The Formula 1 field was in danger of shrinking to 18 cars until an 11th-hour deal on the eve of practice for the Belgian Grand Prix put Force India back on the grid.@DieterRencken followed developments closely in the paddock at Spa, spoke to the major players involved, and offers his insight.
In his post-Belgian Grand Prix media briefing, Formula One Managing Director Ross Brawn referred to the outcome of the race weekend for Force India thus: “What an incredible weekend for Force India. Reborn as Racing Point Force India, on Saturday it got both its cars onto the second row of the grid and on Sunday brought both cars home in the points, in fifth and sixth places.
“It was very important that this story had a positive outcome, thanks to the efforts of all those involved, including the FIA and the other nine teams entered in the championship. It was significant for the good of the sport, for its credibility inwardly and in the eyes of the outside world, and above all for the hundreds of the team’s employees and their families who were worried about job security.”
There is no disputing it was a fairytale result for a team that headed for F1’s summer break with their employer in administration, and participation in Spa-Francorchamps unsure until Thursday evening, when the sport’s governing body, the FIA, confirmed it had awarded the reconstituted team – Racing Point Force India (referred to here as RPFI here in order to differentiate it from what went before) – an unprecedented mid-season entry.
However, as the polemics surrounding the team unravelled during the weekend, so it became increasingly apparent that not all was what it seemed at first glance, and thus Brawn’s comments that “that this story had a positive outcome” may yet turn out to be overly optimistic.
As always in F1, Isaac Newton’s Third Law applies: that there is an opposite and equal reaction to every interaction; or, phrased differently, every dollar granted to the resurrected team from the teams’ “pot” through largesse is one less dollar collectively split amongst the rest. Consider the “swing” effect of that dollar: RPFI gains more performance, and the rest less.
Hence it was surprising to learn that all nine teams had (allegedly) had signed waivers that granted RPFI access to so-called Column 1 funding two years earlier than the norm. In simplified terms, F1’s prize pot is split into two equal columns: Column 1, divided equally amongst all qualifying teams, and Column 2, which is disbursed on a sliding scale (19%-4%) amongst the top ten finishers in the previous year’s championship.
Here, though, is the rub: To qualify for Column 1 proceeds, teams need to finish in the top ten in two of three previous years, and thus it follows that RPFI would qualify for Column 1 money only after end-2019, at earliest. Given that the money pot is finite (see here for further details) it follows that concessions made to RPFI have the effect of reducing total payouts to others by an equal amount.
Notes: Bonuses paid to Ferrari, Mercedes, Red Bull, McLaren and Williams are calculated separately, and not included in the “pot”.
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When Sahara Force India (hereinafter referred to SFI) went into administration during the Hungarian Grand Prix, it was clear that the preferred buyer was a consortium headed by Lawrence Stroll, with (unconfirmed) reports having it that Mercedes, a substantial creditor due to unpaid engine bills, would refuse to supply power units to other purchasers – and possibly even waive any accrued debts dependent upon final purchaser.
Indeed, on Hungary Sunday Lawrence Stroll was seen scuttling about in company with F1 CEO Chase Carey, soliciting permission for Force India, should the former’s consortium be chosen as new owner of the team by SFI’s administrators FRP Advisory LLP, to retain the Column money. The argument was that agreeing to the Column 1 waiver would save the jobs of 400 employees and keep two cars on the grid.
Our best information is that all teams bar McLaren, Renault and Williams agreed to a waiver from Column 1 conditions as outlined, although they subsequently clarified that they did not refuse outright, but had instead sought certain clarifications before appending their signatures to the document.
According to insiders, there was little doubt that they would eventually sign, as none wished to stand accused of influencing any potential sale through withholding their signature(s), with the subsequent loss of a team, 405 jobs and two cars on the grid.
The clarifications they sought are believed to relate to any newly constituted operation’s relationship with, in particular, Mercedes, as they feared that any contractual arrangements going forward could see the resurrected operation mutate into a (semi) Mercedes ‘B” team, similar to the Ferrari-Haas/Sauber axis and Toro Rosso’s relationship with Red Bull Racing.
As an aside, Wolff is not, and never has been, listed as a director of the engine supply entity Mercedes AMG High Performance Powertrains Ltd. (Company number 01760288). That may, or not, be relevant as the saga unravels.
However, the crucial issue is that at the time Stroll and Co sought the waivers for the take-over of a going concern, i.e. a company continuing as-is save that names of directors and shareholders are changed in registers with all other operational details remaining the same – with all debts settled by the administrator out of sale proceeds.
Thus the team would continue to race under the Sahara Force India licence, personnel would remain the same, and all contracts would be honoured going forward, save those that would be novated (cancelled, altered or transferred by mutual consent). Indeed, the only change would be that Vijay Mallya would no longer be team principal, with the new owners taking the place of the out-going group.
