POWER PLAY
FERRARI STILL HAVE A HOLD ON F1’S FUTURE
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.