F1 Teams Could Benefit from Kirch Fallout

The collapse of the Kirch media group could free Formula One from the threat of a damaging split in five years.

It could also secure greater stability for a glamour sport that needs to cut costs in a difficult economic climate but is divided about how to do it.

Much depends on whether Kirch decides to offload its majority stake in SLEC, the holding that has a 100-year deal to run the commercial side of Formula One, and how the major players in the sport respond to that.

A pointer may come at this weekend's San Marino Grand Prix, where bosses from Europe's major carmakers in Formula One - including Fiat's Ferrari, Mercedes and Renault - are expected to meet to discuss plans for their rival championship from 2008.

International Automobile Federation (FIA) president Max Mosley is due to hold a news conference at Imola on Saturday and is sure to be asked about post-Kirch developments.

Kirch has said in the past it is open to offers for its holding but the FIA retain the right to veto any change of ownership that they feel may have a negative impact on one of the world's most popular sports.

Kirch bought its 58 percent stake of Bernie Ecclestone's SLEC from troubled media rights company EM.TV last year, a move that prompted the carmakers to set up their own GPWC firm to run a rival championship from the end of 2007.

Big Investment

The carmakers are determined not to let Kirch enjoy the financial rewards from their own hefty investment in Formula One and also want to ensure Grands Prix remain on free to air television for maximum exposure.

They can call the shots since they own or are heavily involved in more than half the 11 teams - Ferrari (Fiat), Jaguar (Ford), Toyota and Renault outright while Mercedes are partners with McLaren and BMW with Williams.

The teams, some of whom are struggling to keep afloat in a climate that has already claimed the Prost team this year, will be free agents from 2008 when the current "Concorde Agreement" with Ecclestone and the FIA expires.

All want a far greater slice of Formula One's revenues in future to underpin their expenditure and make them less dependent on the vagaries of sponsorship. After initially talking to Kirch about buying a stake in SLEC, a move that would be sure to get FIA approval, the carmakers' position has hardened.

Last month they declared openly that they no longer needed to buy into SLEC, although some observers saw this as more of a bargaining position aimed at driving the price down as Kirch's problems grew more severe.

"We would say no," said BMW development chief Burkhard Goeschel when asked in March how the carmakers would react to an offer from Kirch.

The carmakers' main aim is to safeguard Formula One and their own investments and they have a choice of strategies, both of which would involve considerable expenditure. They can go it alone, with a renamed series, or they can buy into the existing championship.

A deal with Kirch would doubtless save time as well as reassuring sponsors and doing minimal damage to the sport's prestige - something that could be decisive.

"I think this is now a fantastic opportunity for the carmakers and Bernie to get back 75 percent of SLEC at a low price," one Formula One insider, who did not want to be named, told Reuters on Tuesday.

"On the one hand they have something that works, is well-oiled and very well-run and on the other something that they will have to build up from scratch. If you have two championships, then the sum of the two will always be worth less than the one on its own."