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What the current engine stand off tells us about the power of manufacturers in F1

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What the current engine stand off tells us about the power of manufacturers in F1
Oct 9, 2015, 10:16 AM

Red Bull's Christian Horner and Helmut Marko spent most of Free Practice 1 at Sochi in a meeting with Bernie Ecclestone as it came to light that Fe...

Red Bull's Christian Horner and Helmut Marko spent most of Free Practice 1 at Sochi in a meeting with Bernie Ecclestone as it came to light that Ferrari has declined to supply them with an engine for next season. They have offered 2015 Ferrari units to sister team Toro Rosso.

Ferrari team boss Maurizio Arrivabene told O Globo this morning in Sochi, that logistics are at the heart of their decision,

"Red Bull has no engine for 2016 and it seems that we are guilty, but it's not like that.

"We have to plan everything we do, obviously. And our review of the new power unit development programme and the production, to satisfy another team, would require us to change everything we have planned so far. I am convinced that they were certain they would use the Mercedes engine in 2016, So much so that they not only reviewed (cancelled) the contract with Renault but also with Infiniti and Total.

"If they had done so in June, for example, there would still be time for us to look at it. But to come talking to us after Monza... To think about a fourth team now, we need engineers who are trained by us to monitor the use of these engines, as we do with Sauber and Manor today And these guys cannot be young people who are just leaving university. F1 is not like that.

"If tomorrow the president of our company (Sergio Marchionne) called me and said 'Give the engines to them', we would have to change everything that we planned very carefully long ago."

This can be read as a message to Marchionne as much as to Ecclestone, Red Bull and the F1 fans.

So we have the farcical situation of a championship level team not being able to compete because its rival competitors hold all the cards on engine supply. In turn this leads Red Bull back to their partners Renault, from whom they have been divorcing in recent weeks, to see if reconciliation is possible.

Renault may ask for a change of management at Red Bull, the situation may also require Ecclestone to pull some strings. His ability to influence Ferrari and Mercedes is clearly reduced, however the deal for Renault to buy Lotus is not yet complete and part of the unfinished business is the amount of prize money bonus the team will receive for its historic F1 achievements.

Christian Horner, Bernie Ecclestone

This leaves Ecclestone some wriggle room and possibly some ability to leverage the situation to keep one of his most important teams on the grid.

Toro Rosso would accept the 2015 Ferrari engine, however, according to its boss Franz Tost. Speaking to F1.com he said, "Toro Rosso would accept the 2015 engine, as we think it would be a step forward for us.

"But yes, Toro Rosso is in a different situation than Red Bull Racing. Their DNA is to fight for wins and championships and therefore they want the same material Ferrari will run in 2016."

All of this illustrates what we have been saying on this website for some months, that the unintended consequence of the new hybrid turbo regulations has been to empower the manufacturers. They now hold the balance of power in F1.

This process has already raised the prospect of two tiers of engine being the norm in F1; A and B spec based on newer and older specifications. The logical conclusion of that is that the works teams always stay well clear of the opposition, Williams, Force India and the like will only ever be fighting for best of the rest behind the manufacturers.

And perhaps it can go further still. If Ferrari, Honda and Renault want to catch up with Mercedes they need more freedom on development regulations, which means abandoning cost controls and increasing development spend. Do they have the power to force that through in upcoming meetings? This would increase costs to their customers.

But Red Bull's withdrawal would lead to around $230 million per year of prize money going back into the pot to be shared among the other competitors, which would take out one key rival for Ferrari and Mercedes and make their other customers solvent. So there's really no incentive for those two powerful manufacturers to help Red Bull now and every reason for the manufacturers to take a strong position.

All of this is taking place with an even bigger story going on in the background; the potential sale of F1 to the consortium involving US sports mogul Stephen Ross, the Qatari investment fund (QSI) and two other investors, one of which is Chinese.

Stephen Ross F1

The Financial Times is reporting today that the price has been agreed at $8 billion and a deal agreed in principle. There is still a chance of the deal unravelling in the due diligence and final stages, but FT sources say Ross' associates are feeling very positive about the deal.

The decision to sell comes from controlling shareholder CVC, whose board is keen to offload the F1 asset, one of their best performing investments ever. The cornerstone investors, who came in ahead of the planned flotation in 2012, to set the value of the business at the time, apparently have a deadline whereby they get their money back via a flotation or a sale and that deadline is looming, hence all the activity around it at the moment.

Ecclestone has said that there are other parties interested and there are even some suggestions from him that he might be interested to buy it back with CVC's managing partner on the F1 business, Donald Mackenzie.

There is however scepticism about the deal in the F1 paddock; one prominent figure asked why an investor would pay 23 times the EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) of the company when a 10 times ratio is the norm and in the teeth of major uncertainties about the future of Red Bull, Toro Rosso, Lotus and Renault and the complaint to the EU competition commission.

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