The Weekly Grapevine

The Butterfly Effect

If the demise of Super Aguri does not ultimately go down as the most significant Formula One team closure in the 58-year-old history of the world championship, it will certainly rank right up there with the likes of Brabham, BRM, Cooper and Lotus - championship winners all - and the withdrawal from the sport of a legendary supplier such as Cosworth.

Given that over 120 teams have, for various reasons - including bankruptcy, achievement of marketing objectives, death of a team kingpin, and a myriad others - departed the scene over F1's life-time, and that Super Aguri failed to even see its third birthday, the statement illustrates precisely the level of turmoil the sport is presently experiencing.

Where Super Aguri's withdrawal differs from the examples given - and these are just the tip of a very long list - is that in all those instances Formula One had entry lists containing numbers well above danger point - generally accepted as being 20 cars per grid, regardless of category of racing.

Plus, there were a host of teams planning to come into the sport, either by upgrading their F3/F2/F3000 operations, or by going the whole nine yards and investing in new cars and factories as, for example, the Austro-Canadian oil billionaire Walter Wolf, alloy wheel magnate Gunther Schmidt or slot machine king Walter Brun did.

Anthony Davidson and Takuma Sato in Super Aguri's final start, in the Spanish Grand Prix © LAT

An analysis of entry lists for the 1988, 1998 and 2008 seasons perfectly illustrates the point. The earlier year saw 18 operations fielding upwards of 30 cars; ten years later the number of teams was down by seven teams to 11 and 22 cars. This year the sport is struggling to field ten teams and 20 cars!

More to the point, of the 1988 and 1998 lists only Ferrari, McLaren and Williams have survived in their original form - the rest have variously folded, withdrawn or been bought out, usually by a motor manufacturer, who subsequently altered the entire character of the outfit.

Of course, some of 1988's entrants were not worthy of the term, whilst two teams - Toyota and Aguri - joined after 1998, but for every incomer between 1998 and the present, two teams have departed ...

Now, rewind exactly two years and a week: on 29 April 2006 the FIA outlined its vision of grids 2008-style. Twelve teams (selected from 21 applicants) of two cars each would be competing, said the governing body, some of which - possibly even half that number - would be running with customer chassis.

These would effectively be 'B' teams operating under the auspices of a mother ship, for which read some or other motor manufacturer.

Now go back just two months, to the line-up facing the lights in Melbourne. Just 22 cars made the trip down under after Prodrive (the favoured '12th' team on the grid) withdrew. Worryingly, two of these were doubtful starters until just a day before the first practise session of 2008.

Since then, of course, those two cars - (illegally?) running customer chassis - have been withdrawn from the championship after the team got itself into financial straits totalling between $80m and $120m depending upon whom one spoke to, whilst another team (Scuderia Toro Rosso), saliently also equipped with a bought-in design, admitted during the second race of the season that at least 50 percent of its shares were up for sale ...

As exclusively disclosed in this column back in March, STR had previously found a potential purchaser in A1GP - which wished to operate it is a marketing vehicle for its own series by sourcing Ferrari cars and kit from the Italian team and competing as its 'B' outfit.

Tony Teixeira © LAT

That came to nought when a legal threat mounted by Williams over the eligibility of customer cars and a subsequent settlement meant all teams would have to design and manufacture their own chassis from 2010 onwards.

All these issues have been previously been discussed in these pages, and there is thus no further need to expand upon them, save to stress that this requirement was effectively the last straw for Aguri - as any prospective saviour of the team was immediately faced with a major technical and facility challenge - and could well have the same effect on STR.

However, 'last straw' implies a raft of other reasons for Super Aguri's sad demise - and forget not that with every team closure hundreds of dependents, headed by folk who sufficiently believed in the team to hang in until all was lost, are condemned to uncertain futures - and so there are.

These fall under two headings: Commercial and Administrative.

Commercial

That the sub-prime crisis has knocked F1's ability to attract sponsors, partners and investors is a given. After all, how many multinationals with the sort of budgets required to quench F1's voracious thirst for money would enter into long (or even short) term deals with F1 teams at present?

