Archive for the ‘ F1 Business ’ Category

Calling Planet Anderson…

Mark Webber has likened the state of Formula 1’s new teams to a cartoon. But when intelligence reached my ears that not only are the two principals of USF1 no longer on speaking terms, but that one of them has been living in the Hilton Charlotte for over two months while trying to pacify an increasingly irate band of creditors, I was put more in mind of I’m Alan Partridge.

So while Peter Windsor subsists on room service while trying to clear up the mess that is USF1, Ken Anderson has been spouting cant to the press.

“The way the chips fell in January, that put us behind,” he told AUTOSPORT. “We were on schedule right up until mid-January, and that was when some issues arose with sponsors that kind of locked us up.”

Chips? Fell? What twaddle is this? Here’s how an F1 start-up works, Ken: sponsors and partners set certain key technical milestones, with deadlines, and when those are met – on deadline – hey presto! More money arrives.

And when I say “key technical milestones” I mean “actual bits of an F1 car, not just pictures of what they may look like”. It’s as simple as that.

Here’s another tip on how to get ahead in F1: if you’ve got a benevolent millionaire entrepreneur on board, share him with Bernie. Even just an introduction would do. A little more goodwill may have radiated from Princes Gate as a result.

The only hope left is to keep the entry notionally alive so that it can be sold to pay off the creditors, including some very angry Argentines; and the sorry legacy of this tawdry scenario is that the much-needed American F1 team and US Grand Prix now seem further away than ever. Still, the local Starbucks has done well out of it.

Enter the Cable Guy

Lotus Racing announced a partnership with CNN today. As ever, that weasel word ‘partner’ leads one to ponder how much (if any) money is involved, and what benefits eventuate for either party.

Launched by media mogul Ted Turner in 1980, the Cable News Network leapt to international prominence during the first Gulf War by dint of being in the right place at the right time: it had a clutch of reporters in Iraq when hostilities broke out. The 24-hour news cycle we take for granted today truly came of age as Bernard Shaw (no relation to the author of Pygmalion) reported live on the bombing of Baghdad.

The competition between these rolling news networks is fierce, and, as you might expect, coverage is costly, especially since the big guns now operate locally tailored programming on a global basis – usually aimed at a business audience. Increasingly these networks – even BBC World – are turning to commercial sponsorship of their news broadcasts. The Lotus release aligns its ‘partnership’ with CNN’s ‘Partner Solutions Group’ (I feel a submission to Private Eye coming on) under the leadership of Rani Raad, the senior vice president International Advertising Sales, who had this to say:

The combination of two such iconic and aspirational global brands fits perfectly with CNN International’s worldwide reach and brand positioning. This unique partnership with Lotus Racing takes CNN International into a new era of marketing and promotions and puts us in front of a worldwide audience of millions.

Raad is credited with engineering a number of high-profile programme sponsorships for CNN International. Most recently he has been involved in a deal for the Earth’s Frontiers environmental series to be sponsored by Masdar, a renewable energies company wholly owned by Mubadala, the sovereign wealth fund of Abu Dhabi (which, coincidentally, has a stake in Ferrari as well as being one of the driving forces behind the Abu Dhabi GP). CNN is also launching a broadcast facility in the emirate.

Some readers may be uncomfortable with corporate sponsorship of news broadcasting, but this is the direction we’re heading in as conventional ad revenues decline. There are governments and sovereign wealth funds out there with pots of money that they wish to spend on promoting their countries as business destinations. The Lotus connection will engender a lot of attention in the kind of emerging markets CNN is aiming for.

Petronas to be Mercedes GP title sponsor

Mercedes GP announced this morning that Petronas, the Malaysian oil giant, will take title sponsorship of the team from 2010 onwards.

