of the income generated is going to service the debt that was generated buyin the rights and disappearing out of the sport.

The teams now have an association that appears to be pulling together and working for the greater good although no doubt Ferrari will revert to type sooner rather than later and stab the rest in the back when there is a chance to gain an advantage.

I still believe the circuits should create a similar group and negotiate en bloc. Just now no one circuit can put pressure on the FIA but if the circuits worked together they could cancel the next 6 races in the middle of the season and put some serious pressure on Bernie and Max.
Date Added: 18/12/2008

Nick Goodspeed
The system at the top of F1 is not worth salvaging. F1 is. Whatever strategic posturing is done by Ecclestone, CVC or Mosley, to try and retain control, the fact of the matter is that they are no longer credible to the teams or the fans. Luca di Montezemolo is not to be trusted either. He has showed in the past that an equitable situation does not suit him. He believes that Ferrari are a cut above and deserve more. This is the same basic attitude that has poisoned F1 for the last long while. If things cannot be made equal there will be no balance. The basic product will be flawed. Since the whole multi billion dollar business is based on the product, F1 racing, the product must not be compromised. The teams need more pwer of what is done but they need a system that will not give any one of them an advantage.
Date Added: 19/12/2008

When I heard that Ecclestone no longer owns commercial rights, and that he is only managing the situation for CVC, it all became clear. Bernie is trying to save CVC, advocating for CVC. It just so happens that what CVC needs is beyond what F1 can support. I suspect that F1 is the ONLY cash cow the CVC has. To save F1 FOTA must force CVC to sell the rights. I imagine FOTA can only do that by demanding a greater percentage of F1 revenues. Ecclestone will move on when CVC folds.

Ecclestone has had it pretty easy compared to Mosley, but Mosley deserves every bit he gets. His draconian stance toward motorsport is reprehensible given the fact that it generates most of the revenue that makes up the FIA budget. But nothing influenced his positions until now. His feet are being held to the fire of possibly losing a very large chunk of FIA income (he is already dancing on the hot coals of the WRC implosion). In my opinion the FIA has been mismanaged for so long, that it appears these implosions were inevitable.

I suspect that the ballooning cost associated with the two pinacle motor sporting branches were a symptom of FIA mismanagement. Mosley treated ballooning cost like it was the disease, while trying to influence the direction of developement. Had Mosley built consensus rather than imposing his agenda, he could have achieved both a reduction in costs and developed new cutting edge technology.

It took a long time for the F1 teams to actualize the power they knew they had. FOTA was formed only recently after all. But Montezemolo, as the mouth piece of FOTA has really delivered. Mosley will hold on with his cold, shriveled talons until the bitter end, which I hope is near. But, as has been pointed out, Montezemolo
could turn on the rest. But that is the weakness of FOTA not just Ferrari; they are in competition, and cooperation is anathema to them.
Date Added: 19/12/2008

Peter Boyle
Just gotta point out - I posted this here in March 2008, when several teams made anti-spanky statements:

"Peter Boyle
The Max takes out Bernie as collateral theme is one
I have been wondering about for the first time.

The manufacturers versus Bernie/FIA money squabble
was never resolved - even though Bernie won it is so
inequitable that the guys who actually provide
the ingenuity and do the work to produce the spectacle
don't get the lions share of the TV rights money that it
is inevitable it resurfaces.

The collective action of manufacturers against Max just might be the beginning. They might just stick it to the FIA entirely. The longer Max holds on, the more likely. I'm
personally surprised Bernie didn't take the headshot for a clean kill instead of the messy and tentative hint of no-confidence he has given.

Maclaren, BMW, Honda, Toyata, possibly Williams leaving to
form their own series with a new title. Ferarri versus Renault
left behind in "F1".

Here's hoping....
Date Added: 12/04/2008

I never in a million years expected Ferrari to be leading the assault....

Date Added: 19/12/2008

Steven Roy
CVC's website lists the companies they own and F1 is not the biggest. I only checked the details of one other company that I have some contacts in and it has a higher turnover than F1.

Bernie may appear to be doing CVC's bidding but that is for public consumption only. Bernie is only interested in Bernie and he will view the current stock market depression as an opprtunity to buy back the rights at a falsely low price with a view to selling them again when the market recovers. Unfortunately for him his marital situation may make that a little tricky since many off his shareholdings are in his wife's name because she has a non-EU passport and is therefore able to avoid details like normal taxes.

Bernie cannot risk taking Max out of his current position unless he can find another puppet to put in his place. As soon as anyone remotely independent gets elected they will start an enquiry into the deal that gave Bernie 100 year's of F1 rights for a few magic beans. Since it seems to be accepted wisdom ( that Bernie gave Max a one off payment of exactly the same amount as he paid for the rights you have to assume that any enquiry is going to find that the deal was dubious at best.

Max's reason for having to be kept in office during his vote of confidence was that he was the only person able to re-negotiate that deal. Since then unsurprisingly we have not heard him mention the deal in any way. It always struck me as odd that the only person able to re-negotiate the deal disqualified himself from the original negotiations on the grounds of conflict of interest. In his position I would not want my signature to be on that deal either given that it is as crooked as a greyhound's back leg.
Date Added: 19/12/2008

Nick Goodspeed
I have read in a couple of places that Tata is sponsoring Ferrari this coming year. It seems odd for the owner of Jaguar to be sponsoring Ferrari! Strange bedfellows in the land overseen by an aberration and an avaricious elf.
Date Added: 19/12/2008

Nick: In these days of reduced sponsorship and a horrible eeeekonomy, I'm sure any of the teams would look seriously at being sponsored by a web porno site if the money were right. Ferrari is no exception. But you're right, it is a very intereesting partnership. Perhaps they'll showcase other Tata brands.
Date Added: 19/12/2008