McLaren team principal Ron Dennis once stated that, due to the long-term nature of F1's deals, teams feel the effects of bull and bear markets later than other economic sectors. Simply out, sponsors are forced by the nature of their commitments to remain in the sport after downturns have begun, but enter well after upturns commence.

Thus, major teams with established sponsor portfolios are able to ride out the crisis for a while, whilst strugglers such as Aguri (and STR, which has no heavyweight funding if Red Bull's contributions are removed from the bottom line) are unable to attract incoming funding.

But, as Dennis pointed out, this situation usually prevails well after the financial markets consign their problems to the skip, with business then picking up again. However, does it not stand to reason that any multi-billion dollar business should have a sustainable business model, one not directly at the mercy of stock market crashes?

Of greater concern though is F1's financial model, a model which sees 50 percent of the sport's billion dollar-plus annual revenues head straight out and into the loan accounts of a private equity house, with the balance being split (and far from evenly at that) between ten teams.

Bernie Ecclestone © LAT

Can it be purely coincidental that every time Bernie Ecclestone's family features towards the sharp end of the Sunday Times Rich List yet another team goes out of business?

Equally, can it be coincidental that the very year that saw a massive drop in actual and wannabe teams (1998) was the first year in which the sport's commercial rights' revenues accrued not to the teams, but a private party?

Finally, as highlighted in this column a fortnight ago, the full revenues from 2006/7 have yet to be paid to the teams. Whilst STR and the debris of Aguri are embroiled in arbitration brought by Force India over their use of customer cars, and thus the value of their individual pay-outs are riding on the matter, the fact remains that in a capital-intensive environment in which cash-flow is king, such delays have hardly helped Aguri stave off creditors.

Administrative

The fact that no current Concorde Agreement exists - nor is likely to, certainly not in the accepted sense - means the sport faces uncertainty over the exact obligations of the parties making up the triangle which governs the sport: the sports controlling body, the FIA at the pinnacle; and the rights' holder and collective of teams at each base corner respectively.

Without clearly defined obligations prospective purchasers of teams or any future entrants are unlikely to commit the sums required to make the grid, let alone those needed fight for points and podiums. Without their commitment, sponsors are unlikely to commit ...

Equally, the recent scandals - 'Spygate' and 'Open' gate - have hardly endeared the sport to incumbents of the world's boardrooms, and, regardless of eventual outcome, have collectively tainted the sport, and will continue doing so for an appreciable period to come.

Conclusion

The only asset of any value Aguri, which competed with customer cars and chassis operated out of rented facilities reached by leased trucks, had to sell to prospective buyers was, arguably, its two-car grid slot.

However, when Prodrive failed to take up its entry (over customer cars, remember), the prospective value of Aguri's right to entry deceased exponentially, and is unlikely to appreciate unless 24-car grids once again grace the sport. Thus, in real terms, exactly what did Aguri offer its prospects?

Gerhard Berger and Franz Tost © LAT

In essence STR's situation is not dissimilar. Yes, the team has facilities in Faenza, Italy, and, yes, it once built its own chassis, but, given the time elapsed since the former Minardi operation wholly designed and built a new car (five years), a wholesale revamp of virtually all facilities is likely to be required.

So, again, the question must be asked- just where does the value in STR lie?

In the final analysis, as per the media release put out earlier this week by Honda, which is owed a large portion of Aguri's $100m or so debt, the team's demise 'was inevitable'.

To a degree Honda could be blamed for aiding and abetting team founder Aguri Suzuki in setting up the operation simply to provide a drive for Japanese hero Takuma Sato. Honda can equally be blamed for effectively closing down the operation by refusing to extend further credit.

By the same token, Super Aguri can be blamed for failing to acquire sufficient sponsorship to mount a sustainable operation during its 28 trading months, but the roots of the team's demise lie elsewhere, way out of the ambit of either Honda or Aguri - namely within the commercial and administrative arrangements which govern the sport.

Ultimately the buck has to stop somewhere, and that ain't at the steps of Super Aguri's rented building or, if it comes to that, at Scuderia Toro Rosso's door.