The real reason manufacturers left F1

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An interesting read at the Telegraph by Christian Sylt and Caroline Reid regarding the reason car manufacturers left F1. Doing their digging through quarterly reports and financials from each of the car makers they have come to the conclusion that like all decisions made in business, it centers on profit and loss. No surprise at F1B as we’ve been echoing a similar opinion caught by prevailing winds amongst business propriety.

Negative Camber

Many reasons were given and most of us bit our tongues when they played the “green” card on us. The “F1 isn’t relevant anymore” notion was both nonsensical and insulting to fans, teams, drivers and employees. It’s completely understandable that PR departments would spin it this way but they insulted the machine of F1 by making it the scapegoat of ineffectual business sense in their rush to marginalize their financial decisions as eco-conscience, market driven mandates.

Perhaps it is another reminder of how marketing, sales and PR are often in completely different wings of the company HQ. Precious few companies have found a way to tether their marketing and sales departments in a meaningful manner that equates to positive results that are extrapolated to the highest percentage of penetration within a segment or market. The PR department is the child in the divorce as they try to develop and deliver the message of both sales and marketing and often times that message gets lost or contradicts sane, top-level performance.

Confident were the F1 juggernauts, who found the bravado to form the Formula One Teams Association (FOTA) on the sweat and toil of those who labored in their factories, risked it all on a breakaway series to create a sanity and stability that would ensure a proper racing series for years to come. They stood firm in the trenches of 2009’s economic collapse and trumpeted the concept of a new series that fans and employees could be proud of—and then they promptly left with their tails between their legs.

F1 wasn’t relevant anymore but Ferrari insinuated that the departure of other car makers had little to do with “green” market demand and alternative energy cars. Leveling the rifle at the FIA’s head, Ferrari suggested the war on manufacturers in 2009 had taken its toll. Relevancy withstanding, the thing that wasn’t present was the demand for their products. Simply put. It must be said that Ferrari and Mercedes are the only two car companies with the good will to see out their obligations and to my mind that is every reason to endorse their products and services—if you can afford them.

It is not fair to suggest that the car companies sailed too close to the wind. Nor would it be prudent to suggest that they were disingenuous when their PR departments suggested market demand for eco-friendly cars had prompted their departure. Those messages were to be expected. What is fair to say is that the economy played a major role in why they left. Both Christian Sylt and Caroline Reid suggest as much in the Telegraph story and there is little doubt that remaining 30-50% off or more in sales volume will bring any organization to its knees.

If the article is correct and the expense for F1 programs is born from the marketing budgets of the manufacturers, perhaps that is part of the problem. If a major portion of the operational cost is covered by sponsors, they are actually marketing other company’s products and services. A re-think could be in the making as to where the expense is carried and just how that expense manifests itself on the balance sheet.

Marketing departments, like advertising, are often the first cut in a recession and there is little wonder that the F1 programs of BMW, Honda, Toyota and Renault were cut. It must be difficult to quantify the expense in a tangible measure. How many cars did Toyota sell in 2007 because of their F1 involvement? Difficult to say. How much Panasonic electronics were sold in 2007 because of Toyota’s engine cowling location for the electronics maker’s logo? Good question.

In the end game, the manufacturers need a series that can develop their cars, products and services in a real world environment. The rules and regulations need to cater to providing an environment that pits each manufacturer against the other in a proving ground of technology and engineering that is both translatable and affordable. The FIA has provided nothing of the sort. In fact, they have provided a series where the main goal is to stop, slow, hamper or hobble the manufacturer and their products.

That’s not an indictment of the FIA’s former President Max Mosley or current President Jean Todt regime or commercial rights holder Bernie Ecclestone. The FIA feared for safety and other reasons and were determined to slow the cars down and manage (some would say manipulate) the series for entertainment value. The “show” was the main concern and tweaking regulations yearly, nearing monthly, seemed logical when things were not “entertaining”. Their goal? Keep TV ratings as high as possible so TV contracts would remain multimillion dollar propositions.

When FOTA rose to strike a balance or leave the sport, the war to marginalize the manufacturer was on. Messrs. Mosley and Ecclestone were intent to quell any uprising amongst the indigenous tribes and would use the scorched earth policy if need be. The Twilight revealed a battle field littered with corpses of the main power brokers and potential helmsman of FOTA , the teams, the FIA and possibly the future of F1. Briatore, Dennis, Symonds, Vatanen, Theissen, Howett and many others were gone. Left to his devices and without the generals he relied upon, Ferrari and FOTA President Luca di Montezemolo resigned himself to hammering out a Concorde Agreement extension and now has stepped down as FOTA president.

Last week di Montezemolo said that unless changes occur, Ferrari could still leave in 2012. Perhaps di Montezemolo was right? Maybe the war did take its toll but that doesn’t marginalize Christian Sylt and Caroline Reid’s efforts as the real crux of the issue is financial. If the series was not conducive to the company and sales are down dramatically, the choice is obvious and it is up to the PR people to spin it. The war was territorial and the territory just became immensely unattractive to BMW, Honda, Toyota and Renault.

Mosley likes to say the economy was going to make this happen and he saw it before anyone. Fair enough, he probably did but could any of these teams afford $200MM a year? Yes. Did they want to spend $200MM in a series that had become a shadow of what it once was for the car maker and rescinded in its offer of a competitive showplace and proving ground for the worlds premier automakers? No. Keep washing those hands Max, there’s still a little blood left on them.

I shudder to think about the article Christian Sylt and Caroline Reid will be writing in 12 months time about the even more dramatic collapse of the privateer and financial reasoning for them to even wade in to the pool once roiling with piranha. A story that will be mouse-in-pants uncomfortable to read and more expository of the real problem in F1.

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