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Q & A with Williams F1 CEO Adam Parr

Amid the ongoing worldwide financial crisis, the Formula One paddock was been awash with talk about the need for cost cuts in a bid to help the sport through these difficult times

A primary motivation for taking such action has been to keep the sport's independent teams alive - whether they are owned by billionaires like Dieter Mateschitz or passionate racers like Frank Williams.

Indeed the fate of Williams has been a focus as the team is backed by sponsors like the Royal Bank of Scotland and the Icelandic company Baugar Group that have had their fair share of troubles in recent weeks. So autosport.com caught up with Williams F1 CEO Adam Parr to find out about the team's situation, the thoughts on cost cuts and where he sees the sport heading in future years.

Q: How tough is it for an independent team at the moment. Max Mosley says you need either a manufacturer or a billionaire behind you these days to survive in Formula One. What is your view on that?

Adam Parr: I think the best thing is actually to have neither a manufacturer nor a billionaire behind you! Williams are a unique team, and I question whether anyone else could do what we are doing. Because of the heritage of the team, the way that Frank [Williams] and Patrick [Head] have run it for so long, there is a lot of loyalty. We enjoy a lot of support from partners, from the media, and from fans - which you could not recreate now I don't think. As a business model I think it is pretty much a one-off and very special.

There is one other thing that I think is very significant. If you look at the way that Williams reacted to the end of the tobacco era, in the late 1990s, we said goodbye to it before anyone else. That completely changed the base of our sponsorship model and that has really sustained us through the last few years - having a coherent sponsorship strategy that has kept revenues coming into the team.

Q. What is the short term financial situation for Williams? You posted some losses last year, and at the moment the two kinds of sponsors you would not ideally want for the long term are those from Iceland, and banks - which are your two core backers. Are there short term worries with having Baugar and RBS as sponsors?

AP: I don't know how the things are going to develop with the Baugar group, but you have to remember that the businesses on our car are operating units in which Baugar has investments and are, without exception, very good businesses. That is why Philip Green is trying to spend £2 billion to buy them. What that means for us I cannot tell you, but they are good solid businesses and they always have been. The issue with Baugar is that its financing is from banks that are in trouble, so I don't know how that is going to pan out. It is just too early to say.

With the Royal Bank of Scotland, I don't think there is any issue at all with them.

Q. And you have a firm 100 percent signed contract with them for next year, don't you?

AP: Yes. We have got a longer term contract than that, and quite apart from that I don't think there are any indications that RBS is in trouble. Virtually every major bank in the world has taken up the Gordon Brown model of recapitalising and rebuilding their capital ratios. And the reason they are doing that is to encourage interbank lending and rebuild confidence. But the ratios are not today below levels that have been considered acceptable by the bank of international settlements.

Q. But is it not difficult for a banking industry that is laying people off, that is at the centre of government bailouts, to send corporate guests around the world for entertainment and be involved in sponsorship?

AP: No, I think that is a mistake. I actually believe banks are no different to any other business. Marketing your products, your services and yourself is absolutely fundamental. Any business that gives up on that is giving up on everything. Remember that for a bank like RBS, the amount of money they spend on this activity - while it is significant - is absolutely immaterial.

Q. Are you saying then that because F1 is so cost-effective, they should be doing more because of the situation they find themselves in?

AP: I absolutely agree with that. We would love them to do more, but companies like RBS, Philips, Allianz, Thomson Reuters, our core sponsors, they have looked at the returns they get on their investments. These are not petrol head emotional people. They look at the return on the investment across the board and they say this is a fantastic source of investment.

Q. What sort of return do you think they are getting on that - 10 to 1, 15 to 1?

AP: I would think so, at least that. And if you look at the components of return - RBS has a presence here on the F1 track, it has a presence through the Williams team and a presence through its spokesman and ambassador Jackie Stewart. And I will give you another example. When I left Japan I flew from Narita Airport, Terminal 2, and in the middle of that was the RBS Williams F1 car - that car had Lenovo on it, it had Philips on it and all our other partners. That type of activity is worth around $250 million in our team alone. In other words, every other partner feeds off that - and they don't pay for it.

You cannot get that with any other form of advertising or sports sponsorship in the world, because if you are on the Chelsea shirt you are the only person there. And no one is interested in taking pictures around the side of a football stadium of someone else's logo. So the great thing about F1 is our partner's brands are embedded in the product, and the product is intrinsically what people are looking at - and that is where their eyes are focused. I think we have been able to demonstrate year in, year out that we can generate fantastic returns on investment, and an emotional commitment between the 600 million people who watch F1, and the products and services they see in this environment. I truly believe that F1 is the best platform for developing any global brand that is available.

