Sergio Perez, Force India 2018

What Perez’s shock decision tells us about Force India’s uncertain future

RacingLines

Posted on

| Written by

The revelation that Sergio Perez was involved in putting his own Force India team into administration, which RaceFans exclusively revealed on Friday, shocked the Formula 1 paddock.

Force India co-owner Vijay Mallya faces losing control of his own team following the actions of, among others, the driver he signed five years ago, who has since delivered five of the team’s six podium finishes.

But what – and more importantly who – was really behind this extraordinary turn of events? @DieterRencken has the inside story.

Vijay Mallya knew it was over when he took a call on Thursday evening: Force India’s final lifeline, a loan from Lawrence Stroll, the Canadian billionaire (and father of Williams F1 driver Lance), against 51 per cent of the team’s asset base had been withdrawn after the fashion mogul had been advised that any such dealings could be in breach of Indian government restrictions on Mallya’s assets.

There was still an exceedingly slim chance that an injection from Rich Energy, a wannabe upmarket drink, could appease the most pressing creditors, but after months of media noise but little or now no cans on supermarket shelves, Rich Energy lacked credibility (and, possibly, the cash to flash immediately).

For the rest, the embattled Mallya ran out of options, and knew it: apart from an internal debt pile of an estimated £150m (mathematically split 42.5/42.5/15 amongst Mallya, the equally beleaguered Sahara Group and Dutch Mol family, all shareholders in the holding company Orange India Holdings), the team was variously indebted in the amount of around £25m, and recently survived on FOM advances.

The approximate debt pile comprised the following: Mercedes (£10m for power unit hardware), sponsor BWT (£5.6m), £4.1m to a company linked to driver Sergio Perez, and around £2m to Formtech, a Bavarian composites components supplier to the motorsport industry. Besides, there are sundry creditors, including HMRC, the British revenue service, which started winding up proceedings over unpaid employee contributions.

BWT’s alleged debt is difficult to quantify: Apparently, the sponsorship is in the form of a “loan” paid upfront, reducing pro rate with each passing race. Thus, according to a witness statement presented to the court by BWT’s lawyer, Stevie Loughrey, £5.6m is owing – but logically, Force India could discharge its obligations were it to continue racing.

The Austrian company has long been linked to equity in the team and has close ties to Mercedes Motorsport, so the plot thickens…

Lawrence Stroll, 2018
Lawrence Stroll was in Force India rescue talks
While all this flies in the face of Mallya’s comments that Force India was not disastrously burdened by debt – companies regularly owe shareholders monies, and, in F1, internal sponsorship is oft dressed up as loans or vice versa, while debt of 30 per cent of annual budget is no big shake in F1 – Force India’s problem was not so much the amount if debt, but that Mallya and Co were unable to (or refused) to inject fresh funds.

Formtech is believed to have initiated winding-up proceedings last Wednesday (Matter: CR-2018-004624 Force India Formula One Team Limited), but this was (allegedly) delayed to 22 August, basically providing breathing space for Mallya to rustle up £2m, or agree on a repayment schedule with creditors. Winding-up orders are, on the face of it, absolutely final – and thus handed down only as a last resort by courts.

Here the fate of the operation formerly racing as Lotus F1 Team is illuminating: between July 2015 and the team’s acquisition by Renault almost six months later, the Witney-based operation faced a string of winding-up petitions brought by various parties, all of which were staved off until the sale was finalised. Mallya hoped for similar, and the Stroll loan was fundamental to the team’s ongoing survival under Orange India.

Advert | Become a RaceFans supporter and go ad-free

As outlined during the interview, Mallya’s goal was to see the team through the next two years, when budgets caps and a more equitable, purely performance-based revenue structure would not only make the team more attractive to a buyer, investor or sponsor, but perfectly play to the team’s strengths and structure. As he put it, “The team faces another two years of pain…”

Still, Force India’s performance was compromised by Mallya’s inability to attract sponsorship: no major brands would touch a team controlled by a high profile entrepreneur subject to protracted extradition proceedings to face billion-dollar fraud charges – whether these eventually stick (or not).

Toto Wolff, Mercedes, Mer, Albert Park, 2018
Mercedes are among those owed money by Force India
Equally, Sahara’s various legal tussles meant owner Subrata Roy was unable to step into the breach, while the Mols are minority and silent shareholders, and thus not directly responsible for the vast portion of Force India’s debts. Hence survival on FOM advances – and the pressing need to build a new 2019 car, with all its related aero challenges…

Seemingly things were proceeding too slowly for Stroll Snr: having built Tommy Hilfiger, Ralph Lauren, Michael Kors and others into global brands, he has concentrated on Lance’s career. As is the way in F1 today, any driver with funding is likely to find a more competitive seat, and Lance has plenty of backing due to shrewd deals by Lawrence to off-set the cost of a drive. Think Bombardier, think JCB, think Canada Life.

