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Analysis: How Red Bull moves towards F1 end game with Audi

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Analysis: How Red Bull moves towards F1 end game with Audi
May 12, 2015, 12:35 PM

It is an unusual way to do business, to baldly state that either a takeover deal is done with a manufacturer, who has thus far shown no interest in...

It is an unusual way to do business, to baldly state that either a takeover deal is done with a manufacturer, who has thus far shown no interest in F1, or else your team will leave the sport and then to back it up by saying there are no talks in place for such a deal.

However Red Bull is not a typical company with a typical way of doing business.

There have been some seismic changes in this story in the last few weeks - triggered by the departure of parent company chairman Ferdinand Piech, who opposed an F1 entry - and by Red Bull's abysmal performance this season with Renault engines. Well informed sources suggest that Red Bull's boss Dietrich Mateschitz means what he says about leaving the sport.

A throwaway comment from former Ferrari boss Luca Montezemolo last week about a 'mutual friend' telling him that Mateschitz had decided to 'either sell to Audi or exit F1,' was backed up by Red Bull director Helmut Marko on Sunday. He coupled it with a caveat, "unless we get a competitive engine", but for some well informed observers, the caveat isn't really there. Mateschitz is just looking at the two options. He does, however, have great concern about his employees, so passing the team on to a solid new custodian will be foremost in his priorities, as it was for Peter Sauber when he sold to BMW.

Audi will know that and it will help with getting the right price.

Moving the story along, an official response from Audi on Monday, has now left the door open for the possibility of a takeover.

"There are so many rumours. Officially there was no request or talks," said Marko. "The VW Group first has to sort out who will be the new chief of support, who will run the brand of VW, and when they have sorted all these things maybe then they can think about what they are doing in motorsport."

Speaking yesterday informally to Auto Express about the possibility of taking over the Milton Keynes-based team, Audi's chairman Rupert Stadler (below) said, “It’s something we’re looking at, but then we’re always looking at it and many other things. But I can’t say yes or no.”

Rupert Stadler, Audi

Realistically, then, the timetable for such a deal would be end of 2016, so the team could potentially be Audi from 2017 onwards.

There would never be a better way for a manufacturer to come in to F1 than to acquire a state of the art team, fully stocked with top engineers and technology, which has won the world title four years in a row from 2010-13. Toyota, in contrast, built everything up from scratch in Cologne at vast expense and got nowhere after spending billions. That is a case study in how not to do things.

Another sweetener for this potential takeover is that Red Bull Racing has a guaranteed $70 million a year up front from FOM as part of the so called CCB agreement, whereby five top teams get up-front payments; this group includes Ferrari, McLaren, Mercedes and Williams. Red Bull gets the second highest payment of all after Ferrari's $100m a year.

This is guaranteed until the end of 2020, so Audi by taking over the entry, should be sure of having that portion of the budget paid for four years, plus prize money from wherever the team finished the year before.

That said, this would depend on the other teams welcoming Audi to the sport; dealing with a name change requires careful negotiation as the other teams would have to agree to the team continuing to get Red Bull's prize money, even though the chassis maker's name had changed. It would be a real boost for the sport, so they shouldn't stand in the way, but we do know that the smaller teams are unhappy with the financial distribution in F1, so they may take the opportunity to leverage their position to see if there's something in it for them.

The company number would remain the same as an entrant, of course.

Sponsorship wise, the Infiniti deal is due to come to an end after the 2016 season, so that timing would fit in well for their exit as Infiniti is a Renault-owned car brand and a direct competitor of Audi. It is not known whether Red Bull would retain some involvement or brand exposure in this project. They are committed to hosting the Austrian Grand Prix for a few more years, so F1 would remain part of their activities and the company has strong historic ties with Audi.

Red Bull

Either way, budget wise, with the current F1 rules fairly limited on cost-control, the team would expect to get through around $150-170 million a year for the Milton Keynes operation, plus whatever Audi chose to spend on engine development and production at its base in Germany, probably around $100m-$120m a year. They could supply engines to another team and recoup around $20m per team.

Well organised and with the $70m up front payments until 2020, Audi could probably do F1 on a competitive level for a net spend of around $100-120m a year. It sounds a lot, but it isn't really; the media value and brand exposure alone would far outweighs that. Telling the story of the 'world's most thermally efficient engines', which these new F1 hybrid turbos are, is a powerful message and the chance to take on and beat Mercedes and Ferrari in the most high profile competition is very attractive.

The business logic is there, provided they are comfortable with the numbers - Audi has achieved everything it can in World Endurance Championship and its sister brand Porsche is now competing there anyway; Audi is likely to win Le Mans again this year and there are surely diminishing returns for them in WEC, for what is still a significant spend - well over $100m. F1 is a new challenge with far greater return on investment.

Audi of course, runs with hybrid diesel engines in WEC, so would need to perfect the technology for petrol engines, but there are suggestions that it has been playing with hybrid petrol test engines in its R&D facilities and the energy recovery side is class leading in WEC. The F1 unit would need to be lighter, of course.

Domenicali

Former Ferrari F1 team principal Stefano Domenicali was hired by Audi last season, allegedly in a 'mobility' capacity but he still spends a great deal of time in the motorsport arena as the FIA's single seater commissioner, putting in place the ladder from F4, through F3 and specifying a new F2 series, which will soon release blueprints and go to tender. He is still very much a racing man. If the deal goes ahead, Audi may retain Christian Horner, who guided the team to four world titles, or he may see it as a logical stepping off point and may decide to pursue a role in the central running of the sport.

Audi will have an eye on the future ownership of F1, of course, with CVC looking to exit, cornerstone investors looking for a flotation or an exit soon and Bernie Ecclestone very much in the picture, looking to take it all back again if the opportunity arises. He has indicated that Horner would be an ideal successor.

What do you think? Will Audi come in? What would the departure of Red Bull as a team mean to you?
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Series Formula 1
Teams Red Bull Racing Shop Now
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