Ferrari faces $100m fine over threat to split from Formula One

The Telegraph ^ | 6/20/2009 | Christian Sylt and Caroline Reid

[bruinbirdman]

The Ferrari car company faces a $100m (£60.4m) fine from the Fédération Internationale de l’Automobile (FIA), the governing body of Formula One, over its threats to set up a rival racing series.

In the build-up to today’s British Grand Prix at Silverstone, Ferrari and seven of the sport’s biggest names announced that they would quit F1 in 2010 due to a dispute over new regulations including a budget cap.

If a rival series gets off the ground then the value of Formula One Administration (FOA), F1’s rights-holder which is majority owned by private equity firm CVC, could hit the wall.

The split has been fuelled by the expiry in 2007 of the Concorde Agreement, the contract that commits teams to race in F1. However, Ferrari is exposed to legal action for damages because of a separate contract it signed with the FIA which, according to the governing body, ties it to F1 until 2012.

In a letter sent to Ferrari on 8th June the FIA said: “Ferrari... has already breached its agreement with the FIA by threatening to withdraw from the Championship. The instability that this has caused continues to give rise to damage.” On Friday it announced legal proceedings were under way.

Ferrari’s response is that it has “no contractual obligation” to remain in F1. The car company says that it has an agreement with FOA to extend the Concorde, and to stay in F1 until the end of 2012 but this is conditional on the FIA accepting the extension which it claims it has not done.

CVC has a lot to lose from a split. It got $2.1bn in debt from Royal Bank of Scotland to buy FOA in 2006 and its annual interest payments now come to $260m. The sport’s running costs are around $300m annually so

[Frantzie]

Well some Europeans will argue Bernie’s iron fist brought order out of chaos. Some may say Bernie & Max treated Ferrari with kid gloves and showed them favoritism.

I think Ferrari and the other teams have decided that they are paying Bernie too much to keep order. Bernie always used all sorts of “tactics” to make sure this day would never come. Never write him off.

His ex-wife is going after half his wealth. The Daily Mail recently showed hime buying TV dinners at a local grocery store even though he lived in arguably the most expensive home in London he sold 2 years ago to Mr. Mittal - I think.

[GOPsterinMA]

Good stuff! I take it you’re a big F1 fan?!?

[Trajan88]

F1 (or its replacement) needs to race again in the U.S.

Whatever it takes ... this action by Ferrari and Red Bull and on and on is a good thing.

[Frantzie]

I don’t like it as much anymore. I do respect the incredible engineering and the drivers skills.

[zeestephen]

sig writes:

“CVC paid $2,100,000,000 to buy what was essentially a three year deal for the rights to Formula One.....This seems to be incredibly bad business on the part of CVC.”

Not only that, the interest rate on CVC’s loan is 12%.

When they borrowed the money in 2006, the Prime Rate was 6%.

I don't know what their strategy was in 2006, but that was definitely high risk finance.

[rvoitier]

Thanks RO.

I won't be complaining about the cost of my speeding tickets anymore. :)

[rvoitier]

This seems to be incredibly bad business on the part of CVC.

He's bucking for Geithner's job. Now, all the ceo has to do is not pay his taxes and he'll be a prime candidate!

[Frantzie]

Schumi’s official pay was probably less. Much of it was paid for by Ferrari’s biggest sponsor Marlboro and probably Shell Oil. He was very good and a very hard worker. Some people believed he had some moral failings of trying to game the rules. As he got older he was eclipsed by the incredble talents of Alonso and Raikonenen.

The young 20 year old German Sebastian Vettel is being called Baby Schumi because he may be better than Schumacher. Vettel also has a fantastic personality where everyone likes him. The kid is incredible and on the pole at the British GP.

[zeestephen]

Sebastian Vettel, Formula One racer.

20 years old.

Not old enough to RENT a car in the United States.

[Frantzie]

The kid started in F1 at 17 or so. He looks way too young. I think he just turned 20. All the people in F1 are shocked at how mature he is as a driver, controlled, unflappable and smart.

Super kid - lights up the room when he smiles in the post race or qualifying interviews. Always very polite where some F1 drivers appear to be a bit arrogant. He is very likeable. A case where a good guy is finishing first. A good role model in sports where role models are often lacking.

[zeestephen]

Interesting.

I followed F-1 very closely in the 60’s and 70’s, but not much lately.

Truth be told, I had never heard of this youngster.

[bobby.223]

dittos to that. ‘65-73 was when I REALLY followed it although F1 coverage was very thin (to nonexistent really, except for the auto mags and a few other places) in America. we COULD always count on the yearly Grand Prix broadcast from Monte Carlo on ABC’s Wide World of Sports though!