The problem is Williams hit a downer it’s unlikely to recover from soon, and time is of the essence in F1 – not only on-track. Stroll ran his finger down F1’s entry list: Mercedes, Ferrari, Red Bull Racing, Toro Rosso and Renault are currently out of reach to Lance, while Haas does its own thing at its own pace – leaving Williams (see above), McLaren (who wishes to go up against Fernando Alonso, though?), and Force India.

On paper Force India provided the ideal next step for Lance: fourth in the last two seasons and thus ahead of Williams (powered by the same Mercedes power unit) both times. Regularly F1’s best ‘bang for buck’ team, Force India’s only impediments this year have been financial and Mallya’s dogged refusal to sell the team for less than the value of shareholder receivable.

Force India’s predicament also presents Mercedes with issues: It holds long-term contracts for the supply of complete “back-ends” – engines, associated hybrid components, transmissions, and electronics/hydraulics – yet gets tarnished by association, all while both its customer teams are slipping down the grid. Where once six of the top ten cars were invariably Mercedes powered, only the team’s own entries made Q3.

Go ad-free for just £1 per month

>> Find out more and sign up

Worse, apart from the financial implications, a wound-up Force India holds adverse political implications for Mercedes: with their negotiations with Liberty over F1’s post-2020 landscape currently at a delicate stage, Mercedes and Ferrari each need a full hand of cards, namely three teams each to present a force of six (of ten) teams under their combined “control”. Force India’s closure would reduce that to 50/50.

Then, Renault, aware of the advantages of strength in numbers – and having lost Toro Rosso and Red Bull Racing to Honda for the foreseeable future, and gained only McLaren – is said to be scouting about for a second customer team. With Sauber committed to Alfa Romeo (and thus Ferrari technology) and Haas having a “listed parts” deal with Maranello, that leaves two prospects: Force India and Williams.

Otmar Szafnauer, Sergio Perez, Force India, 2018
Was Szafnauer one of those who urged Perez to act?
Time for some (pro)action. By Mercedes team boss Toto Wolff’s own admission “(Force India COO) Otmar (Szafnauer) walks the dog and comes for breakfast in Oxford, [at] in my place,” and it is inconceivable that they spoke only about the birds, bees and dog breeds; equally, Wolff, an Austrian steeped in the ways of business in the tight-knit country, is said to have brokered the BWT deal. Draw your own conclusions…

Enter Sergio Perez, or, more precisely, Brockstone Limited, in the sorry saga: In his own words, made in direct response to a straight question from myself, he was asked by “a couple of members of the team to go ahead and save the team and protect the 400 people that was working there”, adding “Therefore I was asked to basically save the team, to pull the trigger and put the team into administration.” Sounds heroic, doesn’t it?2

However, why, though a Certificate of Urgency before the court if the team had a breather to 22nd August? If he really is that concerned about the welfare of team members, will he donate the four million quid to the salary pot?

Then, read that quotation again, then question who “the couple of team members” could be, and why they would urge him to do so; above all, why he would do so. Hint: They’re unlikely to be truckies, cleaners, or gardeners. Then, ask why Perez would put his reputation on the line so publicly without guarantees of racing for the team in 2019; after all, why go through all this only to see his seat go to a competitor?

Once it was clear Rich didn’t have the immediate wherewithal to save Force India, the Silverstone-based team was placed in administration as per the urgent application brought by Brockstone, with FRP Advisory LLP, previously administrators to Marussia and Manor, taking charge of the team’s assets on Friday evening.

On Saturday afternoon Wolff told the media: “Now that process has been kicked off by the administrator there are many potential buyers with great interest, with deep pockets, with an understanding of what kind of spending levels are needed in order to perform in Formula 1.” Ask yourself how he knew that on a Saturday, within 18 hours of the administration order being handed down.

Advert | Become a RaceFans supporter and go ad-free

Yet, on Sunday when I referred to his Oxford breakfasts and asked whether everything was going to plan, he told me: “You are having always this perspective of somebody plotting in the background.” No, Toto, not always – but I do believe something to be a duck when it walks like a duck and quacks like a duck…

Whatever, what happens next? The priority for FRP and F1 is for Force India to be saved as a going concern, by salvaging as much of the team’s value as possible while settling with internal creditors. Thereafter shareholder receivables come into play.

Lance Stroll, Williams, Red Bull Ring, 2018
Lance Stroll could find his way into a Force India
In the interim we await news on the way forward: Will Stroll make a bid, as angel investor, shareholder or outright proprietor; will Szafnauer, Mercedes and BWT be involved directly or peripherally? Will Lance be accommodated in a pink car, faciliatated by loans made by Lawrence?

