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Struggle for control of F1 rule making as new Concorde Agreement remains unsigned
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Posted By: James Allen  |  28 Jan 2013   |  12:35 pm GMT  |  49 comments

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.”

The 2014 V6 turbo unit


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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49 Comments
  1. Jonno says:

    This is becoming an annual event. Even to us who follow F1, it’s becoming a real bore, because the issues are exactly the same every year.

    I’d like to know what the FIA does with it’s money. Does it really need £millions every year? Why does it need that palace in the middle of Paris? They get income from competitors, event holders and track owners – but the vast majority of people involved in racing work for nothing, except those at the very top, who do very nicely out of the FIA.

    Nice gravetrain if you can get on it.

    1. Luciano says:

      I think Bernie and CVC are the ones on the Gravy train. What the FIA gets is peanuts in comparison. How much is Bernie worth again?

      1. Wayne says:

        But Bernie and CVC are in business to make money, the FIA should be in business to provide a regulatory service, nothing more.

      2. Grabyrdy says:

        Bernie and CVC are in business to make money.

        Hmm. Make money, eh ? The new God. That excuses whatever they do – is that it ?

        Of course, we knew that. But some of the more romantic amongst us would wish that the bottom line was not the only thing that determined their actions.

        Who represents “the sport” if Bernie is only there for the dosh and the FIA only there for empire-building ?

      3. Stephen says:

        Yes whatever the terms of the agreement this will be a win,win situation for Bernie and CVC.

    2. JTW says:

      In regards to stuffing one’s own pockets … does F1 really need Ecclestone?

    3. Wayne says:

      Your questions about the FIA ring home with me. They should have just enough funds to police the sports they govern and pay the bills. They have no business demanding money from teams and then using to fund road (not track mind!) safety programmes etc.

      Also, if I understand it correctly, pretty much every country in the world with some sort of motorsport programme (and even a few who do not) have a representative and each of these rep’s gets to vote on the new president of the FIA – those votes cost serious money and that’s why they want more of it!

      1. Jonno says:

        I’ve no idea how or why the FIA got involved in road safety. They have a fancy website, but no information on what they are doing and have achieved.

        http://www.actionforroadsafety.org/

        I believe the fine levied on McLaren was used to set it up.

      2. MookF1 says:

        It’s all to do with money and power the FIA sold the tv rights and used some of the money to fund the road safety programmes but on whose bequest? This article sheds a bit of light on the matter http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1939946/
        in fairness the response from someone on the FIA payroll is here
        http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1963394/

        Seems to me that the FIA has business interests at its heart much the same way as Bernie so is this really about resource restrictions and stakeholder relations or money and power. Or could it be more insidious with Bernie and Todt just playing their roles in an ongoing saga to set the narrative and to maintain division and thus remaining in control. Isn’t that what Max and Bernie used to do?

  2. Gordon says:

    Is Bernie going to even consider allowing Marussia to sign the Concorde Agreement?

    They are competing in this years competition, so surely they should be entitled to a slice of the commercial money, all be it a small slice.

    1. Tank says:

      I agree, however it looks as though Bernie gets what Bernie wants and he never wanted the new teams around…

  3. Candice says:

    well, if they enjoy having 10 cars to race in near future, they should kept on doing what they do best in ignoring the implementation of budget cape.

  4. AMSG says:

    This is the part of F1 I hate. Plot and intrigue help the show, but not to this level.
    Whatever happens, I want to see money flowing down to the smaller teams more.

  5. Anne says:

    So Lauda was at the Meeting representing Mercedes. Well now we know for sure who is running the show there.Sorry about that Ross

    Bernie has said before he doesn´t want the new engines. So I guess nothing has been written in stone for next season

    1. franed says:

      “So I guess nothing has been written in stone for next season.”
      Well actually the regs have been written for a long time, I have two versions now. Originally it was to be “electric only” in the pit lane, but Bernie objected and guess what, the regs were changed in December and the part he didn’t like has disappeared. (It was 5.19 of the tech regs, but no longer.)

      So regardless of whether it is the working groups or the F1 policy group Bernie gets his way.

  6. Biggus says:

    Bernie has done well in the current age. But the age is ending. Why is it smart for the sport to ignore the needs of its fans and to bleed money to the suits?

  7. Monza01 says:

    James, while the argument you explain so well is interesting, it’s a side show when we have the German Grand Prix under threat, no French race on the calendar and a vacant slot that looks like it is going to stay that way.

    At least we now have a successful US race at last but the jewel in the European calendar, Spa, is still not safe for the long term.

    Only Bernie has to answer for this debacle.

    How can he be acting in the best interest of the sport and the teams when he makes no concessions to safeguard the European races in the light of the current financial situation ?

