Q & A with Luca di Montezemolo
Luca di Montezemolo: Today I think it is a very important opportunity to give you a complete picture of what FOTA is. Let me tell you that I have been in F1 since 1973, a little bit up and down but still there (all the time)
I've never seen in some many years such a strong commitment between the teams. All the teams are pleased and convinced to work together with a very common objective - promote the development of Formula One and give a worldwide image and strong reputation through four very clear points and priorities.
One is stability; the second is technical competition and research, this means the DNA of F1; sustainability, the balance between costs and revenues; and of course the show - we mean audience, we mean interest, we mean progress. This is the framework of everything.
And I've never seen before such a strong commitment. I don't want to use big words, but this is (of) historic importance for F1. Teams that want to work together but compete on the track. We will work together for the future and work together for F1 and work together for the improvement of the sport. Stability is crucial for us- if we can go back.
Stability means that we need stable rules, we mean stable competitors but open the hand for new entrants - this is part of the history for F1, a mix of new entrants and stable competitors. Stability means also possibility to make programmes, to make planning and to look ahead in a clear way.
Technical competition and research - this is again the core business of F1. Competition, extreme competition, competition 360 degrees, technology competition and the research not only for safety, which is important, but new technology for the future of road cars. This has been always in the past the key, again the DNA of F1.
Then F1 means to have a good balance between cost and revenues, as every other activity for every single company, this is crucial. You will see later on our proposals to improve - they are not revolutionary. We have to improve step-by-step, something which is already good. The latest numbers in terms of audience, in terms of international growth and presence of F1 are important for us, for the sponsors, for the spectators, for the TV.
I like to spend a few words to inform you of the FOTA structure.
We have the executive committee. It is the board in which we will take the decisions, but decisions supported by very important work from the Working Groups.
There are three Working Groups: Technical, chaired by Ross Brawn; the Sporting Working Group chaired by Martin Whitmarsh and the Commercial Working Group chaired by Flavio Briatore.
We have a voting system that for 2009 mean 100 percent to take decisions, but for 2010 it is a majority of 70 %. We have permanent offices and activities here in Geneva.
Let me tell you what happened. FOTA was really formed in Monza in September last year. The teams met before in July in Maranello and agreed to form FOTA, so originally July 2008 but September was the first official day of FOTA. Then teams agree in October for a first package of measures in Shanghai
FOTA has done very good work because despite a very tight final of season, very competitive final of season, since Shanghai they have worked to present a package of measures. Then in London in November and December, the teams agreed further important cost-cut measures for 2009 and 2010.
We focus before everything else for 2009, because we know 2009 is the most important year in terms of economic crisis, so it was urgent to define important decision. We took all the decisions for 2009 as unanimous agreements, and I emphasis 'unanimous' agreements between the teams. They were putting together the interest and goals of independent teams and the interest of the car manufacturers of the big teams.
This is important again to emphasise because you know again F1. This was not very usual in the past.
Then the 2009 decision has been taken only thanks to FOTA's work, FOTA's commitment and the decision by the teams. Then we go to again December 10 when in Monte Carlo we have officially presented to the chairman of FIA Max Mosley our important proposals for 2009.
In January in Geneva FOTA incorporated the Geneva office and we opened our activity officially here. And in February in London the teams agreed long term strategy starting with 2010 decisions. Today we call attention only on 2009 and 2010, but we will work also for 2011 and 2012.
Finally today, we are here to present the road map, the FOTA road map, for the future of F1. So you see from September 2008 and March 2009, FOTA has done a lot of works.
How FOTA fits in? This is very important. F1 today has to work together in a triangle in which we have clear rules, clear responsibilities and clear goals. We want and we have a strong political authority and regulator, that is FIA.
I have to say we have appreciated when more or less one year ago the chairman of FIA called attention to the teams of the cost of F1. We share since the beginning this attention because F1 has to be in line with what is going on around the world, with economic crisis, and we cannot escape, we know what happens in the world.
So we appreciated the words of Max Mosley and I think we have done something in 2009 that was totally unexpected in terms of time of response, time to market, and in term of decision and unanimous agreement.
Then you have FOM. FOM is the owner of commercial rights, this is again an important association for us, a crucial association for us, because we have to look at costs but also at revenues. I think that not only because I know him since 1973, but on behalf of FOTA, that Bernie Ecclestone has done in recent years and in the past a fantastic job for F1. F1 today is a completely different F1 since the past, and I think we have to say that Bernie has done a fantastic job.
In the middle there is the audience, we want to work together but we want to say the teams are the players, the teams are crucial for the sport, the teams are investing money in terms of technology, in term of competition, and today the teams are working together and keen to work together for the future of F1. We have so many things to do that we are ready to continue, independent of what we have already done in the last few months.