Or will the team fall into foreign hands, either Russian or American. If the latter, will it be the consortium assembled by Michael Andretti or an investment company keen to invest in F1? In total there are allegedly five interested parties, and only time (and FRP) will tell.

Unlike many of the 50-odd casualties F1 has suffered over the years, Force India is too good to die, and ended in this predicament not though sporting ineptitude or a loss of focus, but through circumstances playing out tens of thousands of miles removed from the team’s Silverstone base, which were then compounded by Mallya’s refusal to sell, even in the face of fair offers. He firmly believed if he held out until 2021 all would be good.

The tragedy is that even without Mallya’s legal battles Force India was doomed to fail, battered and beaten by a structure devised by F1’s previous commercial owners CVC Capital Partners, one designed to give independent teams absolutely no chance of survival, then gradually force them into the hands of the sport’s majors, Ferrari and Mercedes – who between them aim to “control” six teams, with two owned by Red Bull.

Only Renault and McLaren operate outside of what could arguably be deemed to be a cartel, with all others being somehow reliant on one of the three majors, who, crucially, stand to share bonuses of $250m (£190m) between them this year. That amounts to a billion quid paid to the three top teams since the structure was introduced in 2013, and is paid to them simply for turning up, before any performance-related monies!

Nicholas Latifi, Force India, Hungaroring
Despite an uncertain future, Force India is preparing for 2019
Any wonder they alone have won races since the payment structure was introduced, and invariably locked out the top six places, barring the unexpected?

Extrapolate those bonuses over the full 2013-20 (inclusive) period, and F1’s total money “pot” – amount disbursed in performance payments – would have benefitted to the tune of £1,6bn. On average over the years Force India qualified for 10 per cent of that pot, or £160m – roughly its current pile of debt, including shareholder receivables.

Consider the fate of independents under CVC’s payment structure, in turn inherited by Liberty, and excluded from fat bonuses paid to the top three are – or were in the case of defunct teams – with their fates in brackets:

McLaren – paid bonus ±40 percent of that paid to top three teams
Caterham – administration, then wound up
Marussia/Manor – administration twice, change of ownership and wound up
Lotus – staved off three winding-up attempts, then sold to Renault
Williams – paid flat bonus of £8m on heritage basis, clearly hit hard times
Force India – in administration
Toro Rosso – owned by Red Bull
Sauber – changed ownership after being unable to meet obligations
Haas – incorporated 2015, operates to unique business model

Painful reading, that, and made all the worse by a comment made by Wolff on Sunday: “We are actually one of the creditors, one of the suppliers that has helped the team over the last god knows how many years in competing.”

Technically true, but of little consolation to 400 employees and their families who now face a summer (break) of discontent.

Go ad-free for just £1 per month

>> Find out more and sign up

Follow Dieter on Twitter: @RacingLines

RacingLines

Browse all RacingLines columns

Author information

Dieter Rencken
Dieter Rencken has held full FIA Formula 1 media accreditation since 2000, during which period he has reported from over 300 grands prix, plus...

Got a potential story, tip or enquiry? Find out more about RaceFans and contact us here.

61 comments on “What Perez’s shock decision tells us about Force India’s uncertain future”

  1. Nice article, Dieter, although it makes for depressing reading. Purely as an F1 team (i.e. setting aside opinions about Mallya/etc. aside), FI is probably among the last teams I want to see squeezed out. I do hope that any angel investor or saviour who comes into play retains the essence & spirit of the team.

      1. +1
        What’s most depressing to me is that McLaren and Williams (and Renault) were blocking potential sales so that FI wouldnt get its income for 2018. It’s the kind of petty greed that I had hoped would die now that Bernie was gone. But its even more disheartening to see it coming from independent constructors like McLaren and Williams.

        1. Who gets money extra from historical purpose makes it evil just because FI did well those two try to destroy the team.

        2. @umartajuddin, what has been suggested is that Renault, Williams and McLaren are raising objections to Force India continuing to receive the same entry rights as before – entering into administration means they have technically forfeited their historical entry rights, and therefore their rights to any prize money accrued in the past, and will therefore depend on the other teams agreeing to a waiver to allow them to keep those funds.

          It does, however, seem to be a consequence of some of the concerns that some of the other teams have raised about the growth in power of the largest teams. It sounds as if those three teams are concerned about the prospect of a new buyer of Force India turning them into a satellite team that is similar to how Haas operates with Ferrari, which would then threaten to push those three teams even further down the WCC rankings.

          To some extent, it sounds as if it is a more complex situation than just greed – it sounds more like the fear that they might find themselves being squeezed to the point where their own futures are no longer viable. The prospect of having a grid with three large teams that then have a fleet of multiple satellite teams that depend upon, and do the bidding of, the parent team, is one that deeply troubles them, and the possibility that it could happen to Force India seems to be the tipping point for them.

