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The biggest danger to F1? Short term thinking

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The biggest danger to F1? Short term thinking
Aug 23, 2012, 11:19 AM

The Summer break has dragged on, with all F1 factories shut down for two weeks since the last Grand Prix.

The Summer break has dragged on, with all F1 factories shut down for two weeks since the last Grand Prix. But that does not mean that nothing has been happening.

Behind the scenes F1 is moving forward on several fronts, at the same time as keeping an eye on the prosecutor's office in Munich for any signs of a follow up to the conviction of Gerhard Grobkowsky, who said he had accepted a "bribe" from F1 commercial boss Bernie Ecclestone.

The teams are closing in on a deal to secure their involvement for the medium term, the next 8 years. The new Concorde Agreement is pretty much sorted out, but the outstanding issue is the sporting regulation and particularly cost control. And here the danger is that the teams revert to type and think short-term rather than long-term.

Before the break I interviewed Lotus F1 boss Gerard Lopez for a Financial Times feature. One of the subjects in our interview was cost control and it was interesting to hear his take, as a man with extensive business experience outside the sport, on the way the teams have been tying themselves in knots over the Resource Restriction Agreement.

He made a very interesting point about how people whose sole focus is on finding fractions of a second, struggle to see long term and I think he's right.

“Some of the stuff that happens (in F1) is a bit strange," says Lopez. "But there is so much at stake in terms of performance. We are talking about tenths and hundredths of a second. So it’s always edgy because the moment you give something up in a contract, you think you are losing something on the track. And the moment you lose something on the track you feel that you have the potential to lose sponsors or prizemoney. So there is an economic angle to whatever decision gets taken.

“The problem is everything is so tight, negotiation becomes really tough because of it. And that’s what marks this sport. When you think in terms of tenths of seconds, how does that combine with long-term thinking? Long term is years. Tenths of seconds is what defines winning and losing and all the contracts that we discuss always have some sort of impact on performance. “

FOTA split over the issue of cost control and the lack of trust between the teams and this loss of perspective is at the heart of it.

It's easy to see how competitive individuals find it hard to change focus from short-term to long-term. But change they must if F1 is to secure the right formula for the future. A sport turning over the billions F1 does, should not see teams in financial trouble. The payments to the 12 teams in the current Concorde Agreement are well over $600 million, not divided equally of course, but it's still a lot of money. Teams will always call for more money, while the sport's owners will want to keep as much as possible. Controlling costs, like a proper business has to be the solution, as long as its the same for everyone.

Another problem that all the stakeholders have been wrestling with this summer is that while Ecclestone's Formula One Management business is in charge of the Concorde Agreement, which is essentially a commercial contract, the FIA is in control of the sporting regulations, of which cost control is part. Some teams argue that they need to be controlled by the same body. So who should regulate the new RRA?

The answer needs to for be long term - like the thinking that needs to go behind it.

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