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Struggle for control of F1 rule making as new Concorde Agreement remains unsigned

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Struggle for control of F1 rule making as new Concorde Agreement remains unsigned
Jan 28, 2013, 12:35 PM

There have been some interesting developments behind the scenes in F1 in the last week, all related to the fact that there is currently no agreemen...

There have been some interesting developments behind the scenes in F1 in the last week, all related to the fact that there is currently no agreement in place binding in the teams, governing body and commercial rights holder, known as the Concorde Agreement.

A meeting was held in Maranello, with a select group of top teams and Ecclestone while the FIA's Charlie Whiting convened a meeting of the Technical Working Group and Sporting Working Group in London. But in the current regulatory vacuum, the outcome was that Whiting would forward the recommendations of the Groups directly to the World Motor Sport Council, which is due to meet again shortly before the start of the new season.

It sounds dysfunctional, but what it this all about, does it matter and what are the risks of not having an Agreement in place?

Essentially the arguments revolve around these key issues: money, who should make the rules and what is the cost control mechanism?

Although there may be some dire warnings at large about F1 falling apart or teams boycotting races, the racing will go ahead this year, because the teams (with the exception of Marussia) are all signed up to commercial agreements with Ecclestone, which provides a significant slice of their funding. Those deals were done just under a year ago.

However the regulatory process is what Ecclestone and some of the teams want to get control of.

In April 2011 Ecclestone lashed out at Todt saying, “We should write the rules with the teams. The competitors have got to race and have got a big investment. We have got a big investment. It (the FIA) should be like the police – the police don’t write the rules and say you’ve got to do 30 miles an hour. The FIA is a joke.”

Rule making falls under FIA control and with no Concorde Agreement in place the FIA is theoretically able to dictate what the rules are. Some smaller teams, for example, would like a budget cap and the FIA could impose one at the moment in the vacuum created by no Concorde Agreement. But that would cause World War Three in F1 terms and the season would be threatened.

FIA president Jean Todt has his hands somewhat tied by a re-election campaign coming up and also the FIA's need for money. A deal was agreed last year whereby the FIA would get $15 million from teams in the form of bonus payments for points scored in the previous season and $25 million from the Commercial Rights Holder - but that is being used as a bargaining chip at present, as we will examine later.

It appears that the team have paid their basic entry fees, but McLaren and Mercedes have so far withheld the bonus payment element, pending satisfactory resolution of these outstanding issues. Both teams want a Concorde Agreement, as it seems does Ferrari, but there are some question marks about whether Red Bull wants one or whether it is playing a different game, once again, from the other teams.

Ecclestone made his position very clear after the Maranello meeting when he told ESPN, "We don't need the Concorde Agreement signed. It doesn't matter to me whether we have got the Concorde Agreement or not.

"The Concorde Agreement is really made up of two sections. We have already dealt with the financial section with the teams. It is all done so it is a case of the regulations which change all the time. It's a case really of how you change the regulations."

Ecclestone remains of the view that the new generation 1.6 litre turbo engines are bad for business and he, together with some of the race promoters, continue to apply pressure on Todt to drop the new formula, even at this late stage.

That - and the wider issue of who controls the regulations - is the nub of this current instability.

Stability of rules is of first order importance to the teams, from a cost-control point of view. The 2014 rules will cost everyone significantly more money, with new chassis rules and a more expensive engine.

This is one of the reasons why we are seeing a rise in pay drivers; teams are making sure that they have plenty of cash this year to fund their 2014 projects.

The teams have been notably unable to agree among themselves a cost control structure and in desperation last year it was suggested that the FIA should control this, but some of the bigger teams are against this, as is Ecclestone.

It is reported that relations between Todt and Ecclestone have been strained this month over a letter the Frenchman sent to the Englishman which featured some strong sentiments and language. Todt had previously avoided confrontation with Ecclestone, telling me in April 2011, "What is important is never to overreact. I feel confrontation, unless it is necessary to achieve the final result, you lose time.”

On Wednesday Ecclestone attended a meeting at Ferrari's base in Maranello hosted by Luca di Montezemolo and Stefano Domenicali, along with Martin Whitmarsh from McLaren, Christian Horner from Red Bull and Niki Lauda representing Mercedes.

This was not a convening of the "F1 Strategy Group" - the select group as proposed under the new Concorde Agreement to decide regulation changes - as it did not include Williams and the floating fifth member which this year would be Lotus.

Does all of this matter, or is it just another bout of posturing among the sport's rich and powerful?

Well, it does matter because instability is not good for anyone, from teams to investors. It certainly means that the planned flotation will remain on hold, but F1 commercial rights owner CVC took steps to broaden the investor base last year, selling down its holding from 63% to around 35%.

The Concorde Agreement is essentially the labour agreement at the heart of the sport of F1, which binds in the teams, the FIA as governing body and the Commercial Rights Holder, which is CVC and Bernie Ecclestone.

Any business worth a reputed $9 billion, with the stakeholders it has and the amounts of money at stake, logically requires a labour agreement to provide stability.

But with the F1 season due to start in six weeks time, there is no sign of one being signed any time soon.

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