          Now, it’s worth noting that, right now, there is no clear indication that Force India would become a satellite team of Mercedes – nobody seems to have suggested that option is on the cards. However, it is just the possibility that it could happen is one that seems to have prompted this action, suggesting that this is a warning shot to the FIA and FOM that they want to see a greater separation between the parent teams and the smaller teams that are dependent upon them to ensure that genuine privateers, and even smaller manufacturer teams like Renault, can still survive in F1.

  2. Stroll Snr: having built Tommy Hilfiger, Ralph Lauren, Michael Kors and others into global brands,

    Well, TIL

  3. Excellent and most revealing, @dieterrencken. Shows what a mess F1 is in; only three teams financially viable and few race promoters actually able to make money after paying the hosting fees.

  4. Don’t forget Ron Dennis with his consortium of Chinese investors! Now is their chance!

    1. I wish that would happen. Ron Dennis’ own F1 team – RDF1. I’m pretty sure it would be quicker than McLaren straight away. That would really burn Zak up.

      1. considering that they already are faster than McL that wouldn’t be the biggest of achievements

      2. I wish that would happen. Ron Dennis’ own F1 team – RDF1

        @todfod instead of “RDF1” Project 4 would be much more appropriate and awesome.

        Maybe instead of 4 he can use the number of companies who are part of the consortium, but something along those lines.

        …And maybe VAG “TAG” engines again!

      3. @todfod, I am not sure that it would, as it could be pointed out that a number of the problems that McLaren have now stem from decisions made under Ron Dennis’s management.

        For example, I believe that Newey has suggested that it was Ron Dennis who introduced the “matrix management” structure that has been under so much criticism recently, suggesting that Ron introduced it mainly to spite Newey by reducing his importance, and that of more senior designers, with the effect of consolidating more power in Ron’s hands instead.

        Judging from the complaints of former staff at McLaren, it sounds as if Ron’s more recent period in charge might have also resulted in increased infighting within the company that helped created the current “toxic atmosphere” that has now come to light, but seems to have been festering under the surface for quite a few years now.

        Some former employees have suggested that, towards the end of Ron’s most recent period in charge, the employee turnover rate at the McLaren Group of their junior to mid level technical staff was running at more than 20% per year. Now, it has to be said that it is hard to verify those claims and that there is no clear evidence whether things were that bad at the racing division as well – but, if things were even half as bad as some have suggested, that sort of employee turnover over a three or four year period must have badly damaged the team.

        Now, it is not to say that all of the ills of the team can be thrown at Ron, as there clearly are issues that have continued and worsened under the current management as well. However, it is to suggest that Ron is not without his faults and that some of his actions could be said to have helped put McLaren into their current position, such that it is debatable whether he really is that well suited to then take on a team like Force India now.

  5. Only Renault and McLaren operate outside of what could arguably be deemed to be a cartel, with all others being somehow reliant on one of the three majors, who, crucially, stand to share bonuses of $250m (£190m) between them this year. That amounts to a billion quid paid to the three top teams since the structure was introduced in 2013, and is paid to them simply for turning up, before any performance-related monies!

    This is shameful fabrication. Please stop lying to the readers.

    The $100 million CCB prize money is completely based on performance (race wins over the previous four seasons) and Mercedes’ bonus for consecutive championships is obviously also performance based.

    Only the Ferrari bonus and potential bonuses which teams have negotiated with FOM (and are not paid from of the prize money) are indeed paid for “turning up”. Still apart from the Ferrari payout which is documented, we don’t know exactly how much bonus the other teams negotiated. If any.

    1. @patrickl – please read my message to you under the prize money report, and adhere to it.

      1. @dieterrencken Please have the decency to at least pretend to “investigate” how wrong you are on these figures.

        ESPN, Christian Sylt and Joe Saward would be good sources to start with.

        1. Bernie's Mushroom Generator
          1st August 2018, 16:30

          @patrickl Mr Rencken is a long standing, well established and very highly respected F1 journalist. Signing someone of his calibre to this website was a monumental coup on Keith’s part. While I often find myself concurring with the points you make, on this occasion you’re out of order. Rather than accusing a man of such standing of dishonesty, with zero evidence, perhaps you should examine your preconceptions and consider whether you were misinformed. Especially when among the sources on whom you apparently rely are a clickbait emporium and a little monkey who sits on Bernie’s shoulder repeating everything he says.

          1. @ Bernie’s Mushroom Generator, I have been trying to get Dieter to understand what he’s doing wrong with these F1 figures for weeks now. I was reasonable at first but he’s simply ignoring whatever evidence I provide and pedantically puts me away as “ignorant” and “misleading the readers” (when clearly he is the one falling foul of that).

            Meanwhile he keeps pushing his agenda of grossly overestimating F1 bonuses and for instance saying how crazy unfair it is that McLaren still gets a CCB bonus when in fact they haven’t had one since 2015.

