MOTORSPORT: Bernie Ecclestone's American bungle

Friday motorsport reportJuly 13, 2007

By our calculation, Formula 1 supremo Ecclestone is approaching his 77th birthday.

Despite his apparent sense of immortality, some time in the next 25 years he'll probably die.

And, amid the tributes for his business wizardry, we can now reasonably anticipate that a prominent part of Ecclestone's legacy will be that he failed to get F1 to take hold in the United States -- the world's biggest car market -- when he had a golden opportunity.

For most of the 1990s F1 didn't have a race in the US, but towards the end of that decade Ecclestone forged a deal with the Indianapolis Motor Speedway that seemed like the perfect outcome for F1 -- to run a grand prix on a specially-created road course that included part of the famed Brickyard oval (or more accurately rectangle).

That deal married what is meant to be world's premier form of motor racing with the world's most iconic motorsport venue.

The first race under that marriage was held in the middle of the Sydney Olympics; the morning of the day that Cathy Freeman won the 400 metres gold.

More than 200,000 fans were at the Brickyard to see Michael Schumacher win and Rubens Barrichello make it a Ferrari one-two.

F1 was off and running in the US. Finally it looked as though it was going to work there.

Today the marriage between F1 and the Brickyard has effectively been annulled, although appearances are being made that they are parting as good friends.

Ecclestone and Indianapolis Motor Speedway president Tony George could not agree on financial terms for an ongoing deal.

Now let's forget the niceties.

Our assessment of this situation is that Ecclestone has squandered the chance to make F1 happen in the US through sheer greed; that he has walked away out of resentment that he was getting a much smaller fee for the race at Indianapolis than at other venues, and that he didn't like the fact that Tony George was not prepared to meet his demands.

Ecclestone is renowned for his insatiable hunger for making a quid, and in a sense all credit to him for the way in which he has done that so successfully for so long.

But, apart from his own appetite for money, we perceive that the US situation is exacerbated by his business, F1, now being 75 per cent owned by CVC, one of the private equity outfits so prominent in financial markets at the minute.

These companies have a simple method of operation -- they buy into businesses which they perceive they can wring a lot more profit out of almost instantly, thereby increasing the value of those businesses, and then sell them on for whopping profits.

It is that method of ramping up the profitability of businesses that we suspect is central to the failure of the Indianapolis deal.

In effect, CVC's presence in the F1 business could be pressuring even Ecclestone to squeeze greater profits out of the sport.

The simplest way for F1 to increase its profitability is to add more races paying astronomical sanction fees to the F1 calendar.

Already we know that Valencia and Singapore will join that calendar next year, with Abu Dhabi getting a GP the following year.

Another way to boost F1's profitability is to jack up the fee of any race paying below the norm -- as Indianapolis clearly has been -- or drop it in favor of one that will.

It is generally thought in the F1 community that Indianapolis has been paying US$10-12 million a year for a GP.

It was revealed recently in the Malaysian parliament that US$39 million was paid for this year's GP in Kuala Lumpur.

London's mayor, Ken Livingstone, suggested a few days ago that if his city had taken up the idea of an F1 GP on its streets he would have had to write Ecclestone a cheque for £20 million the first year. Our calculator tells us that's about A$47 million.

These Malaysian and British numbers are probably good clues to the benchmark fee for an F1 race these days, so it makes sense that Ecclestone not be happy having one of the promoters in the world championship getting his race for "only" US$10-12 million.

The Indianapolis marriage began with great optimism on both sides about working to promote F1 in the US, a market which had had a taste of it at various locations over the years but without any great impact.

Americans like oval racing because it produces close and exciting racing -- and they like racing with American drivers.

F1 doesn't cater very well or very often to the need, in that market, for close and exciting racing or American drivers.

As if F1 wasn't right back behind the eightball in the US within a few years of that illustrious restart in 2000, the shambles that was the 2005 US GP -- when only six cars raced (those on Bridgestone tyres, after the 14 on Michelin were withdrawn because of doubts they could safely complete the race) -- could have killed F1 in the States forever. In effect, it may have.

By this year the US GP crowd had dwindled to about 100,000 -- half what it was in 2000. Nor has F1 taken root on US television. The audience figures are abominable. Processional racing just doesn't grab Americans accustomed to entertainment.

Yet even before this year's event Ecclestone was making noises about how perhaps F1 didn't really need Indianapolis and America, and how it seemed the Brickyard was more intent on promoting its other events -- the Indianapolis 500 and the Brickyard 400 NASCAR race.

Perhaps that might just be, Mr Ecclestone, because those other events are a helluva lot bigger than your GP there. They have far more spectators, more history, more appeal -- and more future.

So too, probably, does the new MotoGP round that Indianapolis has just signed up for, to be held for the first time in September 2008. Ecclestone has made a career out of kidding the world that he has a product people and places can't live without.

