F1 close to tire deal?

We’ve been keeping an eye out on the tire situation in F1 for the past few weeks as this, to us, is a major storyline for F1 in 2010. The details regarding the negotiations have been relatively sparse but it seems that things are getting close to a resolution.

Teams are looking for a decision this weekend in Monaco and s the tire dictates the entire structure and design of a car, the progress on the 2011 cars could be affected by the delay. According to Reuters, Mercedes GP’s Nick Fry has shared his thoughts on just where w stand and what the expectations are moving forward:

“I think we’ve got to come to a decision in the next 10 days or so,” said Fry.

“The encouraging thing is that we are in a massively better position than we were three or four weeks ago when it looked as though we might only have one maybe opportunity open to us.

“Now we’ve got three and I think discussions are still going on trying to persuade Bridgestone that they might like to stay. Even if they don’t there’s three options open to us and I think any of those three could provide a suitable tyre.”

Bridgestone announced their withdrawal at the end of this season but it seems that there are continuing talks about remaining in the series.

The bigger question is what will become of the sole-supplier solution that has adorned F1 for the past 3 years? It seems that with all the talk and negotiations, there may be more than one tire supplier in F1 again and that perhaps Pirelli, Bridgestone and Michelin are the front runners.

The French and Japanese companies have a long history in F1 as they battled for supremacy in the late 90’s and early 2000’s. It was the FIA who decided a single supplier would be best for F1 and Bridgestone took the offer. Michelin is adamant that they want competition in the sport should they return and have, according to some, made the price tag for their return very high.

Pirelli is no stranger to racing. They have a history in the sport that goes all the way back to the early 1900’s and have adorned the cars of Nuvolari, Ascari and Fangio to name a few.

In 2009 Pirelli enjoyed a robust market in North America which comprised 30% of their sales. The brand equity of Pirelli is strong in the United States and it is clear that this would only help their position as a high performance tire manufacturer.

Perhaps the bigger reason for their interest in F1 is the Asian market penetration. Only 14% of their sales were to these markets in 2009 and a strong presence in F1 would surely open these opportunities for them.

While they are diversified in their business focus, almost 90% of their revenue is derived from the sale of tires. This rich racing pedigree and the desire to seek new markets is something they might want but they there was some suggestions this week that they were seeking to make a profit from the supply of tires in F1. That, as we all know, may be the nail in the coffin of negotiations.

Michelin is keen to produce an 18″ tire and this would dovetail with their current sportscar series programs. They also would like to promote their Green X tire and have attached a large price tag according to Williams F1’s Sam Michael.

It seems that Formula One Teams Asociation (FOTA) chairman Martin Whitmarsh has more insight to jsut what may be happening in the short term and perhaps that is the avoidance of a costly tire war which would keep a sole-supplier situation for the time being:

“There are four proposals that appear to be out there and maybe there’s another couple as well,” he told Reuters. “I think we are running out of time so we are going to have to make a decision quickly.

“We have got to try and balance the different philosophies. Some of the bigger teams want the lowest technical risk and some of the smaller teams are prepared to accept technical risk in exchange for a substantially better commercial deal.

“The teams are trying to be sensible and mature and balanced about that but we can’t hide the fact that there are those who are fighting for survival that just want tyres for free or whatever and will live with the risks.

“The established teams are prepared to pay perhaps a little bit more of a premium.”

Michelin, who have recent experience of F1 but are considered the more expensive option, have said they will only come back if there is competition among tyre suppliers.

Whitmarsh did not see that as a stumbling block but explained that teams wanted to avoid a costly ‘tyre war’.

“If you use multiple suppliers, it has got to be controlled in terms of testing and development,” he said.

“Philosophically, Michelin want competition and want the opportunity for competition. I think they are very pragmatic in their support of F1 and accept they may enter in the short term as a sole supplier by default…but welcoming competition thereafter.”

While many are looking for something to spice up F1, a tire war could certainly provide that random element to create some challenging racing. With the regulations changing in 2012, perhaps limping through 2011 is something teams are willing to do.

A tire war could be very costly as well as the Bridgestone/Michelin war proved. The solution, whatever they decide, may be a temporary fix until the series can get the tire and regulation changes all working in concert with each other to make an impact that affects the entire series for the better.

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