            So yes, you find me on the annoyed tail-end of it all. Besides since he’s been told he’s wrong by several people he must know by know he’s got it wrong, so I’m calling malicious intent on this one too.

            The sources I rely on are Christian Sylt and the prospectus for floating F1. There are a clickbait emporium and a little monkey?

            That prospectus is an official F1 document. Detailing every financial arrangement. Not sure if that is the clickbait or little monkey, but yes I hold that information a in a lot higher esteem than someone who’s figures make no sense at all. By his own admission.

            If anything Dieter’s constant agenda pushing and false information would count as clickbait. Look at the people who click and are baited in replying in sheer indignation over such utter unfairness. When in fact the numbers are very much wrong and the new Liberty prize money scheme is hardly different at all for the smaller teams (all they do is pocket some of the big team bonuses themselves).

            Christian Sylt gets corroboration on some of his information from Ecclestone yes. How on earth is that a bad thing? For instance that “domination” bonus is already detailed in the FOM annual revenue documents and then Ecclestone explains how it got there. Yet Dieter claims none of it exists. So you still you take Dieter’s word over all that?

          2. Bernie's Munchkin Generator
            1st August 2018, 18:02

            @patrickl you’ve just admitted that your primary source is in Bernie’s pocket, and therefore has an axe to grind, whereas Mr Rencken has none. Ask your other source for his opinion of Mr Sylt.

            The prospectus you quote is 1: exacty that: prospective; and 2: five years out of date.

            The only person pushing an agenda here is you. You might want to google “conspiratorial ideation”.

            I take nobody’s word for anything. You claim to have posted evidence, but you’ve posted none. A second-hand report from someone already known to be biased, by your own admission, is not evidence.

          3. @patrickl Just checked out Sylt’s Formula Money twitter account and 3 entries down, as I have pointed out to you on Dieter’s prize money article conversation, the following…

            “Just doing some research for my upcoming Force India feature and this gem of a

          4. Oops…”headline from @racefansdotnet caught my eye. You can always bank on Dieter to be on the money…” He is referring to Dieter’s July 26th article on Force India and Perez.

            Ya just like Sylt, who uses Dieter’s articles for research, I trust Dieter too. Perhaps you should send your unfounded rhetoric about Dieter to Sylt and see what he says. You trust him obviously so I hope when he straightens you out you’ll apologize to Dieter.

          5. @robbie Yeah hilarious. I saw that when it went up. Was actually wondering if I should ask him to actually fact check that article remark on bonuses.

            Rather funny that in fact Dieter’s numbers are so far off from what Sylt posts and Sylt already corrected those numbers in 2015. Ah well. Professional sucking up I guess.

          6. @robbie Sylt already corrected Dieter on his incorrect numbers in 2015 so I don’t have to ask him to do that again.

            BTW, There also is Joe Saward doing the same exercise, but with pictures. Perhaps that is easier to follow:
            https://joesaward.wordpress.com/2017/11/18/how-f1-payments-work/

          7. The information that is sorely lacking in this article is that Perez’ actions most likely will have cost Force India their prize money. Making it more likely for them to go under.

          8. @patrickl Blah blah blah, you do know this is 2018 now right? Save your text…I’m with Dieter and Keith.

          9. @patrickl that is only when they are bankrupt, not under administration. At least that wasn’t the case with Manor/Marussia when they were under administration and sold.

            When bankrupt a team loses all rights to prize money and even the entry as an F1 team.

          10. @patrickl, as I have noted in the other thread about prize money payments, the problem is that the sources that you cite are not always consistent with one another when it comes to the payments of some of the larger teams, with one source sometimes contradicting the other or even seeming to contradict themselves at times.

            In particular, the payments which go to Ferrari seem to be causing a fairly noticeable discrepancy. It is worth noting that, whilst you suggest that Dieter has overcalculated the amount going to the largest teams, Sylt and Saward have presented figures which suggest Ferrari were being paid even more than Dieter has suggested.

            In November last year, Sylt published an article in the Independent that suggested Ferrari was paid £160 million in 2017, whereas Dieter’s figures would put it at about £137 million (working backwards from his figure of £147 million for this year and the fact that he puts that as being about £10 million more than 2017) – so, if anything, Sylt seems to suggest that Ferrari’s payments are even more disproportionate than Dieter suggests. https://www.independent.co.uk/sport/motor-racing/formula1/ferrari-formula-1-f1-exit-leave-liberty-media-proposal-rules-a8060521.html

            Meanwhile, if you were to go by the figures that Saward posted in his article, which was to claim Ferrari was paid $218 million, his figures are not only substantially higher than your estimates in the prize money thread (where your figures would put Ferrari’s payments closer to $188 million, or about $30 million lower), they are possibly even fractionally higher than the figures which Dieter and Sylt have suggested (I believe Saward’s figure works out to about £165 million).

