Is F1 being run as a cartel? EU Commission to investigate?
Discussion
Good to see the smaller F1 teams making a (last) stand.
The small Formula 1 teams have written to Bernie Ecclestone asking him to reconsider his position regarding the distribution of prize money and bringing to light some interesting figures about what it costs to run an F1 team today. The letter, signed by Bob Fernley of Force India, was sent to Ecclestone, the other F1 teams, the FIA and to CVC Capital Partners, the owners of the Formula One group. It says that Lotus, Sauber and Force India F1 “clearly see the direction of Formula 1 towards customer cars/super GP2″ and says that “it is equally clear that the Strategy Group has no intention at all to reduce costs”.
In order to highlight the scale of the problem the letter says that they received money from FOM this year ranging from $52 million to $64 million.
“The costs of the power unit together with the installation costs amount on average amongst us three to $43 million. This clearly shows that 70-80 percent of the FOM income has to be allocated to the engine.”
The letter goes on to say that “unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 percent is by far not enough to construct, enter and run a team over a 20-race season. The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams”.
The teams say that they have been focussing on the reduction of the costs but noted that allegations that they are not running good businesses are unjustified as all three teams have recorded podium finishes in recent times.
The letter says that Red Bull and Ferrari are receiving in the region of $160 million each and says that the 2014 Prize Fund will be around $835 million but around $412 million is going to the four teams in the Strategy Group.
“The current skewed position is a direct result of the massive increase of costs and the lack of willingness to reduce the costs.”
The letter goes on to say that “we cannot accept the current distribution of funds in view of the massive increase of expenses. We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula 1 and apparently, the distribution of FOM funds.
“Whilst the FIA are involved in The Strategy Group, they are impotent to act, as demonstrated in the recent cost control process which saw the FIA issue a media statement confirming their intent to impose cost controls and their subsequent climb down when over ruled by the CRH, Red Bull, Ferrari, Mercedes, McLaren and Williams.”
The teams say that F1 remains “one of the strongest global sporting platforms. However, circumstances within and around Formula 1 have changed, and our collective inability to react is damaging the sport. Pursuing a direction towards third /customer cars is creating fears. Such a move, representing a misuse of power, will not only change the DNA of Formula 1 but also damage the value of our enterprises and lead to job losses. A two-tier system can only be considered a short-sighted vision. It is evident that the current developments are dramatically reducing the value of Formula 1 and massively undermining its reputation as a sport.”
The letter adds that “our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus. The issues we are facing are related to financial matters which can only be resolved by financial measures. In our common interest and for a sustainable future of the sport, we request you, together with the other stakeholders, to implement a more equitable distribution.”
The teams have requested a meeting with Ecclestone over the Abu Dhabi weekend.
more details here
http://joesaward.wordpress.com/
The small Formula 1 teams have written to Bernie Ecclestone asking him to reconsider his position regarding the distribution of prize money and bringing to light some interesting figures about what it costs to run an F1 team today. The letter, signed by Bob Fernley of Force India, was sent to Ecclestone, the other F1 teams, the FIA and to CVC Capital Partners, the owners of the Formula One group. It says that Lotus, Sauber and Force India F1 “clearly see the direction of Formula 1 towards customer cars/super GP2″ and says that “it is equally clear that the Strategy Group has no intention at all to reduce costs”.
In order to highlight the scale of the problem the letter says that they received money from FOM this year ranging from $52 million to $64 million.
“The costs of the power unit together with the installation costs amount on average amongst us three to $43 million. This clearly shows that 70-80 percent of the FOM income has to be allocated to the engine.”
The letter goes on to say that “unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 percent is by far not enough to construct, enter and run a team over a 20-race season. The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams”.
The teams say that they have been focussing on the reduction of the costs but noted that allegations that they are not running good businesses are unjustified as all three teams have recorded podium finishes in recent times.
The letter says that Red Bull and Ferrari are receiving in the region of $160 million each and says that the 2014 Prize Fund will be around $835 million but around $412 million is going to the four teams in the Strategy Group.
“The current skewed position is a direct result of the massive increase of costs and the lack of willingness to reduce the costs.”
The letter goes on to say that “we cannot accept the current distribution of funds in view of the massive increase of expenses. We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula 1 and apparently, the distribution of FOM funds.
“Whilst the FIA are involved in The Strategy Group, they are impotent to act, as demonstrated in the recent cost control process which saw the FIA issue a media statement confirming their intent to impose cost controls and their subsequent climb down when over ruled by the CRH, Red Bull, Ferrari, Mercedes, McLaren and Williams.”
The teams say that F1 remains “one of the strongest global sporting platforms. However, circumstances within and around Formula 1 have changed, and our collective inability to react is damaging the sport. Pursuing a direction towards third /customer cars is creating fears. Such a move, representing a misuse of power, will not only change the DNA of Formula 1 but also damage the value of our enterprises and lead to job losses. A two-tier system can only be considered a short-sighted vision. It is evident that the current developments are dramatically reducing the value of Formula 1 and massively undermining its reputation as a sport.”
The letter adds that “our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus. The issues we are facing are related to financial matters which can only be resolved by financial measures. In our common interest and for a sustainable future of the sport, we request you, together with the other stakeholders, to implement a more equitable distribution.”
The teams have requested a meeting with Ecclestone over the Abu Dhabi weekend.
more details here
http://joesaward.wordpress.com/
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