During the past decade, Formula 1 has become increasingly dominated by the world’s largest car manufacturers. Major car companies have always played a part in Formula 1, to one degree or another, but during the opening decade of this millennium we have seen the manufacturers’ impact grow to the point where they seriously considered banding together and forming a rival series. At the peak of this period, Formula 1 teams either owned outright, or insignificant part, by major manufacturers included Ferrari (a division of Fiat), McLaren (40% owned by Mercedes), Honda, Toyota, Renault, Jaguar (a division of Ford) and BMW.
This is a stark contrast from previous decades, during which the sport had been dominated by smaller, privateer teams. During the privateer era, manufacturers generally confined their participation to engine supply. During recent years, however, as teams sought additional funding to cope with technological advances, and manufacturers began to view Formula 1 as both an R&D lab and a marketing platform, we the big car companies either buying existing private teams outright, or starting new team operations from the ground up.
One of the most obvious effects of this change was a fiscal one: major corporations begat major budgets. The general level of spending was boosted to a level well beyond the reach of the smaller, privateer teams, with the result that many of them, including Stewart, Jordan, Sauber, Tyrell, BAR and Benetton sold their operations to manufacturers.
There is, however, an inherent problem in the ownership of sports teams by major corporations. The core business of these companies is selling road cars, and ultimately the boards of directors (and by extension, the stockholders) must be convinced that a participation in Formula 1, regardless of the glamor involved, somehow benefits the bottom line. If a simple cost-benefit analysis repeatedly shows that the money is being wasted, it’s inevitable that the parent company will pull the plug on the venture, even if, as was the case with Toyota, the F1 budget is only a small fraction of total overhead.
Furthermore, we have typically seen such decisions being made in the course of a single directors’ meeting. Such was the case with Ford, Honda, BMW and now Toyota. Clearly, this is detrimental to the continuity of the sport.
It’s also true that most of the manufacturers were doomed from the start. In an ideal world, perhaps wins would be evenly distributed amongst all teams, but Formula 1 does not belong to that world. Typically, success runs in cycles, with one team or two teamas dominating the podium each year. The teams might change, but not the distribution. It could probably be charted as a mathematical constant. This is very different from the world of making road cars, in which several different manufacturers can share the total car market and reap huge profits. Apparently, the manufacturers thought they could apply this general model to Formula 1 – but they were wrong.
With Toyota’s announcement today that they are withdrawing from Formula 1, there are only three manufacturers left with a significant ownership stake in F1 teams: Ferrari (Fiat), McLaren and Renault – and Renault is rumored to be on the bubble. If they have another season as dreadful as 2009, no one should be surprised to see them bail out.
This would return the sport to where it was in the early nineties, with minimal factory participation. McLaren, while backed by Mercedes, are still technically a privateer team, and Ferrari is a hybrid, having orignally been founded by Enzo Ferrari as a means of funding his racing. It would make more sense from a marketing perspective if the car makers returned to supplying engines, leaving the privateers to construct the cars. It would be analagous to having a diversified stock portfolio. Risk would be minimized, and potential reward would be maximized. Likewise, it would guarantee a greater supply of engines to privateer teams, and at this point it seems that the privateers are once again poised to be the foundation of the sport.
One is thankful that teams like Williams, Red Bull, and the fledgling Brawn, have been able to hang on. It might be that in the coming years, they’ll be considered the sport’s big guns.
Image source: Wikipedia, licensed through Creative Commons.