            In that same article, Sylt implies that Mercedes were, by contrast, paid around £120 million in 2017. If that is also correct, that figure corresponds reasonably well with the figures which Dieter suggested for Mercedes (back calculating from the 2018 figures would put it at about £129-130 million – a bit higher, certainly, but still arguably within the range that might be expected from a rough estimate of exchange rates).

            The problem there is that, based on the exchange rate between the USD and GBP that year, Joe Saward’s figures would be suggesting that Mercedes should have been receiving a payment closer to £145 million – so he is suggesting that payments to Mercedes were far higher (as much as £25 million higher) than either Dieter or Sylt have suggested.

            Which one, therefore, is providing the right figures? Saward and Sylt might present figures that are in closer agreement when dealing with Ferrari, but then Sylt’s figures for Mercedes in that 2017 article are in much better agreement with Dieter and suggest Saward is overestimating the payments.

            We’re in a situation where those other sources aren’t necessarily always presenting a consistent picture – sometimes they contradict Dieter, sometimes they appear to support Dieter and sometimes they contradict each other or even themselves (for example, if you have done your calculations in the other thread correctly, you seem to be suggesting that Sylt has both overestimated payments to Ferrari and underestimated payments to Mercedes in that 2017 article when you use the percentage breakdown from his earlier articles).

            I hope that I am coming across as being reasonable with my arguments – I don’t want to dismiss your argument completely out of hand, but at the moment there seems to be inconsistencies in your sources that makes me feel that perhaps your judgement is based on sources that may be flawed themselves.

          11. @silfen Well I saw some buzz about them perhaps losing their prize money, but could have just been a misunderstanding yes.

          12. @ anon, Christian Sylt uses the same figures I posted.

            I simply left out the extra bonuses (including CCB) since these are not part of the prize money anyway.

            There are two things going wrong
            1) Dieter doesn’t understand how the CCB fund works and because of that he just fills in some bogus bonus amounts going by data from 2014 instead of actual data and then acts surprised about the weird numbers.
            2) He (and others) exaggerate the effect the new Liberty prize money structure changes will give.

            It seems only the actual prize money (coming from half of the F1 revenue) will actually be distributed slightly differently. That’s the column 1, 2 (and in theory 3 payments) plus the Ferrari bonus.

            While Dieter pretends that all the bonus money will be distributed among all the teams. When it’s much more realistic that Liberty will simply keep that money. Just like FOM did before Ecclestone started bribing the teams to do what he wanted them to do.

          13. @patrickl, currently, it does not look like the figures which Sylt is using are the same as the ones you are suggesting – there is still a mismatch there.

            If we take the figure that you suggested was the actual prize money paid to Mercedes – which you suggested would be about $191 million, or about £145 million – then the figures you are suggesting are about £25 million higher than the figures which Sylt suggested in his article (£120 million). Sylt seems to suggest in his article that the payment Mercedes got was their total payment for the year, so that should include factors like the CCB – therefore, there does still seem to me to be a problem with reconciling your figures with his.

            I still think that there is something not quite right here, as there still seems to be an issue with either your calculations indicating higher payments to Mercedes than there should be, or Sylt is underestimating payments to Mercedes.

          14. You are comparing Sylt’s 2016 amounts (still featuring Manor) with the amounts I calculated for 2018. That means different bonuses and different prize money fund amounts. He also rounds to the nearest ten million. Plus we have no clue as to what exchange rate he used (2016? 2017?).

            So those figures are never going to be exactly the same no.

            He also doesn’t mention the “domination” bonus, which was new for Mercedes that season and it seems like he forgot to add that one for Mercedes.

            If I calculate the 2016 prize money distribution I get $190 million for Ferrari and $144 million for Mercedes (excluding domination bonus). If $190 million is supposed to be £160 million, then $144 equals £121 million. Indeed close to £40 million lower.

            Manor would receive $52 million, which would convert to £43 million which rounds to £40 million.

            Mercedes would have received the “domination” bonus since they won 2014 and 2015 back to back with a huge amount of wins (well over 22 or 25). So yes Sylt seems to be wrong on that one bonus amount. Mercedes would have gotten $22 million extra for a total of about $166 million (£140 million)

  6. Michael (@freelittlebirds)
    1st August 2018, 13:41

    I really don’t know much about the financials of the sport but I don’t think the sport is sustainable for smaller to medium teams as this article points out. There are 3 factors, I’d like to talk about:

    1. Merchandising is not easily accessible and pretty expensive. I’m not sure I’d like to pay $500-$1,000 to buy a couple of t-shirts for me, my wife, and my kids. Volume is really the key. I would own a Williams, Haas, McLaren, Mercedes, Red Bull, Ferrari t-shirt if they were reasonably priced and so would my wife. Recently we went to a store with F1 merchandise and the prices were so high that we walked out with nothing and F1 lost a ton of money that day.

