Mark Hughes: 'Response to Andretti F1 proposal is lukewarm at best'

Michael Andretti recently upped the stakes in his attempts at taking his team Andretti Global into Formula 1 with the announcement that GM was part of the bid and the intention would be to race under the Cadillac brand. Yet still, F1’s response to the idea can only be described as lukewarm at best. It’s a complex subject and the root of it, as ever, is money.

Since Liberty took ownership of F1’s commercial rights from Bernie Ecclestone we have entered the era of teams being franchises in the F1 business. Without having actual equity in the business, the existing 10 teams share between them around 60% of F1’s profits. In the era of the cost cap and F1’s commercial expansion, this makes them valuable entities.

The value of any one franchise will be a function of the size of F1’s profits and how many other franchise holders there are. In their agreements with Liberty, the existing teams have a certain amount of protection regarding new entrants. Under the current Concorde Agreement any prospective new team must provide an ‘anti-dilution fund’, $200m which is distributed between the existing teams.

Bringing an 11th team into the equation reduces the profit share of the existing franchise holders. From the existing teams’ perspective, the question becomes whether a new team’s participation would increase F1’s profits via the extra interest it would create, enough to overcome the smaller share of those profits which the other 10 teams would receive. Can the new team make the cake big enough that the smaller slice is still more cake than a bigger slice of the smaller cake? It’s clear from F1’s response that it still needs to be convinced that the combination of the Andretti and Cadillac names would be enough to do that. Even with the inclusion of the $200m anti-dilution fund.

But the championship is not owned by Liberty or its F1 management company FOM. They merely lease the commercial rights from the owners, the FIA, the sport’s governing body. FIA president Mohammed Ben Sulayem responded to FOM’s muted response to the news on social media, saying: “It is surprising that there has been some adverse reaction to the @Cadillac and @FollowAndretti news. The @FIA has accepted the entries of smaller, successful organisations in recent years. We should be encouraging prospective F1 entries from global manufacturers like @GM and thoroughbred racers like Andretti and others. Interest from teams in growth markets adds diversity and broadens @F1’s appeal.”

There is a fine line to tread between allowing existing franchisees to act as a cartel, keeping anyone else out, and maintaining the financial health of the existing teams. It is the FIA’s responsibility to ensure that line isn’t being crossed. In so doing it is also a reminder that the FIA’s power should not be taken for granted by Liberty.

Andretti’s pitch has been conducted in the open. He tried, in the full glare of the cameras at last year’s Miami Grand Prix, to enlist the teams’ support for his entry. This did not go down well, most teams feeling he would have been better advised to have made his pitch behind closed doors. After receiving just two signatures (from McLaren, which has an association with Andretti in IndyCar, and Alpine, which is hoping to provide engines) Andretti has focused his campaigning on the FIA.

“It’s a delicate dynamic to dance around and Michael’s feet have been a little clumsy”

“It is still an FIA series,” he says, “and the president has shared that he would like to have an 11th team. Having our great partnership with Cadillac we have a good shot at checking every box and being able to be on the grid soon.”

But it’s not quite every box. FOM has veto power over the acceptance of any additional team. In focusing just upon the FIA, Andretti runs the risk of isolating FOM and the teams further and thereby increasing the chances of FOM using that veto. It’s a very delicate dynamic to dance around and Michael’s feet have perhaps been a little clumsy.

The teams have not seen any hard detail of the Andretti plans, don’t know how well it is financed, whether the Cadillac involvement is anything more than a sponsorship deal (like Alfa Romeo of Sauber) or a genuine automotive participation. If the team should be uncompetitive it would be adding nothing to the pot but still taking a share of the income. The others fear a less-than-serious team getting a free ride on the back of their previous commitment. It is incumbent upon Andretti (and Cadillac) to engage the other teams and convince them that is not going to be the case.

There’s likely to be another obstacle too. The anti-dilution fund was set at $200m when that was roughly the value of a team. Williams was sold to Dorilton for around $180m at this time. The fund was set at a level to discourage anyone buying an existing team then quickly selling it on for a profit. But such has been F1’s commercial expansion that teams are now valued higher than that. Audi’s purchase of the Sauber team reportedly came with a price tag of $600m. This Concorde Agreement expires at the end of 2025 and it’s expected that the fund will be set at circa $600m from ’26, the season in which Andretti would be expecting to join.

It would be terrific to see Andretti and Cadillac in F1 but it has a lot of work to do yet even to get the green light. Put that down to greed of the existing teams if you wish, but that’s the playing field Andretti is trying to join.

Since he began covering grand prix racing in 2000, Mark Hughes has forged a reputation as the finest Formula 1 analyst of his generation
Follow Mark on Twitter @SportmphMark