That game has worked for decades because it's been easy to convince anyone thinking otherwise that he must be right because there is the appearance of a queue of venues lining up to snatch any GP that's unwanted.

While it won't make much of a dent in his financials, because he'll simply go somehwere else and sign up someone for his normal fee, Indianapolis -- and the US -- have effectively shown Ecclestone that not everyone needs his F1.

And, even though the marriage is -- in our estimation -- over, the Brickyard's Mr George is even being nice about it all.

He's saying it's a "great disappointment" that there won't be a US GP in 2008 and that his "sincere hope is that we will have an opportunity to bring it back in the not-too-distant future".

But the US-based RaceFax newsletter, which is among our favorite reading material, says today that "no one who understands the situation believes that was anything other than George being too polite to slam the door shut".

"You can take it to the bank that the departure of F1 from the largest market for most of the auto manufacturers who primarily fund the sport is as final as death," RaceFax says.

"The difference (in financial terms) between George and Ecclestone was more an ocean than a gulf, and neither was prepared to man the oars.

"Ecclestone told George what he wanted, and George could find no justification for it, and it seems evident that thereafter nothing took place which could be called a negotiation."

In other words, Bernie, you can get st….. with your F1 circus.

In recent months there has been a suggestion, probably another Ecclestone bargaining ploy to try to get Indianapolis to cough up more dollars, that Las Vegas was back in the frame for an F1 race.

Today Ecclestone has admitted that there won't be a GP in Vegas in a hurry. Certainly not next year, and to those who remember the previous events in a casino carpark, hopefully never.

"We didn't reach an agreement (with Indianapolis) ... Let's see if we miss America," Ecclestone says.

In the short-term financial sense, it -- or him and his empire, including his CVC investors -- won't. They'll mint money from elsewhere in what RaceFax irreverently jokes is becoming "the Third World Championship".

But that's not to say other F1 stakeholders are going to be happy -- especially the car manufacturers who are now so integral to it, and who for quite some time pursued a plan for an alternative world championship on their terms (a business plan they may yet dust off one day).

"We most definitely should have a race in the US, and maybe two or even more," Mercedes-Benz motorsport chief Norbert Haug says.

"For a world championship it is important to be in the US."

Indeed it is. Bernie Ecclestone had a great chance to make much of the deal he did with Tony George almost a decade ago.

Making F1 work in the US could have been the miraculous Ecclestone's crowning glory. Instead it will probably come to be seen as his biggest failure.

The FIA charges that between March and July the F1 championship-leading team had "unauthorised possession of documents and confidential information belonging to Ferrari".

Previously it had been thought that McLaren's senior designer, Mike Coughlan, received up to 780 pages of Ferrari files on two computer discs in April, so the FIA's mention of March adds a new dimension to the scandal.

Ferrari has implied, without specifically saying it, that McLaren's hot form in May could have been related to it having obtained some of its secrets.

The FIA says the information includes data that could have been "used to design, engineer, build, check, test, develop and/or run a 2007 Ferrari F1 car".

McLaren says it is "extremely disappointed" at being charged by the FIA.

"While McLaren wishes to continue its full co-operation with any investigation into this matter, it does wish to make it very clear that the documents and confidential information were only in the possession of one currently suspended employee on an unauthorised basis," it says.

"No element of it has been used in relation to McLaren's F1 cars."

One London bookmaker has suspended bets on the outcome of the F1 driver and constructor championships until the air cleared.

Setback for F1 on brand claim
Formula One Licensing has failed to secure exclusive rights to the 'F1' abbreviation in a case in London.

Trademark Registry official David Landau found the public would recognise F1 as a type of sport rather than a brand name.

Landau says the Formula One Group is the only organisation organising F1 races but that "does not mean that the public will perceive F1 as a trademark".

"It just means that currently it enjoys a monopoly on the races," Landau says.

"However, if private owners of F1 cars race them on a friendly basis is that not an F1 race?"

He rejected FOL's trademark application and supported Racing-Live's opposition to it.

Conner was fined US$1000 for actions detrimental to stock car racing, equipment that did not conform to NASCAR rules, and unapproved aerodynamic modification.

These problems were found on Ambrose's Ford Fusion before qualifying last weekend. Somehow mention of them escaped announcements circulated in Australia.

From memory, this is the second time this year Mr Conner has been in a bit of strife with NASCAR officialdom.

Unser, 45, has struck a plea deal in the case, under which charges including hit-and-run, failure to render aid in an accident and failure to report an accident will be dropped.

Unser will automatically lose his driver's licence for 90 days, be fined the maximum $1000, be required to attend a driving school and a victim-impact panel, and be required undergo alcohol abuse evaluation.

"He's a recovering alcoholic. He hasn't had a drop of alcohol since this happened," Unser's lawyer says.

"Little Al", son of four-time Indianapolis 500 winner Al Unser, won the Indy 500 in 1992 and 1994 as well as two CART (now Champ Car) series titles and two International Race of Champions titles.

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