Where to in the auto world's green future?

The Australian Grand Prix begins the Formula One season this weekend and with it, brings an end to one of the most tumultuous off-seasons in the sport's history.

Honda's decision to quit the series at the end of last year was the catalyst for the sport to begin making drastic changes.

And it's not just Formula One that has endured a difficult period of late, with motor racing all around the world feeling the effects of the Global Financial Crisis (GFC).

This is the moment many people inside motorsport have dreaded for years. For almost a decade now categories around the world and in Australia have been trying to cut the cost of competition.

Yet almost every category around the world has spiralled out of financial control as money poured in while times were good. But times aren't good any more.

The GFC has hit and it's hit the auto industry hard. The American car industry has felt it first and the hardest with sales down a whopping three million units in 2008, as high fuel prices slowed sales and then the credit crunch sent them into freefall. But the problems weren't contained in the United States -- the rest of the world suffered too.

As manufacturers and dealers have felt the pain from the dropping sales attention has turned to saving money. And the high-cost world of motorsport was one of the first targets for cutbacks.

Formula One, V8 Supercar, World Rally Championship and NASCAR are just some of the categories feeling the pinch.

And this is only the beginning, with analysts divided over just how long this downturn will last, and some predicting several years before sales return to levels seen in 2008. Regardless of how long it continues, there is no doubt that the automotive landscape has changed forever.

Who would have imaged even a year ago that America's Big Three would have to front the US Government pleading for money to stay afloat? How much longer will local production of Commodore and Falcon remain viable if large car sales continue to drop? Will many brands continue with high-performance cars in the face of high fuel prices and 'green' concerns?

Fuel economy and emissions reductions are now the top priority for most manufacturers, along with building smaller, cheaper cars. Not that those things weren't important before, but now efficiency is the priority ahead of everything else.

EVOLUTION OR...
How motor racing fits into this new world order will be intriguing to watch. It would be easy to dismiss it as an excess of the auto industry and one that is expendable. But that would not only be unfair to the millions of fans around the world, it would also miss out on an important opportunity for the auto industry.

Instead, motor racing needs to evolve and become a vital part of future auto industry success. Throughout its history motorsport has pushed new technology to the limits in the name of both development and promotion. Potentially it now needs to play a greater role than ever before.

At the top of the sport Formula One is working overtime to make sure it doesn't get caught up in the path of cutbacks and lay-offs caused by the GFC. Last year the teams united to form the Formula One Teams Association (FOTA) and have been working to come up with a plan to improve the sport as well as make it cheaper.

After conducting extensive market research FOTA released its plan for improve the technical sporting and commercial areas to make it cheaper and more spectator friendly. But perhaps the best – and most important – factor to come out of the GFC and the formation of FOTA is the unity the teams now share.

After years of division, and in some cases bitter squabbles, all F1 teams are united by the common goal of securing the future of the sport in the face of the challenges it currently faces.

The FIA, the governing body of motor racing worldwide, headed by its controversial president Max Mosley, is pushing ahead with its own plans to cut costs. Mosley has announced to implement a budget cap of 30 million pounds beginning next season. To get around European Union laws Mosley has made it clear the cap is voluntary but those who do sign up will get more technical freedoms than those who continue to spend more.

"Everything except the motor home (if the team has one) and any fine(s) imposed by the FIA," Mosley said, explain what is covered under the cap.

"All expenditure will be included, even the salaries of the drivers and team principal.

"If the team is profitable, it can pay a dividend to its shareholders, who may well include a chief engineer, team principal or even a driver. But we would make sure the team was genuinely making enough profit to cover the dividend."

Mosley not only wants to attract new teams to the grid but independent teams like Williams, the new Brawn GP outfit and the planned USGPE. Those teams are free of the control of manufacturers and their boards, and give F1 a potentially more stable footing should the car industry continue to decline.

If it were to be successfully implemented next season (with the state of F1 politics it's nearly impossible to predict next week, let alone next year!) it would be arguably the most significant change to the structure of the sport since its inception. It would have an effect on every aspect of how teams went about racing from designing, building, testing and racing.