    Why hasn’t Liberty Media made a deal with Under Armor or Nike on behalf of all the teams? Why can’t I buy an Alonso T-Shirt for $30-$35? We would have spent thousands of dollars on clothing over the years…

    2. Attendance to GP is expensive and difficult. From what I’ve heard, attending a GP is about as expensive as a week at Disney World at a pretty good resort with the full bells and whistles. It’s bad enough I have to travel to Texas or Montreal but at least make it a little more accessible. I haven’t watched a F1 race live but I’ve watched soccer games live and my TV is almost up there with being in a stadium.

    3. TV coverage is expensive (in some countries) and the quality is not there (especially since we lost the 3 amigos). Even in the US, I have to upgrade to the most expensive package offered by Verizon to watch all the races and qualifying – it’s not a major expense ($150/yr but it’s the principle that is stopping me – like everyone else, I hate being forced to do something because someone decided that I should). I’ve read horror stories here about how most folks in Europe have to pay a fortune to watch F1 in their countries.

    The problem is not finding more money from investors – the problem with F1 is identifying the ways to make the money and make the sport accessible to more folks. How is F1 advertising in the US??? I don’t see any commercials anywhere to let people know about the upcoming GP – are they supposed to check the calendar like the folks here do???

    We represent 1% of the fans and some of you guys are in the 0.01%;-)

    1. In the Bernie era F1 was aimed only at people who could afford a Rolex and if you couldn’t afford one then your opinion and presence were irrelevant.
      Liberty thought they were buying a cash-cow but have since realised that they were fooled by the Emperors new clothes and desperately need extra revenue streams, hence the scramble for OTT streaming and other froth ventures.
      Liberty should be focusing on organic growth by helping existing fans convert their children into new fans by the sheer entertainment value of close racing amongst multiple teams and drivers.
      Instead they are assuming the existing fans will always be there while they engage in a mad dash for new markets and new venues.

      1. Michael (@freelittlebirds)
        2nd August 2018, 2:28

        @ceevee Is the plan for the OTT replace the ESPN coverage in the US and Sky in Europe?

        I think that will pretty much destroy F1 unless they have a genius at Liberty who can work out a deal to include it with Amazon Prime or Netflix.

  7. this is really interesting, particularly the different vested interested and the murky identities of all the stakeholders. it seems highly incongruous that perez has any real involvement in these proceedings (and if he does, it is an absurd position for a driver to be in). however, this article feels very rushed – not so much in the facts and detail, but there are many errors, which are very distracting and makes it hard to read.

  8. Given Mallys’s constant financial trickery, I’m very surprised that niether the Indian or EU govt has not just siezed all his assets. The team deserve far for than they are getting, and would be a shame if they wind up like Caterham. My guess is Stroll Sr. will wind up buying a major percentage at a discount and that’s where Veruca, er, Lance, will race for the next few years. Then Stroll Sr. will sell the team for a huge profit, because he actually knows how these things work.

  9. I’ll forever hold a grudge towards Force India for the petty reason that they’re no longer Jordan Grand Prix. However, I’d like nothing more than to see this resolved successfully.

    IF Lance Stroll buys his way into a race seat for next year, I think they should add a “D” at the end of “Force”. To be honest, I’d probably like that anyway as he doesn’t deserve a Williams seat.

    1. It’s not like anyone forced Jordan to sell the team.

  10. I’ve always been a fan of Force India. True garagistas punching way above their weight time after time with limited resources. I’ve also always felt that they were a cash injection away from being serious contenders, possibly heading the mid-field queue & snatching the not-so-odd podium or even the odd race win. If that cash injection comes conditional with the younger Stroll as lead driver, however (which he would be… it’d basically be his team) then my enthusiasm for this team will follow whichever departing driver out the door, sadly. Lance hasn’t shown me anything that suggests he’s hiding any performance, & his current level is sorely lacking.

    1. Right on so many levels.

  11. “Therefore I was asked to basically save the team, to pull the trigger and put the team into administration.” Sounds heroic, doesn’t it?2

    However, why, though a Certificate of Urgency before the court if the team had a breather to 22nd August? If he really is that concerned about the welfare of team members, will he donate the four million quid to the salary pot?

    Is this really necessary? Do you really need to include this kind of comment to feel good about your article?

    1. Sounds heroic, doesn’t it?2
      will he donate the four million quid to the salary pot?

      The above were supposed to be in bold inside the quote block.

    2. Blatantly ridiculous indeed! It’s fine that RaceFans/F1Fanatic do not like Perez at all, widely demonstrated throughout plenty of articles, but speculating on the motive about taking that decision and not other, like donating his salary, it’s way beyond any boundary journalism would allow…

    3. That sentence also got my attention @dusty, a bit unnecessary. What more those the guy need to do? Isn’t enough the number of sponsors that he brings to that car. His performances have come short? No! Plus it is a company connected with Sergio Perez, not Sergio Perez himself. And even so, if it was his salary he has worked for it.

