Formula 1 crisis

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Bernie Max
This week signals the third withdrawal from Formula 1(F1) for Honda Motor Company. Originally entering the world’s most expensive sport in 1964, Honda faced mounting pressure and struggling performance in this their latest foray into the sea of F1.This news comes amidst Honda’s placing key personnel in all the right places for a comeback of sorts for 2009. Ross Brawn, most notably of Ferrari fame and credited for their dominance during the Michael Schumacher era, seemed a good bet and his oversight of the 2009 car should have proved Honda’s swansong. A secure contract with F1 driver Jenson Button was also a benefit and the team seemed poised for a rejuvenation starting in March at the Australian Grand Prix.

But all of this is academic if you subscribed to the warnings of FIA, F1’s governing body, President Max Mosley. As the self-described ‘guardian of the sport’, the FIA has been warning of the need for drastic cost reductions in F1 or face dire consequences. Warnings aside, little progress was made over the last three years as many of the regulations adopted by the FIA seemed aimed at meeting public perception models of a ‘green’ sport instead of reducing costs. These regulations have failed to reduce the cost of F1 and some argue it has actually increased the price tag to field 20 cars for a season. Honda’s immediate withdrawal from the sport for financial reasons has provided Mr. Mosley the soapbox he cherishes to say, in effect, ‘I told you so’ and announce that further team withdrawals would not be surprising. Can BMW, Toyota or Mercedes be far behind?

The FIA have announced a drastic plan that would position Cosworth, manufacturer of race car engines, as the official provider of a spec-engine for all teams. This specification could either be purchased or manufactured by the teams and would ensure a reduction in costs as the technology involved is understood to be remedial by current team standards for continued development and technological advances in engine and drive train advancements. This plan has not been looked upon favorably by teams such as BMW, Mercedes, Ferrari, Toyota or Honda as it would cease to be a true Mercedes if it were a Cosworth design. This strikes at the core of why these manufacturers are in the sport to begin with. Let’s unpack this shall we?

Shooting pragmatic bullets from the hip like Harry Dean Stanton’s ‘Willard’, Mr. Mosley has ushered a host of regulations that have been aimed at slowing the cars, reducing the cars traction, making the sport green and now reducing the cost of participating in the F1 series. Each of these measures has proven to be antithetical to the very nature of the sport enjoyed by millions of fans world-wide each year. While Honda’s withdrawal will surely prompt more vigorous discussion between the FIA and FOTA (Formula One Teams Association) as to the best way to dramatically lower the sport’s costs while ensuring each manufacturers car remains distinct from the others, it will also press teams to face the FIA’s new proposal to use an engine and drive train that is not their own.

The collision presented here is that F1 is still the best way for manufacturers to distinguish themselves from their rivals and showcase their technology and engineering skills. Toyota and Renault say they have no plans of quitting the sport although both are currently suffering over a 30% reduction in sales volume (the same as Honda) with no bright light in 2009. A complete collapse and exit of the top teams in F1 is unlikely as these manufacturers are specifically keen on emerging markets such as Russia, Asia and Latin America. These markets are vital for the manufacturers and must see their products as distinct, unique, advanced and of high quality/value. Honda’s approximate $200MM a year that it spends on the F1 program will have little effect on the earnings forecast for 2008 and as the final costs of the exit plan haven’t been decided yet, it may incur a substantial hit in 2009 just to close the Brackley shop.

While Honda’s announcement is bad for F1, it also signifies the state of the world economy and changing auto market. Automobiles have reached a precipice. Advance in design, technology, mileage and value or get lost in the past. Henry Ford did it over 100 years ago and the time for a re-think is at hand. Alternative fuels, new technologies and better products are in high demand from a market that is forcing the hand of all auto makers world wide. If the FIA and Mr. Bernard Ecclestone, F1’s commercial rights holder and CEO, were really serious about sustaining the sport instead of cashing in on a financial juggernaut critically beholden to the fiat economy of the past 10 years, they would look to team discussions and ways to embrace the advancement of car design and technology in a way that leaves the past behind and presents a product and show so desirable that car manufactures can’t afford not to be a part of it lest they go the way of the Dodo bird.

Many suggest these Messrs. Mosley and Eccelstone actually do represent the ghosts of F1’s past and have quite frankly passed their sell-by-date. I suspect Honda’s announcement this week only fuels that critical line of thinking as the duo have certainly made billions on the sport and yet seem unable to solve the current economic problems save versus the ability to say ‘I told you so’. Extorting government-backed race sanctioning fees from small, emerging countries and pressing for ‘green’ initiatives in F1 is akin to turd polishing at best and while Ecclestone has long-term debt to worry about and Mr. Mosley has an office to retain post-sex scandal, it is clear that F1 is merely a vehicle by which these two men, team owners and associates have become multi-millionaires and the sport itself is really little more than the bravado it’s built upon. In short, clearly errant of the original spirit of this gentleman-racer’s sport. Chapman, Tyrrell, Neubauer, Enzo and Duckorth must be observing with moist eyes.

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