I know…it’s an older story but with everything coming unhinged at Renault, I haven’t had time to share the good news with you. So here it is:
Itâ€™s a difficult economy. There is a good chance I donâ€™t need to tell you that but it is true nonetheless. Large layoffâ€™s (or redundancies) have become de riguer for most companies and the unemployment rate is a clear sign of this. Rest assured that our old friend F1 is no stranger to struggling economies as well.
Just this year Honda left under the weight of a failing car sales market and the latest blow came from BMW who claimed that the FIA Formula 1 Series was not relevant to their eco-friendly direction they are embarking onâ€¦never mind the massive losses they have experienced since 4th quarter of 2008. Iâ€™ll let the reader do the math on just what the prime mover of their departure might be. Itâ€™s green alright, but more along the lines of â€œgreenbacksâ€ than â€œgreen carsâ€.
Attendance has been down all year at each event which prompted Ferrari president Luca di Montezemolo to call for a FOTA work day at the end of this season to seek ways to remedy the situation. Monza attendance was down 16% last weekend while the Turkish grand prix had a paltry 30,000 spectators if rumors are to be believed.
Sponsors are pulling out and racing venues are finding it difficult to cope with large sanctioning fees born on the back of contracts previously signed with Formula One Management prior to the economic meltdown. Donington, the future home of the British Grand Prix, is at serious risk of losing its rights as they are finding it difficult to raise the cash needed for track improvements through a crafty debenture program designed to get fan buy-in and owner loyalty.
In times like this it is nice to know that the managing arm of F1, CVC Capital and FOM chief Bernie Ecclestone, have a firm grasp on making the kinds of cuts to secure the future of F1. That is if you can consider a 15% pay raise a cut to save the series.
It seems that Mr. Ecclestone was given a pay raise this year and one could presume it was an â€œatta boyâ€ for preventing the discontent FOTA teams from leaving the sport. Truth be told, it seems that CVC did make some serious financial concessions to entice the FOTA members to stay but it also felt compelled to approve a nice, healthy raise for Ecclestone.
If Ms. Carmichael has her sources and figures correct (I’ll let you decide on the credibility factor of “moderate” regarding the ex-KGB agent owned paper), it appears that:
Formula One’s owner, private equity firm CVC Capital, lost Â£300 million from F1 last year after it was forced to bolster prize pay-outs to ensure the cash-strapped racing teams do not follow through with threats to leave the sport.
The overall prize fund grew by over 50 per cent this year to around Â£310 million.
Pre-tax losses for F1’s operator, Delta 3, also soared, from nearly Â£250 million in 2007 to over Â£320 million last year.
It also is suggested that CVC still owes $1.4b on a original note of $1.5b taken out in 2006 to buy the F1 series. They have until 2014 to repay the note. Thatâ€™s a lot of cash to pay out and one wonders what FOTAâ€™s financial demands were prior to signing the Concorde Agreement extension until 2012?
If this report is correct, there seems to be the lingering divorce of the Ecclestoneâ€™s that may be at play but thatâ€™s a personal matter for the courts and to be honest, none of my business.
Suffice to say that Slavica Ecclestone, former wife of Bernie Ecclestone, may just stand to do very well. Mr. Ecclestone seems to be relatively well-seated financially leaving F1 and CVC in a tight spot. Perhaps F1 and the CVC could choose to â€œgo greenâ€ like BMW and bow out for â€œgreenerâ€ pastures. No doubt Bernie Ecclestone just pressed the KERS button on his salary wheel.