F1 Racing (UK) - - CONTENTS - DI­ETER RENCKEN @F1rac­ing_­mag face­book.com/ f1rac­ing­mag

Di­eter Rencken on how Fer­rari con­trol the fu­ture of F1

At the root of all For­mula 1’s cur­rent ills are two in­ter­twined is­sues that arose be­cause of for­mer com­mer­cial rights holder CVC Cap­i­tal Part­ners’ de­signs on a Sin­ga­pore stock ex­change list­ing: an in­equitable rev­enue struc­ture that re­wards par­tic­i­pa­tion in­stead of per­for­mance, and dys­func­tional reg­u­la­tory pro­cesses that per­mit one team, Fer­rari, to veto pu­ta­tive rule changes, even if they are put for­ward af­ter ma­jor­ity agree­ment.

A se­ries of bi­lat­eral agree­ments be­tween For­mula One Man­age­ment, now owned by Lib­erty Me­dia, and a se­lect group of teams en­sures they not only ben­e­fit pref­er­en­tially from F1’s bil­lion­dol­lar rev­enues, but also de­cide which­ever mo­tions are es­ca­lated to the F1 Com­mis­sion via the Strat­egy Group. They also form a ma­jor vot­ing force in that oxy­moron­i­cally ti­tled com­mit­tee upon which they sit, to­gether with the FIA and FOM – each group hold­ing a block of six votes.

This gives the ‘pre­ferred’ teams the power to block any pro­pos­als that threaten their own in­ter­ests – a power they use fre­quently, when such pro­pos­als favour the in­de­pen­dent teams. Plenty of sen­si­ble ideas to cut costs, for in­stance, have been need­lessly and sum­mar­ily shot down.

That’s not the end of se­lect team priv­i­lege, ei­ther. Once the Com­mis­sion has ap­proved a mo­tion, Fer­rari get to have their say be­fore the gov­ern­ing body grants fi­nal ap­proval. Should any change not find favour in Maranello, the his­toric veto is trot­ted out (or, at the very least, threatened), as was the case when the FIA and FOM pushed for cheaper and sim­pler bi-turbo V6 engines in place of the cur­rent, com­plex units.

Is it any won­der F1 finds it­self in a reg­u­la­tory mess? The blame rests squarely on CVC and ex-f1 tsar Bernie Ec­cle­stone. In their haste to list F1 as a means of turn­ing quick bucks, CVC ap­peased Fer­rari’s de­mands, plus those of Red Bull, Mclaren and Mercedes. Wil­liams, al­beit less priv­i­leged fi­nan­cially, are the fifth ‘club’ mem­ber. The IPO was even­tu­ally aborted, but we still suf­fer the ef­fects of the deals cut to ex­pe­dite its pas­sage.

The good news is that these deals ex­pire on 31 De­cem­ber 2020. F1 will then hope­fully re­vert to per­for­mance-linked pay­outs. The bad news is that the Strat­egy Group will frame F1’s reg­u­la­tions through to the ex­piry date. This means that the ghosts of the teams who con­trib­uted to the chaotic state of F1’s cur­rent reg­u­la­tions will con­tinue to haunt F1’s post-2020 reg­u­la­tions. That’s de­spite op­ti­mism that the end of the Cvc/ec­cle­stone era would re­sult in cost-cut­ting and end dom­i­na­tion by four priv­i­leged teams once F1’s fi­nan­cial and reg­u­la­tory in­equal­ity were elim­i­nated.

Clearly this will not be the case; worse, Fer­rari, whose pres­i­dent, Ser­gio Mar­chionne, is threat­en­ing to can­cel the team’s F1 ac­tiv­i­ties, will con­tinue to ex­er­cise their veto through to ex­piry. Should it be ex­tended as a sweet­ener to keep Fer­rari in F1, he might well keep that power for the fore­see­able fu­ture, mean­ing any reg­u­la­tion changes pro­posed for F1’s ‘new era’ will be sub­ject to Maranello’s caprice. What does this mean in real terms, and how did the sit­u­a­tion arise? In terms of process, the post-2020 reg­u­la­tions – par­tic­u­larly per­tain­ing to power units – need to be ap­proved by the FIA at least two years ahead of in­tro­duc­tion, i.e. 31 De­cem­ber 2018. Be­fore such rub­ber­stamp­ing by the FIA’S World Mo­tor Sport Coun­cil, they need to have passed muster at Strat­egy Group and F1 Com­mis­sion lev­els.

Sources say that in CVC’S hasti­ness to list on the stock ex­change, no pro­vi­sion was made in the bi­lat­eral team agree­ments for an in­de­pen­dent reg­u­la­tory body to shape F1 post-2020. There was just one stip­u­la­tion: that if no agree­ment was reached, the present reg­u­la­tory process (Strat­egy Group and F1 Com­mis­sion) would con­tinue, even af­ter 31 De­cem­ber 2020 if nec­es­sary. And why would this se­lect ‘club’ agree to change be­fore that date? Do tur­keys vote for Christ­mas? And don’t for­get that Fer­rari’s veto ex­pires only on 31 De­cem­ber 2020…

Thus, even if the FIA and FOM present a united front and to­tally align them­selves at Strat­egy Group level – where they col­lec­tively hold 12 of 18 votes – in the hope of forc­ing through less com­plex power units and cost-cut­ting ini­tia­tives, Fer­rari could still tor­pedo such changes. And if pro­pos­als don’t suit the agen­das of, say Mercedes or Red Bull, they could aid and abet Fer­rari.

Al­ready the word is that bud­get caps will be ve­toed, as will any dumb­ing down of F1’s present power units; worse, Mercedes, Fer­rari and Honda are in favour of all­wheel-drive sys­tems via front axle-mounted KERS mo­tor-gen­er­a­tors. Cheaper, less com­plex F1 post-2020? Un­likely.

Fer­rari’s un­re­voked power to veto new reg­u­la­tions in For­mula 1 could af­fect the sport be­yond 2020

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