OPINION: Making sense of Andretti and Formula 1
By Mat Coch
Wednesday 11th January, 2023 - 10:00am
The efforts of Michael Andretti to have his eponymous organisation join Formula 1 have proved divisive.
On the one hand, is the FIA, and more specifically support its President Mohammed Ben Sulayem.
Seemingly on the other is the sport’s commercial rights holders, headed by ex-Ferrari boss Stefano Domenicali, and a host of teams themselves.
It entitles the latter to an opinion as it is their businesses that would be affected most directly by Andretti’s arrival.
However, they ultimately hold little sway in the decision one way or the other over the American team’s fate.
Instead, it is the FIA and Formula 1 in concert that will decide whether the Andretti name joins the grid.
Why then are they seemingly at loggerheads, and what is actually going on? They’re valid questions with, currently, no satisfactory answer beyond ‘politics’.
From the outside, it seems there is sound reasoning in allowing Andretti into Formula 1.
It is an established and respected name in global motorsport and, being American, addresses a market Formula 1 is currently pursuing earnestly.
The addition of General Motors is also positive with the outward perception at least of manufacturer involvement.
GM’s involvement needs to be taken with a grain of salt as the details of what exactly it will do is unclear.
There are no plans for the American car maker to develop a power unit, suggesting its role is more akin to that of Alfa Romeo than Audi.
Alfa Romeo currently holds a commercial deal with Sauber Motorsport which sees the Swiss team branded in its name.
Audi, meanwhile, is joining the sport as a power unit manufacturer and is gradually increasing its relationship with, ironically enough, Sauber which will see it become the squad’s factory team.
It’s an altogether different level of investment.
For now, the GM announcement appears little more than a sponsorship arrangement, a point those in charge of Formula 1 have noted.
Hence the subdued response to the announcement last week, especially since there have been claims since then that Porsche, Hyundai, and even Ford.
Porsche’s interest is known, though just how serious the latter two are is unclear.
Speedcafe.com understands Hyundai has little interest in Formula 1, while Ford’s last factory effort ultimately led to what is currently the Red Bull team (through Stewart GP, and then Jaguar).
Hyundai and Ford are apparently having their conversations behind closed doors, unlike Andretti.
That’s handy as there is no way to really interrogate the claim, as it would be easy for the sport to state that it does not comment on speculation or commercial matters, and the car companies to refute ‘speculation’.
The simple fact is, however, that there are few secrets in Formula 1 – the truth always finds a way to leak out.
It is therefore somewhat difficult to believe that there are other parties beyond Andretti as serious about an entry.
Further to that point, there has been no mention from FIA President Mohammed Ben Sulayem about them, a curious state of affairs given his public support for the American effort.
The FIA boss is not necessarily pro-Andretti so much as pro-Formula 1, and he sees value in the new operation.
He would likely see value in interest from Hyundai and Ford, but there have been no hints of that in his public comments.
And when one boils the process down, it is the FIA that would approve any new entry.
It is the FIA Formula 1 world championship, with ‘Formula 1’ simply the organisation owned by Liberty Media which currently holds the sport’s commercial rights.
That allows it to earn income from television, sponsorship, and so on while freeing the FIA to manage the regulatory side of the sport – a point that was clearly defined by the European Union in a ruling that dates back more than two decades.
Complicating affairs however is the Concorde Agreement, a deal between each of the teams and Formula 1 (the organisation) guaranteeing their appearance at each event in exchange for a financial consideration.
In that document are a number of regulatory matters, including the definition of jurisdiction and others – as came to light during Oscar Piastri’s contract saga last year.
However, it is fundamentally a commercial arrangement and cannot, by EU ruling, be regulatory.
Hypothetically then, the FIA could accept Andretti’s entry and leave Formula 1 to sort itself out after the fact.
In reality, that will not happen as the regulatory and commercial sides of the sport work hand in glove.
The FIA and Formula 1 must therefore both agree to allow Andretti in, and while the FIA is seemingly looking at the greater good of the sport, Domenicali and co will be looking at the financials – both immediate and long term.
The Formula 1 grid currently sports 10 teams who enjoy a more equitable split of the sport’s prize money than ever before.
That comes at a time of strong growth globally, but especially in the United States, which is driving up the value of the championship and each team.
Throw in Financial Regulations which limit what teams can spend and the financial underpinnings of Formula 1, at least currently, sound to the point a well run operation could well be profitable even without significant success.
The hesitation of rivals to a new entry is therefore more a means of protecting franchise value and projected profits than ere survival, as would once have been the case.
To protect that income, a new entry currently faces a $200 million anti-dilution fee.
That figure was designed to offset and drop in prize money for incumbent operations should a new entry be admitted.
Between the 10 current teams, that amounts to a one-time payment of $20 million. In Formula 1 terms, chicken feed.
The current Concorde Agreement ends at the conclusion of 2025.
With nothing currently in place, entering for 2026 could again, hypothetically, be done without having to pay such a sum.
It has been claimed that the figure could rise to $500 million when the Concorde Agreement is renewed.
That sum is more in line with that in place in other sports and is arguably more in line with Formula 1’s current financial health.
Of course, none of this addresses why Formula 1 is cool on the notion of Andretti entering the sport – to the point there was no coverage of last week’s developments on the sport’s official site.
Instead, there was a statement downplaying its significance, contrasted against Mohammed Ben Sulayem’s support.
There are games afoot between Formula 1 and the FIA which begs the question; is Andretti a pawn in the chess match between the pair, or will it be checkmate for the American operation?
Andretti’s F1 berth was the subject of this weekend’s Pirtek Poll, where we asked whether you’d like to see the squad on the grid.