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Why New Jersey needs to show us the money

NEWS STORY
12/01/2012

It was not so long ago that Germany had two Formula One races but the economic downturn put paid to that. Now Spain is feeling the pinch too with talk that not only could Valencia lose its government support and drop off the F1 calendar but Barcelona may follow suit.

Both Germany and Spain have historically been two of F1's strongest markets thanks largely to the tremendous popularity of world champions Michael Schumacher and Fernando Alonso. Current champ Sebastian Vettel is of course German but not even his fan club can help sustain two races in his home country. Which brings us to America.

The majority of the population of the United States doesn't even know what Formula One is and many of those who do have a bitter taste about it. There is good reason for this because a little more than six years ago a race took place at Indianapolis in which only three teams took part. It led to fans throwing bottles on to the track and (unsuccessfully) suing the organisers. It's hard to believe but F1's reputation in the United States went downhill from there.

A dispute over the fee saw the US Grand Prix cancelled after the 2007 race and it hasn't run in the country since then. US race fans didn't miss it as their home-grown NASCAR series is wildly more popular than F1 was when the US GP ran at Indy. Adding insult to injury, a planned US-based F1 team failed to get going and has left F1 with two empty grid slots since 2010.

It is against this unlikely backdrop that two race promoters in the US decided to bid for slots on the F1 calendar. Austin was the first to succeed and in November this year the US GP is scheduled to take place on its immaculately designed Circuit of the Americas. This came as a bit of a surprise since Austin had no F1 heritage. However, the bigger surprise was still to come when in October last year a race beside the Hudson River in New Jersey was granted a slot starting in 2013. At the launch event the race's lead organiser, businessman and sometime racer, Leo Hindery, claimed that the three-day event will attract 100,000 people, and generate around $100m a year in economic activity.

It seems hard to believe that America will be able to support two races when the countries in F1's heartland are struggling to support one. Data from F1's industry monitor Formula Money shows that race ticket prices average at £294 ($449.50) so you might think that this alone could be a concern for cash-strapped Americans.

However, as ever, F1 follows the money and, if a big enough cheque was handed over then it wouldn't be impossible to imagine a GP taking place in Iraq. There have been well-documented disputes between the organisers of the race in Austin but from the very start they have been upfront about the sources of their funding. Texan billionaire Red McCombs and private equity boss Bobby Epstein committed to providing money with the former giving an interview to Pitpass' business editor Christian Sylt to promote his involvement.

Since then, it is understood that the Austin race organisers have been in touch with additional backers. Investment firm Anchorage Capital was recently considering putting money in but backed out according to one of its officers Neel Gehani. Regardless of who provides additional funds, one thing that is clear is Austin has got money.

Shouting about having backers makes perfect sense and is completely normal behaviour for an F1 race or team. The logic behind it is simple.

F1's history is littered with races which failed to get off the grid ranging from flights of fancy such as Cancun and Cape Town to Moscow (which had a press conference to announce its race) and of course Donington which was only scrapped a few months before the British GP was due to take place. Investors and sponsors around the world are well aware that F1 is a risky business so the last thing they want to do is commit funds to a race if it looks like there is a chance of it failing. The best way to prove that a race is a safe investment is to publicly reveal the backing.

We aren't saying that New Jersey lacks backers but we are saying that, in F1 terms, it is unusual that it has not revealed their identities. Most people involved with F1 aren't shy of showing off their funding for the good reason explained above. At a time of economic decline being upfront about funding is the only way to be really sure that two races can take place in a country with such a poor track record as F1 has in America. It is hard to forget the words of Donington's former boss Simon Gillett who said that his race "will bring significant investment and regional development" yet just over a year later it was scrapped for failing to pay F1 boss Bernie Ecclestone the hosting fee.

A senior source in the US motorsport industry told Sylt in October on condition of anonymity that "Hindery has already appointed a marketing firm to find sponsors for the event. To do this within hours of the launch suggests that either the promoter is highly organized or finding other people's money to stage the race is important or (most likely) both."

Sylt is also aware that the New Jersey project is in the process of appointing a president and PR executive. Ironically, one thing it doesn't seem short of is senior executives. There's Hindery and his private equity company Intermedia. Former NASCAR race promoter Humpy Wheeler and his son Trip are also involved. Sylt also understands that businessman Les Delano is involved. Longtime Pitpass readers may remember his name from when he was chief executive of marketing firm Octagon whose contract to run the British GP was prematurely terminated in 2004.

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