Or so they all thought, including Sergio Perez, who initiated the administration via Brockstone, an entity linked to the Mexican, and SFI COO Otmar Szafnauer, who, even before the process was triggered, spoke of “…this critical period, which might last a week or two, we have to keep our heads down, do the best we can here, go enjoy, after the test, enjoy our break and then come back fighting thereafter…”
Now compare his words, said a full six hours before a London High Court delivered his administration verdict, to what we now know: That a “going concern sale” proved complex due to delays (whether justified is not relevant here) on the part of 13 Indian banks who held orders over Force India Formula One Ltd (SHI’s holding company) and Diageo, owner of Jonnie Walker, who held a lien over the entity.
Indeed, there were doubts whether all the agreements could be obtained at all, let alone in time for SFI to reassemble in time for the Belgian Grand Prix, so Plan B was hatched: Stroll and Co would acquire the assets to the team in the name of a shelf company, but not title to the holding company. The new company, racing Point, would then need to apply to the FIA for an entrant licence – crucially as a new team.
Not so neat, after all…
An analogy: a computer consists of software and hardware, both of which are required to mesh seamlessly to operate. Effectively, for purposes of explanation, the holding company is the software portion of the operation, and human capital, facilities and cars constitute the hardware.
Stroll and Co acquired the hardware but not the ‘corrupt’ software – to apply an IT phrase – and thus the cars could not run unless a new software licence was acquired. Said license was awarded by the FIA late Thursday.
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Now consider the legal status of that original waiver, granted by six teams, including Haas, on a going concern basis, yet here was Racing Point requesting an entrant licence for a new team. Is there a difference? A technical one, certainly.
Consider: when Haas entered F1 in 2016 team owner Gene Haas did so in the knowledge that Column 1 monies would be denied them until end-2017, even if they won all championships going in the interim. True, the machine tool magnate accepted the terms and conditions and entered all the same, but the flip side is that they created at least 250 jobs – with more to come over the years – and added two cars to the grid.
Did anyone come rushing to Gene’s aid and offer waivers at the time? Had Haas, though, acquired an existing team on a “going concern” basis – which did not save jobs or add cars to the grid – they would likely have qualified for Column 1 immediately. Spot the anomalies?
Herein lies the legal challenge for F1, for RPFI and all affected parties: According to information obtained from various sources, and shared with the FIA and FOM personnel to ensure that there exists no confusion, the six signatures obtained in Hungary specifically referenced a team take-over, whereas those subsequently obtained refer to as asset sale. So oranges and apples mixed to create vegetable pie…
To add further spice, a number of sources are adamant that some clauses were retrospectively amended as the revised circumstances arose, yet not all signatories were advised accordingly. So what they thought they’d signed for is possibly not what is now reflected.
Then, on Friday Formula One Management’s legal department allegedly circulated yet another document to all teams, requesting that they attest to not having placed under duress or coerced into signing whatever waivers they signed in the first place. Curious.
This may explain Szafnauer’s intriguing choice of words when asked in the Friday FIA press conference whether RPFI faced any consequences due to the situation: “The remaining nine teams have signed, so to speak, a document that enables us to keep the money that Sahara Force India had earned in years past.”
Why the “so to speak”? Possibly Szafnauer knew then that not all “the remaining nine teams” had signed the same document? That evening, during the team’s own media session, he suggested that all teams had signed the waiver because they thought “it was the right thing to do”.
Thereafter we were requested to leave Force India’s hospitality unit as a crucial meeting had been called – and one by one the team bosses entered, to be addressed by Stroll, who reportedly explained to them why not voiding their signatures due to the changed circumstances would be the right thing to do. Curiouser.
Given the foregoing it is not rocket science to deduce that the entire sale could yet unravel spectacularly, particularly if legal challenges are mounted against RPFI and FOM – and that reckons without demands by Uralkali, linked to unsuccessful billionaire bidder Dmitry Mazepin, that FRP Advisory provide satisfactory answers to their questions – as originally revealed here.
FRP Advisory has (twice) told RaceFans: “All bidders were given equal opportunity to submit the best deal for Force India. Throughout, we (the Joint Administrators) have closely followed our statutory duties and objectives as administrators and had the advice of experienced legal counsel.” Yet, clearly, Mazepin is not convinced.
Sitting in the middle is the FIA, which moved heaven and earth to grant a mid-season entry to the team, based on the assurances that FRP has acted correctly and information from FOM that all teams had agreed a waiver – which they apparently had, although possibly not all the same waiver with identical clauses…
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It seems that, on the basis of the information provided to the FIA, the governing body acted impeccably throughout – even if the court processes which saw SFI excluded from this year’s championship could have been more transparent, and the late entry fee paid by RPFI made public – yet all its work may still be undone by the courts.
