F1 seeks to put brakes on high costs
Formula One's future is at stake because of the global credit crunch, and its leading figures are trying to find a way to cut costs in a sport long linked to celebrities, glamour and big money.
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MADRID–Formula One’s future is at stake because of the global credit crunch, and its leading figures are trying to find a way to cut costs in a sport long linked to celebrities, glamour and big money.
Max Mosley, president of the FIA, motor racing’s governing body, and Luca di Montezemolo, who chairs the body that represents Formula One’s 10 teams, met yesterday to start discussions on how the sport will navigate this crisis.
Mosley warned at the meeting in Nice, France, that if drastic cost reductions aren’t in place within two years, the $4.7 billion (all figures U.S.) F1 empire could be in peril.
“It has become apparent, long before the current difficulties, that Formula One was unsustainable,” Mosley said Tuesday.
“It really is a very serious situation. If we can’t get this done for 2010, we will be in serious difficulty.”
Mosley will meet with Di Montezemolo and the Formula One Teams’ Association after the Chinese Grand Prix on Oct. 19 with one topic on the agenda: attaining “significant and urgent reduction in costs.”
Mosley has been given the green light by his group’s world council to push through the necessary measures should negotiations with the teams falter.
The 69-year-old Briton is serving a fourth term as head of his group despite a recent sex scandal. He is championing budget caps and hybrid technology, hoping they will keep F1 relevant to the average fan unimpressed by the spectacle of racing at night in Singapore or around the famous street course of Monaco.
“The days when they could just toss out the 100, 200, 300 million euros a year, which is what Formula One costs those big companies, I think they are finished,” Mosley said. “We’ve got various means of making sure they don’t spend that money, but it does mean some draconian changes.”
F1 team owners splashed out a combined $1.6 billion in 2008 following the arrival of Indian billionaire Vijay Mallya’s Force India team. That’s up from $1.47 billion in 2007, according to a report from industry monitor Formula Money.
“People in Formula One still believe that whatever happens in the economic world, the sport will still carry on,” Renault managing director Flavio Briatore told Autosport magazine. “We never learn from our mistakes; we just spend more money.”
Although many teams have stated that they are wealthier than ever thanks to nearly $900 million in sponsorship revenue, sponsors and new teams weren’t exactly lining up even before the current crisis.
“If you look at the investment required for a privateer to come into F1 nowadays, the business model just doesn’t make sense,” Red Bull principal Christian Horner has said. “So somehow we need to get those costs under control.”
Indeed, a spokesman for Canadian Grand Prix promoter Normand Legault said yesterday it is no longer economically viable for a private company to run the annual F1 event due to rising costs.
Spokesman Paul Wilson confirmed that the race will not be held at Montreal’s Circuit Gilles Villeneuve in 2009 and that Legault’s company, F1 Grand Prix du Canada, is no longer interested in running the event.
He said all other events on the 18-race schedule are run by some form of government body.
Federal government officials in Ottawa are looking at bringing back the event, which generates an estimated $100 million a year in revenue and economic spinoffs, he added.
He said Michael Fortier, the Conservative Minister for the Montreal region, has spoken to Formula One boss Bernie Ecclestone at the urging of Prime Minister Stephen Harper.
The FIA announced on Tuesday that the Montreal race had been dropped from its 2009 calendar. Ecclestone later said it was due to a contractual problem.
Wilson said a few proposals were made to keep the race alive at costs affordable to the promoters, but that they were turned down.
With files from The Canadian Press