I would like to say two more things. First of all, we are looking at the crisis in a positive attitude. Let me explain what we mean by positive attitude - crises represent huge opportunities to improve F1 in terms of costs, in terms of competition, in terms of to really look ahead.
So not only for us, but for many companies, we hope the crisis will end soon but we are taking this opportunity to work very, very hard, as we have already done. We will continue to do so inside F1, inside the teams, and I also have to say as a chairman of a company, inside the single companies and car manufacturers.
The second thing is that we want to preserve and emphasise the DNA of F1. We don't want an F1 that becomes something different, we want competition, loyal competition on the track, sport competition, technological competition, we want research, and we want to put the brand, the name on the cars. We are not sponsors, we have sponsors and sponsors for us they are crucial and important.
That is why we want a stable F1, a positive F1, because we want that many strong international brands can use this fantastic opportunity to be present all across the world. We want to increase the audience, we want to work together to develop F1 in a proper way - maintaining and if possible increasing this fantastic formula that is unique in the world.
Where we are? We are in a condition where we have really have made a strong effort in the contingent priority to reduce the costs.
In 2009 we have achieved the reduction of engine price, an important reduction of engine price, a reduction of testing, limitations in aerodynamic development activity, savings in a critical, critical year, so this year was the most important year to be approached in terms of strong cost reduction. This would simply not have happened without FOTA and we are quite proud of this - again with unanimous agreement between the teams.
Costs are extremely important for 2009 but it is not the only thing we have done, but there are some clear numbers about cost reduction.
Engine supply: reduction in price of engines. In two years, 2009 versus 2010 - it's 50 percent less. That has represented a fantastic effort already, but 2009 to 2010 there is another 37.5%. This is a typical example of something crucial for independent teams and for new entrants, because the cost of the engine has dramatically declined.
Then gearbox: that is very more. 60% less in one year. So this is crucial for an independent team, crucial for the costs, crucial for newcomers. These are facts, not just words.
Testing: 50% less in reduction in testing, and additional reduction in 2010, 30%. Remember we said a few months ago we are concentrated on 2009 and then we will have a systematic approach for 2010. We have done this. You will see some important reductions.
Chassis: for 2009 the chassis was already done when we did our work in Monza but for 2010 there is a 30% reduction only in reduction of price of chassis. This is very important.
Aerodynamics: the reduction in aerodynamic development costs, this represents a big, big area of costs for every single team. It is 20 percent for 2009, again the chassis was set, but 50% thanks to the decisions for 2010.
KERS: KERS has unfortunately represented for every single team has represented the highest cost in the 2009 budget, by far the highest. So we have decided to achieve a KERS standardisation and a reduction in costs, and through a bit.
Our goal is that we can have a budget saving from 2008 to 2010 up to 50 %. A 50% of overall reduction in only two years. And, as I repeat, we will work also on 2011 and 2012.
We have done a lot of work, even in commitment to engage the audience, this is looking ahead. The triangle is crucial, the collaboration is crucial with FIA to FOM to introduce current and future ideas to improve the sport, the show and the spectacle; to engage the audience through improved coverage in the sport, and, this is extremely important, to expand the use of new media. We see a lot of room to improve in that area and this is something we want to work very hard.
But we have to have a balance between revenue and costs. We have been extremely busy and determined to cut costs and now we have to work on the revenues for the future. This is automatic in every company the balance between cost and revenue to sustain the future for current teams, but to give room and be attractive for new entrants. Again this is why it is important to have the balance between costs and revenues.
And to preserve, and even improve, the unique DNA of F1. Working together, we think that providing affordable engines and gearboxes for three year is a real and important effort to help independent teams. This is very, very important. We will supply three years of gearbox and engines for sure.
Working together means also to share common goals, to have clear rules and to look ahead in a constructive way preserving the image, the credibility, the stability of F1 without polemics and with a team spirit. We are sure that the former Honda team can have a future and can have all the rights that they need and they own to look ahead in a positive way and with a positive attitude.
Let me finish with just two more messages. F1, as Flavio very well emphasised, is something unique because, apart from soccer that is worldwide sport that put together in different countries, if we look at the development of F1 until now and if we look at key countries in the world that are keen and waiting for F1 - just two are India with a lot of people and persons that are already in touch with us through television and internet, and Russia, we see how many things we can do. We see the room for improvement.
I think that FOTA is important because at the end of the day the players are together, the players are investing money and they are ready and pleased to be motivated in this triangle with the audience. It means success, it means customer satisfaction, and it means innovation. In other words, it means the future of F1.