AMERICAN FLYERS
As noted above, Formula One isn't the only category having to adapt because of the GFC and its impact on the auto industry. And some are fully utilising the opportunity the crisis has presented.

The American IRL IndyCar Series is a prime example of how to make the most of a bad situation. After its decade-long 'civil war' with Champ Car racing the once-again unified series is preparing to implement new rules in 2011.

Given that the series starts with a blank sheet, IRL president Tony George has engaged the manufacturers to help draft the new engine regulations. The hope is by allowing the manufacturers to have significant input into the rules will entice them to commit to the category.

"This process was designed to showcase the league's position as an innovator and bring relevance to the forefront for the manufacturers," says Terry Angstadt, president of the commercial division for the Indy Racing League.

"What we have found in the ensuing months during the economic downturn is that the IndyCar Series has really hit on the relevance point with the manufacturers and quite possibly helped the motorsports industry usher in a new era of responsible cost containment, performance standard and engine development."

And so far the plan has worked. Honda, Audi, Volkswagen, Porsche and Fiat have all been heavily involved and at least three (Audi, Honda and Fiat, under the Alfa Romeo brand) are reportedly set to be on the grid when the new rules take effect.

In an effort to be relevant the current trend of small-capacity turbocharged engines, the new regulations are likely to be for 2.0-litre turbocharged four-cylinder engines using direct-injection technology and running on ethanol.

"IndyCar's process of soliciting direct and unfiltered input from the automotive manufacturers has been a unique and refreshing approach," says Audi's head of race and special engines, Ulrich Baretzky.

"This is a responsible and realistic approach to all of motorsports and presents an opportunity to integrate it directly with consumer relevance."

Sportscar racing is another category that is actually growing despite the GFC. This year has seen both Acura (Honda's US market-focussed luxury arm) and Aston Martin join the top-level prototype class. They join the already established Audi and Peugeot operations that are using the technical freedoms of sportscar racing to showcase turbodiesel technology.

Audi become the first manufacturer to win major motor races (including the 24 Hours of Le Mans and the Sebring 12 Hour) with its R10 TDI and the company has leveraged it heavily with its road car TDI range.

New rules due to come into play in 2011 also focus on downsizing with a limit of 3.4-litre V8 naturally aspirated, 2.0-litre turbocharged and 3.7-litre turbodiesel engines and have been greeted favourably.

LOCAL RULES
While that is all good news for those in the Northern Hemisphere what does the GFC mean to Australia? So far, the impact has been minor. V8 Supercars has managed to attract new sponsors and signed up new events in Townsville and Sydney before the economy changed.

But looking further ahead it is obvious something is going to have to give. The recent Melbourne International Motor Show (MIMS) showcased the future of Australian motoring production and it is looking increasingly less likely to include the Commodores and Falcons upon which our homegrown V8 Supercars are based.

Holden's star attraction at MIMS wasn't a flashy concept like the Coupe 60 or Efijy, but a production-ready Cruze – a compact sedan that will be built locally alongside the Commodore starting next year.

Over on the Ford display it was the tiny Fiesta ECOnetic that was designed to be the focal point. These are two cars that couldn't be further from the V8-powered Commodores and Falcons that represent the brand on the racetracks.

But recently installed Ford Australia President Marin Burela believes motor racing can still be used to help the brands.

"I think as long as there is a customer for motorsport there will always be motorsport," Burela says.

"Right now there is nothing that tells us there won't be desirability from customers for that moving forward. We're very proud and happy with our association we have in all our motorsport whether it be rallying or V8s touring car racing. It's all a question of supply and demand; when there is a demand there, there is also supply.

"Just talking to the various teams and the leadership group of V8 Supercar racing they are very optimistic, and if they are optimistic, I'm optimistic."

But with the future of Falcon and Commodore production facing increasing uncertainty as both companies invest in new production lines for small cars (Holden with the Cruze in 2010 and Ford with the Focus in 2011), there comes the inevitable question of just what shape V8 Supercars will take in the next decade.