[spetznaz]

McLaren has a multi-racial driver in Lewis Hamilton who won the drivers championship (WC). Sort of an Obama. His mum is white and dad is from the islands and is black. The kid is pretty nice but the father has a chip on his shoulder and is a troublemaker. Getting to the top often involves a lot of politics. Lewis in 2007 was teamed with Fernando Alonso from Spain. Alonso won the WC at the youngest age ever and won it twice. He moved to McLaren in 2007. When you are WC you expected to be treated like the #1 driver on the team. Well Lewis old man was trying to stitch up Alonso with the team. Making sure Lewis was treated favorably. There was an incident at the Hungarian GP where they really tried to screw over Alonso. Alonso was not having any of it. Alonso knew McLaren had the Ferrari data and blew the whistle and semi-blackmailed the major owner Ron Dennis of McLaren-Mercedes. It became an ugly mess and they were fined. Alonso left the team. Also caused a major rift because Alonso is an incredible national hero in Spain. Hamilton wins WC in 2008. In 2009, Hamilton and his chief mechanic try to get Jarno Trulli of Toyota disqualified in an early race this year for passing under the yellow. Turns out they lied, got caught in the lie and Trulli was innocent. Once again another major scandal for McLaren due to “Team Hamilton” father and son. Ron Dennis has to quit the company he is a major owner in and the mechanic gets fired. They could have gotten banned from F1 for the year. Mercedes must be tearing their hair out because this kid and his father are arguably wrecking the team. The team never had a scandal in 30 to 40 years and has had 2 major scandals because of the Hamiltons in 2007 then 2009. The team budgets in F1 are over $300 million.

I also follow FR, and while I agree that Hamilton's father has been 'interesting' (to be honest, many sports fathers are absolute pain), I doubt that Mercedes is tearing their hair out regarding Hamilton. It's like saying the PGA is tearing its hair out regarding Tiger.

I do agree that the second case you mentioned (the false accusation against Trulli) was not good, but you cannot blame the Hamiltons for the first incident (McLaren having sensitive Ferrari data, and Alonso blowing the whistle because his apparently very gentle ego was hurt). The fault there lies SOLELY with McLaren ...blaming Hamilton (father, son or both) for that is quite off. The people responsible for that are in Mclaren (and to be honest with you Alonso even has more skin in it than HAmilton, since he tried to use it as a blackmailing move).

[Elle Bee]

I don't remember the eclipse

Michael was more than arguably the greatest driver in the history of the sport

As for gaming the system ... I thought the stall on track to eliminate a rivals last hot lap was well within the rules and genius ... putting in a left handed pitcher isn't considered gaming the rules

F1 is like a chess game, tires, fuel, pit stops are all part of the dynamic and the strategy

The rules constantly change and the engineers constantly innovate

Watching Michael run in the rain or when told he needed to pick up time before an upcoming pit stop was always an incredible joy

When the stewards penalized Michael for letting the car stall and knocking out his rival's hot lap he was sent to the back of the grid from pole

He finished second that day in a field of 20

I've never seen that before or since

[Elle Bee]

FOA = Bernie Eccelstone
FIA = Max Mosley (Oswald Mosely’s son)

I for one am long over the Bernie and Max show

Two weeks ago in Turkey they were lucky to get 30,000 out and yesterday they had 75,000 at Silverstone just for Qualifying ... though I'm sure Jackie Stewart can be a handful, the Max and Bernie show are going to make today the last F1 race at Silverstone ... a screaming track and a driver's track

I wish Ferrari would take a walk on the Bernie and Max show

Ferrari is F1 and FI will be whatever series in which Ferrari races

The constant dumbing down of the rules by Bernie and Max (I think of it as F1 Affirmative Action) have not enhanced the sport and don't even get me started on the greenie weenie rule changes

The sport was more innovative (and that is the purpose) when it was less restrictive

Formula 1 still means the fastest and most sophisticated but the Bernie and Max push toward making all the cars equal has taken much of the uniqueness and innovation away

Ferrari should run where they like .... they are and will always be F1 ... they're just to classy to break up the sport ... but I'm sick of Bernie and Max

.... and I still think Michael is the greatest driver

.

[bobby.223]

which race was MS penalized, get sent to the back, and then finish second?

[Elle Bee]

Don't hold me to it but I think it was his last year and I think the race was Monaco (which makes passing 18 cars all the more extraordinary) and I think the driver he boxed out of his last hot lap was Alonzo

There was a controversy over Michael skidding in one turn and stalling the car just as the final moments of qualifying ticked down

Michael didn't crash but the stalled Ferrari on the narrow racetrack brought out the yellow flags and since Michael had just set down a P1 time ... there was a claim that he deliberately skidded and stalled to bring out the yellow and kill Fernando's last shot at his Pole

Granted I always root for the Red team, but if the rules say you can't run hot on Yellow ... dems da rules

If Michael did deliberately stall ... well nothing in the rules say you can't play that gambit ... and if it was deliberate it was brilliant

The stewards said Michael was such a driver that the likely hood of this stall being happenstance was not high, so overnight they sent him to the back of the grid

He drove like a man who was not happy with that ruling the next day ... I've never seen a drive anything like that day ... and if it was at Monaco all the more amazing

.

[Elle Bee]

My Yellow Shumi

[Elle Bee]

My bad ... he only clawed his way back to 5th ... but on the streets of Monaco .... I dare say no one has ever, or will ever have a drive like that

Monaco is a tough track upon which to pass even one car

Monaco 2006

Schumacher was stripped of pole position at the Monaco Grand Prix and started the race at the back of the grid. This was due to him stopping his car and blocking part of the circuit while Alonso was on his qualifying lap; he still managed to work his way up to 5th place on the notoriously cramped Monaco circuit.

Michael clearly locked up his wheels going into the turn and may well have credibly stalled to save the car from hitting the narrow walls just a day before the race

Regardless the drive was brilliant and, deliberate or not the stall was cutting edge genius

.

[Joe Boucher]

I hate restricter plate racing.
It isn’t racing, it’s crowd control.

Where in Fla ya at sten?