We need this to improve, also because we have potential important sponsors for big teams, for small teams, new countries mean new sponsors and new countries mean new possibilities. Of course the cost has to be reduced, and we have already done a fantastic and we will continue in this way
I think, to be honest, this is an opportunity where we have been a little bit too far - so it is better to come back with our feet on the ground and looking ahead with positive attitude. I have written something: FOTA's attitude is to work with passion for the future of F1 together. So passion together for the future.
Q. In one of the slide presentations it said there was a commitment from the car manufacturers to remain in Formula One until the end of 2012. Can you confirm that all the manufacturers intend to stay in F1 until that date?
LDM: I haven't got any written confirmation from all the teams or all the car manufacturers, but as you know I have a lot of contact with my colleagues, and I am talking now as the chairman of FIAT, and I want to say that all the car manufacturers are prepared to enter and commit into a new Concorde Agreement until the end of 2012. All the actual teams and all the car manufacturers.
Q. You've talked about a 50 percent budget cut achieved over two years. For the sake of transparency, is it possible to know in Euros how much that would represent?
LDM: You know why it is not possible! This is different from one team to another. So it is difficult to tell you exactly a figure. Maybe in the future months we can be more precise, but this is a goal we can achieve with decisions we have already taken for 2010.
Q. You have mentioned the additional revenues that you can offer by providing data and information, and generating additional revenue from new revenue. Do you want to discuss the share of that revenue with Formula One Management, and if so would it be from 2013 or sooner?
LDM: The dialogue with FOM is of course very open dialogue. We are committed with them until 2012 - and that at the end of the day with the speed of the world is tomorrow. We think that, any way, between now and that date it is possible to improve the use of the new media, but I think after 2013 it will be even more possible. Again our commitment is until the end of 2012.
Q. So the revenue share is fixed until the end of 2012?
LDM: Yes but we can increased inside the share the amount of revenue if we improve some activities. One of which we strongly believe is the new media. So maintaining the share but inside the share we can improve the numbers, because we are committed with the share until 2012.
Q. Do you have any outlook about to what extent the contribution from your sponsors will be affected by the current crisis?
LDM: I am old in F1, and we have faced from the early 1970s a lot of crisis. I remember 1975 with the oil crisis it was a disaster for F1. In the beginning of the 1990s with the big crisis of 1993 we have sponsors that enter, we have sponsors that go out, sponsors that take opportunities of the crisis maybe to spend less but enter in this moment. This is life. I think that what we have showed today together gives two important demonstrations. One that F1 has an innovative, important future maintaining its unique characteristics. This is very important for the sponsors.
Secondly, there are a lot of things to do, a lot of things to do and a lot of possibilities. This means big opportunities again for sponsors, for sponsors of different countries, for sponsors of different dimensions and sponsors of different commercial activities. You have seen today that you can have some crisis in some sectors, like banks, but banks have been one of the most important sponsors for 12 years. Then we will work in different sectors in the future. This is the life.
Anyway I feel it is important that sponsors can touch with their own hands how big the potential still is of F1. I think that has already been explained to you.
Q. The FIA put a statement out last week saying that they were looking in light of the current economic situation at some drastic measures that they are talking about pushing through in the next world council. Several of you have talked about the era of the 50 million Euro F1 team, do you think what you have proposed here today goes far enough to satisfy the FIA, and where will the engagement be today with them after today's meeting?
LDM: First of all I think that what is important is that the car manufacturers and the teams, that are at the end of the day are the person and company that put the money on the table to invest for F1, (have reached) unanimous agreement in this important cost reduction for 2010. And this has already achieved without any push for 2009, because 2009, that means that this year, is crucial.
If we had not done alone these cost savings, it would have been difficult for many teams to maintain activities in F1. We will meet with the chairman of FIA in the next days, and we will inform the World Council on these important decisions, because as you have seen these decisions have been taken in such a short time and I think there are important cost savings.
I think we have done a good work and we agree that these can maintain the characteristics of F1 without standardisation, and without decisions that will heavily affect the DNA of F1.
Q. Yesterday at the Geneva Motor Show a high executive of Renault said that if F1 does not heavily reduce costs, and if teams will not get more revenue from F1, Renault is considering the possibility to leave F1. What do you say about that?
LDM: I think that what he said was exactly what I discussed a few weeks ago with the chairman of Renault. We totally share that belief that to maintain F1 players it is important to have a good balance between costs and revenues. There is no question about it.
I think and I repeat that we have appreciated it one year ago when Max Mosley said, listen guys, it is important to look at the costs. We have done a big effort, maintaining the characteristic of F1.
With the decision that we have taken for 2010, Renault is extremely pleased for the cost and we are committed until the end of 2012 and we have to look ahead to increase the revenues after 2012. But even between now and 2012, (we can work) inside the share with the commitment that we have with FOM and working with the FIA, because again here for us it is very important the credibility, the image, the governance of F1 for the future and the present, and this is the effort of FOTA in this direction. I closed my quick speech here saying together, it is important to share the same goals.