Q. So why are the independents battling then?

AP: Well, going through the independents. The two Red Bull teams - I think having two teams, even for a billionaire, is a stretch. But that is what Dieter Mateschitz has decided to do. He has a privately owned company and he can afford to do it, and he and his partner have clearly decided this is a fabulous platform for their brand. They don't have any sponsors on either car, other than themselves, and that is their choice. I am not saying they haven't tried, but at the end of the day what they have got does not make a measureable difference so they have said, 'look, let's keep the impact to ourselves.' Four cars are promoting one drink, so you cannot say Dieter Mateschitz is struggling.

If you look at Vijay Mallya, he is a very ambitious man. He does not want to have his cars at the back of the grid. He has a number of Indian partners in there. That team has a long history of getting by on the sniff of an oily rag and doing a pretty good job with it. The problem is, if you want to play at the other end of the grid, what Vijay has discovered is that you need a hell of a lot more money. I don't think his partners want to invest that money, so he is a bit of a bind. But there is nothing unsustainable about what he could do.

Then you look at Williams, which I would argue is slightly unusual because we are a different position. We are not here to market Kingfisher or Red Bull or Mercedes-Benz or any other product. We are here to go racing - and there is no question that we are having a challenging time. But we have had a challenging time for ten years now. The best tonic in these times is to talk to Frank. He is so buoyant and so optimistic. And, let's face it, he has been through stuff that makes all this look like child's play.

Q. What is the mood at Williams heading into the future? Are you worried about the business model of F1, optimistic that cost cuts will help make things much better, or simply relaxed and confident with the way things are progressing?

AP: Only an idiot would be confident about anything today. I joined two years ago, and within a few days it was quite clear to me that we had to do something serious about costs. In January this year we all met in Paris, and Max said, 'look guys, we are going into a major challenging period for the car manufacturers with both sales and environmental issues. This is unsustainable and we need to do something about costs.' A number of us agreed strongly with that, and in fact I think everyone agreed actually.

But we have done nothing for nine months. And that is the biggest mistake we have made. We could have done things that could take effect in 2009 and we haven't. Now, at last, I think everybody understands that we have to do something. And that is a bit like when you face up to the fact you are an alcoholic, isn't it? Until you reach that point there is no cure.

Q. Are Williams in favour of standardised engines?

AP: We are not commenting on that, but Williams' view is that we have to cut costs as a sport. That view is shared by almost everybody else. The single biggest cost for an independent team of manufacturer is the engine, so we have to do something about it. When we froze the engine for five years it was a massive mistake, a massive mistake. We froze a very expensive engine, and the thinking at the time was that it was not a performance differentiator and therefore you could freeze it. Subsequently it turned out that maybe it was a performance differentiator, or it has become a performance differentiator, and therefore you cannot have a frozen engine.

All but one of the manufacturers has said that opening up an engine for a development war is not feasible, because they have not got the money or appetite to do it. So what are you going to do? If you cannot race for competition for the engine then you have to have an engine that is not a performance differentiator. What is the point in having an engine that is not a performance differentiator that costs an unfeasibly large amount of money? What is the point? It will be like spending 100 million Euros a year on tyres when we all have the same tyres. What is the point? Williams' view is we don't know what the right solution is, but clearly you have got to start with the engine.

Q. What are Williams' feelings on the way the F1 calendar is developing?

AP: We have had a tremendous run of growth in the calendar, and increasing promoter fees. And I think it is inevitable that a small number of races in the calendar are going to struggle - maybe because their local sources of funding, advertising or government haven't got the appetite. It may happen. Canada has fallen out because they cannot afford to pay. France has fallen out because they cannot afford to pay. The truth is that they could not afford to pay for a number of years.

What you have to ask yourselves is, will we be able to manage a situation where we can have a great calendar? Will we get back to the US? I am sure we will. I am sure this sport is still so attractive that we will find the right balance. We have to go back to the US as soon as possible.

I don't think having one or two fewer races in Europe matters, but having a significant presence in Europe is vital. Singapore was possibly one of the most exciting weekends in the history of F1, so Bernie's model clearly isn't bust, is it? He is more than capable of bring together a great event. Next year, when we finish the season in Abu Dhabi, it could be again an absolutely staggeringly exciting event. The world is changing, and we will go with that. We will have a race in India, and within the next few years we will be in Russia.

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