Crunch time

Can Formula 1 survive without Ferrari and Mercedes? Zak Brown, Mclaren’s commercially savvy boss, thinks the sport has to take that risk

The next few months are going to be crucial for F1’s future according to McLaren’s chief Zak Brown. Although the new era encompassing different technical regulations and commercial terms doesn’t begin until 2021, Brown believes that a map of what that future looks like needs to be in place some time this year.

“We have a chance to course-correct 2021 now,” he says, “but Liberty and the FIA need to move quickly to minimise the period of negotiations because they will be turbulent and the longer that goes on the more disruptive it becomes. If new engine manufacturers and teams are going to come in it takes a couple of years to gear up – and time is ticking. I’d like to see what 2021 is going to look like by the middle of this season. After that, it begins to get very hard technically… In terms of costs, [Liberty is] talking of a 150 million [euros] cap. We would be in excess of that cap at the moment, some others more so. But we have – as do the others – an automotive business, a technology business and other forms of racing. So if those decisions were made this year, it would give us all enough time to redeploy resources we have today that we won’t need in 2021.”

Brown is effectively challenging Liberty and the FIA to set out its stall early, to give Mercedes and Ferrari the choice of either agreeing – or leaving. Because it’s becoming increasingly clear that the Ferrari/Mercedes position is different to everyone else’s. Whether that’s a difference in fundamental beliefs or one of negotiating position isn’t clear.

There are three basic areas of discussion:

1) Engine regulations
The four current engine manufacturers are in broad agreement on future engine regulations – which is for a continuation of the current hybrid with ERS-h – but the would-be new manufacturers would not countenance coming in under that formula. The independent teams, by and large, favour the presence of at least one independent engine manufacturer – and therefore by default disagree with the continuation of ERS-h. Ferrari’s Sergio Marchionne has been vocal in dismissing the idea of abolishing this technology as ‘dumbing down’ and against Ferrari’s brand values. Mercedes is in broad agreement.

2) Revenue distribution
Liberty is on record as saying it wishes to create a more even spread of F1 revenues between the teams, but hasn’t publicly stated the scope of the redistribution. Force India and Sauber have recently withdrawn their long-running joint complaint to the European Union about anti-competitive practices, whereby the big teams (but most notably Ferrari) receive disproportionately more than the rest. They withdrew it because of their belief in Liberty’s Chase Carey and his team. “Their approach has brought a new culture of transparency to the sport and illustrates willingness to debate fundamental issues such as the distribution of the prize fund monies, cost control and engine regulations,” read a joint statement from the two teams. Obviously, Liberty isn’t talking about giving its share of the money to the less favoured teams – that money has got to be surrendered by Ferrari, Merc, Red Bull. Not an easy sell… 

3) Cost reductions
The FIA has recently engaged McLaren’s former boss Martin Whitmarsh to help it frame a post-2020 control upon costs, with Liberty having floated the idea of a future team cost cap of about 150 million euros per year.

WHAT’S BEST FOR F1?

“I can understand why Ferrari and Mercedes want to protect their position,” says Brown, “but I think we need to ask: if Mercedes wins seven championships in a row, is that good for the sport? Is it healthy for anyone in the sport? On current spend and regs, they are odds-on favourites to win the next three years.”

The imbalanced payments – largely created when previous owner CVC needed the signatures of the top teams as it tried to float the sport on the stock market – are constantly expanding and reinforcing the advantages of the big teams over the small. But even that is being compounded by a highly complex cutting-edge engine that only one, maybe two, manufacturers have truly mastered even after four years. That unfortunate combination has frozen in place a static competitive order – and, if not radically changed at the 2021 opportunity, threatens to freeze things indefinitely. The two main beneficiaries of that competitive order, carrying enormous political weight, don’t want it radically changed.

Liberty’s Carey and Ross Brawn have been at pains not to conduct negotiations in public and have stated they will negotiate for as long as is required to get something that all parties can live with. But the concern that Brown outlines is that this very delay could be what ensures nothing will really change. “I think Liberty needs to focus on what’s best for the sport and what’s best for the fan. If that means a team/manufacturer not supporting that, then I think Liberty and the FIA need to be prepared to recognise you’re not going to make everyone happy. So they need to just centre on what’s best for the sport. If someone feels that’s to the detriment of their team and leaves, I’d rather that than have just two teams that can win.”

So, call the bluff of Ferrari and Mercedes? What if they do leave? “I think that’s highly unlikely but anything’s possible,” says Brown. “So we need to land on a set of rules that allows other teams to enter in the unlikely event of one or the other of the existing ones not continuing. Ferrari is a unique case but we’ve all seen manufacturers come and go in the sport. We have to write rules that are best for the sport, not what’s best for today’s manufacturers.”

So what does Brown hope 2021 F1 will look like? “F1 of all the major sports has the biggest revenue discrepancy from first to last. We’ve got to close that. Costs are totally out of control. We’re probably the only industry in the world, let alone sport, that hasn’t addressed costs in today’s age. I think that’s the highest priority. If people are making more money than others, I’m OK with that, so long as they are not able to spend it to increase this great gap in competitiveness. The engines are obviously complicated, and expensive, and there probably needs to be an independent manufacturer in there to give teams greater choice because the engine situation does get very political. The FIA announced a direction of more simplified engines. We support that. I’m not exactly sure of the FIA’s position on cost cap vs cost containment, but I think cost containment is very difficult and cost cap is the way to go. If you have the money you’ll figure out how to use it. Like the wind tunnel hours restriction. Teams just spent money instead on extracting more data from the more limited running. That’s a good example of how cost containment doesn’t really work.”

So McLaren, like most teams outside the Ferrari/Mercedes alliance but against the current engine suppliers, supports a simplified technical formula that would allow an independent engine supplier and make entry to F1 for new teams easier. This plus a radically tough cost cap of about half the budget of the top two teams. Sailing a smooth path through these troubled waters to 2021 is going to take some feat of diplomacy.

Brown: “It’s going to get pretty aggressive, I think. There’s going to be talk of breakaways. I hope not because a breakaway isn’t feasible, but I’m sort of resigned to the fact it’ll be used as a threat. But hopefully the conversations are more constructive in trying to get a solution and can be concluded quickly.”

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