The absolute irony is, of course, that the bilateral agreements between teams and FOM permit teams to “fail to participate in more than three (3) events in the same FIA F1 Championship before they shall be considered to have withdrawn from the championship”.
On that basis FRP and any prospective buyer could have sat out Belgium, Italy and Singapore before returning to the championship chase for Russia – providing nine weeks for resolution – in an orderly manner. That way an asset sale would have been a last resort rather than a rush resort.
The sooner F1 learns that rush jobs invariably end in botched jobs and that the true victims of every botch job are very real human beings with very real families – in this instance 405 dependant units – the better in every respect.
Follow Dieter on Twitter: @RacingLines
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60 comments on “Why Force India’s rescue deal could still unravel”
29th August 2018, 12:42
I think this has the potential to get very childish and petty…
The way I see it is that non of the teams have lost out due to the sale of Force India compared to a couple of months ago. So no one really should be stomping their feet. After all I am sure no one wants to see hundreds of people out of jobs and less cars on the grid.
However this is F1 and the rubbish way it is run financially makes arguments about technicalities far more likely…
29th August 2018, 12:43
Very nice point – and I don’t think I’ve seen it mentioned here before that the “reward” for adding cars & jobs is that you’re not considered for column 1 for two years.
One wonders if the people involved had been advised of or had considered this, and if yes, what were the reasons for ruling it out.
Very nice article, Dieter, and brings a lot of the information into a single place for those of us who want to make better sense of what went down these last few weeks.
29th August 2018, 13:12
@phylyp excellent summary of the value offered by this article.
The feeling is that probably no one (teams especially) wants to be seen as the party pooper, so things may get smoothed out, but article depicts the potential mine field ahead very clearly.
29th August 2018, 14:11
Another issue is that sponsors might not be happy if the cars are missing for 3 races…
29th August 2018, 14:25
Yeah, that’s a good point, Lee1. It was mentioned earlier (not sure if it was an article or comment) that BWT’s sponsorship was in the form of a loan, the outstanding amount on which reduced with each race the team participated in, and zeroing out at the end of the season (it was also mentioned that many sponsorship contracts are similarly structured, or are contingent upon the number of events the team participates in). So there would have been that added financial motivation of not adding to the amount owed by missing races.
29th August 2018, 16:20
I have another (much too long?) post below @phylyp, but I’d say: if it took three months to sort, who of the best staff, and drivers, would still be around at the end of it? I would argue, what would be left would be only a shell of the current racing team. Sponsors might indeed have issue with that!
30th August 2018, 16:29
well if these people got other jobs at other teams, seeing as they aren’t available anymore, then who cares?
29th August 2018, 12:45
Also, @gabf1 asked a very pertinent question about how SFI arrived in this situation in the first place:
I recall from your column about Vijay Mallya some weeks ago, he never gave the impression that SFI were circling the drain this dangerously. If anything, more eyes were on Williams as being the first one at risk.
29th August 2018, 13:14
@phylyp Thank you for referring to my earlier point. That question for now remains unanswered. Possibly we won’t know as the people who pushed Force India over the edge don’t want to be named. And it may not be in team’s current interest to spill all the beans about the past.
30th August 2018, 12:26
The black hole has been in the making for years now, for a long time actually. Read this– this.
The company/team was always on the edge. They were quite literally ‘surviving’. There came a moment when he knew he had no way out with his legal troubles and also as Dieter mentioned, unable to pump in fresh funds.
On May 31, Mallya stepped down as Force India director, handing over the board role to son his Siddarth.
Maybe a certain plan was in place to ensure that he distanced himself from the team.
Later in July, a UK court allows the 13 banks to go after his assets in UK.
And as we all know, he owns 42.5% of the holding company Orange India Holdings which happens to be Force India’s largest investor and creditor with outstanding loans of about £159 million
Orange India is a subsidiary of United Breweries whose chairman is Vijay Mallya !!!
My opinion–> Perhaps the delay on the part of the banks comes from the fact that they are still assessing the value of his assets (this should be inclusive of his stake in Orange India) so as to recover the maximum. Also, there was order in May, freezing all his assets internationally. Now whether this is applicable (or not) to the 42.5% of his share in the team is something to be known.
Beyond all this, the primary intention of the banks would be to recover (by selling his assets of course) the money they are owed.
Sidenote: There is a fresh hearing scheduled on September 3rd under a new Bill. I think we’ll know a little more next week.
I agree with @dieterrencken. There is a lot left to be unraveled.
30th August 2018, 12:30
Apologies for the goof up.
