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Jordan’s Head of Marketing, Mark Gallagher showed signs of optimism this weekend over the global economy, in light of the growing concern by some of his colleagues in F1. For Mark Gallagher, this week's press reports that Formula 1 is suddenly...

Jordan’s Head of Marketing, Mark Gallagher showed signs of optimism this weekend over the global economy, in light of the growing concern by some of his colleagues in F1. For Mark Gallagher, this week's press reports that Formula 1 is suddenly ‘in crisis’ are surprising given that the sport’s business experts have been aware of the US economic downturn for many months.

The dotcom crash of 2000 and parallel drop in the tech and telecommunications sector - including telecommunications companies involved in Formula 1 such as Nortel Networks, Marconi and Lucent Technologies - has made it obvious that some technology companies would not be in a position to renew their sponsorship deals at the end of their term.  The IT sector has been similarly affected, though Formula 1’s leading sponsors from this area - Hewlett-Packard, Compaq and Sun Microsystems - are in long terms partnerships.

"It is clear that the withdrawal of Nortel’s sponsorship from Williams, and Marconi from Benetton-Renault, owes more to the downturn in their sector over the past 18 months than to any short term issues such as those arising out of the September 11th terrorist attacks in the USA," said Jordan’s Head of Marketing, Mark Gallagher.

"Most people in developed countries are nervous because of the problems being faced in America at present - the economic slowdown, the terrorist attacks and the subsequent war in Afghanistan - and reading daily reports about the difficulties faced by the airline industry and tourism add to the problem. We should remember, however, that global businesses don’t fail overnight and Formula 1 benefits from the support of over 200 international businesses, most of whom are involved in multi-year sponsorships and technology partnerships.

Formula 1 has shown itself to be very resilient in times of economic difficulties because it is truly global and can extract sponsorship from whichever industry sectors are the most robust. The recession and Gulf War of the early 1990s demonstrated Formula 1’s ability to cope with such problems, and teams today benefit from the facts that there are fewer of them seeking sponsorship - there were 18 back in 1991 - and that those already in the sport have guaranteed television revenue. Major global brands may tighten their belts, but they cannot afford to cancel expenditure on marketing and selling their wares."

Comments by some team bosses that certain Formula 1 teams will face bankruptcy have been jumped on by the motor sport media and suggestions have been made that some of the car manufacturers involved in the sport may cancel their programs.

"I don’t agree with these kind of scare stories, most of which are sensationalist and only contribute to the unease felt in recent weeks," added Gallagher. "The fact is that Honda only returned to Formula 1 last year, Renault and Toyota are joining us next year and the teams which are facing financial difficulties at present have been coping with such problems for some time. It’s not a sudden, new development.

What is clearly a problem is that the escalating costs of competing in Formula 1 are creating difficulties for the less successful and more poorly supported teams. We do need to consider cost reduction and ask ourselves whether or not Formula 1 is pricing itself out of the sports sponsorship market. If the impact of the immediate economic concerns is to force us to re-evaluate our costs then the cloud which everyone is talking about may indeed have a silver lining."

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Series Formula 1
Teams Williams , Benetton , Jordan