by Terry Lovell
The 2005 grand prix, though, gave fans little to laugh about. A dispute over the safety of Michelin tyres after Ralf Schumacher’s Toyota crashed badly on turn 13 – a high-speed banked turn unique among F1 circuits – due to a left-rear tyre failure led to seven Michelin-shod teams (Renault, Red Bull, McLaren, BAR, Toyota, Sauber and Williams) withdrawing from the race. The FIA rejected Michelin’s suggestion of introducing a speed-reducing chicane on the grounds that it would be unfair to Bridgestone, who had come with properly working tyres. Farcically, only the Bridgestone-shod teams – Ferrari, Jordan and Minardi – competed, resulting in global negative publicity in an important showcase market for the manufacturers, particularly Ferrari.
Some commentators and pundits predicted that this comedy of cock-ups might prove to be the last grand prix to be held in Indianapolis. They were wrong. The 2007 Indianapolis Grand Prix proved to be the last, due to the fact that Ecclestone and Tony George were unable to agree terms. Once again, to the frustration of both teams and US fans alike, Formula One disappeared from the biggest and most lucrative road car and motorsports market in the world, all because of Ecclestone’s lifelong mission to acquire yet a few more bucks.
Before his link-up with Tony George there was one other Stateside deal that went sour for Ecclestone. This time it was with Hollywood star Sylvester Stallone, who was keen to direct and star in a film on Formula One. At the Italian Grand Prix at Monza in 1997, Ecclestone signed, for the benefit of Stallone’s backers, an agreement provisionally granting him the film rights.
For the next two years, Stallone claimed he worked hard with lawyers and producers to formalise the financial arrangements. ‘I thought we had a deal but, every time I went to sign, Bernie would raise the price.’ Ecclestone claims he had been advised that the terms provisionally agreed with Stallone were too generous. The project went no further. But even if Ecclestone had been willing to proceed, it seems the project would have run into a major obstacle with the FIA. Stallone wanted the rights to the film for infinity, something that Ecclestone couldn’t guarantee, as the Formula One commercial rights will revert to the FIA on the termination of his contract with the governing body in 2010.
Mosley wanted to check the script. He explained he had to be sure that Formula One would not be portrayed in a sensational plot that was detrimental to its image. Stallone refused point blank, and phoned Ecclestone to express his anger at that ‘fugger Mosley.’
Notes
1. A Critique of the Economic Impact Evaluation of the 1996 Transurban Australian Grand Prix, report of Economist at Large & Associates.
2. Autosport, 1 August 1985.
3. Ibid.
4. Autosport, 28 June 1990.
5. Dallas Morning News, 4 August 1985.
10
HOW CANADA LOST ITS NSA – AND BRANDS HATCH AND SILVERSTONE THE BRITISH GRAND PRIX
By the mid-eighties the single most powerful voice in Formula One belonged to Bernie Ecclestone. He now assumed all authority in dealing with the teams, television broadcasters, sponsors, promoters, circuit owners and the FIA. By extension of his influence within the FIA, national sporting authorities (NSAs), invariably a country’s principal motoring organisation appointed by the FIA to ensure Grands Prix were run in accordance with its rules and regulations, also became subject to his control.
The NSAs discovered how vulnerable they were to the new rule of order through the examples of the Canadian Automobile Sports Club (CASC) and Britain’s Royal Automobile Club (RAC) – that it was no longer the FISA to whom they were answerable, which had been the case for more than 30 years, but to Ecclestone. The manner in which he removed the CASC as the national sporting authority of the Canadian Grand Prix, and replaced it with his own NSA, is particularly illuminating as an exercise in legal and political expediency. The message it sent out was clear: do not incur Ecclestone’s displeasure.
The conflict began, like so many others, over his financial demands on behalf of the FOCA. The sponsors, the Canadian brewery Labatt, who had promoted the Canadian Grand Prix since 1978, when it financed the construction of the Circuit Gilles Villeneuve in Montreal, claimed to be so concerned by Ecclestone’s increased demands, principally over the prize money, that the company expressed serious doubts to the CASC’s executive director, Bob Hanna, that it could agree terms for the renewal of its six-year contract with the FOCA to begin in 1985. It was already losing annually one or two million dollars, which was acceptable due to the promotional value of the Grand Prix, but Ecclestone’s demands threatened to double those losses.
