26/06/2011
NEWS STORY
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For years we have heard threats from Formula One's teams about leaving the sport, buying the sport or joining a rival series. It has become something of a stuck record and now F1, and in particular, the sport's governing body the FIA, has a new threat to worry about. It has come right out of the blue and appears in an article in today's Express written by Pitpass' business editor Christian Sylt. In a nutshell, 17 race promoters, including Monaco, Monza, Silverstone and Spa, have all agreed to stop holding F1 races and run IndyCar instead if new smaller engines are introduced to F1 tomorrow. It is hard to believe but it is no idle threat.
The catalyst for this situation was the decision in December by the World Motor Sport Council (WMSC) to introduce to F1 from 2013 four cylinder 1.6 litre engines with a maximum of 12,000 rpm. This proposal met with huge resistance from most F1 teams as well as the sport's boss Bernie Ecclestone due to it being a 33% reduction in power from the current eight cylinder 2.4 litre engines which run at 18,000 rpm.
The change was heralded as a move to make F1 greener since the smaller engine would cut carbon emissions. However, the reduction of the rev limit would also affect the exhaust note and make the cars sound far less impressive than they currently do. It may not matter much to television viewers, but for spectators, who are the race promoters' bread and butter, it is of paramount importance.
On 3 June the WMSC approved the regulations containing the new engines which brought them one step closer to being used. The resistance to this led to the proposal being modified on Wednesday by the Formula 1 Commission, a decision-making forum for the teams and major stakeholders. The F1 Commission decided to delay the introduction of the engines by one year until 2014 and they were switched to V6 models instead of the previously proposed four cylinders. This is due to be written into the regulations tomorrow by a WMSC fax vote. However, one crucial change has been left untouched - that the new engines will run to 12,000 rpm. This has lit the touch-paper with the circuits and it is no surprise.
According to F1's trade guide Formula Money it costs the circuits £619m ($988m) to host F1 races and the only income they receive is from ticket sales. The broadcast fees and income from F1's trackside advertising and corporate hospitality all flow to F1's parent company Delta Topco, which is majority owned by private equity firm CVC. So the race promoters will carry all the losses if crowd numbers fall due to the cars' performance or engine volume going down.
Ron Walker, chairman of the Australian Grand Prix Corporation, represented the circuits at the Commission meeting and speaking to Sylt on Friday he described it as "a real showdown. It was the first showdown that the promoters have ever had with that commission and they understand exactly where we are." That's no exaggeration.
Walker says that "the proposal by the World Council for the first time galvanised all the promoters together, including Monaco, and they gave me their letters of authority and their proxies, to vote against the engine... 17 of the circuits gave me their proxies to tell them that. The only people that didn't allow me to vote for them was Korea and China."
The 17 are unified against the 12,000 rpm engine and only agreed to investigate the possibility of introducing a V6 in 2014 if it runs at 18,000 revs and sounds the same as the current engine. Walker says that they unified against the downsized engines "on the grounds that not one country round the table has a carbon policy. If Australia tried to introduce one the governor would be thrown out."
Walker adds that the study last year into F1's environmental impact carried out by the Formula One Teams' Association (FOTA) showed that racing and testing the cars only accounts for 0.3% of the sport's emissions so reducing the engine specification would make little difference. However it would have a huge effect on the sound and performance and this is what led the circuits to unleash their bombshell.
Walker says he told the Commission that if it persists with implementing the downsized engine then "the majority of circuits would sign a deal with Indy and we would run Indy Cars because it is very hard to distinguish an Indy Car from a Formula One car from about 100 metres and the crowds would still love it. Indy would give their right arm to get into all those countries."
Sylt initially thought this was yet another bargaining tool, as the teams have used for so many years, so he put it to Walker that it is an empty threat and that circuits such as Monaco and Monza would never leave F1 over it. However, he ominously replied: "I can absolutely give you 100% assurance that they would not run Formula One."
Further explaining the reasoning behind the circuits' decision Walker said "we spend $1 billion a year putting on this show, most of us lose money because it is government backed, and we are not going to have our customer base destroyed... I told the Commission that the circuits would not run F1. They can build their own circuits because we are not going to run it. The sound is part of the brand."
He adds "it is all very well for [FIA president] Jean Todt to say we will show the world we are going green but they are going to ruin the whole show... it would ruin our customer base." The circuits believe that the performance of the engine is one of the biggest selling points of F1 to fans and Walker explains that they "come to see a big engine that gives 18,000 revs."
He says that the noise from the downsized engine "would be so bad it would be like a tin can rattling and that is not what we signed up with the commercial rights holder." Given that F1's contracts refer to the sport being maintained as the pinnacle of single seater open wheel racing the engine change could give the circuits an avenue to claim there has been a breach and leave the sport.
The circuits are so serious about this that on Thursday Walker wrote (pdf file) to all members of the Commission, with the WMSC members copied in, saying that the new engine regulations "must ensure that Formula One remains the pinnacle of motorsport for high-tech and appeal." The letter reiterates the circuits' demands that the new engines must sound the same as the current models and must "have a capacity of at least 18,000 rpm."
Walker says that Ecclestone completely supports the circuits' view. "There is no doubt that Bernie is in agreement; he has been fantastic" he says. Ecclestone has been a particularly vocal critic of the new smaller engine formula saying that it "is not Formula One - it doesn't sound anything like Formula One".
However, F1's teams seem set on the changes and on Friday Mercedes Grand Prix team principal Ross Brawn said "all the manufacturers who are currently supplying engines in Formula One have signed an agreement that this is the engine we're going to support in the future." It doesn't bode well for F1 if the teams stand by this.
It is hard to describe the severity of the consequences for F1 if 17 circuits switch to IndyCar. Losing Monaco, Monza and Silverstone would be a disaster but losing them to IndyCar could be even more damaging. Yet they have given their authority to Walker and he says they will do exactly that if the 12,000 rpm engines are introduced. Presumably F1's top teams and drivers wouldn't be far behind the circuits in switching but even without them it is surprisingly understandable why Walker may see this as a viable option.
According to Formula Money's data, even if the IndyCar races only attracted around 75% of F1's current spectator numbers, but cost half of the current hosting fee (which would still represent a huge amount of revenue for IndyCar), this would leave the financial position of most F1 circuits unchanged. Since the circuits don't share in the revenue from TV broadcasting it wouldn't even have a direct financial impact on them if viewing figures (and thereby also trackside advertising) fell.
Walker wants to put a stop not just to the 12,000 rpm engine but to the future plans for it. "Todt told me in Australia that the next thing is they are going to have a hybrid," he says adding "I said what about the noise and he said they will put a squeak box on the back of the car. God almighty! Max had ambitions to get the safety right and he did a brilliant job and he got the costs down but to go green, let them go green in their own time."
There can be no denying that the absolute worst case scenario would be the circuits departing and even though Walker was deadly serious about this happening it seems unlikely, particularly since their resistance has Ecclestone's support. However, perhaps the biggest upshot of this development, which is here to stay, is that there is now a new force in F1. This could have absolutely gigantic consequences for the future of F1 and particularly any talk of it being sold in the near future.
This is the first time that the circuits have unified and taken such a public stand. And what a stand have they taken. Unlike FOTA, which has numerous decision-making committees, Walker is a single person who holds the authority of 17 circuits and this gives them incredible power. It may well also be useful for Ecclestone since Walker is one of his closest friends. With just two people being in charge of decisions over F1's commercial rights and its circuits it is hard to see how the FIA and the teams could prevail. F1's new power-base starts here.