30th August 2018, 13:07
Thank @webtel , that was an interesting read. Some of it went right over my head, but I did get the gist of it, that Mallya and other principals have been playing a fine balancing act that has finally unravelled.
30th August 2018, 13:30
Precisely. It is the balancing act that has kept the team afloat all along.
I couldn’t attach the following links in the earlier post. Pasting the URLs here:
Dieter Rencken (@dieterrencken)
29th August 2018, 13:15
That question was asked in another of our reports I believe, one which quoted Otmar Szafnauer, who, let’s face it, has sometimes said he isn’t privy to info as he wasn’t a shareholder of SFI, and other times shares info freely. Also, he is now in the employ of RPFI…
In F1 there are usually three sides to a story: Story A, Story B and the truth.
The truth will only be known once all deals are done, all papers signed and the administrator opens up all documents. Most of SFI’s debt was held by the shareholders, and if they don’t call it, the company can survive, provided they pump in sufficient funds to keep it going. That I believe was the problem: Mallya and Co were unable to pump in sponsorship funds they way they had in the past.
Certainly, the assets were worth more than the company owed non-shareholder creditors.
29th August 2018, 13:18
Thank you, Dieter.
29th August 2018, 13:29
Thank you @dieterrencken. Always great to have a question answered by the author of the article.
29th August 2018, 12:54
“with all debts settled by the administrator out of sale proceeds.”
I believe that Mallya claimed he was owed something in the region of £200m by the company and if it continued as-was he would have been paid off as a debtor. By buying the assets and creating a new legal entity they removed this irritant. Mallya would now have to try and get his debt from a company with few assets, no race entry and little cash. He would have no claim at all on the new company.
Stroll could then do a deal with the engine supplier, Perez and the other selected debtors to keep them happy while sticking two fingers up to the rest. The FIA and Liberty also gain by being especially helpful, as they get good PR for saving the team and its members and the bonus of getting rid of Mallya from the F1 scene. Only one loser really…
Dieter Rencken (@dieterrencken)
29th August 2018, 13:07
If there are no legal challenges.
29th August 2018, 13:47
Just come across this article in forbes.com. Near the bottom of the article it says
29th August 2018, 13:51
@shoponf – ooh, that might turn out to be a problem. It was good that for a long time Force India didn’t get mired in Mallya’s legal troubles, but sadly that might no longer be the case.
29th August 2018, 13:59
@phylyp I agree.
29th August 2018, 16:35
@phylyp, but eh, isn’t the freezing order an indication that maybe those troubles already were affecting Force India, an maybe even that they were a reason for the current troubles – that freeze likely made it hard(er) for Mallya to put needed funds into the team, after all.
So to my view, had those banks been more open to looking at a solution, maybe the licensee wouldn’t now be an empty bone; also, had Mallya found better ways to deal with this (or had he not asked for more than $200 million) perhaps the team would have not been affected at all.
30th August 2018, 10:50
The Administration firm have no obligation to answer questions posed by a bidder and I can assure you that little spat will go nowhere. This is a large experienced firm and the UK legal process is well tested and part of UK sovereign law.
Further, given the assets belonged to a separate (to OIH) subsidiary limited UK company the freezing order would have not included them unless specifically stated (and that would not have stood up in law)
Only the shares of the company are frozen. The assets cannot be frozen and once under Administration can be disposed of if the administrator sees this as the most sensible and viable option.
Further to suggest that someone purchasing Force India as a company or its assets can somehow be forced to pay the Indian Banks is frankly nuts and a complete failure to recognise or understand international commercial and business law.
29th August 2018, 13:24
A question that’s not directly relevant to the article, but clicking the photo of Toto (I can rhyme, can’t I?), I see it captioned “Andreas Weissenbacher, Otmar Szafnauer, Toto Wolff, Monza, 2018“. Have the teams already arrived at Monza, or is this an picture from Sochi from past years, going by the end of the URL?
Keith Collantine (@keithcollantine)
29th August 2018, 13:42
@phylyp Indeed, that should say 2017, fixed now.
29th August 2018, 13:45
Nulla Pax (@nullapax)
29th August 2018, 13:25
It’s all a bit complex for me – not my field of expertise – I just hope and pray that this entertaining and hard working team don’t get devoured by the lawyers or fall foul of corrupt practice.
29th August 2018, 13:40
On top of all this now there is talk about Perez possibly returning to McLaren which would be the end of Perez racing career like it was for Alonso.
29th August 2018, 13:41
Doesn’t that run contrary to earlier reports that Perez extended his contract with SFI/RFPI into 2019?
29th August 2018, 14:12
On the other hand in a Tweet by Keith today Ocon seems pretty warmed up to Stroll, kind of unthinkable if the later was trying to get into his seat.
