Following on from my last post on the relationship between innovation and regulation the nice people at Virgin asked me to do a guest piece for the Virgin Disruptor’s website, you can see it here:

I used the example of how Colin Chapman created a huge opportunity for Lotus and, as it turned out, the British motorsport industry when he had to adapt to the change in engine regulations back in 1966. My point was that you can see regulatory change as a threat or an opportunity, and it is those that focus on the opportunity who will ultimately succeed. Just look at Mercedes in F1 at present. It would be wrong to think that the reason for Mercedes’ current dominance was that they are just lucky enough to have a good power unit – the decisions that brought about their current success were taken some time ago, choices made to focus on car and power unit for 2014 were taken back in 2012 and are now bringing the success they hoped for. Of course many of these choices were made by Ross Brawn who is not the one enjoying the current accolades, but presumably enjoying a spot of quiet fishing somewhere. I’m sure that this hasn’t gone unnoticed and I’m sure that, should he wish to, there are one or two openings for him to do the same again elsewhere.

Luca Marmorini, Ferrari’s Head of Engines, has been quoted in as saying that it is important that Ferrari have a second (ie in addition to Sauber) customer for their 2014 power unit – note the term ‘power unit’ as effectively these are engine + energy recovery systems, so the simple term ‘engine’ no longer seems to do it justice.

The reason for this concern is that their current second customer Toro Rosso have recently announced that they will be shifting to a Renault power unit in 2014, which makes sense organizationally as they are co-owned by Dietrich Mateschitz of Red Bull with Red Bull Racing, so presumably they can share more data during development and racing and therefore improve the performance of both teams. However Toro Rosso’s location in Faenza makes Maranello the ideal partner from a logistical point of view as they are literally a few kilometres down the road. Location matters in F1, otherwise we wouldn’t have Motorsport Valley in the UK, and so the proximity between the power unit supplier and customer cannot be ignored. For this reason, Marmorini hopes that all is not lost with Toro Rosso and that they may review their decision to go to Renault, as he says on the Autosport site:  “I don’t know if Toro Rosso will be with us next year. We are still working very well with them now. They’re an important contribution to Ferrari engine development, but I also think we are giving them a competitive engine.”

A key factor in this is data. Derek Gardner, the now sadly departed designer of the six wheel Tyrrell, told me that a key problem that they had with the six wheeler was the speed of development of the front tyres, which were far smaller than the standard F1 front tyre that Goodyear supplied to all the other teams. As a consequence they were getting far less data on the performance of the tyre – as it was only fitted to two cars and so were unable to develop it as fast as the other which had feedback from twenty four cars (there were 13 teams racing back in 1976). Data therefore is everything if you want to improve performance.

So currently it seems (and things could still move around a fair bit) that if Toro Rosso move to Renault then Renault will be the leading supplier with power units in five teams: Red Bull Racing; Toro Rosso; Lotus; Williams and Caterham. Mercedes will be supplying power units to three teams: their works team plus McLaren and Force India. Ferrari will be supplying two teams – themselves and Sauber. It seems very unlikely that Cosworth, who currently supply Marussia, will be in the frame for 2014 (but never say never) and so who knows, we may see Ferrari supplying the power unit for Marussia, which will make an interesting dynamic in their race with Caterham to tenth place.

The Future of FOTA

December 7, 2011

The news that both Ferrari and Red Bull Racing are planning to withdraw from FOTA has led many to suggest that this is the end of the team’s association. Clearly it is better for the teams to act as one if they wish to get a bigger share of the FOM revenues, but as seems to always happen, self interest is the decider at the end of the day. They are all agreed that they want to reduce costs – doesn’t any organisation? The important question is therefore how do you do it? When you’ve got your own bespoke test track then a ban on testing means you can’t use one of your key assets to improve your performance, so you can see why Ferrari would feel that being in FOTA isn’t in their best interests, RBR are in a different situation where their business model is a very different one to the other teams, so, again it may make better sense for them to go their own way. Of course we also have HRT who were the first to leave FOTA back in January 2011. The other reason rumoured for the departure of Ferrari and Red Bull Racing is the issue of third (or fourth) cars where constructors are allowed to sell/loan their cars to other teams, a practice well used in the 1950 and 60s. Stirling Moss’s legendary victory for Lotus at Monaco in 1960 was not achieved for Lotus Racing, but for Rob Walker’s private team using a Lotus 18. This is an issue which FOTA has been divided on and it could be argued that building more cars would effectively reduce the costs of certain teams such as Ferrari and also for RBR, whose original concept was to provide cars for Scuderia Toro Rosso. It’s just a very different way of achieving the same objective.