      Was a completely altruistic act from Perez? Most likely not, but still pointing out those 4M against him is a bit weak if you ask me

  12. It all seems like a bit of an unfortunate situation. Perez pulling the trigger and whatever Mercedes interests are behind the scene I think are ultimately secondary to the fact that Mallya made it hard for himself to do business thanks to his previous business failures and related legal matters.

    Hopefully the team finds a buyer although as was pointed out FRP don’t have a great track record in this regard. Wouldn’t surprise me to sadly see the team go the way of the previous two they were administering.

    As a side note, is it possible to push through that 3 car rule as an emergency rather than hit 18 cars next year? Or too late for that kind of talk?

  13. @skipgamer I think ultimately F1 needs to disappear in order to be rebuilt from scratch on much cleaner/healthier grounds, Liberty will lose money yes, but there will be lessons learned and hopefully the next series will be better, we will lose Ferrari, so be it at the end of they it’s an engine with four wheels running.
    what we want to see is a show based on the pinnacle of Motorsport, with these dumbing down rules we are going backward anyway.

    1. Yes. The $8.5 billion capital structure of Liberty Media, which is nothing more than the legacy of Bernie and CVC, needs to be eliminated as a financial burden on the sport. And this can only happen by the forced bankruptcy of Liberty Media. And this can only happen by the implosion of the sport, presumably by two or three key teams abandoning the counterproductive business model forced on the sport as a result of the capital structure burden.

      1. It can’t go forever, as much as I love the sport I would like to see a reset, each year we hear the same stories that teams are about to collapse, we can’t enjoy the sport when are reminded each time that people are going to lose their jobs simply because of injustices and greed when everyone can eat equally from the same cake.

    2. @abdelilah, I have been wishing for this every time the “Concorde” has come up for renewal, the problem is that Bernie’s $multiBillion poison pill means that for at least 1 year (likely more) there would be no series, and therefore no income for the teams, only the manufacturers could survive or start again when contracts were finally in place, but who would pay the millions for an unknown motorsport series?

  14. @dusty i have to say I also found that bit unnecessary…

  15. I’m not particularly fond of Mallya, but he had kept the team going for a relatively long period, going by recent F1 trends. The problem I have with this administration thing is, only the administrators live it even if they have to sell the concern for just enough to pay their fees.
    As desperate as FI’s situation was or is, I believe they could still have kept going.
    So I believe a potential buyer has whispered in Perez’s ears and promised he will retain his seat.
    Who wouldn’t want a bargain sale.

    1. Or he knew he would probably keep his seat but this way FI could get some cash injection and advance in the midfield.

      Instead of going backwards as they have been and with Mallya at the helm likely to continue as he loses his assests and freedom to the Indian banks

      Or maybe Merc offered him Lewis’ seat, with their fingers firmly crossed of course.

  16. Peppermint-Lemon (@)
    1st August 2018, 23:27

    How about Liberty pay the deft off, at the point an investor (new owner) comes in and matches that value with their own funds…

    How about Daimler? Just rebadge the PU as a Daimler-Benz. They could be like Haas is to Ferrari in terms of car component sharing, and relationship wise could be like Torro Rosso is to Red Bull.

  17. Smells like Bernie.

  18. @freelittlebirds Well, Amazon Prime users will have access to F1TV Pro (if available in your country) for free later this year

    1. Michael (@freelittlebirds)
      2nd August 2018, 13:52

      @ofitus21 really? that would make sense in the US market too and it would broaden viewership – plus people wouldn’t have to check the calendar for races which is fine for fans but not that friendly for normal people.

      You also wouldn’t have to go channel hunting either which is happening with ESPN and also happened with NBC when they moved the live races from NBC Sports to NBC or bumped the practices or qualifying down to CNBC.

  19. Michael (@freelittlebirds)
    2nd August 2018, 13:54

    By the way, Force India’s troubles are the perfect opportunity for Mercedes to start a 2nd team like Toro Rosso. I’m not sure I would like to see that happen but at the same time, I’m not keen on having 2 billionaires’s sons in F1 along with another one at McLaren. The sport is really getting out of total hand.

  20. What a great piece of journalism!
    please excuse the advert, but after this piece i finally decided to subscribe to racefans, we need to support great journalism!

  21. I’m usually just a lurker, but coming back to read again over this I wanted to thank you. This is the most engaging read that I have on F1’s current issues.

Leave a Reply

Your email address will not be published. Required fields are marked *

All comments are moderated. See the Comment Policy and FAQ for more.
If the person you're replying to is a registered user you can notify them of your reply using '@username'.