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Force Strulovitch 2018


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#61 Rad-oh-yeah?

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Posted 29 August 2018 - 15:39

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Why Force India’s rescue deal could still unravel
RacingLines
29th August 2018, 12:00
Dieter Rencken


The Formula 1 field was in danger of shrinking to 18 cars until an 11th-hour deal on the eve of practice for the Belgian Grand Prix put Force India back on the grid.

But in the haste to rescue the team, and facing unprecedented legal complications, was the deal built on solid foundations? @DieterRencken followed developments closely in the paddock at Spa, spoke to the major players involved, and offers his insight.

In his post-Belgian Grand Prix media briefing, Formula One Managing Director Ross Brawn referred to the outcome of the race weekend for Force India thus: “What an incredible weekend for Force India. Reborn as Racing Point Force India, on Saturday it got both its cars onto the second row of the grid and on Sunday brought both cars home in the points, in fifth and sixth places.

“It was very important that this story had a positive outcome, thanks to the efforts of all those involved, including the FIA and the other nine teams entered in the championship. It was significant for the good of the sport, for its credibility inwardly and in the eyes of the outside world, and above all for the hundreds of the team’s employees and their families who were worried about job security.”

There is no disputing it was a fairytale result for a team that headed for F1’s summer break with their employer in administration, and participation in Spa-Francorchamps unsure until Thursday evening, when the sport’s governing body, the FIA, confirmed it had awarded the reconstituted team – Racing Point Force India (referred to here as RPFI here in order to differentiate it from what went before) – an unprecedented mid-season entry.

However, as the polemics surrounding the team unravelled during the weekend, so it became increasingly apparent that not all was what it seemed at first glance, and thus Brawn’s comments that “that this story had a positive outcome” may yet turn out to be overly optimistic.

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Esteban Ocon put his Force India third on the grid

As always in F1, Isaac Newton’s Third Law applies: that there is an opposite and equal reaction to every interaction; or, phrased differently, every dollar granted to the resurrected team from the teams’ “pot” through largesse is one less dollar collectively split amongst the rest. Consider the “swing” effect of that dollar: RPFI gains more performance, and the rest less.

Hence it was surprising to learn that all nine teams had (allegedly) had signed waivers that granted RPFI access to so-called Column 1 funding two years earlier than the norm. In simplified terms, F1’s prize pot is split into two equal columns: Column 1, divided equally amongst all qualifying teams, and Column 2, which is disbursed on a sliding scale (19%-4%) amongst the top ten finishers in the previous year’s championship.

Here, though, is the rub: To qualify for Column 1 proceeds, teams need to finish in the top ten in two of three previous years, and thus it follows that RPFI would qualify for Column 2 money only after end-2019, at earliest. Given that the money pot is finite (see here for further details) it follows that concessions made to RPFI have the effect of reducing total payouts to others by an equal amount.

Notes: Bonuses paid to Ferrari, Mercedes, Red Bull, McLaren and Williams are calculated separately, and not included in the “pot”.

When Sahara Force India (hereinafter referred to SFI) went into administration during the Hungarian Grand Prix, it was clear that the preferred buyer was a consortium headed by Lawrence Stroll, with (unconfirmed) reports having it that Mercedes, a substantial creditor due to unpaid engine bills, would refuse to supply power units to other purchasers – and possibly even waive any accrued debts dependent upon final purchaser.

Indeed, on Hungary Sunday Lawrence Stroll was seen scuttling about in company with F1 CEO Chase Carey, soliciting permission for Force India, should the former’s consortium be chosen as new owner of the team by SFI’s administrators FRP Advisory LLP, to retain the Column money. The argument was that agreeing to the Column 1 waiver would save the jobs of 400 employees and keep two cars on the grid.

Our best information is that all teams bar McLaren, Renault and Williams agreed to a waiver from Column 1 conditions as outlined, although they subsequently clarified that they did not refuse outright, but had instead sought certain clarifications before appending their signatures to the document.

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Rivals fear Force India becoming a Mercedes ‘B team’

According to insiders, there was little doubt that they would eventually sign, as none wished to stand accused of influencing any potential sale through withholding their signature(s), with the subsequent loss of a team, 405 jobs and two cars on the grid.

The clarifications they sought are believed to relate to any newly constituted operation’s relationship with, in particular, Mercedes, as they feared that any contractual arrangements going forward could see the resurrected operation mutate into a (semi) Mercedes ‘B” team, similar to the Ferrari-Haas/Sauber axis and Toro Rosso’s relationship with Red Bull Racing.

As an aside, Wolff is not, and never has been, listed as a director of the engine supply entity Mercedes AMG High Performance Powertrains Ltd. (Company number 01760288). That may, or not, be relevant as the saga unravels.

However, the crucial issue is that at the time Stroll and Co sought the waivers for the take-over of a going concern, i.e. a company continuing as-is save that names of directors and shareholders are changed in registers with all other operational details remaining the same – with all debts settled by the administrator out of sale proceeds.

Thus the team would continue to race under the Sahara Force India licence, personnel would remain the same, and all contracts would be honoured going forward, save those that would be novated (cancelled, altered or transferred by mutual consent). Indeed, the only change would be that Vijay Mallya would no longer be team principal, with the new owners taking the place of the out-going group.

Neat.

