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13 Nov 2013

Over the last few seasons the term 'pay driver' has become synonymous with all teams outside of the big 4 teams in the sport (Ferrari, McLaren, Mercedes and Red Bull Racing).  The trend is not a new one though with many drivers having to fund their way into Formula One over the decades.  The problem however is much more deep rooted than it appears from the outside and is primarily caused by a failure for the teams themselves to adapt to the current economic environment and the way in which talent is being nurtured.

Ferrari and Mercedes are involved in Formula One as an advertising platform for their respective automotive brands with their parent companies ploughing money in, in order to gain global exposure.  Red Bull Racing have since their inception used Formula One as a vehicle to advertise their product too, albeit not from an automotive perspective.  Their success since 2009 also led to a works style partnership with Renault whom in my opinion made the shrewd move of exiting the sport as a constructor in 2010.  As a result of this partnership from 2011 the Red Bull car's have carried the Infinti branding, the more exclusive sector of the Renault-Nissan Alliance.  These three teams through virtue of their brand exercise don't need a title sponsor and are more than willing to pay to secure the services of top drivers.

McLaren although they are now firmly establishing theirselves in the automotive sector are essentially a race team, and have aligned themselves with title sponsors over the years to help fund their ambition.  The current deal they have with Vodafone comes to an end this season and begs the question how do they make up the deficit?  Their current deal is rumoured to be around £40m per season and so is a significant chunk of money to go without if they can't replace Vodafone.  Of course the obvious thing is to look across the garage to Sergio Perez who has had his racing largely bank rolled by Telmex and Carlos Slim in the past.  The problem however seems to be that Perez is going to be offloaded by McLaren in favour of their latest protege: Magnussen.  Interestingly there have been rumours that the Danish investment bank: Saxobank are interested in engaging in Formula One as an advertising platform and are of course a good tie in with the aforementioned Magnussen.

For those questioning why Lucozade or MaxiMuscle might not appear on the car these are race deals organised through McLaren's technical partner GSK who own both brands.  The question therefore remains, who will fill Vodafone's boots in 2014 or are Honda helping before their arrival in 2015?  Lest we forget McLaren are having to pay for the 2014 powerplants something the team haven't had to do during their previous partnership with Mercedes and are unlikely to do so under Honda.

Force India are a team on the cusp of the front runners but inevitably slip backwards throughout a season into the midfield.  Run by Vijay Mallya the team is used as a vehicle to advertise his own Kingfisher airways but the team do have the title sponsor support of Sahara too.  The team also enjoys working relationships and smaller sponsorship deals with a plethora of other companies. Even with this level of investment the time is constantly fighting the battle to stay afloat and some of the aforementioned companies are deals brokered through the drivers they have onboard.

Next up is Lotus F1 Team, owned by Genii capital and another victim of the desire to land sponsorship.  Their name leaves everyone assuming they get a big cheque in the post from the Malaysian marque but that's quite incorrect.  The Lotus name is a legacy of the argument that ensued between Tony Fernandes' then Team Lotus and the then CEO of Lotus cars Dany Bahar over the right to use the name in Formula One.  Those in the know of course realise that Colin Chapman's race team had little to do with his cars but the fight spiraled into a lengthy court case that saw Genii initially reaping the financial reward from Lotus cars.  With the money now dried up the team is left holding the baby as such, whilst Lotus cars reaps the rewards of their name emblazoned on the car's, the factory etc for no fiscal outlay.  The problem for the team however is the devil or the deep blue, they want to appear to be bigger than they are to entice investment and so carry the Lotus name.  Furthermore a change of name would also result in a loss of revenue from FOM/CVC and require a unanimous vote from the other teams to push it through (although I see no reason why they wouldn't grant a change)

This leaves Lotus in a precarious position and makes the sale of 35% of the team to Quantum (previously Infinity Racing) almost essential.  The lack of sponsors (Burn being the largest) on the car mean that Genii have been picking up the bill for going racing and perhaps can't afford to anymore.  Their other alternative (should that deal through) is to see which driver has established enough money/backing and can bring sponsorship with them.  This is of course is a route the team have taken already with Grosjean whom carries sponsorship from Total.  Total are actively involved in Formula One with others too: Red Bull Racing and Charles Pic at Caterham in sponsorship capacities whilst the brand has been engaged in Formula One on a technical level for decades.

Many have therefore doubted that a link with Pastor Maldonado can be achieved but Pastor's money comes via PDVSA whom although are an oil company and in opposition to Total they aren't currently active in the technical side of the sport.  They do have other interests within F1 with Rodolfo Gonzalez at Marussia for which their logo is currently placed on the MR-02 but they inherently sponsor the driver rather than teams, placing money with the team to secure a drive for their chosen pilots and taking small placings on the cars of the chosen team.

Sauber F1 Team are yet another example (like Lotus) of a team still reeling from the exit of a car manufacturer from the sport.  Previously owned by BMW, Peter Sauber rescued his team when the car giant were looking to exit the sport.  Again unable to align itself with a title sponsor the Swiss team have of recent had to look elsewhere for funding.  The latest revenue stream will arrive direct from Russia funding the emergence of Sergey Sirotkin but it's unclear at present whether the team will allow the 18 year old to race from the start of the season.  This casts doubt on the availability of a seat with the team who are yet to confirm their other driver but are likely to retain the services of Esteban Gutierrez.  Maldonado is also thought to be in talks with Sauber should the young Russian sit out 2014, instead focusing on training for next year.  The money from both these drivers would be a welcomed boost in Hinwil and not only help to secure racing for next season but pave the way for improvements to their infrastructure.  I've mentioned in the past that Sauber don't have a Simulator on site and so this could lead to a significant boost to their future development.

