Ferrari/Mercedes can hold F1 to ransom

For the Volkswagen Group to openly admit that Formula 1 is not on its agenda is no surprise, particularly given the fall-out from 'Dieselgate'.

In fact, even before the scandal broke in September, this writer consistently doubted rumours that Wolfsburg's management board harboured serious intentions of entering F1, regardless of who - initially Ferdinand Piech, then Martin Winterkorn and, now, Matthias Muller - headed VW Group.

Comments made to Autosport's sister magazine Autocar by group motorsport director Wolfgang Durheimer, also CEO of Bentley/Bugatti, suggest F1 was not a blip on VW's radar even before the emission issue. He specifically cited the lack of regulatory and technical stability as the primary reason, before questioning the commitment of F1's commercial owners - venture fund CVC Capital Partners - to the business.

"Before you commit the kind of money needed [VW] must see five years of rules stability," he concluded.

Tellingly, the VW group has honoured all existing motorsport contracts - albeit with certain cutbacks - and remains committed to the World Endurance Championship, World Rally Championship, World Rallycross Championship, DTM and GT3, in some instances with multiple brands. This strongly suggests motorsport per se is not a frowned upon within VW's corridors, despite the ongoing effects of the crisis.

Saliently, the former Porsche R&D director who gave Stuttgart the green light to go up against sister Audi in the WEC considers that championship's "technology [to be] greater than that in F1, and levels of investment are therefore greater". Given that VW currently contests the endurance championship with different concepts via two brands, his comments suggest pure economics are not the reason for going WEC and/or shunning F1.

The VW Group supports two works LMP1 teams but has no interest in F1 © LAT

Sources within VW suggest the group spends upwards of £300million annually on the WEC plus £200m on the WRC, DTM and other closed-roof series, all of which dwarfs Mercedes' net F1 spend after sponsorship and Formula One Management revenues. Still, the combined motorsport budgets equal less than eight per cent of VW's projected annual R&D spend, so F1 is easily affordable - even before FOM revenues and sponsorship.

Recent senior moves within VW underscored that the group had not planned on expanding its motorsport activities upwards: ex-Scuderia Ferrari team boss Stefano Domenicali was promoted to CEO of sportscar maker (and Ferrari rival) Lamborghini - after preparing (a thumb-downed) F1 feasibility programme for the board. Clearly his return to Italy signals the end of the study...

Equally, VW (brand, not group) motorsport director Jost Capito, formerly head of Ford Europe's motorsport activities (including F1), is awaiting release from his VW masters to enable him to join McLaren as racing division CEO. Surely if it had any ambitions towards F1 it would have retained a man who guided the most dominant rally team of recent times, particularly as he previously held senior management positions at Sauber.

The bottom line is that VW's decision to steer clear of F1 means that, of the top five global motors manufacturers (Toyota, VW, General Motors, Nissan/Renault and Hyundai/Kia), only Renault is represented on the current grid - and two-thirds of the Franco-Nippon alliance's sales are generated by its Japanese brands.

The others on the grid are, of course, Mercedes, Fiat Chrysler Alliance (albeit now only loosely, through associate company Ferrari) and Honda.

With F1 not on VW's horizon and Hyundai/Kia not stirring on the motorsport front - apart from the former's WRC campaign - the implications for F1's engine landscape, and, by extension, F1's independent teams, are dire, for all motor manufacturers currently in F1 either operate their own teams (Mercedes, Ferrari, Renault), or are in primary partnerships (McLaren/Honda - where the former holds a veto over supply).

Why would they, under those circumstances, risk undermining their own operations by supplying a Williams or a Red Bull Racing with technical support packages?

Red Bull and Williams have title-winning pedigree but now run customer engines © XPB

Put somewhat crudely, why keep a cow, yet continue buying milk for cheese making? If championship-winning teams such as those listed have little chance of 'works' engines going forward, what chance other independents, if no additional engine suppliers enter F1?

Already we had a case of customer Mercedes-powered teams playing second fiddle to the main team's operation - from Italy last year through to Abu Dhabi despite already marked superiority, ostensibly due to production capacity issues - while this year Toro Rosso is powered by 2015-spec Ferrari engines, as Manor previously relied on year-old specification Maranello units before switching to Mercedes for 2016.

It can be no coincidence that despite four consecutive (2010-13) constructors' championships won as partner to Renault, Red Bull Racing's power unit is this year badged 'TAG-Heuer'. The renaming comes after much U-turning throughout last year over engine contracts and well-publicised (but ultimately unsuccessful) attempts at switching to either Mercedes or Ferrari units of full works specification.

The overall game plan seems clear: The four manufacturers - forget not that McLaren, too, is a fully-fledged carmaker, even if the internal relationship between McLaren Automotive (car company) and McLaren Technology Group (owner of the F1 operation) is rather more distant than is the case elsewhere - aim to utterly dominate F1 technically and commercially, and plan to do so primarily via engine supply.

Hence also FCA CEO Sergio Marchionne's call that further car companies enter F1 - plans for his own Alfa Romeo brand spring to mind immediately - and recent comments by Mercedes motorsport director Toto Wolff that it would be unrealistic to expect teams to survive without some form of manufacturer equity - as is the case with Mercedes, where Wolff holds 30 per cent of equity, and Niki Lauda 10 per cent.

