The Weekly Grapevine

The difference between the two men - arguably the two most powerful forces in Formula One at present - could not have been more marked. The scene was Fiat's ski chalet set high above Madonna di Campiglio; the backdrop the snow-clad Dolomites; the time shortly before lunch; the day Friday; the event the annual Wroom ski camp staged jointly by the sponsors of Scuderia Ferrari Marlboro and the Ducati MotoGP team.

Near the side entrance, away from the chill wind, sat Bernie Ecclestone. He was resplendent in the red/white uniform of the main sponsor, and spent the time chatting to daughter Tamara, present due to television interviewing commitments.

Luca di Montezemolo and Bernie Ecclestone at Madonna di Campiglio

Up the ski lift came Ferrari (and Formula One Teams' Association) president Luca di Montezemolo. The patrician Italian wore a red team jacket, yes, but only whilst outside. Shortly before reaching the chalet he took Luca Badoer's baby in his arm, dramatically gave the kid a hug, returned it, shed the anorak to reveal expensively tailored slacks and cashmere roll-neck, and entered his domain.

There he gave the 79-year-old Ecclestone - recently the subject of some rather public criticism from the charismatic 61-year-old American-educated international law specialist - a quick arm hug before whisking him away to a private dining room. The frisson running through the media contingent made the winter weather feel positively tropical. Then came the announcement: di Montezemolo would address the media in 30 minutes. The ski slopes emptied.

The excitement had begun the previous day when rumours swept through Madonna that Ecclestone would be visiting as guest of Philip Morris ("a cheap holiday," the multi-billionaire called it), but was soon dampened by news that Ecclestone would not be meeting the media. Then came news that di Montezemolo planned to drop in on Friday, ostensibly having commitments in the Trentino region within which the village finds itself.

No sooner had Ecclestone arrived than he was ambushed by TV crews and pen pushers alike, with the exchanges being reported here. Note his reaction upon being asked about discussions with FOTA: "There will be discussions for the future but maybe now that we have really managed to reduce the costs a lot, we will be able to pay them less money! They don't need so much money."

The next day it was di Montezemolo's turn. If some of his remarks had jesty overturns, there was no mistaking the steely glint in his eyes as he responded to journalists in Italian. "F1 is heading for war," summarised an experienced journalist fluent in both languages.

On Monday, Ecclestone reiterated there would be no more money for the teams, adding that, if anything, he was looking at reducing teams' payouts from total 50% of agreed in principle by way of a (non-legally binding) Memorandum of Understanding in May 2006. Certain teams, saliently Ferrari and the independents, have been paid in the interim, but, equally saliently, the manufacturer teams - including, it is believed, Honda - have apparently not have received their agreed shares of the 'pot' since end-2005.

According to one manufacturer team boss, the money has been "ringfenced" in an interest-paying account, and will be disbursed once the dissidents have converted the MoU to a legally-binding contract - an updated Concorde Agreement for want of a better description - between all teams and Formula One Management, which must, in turn, be approved by the sport's governing body.

Simultaneously, FIA President Max Mosley is pushing for teams to be able to race competitively on FOM's disbursements alone - approximately $500m shared unequally amongst all entrants. FOM's income can, though, be fickle, for it is mainly dependent upon race hosting fees (already two circuits have dropped out, with a raft of others threatening to do so) and television income (broadcasters are said to be shying away from renewing contracts until FOM provides details of full HD TV services - said to be some way off at present due to technical and costs isues).

Assuming, though, the sport manages to contain costs at levels whereby even the most cash-strapped privateer outfit can survive on its allocated slice of the pot, the burning question is precisely why two non-F1 entities should be the primary beneficiaries of the sport's intense cost-cutting drive.

Consider: should costs be substantially reduced to Mosley's desired levels without affecting the essential make-up of F1 and therefore its revenues, and payouts are then reduced in line with Ecclestone's suggestions, then private equity house CVC Partners, which owns 63% of the sport's leased commercial rights, stands to gain the most, followed by merchant bank JP Morgan, and, then in descending order, (the liquidators of) Lehman Bros and the Ecclestone family trust.

Equally, reduced reliance on sponsorship income will mean smaller teams will cut rates simply to attract income - which will in turn affect the sport's 'rate card'. Currently commercial income constitutes approximately of their annual budgets, and is thus vital to their continued survival - forcing them to constantly pay heed to the benefits they offer partners in return for ever-increasing spends which have been justified on the basis of the sport's eye-watering costs of entry and participation.

The Williams FW31 in Portimao © XPB

Should they, though, be able to participate on FOM money alone, then the incentive to push for ever-higher sponsorship rates drops away, with a resultant drop in the 'sticker price'.

Much has been made of late of the recent cost-reductions drives by all three parties in the unholy trinity (FIA, FOM, FOTA) which currently makes up F1, with these statements in turn being keenly studied by sponsorship directors and agents. How can F1 justify ever-increasing sponsorship rates when its costs have been cut by as much as 50% they ask - not unreasonably. According to one sponsor agent downward pressure on rates has already commenced as a result, and is expected to be grasped with increasing glee by sponsors as the recession bites further.

Should the sport continue to maintain its popularity and thus worldwide viewerships (which, though, is doubtful, for a little excess, as any Hollywood writer knows, attracts the attention of the masses), then the sponsors, and not the teams, stand to gain the biggest bangs for their bucks for their exposure will remain constant at vastly reduced rates.

Under such circumstances said sponsors have two choices: allocate savings thus made to increasing their sticker exposure, thus cutting back on the space and potential income from other sources, or worse, sponsor other (non-motorsport) activities.

If, though, the sport does lose a portion of its appeal due to its increasingly anodyne nature - and this is the likely outcome of the cost-cutting drive - then sponsors will seek alternate, more exciting opportunities and allocate sponsorship budgets accordingly, particularly if F1 continues to charge top dollar for what is increasingly being punted as a cut-rate sport. Either way F1's savings spree could very well end up funding competitor activities!

But, if a vulture fund and the sport's sponsors stand to gain the most from the latest round of cost cuts, then the biggest losers are certainly those team members who sacrificed home, hearth and in many instances heart in order to be a part of the sport they love.

As they anxiously ponder whether they can meet their next mortgage repayments, they may like to consider that just last week Prufrock's column in London's Business Times reported that "Donald Mackenzie, a (senior) partner in CVC Capital Partners, recently bought a property in Vandoeuvres (Switzerland) for 25m Swiss francs (£15m)." This in addition to a portfolio of properties spread across the world...

To draw a comparison: imagine the reaction from trade unions if General Motors President Rick Wagoner (or any other CEO of a global company) made a similar purchase at the very time swingeing staff reductions were being implemented within his organisation. 'Downing tools' would be too mild a description of the havoc which would surely follow.

The formation of FOTA, effectively a trade union of teams, has provided team principles with a collective bargaining platform, which has, in turn, served them well in protecting their interests. Possibly the time has come for F1's team members to consider the establishment of a trade union to protect their own particular when such insensitivity is displayed by one of the sport's majority shareholders.