F1: The Political Future

[BtccLee]

Now, I do not know if people will see any value in such a thread as this and feel free to say if you consider it a pointless addition.

I realise there is a lot of individual discussions on F1 Politics, however I thought it may be a good idea for people to bring all their thoughts together on the effect these issues will have on the future of the sport.

I would quite like this to avoid the typical “It is rubbish and doomed etc etc etc” because frankly, whilst I appreciate people’s individual positions, it not constructive. I am looking at where people think we will be with CVC? Is Bernie going to be on his way out? Will the sport have new owners and perhaps who? Most critically, will this be good for the sport?

It may be interesting to look at it from the perspective of the near future, where will the sport be politically in a years’ time?


Fire Away!

[Casper]

My crystal ball has fog in it but I am sure of one thing and that is the future of BE. Even if he gets out of the German Poo he must be on the way out as there is no way that CVC will want him to be here one day and dead the next. They will want to manage the situation to benefit them and their greedy pockets.

[Mike Harte]

CVC's days are numbered already.

This is because when they originally purchased the group of companies that are, to all intents and purposes, Formula 1, they had to give a written undertaking (enforceable in a court of law) that they would sell all their interests in F1 by a certain date. This mandate was placed on CVC by it's own investors, and the sell-by date is within the next couple of years.

Putting aside the legal case going on in Germany as nobody has any idea what the final outcome of that will be, I must admit that Ecclestone has been of great benefit to CVC, and F1 has been one of the best investments that CVC has ever made.

My own opinion on the matter is that CVC will be "praying" that Ecclestone is acquitted in Germany, and that he remains alive until at least the time when they have to sell up. After that point, the problem will no longer be theirs.

[Casper]

I wonder if the fact that CVC are obliged to sell their holdings will in fact force them to get rid of BE. He is not flavour of the month in a lot of circles and if he is still in his present position it may inhibit the sale. It could go the other way of course and enhance the sale as he has done a good job for CVC. Has he done a good job for F1 as we the spectators see it? Not in my book but that is not what is important to CVC or is it? His continued presence and solid refusal to entertain any change in the media distribution of the races is costing the sport and CVC are not in it to lose money but to get the maximum they can at the time of sale. My crystal ball has frozen up.

[Moneyseeker]

Originally Posted by Casper

I wonder if the fact that CVC are obliged to sell their holdings will in fact force them to get rid of BE. He is not flavour of the month in a lot of circles and if he is still in his present position it may inhibit the sale. It could go the other way of course and enhance the sale as he has done a good job for CVC. Has he done a good job for F1 as we the spectators see it? Not in my book but that is not what is important to CVC or is it? His continued presence and solid refusal to entertain any change in the media distribution of the races is costing the sport and CVC are not in it to lose money but to get the maximum they can at the time of sale. My crystal ball has frozen up.

BE may be the buyer of course, if current rumours are correct.

[Oldtony]

CVC may be under obligation to sell, but there is no obligation as to whom they sell.
It might in fact be the same group under another name.
Welcome to ownership of F1 VCV!
The other point is that while Bernie may not be flavour of the month in some circles he does have friends in very moneyed places.
As someone to head up a group to buy F1 is there anyone else who knows better where all the bodies are buried?
Then again will the manufacturers decide to run their own show. You would imagine if that was the case that they would want a corporate entity created that would distribute as much back to the teams as possible.
That would alsop probably mean that FIAT would have to agree to a more equitable distribution so Ferrari could finish up in LP1.
In fact if the costs don't get managed, or the returns to teams improve, we could see all the manufacturers thinking LMP as being the best bang for buck proposition.
Meanwhile there is the other sort of politics,
Think Sochi, Bahrain etc. at one end of the problem, acceptability.
And then the cost of subsidies in tight economies, Spain, Belgium, etc.

[Mike Harte]

Oldtony, you have missed the most important part about CVC having to sell; it is their own investors (CVC's) who have demanded that their ownership of the F1 has to end by a certain date. Why insert that legally binding clause in the original purchase if they wanted to override it.

You may have also forgotten that they had previously set the wheels in motion for F1 to be sold by way of a public flotation on the Singapore Stock Exchange which was only stopped because the world's economy tanked at the same time.

