FLASH: F1 is reportedly planning to replace its CEO, Chase Carey with Toto Wolff, boss of reigning champions MercedesAMG.
F1 is owned by the investment firm Liberty Media’s Formula One Group (NASDAQ:FWONK).
British billionaire Bernie Ecclestone, who had been F1’s boss for nearly 40 years, was replaced by mustachioed Chase Carey
Liberty’s contract with auto racing’s regulator, the Fédération Internationale de l’Automobile (FIA), grants it the rights to commercialize F1 until Y 2110 but its contracts with the 10 teams expire at the end of next year. The contracts outline how much the teams are paid and commit them to race.
There are 20 months to go before those contracts expire and the teams have not signed up to new terms. Meaning, as things stand, F1 has no guaranteed revenues beyond the end of next year.
The owners of the Top 3 teams: Ferrari (NYSE:RACE), MercedesAMG, and Red Bull Racing have all threatened to quit over Liberty’s plans to reduce their prize money and curb their spending from Y 2021.
Complicating the situation, it was thought that Mr. Carey’s contract ran until the end of Y 2019. But, a source has confirmed that it expires at the end of Y 2020 which should enable him to see through the signing of the new contracts with the Key teams.
A report Thursday on Racefans confirms this and claims that Mr. Wolff is being lined up to replace Mr. Carey, F1 declined to comment.
A Key point that Racefans neglected to mention is that Ferrari has a say in whoever becomes F1’s CEO.
Ferrari is the only team which has been competing in F1 continuously since the championship was launched in Y 1950 and it is richly rewarded for doing so.
F1’s prize fund is equivalent to 68% of F1’s underlying profits and it is divided amongst the Top 10 teams. Last year they shared $913-M in prize money but several get more than others and Ferrari is 1 of them.
Ferrari also has the right of 1st refusal to supply cars for F1’s support series if the Porsche Supercup ever vacates this place. And Ferrari wields considerable influence in F1 through its CEO Louis Camilleri having a seat on the board of the sport’s parent company Formula One Topco.
Prior to the teams’ current contracts beginning in Y 2013 they were signatories to a 1 document called the Concorde Agreement which ran from Y’s 2009 to the end of 2012. The flotation prospectus reveals that under this contract F1 “must obtain the written consent of Ferrari prior to the appointment of any person as our chief executive officer if within the past five years, he or she has held a senior executive office or an ownership interest of 5% or more in any Team or automobile manufacturer which either owns more than a 5% interest in a Team or is a supplier of engines to a Team.”
That would give Ferrari a veto over Mr. Wolff’s appointment and although the Concorde Agreement ran until the end of Y 2012, that does not mean its terms are not still in force.
In a nutshell, the Concorde Agreement is F1’s governance contract and was signed by F1’s rights holder, the teams and the FIA. Although the last tripartite contract ran until the end of 2012, the Concorde Agreement itself didn’t stop there. It states that “‘Concorde Agreement’ means the Concorde Implementation Agreement.” Meaning the Concorde Agreement will be applied and renewed in respect of the period 1 January 2013 to 31 December 2020 and successive subsequent periods until 31 December 2030.”
In other words, the Concorde Implementation Agreement extended the Y 2009 Concorde Agreement so it is indeed still in force and will until the end of Y 2030.
Ferrari’s position on the nomination committee comes to an end when its contracts expire at the end of Y 2020 and of course it could agree to waive its benefits which some have said should happen.
The need for Ferrari to consent to F1’s new CEO is not the only veto it has. It can also block changes to the regulations, it “allow Ferrari to veto any change to the regulations already announced or introduced.”
Ferrari’s veto was formally granted to it by the FIA in a letter dated 17 January 2005.
It is understood that Ferrari founder Enzo Ferrari 1st requested the veto when his Scuderia was using a V12 engine despite F1 being dominated by V10-powered teams which were based in an area of Britain called motorsport valley. Ferrari asked for a right to block changes to prevent its engine from being banned even though it was bigger than the others.
As FIA president Jean Todt explained, last year, Ferrari “was the only team supplying engine and chassis against some other teams that were all powered by Ford. So at this time, it was decided that being away from what is called the silicon valley of motorsport, they needed to have a protection. That is the story about the veto. But personally, I feel now I am not in favor of that. Times have changed.”
However, it remains to be seen whether Ferrari would agree to waive its benefits knowing full well that Liberty may be planning to make a decision afterwards which it would have otherwise had a say in.
Ferrari and MercedesAMG have collaborated closely in the negotiations over a new contract with Liberty. They have shared the same view that if it changes F1 too much then they could both leave. However, it remains to be seen whether Ferrari would approve of the MercedesAMG’s former boss taking the wheel of F1 itself. With just 20 months remaining, Liberty could be in a race against time to navigate this Key obstacle.
Ferrari is the Aristocrat of the automotive sector.
Ferrari is the Aristocrat of the automotive sector.
HeffX-LTN overall technical outlook for RACE is Bullish across the board, and there is very little resistance here and none above 140.26. All of our Key indicators are Very Bullish in here.
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