The discussions between Labatt and Ecclestone during 1984 finally ground to a halt. The company informed the CASC, on 31 August, that it was serving notice of its intention to terminate its five-year agreement as sponsors, which had been renewed in 1983, because it had been unable to agree terms with Ecclestone. Its contract with the CASC was conditional on such an agreement. Hanna phoned Ecclestone, who told him that he was continuing to talk to Labatt, but, if a deal couldn’t be done, they would work together to find another sponsor/promoter. On 9 November Ecclestone contacted Hanna to tell him that he was close to concluding a deal. He had also advised Labatt that, despite the fact they had terminated their agreement with the CASC, the club must continue to be involved as the organiser. On 13 November Hanna received a telex from Labatt claiming that an agreement had been reached with Ecclestone and requested the CASC to sanction the race.
But what followed suggested to Hanna the real reason why Labatt had terminated its contract with the CASC. During its negotiation the company had applied considerable pressure on him to agree to sign over all commercial and sporting rights. This was not in Hanna’s power to do, even if he had so wished. The Concorde Agreement made clear that the sporting function of a Grand Prix, in ensuring that the FIA’s rules and regulations were observed, was the obligation of the national sporting authority, while the commercial activities were the responsibility of the promoter, who could have no control over the sporting role.
Now, in negotiating a new contract, Labatt tried to gain complete control of the event through its influence within the CASC. During the negotiations it stipulated that it would pay only a limited amount of out-of-pocket expenses for a few senior CASC officials, and it would also arrange for the Fédération Auto Québec, the Quebec branch of the CASC, to provide the necessary officials to look after the sporting activities. Hanna resolutely refused to agree to Labatt’s terms. But it seemed to confirm what he had suspected – that an influential Quebecois faction on the Labatt board of directors was pulling the strings.
It was given credence by events at a CASC board meeting on 7 December, when a stage-managed revolt, led by the Quebec region delegate, who later went on to join Labatt, resulted in a vote of no confidence being passed in the president, John Magill. The board directors – described by a senior official of another national sporting authority as ‘amateurs frightened of losing the Grand Prix’ – had been persuaded that he and Hanna had been the problem in negotiating with Labatt and, as a result, had put the race at risk. The board then appointed a committee, consisting of three directors, none of whom had any experience of Formula One negotiations, to conclude talks with the brewery, which led to the CASC signing over the sponsorship rights to the Canadian Grand Prix for five years, followed by a five-year option and then a five-year first refusal, and on terms advantageous to Labatt.
Labatt now believed that it was in a very strong bargaining position in concluding its contract with Ecclestone, which had yet to be signed. For a senior executive had contacted a leading figure of a national sporting authority outside of Canada to confirm if it was correct that, under FIA rules, a Grand Prix could not be held without the approval of the national sporting authority. He was told that this was so. With, as it thought, the CASC safely in its corner, and with a contract to prove it, Labatt believed that Ecclestone would have no alternative but to accept its financial terms. This was to fatally underestimate the man, or the power that
he wielded within the FIA. Balestre apart – and he was now very much on Ecclestone’s side – he was the one man who could tear up the rule book.
The CASC would also have been unaware that during this time Ecclestone had been busy behind the scenes opening up his options. As an insurance policy, he had been talking to an American called Jack Long, whose motor sport marketing company, Long-Dilamarter Inc., represented a rival brewery, Molson, which had been standing on the sidelines, ready and willing to sponsor the Canadian Grand Prix. When news of Labatt’s sponsorship deal with the CASC reached Ecclestone, he was furious at what he saw as a blatant attempt to outsmart him. He picked up the phone, called Long and agreed to sign a six-year contract with Molson.