Stephen Crowsen (@drycrust)
29th August 2018, 18:10
If it wasn’t for Lance Stroll being an F1 driver then it’s unlikely Lawrence Stroll would have been around to rescue SFI.
29th August 2018, 14:29
@dieterrencken, excellent article (as always).
Any idea (rumours) how much the FIA entry fee was?
Bridge Wilson (@gwbridge)
29th August 2018, 15:00
@DieterRencken @dieterrencken What an EXCELLENT analysis of this situation and what led up to it. I like it because it seems to match what my understanding of what was happening as it unfolded. This story was widely misreported by bloggers posing as journalists and fans who have no understanding nor appreciation of the business side of Formula One. Perhaps Dieter had the advantage of having waited to do an analysis until most of the facts were in, although that comes dangerously close to praising Dieter for simply demonstrating that he has a modicum of common sense (something usually lacking at some major F1 websites). I’m glad that Force India RPFI Whatever is still racing, but I fervently hope that the FIA and F1 get thoroughly raked over the coals and held accountable in some way for this blatantly preferential treatment that tosses all of the usual rules and procedures completely out the door.
Dieter Rencken (@dieterrencken)
29th August 2018, 15:53
Actually, it was the opposite: we had all the facts as they became apparent, and reported them either in news reports or my diary. This column is effectively a summary, with some post-weekend news. But thanks for the warm words, in any event.
SK Chow (@fluxus)
29th August 2018, 15:07
Does the original Sahara Force India company still hold a valid entry to participate in the 2018 season? If they could have sat out three races before being excluded, is it still theoretically possible for them to purchase some assets (a car, equipment, staff, etc.) necessary to enter Singapore and race alongside Racing Point? Imagine Sahara Force India turning up to the paddock with a couple of old Formula 1 cars (rebadged as VJM12) at Singapore and claiming they had been wrongfully excluded all along!
29th August 2018, 15:28
Probably not, @fluxus.
1. They lost all points, and FIA cannot take their points away if they still have a valid entry.
2. The only way for RPFI to get an entry mid-season is through a ‘spot’ being available. That spot only became available when SFI withdrew (actively or passively) or was ‘evicted’. This might be challenged by entities which have a lien on SFI (the parent company).
29th August 2018, 18:37
@coldfly @fluxus I’m not sure that SFI lost their points, just that they were withdrawn from the table. RPFI ‘lost’ all the points, although that is just the language that was used, they obviously didn’t have any to lose, as a new entity. As a new entry was granted to RPFI, I don’t see any reason that SFI’s would be negated, or could be prevented. Unless I’m wrong. And that seems likely. I probably missed something.
Didn’t John Booth still have some cars kicking about?
29th August 2018, 19:57
Stodart might still have the 2-seater. Allows them to save the cost of 1PU.
Michael Brown (@)
30th August 2018, 3:37
One driver works the steering, the other driver works the throttle & brakes.
29th August 2018, 21:59
I would absolutely LOVE for this to happen, the 13 Banks F1 team to lease some equipment, rush an old Marussia / Caterham / HRT Frankensteined together up to the current regulations showing up to the grid to fight for their share of column 1 money, to which, by all accounts in the article, the existing teams already have signed on. Fantastic
29th August 2018, 15:44
NOW things are sounding like Formula 1. All of that happiness and light did seem out of place.
29th August 2018, 16:06
@dieterrencken Correct me if I am wrong, but wasn’t the whole point of the Administrator being called in the first place, to prevent the winding-up order issued by the court for HMRC (for unpaid taxes) being acted upon. If so, and it happened then the assets would of been sold and we would probably have ended up right where we are now with RPFI, but maybe not as quickly.
Dieter Rencken (@dieterrencken)
29th August 2018, 17:44
Two points there: first, HMRC had applied for a winding up order, as had Formtech, but the return dates were in August and could have been delayed further. The administration process than preempted that.
Second question: with a winding up order the assets would have been auctioned, but not necessarily as a job lot. So and I could have each bought a car, and Johnny Nomates the autoclave. So the team would have splintered.
29th August 2018, 17:53
@dieterrencken I am sure Stroll Snr. could of got someone to sit in on the Aution and outbid everyone including your good self for all the various job lots! :-)
29th August 2018, 16:13
“…reports having it that Mercedes, a substantial creditor due to unpaid engine bills, would refuse to supply power units to other purchasers – and possibly even waive any accrued debts dependent upon final purchaser.”
I’d be interested in knowing the legality of this…. If it’s true, Mercedes are effectively in control of this takeover by making it unfeasable for anyone other than Stroll to buy the team.
29th August 2018, 22:03
There would be nothing illegal about it. They are under no obligation to supply anyone they choose not to.
29th August 2018, 16:15
I think this is a very interesting article and I look forward to read more about how this develops. I hope though that all the doubters are proven legally wrong (or irrelevant).
