Diligence still due?
21/02/2010 With under a month to go before the start of the season we still don't know which teams will be racing in F1 this year. The takeover of Campos earlier this week and the reports that USF1 is asking to miss the first four races raise a crucial question about the due diligence which was carried out on the new teams last year: could it have been improved? On 12 June last year the FIA released a statement about the due diligence carried out on the new teams and it declared that "we have requested documentary evidence to support all the new teams' assertions, in particular with regards to funding. Thus we have been provided with accounts, contracts, multi-year business plans and other supporting material." It added that "we have asked to see contracts and letters of intent. This extends to the sponsorship side, where plans and any descriptions of existing relationships are required. In all these aspects we have requested evidence that substantiates any claim in the teams' plans." So how did we get to a situation where team financiers have fallen by the wayside before the racing has even begun? Pitpass' business editor Chris Sylt points out that when the due diligence was done, the £40m budget cap was expected to be implemented and so this may have been a factor in the conclusions which were drawn. However, more to the point, the financial world has changed a lot (and not all for the better) since the due diligence was done. Instead of doing the due diligence in only one round early last year, it would surely have been far more prudent to have granted the selected teams entry provided that they meet regular financial checkpoints throughout the following 12 months. The fact that the due diligence has long been done and dusted may have an interesting consequence for Zoran Stefanovic who is hoping to race this year with his Stefan GP team. In a nutshell, if Stefanovic were to take over USF1 for example, the team's ownership, finances and business model would fundamentally change so one would expect this to void its entry since it was accepted on the basis of its previous financial structure. Of course this would not be a problem if Stefan GP were to join F1 as a 14th team but this would require the agreement of all the teams, the FIA and the F1 group and this would almost certainly take months to achieve if indeed it would ever be accepted. In the event that all parties were to agree, Stefan GP would also most probably face a due diligence test and it remains to be seen whether it would pass. F1's boss Bernie Ecclestone has confirmed to Sylt that Stefanovic is supported by money from the government in his home of Serbia. However, it is highly unlikely that any government would pay money to a team which had no slot to race in so it could leave Stefanovic in a catch 22: he may only get the money to race once he has a slot but to pass due diligence he may need the money. If Stefanovic had already been gifted the funding from the Serbian government then he surely would have bought the Toyota team lock, stock and barrel when it still had its F1 entry. We also learned in a recent report that Stefan GP does not have tyres for the Toyota-designed cars he intends to use. Presumably, if Stefanovic threw enough money Bridgestone's way the manufacturer would give him some tyres to use, particularly in light of his team's ties to fellow Japanese company Toyota. In summary, it cannot be certain that Stefan GP would pass due diligence and Pitpass is aware of at least one of Stefanovic's bills for which payment is over seven months overdue. So Stefan GP looks to be out of the picture contrary to the reports of some other media outlets. USF1 seems set to miss the first race at least and, despite its new owner, Campos still seems to be on thin ice as it has yet to even reveal its car. With just three days to go before Force India's own deadline to file company accounts and stop the doors being closed at the team, F1 could easily end up three teams down by Bahrain. That would leave the sport with a tally of 10 entries - precisely the same number as it had last year. This could give us perhaps the best insight into why the new team slots were created in the first place - with three teams having left F1 in the past year, getting in new entrants may well turn out to be the only way to maintain equilibrium in the sport. |
