Analysis: The state of Formula One

The fight on track for the Formula One world championship may be keeping fans excited this year, but off track there are bigger battles going on at the moment

Analysis: The state of Formula One

In the wake of Super Aguri's withdrawal from F1, the impact of the credit crunch and a possible worldwide economic recession on the way have left teams concerned about the future direction of the sport.

Only a few days ago, FIA president Max Mosley warned of an imminent 'major financial crisis' in the sport, due to rising costs and a lack of revenue.

Back in 2002, when F1 lost Prost and Arrows in a short space of time, Autosport held a round-table paddock discussion with team figures talking about how F1 was reacting to the difficult post-9/11 financial climate.

With all that is going on at the moment, it felt right to repeat that exercise and find out what those within the sport feel about how F1 is doing at the moment. Here is the full version of Autosport's look at the state of grand prix racing.

Q. Is Formula One at risk of repeating the same mistakes it made in the wake of the 9/11 recession that claimed the Prost and Arrows teams?

Flavio Briatore: Definitely, we are repeating the same mistakes. People in Formula One still believe that whatever happens in the economic world, the sport will still carry on. We've seen so many examples of it - the most recent being Super Aguri. We never learn from our mistakes, we just spend more money.

Christian Horner: The one thing every team in the pitlane agrees upon is that we need to get costs under control. F1 is still disproportionately expensive against the revenue it can potentially generate, especially during tough economic times. The teams are all reacting responsibly - but we still need to take action promptly.

John Howett: When the market becomes difficult, only the fit survive. But F1 is still one of the strongest sports in the world in terms of its appeal, coverage and popularity - particularly in developing markets like Russia, China, India and the whole of South America. And I'm a great believer that there's still a lot of stretch in the sport and we've yet to really tap into alternative sources of revenue in these new expanding markets.

Q. Does the loss of the Super Aguri team - and F1's apparent obliviousness to its absence in Turkey - send out a bad message?

Nick Fry: The first question to answer is: 'Is F1 any place for a not-very-well funded privateer team?' In this sport, there is a history of teams working at the margins that invariably fall off the bottom and I think it will ever be so. The real mission for F1 is to attract a Volkswagen, an Audi or another big consumer business into the sport and not attempt to bring in more privateers, who may end up in the same position as teams like Arrows and Prost.

Privateer teams enter on the basis that they can afford the first season - but invariably can't generate the revenue to continue into their second or third years. If you can't afford to compete, you shouldn't be here.

John Howett: If you don't have a well-structured, well-run operation then it is much more vulnerable when you enter a tough market environment.

Q. So was the withdrawal of Super Aguri more of a one-off rather than a true indication of where the market is really at?

John Howett: I think so. Look at what Vijay Mallya is doing at Force India - it's a well-financed team with a unique opportunity to tap into the Indian market. Scuderia Toro Rosso might be up for sale but it's been well maintained and could well prove quite an attractive proposition to a buyer.

Colin Kolles: Super Aguri was a special case - it was a team built artificially and therefore always found it quite difficult to attract investors and sponsors because it was run to a unique business plan. By contrast, the future of Force India is bright because we have made the right decisions. Yes, we are an independent constructor but we have strong partners and a well-structured business plan.

Q. Does the loss of Aguri now make it harder for F1 to attract new independents into the sport?

Mario Theissen: I don't think so and I hope not; we need the mix of manufacturers and independent teams and we are working towards a more stable situation [with the budget-cap]. I always hated the idea of customer teams so it would be much better to bring down the costs and allow only one sort of team into the sport. The new regulations are aimed at doing exactly that.

Christian Horner: If you look at the investment required for a privateer to come into F1 nowadays, the business model just doesn't make sense. So somehow we need to get those costs under control.

Flavio Briatore: I remember when I sold Ligier [in 1997] - there were six or seven people interested in buying the team. There were people queuing up to buy it. What has happened with Super Aguri sends out the clear message that fewer people are interested in investing in an F1 team these days.

Q. Does next year's arrival of the budget-cap and KERS make Formula One a more attractive and viable proposition for both existing and potentially new teams?

Mario Theissen: In two years' time, the budget-cap limit should be realistic for independent teams. And KERS is not only good for the manufacturers, who can benefit from its technology, but also for F1 itself - it will change the sport's image, reposition it and attract new sponsors who can't yet identify with F1's current image. We are definitely moving in the right direction.

Ron Dennis: It's arguable because the factor that minimises cost more than anything is stability. And the reality of F1's financial model is that you always spend what you have got - it's as simple as that. This isn't a business you go into to make money, it's a business about winning, so you're always spending whatever you've got available. That is F1's natural economy.

John Howett: A budget cap won't necessarily help the smaller teams because it will need to be sensibly high if it is to maintain manufacturer presence. But the cap will comfort the smaller teams because they know the sport's competitive reach is being compressed. And it might also encourage some teams to enter F1 and be competitive at a budget that is sustainable for them.

Q. How much of a concern is the global credit crunch to the senior boards of the manufacturers?

John Howett: The belt is always being tightened at Toyota anyway: we constantly evolve the group in an attempt to make it stronger and meet these challenges. But our focus now is about evolving the developing markets in Russia, China, India and South America - huge areas of untapped potential.

Mario Theissen: There is definitely more pressure from the board. We have reduced our powertrain budget and the budget-cap will limit chassis development. It's much appreciated within the company,

Nick Fry: For the automotive industry, the north American market is clearly a concern - and Honda has declared lower profits. That might not necessarily have an impact on our budget in the short-term but it definitely affects thinking behind budgets for the future.

Q. Does the lack of a singular, unifying Concorde Agreement have an impact on how deals can be done in the sport?

John Howett: There are three fundamental issues: last year's McLaren-Ferrari spy scandal; Max Mosley and the issue of ethics, because a lot of modern corporations are under huge pressure to adopt ethical practices; thirdly, a degree of uncertainty about the Concorde Agreement. Those factors are causing a degree of hesitation for some companies considering entering F1.

Nick Fry: It was certainly a factor in trying to find a financial partner for Super Aguri. But that's to be expected from people investing in a company that would, to some extent, have been controlled by Concorde.

Christian Horner: Each team has a totally different agenda for being in F1 so I do think the Concorde Agreement binds everybody unilaterally with the promoter and the FIA. It is important for long-term stability and should be concluding as soon as possible.

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