A leaked letter addressed to Bernie Ecclestone from Force India deputy team principal Bob Fernley has urged the 83-year-old to help the smaller teams either financially or by forcing a budget cap.
Ecclestone had informed the teams that he would raise the issue with CVC Capital Partners, but later decided that it would be a pointless exercise and instead asked the larger teams to give up a share of their prize money to help struggling outfits.
That idea was rejected by the ‘big five’, therefore leaving Force India, Lotus and Sauber without a solution.
In the letter, Fernley once again urges Ecclestone to find a way of distributing the sport’s revenues more fairly. At present, the ‘big five’ (Ferrari, Red Bull, McLaren, Mercedes and Williams) receive roughly 70 per cent of the revenue directed to the teams which totals £700 million ($1.1bn)*.
Of that £700m, just 25 per cent goes to the bottom four (Force India, Lotus, Sauber and Toro Rosso) and the remaining 5 per cent to Caterham and Marussia.
“After our meeting in Brazil we clearly see the direction of Formula 1 towards customer cars/super GP2. It is equally clear that the strategy group has no intention at all to reduce cost,” wrote Fernley in the letter.
“We would like to highlight that we came to you primarily with the request to reduce costs. Due to the lack of interest in pursuing this target we then addressed the distribution of income as a way to absorb the higher costs.”
In the letter, Fernley also rejected the idea that poor management and overspending was to blame – as suggested by Ecclestone – highlighting that almost 70 per cent of their prize money goes on power unit supply for a single season.
“Unlike manufacturer-owned teams, our core business is Formula 1. Yet, we have no choice but to spend most of our income on the engine, and the remaining 30 per cent is by far not enough to construct, enter and run a team over a 20-race season.
“The generation of further funds though sponsorship is achievable but we all recognise that other global sporting competitions are chasing the same sponsors which are at lower levels than even two years ago. It is challenging when the Commercial Rights Holder of F1 is also competing against the teams,” he added, in regards to F1 itself poaching sponsors such as UBS, Rolex, Johnnie Walker and Tata Communications.
The strongly worded letter went as far as comparing F1 to a cartel, something that would certainly raise eyebrows at the European Commission, as well as making clear that they are bound to the sport as it remains their only business unlike the big manufacturers.
“We understand that the distribution is based on our bilateral agreements. It is, however, known to us all under which circumstances we signed these deals. The shareholder’s focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation.
“Our teams have, like the others, a clear intention to continue as constructors in Formula 1, however, unlike the manufacturer teams, who could exit on the whim of a Board decision, Lotus, Sauber and Force India F1 are bound to the sport as it is their only business focus.”
He demanded a second meeting to discuss the matter further.
“I would respectfully urge you to spare time over the weekend to meet with Monisha [Kaltenborn], Vijay [Mallya], Gerard [Lopez] and myself to find an equitable solution to the distribution of FOM funds with a view to presenting a proposal and reaching a consensus with all the stakeholders.”
*Editors Note: The amount of money distributed to the teams annually is roughly £700m ($1.1bn), however this includes historical bonus payments to the five big teams based on how long they have been in the sport. The actual amount referenced in the leaked document quotes just £533m ($835m) in revenue. This figure does not include historial bonus payments.
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