Why? Well, I cannot fully agree with the concluding remarks of this article. Having the team members wait three months before this would be settled, would be a great way to lose the best staff and both racing drivers, and would thus effectively wreck the racing team, demolishing much of what makes the operation work.
The thing is that usually the team entry is deemed the valuable thing. It was for deemed so for Manor, for example, while the racing assets only brought in a few quid in the end.
In reality, if the entity that owns that racing license comes loaded with issues, such as VJ’s India troubles, and his claim that the racing team owes his holding company 200 $mil; Caterham with lots of doubts about ownership; and Manor with questionable contracts with Marussia (or was that the actual racing team?), that might not be quite so valuable in the end.
If the actual racing team assets are good value, as is the case with Force India: again, the people, and the operational structure that has been able to deliver the best points/million on the grid for quite a few years now, then that is the thing that you want to keep to make it a worthwhile purchase.
Of course, normally, doing it that way would imply having to wait for money, making it very costly, but here Liberty decided that a team of people, ‘the Silverstone team’ that has been on the grid for over 20 years, should be treated better (and that’s eminently defensible for a sport that pays Ferrari so much to turn up, and McLaren, Williams a bit too on the strength of their continuing presence even as they are dwindling at the moment).
I think this solution could arguable be the responsible way. So, while taking that longer path might seem like a prudent, cautious route, for this team, I think waiting three months to sort if will drain much of the actual value of the team, and would have been bad for the sport.
I don’t know what the main considerations for UK administration are, paying the debtors (isn’t that what insolvency is about?), or making sure that the company and the jobs it brings can keep existing, ensuring future financial and operational stability. If the latter, certainly the current way is the right one; if it’s the first one, there would be more arguments to counter the current situation, I imagine.
As for comments about stealing from the banks and VJM, isn’t this switch around how finance people tend to operate, and that’s usually seen as legal, even if it feels like legal robbery? VJM built the team on from a good, but struggling base, and did a great job.
But, in the last few years, his mishaps with his airline and the resulting problems from that put the team in jeopardy, leading to the administration/insolvency. And from his claim of $200mil from the team it’s clear why such a seemingly good buy was never taken over: he wanted that money for the team, but with the associated liabilities, it just was not worth that. Again, this goes back to ‘what is the administrators primary duty’ – because it is likely not firstly paying the owners any loans they still claim from a company they managed to bring to the brink of bankruptcy, those tend to come last in such cases (but do tell me if I’m wrong, I’m not versed in UK law). And didn’t VJM claim that the team wasn’t liable for any of his Indian debts? In that case, maybe those 13 banks don’t have a proven claim anyway. But they are free to try and take it out of the holding company.
29th August 2018, 16:28
@bosyber – very nice and thought-provoking viewpoint (thanks for pointing me to it), that takes a look at the other perspective – that of the team’s members. Setting aside the potential for a cleaner legal solution, you definitely make a good argument for not waiting the 2 months or so for a better resolution – essentially, would the entrant who turned up at that time had the same fire in their belly that the men and women in pink did at Spa? I think what we saw this weekend at Spa speaks for itself.
29th August 2018, 16:37
Thanks @phylyp, and indeed, Spa was a good indication the current way was the best way, to me.
Bridge Wilson (@gwbridge)
29th August 2018, 17:28
@bosyber “The thing is that usually the team entry is deemed the valuable thing. It was for deemed so for Manor, for example, while the racing assets only brought in a few quid in the end. In reality, if the entity that owns that racing license comes loaded with issues, such as VJ’s India troubles, and his claim that the racing team owes his holding company 200 $mil; Caterham with lots of doubts about ownership; and Manor with questionable contracts with Marussia (or was that the actual racing team?), that might not be quite so valuable in the end.”
And then you have Gene Haas come along. He looks at the most recent teams and Force India and sees that some of them are in REALLY shaky fiscal shape due to all of the convoluted business connections, being financed by speculators who get their money from who knows where, being run by people like Vijay Mallya who we now know for certain was a crook and a flim-flam artist. Then he looks at the regulations and procedures for starting a team from scratch and decides that’s better than buying someone else’s mess. Haas plays by the rules, convinces F1 to give him an entry license, pays whatever that costs, and then has to put up $20 million in security on top of that while agreeing not to get a share of the F1 profits for two seasons. He builds a successful team on a limited budget and does pretty darn well for a startup.
Now, Stroll comes along and simply waltzes into F1. He gets an F1 team and all of the positives that come with a team and none of the negative. There’s no huge upfront payment to F1. He gets an F1 entry license and all of FI’s assets and somehow avoids assuming their debt and legal entanglements. On top of that, he’s to be treated as a continuation of Force India and continue to get monies from F1 which were EARNED by Force India, NOT by RPFI.
