rich The teams had a strong in­cen­tive to see that the RRA failed

F1 Racing - - AWARD WINNER -

First a bit of his­tory: by 2002, ex­ces­sive cost was a real threat to For­mula 1 but the teams could not agree on how to re­duce it. Start­ing in 2003, the FIA took the ini­tia­tive and con­tro­ver­sially abol­ished qual­i­fy­ing cars, re­stricted en­gine de­vel­op­ment and pre­vented ex­ces­sive en­gine changes, plus other mea­sures. But by 2008 we re­alised we could not con­trol costs by reg­u­la­tion alone. With a nan­cial cri­sis driv­ing the big car com­pa­nies out of For­mula 1 and ris­ing costs mak­ing things very difcult for the smaller teams, a rad­i­cal new rule was needed. It was time to limit what a team was al­lowed to spend.

If pitched at the right level, a cost cap would make all teams nan­cially vi­able and the well-spon­sored ones very prota­ble. It would also level the play­ing eld; a team with three times more money might as well have a big­ger en­gine. Most of us would like to see what the en­gi­neer­ing tal­ent in the smaller teams could achieve if all teams spent the same.

The im­me­di­ate ob­jec­tion was that you couldn’t en­force a cost cap. But be­tween Jan­uary 2008 (when we pro­posed it) and the fol­low­ing May, the nance direc­tors from the teams, two spe­cial­ist part­ners from Deloitte and a for­mer F1 nance di­rec­tor got to work un­der the chair­man­ship of for­mer Jaguar Rac­ing team prin­ci­pal Tony Pur­nell. They pro­duced a fool­proof scheme for scru­ti­n­is­ing each team’s nan­cial ac­tiv­ity and ac­counts.

There was ab­so­lutely no doubt it could be en­forced, but over the win­ter of 2008/9 the teams de­cided they did not want an FIA-reg­u­lated cost cap. They told us they would make a ‘Re­source Re­stric­tion Agree­ment’ (RRA) among them­selves. I was sur­prised that the smaller teams went along with this. It seemed ob­vi­ous that with­out in­de­pen­dent en­force­ment, the RRA would fail. It was also ob­vi­ous that the big­gest teams did not gen­uinely want to re­strict spend­ing be­cause they would lose their ad­van­tage: eas­ier for them to com­pete with two or three other rich teams and have the rest hand­i­capped by a lack of money than to face ten teams with equal nance. The rich teams had a strong in­cen­tive to see that the RRA failed.

So why did the smaller teams agree to the RRA rather than back FIA reg­u­la­tion? I think they were prob­a­bly swept along in the cam­paign for more money from For­mula 1’s own­ers, CVC. Fer­rari’s then pres­i­dent Luca Di Mon­teze­molo and oth­ers were com­plain­ing that Bernie and CVC were tak­ing too big a pro­por­tion of the re­ceipts. That was cer­tainly ar­guable, but was, for the time be­ing, a side is­sue. The ur­gent need was to re­strict spend­ing and di­vide the CVC money (such as it was) fairly. But like a con­juror dis­tract­ing his au­di­ence, Luca fo­cused the smaller teams on the amount CVC were pay­ing rather than the im­me­di­ate prob­lem.

Back in 2008, if the smaller teams had asked, the FIA could have pressed for a fair dis­tri­bu­tion of the CVC money. The 1998 Con­corde Agree­ment had ex­pired on 31 De­cem­ber 2007. Bernie and CVC wanted it re­newed. The nan­cial ar­range­ments for the teams were part of Con­corde. It needed the FIA’s sig­na­ture, so we were in a strong ne­go­ti­at­ing po­si­tion. We might not have achieved equal­ity but we could have got a much fairer di­vi­sion.

Bernie un­der­stood this. He would not send us the nan­cial sched­ule he had al­ready agreed with the teams, say­ing it was none of the FIA’s business; it was be­tween him and the teams. We replied that we would not sign a new Con­corde with­out see­ing and ap­prov­ing all of it, in­clud­ing the pay­ments to the teams. Bernie and I had a rare pub­lic dis­agree­ment about this at the June 2008 World Mo­tor Sport Coun­cil. Another 12 months fol­lowed with no move­ment, so no Con­corde Agree­ment.

Bernie claimed the money was not our con­cern be­cause we had agreed with the Euro­pean Com­mis­sion that we would have no com­mer­cial in­ter­est in any FIA cham­pi­onship. But in re­turn for ofcial recog­ni­tion as the sole body gov­ern­ing in­ter­na­tional mo­tor­sport, we had agreed to en­sure fair­ness and safety. This meant the com­mer­cial ar­range­ments had to be fair – a sep­a­rate mat­ter from the FIA par­tic­i­pat­ing nan­cially in F1. For ex­am­ple, we would have had to in­ter­vene had CVC given all the money to just one team. The prob­lem was that the smaller teams were not com­plain­ing. I was be­ing la­belled a dic­ta­tor be­cause of the cost-cut­ting and we could not force through fairer pay­ments with­out the support of the smaller teams.

We nev­er­the­less tried to in­tro­duce a cost cap in 2009 by of­fer­ing greater tech­ni­cal free­dom (for ex­am­ple, mov­able aero) to any team pre­pared to op­er­ate on a greatly re­stricted and rig­or­ously checked bud­get. The idea was to make up the grid with cars that would be up to F1 per­for­mance lev­els rather than ad­mit GP2 or al­low third cars. It would also have shown that from the grand­stands and on tele­vi­sion, a £40mil­lion team was in­dis­tin­guish­able from a £200mil­lion team. The big teams were strongly op­posed say­ing it would lead to ‘two-tier rac­ing’. It seemed they hadn’t no­ticed we al­ready had that. By 2009, CVC’s need for a new Con­corde Agree­ment had be­come ur­gent. If the smaller teams had backed the FIA we could have in­sisted on a cost cap and fair dis­tri­bu­tion of the money in re­turn for sign­ing. The rich teams might have tried a break­away (as they re­peat­edly threat­ened) but it would have col­lapsed by early 2010 once they re­alised our deal with the Euro­pean Com­mis­sion meant their se­ries would have to run un­der the FIA and, worse, that their bar­gain­ing po­si­tion with race or­gan­is­ers and TV com­pa­nies was hope­less. But the smaller teams had cho­sen to back FOTA against the FIA. We de­cided to leave them to it.

So where are we to­day, ve years on? The prob­lems are press­ing, but I think a prop­erly en­forced cost cap com­bined with a fair di­vi­sion of the

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