"Goodbye dear independents - unless you adhere to our conditions," seems to be the clear word from Mercedes and Ferrari, the last-named's position being politically entrenched at all regulatory levels on account of its traditional regulatory veto?

Was this what FOM CEO Bernie Ecclestone recently referred to with recent scathing comments that the F1 Commission - of which he is titular president - is effectively a "cartel"?

Ecclestone has been blunt in his criticisms of Mercedes and Ferrari © XPB

What is known, for example, is that Wolff and Winterkorn met last August in Sicily, and not simply to discuss suntans. Which brings us to Durheimer - could he be reading the situation the same way, and hence his comments?

Such questions must surely be vexing minds in Brussels as they consider the EU complaint filed - admittedly primarily against FOM - by Force India and Sauber, with the core of the matter being that FOM's commercial and regulatory covenants are in breach of the EU's anti-trust (monopolistic) regulations. Which teams are (now) the biggest beneficiaries of said bilateral agreements? Mercedes and Ferrari...

The foregoing could explain the lack of tangible progress made on the engine front since the FIA's announcement in October last year that it intended introducing an alternative independent (read 'cheaper') engine, unless current suppliers agreed to open supply lines - i.e. service at least three teams each, if called up to do so - and reduce prices, which run out at around €25million per annual team supply, or 250 per cent up on the V8s.

Following the last Strategy Group/F1 Commission summit, held in a show of magnificent timing on the second day of pre-season testing, the crucial question of power units was summarised in this brief paragraph:

Significant further progress was made on the four major topics regarding power unit supply:
- Supply cost
- Obligation to supply
- Performance convergence
- Further improvement of noise

A working group comprising representatives of the FIA, commercial rights holder, power unit suppliers and customer teams will undertake further work with the aim of reaching agreement on a plan to meet the above requirements by April 30 2016.

Engine costs are a large part of the budget for a team in Sauber's position © XPB

Excuse the unbridled cynicism, but about the "most significant progress" was that the quartet agreed to discount their annual prices by €1m per team from 2017 as a sop to independents, many of whom are seriously cash-strapped due to FOM's inequitable revenue structures! Rake in an additional €50m per year each on average from 2013, then generously hand back a collective (deferred) six million bucks...

Do they really believe €1m will ease the plight of such as Force India and Sauber? Talk about crumbs flicked down from the main table...

That said, after those fraught few months last year when it seemed that both Red Bull outfits would be power-less in 2016 - and possibly be forced to exit F1 - at least they still have engines, but with its Renault contract expiring this year, what chance Red Bull Racing finds itself in the same boat come next season? Has the rattling can simply been kicked down the road for another year?

"Hopefully we won't have a re-run of 2015. We have an agreement with our engine partner until the end of [2016] and we will look to make decisions later in the year," Red Bull Racing team principal Christian Horner told this writer the day after the Geneva summit.

"We're not in any rush; we will see how things pan out. We saw last year we can afford to leave a decision [to change suppliers] fairly late."

He does, though, accept that his team is not exactly flush with alternatives, particularly as Red Bull has zero intentions of entering the F1 engine business, saying, "It's not Red Bull's core business." (But, building chassis is to the lifestyle drinks company?)

"I think our options are relatively limited and fairly obvious. We will see how things pan out. There are no new manufacturers coming in for 2017..."

Given the looming stalemate, is the much-mooted independent engine - a 2.2-litre twin turbo, possibly with a low output KERS system to provide a 'green' aura was among the options - still on the cards?

Horner's team faces another engine dilemma soon © LAT

"There is a working group being created to discuss the engine again, but I think that's unlikely," Horner said, adding, though, that "the FIA has to reconsider the independent engine again," should Mercedes and Ferrari remain opposed to any changes on this front.

However, given that D-Date (March 1) for tabling the regulations ahead of 2017 has now come and gone, have these stalling tactics effectively ensured that the engine, and by extension affordable, full specification parity, cannot be introduced before 2018, at earliest? Have Ferrari and Mercedes had their way for yet another year, at least?

"It's certainly too late for 2017," admits Horner, whose hopes that his team would be the primary beneficiary of any VW F1 power unit have clearly been dashed. "We won a championship as a customer when Renault still had a works team in 2010."

The absolute irony is, of course, that the current ('green') engine regulations were originally framed with a view to attracting motor manufacturers to F1 engines, but F1's regulatory wrangles have effectively scared off the only geese that could lay the eggs the championship so desperately needs.

In this climate the current engine suppliers are able to hold F1 to ransom until it is no longer feasible to introduce changes ahead of the commercial agreements between FOM and teams expiring in 2020, when Mercedes and Ferrari would have entree to their own series, run on their own terms, for their own accounts, for their own customers...

Now, what is the definition of a cartel again? Take your choice:

An association of manufacturers or suppliers [existing] with the purpose of maintaining prices at a high level and restricting competition.

A coalition or co-operative arrangement between political parties intended to promote a mutual interest.