Q. You talk of the need for balancing revenue and cost, but the easiest way to improve revenue would be for you to take 100 percent of the revenue of the sport. You are talking about 2011 being open-ended at the moment. Is FOTA by its very essence not a show across the bow of FOM? Will you in time run the sport yourselves?
LDM: You know, we have started to discuss cost saving in Maranello all together in July 2008. So we have anticipated the crisis because it is not possible to cut the costs when the train is at high speed in the middle of the season, but we have started. And two months later in Monza we started with the first ideas to develop.
In that meeting we discussed also with Mr. Ecclestone and Mr. (Donald) McKenzie, the major shareholders of FOM, the problems of the revenues. I think that the dialogue is very, very open and I think between now and 2012 there are a lot of things that are to be improved - in terms of possibility to increase the revenue inside the contract, inside the share.
I repeat we are convinced that Bernie Ecclestone has done a fantastic job to develop F1 until now. We are committed until 2012, and then we will see. From one side 2012 is tomorrow, from another side we are now committed to prepare a lot of ideas to improve audience activities. We will see.
I want also to say that Bernie has done a fantastic job. Today the owner of FOM is a financial company, CVC, that is different from Bernie Ecclestone - this is the reason why we will see.
Q. Regarding the standard KERS. Until now, and during this season every team has to develop their own system, do you think this was a mistake. And do you already have a supplier for 2010?
LDM: For sure if you want my opinion, it was better for economic reasons and also because for the public, for the spectators, KERS is not such an important element like the engine, like the gearbox, like aerodynamics. So we can have a standard KERS for both reasons. It is like an electronic box, it is not a sexy box!
So for the next year we decided with unanimous agreement to say FOTA decided to have a tender for one reason - to cut the costs. We have to be coherent if we have to cut costs everywhere, we have to cut costs even in the parts that are not fundamental and represent a big cost. Today KERS cost is the highest cost for 2009. So for 2010 we want to maintain KERS, it can be something useful for the research for the future, it is very good, but also on KERS. We are preparing the tender.
Q. Since May 2006 the teams have not signed a Concorde Agreement. Why suddenly now are the teams prepared to sign it?
LDM: I have to say one word: the condition. We are now in the process, our discussions with the legal department of FOM (are ongoing) to solve the latest problem, and we hope and we think that we can be in condition to sign the Concorde Agreement before the start of the season. And anyway, we hope before March 18. We hope.
Q. Which of the three areas was the single biggest drivers behind the formation of FOTA?
LDM: They are very complementary of each other, because it is impossible to work without one of the three elements. Technology is the core business - it is research, it is competition, it is cost, it is many things. Commercial is the fuel - it is to work together with FOM and to improve everything. Sport is the show, it is the audience, it is commercial, and it is the attraction for sponsors. So they are very complimentary of each other. They are the three key areas.
Q. With the costs coming down, the driver salaries are going to start to appear as one of the biggest costs on the balance sheet. How do you plan to tackle that in the future?
LDM: I am older in F1 than you and I have heard this question very often in the past. First of all I think F1 is, regarding drivers, is a one-man show. It is not 11 or 23 men. We have teams in Italy, and we have teams with three or four teams inside. When I was young it was a team of 11, now there are 23 or 24 players. But F1 is one.
Second I think F1 we have to keep in mind and never forget it is a very peculiar sport - and the market is the market. For sure in the future there will be more competition between the drivers in terms of costs and maybe the teams will be ready to pay less, but the market is the market. If you want a person who can make the difference and everybody wants to win.....(then you will have to pay).
We have a fantastic collaboration but on the Saturday in Australia we want to beat each other in a loyal and fair way. Potentially I agree with your question, but we will see. For sure, maybe somebody has been a little bit too far, but as a I said before all the F1 goes back and we are going back to have the feet on the ground.
Having said that, if we look at what we have done in eight months or even less, I think we are in a very good direction and I am very pleased with this. We have to be careful not to destroy the appeal of F1.
Can I just add that the team spirit here is strong. All of them have done a very important contribution since the beginning, since the beginning. (There is) passion but also building and developing Formula One, if it is necessary to even improve. For me it is important to confirm what has already come out from the presentations, from the Ron Dennis words, it is the message that governance is the most important element for us, for the teams, for the car manufacturers, for the sponsors, governance and a good relationship inside F1 governance.
I think that every sport needs a strong political authority and regulator because we are not in a circus we are in a sport with rules and credibility, so we need strong commercial activities and we need a strong unanimous commitment by the players. This is the triangle we have in mind, we will give maximum support to everyone in this direction, representing the interpreters of this sport.
Q & A with Luca di Montezemolo
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