Patrick: I agree that Ecclestone has had an easier time from the critics than has Mosley so far - in fact, I have been guilty of this myself. But Max seems to be in a more conciliatory mood than ever before at present (for reasons that we can guess at), whereas Bernie becomes more entrenched in his own views every day. When it comes to the future of F1, it is time to be rather more realistic than Bernie wants to be, however, and the blogosphere must express its serious doubts regarding his continuing hold over the sport.
Date Added: 19/12/2008

Björn: I think that's a pretty fair assessment of the situation and we can look forward to an improvement as time goes on. We do live in exciting times though, don't we? ;)
Date Added: 19/12/2008

Steven: I do believe that there is a schism between Max and Bernie because their motives are so different now. It has become clear that all Max cares about his own power whereas Bernie is under enormous pressure to keep the money flowing in. That explains why there are times when the two appear to be singing from the same hymn sheet - when the issue does not affect Max's position, he is happy to go along with things. Take his indifferent attitude to Bernie's latest brainchild, the medals system; Max really could not care less whether it is instituted or not.

But when Max sees an opportunity to extend his power, he will go for it regardless of how it affects his old buddy. In the matter of distribution of finances, Mosley has clearly sided with the teams and is inevitably in conflict with Bernie therefore. So Max keeps the teams happy and ensures that they will not balk at his standing for yet another term as FIA president - Bernie can be fired by his employers for all Max cares.

Certainly, I agree with you that the circuit owners should form their own association, however. FOTA has shown the way forward and now the circuits need to have their say too.
Date Added: 19/12/2008

Nick: I agree with what you say but find within it the reason why Montezemolo can be trusted to act in the interests of F1 for the moment. The sport is essential to Ferrari's image and marketing - without F1, the company becomes just another manufacturer of hugely expensive and impractical sports cars. I believe that Luca understands this and so he will work to ensure that F1 survives in recognizable form, thus providing Ferrari with the necessary credibility as a racing team and superior constructor that it benefits from at present.

Once that objective has been achieved, however, I would not trust the old fox further than I can throw him!
Date Added: 19/12/2008

Marc: What can I say? I agree totally.
Date Added: 19/12/2008

Peter: You nailed that one all right! I think we are watching the last attempt by the teams to clean out the government of F1 and, if this does not succeed, there will be a breakaway series. Ferrari's involvement makes it pretty obvious that this time things are serious.
Date Added: 19/12/2008

Steven (again): Good points all and indicative of the morality of those who govern F1 at the moment. As for Max, he will be involved when it suits his lust for power and not when it has no bearing on the issue.
Date Added: 19/12/2008

Nick (again) and Don: Tata's sponsorship of Ferrari is very telling, I think. One might have expected the company to put their money into Force India but that is forgetting that Indian companies compete just as much as any others. To me, it is an indication that Tata has an interest in the sport as a marketing tool and this is just a first testing of the waters. If it proves of any value at all, expect Tata to enter the game with a team of their own. It is only a pity that this comes too late to help the Honda F1 team - but maybe STR can start hoping, especially if some sort of agreement can be reached on customer cars...
Date Added: 19/12/2008

Nick Goodspeed
Clive: The fox is interested in the continuation of the chicken coop only for his own benefit. He doesn't really give a damn if his fellow carnivores starve or not although they may be a necessary evil. Ferrari / Montezemolo know very well there must be other cars on the track but would be pleased as punch if they could arrange to get away with any fair or unfair advantage. This has been their ethic post Enzo.
Date Added: 19/12/2008

Alianora LA Canta
Clive, there are two reasons why TATA picked Ferrari over Force India. Firstly, it already has a partnership with Fiat over development of the road car side. Secondly, it's on the opposite side of the Indian national sporting authority schism to Mallya, and despite recent attempts, that schism still hasn't healed. In the latter case, Max Mosley has a lot to answer for (it was his insistence on an unpopular representative for the country that created the schism in the first place).
Date Added: 19/12/2008

Nick: All true but my point is really that Montezemolo/ferrari's interests lie with FOTA at the moment. As you say, to be seen to be competing with other teams is a necessity for the company.
Date Added: 19/12/2008

Alianora: Ah, yes, I was forgetting about the rift in Indian motor sport. But it all adds up to the fact that Tata are likely to be drawn into F1 as a team in its own right...
Date Added: 19/12/2008

Peter Boyle

Holy shit...

it's imploding.

Ferrari International Assistance is official, and Bernie
just hit the mutually assured destruction button.
Quick... let's play tic tac toe with zero players.

Date Added: 20/12/2008

Alianora La Canta
As attempts to avoid paying more money to the teams out go, that was pretty extreme. Now I expect that the teams will demand that Ferrari be paid the same as everyone else (with the $80m extra distributed equally between all teams), but that would require a new Concorde Agreement, since Ferrari got that payment until 2012 subject to signing the Concorde Agreement for that length of time.

It's also worth noting that Bernie only claimed to be offering a $100m combined one-off payment to early signatories of the Concorde Agreement (i.e. those signing it before the start of 2006, which means Ferrari, Williams, Toro Rosso, whatever Honda becomes and Force India). Now that Ferrari appears to have received $400m for its early signature ($80m for each of five years - though it wouldn't surprise me if they got it for 2006 and 2007 as well because of how early they signed), that indicates that the other four "early signatories" may well have been cheated out of a lot of money. There is no alternative reason I can think of why Bernie would underestimate the amount of money on the table for an agreement he wanted everyone to sign when he clearly had the money to spend.

It also means that the "extra payment" is about a fifth of Ferrari's total budget. And two-thirds of Force India's total budget. No wonder F1 feels skewed...
Date Added: 21/12/2008

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