Mosley's rallying cry will amuse teams

One of the most bemusing (if not downright amusing) developments of the past week were comments made to press agencies by Max Mosley - the former FIA president and long-standing friend of Formula One Management CEO Bernie Ecclestone.

Formula 1 was, said Bernie's mate of over 30 years, standing on the verge of "collapse" unless the various bilateral contracts that bind the teams to FOM - and thus the sport - are dismantled and the billion-dollar annual revenues shared more equitably among the teams.

Seldom if ever does this writer agree with Mosley, but what he said is absolutely true regarding contracts that pay the likes of Ferrari and Red Bull more money to simply turn up than a team like Sauber would receive should it win both world championships for four years on the trot.

"Half the teams simply can't compete because they haven't got enough money," he said. "To me that is wrong."

F1 in Mosley's final year: Brawn up front but manufacturers aplenty © XPB

Mosley, who headed the FIA from 1993 to 2009, suggested that this fiscal imbalance is akin to permitting half the grid to race with bigger engines, for in F1 money equals laptime - even if some outfits squander both more than others - resulting in inequitable sporting performance.

"The only way to deal with it is to get everybody to agree [to rip up the contracts]," he said. "You can sit all the teams down and say 'Look, collectively we've got a massive problem because some of you have enough money, but most of you don't, and if we go on like this Formula 1 is going to collapse. So I am inviting you all to agree to a change'."

Noble comments, indeed, particularly from a man whose opinions continue to carry weight, particularly in the (dominant) English press, and sure to bring cheer to the disadvantaged. Why, then, the mirth?

Simply because it is the structure of Formula 1's commercial rights deal that - in many iterations - gives FOM carte blanche over Formula 1's commercial agreements for a century. That contract, initially for 10 years before being extended by a further 103 years (yes, you read that correctly), was ratified by Mosley's administration back in the late nineties before being approved in extended form in 2000!

At the time the FIA accepted an EU Commission diktat that the governing body relinquish all commercial control over Formula 1 and cede it to SLEC (FOM's then holding entity) if it wished to lease out the rights for an extended period, and thus it can be safely claimed that any disadvantage the FIA may find itself in goes straight back to that agreement.

Had it, like the IOC and FIFA, retained control over its commercial properties, then the current situation could not have arisen and the FIA would be master of its own championship.

According to sources, that agreement reached in January 2005 provided for a substantial balloon payment to Ferrari, plus a premium of five per cent of F1's annual underlying revenues - 2.5 per cent of which came from the FOM and the balance from the team 'kitty', thus dealing the competition a double blow - to be paid to the Scuderia in return for its guaranteed participation in the championship until 2012.

Larrousse went out of business at the end of Mosley's first year © LAT

Furthermore, between Mosley's first year in office (1993) and the first year under the commercial rights deal (1998) two established teams went under and four more arrived only to each collapse within two years or less.Another two were to disappear over the next five seasons, with only Toyota entering the sport during that period on account of the enormous bonds the Concorde Agreement, of which the FIA was a signatory, demanded from incoming teams.

True, towards the end of his presidency, Mosley did attempt to force through some form of budgetary control in (belated) attempts to halt the exodus of teams, but his efforts to establish a budget cap formula were rewarded by threats by teams - lead, saliently, by Ferrari - to start a breakaway championship, which in turn precipitated his 2009 departure from office and the election of former Ferrari team principal Jean Todt as president.

However, four budget teams answered Mosley's call for 'F1 Lite' prior to his departure. One (USF1) was stillborn, another (Campos/HRT) went under after three years, while both Caterham and Marussia plunged into liquidation late last year, with the latter paying creditors 2p in the pound before a controversial resurrection as Manor.

Not a good record, then, and one that proves how difficult it is to force through change in F1, particularly as the current governance procedure - bar the addition of the Strategy Group (of which more later) - is based directly on Schedule 9 of the 2009-12 Concorde Agreement, which was signed during Mosley's final term. In fact, it was one of the final acts of his presidency.

