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Majority of teams sign up to new Concorde Agreement; Mercedes holding out?

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Majority of teams sign up to new Concorde Agreement; Mercedes holding out?
Mar 24, 2012, 8:32 AM

Today Bernie Ecclestone announced that the "majority" of the current F1 teams have agreed a deal to stay in the sport, which will lead to a new Con...

Today Bernie Ecclestone announced that the "majority" of the current F1 teams have agreed a deal to stay in the sport, which will lead to a new Concorde Agreement starting next January.

"I am very pleased to announce that we have reached commercial agreements with the majority of the current Formula One teams, including Ferrari, McLaren and Red Bull Racing, about the terms on which they will continue competing in Formula One after the current Concorde Agreement expires at the end of this year."

This begs the questions, who is holding out and how many are in the majority?

The details of this deal are still sinking in for most of the F1 paddock. It comes as something of a surprise to some to see McLaren having gone along with Red Bull and Ferrari, which split from FOTA in December.

McLaren and Mercedes were very disappointed with Ferrari's decision to put their own interests first and leave the teams' association. Ferrari is the crown jewel in any Concorde negotiation and once they split off the game was up for the rest.

Red Bull also left and the signs in the last few weeks were that these two were close to doing individual deals with Ecclestone. Offers were clearly made to the other teams, in descending order of significance, but McLaren stayed solid with the other seven FOTA members.

Today's announcement indicates that the McLaren board clearly felt they could not risk losing out in significant financial terms to their two main rivals. The fear would be that it would become like the Spanish football league where Barcelona and Real Madrid have far more lucrative deals than the other teams and therefore win everything.

"It's good that we are not at war," said Whitmarsh on Sky today, adding that a "majority" to him meant more than seven teams. "We need to work together to make all the teams sustainable, we need to control costs and build the sport and make it more exciting.

"We have to work out the details but we are an F1 team and we are concentrating on making sure that we have an acceptable deal for us and also a stable future for the sport."

Mercedes are opposed to the plans leaked last week, for Ferrari as the Longest Standing Team, to have a seat on the F1 holding company board and even to have equity stake. They have not signed and there are question marks about Williams and Sauber, as I understand it currently.

I understand that the deal is longer than the standard five year deal and could be as long as 8 years. This means that Red Bull will be tied into the sport for that length of time with both its teams, which ends speculation about whether they might take their massive marketing budget to some other sport.

From Ecclestone and CVC's point of view, having the majority of teams on board, signed up to what probably amounts to a heads of terms agreement to move forward to a Concorde Agreement during 2012, means that the business is now secure for up to seven years.

This, along with many long term contracts with circuits and TV companies, creates the ideal market conditions for either a floatation of all or part of the business or a sale. There are many options open to Ecclestone and CVC, but the succesful "divide and conquer" strategy employed by Ecclestone on this occasion has averted the threat of a teams' breaking away, as we saw in 2009.

It also means that the teams will continue to earn well out of the sport, but will be left with a lingering feeling that they might have done even better if they had stayed together as a unit.

The signs are that Ferrari has pushed for a return of some F1 testing and it is known to be keen to see teams able to sell their old cars to smaller teams.

The interesting thing now will be to see what the FIA decides to do. Ecclestone has the teams on his side; is the FIA part of the future and if so will its president Jean Todt be able to improve the commercial teams of their involvement?

On paper the FIA owns the sport, Ecclestone and CVC have a 100 year licence to exploit it commercially. Where they fit into this brave new world will become clear in the next months.
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