However regardless of the reasons for Ferrari and RBR to leave the team’s association, does this spell the end of FOTA? As history has a habit of repeating itself, it is interesting to note that in the controversies around previous Concorde Agreements, there were three teams who were united in refusing to sign up to the fourth agreement which was due to run from 1997 to 2002. They were McLaren, Williams and Tyrrell. In many ways it was this stand that led to the financial demise of the Tyrrell organisation, a team who had dominated F1 in the late sixties/ early seventies. Eventually a revised, fifth, agreement was drawn up which included the three teams and was to run from 1998 to 2007. The current (sixth) agreement is to run until the end of 2012, and this is where the negotiations are focused. The point of history is that the three teams who resisted the fourth Concorde Agreement are very much at the heart of FOTA today, McLaren providing the chairman, Williams a committed participant and the team that was originally Tyrrell Racing has now morphed into Mercedes GP (sorry Mercedes AMG GP!), via spells as British American Racing and Honda, with senior management team Nick Fry and Ross Brawn very much committed to FOTA. So even if FOTA doesn’t represent all the F1 teams, it may represent a significantly powerful voice that can influence the terms of the seventh Concorde Agreement, if it holds together.

So with things now underway for the 2011 season do we now have a clear picture has to how the season will pan out? If we take the lessons from Bahrain in 2010 then the answer has to be no. As you may recall the Bahrain 2010 race was pretty boring and suggested that all the changes for that year hadn’t really worked, but what we ended up with was one of the most exciting F1 seasons ever. So Australia was not the most exciting race, a number of teams (RBR and McLaren) appeared to be continuing their 2010 form, a number of teams seemed to have fallen back (Mercedes and Williams), whereas some had moved forwards (Renault aka Lotus Genii), the Pirelli tyres seemed to be a lot more durable than anyone had anticipated, Sergio Perez looks like being the new find of the year and Martin Brundle got things off to a good start in his role as BBC ubercommentator.

The key lesson from Bahrain 2010 seemed to be that one race is never sufficient to pick up on trends through the season. Back in 2009 everyone was writing off KERS (particularly strong advocates BMW discarded their system), but Ferrari and McLaren got theirs to really deliver as the season developed, so there’s no reason to believe that this won’t be the case in 2011. The thing that the teams need is feedback to understand what is working and what isn’t and they will now be absorbing all the lessons from the first Grand Prix of the year to put into the second, and the third.. and so on.

So the main lesson is let’s give it a few more races before we jump to any conclusions.

The current dispute between Tony Fernandes’ Lotus F1 team and Group Lotus, owned by Proton cars, underlines the importance of brands and who owns them. Formula 1 is a brand business, F1 itself is owned by CVC Capital Partners, a brand which they protect and enforce in order to make significant returns on their investment. But even Formula 1 is secondary, in terms of global presence, to its most successful team – Ferrari, and it is the Ferrari brand that provides an example to all in F1 as to what can be achieved from fast cars and motorsport. Of course the irony is that Enzo Ferrari wasn’t interested in building brands, he just wanted to win races and his road car operation was only there to fund the race team – the exact opposite of the other automotive manufacturers who have typically looked to F1 to help them sell road cars. And it is probably for this reason that the Ferrari brand has always been so different and so enigmatic.

A number of teams have attempted to emulate Ferrari, the most recent being McLaren. McLaren’s foray into high value road cars and other luxury items such as audio systems have underlined McLaren Group’s aspiration to become a global brand to the same value and impact as Ferrari. There is clearly a long way for them to go, but their recent move away from the Mercedes brand and their focus on a new road car, the McLaren MP4-12C, has indicated a clear strategy where the F1 team is a key element, but not the only component in a brand building activity.

Enzo Ferrari was famously contemptuous about the British constructors during the sixties and seventies, referring to them as garagistes and assemblatori, in other words he did not consider them to be proper race car manufacturers, but it was also recognised that the one person he really respected was Lotus founder Colin Chapman, you only need to read Enzo’s foreword to Jabby Crombac’s excellent book on Chapman, “Colin Chapman: The Man and His Cars” to recognise this. Chapman’s Lotus was the thorn in Ferrari’s side during both their heydays from the sixties through to the late seventies. The most remarkable thing about Chapman was that he was not only a very capable leader and negotiator as, of course, was Enzo, but he was also a brilliant engineer. If you track the evolution of the F1 car from 1960 through to 1980 the majority of the major innovations and trends were down to Colin Chapman. The Lotus team were famous for their ‘all-nighters’ during this time and we are not talking about partying until the small hours, but working on the cars, rebuilding and modifying through the night to ensure that Chapman’s latest tweaks and ideas were incorporated in the car before the race. During this period Lotus was the name and brand that was equal to, and often beating Ferrari. And like Ferrari, Lotus also had a flourishing road car business, focusing on both tuning existing mass produced cars such as the Lotus Cortina with Ford and the Lotus Sunbeam with Chrysler, and producing light, innovative sports cars such as the Lotus Elan and Lotus Elite. They were in a different space to Ferrari, less of the luxury and more of the fun and performance.