When Labatt heard of Ecclestone’s deal with Molson, it remained defiantly chippy, insisting that it had the one contract that mattered – with the national sporting authority, the CASC. The company had seriously miscalculated, though. While a Grand Prix could not be held without the approval of the national sporting authority, an organiser or promoter first had to have an agreement with the FOCA before the FISA would approve a Grand Prix. It was a lock-up clause introduced in the first Concorde Agreement. The dispute between Labatt and Molson became so vexatious, with an exchange of writs between the breweries claiming the right to stage the 1987 Canadian Grand Prix, that it was cancelled, the first time it had been absent from the Formula One calendar since its inception in 1967. But while the two companies were preparing to square up in court, Ecclestone was quietly planning retribution.
With Balestre’s support, the plenary conference in Paris that October overwhelmingly backed a proposal that the CASC should be stripped of its national sporting authority status for failing to defend the ‘sporting interests’ of the FIA, namely by entering into a contract contrary to the terms of the Concorde Agreement, which allowed Ecclestone alone the authority to negotiate the FIA’s commercial interests. The decision, which made its contract with Labatt null and void, led to the expulsion of the CASC from the FIA. Labatt initially decided to challenge the decision in court but, two months later, withdrew the action. The company, said a spokesman, was left with the choice between protecting ‘our rights in the courts and risk the future of the Grand Prix for the next five years, or pull out’.
Labatt had learnt the hard way what was becoming universally recognised in Formula One – that the only contract that mattered was the one with Ecclestone’s signature on it. But there was now the question of who would replace the CASC as Canada’s national sporting authority. Ecclestone came up with a simple solution: he arranged the setting up of what was effectively his own national sporting authority. Its first president was a French-Canadian building contractor, a former CASC member, whom Ecclestone had come to know through the construction of the teams’ garages at the Gilles Villeneuve circuit. At that time, said a senior member of the FIA’s World Motor Sport Council, the rest of the executive committee consisted of a couple of his friends. Canada’s new national sporting authority, the Autorité Sportive Nationale du Canada FIA Inc., was given the rubber-stamp endorsement of the FISA’s executive committee.
A senior member of the World Motor Sport Council who attended the meeting commented: ‘I said to some of my friends, “Do you realise we have just given Mr Ecclestone a national sporting authority of Canada, because that man [the French-Canadian] is his front there.”’ Staff at the new national sporting authority came to include many of those who had actually worked for the expelled CASC, including its president, who replaced the French-Canadian – he quit after allegedly failing to persuade Ecclestone to invest in his business – before becoming chairman of the FIA’s Circuits and Safety Commission in 1998.
Jack Long went on to become Ecclestone’s representative in North America to promote the disastrous Grands Prix at Phoenix and Las Vegas. In April 1989 Ecclestone acquired Long’s Long-Dilamarter Inc., which, through a subsidiary called Canadian Grand Prix Enterprises, he would promote as well as organise the Canadian Grand Prix. It opened up a new enterprise for Ecclestone, which he was able to extend to America, although less successfully, through General Promotions Inc. in May 1989; to Belgium through Racing Francorchamps Promotion SPRL, which became Spa Activities in 1997; to Germany through Formel Eins Gesellschaft für Motorsport MBH in 1990; and to Hungary through Hungarian Formula One Grand Prix KFT, of which he owned 75 per cent, in 1991.
With the departure from the F1 calendar of the US Grand Prix in 2008, the Canadian Grand Prix, 750 miles away in Montreal, stood alone in bearing the North American banner. But not for long. After thirty-one years at Circuit Gilles Villeneuve, a permanent road course at Parc Jean-Drapeau on Île Notre-Dame, a man-made island in the St Lawrence River, it was about to be axed by Ecclestone. The Grand Prix F1 du Canada (GPC) president and chief executive officer was Normand Legault. Legault had been head of motorsport sponsorship at Labatt in 1978 and part of the management team in 1983, when the brewery and Ecclestone clashed mightily over the Canadian Automobile Sports Club.