    If he was serious and not wanting to set a precedent of cutting fees, he could, at least promote the German and French races himself. After all, he’s done that before.

    It’s no good finding more flyaway races to be played out in front of empty grandstands when Europe, the classic heart of the sport, is losing races that would have played to full grandstands ( if the ticket prices were not so ridiculous )

    The Mercedes board must surely be furious. I’m surprised they aren’t still threatening to pull out, even with Hamilton on board for 2013.

    1. Stephen says:

      Give it till June/July and Bernie probably threaten Silvestone even though there is contract in place.

      1. Stephen says:

        oops that should be threatens

    2. Snowy says:

      “Only Bernie has to answer for this debacle.
      How can he be acting in the best interest of the sport and the teams….”

      Who says that Bernie ever acts in the interests of anyone except Bernie and his mates, the CVC suits. It might occasionally look like he does something for someone else’s benefit but scratch the surface and it is only ever in order to gain or protect something for him. As long as there is a short-term payoff for him, that’s good enough. He’s 82 – what possible interest is there in the long-term for him?!

    3. TW4 says:

      Ecclestone has made his thoughts about Europe known on several occasions. According to him, Europe is not promoting economic growth or domestic consumption; therefore, European assets are being sold to the highest bidder, often private investment from India, China, or the Middle East. Regarding economic commitment, Bernie feels almost no compunction to continue supporting the European governments who he believes are unwilling to pay market value for the F1 show. Bernie feels very little allegiance to Europe, but breaking ties with Britain is almost impossible, since so many participants and teams are based in the UK.

  8. Janis says:

    Sure.
    The teams have agreed with Mr. E. how to cut the pie. Now there is a much more difficult issue of how to bake it.
    Looks like Mr. E. (as usual) is only concerned about pumping money out of the sport, while Todt has a long range view. Throw in the teams seeking how to build in something advantageous for them in the regulations – and that’s the mess they are in now.
    Looks like some important decisions will be made, and if Mr. E. wins, F1 will be making another couple of steps towards being show business instead of a sporting event.
    Take care, Mr. Todt! Let us hope you win :)

  9. Wade Parmino says:

    I wish F1 was run by people who love the sport and would like to make a decent living from an involvement in it. Currently its all about maximising profit. The fact that F1 is owned by individuals is wrong from the outset. The teams, drivers and most importantly, the fans are the collective true owners of Formula 1. Without these, there is no Formula 1.

    The FIA should not only govern the sport but also manage it. Bernie and FOMA are pointless middlemen who simply take gargantuan amounts of money from the sport. The FIA should basically do the same job that FOMA does however only take enough money to pay operating costs and salaries. The rest of the money is divided up amongst the teams who will receive their fair share. Tracks should not pay anything; this will bring ticket prices down tremendously which will in turn increase race attendance (where the teams will sell more merchandise because there will be more customers).

    Teams also need to remember what they are, Racing Car Competitors. Too many teams operate like their goal is to make money through motorsport. Their goal should be to make an adequate amount of money so as to ensure a future of competing in a sport that is supposed to be their passion. If a race team finishes a season covering all of their costs (salaries, logistics, hardware, taxes, future budget from sponsorship) and still has a profit of $5 million, they should be over the moon.

    Enzo’s attitude of selling sports cars to make money to fund his passion of building and racing race cars is the type of thinking everyone in F1 needs to have. Formula 1 was not founded and established to make people rich. It has become this and it may very well lead to it’s breakup or downfall, much to the dismay of it’s many passionate fans worlwide.

    1. nenny says:

      someone make this man the head of F1 :)
      sounds alot better 2 me then burnie does

    2. Adrian Newey Jnr says:

      Where there is money there will always be middle men looking to sponge off it. Whilst I respect Mr Todt, I don’t respect the FIA. It is too similar to the IOC and Football Federation. Too many people looking to take advantage of the benefits the organisation pays to itself. I worry that the more money that is paid to the FIA, the more middle men there will be rather than the volunteers that make grass roots motorsport a success.

      1. Wade Parmino says:

        If a constitution is drafted dictating the ways the FIA functions, putting in place all the necessary legal restrictions and obligations as well as entitlements, there will be no way of corrupt goings on taking place. Middlemen can be made redundant.

    3. FuelGreener says:

      Sorry, but this is utopian hogwash. No sport belongs to the fans (and I obviously speak as a fan myself) because no fan has invested anything, except for the cost of a venue ticket once a year, towards the sport. Teams, venues, racing series etc are founded by entrepreneurs, and they’re the ones who have all had many sleepless nights, struggling to pay bills, terrified about making payroll, living hand to mouth, in order to pursue their passions. Williams, Dennis, Ecclestone, Enzo… they all suffered so that we might eventually be able to cheer the cars going round, so if they, and others like them, have ever felt entitled to extreme remuneration from the sport they created and developed, then they’re 100% entitled to.