Team principal Ross Brawn said:

Everyone at Mercedes GP is delighted to confirm our long-term agreement with Petronas and we look forward to working closely with our new partner in the future. The collaboration of the premium automotive brand Mercedes-Benz and a company as prestigious as Petronas gives our team a fantastic base from which to achieve our ambitions of competing at the top level of Formula One and building on the success of 2009 which saw the team achieve the Constructors’ and Drivers’ Championships. Our plans for the new season are progressing well, as is the development of our 2010 challenger, and we look forward to seeing the car run in the new Silver Arrows and Petronas livery at the Valencia test in February.

There had been much speculation in recent weeks that Mobil 1 would either leave McLaren or split its involvement between the two, but it appears that Mercedes were looking for more than just a technical partner. Mobil 1′s financial input into McLaren is relatively modest but the arrangement has been mutually beneficial, so it saw no need to spend more on a title sponsorship. Neither did it wish to transfer its allegiance from a team with which it has enjoyed considerable success.

When synthetic oil was introduced to the market in the 1970s, in the wake of the first oil shock, it was viewed with suspicion by many customers. Mobil 1 conquered this and established itself as a market leader by getting involved in motor sports and demonstrating its product there. It has been involved in over 100 Formula 1 wins, over half of which have come through its relationship with McLaren.

In recent years oil has become an increasingly important development path. The freeze on R&D, and the move to multi-race engines, has increased the demands on the lubricant in two ways: it must protect the engine over a longer duty cycle, but it can also liberate more power if blended to exactly the right viscocity.

It will be interesting to see what effect the move has on Mobil 1′s relationship with Mercedes-Benz High Performance Engines in Brixworth.

A great time to buy in to F1

Earlier this year I went over to the World Touring Car Championship race at Porto. I caught up with a driver who I haven’t seen in years, and amongst other things he told me that in recent months he’d been snapping up repossessed houses for around 50 per cent of the market rate.

“The banks are desperate to get rid of them,” he said, “because they’re desperate for cash. They need liquidity more than they need the paper value of the asset.”

I pointed out that property values could fall further in the short term.

“Doesn’t matter,” he replied. “The opportunity is now. They aren’t thinking about the future, because it’s less important to them than shareholder value – they don’t want a rout next time they release some figures. When the panic’s over the bargains will be gone.”

Similar thoughts have been playing through the minds of the investors who are presently jockeying to pick up the Renault F1 team, should Renault decide to sell (I was told last week that the decision is still pending). As the weakened manufacturers have fled the sport to focus on shoring up their balance sheets, the better to defend their share prices, visionary entrepreneurs have sniffed opportunities; although sometimes, as in the case of Qadbak, the difference between entrepreneur and huckster isn’t immediately obvious.

Yesterday’s news that Lloyds Development Capital has taken a stake in the Virgin F1 team underlines the fact that the panic is now over in the banking sector. It was also a nimble piece of news management (hardly surprising, given that Virgin F1’s comms chief used to work at Honda and therefore knows a thing or two about firefighting). Banks and bankers are still reviled and reports of them spending money – especially if, like Lloyds, they’ve been bailed out by the British taxpayer – may not be greeted warmly. The timing of the announcement makes it a small element in the hierarchy of today’s launch.

This is a good time to be investing in Formula 1. The background mood of optimism in the market is characterised by the price of F1’s debt, which is currently trading in the region of 90 pence in the pound. Back in July, at the height of the FOTA breakaway threat, it was around 50 pence in the pound.

In buying Brawn, Mercedes have obtained a championship-winning F1 team for far less than British American Tobacco and Honda paid for pretty much the same outfit when it was still a midfielder. They will now derive all the benefits from having their name above the door while spending far less – partly thanks to the resource restriction agreement. Dr Dieter Zetsche, Mercedes’ chairman, has claimed that from 2011 the annual budget will be a quarter of what it used to be.

So the recent talk about Anthony Hamilton throwing his hat into the ring with Renault F1 may not be too hard to believe. After all, as my WTCC snout pointed out, if you’ve got cash these days then why leave it buried under the Swiss Alps when there are bargains to be had?