Negotiations between Ecclestone and the GPC broke down in the autumn of 2008. In addition to an increase in the hosting rights fee, he was demanding that the promoter put up $175 million over five years covered by a government or bank guarantee. The GPC’s best offer fell far short – $110 million over five years without any financial guarantees. The breakdown led on 7 October to the FIA voting to remove the Canadian Grand Prix from the 2009 calendar. At the same time, it was announced that the Turkish Grand Prix would be moved from August to 7 June to replace it. The next day, 8 October, GPC announced that it would no longer continue as the promoter.
As a sporting event that regularly attracted as many as 300,000 spectators and worth between $75-100 million a year to the region, the political response was immediate. Quebec Premier Jean Charest demanded to know why the race had been taken off the calendar, and the Prime Minister of Canada, Stephen Harper, asked the Hon. Michael Fortier, a former Minister of Public Works and Government Services and who knew Ecclestone, to call the F1 boss to assess the chances of reviving negotiations. The call was apparently sufficiently optimistic to encourage the dispatch to London of a tripartite mission comprising senior representatives of the municipal, provincial and federal governments.
On 23 October, Gérald Tremblay (the Mayor of Montreal), Raymond Bachand (the Quebec Minister of Finances and of economic development of innovation and export trade) and the Hon. Christian Paradis (the Conservative Member of Parliament in the Canadian House of Commons and Minister of Public Works and Government Services) flew to London. Roger Peart, President of the FIA’s Circuits Commission, commented: ‘For me to go over there and try to lobby [Ecclestone] to get [him] to change his mind is a complete non-starter, unless I was to go over there with a major sponsor in my pocket who’s prepared to spend millions and millions of dollars.’
It proved indeed a non-starter. On 28 October, Ecclestone communicated the news to Tremblay, Bachand and Paradis that he would not budge on his terms or insistence on a financial guarantee. On their return from London, the offices of Tremblay, Banchard and Paradis began working on an improved offer as well as trying to find a promoter to replace Legault’s GPC, which proved unsuccessful due, they claimed, to the limited revenue generated by a grand prix that required the erecting and dismantling of fifteen grandstands, four bridges and miles of barriers, fencing and advertising hoardings around the 2.71-mile circuit.
The answer, it was decided, was to set up a non-profit organization that would introduce a new operational structure. It was on the basis of the creation of an NPO that, on 4 November, another contract proposal was put to Ecclestone. It included the participation of the government and tourist industry which, it was claimed, would ensure Formula One Management a further $50 million over five years. Ecclestone, though, was not for turning. It was on his terms or not at all. The Canadians finally accepted defeat.
In a press statement, Tremblay said: ‘We were constantly guided in our negotiations by principles of
responsible management. However, despite our endeavours and those of the business community, the demands of Formula One exceeded the taxpayers’ ability to pay.’ Blanchard said they had to been unable to meet Ecclestone’s ‘unreasonable demands… [and] unless he eases his requirements and adopts a different approach, there will be no grand prix in Montreal in 2009.’
Ecclestone claims that for him the issue was not about his financial terms, but money owed to him by Legault’s company. He said: ‘It’s all a bit political. The problem wasn’t that [i.e. what Ecclestone was asking]. It was that the old promoter [Legault] owes us, I think, $20 million.’ So if the debt had been cleared, the Canadian Grand Prix would not have been dropped from the calendar? ‘It probably wouldn’t have disappeared. We went there [for previous grands prix] knowing full he is not going to pay us. That was the major problem in Canada not getting a grand prix. Absolutely. Not only did he not pay us that [$20 million], but he owed money from before that. The last race [he said], “It’s not going to happen again. We are going to be able to meet our debts and pay off what we owe you from the past” and all that business. But it never happened.’
GPC admits there is a commercial disagreement with Ecclestone, but denies grands prix other than the 2008 event are involved. Mr Paul Wilson, Vice-President Marketing of Grand Prix du Canada, said in a statement: ‘Contrary to allegations made by Bernie Ecclestone regarding money owed by Grand Prix F1 du Canada for past hosting rights, the organizers of the Canadian Round of the Formula 1 World Championship would like to make clear that Mr Ecclestone has received and accepted the terms of payment that were fully agreed to for the 2006 and 2007 events.