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Richard Branson’s Virgin Racing a New Model for Privateer Success

Sir Richard Branson - hopes to apply his value model successfully at Virgin Racing

Sir Richard Branson - he hopes to apply his value model successfully at Virgin Racing

When the four new teams in Formula 1 (Manor/Virgin, Campos, Lotus and USF1) joined the grid for 2010, it was with the assumption that a new 45 million euro budget cap would be in effect for all participating teams.  The object of the budget cap was two-fold: (a) to help ensure the long-term viability of existing teams, and (b) to make it feasible for new teams with lower funding levels to join the grid.

The budget cap proposal never sat well with the existing teams (especially the better funded ones, like Ferrari and Mercedes), however, and to stave off a revolt by FOTA (Formula One Teams Association), the FIA was forced to revise their stance on budget cutting.  Ultimately, they accepted a proposal by FOTA that all existing teams would voluntarily roll back their use of resources and personnel to 1990’s levels by 2012, the final year of the current Concorde agreement.  The plan for an mandatory budget cap was scrapped.

This left the four new teams in an uncomfortable position.  Although the teams have been using 45 million euros as a target for funding, the bar has been raised again, meaning the gang of four will either have to revise their funding target accordingly, or find creative methods to leverage their minimal budgets to stay competitive.  Virgin Racing, in what might be a model for future privateer teams, has chosen the latter method.

“We couldn’t change tack,” Virgin’s racing director, John Booth, told BBC Sport.  “We couldn’t say we now need £200m; it’s not achievable. We took the decision to operate with £40m and that’s our aim.”

Virgin’s technical director, Nick Wirth, concurred: “I’m really sad there’s not a budget restriction. It’s a major mistake.  We signed up to something that said 45m euros (£40.1m) and that limits our ability to perform well in the first few years.”

Wirth (formerly a designer with March, Benetton and Simtek) will lead what is essentially an outsourced design operation through his own firm (Wirth Research), which has already enjoyed considerable success in designing a chassis for the American Le Mans Series’ Acura team.  Wirth’s shop will realize a huge savings by not using a wind tunnel, which in recent years has been seen as an essential component for every Formula 1 design shop.  Wirth, however, will rely solely on digital design using computational fluid dynamics (CFD).

As Wirth recently told BBS Sport, “CFD is absolutely critical (to our cost-cutting); it’s cheaper and faster. Is it a risk? No. But where we are on the grid is down to me.”

Meanwhile, Sir Richard Branson is transferring his brand from Brawn GP (now Mercedes) to the rebranded Virgin Racing (formerly Manor), with the idea that he will be able to successfully employ his “value” business model with the new team.  That model might generally be defined as achieving maximum effect with minimum expense.  In the case of his Brawn sponsorship, Branson reckons he realized roughly 68 million euros worth of TV exposure at a cost of 2.7 million euros in sponsorship.

While his deal with the new team won’t be quite along the same lines, it’s thought that Branson’s actual cash outlay will be minimal.  Instead of a simple infusion of euros in return for brand space on the monocoque, Virgin will be a full managing partner.  Virgin’s own commercial team will handle the commercial side of the operation from Branson’s existing offices.  They already have at least ten commercial partners, with commitments that secure an entire season’s funding for 2010.

Although Branson won’t get the same level of TV exposure from a team that very likely won’t be running at the front, what exposure he does get will feature his brand much more prominently.  And considering that he wouldn’t have been able to get the same value-for-money deal with Mercedes GP this year, the new arrangement makes perfect sense.

For his part, new Virgin pilot Timo Glock, fresh from two years on the now defunct Toyota team, his hopeful.  Said Glock, “I’m used to a team of 600-700 people and Toyota had one of the biggest budgets, but I still couldn’t win a race.  Now, I’m at a team with a low budget and 120 people. We’re not going to win a race in our first year but with the right people and no politics in the team you can still be successful. As long as we continue to develop I’ll be happy.”

Image by Richard Burdett, licensed through Creative Commons.

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