Holden managing director Mark Reuss is a motor racing supporter having spent a stint developing Cadillac's range of high performance V-Series cars as well is its racing program before heading to Australia. He has made no secret of the fact that although he likes V8 Supercars, he'd like to see more manufacturers involved and has opened the door to exploring smaller cars like the Cruze for the track.

"It [the Cruze] would make a great addition [to the sport], along with other small cars in Australia. I think we need diversification and I think we need products [racing] that people can relate to," he told television show 'In Pitlane' recently.

But that's not a view necessarily shared by the man in charge of Holden's leading racing operation, Craig Wilson. He heads the company that runs the Holden Racing Team and Walkinshaw Racing.

Wilson believes that even though Ford and Holden are leaning towards smaller cars that doesn't mean V8 Supercar racing should too.

"That's what they are announcing today, but that's not necessarily what people are buying," Wilson says.

"How successful some of the products that are being discussed will be, time will tell. I'm not saying its right or wrong but there have been some knee-jerk reactions to things going on at the moment. A year ago we were all paranoid about fuel economy with the price of oil had gone. Now a lot of that has reduced in terms of, not importance, but in terms of car sales it's not being an issue.

"If you look at car sales they are still selling as many V8s today. I think on a percentage basis V8s to V6 there were more V8s sold in December than there was a year ago.

"Formulas will evolve I don't see the fact that people are launching small cars being critical to the formula we're talking about here, which is V8s."

OPPORTUNITIES NOT
Looking beyond V8 Supercars there is actually a completely different problem for local brands, especially the successful importers like Mazda and Nissan; where can they compete? V8 Supercars is the exclusive domain of Ford and Holden and it would be extremely costly for a new brand to get involved even if the rules allowed it.

The Australian Rally Championship is on life support. Production car racing has very little following. Sportscar racing is limited to the high-end brands. Tarmac rallying has appeal but plenty of downsides too...

That's not to suggest the categories current in place don't serve a purpose by giving privateer racers a chance to compete. But for manufacturers to invest in a motorsport program a category needs a good television package as well as a good calendar. At the moment they only series that has those things is V8 Supercars.

Nissan is the perfect example of how the lack of successful categories restricts manufacturer involvement in Australia. The Japanese company is launching two new performance cars this year; GT-R and 370Z.

The company wanted to enter the new GT-R in this year's Bathurst 12 Hour production car race but was unable to because organizers have put a $125,000 price limit on eligible cars. The cap is designed to limit the amount of high-end exotics that could potentially dominate the race. So, Nissan instead decided to invest in the V8 Supercar safety car program to put the GT-R back at the front of the touring car field.

Marketing boss Ross Booth was formerly Ford Racing manager and knows the value of racing to a company. He sees motorsport as playing an important role but only under the right circumstances.

"I reckon personally and from Nissan's point-of-view there is a value in motorsport," Booth says.

"You've got to get the right category, you've got to get the right team and you've got to leverage it properly. Putting millions or billions of dollars into motorsport isn't going to continue. Personally I've never seen how F1 assisted much from a marketing perspective; it might help with technologies in making cars.

"As long as you can get a category where you can get the name out there and you can leverage your coverage and get some newspaper coverage it's worthwhile. But to do a one-make series is very expensive."

With the GT-R/V8 Supercar deal sorted Nissan is now investigating what can be done to get the 370Z on the track locally. But the challenge is finding the right way to use what money the company has as wisely as possible.

"That's an opportunity for us maybe a Bathurst 12 Hour [and] tarmac rally type program," Booth says.

"That's probably the direction we'll look at with that car compared to GT-R. One of the problems we have is return on investment; it's bloody hard to call. But we'll have a look. We'd like to do something I think the Australian public would like us to do something."

Mazda showed there is still a place for motor racing for Australian brands with its plan to take three cars to this year's Targa Tasmania, including a locally developed RX-8 SP. It may seem like a small step but Mazda's decision to spend money on racing despite the state of the economy isa major boost for the sport.

The Global Financial Crisis won't last forever and the car industry will bounce back. The part that motor racing will play in the recovery and the longer term affect on competition-based spending is still up for discussion.