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Pure speculation?
Posted by: TerraNova19
Date: 06/09/2017 12:25
Pure speculation?
September 6, 2017 by Joe Saward

This is the season of pure speculation in Formula 1, if one looks at some of the stories to be found on the internet. It reads sometimes as if the bottom-feeders, committed to providing x number of news stories a day, are simply linking every driver with every seat that is available…

In reality, the silly season is largely hot air, with few major changes expected between now and next year. It looks like Sergio Perez will end up at Renault, Pascal Wehrlein at Force India, if the team can be convinced to take him, and Charles Leclerc at Sauber. Williams will likely remain unchanged unless the team can find someone over 25 who is better than Felipe Massa – and who hasn’t already been and gone from F1. Hence the recent Kubica stories.

Fernando Alonso will stay at McLaren if Honda leaves. We do not expect to see Fernando opening any Honda dealerships any time soon and the Japanese are unlikely to welcome him into one of its Indycars any time soon. The fact that Takuma Sato last week announced he was leaving Andretti Autosport for Rahal Letterman Lanigan Racing, suggests that’s Michael Andretti’s recent negotiations with Chevrolet did not go down well in Japan, even if Michael has now re-upped with Honda. The Japanese are big on loyalty…

The big question in F1 is what happens at Honda and I have a theory about this. Honda is a listed company. There are rules it must follow and keeping decisions quiet is frowned upon by stock market regulators. Honda was due to have a board meeting on Monday night to discuss F1 and the fact it is now Wednesday, heading towards Thursday in Japan, would seem to suggest that the board has made a decision which did not need to be announced. Logically, that would that it will stay in F1, rather than quit. That may not be the case, but listed companies tend to make announcements quickly. The board was keen on reviving the McLaren-Honda legend of 1988-1992 to give itself more appeal in the car markets, but it seems that this choice is no longer available, as McLaren is intent on termination and a switch to Renault for 2018, 2019 and 2020. After that it is expected that the team will build its own engines for the new F1 rules in 2021. This may seem tough on Honda, but it is fair to say that the Honda engines have been a massive disappointment.

McLaren feels it must make the change just as back in 2008 Honda felt it must quit the sport. As it turned out that was not a great decision as the team was sold to its management, with sufficient money to avoid all the termination costs that would otherwise have been incurred. Honda then had to watch as Brawn GP won the world title, using a Honda chassis and Mercedes engines.

No announcement suggests no pullout and one might assume that work is now ongoing to complete a deal with Red Bull to supply Toro Rosso in 2018 and Red Bull Racing in 2019 – if things go well in the first year. The deal would be financially advantageous to the teams – in other words they would save Red Bull a ton of money. You might ask, why would Red Bull care about cash? Well, there is a school of thought in F1 that is arguing that Red Bull boss Dietrich Mateschitz has had his fill of F1 and wants to move on to new dangerous activities to keep Red Bull edgy for the next generation of adrenaline freaks. He is contractually committed to F1 until the end of 2020, with massive penalty clauses if he pulls Red Bull Racing out before then. This could cost hundreds of millions of dollars and so the best strategy is to stay involved, take the prize money on offer (which is why there are penalty clauses) and reduce costs as much as possible by doing deals for the remaining years. The TAG-Heuer engine branding deal is just such as arrangement, while the Aston Martin sponsorship deal looks more like an exit strategy, with the team becoming Aston Martin-owned in the long term. Obviously Aston Martin is short of cash, but royalty deals on the (Red Bull-designed) Valkyrie supercar project justify the signage on the F1 cars and a Red Bull fade-out, with the Austrian firm remaining the title sponsor for three years, but paying nothing in 2021, 2022 and 2023, means that the purchase price can be made much more manageable.

This probably explains why Christian Horner has become such a convert to cost-cutting and cheaper engines in the future, in expectation that he will lead (and be a shareholder in) an Aston Martin F1 team, securing Adrian Newey’s services with shares, as well. Thus if the Honda engine is decent and there’s money behind it, that would get Red Bull Racing through 2019 and 2020, at much reduced cost.

If one looks at Red Bull’s sister squad, Scuderia Toro Rosso, it is already known that the team is for sale. Almost half the operation now works in the U.K. And the team recently re-signed James Key, to maintain the value in the business. Getting Hondas in 2018, 2019 and 2020, would get the team to the end of the current commercial agreements and ready for the new era of F1 in 2021. The relationship with Honda would be good for whoever owns the team by then and would add value to the team if the Honda engines become competitive. A similar Red Bull fade out sponsorship in 2018, 2019 and 2020 would mean that the price could be reasonable for any buyer out there and while moving the whole team to England might not be desirable for the folks in Faenza, it does make sense, although these days teams can be a little more multinational, as we see with Haas, which has designers and manufacturing in Italy, research and development and marketing in the US, and the race team in the U.K.

The key to these moves is a sensible set of cost-effective rules for 2021 and beyond, but these seems to be in the pipeline. If the costs can be brought down and the revenues pushed up then more manufacturers will come to F1, which explains the Porsche and Alfa Romeo stories of late. Others may follow…

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