My opinion is that CVC will attempt another flotation, or that Ecclestone (via the trusts that he set up for his family) will buy it back. Again, in my opinion, the manufacturers couldn't afford the potential asking price, although they may consider taking stakes in the public company so that they do have some control over how it all operates; please note, some control, not total.

As it has been said, under oath at the various recent court cases involving Ecclestone, CVC have the power to remove him from his position; in fact, it seems as they are the only ones who can. Yet despite the fact that he is, what 83 years old and has had all these legal problems, it would seem that CVC have made no effort to remove him, nor to put an understudy in place. Now, CVC are not stupid, nor the people who run it or invest in it, so one must assume that they know what they are doing.

[chillibowl]

so the investors signed a document saying that at a future date these investors would no longer be interested in investing in things that make money for them?

i think the point oldtony was making, or at least the way i took it, is that CVC may have to divest itself of F1 and its related companies (just F1 for short), but that does not mean that those who invest their money into CVC's various hedge funds wouldnt themselves still be interested in reinvesting in F1. either through a new fund created by CVC, through a new hedge fund manger, through investment vehicles they already control, or if there is agreement among all the investors that they simply tear up this letter of intent you speak of (10 years ago the letter may have seemed like a good idea but today tearing it up may be the better idea). all that would change is the name and the sport would still be stuck with owners only interested in pulling out as much money as possible.

so point is we have no idea who the investors are (heck for all we know BE could be the single largest investor in the CVC fund so if they oust BE he pulls his billion or so) or what their motives are...other then the assumption that investors want to make money from their investments and there is still a lot of money to be made in F1....so why wouldn't they reinvest in F1 either through a fund with a new name or via a flotation?

i cant say i ever recall reading that the flotation failed due to a global recession (which as i understand it happened before i ever heard of the floatation anyways).

from what i recall the flotation lacked momentum due to the Concorde Agreement not being finalized, teams wanting a much greater percentage if in fact F1 was valued at 10billion, legal troubles for BE on the horizon, lack of organizational structure to run the sport if/when BE sheds his mortal coil, and questions stemming from the validity of F1's 100 year long contract and whether or not a 10bil price tag force the FIA and an anti trust court to question the validity of a 100 commercial rights agreement/monopoly.

as far as i can tell those issues still exist so a private sale is the likely option imo.

anyways its all speculation based on imperfect information right?

[Mike Harte]

Hi chillibowl, here is just one link which states that the sale must be completed by 2018 (my memory failed me, I thought it was 2016): http://www.autoweek.com/article/20140304/f1/140309951 . There are a number of other sources, but in essence they all will say the same.

My memory is really letting me down, because I mislead you about why the IPO never took place; it was the Euro crisis in 2012 that caused the problem, but that was created by the meltdown of the world's economy anyway (I am really trying to squirm my way out here).

I am relying on memory here, but from what I can recall, CVC are basically a fund created by short term investors; all they are looking for is a substantial return on their investment in a relatively short period. And this is why they placed an end date to their investment in F1, even though it has been a good money-spinner for them.

And yes, the initial investors (not CVC) could quite easily re-invest through another medium at a later date. If one wants to wade through a lot smoke and mirrors, it would be fairly easy to identify the CVC investors. Ecclestone (and/or his trusts) may or may not have invested in the CVC, but he or the trusts do have a direct holding of about 8% (again from memory).

Another point is that the teams are the main beneficiary of the profits that are generated by brand F1. Between them, they now get about 64% of the net profit, and considering that they haven't actually invested in the brand, that's not too shabby. I know that you can say that if it wasn't for the teams, there would be no F1, but I am sure that there would be others willing to take their place in a re-configured championship.

And you may think that it is mere speculation, but I couldn't possibly comment on that.

[Oldtony]

Talking politics in the light of current events what is the likely situation with Sochi in a couple of months.
Will this be the Bernie deal that people opt out of leaving him high and dry?
Rather Bernie than me having to tell Moscow that F1 is not coming.

[Casper]

Originally Posted by Oldtony

Talking politics in the light of current events what is the likely situation with Sochi in a couple of months.
Will this be the Bernie deal that people opt out of leaving him high and dry?
Rather Bernie than me having to tell Moscow that F1 is not coming.

