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McLaren gets seat on board of F1

NEWS STORY
22/04/2012

For the past month speculation has been rife about what tempted McLaren to recently commit to a new Formula One commercial deal until 2020. McLaren team principal Martin Whitmarsh is chairman of the Formula One Teams Association (FOTA) so, perhaps more than anyone else, he was expected to hold out as long as possible to ensure that the group gets the best deal. Indeed, he is believed to have sent an email to FOTA members in 2010 saying "it may be that in particular circumstances individual teams may be able to secure favourable arrangements. There is little doubt however, that in so doing, such actions would limit the total distribution and in all probability reduce the individual distribution to each team." So it came as a great surprise, even to F1 insiders when the sport's boss Bernie Ecclestone announced on 24 March that he had agreed new commercial terms with the majority of the teams, including McLaren. Courtesy of an article in the Mail by Pitpass' business editor Christian Sylt, we now know how he pulled it off.

In the aftermath of Ecclestone's announcement the speculation from F1's sports reporters went into overdrive as usual with one wild rumour even suggesting that the team signed up because Mumtalakat, a Bahrain government-linked investment company, which owns 50% of McLaren, was encouraged by Bernie Ecclestone to encourage McLaren to agree to his wishes. It was suggested that such encouragement would do no harm at all to the Bahrain government's wish to see a Grand Prix this year and this perhaps might help to explain why Ecclestone has been so supportive of the event. As is often the case, the truth is very different to the speculation.

Sylt reveals that, according to two senior industry sources, under the new commercial terms McLaren gets a seat on the board of F1 itself where it will sit alongside representatives from Red Bull and Ferrari. This made a nice carrot to tempt McLaren to sign up to the commercial agreement and having F1's three most powerful outfits on-board ruled out any chance of the teams forming credible plans to oppose the status quo. The source describes it as a "sensible step forward because one of the key complaints from the teams has been a lack of control and involvement."

Unsurprisingly, the other teams followed suit and signed up with the only ones yet to agree being Caterham, HRT, Marussia and Mercedes. The three new outfits are so weak, in commercial and performance terms, that they have no choice but to fall into line or pull out of F1 and this leaves Mercedes as the only straggler with any standing. There is little sway that one team alone can have so it too is faced with the choice of either signing up or leaving F1. Nico Rosberg's maiden win at the Chinese GP may well have given the team renewed interest to stay even if it isn't entirely happy with the commercial terms.

It should be stressed here that Mercedes is not just holding out because board seats have been given to its rivals but also because of the division of prize money under the new agreement which runs from 2013 until the end of 2020. The current draft of the contract, known as the Concorde Agreement, gives the teams 50% of F1's profits with additional payments to Ferrari because it is the sport's oldest team. However, under the new agreement, additional payments will also go to any team which has competed since 2000 without making a change to its name, with further payments to reward past constructors' championship winners and back-to-back champions. Mercedes' team has changed its name nearly five times since 2000 so that rules it out of the additional payment and goes some way to explaining why it hasn't signed up yet.

When the report about the new commercial deal first surfaced on the Sky News blog Pitpass cautioned that since it was "about an early draft of the agreement, which is believed to run into hundreds of pages, the details could well change by the time the final version is signed." Lo and behold, we now find out that Red Bull and Ferrari aren't the only teams which will get F1 board seats, as Sky News suggested, but McLaren will also.

Giving seats to F1's three strongest teams is part of a savvy strategy by Ecclestone and CVC, the private equity firm which owns the majority of F1. It was needed because when the Concorde has previously come up for expiry it has usually been preceded by threats from the teams to start a rival series unless they got paid more money. However, this time round, nearly all the teams have signed up a year before the deadline with no trouble whatsoever. There are several reasons for this.

Firstly, the current Concorde prevents the teams from talking about a rival series until the end of 2012. Next, although the Concorde is hundreds of pages, the agreement which has been signed is a 30 page document which commits them to the bigger contract. It dramatically speeded up the procedure of getting signatures on the dotted line.

Interestingly, it isn't clear which McLaren executive will be taking up the board seat but it is most likely to go to either Whitmarsh or McLaren's chairman Ron Dennis. If it is the latter then this could make for some interesting board meetings. As Pitpass has reported according to the brilliant biography of Ecclestone written by Susan Watkins, wife of F1's former medical delegate Sid, Dennis believes that "Bernie effectively stole Formula 1 from us. He stole it by concealing from the teams the significant increases that were coming to them as a result of better television contracts. He used this commercial benefit to persuade the teams to accept a contract that eliminated them from the passing of rights as had previously existed."

Dennis' comments refer to events which took place around 15 years ago when the relationship between Ecclestone and McLaren was far more frosty than it is now. The fact that he could soon sit on the board of F1 alongside Ecclestone shows how much things have changed and the new Concorde Agreement is testimony to that.

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