It’s so nice having all of the good stuff handed to you when others have had to struggle to get earn and deserve all those things. I guess that’s the way the Strolls roll.
One more time, we see a demonstration that F1 has a very low regard for fairness and consistency. It’s run like a criminal enterprise or a banana republic. By comparison, NASCAR is like Winthrop’s “Shining City upon a Hill.”
29th August 2018, 18:35
off course you are right too there @gwbridge. But … (I have a few of those following)
1. Gene was free to decide to buy Caterham, to buy Manor, to buy FI, to buy Sauber etc. All had pros and cons. Gene wanted to go his own way, build his own thing etc. He wanted to go with the “dallara builds the car using as much Ferrari tech and knowhow as we can buy”. That was his decision then, but the options were there. Most insiders will have told him it might be easier to buy an existing team instead. If/when he succeeds though, he can now be proud to have build it himself and earn the respect form that.
2. Who knows, maybe if at the time Haas had had the know how and guts to try for a move like this one, he might have pulled it off with either Caterham or with Manor (or with FI really). He did not try – at least as far as we know – so we will never know how that would have turned out. Compare it to how Lopez et all managed to get their hands on the ex-Renault factory team, there was some “clever” dealing and reeling going on with that too.
But the most important one would be the third
You cannot compare the situation when Haas entered with now. Then we had Bernie dividing and conquering, now we have Liberty trying to manage things quite differently. The fact that they went with this route is prove that they want to work differently.
The situation with Manor / Marussia might have ended differently had there been a different management at FOM willing to cooperate more, maybe it would have been a viable option for Haas. Or maybe not. Times change.
Bridge Wilson (@gwbridge)
29th August 2018, 19:15
What manner of mental contortions did you have to endure to come up with this statement?
What has changed? The FIA regulations concerning this have not changed. The teams still operate under the same Concorde Agreement that was in effect when Haas entered the sport. In any matter of legality or fairness or respect for agreements already made, nothing has changed. And the newest team with the least political weight once again gets the short end while the new team registered under the British flag gets treated like the return of some messiah.
I’ve been a VERY outspoken advocate for Liberty Media. I’ve been telling people to be patient, that Liberty has a rationale AND a rational plan for changing things for the better. Lately, I have been sorely disappointed that they are knuckling under to the same old political pressures as the old regime. I don’t care that much what’s under the engine cover, but if changing the engine formula could reduce costs, increase reliability, and maybe draw some new companies into F1, I was all for it. But the vested interests (namely Ferrari and Mercedes) are being allowed to dictate the rules so that they can maintain their usual advantage. Ferrari is still going to be heavily subsidized by the sport while small team struggle to stay alive, much less compete. No other form of auto racing I watch has institutionalized giving certain teams a built in competitive advantage of their competitors by subsidizing their budget with tens of millions of dollars. Between them, Liberty Media and the FIA could have dictated terms. They have that power and that authority. Instead, we have inconsistency, unfairness, favoritism, and a shameful lack of respect for sporting values.
Maybe Stroll should pay the other teams back for the funds they lost out on by being required to follow established procedure and adhere to the regulations every team in F1 must agree to when they enter the sport. Up until now, every team that has ever competed in F1 has conformed to and upheld the regulations they agreed to. Only Stroll has skirted them. It’s just inherently unfair, unsporting, and shameful.
29th August 2018, 19:38
Good to point out the “Haas” side of things as well @gwbridge.
It makes you wonder why all these entry rules exist when someone with a good story, let’s call it that, can circumvent them…
What would the likes of Porsche and Aston Martin make of this story? They’d better wait until Williams and/or McLaren fold and do a “Stroll”…
Bridge Wilson (@gwbridge)
29th August 2018, 20:00
It’s the latest dance craze, sung to the same tune as “Do the Shrimp!” from 1963.
“Rolling Like A Stroll”
Do the Stroll, Stroll, Stroll
That’s the way we roll
It’s called the Stroll, Stroll, Stroll
Bring your fat bankroll.
29th August 2018, 18:48
@bosyber, with regards to the Marussia F1 team, it is worth noting that Marussia Motors itself was actually dissolved as a legal entity more than six months before the F1 team went into administration (Marussia Motors was closed down in April 2014, whereas the F1 team went into administration in November 2014).
I would have thought that the dissolution of Marussia Motors would therefore have broken any links between the F1 team and the manufacturer given that legal entity had entirely ceased to exist. The main legacy legal issues that the team had, as far as I am aware, were those that related to the deaths of de Villota and Bianchi, not Marussia.