Thus, of all folk, he should know the difficulties of imposing the (acknowledged) unanimity required for wholesale change - and consequences of revolt. Thus to maintain the teams could be told "Look, collectively we've got a massive problem because some of you have enough money, but most of don't, and if we go on like this Formula 1 is going to collapse. So I'm inviting you all to agree to a change" is a touch disingenuous.

After all, why should Red Bull Racing forfeit a commercial advantage it was offered, or Ferrari, about to be listed on the NYSE, advise prospective investors that it could lose up to $100million per year? McLaren's plan going forward takes into account premium payments, and Williams has budgeted for them - ditto Mercedes.

Some of F1's best-funded teams also get more money for entering © LAT

The primary reason for the premiums to the so-called Constructors' Championship Bonus teams (Red Bull, Ferrari and McLaren) plus Mercedes (premium manufacturer) and Williams (heritage) was an overwhelming desire by FOM's majority shareholder CVC Capital Partners to list F1 on Singapore's Stock Exchange.

To do so the venture fund needed long-term commitments from the sport's major players, in turn acquired through payment of said premiums. However, various developments scuppered hopes of an IPO, and thus F1 is saddled with contracts that add nil value, yet arguably threaten its survival.

Similarly the formation of the Strategy Group was a sop to the major teams, with a core of five teams plus the highest-placed team not in the group having equal voting power to the FIA, as Todt last year discovered when he wished to impose a budget cap, yet was outvoted 12-6 by six teams voting en bloc with FOM's equal number of votes.

Said Mosley in this regard: "I don't know what's in the [agreements] which have been made [a surprise, for he was a member of the FIA Senate by right when the deal was struck] - but my understanding is that Bernie, together with the teams, can outvote the FIA.

"I might be wrong about that and shouldn't really speculate but I get the impression the FIA is not perhaps in as strong a position as it used to be."

Mosley is absolutely correct about not speculating, but, premium payments, formation of the Strategy Group and the FIA's regulatory disadvantage hark back - certainly indirectly - to his own presidency, for in 2005/6 his administration approved the sale of SLEC (FOM's then-holding company, and holder of the 100-year rights) to CVC despite the existence of what Mosley called a "Don King clause".

Teams' alliance FOTA had fans on its side during the fractious 2009 season © XPB

This allegedly granted the governing body right of veto over any sale, which was patently not exercised - and thus F1 is under the ownership of CVC.

As for the FIA accepting a bargaining position perhaps not "as strong as it used to be", the fact is that the FIA was forced by a looming cash crisis to cut whatever deals it could due to the 100-year extension, which provided for no additional cash to administer the championship as demanded by the terms of the deal, yet all proceeds had previously flowed into the (ring-fenced) FIA Foundation.

It is important to note here that the 10-fold extension did not provide incremental funding, yet obliged the FIA to continue with its duties. Thus, in order to 'save' the FIA financially, Todt had to concede certain rights.

That said, under the current structure the FIA has a one-third vote in the Strategy Group, which is more than it had under the old Technical/Sporting Working Groups and F1 Commission procedure, plus it still retains right of veto via the World Motor Sport Council which ratifies all regulation changes.

The wonder of it all is why Mosley chose to voice his opinions when and in the manner in which he did. It is known that his autobiography is imminent. Equally, Mosley may (again) be coming to the rescue of his long-standing friend Bernard - under pressure from CVC to ensure 10 teams make it through the season.

Given the fiscal imbalance, the easiest route would be for FOM to up payments to disadvantaged teams, but that is clearly a no-no, for CVC's Fund IV carries enormous debt - believed to be a billion dollars - incurred off the back of future earnings.

Repayments run to an estimated $250million each year, and given that it annually nets around $400million and needs to keep investors sweet, there clearly is not enough to spread about.

Thus the suggestion that the contracts be ripped up, and the revenues split more or less equally amongst all teams? Imagine the feelings of satisfaction derived from pulling that on the very teams that contributed to Mosley's departure in 2009...