      When all is said and done, no one puts a gun to our heads to force us to watch F1, and until you or I stump up our life savings, beg for investors and borrow enough money to make our eyes water to try and launch a team, then, and only then, will we have the right to dictate what these guys do.

      1. Wade Parmino says:

        Of course it is utopian. I know it’ll never change but that does not make the way it is right.

        As I said, the teams (that means team owners) should recieve their fair share. I never objected to this at all. It is excessive greed and the parisitic middlemen who I object to. There is no way you will get me to shed a tear for Bernie’s ‘struggles’ and ‘sufferings’. His passion is money (maybe once upon a time it wasn’t, but it certainly is now).

        Without fans, sponsors would never have bothered and F1 (if even still existent) would be a group of enthusiasts meeting on a shoestring budget to race cars. Nothing more than a weekend hobby club.

  10. Scuderia McLaren says:

    This FIA / FOM / Concorde debacle has more plot twists than a JJ Abrams Fringe episode. The only difference is that while I understand neither the F1 debacle or a Fringe episode, I at least enjoy seeing a the nice blonde actress’s A$$.

  11. Truth or Lies says:

    I am so disappointed by what happens behind the scenes in F1, but like so much of our western capitalist world (of which Grand Prix racing is a bright beacon) it’s all about greed and self interest.

    I am convinced, that despite playing a crucial role in the transition of F1 from an amateur and dangerous sport in the early 1970′s, to the what it is today, the current commercial rights holder has no business running a 21st century global sporting organisation.

    Apart from decades of internal power struggles and fiscal manouvers, all to the [mod] benefit of a private family trust, the ongoing investigations in Germany [mod], are evidence aplenty to support my point.

    The commercial rights holder has gotten away with so much for so long, he now believes he can do anything he pleases and what ever way he wants. That’s why the 2013 calendar is still undecided and a complete shambles, just one race in 8 weeks at the height of the European summer. The Festival of Speed and Moto GP already forced to change dates and yet the management of a so called ‘high tech global sport’ can’t decide what to do.

    I am just wondering how silly the board of Mercedes will look after spending millions of Euro to buy an F1 team and then not even having a home race. It defies belief that one man can apparently yield so much power and take no account of the greater good. F1 has a race in India, a seriously challenging place, socially and economicaly yet there will be no race in Germany home of the current drivers champion and one of its manufacturer teams.

    Motor racing and F1 in particular will have enough issues to deal with going forward into a global age of reverse globalisation, scarcity and sustainability, without the [mod] behaviour of the Formula One management.

    1. Rudy says:

      This is perhaps the best post I’ve read in this site since 2010. Well structured and logical. Congrats mate!

  12. Sebee says:

    Can you imagine what would happen if engine formula doesn’t make it in 2014? Slim chance of course, but the fact there is a chance is a serious issue.

  13. Tim says:

    Money & control being fought at the highest levels – this, sadly, is happening all too often in F1.

    Daimler must be thrilled with the question marks regarding the 2014 engines. And still no confirmed German GP. And still, yet again, a nagging little legal issue unresolved in the German courts.

    The GP down-under can’t happen soon enough.

    Tim

  14. vicnsi says:

    I’m not sure whether this question has been asked previously; but could you tell James, what was it that made a re-write of the F1 formula for 2014 become so necessary?

    Seeing as it’s going to cost teams significantly so much more money, under such a tough and harsh economic climate as we have currently…and as Marussia Team boss John Booth himself had admitted while letting Timo Glock off his payroll: “The ongoing challenges facing the industry mean that we have had to take steps to secure our long-term future. Tough economic conditions prevail and the commercial landscape is difficult for everyone, Formula 1 teams included.”

    And not to mention the recent substantial
    increase in fees just to enter F1…etc

    I’m wondering why? Why the expensive 2014 F1 regulation revamp was deemed to be so necessary, and why did the teams even buy into it to begin with ???

  15. Tim says:

    In any sport, the regulatory body should not be both making and enforcing the rules.

    The rules should be written and decided by a technical working group, of which members are elected to by the competitors and members of the organisation.
    The organisation should have the responsibility then of enforcing those rules determined by the that technical commission.

    1. Tim says:

      Tim,
      apologies, I forgot to click “reply”. My reply to you is, at least currently, post #16.

      Regards,
      Tim

  16. Tim says:

    Tim,
    interesting, but do you think this will ever happen?