Williams faced huge restructuring under the watchful eye of Adam Parr several seasons ago which reeled in what was a substantial debt the team had accrued.  The money that Maldonado has bought to the team over the last few seasons has undoubtedly assisted in the general operation of the team but they too can't seemingly attract that one big title sponsor (baring PDVSA via Pastor).  Having signed Felipe Massa the team are insisting they don't need the help of a 'pay driver' to operate.  Although it's likely his salary is being covered by the settlement the team are receiving from PDVSA for Maldonado's contract disconnection.

Toro Rosso the junior team to Red Bull of course have their bills covered by the energy drinks supplier, providing the platform for the next generation of drivers being it's aim.  Based in Faenza, Italy the team have a modest setup for which their performances generally exceed.  Many talk about Red Bull's facilities as just a little unit on an Industrial Estate in Milton Keynes but behind closed doors that modesty is replaced with cutting edge technology that their younger team doesn't have.  With James Key (Technical Director) at the helm the team are making changes to their processes that could elevate the team from the bottom half of the midfield toward the top end.  This would help to act as a bridge for the drivers whom then move onwards to a Red Bull seat but more importantly in the interim give them the potential to take points off of Red Bull's closest adversaries.

Lastly we have the two surviving 'newer' teams who made their way onto the F1 stage back in 2010 and were likely promised a different financial outlook to the formula than they are engaged in today.

Caterham one of Tony Fernandes operations that started life out very differently with the team leasing the Lotus Racing name from the government run Group Lotus.  I firmly believe it was Tony's intention to prove his worth via the racing team and swoop in and buy Group Lotus from the government at a cut price (much like he did with Air Asia).  When the row erupted between Group Lotus and the renamed Team Lotus which Fernandes had acquired to race under it became a squabble that marked the end of Tony's grasp on owning the car division.  Instead he bought into Caterham, another small sports car manufacturer that's DNA is intrinsically linked to Colin Chapman via the 7.  The team now obviously bears the name and branding that associates them with the car building operation but the product itself remains an entry level, low cost motorsport inspired range.  Furthermore the Caterham brand is being used by composite and engineering divisions set up to enhance the companies portfolio.

Although Caterham F1 has many partners the principle matter behind the team is it's used as a platform to promote Tune Group a conglomerate of companies owned by Tony Fernandes and his business partners.  This therefore means that other arms of the company pay for the team to go racing but moreover they are involved in the 'pay driver' culture.  Having previously used Vitaly Petrov that provided economic sanctuary to the team they now host Giedo Van Der Garde and Charles Pic both of which bring money and connections.  Heikki Kovalainen sits on the fringes for Caterham partaking in some FP1 sessions but without funding it appears the Finn cannot get back into the line-up.

Marussia F1 Team are the other new team to have survived although like their closest rivals they too have had to adapt.  Previously Virgin Racing the team found an injection of cash and partnership through the Russian car manufacturer.  With Jules Bianchi retained and likely the catalyst for the teams use of the Ferrari power unit in 2014, the latter perhaps negotiating a deal in which Marussia pay much less for their units.  It remains to be seen though if Max Chilton will be retained by Marussia who also pays his way for said seat or if PDVSA can step up Gonzalez's deal to clinch him the seat.

The culture of money transactions in Formula One therefore seems to have shifted a little over the last few years with many teams struggling to lure in title sponsors.  In lieu of this many of the teams have had to opt to take cash for drives to survive.  Sponsorship comes in many forms and guises and this is just the current trend, I do however fear that on the current costs of F1 we will see at least 1-2 teams bite the dust over the next couple of seasons.  In terms of availability for seats and drivers we have the following:

Teams

Lotus - 1 Seats remains (Grosjean all but secure in the other)
Sauber - No drivers confirmed but Esteban is likely to be retained
Force India - No drivers confirmed and the team is reported to be looking at it's options for 2014
Caterham - No drivers confirmed but the team is likely to retain it's current lineup
Marussia - 1 seat remains with Chilton and Gonzalez the most likely candidates

Drivers

Nico Hulkenberg - Perhaps the most talented/mature driver on the current F1 roster that doesn't have a deal for 2014 in place.  From the seats remaining he reportedly had a 2 years deal tabled to him by Force India although the strongest link pulls him toward the Lotus seat.
Sergio Perez - Likely to make way for Magnussen at McLaren the young Mexican will be in search of another drive to keep his F1 career alive.  Having driven for Sauber it makes sense for him to make the step backwards whilst Sirotkin learns his trade.
Pastor Maldonado - With ties severed at Williams the Venezuelan is now trying to find another seat and has reportedly talked to Lotus, Sauber and Force India about a drive.  His money could do wonders for any of these teams...

It seems to me that the most likely scenario see's:

Lotus - Grosjean & Maldonado
Sauber - Perez & Guitierrez
Force India - Di Resta and Hulkenberg

Which of course casts shadow over the future of Adrian Sutil once more, whatever happens there just simply isn't enough seats for both the talented drivers and those that actively bring sponsorship to teams.  One model that has been overlooked by Formula One is that tried by BrawnGP in 2009 to shore up it's books: Regional Advertising.  With a blank canvas and money in the bank from Honda to carry on racing the team needed to start gaining a bank balance so they could go forward for 2010.  Unable to encourage large investment instead the team worked on race by race deals, often with regional companies looking for exposure.  Of course this is much more work and requires taking money in smaller quantities but sometimes you have to evolve...
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2 comments:

  1. Cavalino Rampante13 November 2013 at 14:50

    "Ferrari and Mercedes are involved in Formula One as an advertising platform for their respective automotive brands with their parent companies ploughing money in, in order to gain global exposure."

    Mercedes may plough money into their F1 team, but Fiat who own Ferrari certainly don't. The F1 component of Ferrari is a self-funding and profitable part of the Fiat group on its own.

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