@gwbridge, Gene Haas isn’t exactly the cleanest of individuals himself, having served a jail sentence for filing fraudulent tax returns (having agreed to a guilty plea to avoid being prosecuted on some of the other charges, such as witness intimidation), and the charges brought against Gene did include accusations that he was using his NASCAR team to create fraudulent expenses claims in order to try and disguise some of his transactions. I therefore wouldn’t hold him up Haas, and by extension NASCAR, as being that much more honourable than Mallya.
Bridge Wilson (@gwbridge)
29th August 2018, 23:20
@anon Who is it that can never go home again without being thrown in jail by theIndian government and all of the people he defrauded? Mallya. Who is it that has brought the sport of F1 into disrepute and caused Force India to fail putting all those jobs in jeopardy? And how has F1 chosen to fix the situation Mallya caused by his criminal actions? F1 as chosen to do a backroom deal with another billionaire who doesn’t want to play by the rules.
How many times do we have to have this IRS conviction brought up? It comes up every time someone wants to put the knock on HaasF1 because they are doing what the other teams have failed to do through good planning and properly executing that plan, all without exception by staying within the rules and regulations agreed to by the entire F1 community. So far, Gene Haas has simply been smarter than those who came before him and it just eats away at some people. A couple of years ago, everyone was talking about how well Force India was doing for what they were spending, but it’s all turned out to be a house of cards, hasn’t it. They shot their entire wad on one season and went bankrupt in the next. Whose idea do you think that was? Was that smart for a team that had been in the sport as long as Force India and its predecessors have been? The brain trust being financed by a Ponzi scheme, and now we should all be thrilled that they are being BAILED OUT at the expense of the other teams. Every undeserved dollar Force India collects is a dollar stolen from another team, and that is simply anti-competitive. It is a bent concept.
Yes, Gene Haas spent some time in a Federal prison because he stupidly though he could get even with the IRS after they screwed him over. What’s that? Hubris? Pride cometh before a fall? Was he ever an international fugitive? Are there hundreds of creditors out for his blood? Haas plead guilty to felony conspiracy to commit tax evasion and was sentenced to two years in prison and ordered to pay $75 million in restitution. He served 16 months. If tax evasion is the mark of shame Gene Haas has to carry when he walks through the paddock, he’s in pretty darn good company. F1 is the Nirvana of tax fraud. Everyone in F1 cheats on their taxes either legally or illegally or both. Not to mention all of the money that the Russian mob and a dozen penny ante despots launder through F1 every year.
F1 ought to be grateful that Gene Haas in in F1 because some team other than HaasF1 would probably have gone down in flames by now, especially after Bernie Ecclestone extorted whatever cash margin they had away from them. Gene Haas is showing F1 how to read the rulebook and launch an F1 team that is somewhat competitive at its first race and gets incrementally better all the time. Just watch now in a year or two when Toro Rosso begin using as many Red Bull Racing parts as Haas uses Ferrari parts. They’ve already seen the light and said as much.
And where did Gene Haas get his money? Through leveraged buyouts and credit swaps? No. Did he inherit it? No. He invented an innovative product and patented it with partner and start his own company to build CNC machine tools that sold like crazy because the were cheaper, faster, and easier to use. Now, it’s the largest CNC machine tool company in the United States and he’s in F1 mainly to try and market his products overseas.
Mallya inherited his money, ran out on billions of dollars of debt, transferred hundreds of millions in government loans out of the country and into tax havens, and is wanted for financial fraud and money laundering. He had to sneak out of India and can never go back without facing prosecution for his crimes. And if he ever does go home, it won’t be 16 months in a Federal country club he’s going to be getting. But he still wanders around the F1 paddock like a celebrity because that’s the proper milieu for people like him.
Gene Haas is not Vijay Mallya.
Aleš Norský (@gpfacts)
29th August 2018, 17:35
Another in-depth factual analysis that only @RacingLines can deliver…
Jay Menon (@jaymenon10)
29th August 2018, 17:42
“All bidders were given equal opportunity to submit the best deal for Force India”
I guess some bidders were more equal than others?
29th August 2018, 18:09
Stroll scuttling around the paddock grovelling to other bosses for cash, and then holding audiences a few weeks later all seems a bit unseemly. Why spend your own money (he has a few dollars) when you can spend someone else’s? Fair enough he’s spent enough on F1 sponsorship over the years.
Altering a document after it’s been signed (allegedly) is a sackable offence in most industries…
29th August 2018, 20:59
This Dieter fellow is being a bit overly dramatic/reading too much into it. Journos can be like that, always looking for “the story” and all.
The teams signed off the column 1 payments for Force India because thats the best thing for the sport. Mind you if teams start closing their doors then there is no F1. Williams, McLaren are sort of on the same boat. If the payments structure don’t change soon they are in jeopardy in the same way FI was a few days ago, and I am sure they recognise that.
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