Pirelli says time is ticking on F1 deal

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If Pirelli has learned anything about being in formula One, perhaps it’s the art of negotiating in public when things aren’t going your way or as quickly as you’d like. F1 boss Bernie Ecclestone is a master of the public versus private negotiating gambit and he knows just when to use which. If a circuit isn’t paying quick enough, it goes public and those involved get the joy of looking a bit silly or empty pocketed while they stave off journalists probing questions. Need a new Concorde Agreement? Well, that is quietly done behind closed doors.

Pirelli’s contract ends at the end of 2013 and they’ve been working behind doors toward a contract extension. Periodically motor sport boss Paul Hembery has mentioned it in the press and usually stated that time is of the essence. Today, Pirelli’s Hembery says time is running out for F1. Hembery told AUTOSPORT’s Dieter Rencken and Pablo Elizalde:

“The more time it passes, the more difficult it becomes,” Hembery told AUTOSPORT.

“We are in the automotive business and I think anyone reading the newspapers will see that Europe is performing particularly badly in our sector.

“We are not immune to that, and the more time that passes the more questions that get asked at board level.

“We have to keep asking and justifying our involvement in this sport. We are willing to go forward in the sport, but I always said that it won’t be at any cost because that simply can’t happen.

“We put a value on the sport and we can’t go beyond that because we have an obligation to our investors.”

In the end, Pirelli wants to sell tires. The idea is to sell tires at a profit. Part of the marketing and brand-building exercise is being the sole supplier to F1 but if that process is producing a loss and the gains or increased sales due to their involvement are paying dividends, then time is most likely running out for a contract that Pirelli is keen to sign… namely, more money for their efforts.

The operative statement in AUTOSPORT’s interview is this:

“You can’t divide what’s going on in the business community with what you are trying to do in terms of branding and promotion.”

This is key to their argument in that the economy is pounding most companies about the head and neck and to be involved, in terms of branding and promotion, you have to have some sense of fiscal responsibility. If the sales of tires are not outpacing your market spend, then there is a problem… you’ll need more cash for your participation in F1.

Hembery says that most of the teams are on board and I will predict that Pirelli will get a new contract very soon. It is our understanding that both parties are keen to continue and the only issue will be ironing out what the compromise will be between the two parties.

I will offer Mr. Ecclestone a little help (not that he needs it) regarding Pirelli’s statement about branding and promotion. The issue with Pirelli is that they have approached this investment much like any traditional marketing activation they’ve managed in the past. What they might want to do is view the new world of brand experience and realize that branding has gone beyond the critical step of ownership in order to be associated with a brand or experience a brand.

If Pirelli wants to entice non-owners of their product to be associated with their brand, that’s fine. Belonging to something is one thing but creating something that makes belonging matter is much, much better. I don’t feel that Pirelli have done that.

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