And so today what we see between Tony Fernandes’ Lotus F1 team and Malaysian car manufacturer Proton’s Group Lotus is a battle for the Chapman legacy. Proton acquired and rescued the ailing Lotus company in 1996. Through investment in new products such as the Lotus Elise they sought to regain the ethos and spirit of Lotus, with a relatively low cost sports car that acquitted itself well on the racetrack and also used innovative technologies such as a bonded aluminium chassis. Certainly in rebuilding the business they did not see F1 as an essential ingredient, and focusing at the club level they have rebuilt the Lotus motorsport presence. Then along comes Tony Fernandes and Mike Gascoyne with a vision and passion to rebuild the Lotus F1 team, locating in Norfolk and using the Lotus name licensed from Group Lotus. The new team is very much the best of the new entrants it has impressed on the paddock and (most importantly) Bernie Ecclestone that they mean business and are here to stay. In reaction to this event Group Lotus appear to realise that there is an opportunity here, they recruit Dany Bahr from Ferrari to help build up their brand, who then brings in a number of Ferrari personnel and then start to look at running their own GP2 race teams in conjunction with ART and Felipe Massa’s manager Nicolas Todt. The licensing deal with Tony Fernandes falls apart and now the lawyers are going to get rich.

Of course this is all about ego and power, something that crops up in F1 rather frequently. But isn’t it a real shame that they can’t work together and, as in the old days, have both Group Lotus and Team Lotus working off each other, driving forward the Lotus name to become a global brand exemplifying fast cars, high performance and competition? Perhaps good sense will ultimately prevail and if they are able to work together maybe they’ll even have Ferrari worried.

The Jordan team prepare for the Imola race back in 2004: Photo Jenkins, Pasternak & West

To many of the current fans of F1 Eddie Jordan is just another pundit on our TV screens, perhaps overplaying his part at times, but providing a distinctive approach and voice to F1 broadcasting.  However the other thing to remember about Eddie is that there is much beneath the Irish caricature he portrays and although he is undoubtedly entertaining, he also knows a thing or two about how things work and what is really happening in F1. My first meeting with Eddie took place at the San Marino Grand Prix of 2004 when Ken Pasternak, Richard West and myself were interviewing a range of team bosses and movers and shakers for the first edition of ‘Performance at the Limit’. I well remember our visit to the bright yellow Jordan motorhome. Eddie remarking to Richard, on seeing his Oyster Rolex, that he was obviously being paid too much, Richard didn’t have the heart to tell him he’d paid a few dollars for it in a market in Shanghai, but the best bit was when we were interviewing Eddie in his suite upstairs, and Ken asked Eddie how he went about selecting drivers for his team, perhaps hoping for some details of psychometric tests, Ken was rather taken aback when Eddie leaned forward and fixed him with a manic stare – ‘I look them in the xxxxing eyes’, he said slowly, leaning ever closer to Ken, who was now moving back as far as he could manage, ‘and I ask them, have you got what it xxxxing takes?’, still moving forward, Ken still moving back ‘have you got the xxxxing balls to make it?’ at this point Ken was virtually climbing backwards out of the window, Eddie chuckled and satisfied with the reaction relaxed back into his seat.

If we look back to this time last year when the rumours of a return to F1 by Michael Schumacher were building up – who was the person that actually broke the story that, even after being unable to replace Felipe Massa at Ferrari in 2009, Michael was planning to return to Mercedes in 2010? It was Eddie Jordan. Well Eddie now has an update to the story which he has posted on the BBC F1 website and it has two aspects to it. The first is that Michael is now changing his mind about continuing with F1 into 2011, and the second is an even bigger bombshell: that due to disagreements with Mercedes management Ross Brawn may also not continue with the team. Now clearly counter-arguments can be put to both of these, and indeed I’ve also blogged as to why I think Michael will stay for 2011, and of course some of this could be part of a negotiation process. But if Ross walks out that would be a significantly different dimension and one in which it may be easier for Michael to also decide to go too. All of this is conjecture of course, but don’t forget, Eddie Jordan has been right before.

Force India could be one of the teams looking for a name change. Photo: Jenkins, Pasternak & West

The commercial rights for Formula 1 are held by Bernie Ecclestone’s Formula One Group which is owned by CVC Capital Partners. I’ve heard on the grapevine that the new Concorde Agreement (the one that all the teams are currently focusing on to carry on from 2013) is likely to stipulate that any team using the terms Formula 1 or F1 in their name will be required to pay a licensing fee to FOG. A quick review of the full names of the teams on the official F1 site shows that this could effect ‘Mercedes GP Petronas F1 Team’, ‘Renault F1 Team’, ‘Force India F1 Team’, ‘BMW (yes it’s still there!) Sauber F1 Team’ and ‘HRT F1 Team’. The implications are that if a team wants to avoid paying significant sums to FOG then they may need to come up with a new name before 2013.

All of this suggests (as previously blogged) a tightening up of FOG’s position on the rights to use and promote the F1 brand and use the paddock area, for example the team’s having to remove their tractor units from the paddock if they had decals of brands which had not paid to be advertised in the paddock. Perhaps I need to look at renaming my blog?


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