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Silverstone: The Beginning and End of Formula One

silverstone-F1.jpgOn May 13, 1950, the first ever (modern era) Formula One Championship Grand Prix was won by Giuseppe Farina in an Alfa Romeo-dominated event in which the Italian manufacturer cruised to a 1-2-3 finish. Luigi Fagioli and British driver Reg Parnell filled the remaining podium positions. The circuit was a WWII bomber airfield called Silverstone. The circuit has been a part of Formula One since that time, although races have, on occasion been run at other Britich tracks. This weekend, Silverstone hosted its last Grand Prix, and in addition to the race, manufacturers and the governing body announced they are going their separate ways as well. And so, Silverstone may go down in history marking the beginning and in some respects, the end of an era in modern motorsport.

While the Red Bull and Brawn teams took the top three steps on the podium, something that would have been considered headline news just a few months ago, all eyes were on Max Mosely, the president of the organization that oversees the sport. Mosely has insisted on a $66 million per team annual spending cap, and the “rebel” teams, who have announced they will race in the “New Formula” from 2010 onwards are rejecting his requirements. The rebels include eight of the top teams in the sport, including Ferrari, Renault, and McLaren Mercedes. Of the ten teams in the current F1, only Williams and Force India have committed to remain.
To the casual observer, the split might remind them of the contentious and damaging split in U.S. open wheel racing that took place in the mid-1990s, when Tony George created the Indy Racing League and as a result, Championship Auto Racing Teams, or CART was splintered. Open wheel racing in America was seriously damaged, and NASCAR quickly took advantage of the opportunity to poach drivers, owners, sponsors and fans. Today, CART and its subsequent Champ Car entity are no more, and single seaters are regaining some popularity, in part due to drivers like Danica Patrick and the Indy 500. But, the split in the U.S. was one based in individual greed and ego. The teams controlled CART, often a formula for disaster. Tony George controlled the Indy 500 and wanted more Americans in the sport. The result was a near “spec” series, with single engine, tires, and only two chassis options. The fans voted with their feet.
As the rebel teams see it, they aren’t splitting up Formula One, they’re saving it. In their eyes, F1 has been splintering for a number of years. And, the departure of the Honda team early this year was perhaps the straw that broke the rebels’ back.
The overall logistics, television, and operation of Formula One on the promotional side has been controlled by Bernard Charles “Bernie” Ecclestone for three decades. Ecclestone is president and CEO of Formula One Management and Formula One Administration and through his part-ownership of Alpha Prema, the parent company of the Formula One Group of companies controls the TV and promotional side of the sport. He does so via articles referred to as the Concord Agreement. He was successful in turning what was a gentleman’s daredevil sport into a mega-business. In doing so, he ultimately created a scenario that resulted in the ingredients now in play.
Without going into the play-by-play details of Ecclestone’s business dealings regarding Formula One for the past decade, know that in the past six years, he has been in collaboration with a group of banks, including – Bayerische Landesbank, J.P. Morgan Chase, and Lehman Brothers, all very popular players in the recent worldwide economic “surprise” of 2008. These banks controlled 75% of Eccelstone’s business operation, which in turn is the biz entity behind the racing empire. The banks sued to eliminate Ecclestone, but he retained his position, and control over the Concorde Agreement, by promising to pay the banks £260,000,000 over three years. As you can see, these banks were able to move Wall Street beyond Manhattan.
To raise the capital to support payment, the great racing circuits began to fall by the wayside, as new, ultra-modern circuits in new markets began to appear on the F1 calendar. These new markets agreed to pay the outrageous sums demanded by Bernie and company. Today, F1 races in some of the most sophisticated circuits, but without the fan support, history, or heritage that so many people who love the sport have lived for.
Separately, Max Mosely, who is president of the Fédération Internationale de l’Automobile (FIA) has been running his own agenda. The FIA is also the governing body for Formula One and other international racing series. Mr. Mosely, who at one time was Mr. Ecclestone’s advisor and has been active in F1 since the 1970s, has seen teams fail, due in his opinion, to the rising costs of technology. Some teams, including Ferrari, are known to spend literally hundreds of millions of euros annually to find their way to the Championship. As such, he has proposed limits on spending, and in fact, has manipulated the sport to the point where it may begin to resemble U.S. open wheel racing in terms of the “spec” approach to rules, engines, chassis, and other components. The manufacturers, who all want to create sales based on their brand AND technology, disagree. Mosley’s ingredients have been added to Ecclestone’s repayment requirements, plus the various teams’ need to maintain the ultimate technological edition of the sport – it results in a stew that may stink at the moment, but with an unknown final meal.
During the past 30 years, the teams and management have disagreed more than once. Races have been boycotted, monies withheld, and threats of breaking away are not new. What is new is the FOTA, the Formula One Teams Association. Created just this past year to “protect the interests of the sport,” FOTA is chaired by Luca di Montezemolo, the Ferrari president. Ferrari is the oldest continual competitor in F1 and is considered the heart of open wheel racing.
FOTA believes that greed isn’t a bad thing when it comes to motorsport. They just believe it should be shared equally among themselves, as opposed to the pockets of Mosely and Eccelstone. And while the teams do earn huge sums, just for showing up at events created by Eccelstone and company, they also are seeing empty grandstands, huge travel costs to new and distant lands, and dwindling sponsor agreements.
FOTA’s position is that they could enter into Agreements with some of the most historic circuits around the world within weeks, and could run a 17-race series in 2010 with as many as 24 cars and most, if not all of the top drivers. Racing would return to Canada, the United States, Mexico, and yes, even Silverstone. All of the parties meet later this week to discuss the possibilities, and for once, FOTA seems to have the minerals to focus on all three aspects of a successful formula: auto manufacturers, star drivers, and historic racing circuits. It will be of some significant interest to see how Max, Bernie, and Luca work things out. If FOTA does create a new series, one can only hope they choose to run their first race at Silverstone. It just might represent a new beginning of an old tradition. And that, in today’s world, is what the automobile industry is all about.

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