    Regards,
    Tim

  17. matty says:

    bernie’s bubble is bursting . No german gp ! It’s the start of a slippery ( no one can pay the money ) slope . I genuinely think it’s bernie’s goal to make and break F1 in 1 lifetime . Certainly a legacy his daughters can be proud of .

  18. Craig in Manila says:

    James,

    So, if was not a formal meeting of the Stragegy Group, what exactly was the meeting on Wednesday all about and how do other parties (Williams, Lotus, Todt) feel about (apparently) not getting an invite to same ?

    Or were they all just getting together to have a latte and discuss the merits of the colour-scheme on the new Lotus ?

    Any thoughts ?

    1. James Allen says:

      Many

      It’s a fascinating, evolving picture

  19. aveli says:

    ecclestone does a very difficult job to keep everyone happy, only the teams can decide why they get involved in f1 and only the teams can decide what their objectives are. i guess bernie would like to ensure that f1 survives long after he’s gone that’s why he suggests that an independent team write the rules for the fia to police. this may remove a lot of unfairness, decreasing the chances of f1 falling apart when he’s gone. he doesn’t earn as much money as some people have expressed above, he’s just forceful and robust.

    1. James Allen says:

      Very interesting comment. I like the thinking

      Thanks

    2. JR says:

      Exactly, In 2011 Bernie Ecclestone was paid £3.3 million, and that year he also didn’t get any additional payments for being a shareholder.

      Many team principals get paid more.

      1. Tim says:

        I agree with the general thrust of your argument and agree that what Bernie does is extremely difficult.However, whilst he may have ‘only’ been paid £3.3 million in 2011 that doesn’t really tell the whole story. He still owns 25% of the shares in the companies that control/own F1. He therefore retains a very keen interest in their value when the eventual public offering goes ahead.
        So, although his salary may be relatively modest (in F1 terms,) he is working towards a very big pay day indeed.

  20. All revved-up says:

    FIA should not make the rules. It limits human ingenuity.

    Imagine if the FIA had rules before the mid-engine Cooper cars – mid-engined cars might have never seen the light of day.

    I feel the proposition that rules are required to cut costs – needs to be examined. I’m not the best qualified – but if you look at the America’s Cup – the rules have allowed sailboats to morph into twin hulls, trimarans and catamarans. It’s taken budgets skyhigh. But yet – the series survives and still attracts all types of fans. Fans who are sailors, fans who like the glamour, fans who enjoy the technical innovations, and fans who enjoy the racing.

    The boats are flying on water. One day F1 cars will seem rather quaint and ancient.

    One view is that a low budget sport attracts poorly funded teams that produce average cars. This is not exciting. The opposing view is that the sport will not survive if costs escalate.

    If we look at the Americas Cup – it seems that an expensive high tech sport will always survive. To me – it’s human nature to admire human ingenuity and creativity.

    Other examples include the space shuttle, the Concord, the stealth fighter, the Nissan Delta Wing car etc. These breakthrough designs seem to capture public interest, and thereby creating more marketing value than mundane FIA Noddy cars.

    1. Tim says:

      If you get the chance, have a read of Adam Parrs book – it really is excellent and explains the problems within F1 and also the need for cost cutting.
      In what other sport would teams take legal action to avoid saving £10 million/season? Or a single team using 200 engines/season!
      I understand the point you are making but the levels of budget required to compete were not sustainable.

  21. Emma_S_N says:

    To those talking about the teams writing the rules, I think that woudl create a massive mess as you would then simply have each team coming up with rules which suit them regardless of what it means for others.

    Its always best for an outside party with no ties to any competitors to write & govern the regulations. Allowing competitors to do either leads to the possibility of rules been written to favor a team’s agenda.

  22. Instability is good for the press!!

    But on a more serious note, I think there is no way that they will not go ahead with the 2014 regulation changes. Bernie is just using this as a bargaining chip / threat as he likes to do.

    Regulation changes are good for business and Bernie probably wants to make sure that he keeps control of this.

  23. Elie says:

    Very interesting article James. I can see both sides to the argument. On the commercial side the new engine formula and the associated costs are a big risk to the sport but then the long term relevance of the sport is equally a big concern given technologies developed in other formulas and the fact that road car technologies are now moving ahead of F1.

    It’s kind of crazy for Bernie to oppose it now after many 100′s of million euros have been spent by the teams and manufacturers to develop it- it’s not likely to go away given that both the FIA and teams are committed to it.

    On the rules side of things- only an independant authority should ever be able write the rules for a “sport” to exist & isn’t that what we have ??. Sure the FIA needs to listen to the teams and the rights holders – but it should always stand firm on the sporting regulations. I don’t see Todt budging and nor should be . Bernie needs to “move on” in any sense of the words.

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