BE will be pedalling hard to make sure it happens but our political masters might have other ideas in the form of sanctions. I think anyone with any sympathy for those who have died in this terrible tragedy would want some demonstration of protest by any means possible. What a terrible waste of life for absolutely no gain on the aggressors part, words fail me.

[Articus]

I personally don't think F1 should race in Russia this year. I'm curious to see what the F1 teams think, and particularly the Mercedes AMG Petronas team. Petronas is a Malaysian company and that plane going down is Russia's fault.

[JacobP]

Originally Posted by Articus

Petronas is a Malaysian company and that plane going down is Russia's fault.

To play the devils advocate, I must ask, why did civilian airliners have to fly through a war zone? It's not like civilian aircraft hasn't been shot down over a war zone before. Recall Iran Air flight 655, shot down by Americans over tge Persian Gulf. Accidents can happen. **** can happen. I try to follow the conflict in the East Ukraine, and I personally lost the count of the number of claims a military airplane or helicopter was shot down there in the last couple of months. A dozen maybe? I personally think that there is no sufficient information to pin the blame on any party right now. The most damning evidence is pointing at the pro-Russian rebels, who are almost certainly supported and encouraged by Russian in many ways.

I do agree that there is enough controversy surrounding Russia's actions in East Ukraine relating specifically to MH-17 flight, that the GP can be canceled until a full investigation is completed. Can you imagine the PR disaster if later this year we find out that it turns out that the pro-Russian SAM system was manned either by Russians or the rebels who were trained by Russians? At this point, F1 should distance itself from such scandals. If the investigation concludes that Russians were not involved and no harm was done, then there is not reason F1 shouldn't visit Russia in 2015 or later.

[Casper]

Originally Posted by JacobP

To play the devils advocate, I must ask, why did civilian airliners have to fly through a war zone?

Perhaps because half the world is fighting someone else at one time or other. Get a map and plot all the conflicts going on at the moment and see what I mean.

[Tucky]

Originally Posted by JacobP

To play the devils advocate, I must ask, why did civilian airliners have to fly through a war zone? It's not like civilian aircraft hasn't been shot down over a war zone before.

Casper is right. With all the uprisings in the Middle East would you expect all aircraft to avoid that massive region? Also just to be clear there are a couple of points which aren't generally known to the public:

1. A no-fly zone was enacted over that part of Ukraine, however the no-fly zone only went up to 32,000 ft. At this height it is highly unlikely that the aircraft would be in danger of whatever's happening on the ground. Obviously in this case something did happen, but the chance of that happening was so small. Also an aircraft at 33,000 ft isn't exactly an easy target from the ground. that's the general cruising altitude for a long haul commercial flight.

2. The airliner's plot their own course, so it is their decision whether to fly over Ukraine or not. Airlines will try and take the route that is not only the fastest but also is the most cost-efficient in terms of fuel.

It's all about balancing the risk and reward. Because the aircraft got shot down everyone's jumping on the airline saying "why would you fly over Ukraine, that's just stupid" but if you've flown long distance, there's a high chance you've flown over somewhere that's in turmoil and everything's been fine.

If you want to know more or talk more about the actual flight I'd suggest going to the Parc Ferme General Forums as they've got a pretty active section on it right now


Going back to F1, how long do you reckon we'll have to wait if they make a statement? surely we'd have heard something by now, even if it's just a rumour?

[Casper]

Originally Posted by Tucky

Going back to F1, how long do you reckon we'll have to wait if they make a statement? surely we'd have heard something by now, even if it's just a rumour?

Bernie is trying to work out how to spin the story and convince everyone that the world will end if they don't go. He might also be waiting for the major governments to make some policy statements which could include trade sanctions etc. He won't want to start revving it up before then unless he comes out and just cancels it, hardly likely as his past record on this sort of thing shows. To come out now and talk it up and have government policy going in the opposite direction would not be a good look and CVC might not be impressed either.

[wnut]

Lauda - Formula 1 is at 5 to 12

http://www.grandprix.com/ns/ns28529.html

I think the problems are more fundamental than just media coverage, but the current management is not helping in this area.