Mosley’s response to Montezemolo

In response to the letter Ferrari president Luca di Montezemolo wrote on April 28th to the FIA president expressing concern about having two classes of F1 car and about a possible legal challenge to the budget cap, Max Mosley wrote back the following day.

He quotes FIAT boss Sergio Marchionne, with whom Montezemolo works closely and his belief that in an economic crisis such as we are in at the moment, only an extreme response will do,
“We are just going to slam the brakes on, cut everything back to essentials. It may be painful, it may be ugly. But if we want to do the right thing for this industry let’s do it now. Today my gut instinct is to be truly Draconian.” These are Marchionne’s words.

Mosley's letter to Ferrari

Mosley points out that the car industry is in serious difficulty and that F1, as an extension of it, is extremely vulnerable. Honda’s departure was a wake up call and another manufacturer could leave at any moment.

“If we are to reduce the risk of the Formula 1 world championship collapsing, we have to allow new teams in. We also have to reduce costs drastically. The matter is therefore extremely urgent.”

Responding to Montezemolo’s legal threat over rights that have not been respected Mosley writes,
“The only radical elements are those needed to close the gap that would otherwise exist between a low-budget team and other competitors. Thus if Ferrari chooses to continue with an unrestricted budget, the new regulations will not deprive Ferrari of any rights…I do not accept that these proposed regulation compromise any commitment that has been given to Ferrari in the past, unless Ferrari would somehow argue that it is entitled to prevent new competitors from emerging at a time when the sport itself is in danger.”

He ends with a flourish, “We are confident (as are our accountants and lawyers) that a budget cap will be enforceable. The cleverest team will win and we would eliminate the need for depressing restrictions on technology, which the existing teams are discussing with a view to reducing costs. I hope Ferrari will take the lead in agreeing the cost cap mechanism, thus freeing its engineers to work and preserving its shareholders’ money.”

Mosley has always wanted three things; to see the playing field levelled so small teams can compete with big teams, to have full grids and he has always felt that the costs were out of control, long before the credit crunch hit the global economy.

What he has done here, along with his technical strategy guru Tony Purnell, is to take advantage of the car industry’s troubles to create a window for killing those three birds with one stone. The two class F1 is not ideal for anyone, but Mosley is calculating that no manufacturer will go for the uncapped option it because it would be unjustifiable to shareholders.

Meanwhile the five independent teams, Williams, Red Bull, Toro Rosso, Brawn and Force India all welcome the budget cap at the £40 million level because to them it means survival, profit and the chance to compete against the big boys. It’s Christmas for them.

The teams formed their association, FOTA, to represent their rights, but here FOTA is in big trouble because the five independents are on a collision course with the manufacturers, so Max has also achieved a fourth aim, to undermine FOTA.

Many people dislike his methods, but think about it this way, if F1 didn’t exist and you were Ferrari or any other manufacturer and someone came to you and said, “I’ve got a great idea for a racing series; we’ll have 17 races in key markets around the world, great TV package giving your brand a media value in the hundreds of millions per year and it will cost £40 million and it capped, so you can innovate within that figure and beat the others.”

I’m sure if you started with a clean sheet of paper, in other words, you might well go for it on that basis. But it’s hard to see the Mosley/Purnell vision for F1 because we come from an era of £200 million budgets. But why does it need to cost £200 million to win?

Shouldn’t Ferrari continue to win races? If you have something very good and you distill it to its core strengths, you end up with something sensational. So surely the 350 best people at Ferrari must be the equal or better of the 350 at any of the other teams?

One of my readers, Martin Samm, made this very valid point today,
“What I (as a member of Joe Public) want is a series of interesting/exciting races – I dont care if they spent 40 million or 200 million, as I’m sure they’ll be as cutting edge as ever regardless; engineers tend to be cunning like that!”

Martin also points out this is all happening at a time when races are being won by two independent teams, Brawn and Red Bull. Most people find this very refreshing and a good thing for F1.

It’s really hard to know which way to go on this one, because it represents a huge cultural shift in F1. You can see Ferrari’s point and they believe that they have right – and the law – on their side.

The way is clear for a summer of messy legal challenges, which would throw 2010 into chaos. Ferrari will not go quietly on this one and they have gathered the other manufacturers around them for a council of war. They make the engines, of course, so the independents are dependent on them.

That is why Cosworth is sitting on the sidelines, waiting.

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Letter from Montezemolo to Mosley

Although Ferrari is refusing to comment on yesterday’s budget cap announcement, some letters between its president Luca di Montezemolo and FIA president Max Mosley have come to light.

These show Ferrari’s concerns and hint at arrangements between Ferrari and the governing body, which Ferrari feel have not been honoured.

Montezemolo ; Legal challenge to cost cap?

On April 28th Montezemolo wrote to Mosley and other world council members,
unhappy that budget caps had been put on the agenda of a meeting which was called to hear the McLaren case.

He wrote, ” I have always been concerned about its introduction (cost cap) mainly because I consider that there are serious technical difficulties in making sure that any cap can realistically be monitored.

“There are..doubts as to whether or not two categories of teams should be created which will inevitably mean that one category will have an advantage over the other and that the championship will be fundamentally unfaor and perhaps even biased. In any event this would create confusion in the public’s mind, which would seriously lower the value of Formula 1.”

This is a view shared by all the F1 teams, that having capped and uncapped teams operating to two different sets of rules is unworkable. FOTA will discuss this at its May 6th meeting.

But Montezemolo then goes on to remind Mosley about the deal, which he signed in 2005 to commit Ferrari to F1 until 2012, the one which broke the idea of a manufacturers’ breakaway series and for which Ferrari allegedly received €100 million.

Montezemolo’s point is that under the Concorde Agreement the FIA “cannot pass or amend any regulation without it being approved by the F1 commission.”

When Ferrari did its secret deal and signed up to 2012, it demanded and was granted “all rights under the previous Concorde Agreement will continue to apply until 31 December 2010, exactly as if the Agreement itself remained in place.”

The language then gets quite legal, and Montezemolo says he ‘insists’ that the FIA respect the agreement they made.

Presumably this is a coded message that Ferrari would launch a legal challenge against the cost cap. The problem there is time. It would take months and that would delay the 2010 rules being published, which would throw the series into chaos.

Ferrari would only launch an action like that with FOTA backing, but that will be hard because half of the teams in FOTA agree with the cost cap, which guarantees not just their survival but that they will be able to compete with the big boys and make a profit at the same time!

I’ll post on Mosley’s response separately.

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Montezemolo’s four point plan for F1

Luca di Montezemolo turned up in Madonna di Campiglio yesterday for the end of the Ferrari shindig and had a good long session with Bernie Ecclestone, whom he embraced warmly. The pair have known each other since the 1970s and they will lock antlers many times in the next year or two as Montezemolo seeks to lead the FOTA teams to the promised land of more control and more money.

Afterwards he sat down with the Italian media and I’m grateful to them for details of what he said. The thing which caught my eye was his reminder that the commercial deal binding the teams into F1 is only until 2012, which will be here soon enough, as the London Olympic committee can tell you. Beyond that, he said, F1 needs “an authoritative sporting body” to lead it.

He sees the key to the future as being four ‘S’s; Stability, “we cannot keep changing the rules every six months or a year”; Seriousness, “because we cannot pretend nothing’s happening in a period of great economic difficulty like this”; Spectacle, “I think the new rules will help with this”; Sustainability, “which is finding the right balance between cost and income.”

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