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Stroll lobbied teams over prize money waiver

Or so they all thought, including Sergio Perez, who initiated the administration via Brockstone, an entity linked to the Mexican, and SFI COO Otmar Szafnauer, who, even before the process was triggered, spoke of “…this critical period, which might last a week or two, we have to keep our heads down, do the best we can here, go enjoy, after the test, enjoy our break and then come back fighting thereafter…”

Now compare his words, said a full six hours before a London High Court delivered his administration verdict, to what we now know: That a “going concern sale” proved complex due to delays (whether justified is not relevant here) on the part of 13 Indian banks who held orders over Force India Formula One Ltd (SHI’s holding company) and Diageo, owner of Jonnie Walker, who held a lien over the entity.

Indeed, there were doubts whether all the agreements could be obtained at all, let alone in time for SFI to reassemble in time for the Belgian Grand Prix, so Plan B was hatched: Stroll and Co would acquire the assets to the team in the name of a shelf company, but not title to the holding company. The new company, racing Point, would then need to apply to the FIA for an entrant licence – crucially as a new team.

Not so neat, after all…

An analogy: a computer consists of software and hardware, both of which are required to mesh seamlessly to operate. Effectively, for purposes of explanation, the holding company is the software portion of the operation, and human capital, facilities and cars constitute the hardware.

Stroll and Co acquired the hardware but not the ‘corrupt’ software – to apply an IT phrase – and thus the cars could not run unless a new software licence was acquired. Said license was awarded by the FIA late Thursday.

Now consider the legal status of that original waiver, granted by six teams, including Haas, on a going concern basis, yet here was Racing Point requesting an entrant licence for a new team. Is there a difference? A technical one, certainly.

Consider: when Haas entered F1 in 2016 team owner Gene Haas did so in the knowledge that Column 1 monies would be denied them until end-2017, even if they won all championships going in the interim. True, the machine tool magnate accepted the terms and conditions and entered all the same, but the flip side is that they created at least 250 jobs – with more to come over the years – and added two cars to the grid.

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Szafnauer said Force India’s rivals did “the right thing”

Did anyone come rushing to Gene’s aid and offer waivers at the time? Had Haas, though, acquired an existing team on a “going concern” basis – which did not save jobs or add cars to the grid – they would likely have qualified for Column 1 immediately. Spot the anomalies?

Herein lies the legal challenge for F1, for RPFI and all affected parties: According to information obtained from various sources, and shared with the FIA and FOM personnel to ensure that there exists no confusion, the six signatures obtained in Hungary specifically referenced a team take-over, whereas those subsequently obtained refer to as asset sale. So oranges and apples mixed to create vegetable pie…

To add further spice, a number of sources are adamant that some clauses were retrospectively amended as the revised circumstances arose, yet not all signatories were advised accordingly. So what they thought they’d signed for is possibly not what is now reflected.

Then, on Friday Formula One Management’s legal department allegedly circulated yet another document to all teams, requesting that they attest to not having placed under duress or coerced into signing whatever waivers they signed in the first place. Curious.

This may explain Szafnauer’s intriguing choice of words when asked in the Friday FIA press conference whether RPFI faced any consequences due to the situation: “The remaining nine teams have signed, so to speak, a document that enables us to keep the money that Sahara Force India had earned in years past.”

Why the “so to speak”? Possibly Szafnauer knew then that not all “the remaining nine teams” had signed the same document? That evening, during the team’s own media session, he suggested that all teams had signed the waiver because they thought “it was the right thing to do”.

Thereafter we were requested to leave Force India’s hospitality unit as a crucial meeting had been called – and one by one the team bosses entered, to be addressed by Stroll, who reportedly explained to them why not voiding their signatures due to the changed circumstances would be the right thing to do. Curiouser.

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Rival bidder Mazepin is unhappy

Given the foregoing it is not rocket science to deduce that the entire sale could yet unravel spectacularly, particularly if legal challenges are mounted against RPFI and FOM – and that reckons without demands by Uralkali, linked to unsuccessful billionaire bidder Dmitry Mazepin, that FRP Advisory provide satisfactory answers to their questions – as originally revealed here.

FRP Advisory has (twice) told RaceFans: “All bidders were given equal opportunity to submit the best deal for Force India. Throughout, we (the Joint Administrators) have closely followed our statutory duties and objectives as administrators and had the advice of experienced legal counsel.” Yet, clearly, Mazepin is not convinced.

Sitting in the middle is the FIA, which moved heaven and earth to grant a mid-season entry to the team, based on the assurances that FRP has acted correctly and information from FOM that all teams had agreed a waiver – which they apparently had, although possibly not all the same waiver with identical clauses…

It seems that, on the basis of the information provided to the FIA, the governing body acted impeccably throughout – even if the court processes which saw SFI excluded from this year’s championship could have been more transparent, and the late entry fee paid by RPFI made public – yet all its work may still be undone by the courts.

The absolute irony is, of course, that the bilateral agreements between teams and FOM permit teams to “fail to participate in more than three (3) events in the same FIA F1 Championship before they shall be considered to have withdrawn from the championship”.

On that basis FRP and any prospective buyer could have sat out Belgium, Italy and Singapore before returning to the championship chase for Russia – providing nine weeks for resolution – in an orderly manner. That way an asset sale would have been a last resort rather than a rush resort.

The sooner F1 learns that rush jobs invariably end in botched jobs and that the true victims of every botch job are very real human beings with very real families – in this instance 405 dependant units – the better in every respect.


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#62 Rad-oh-yeah?

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Posted 30 August 2018 - 21:18

Force India may not receive its full share of Formula 1’s prize money as at least one team has not signed the latest version of the proposed agreement for it to do so.

RaceFans revealed last week all nine of Force India’s rivals had agreed the team should continue to receive its share of F1’s ‘Column 1’ prize money following its rescue from administration.

However it subsequently emerged not all teams have given their written consent since it became known Force India would have to re-enter the sport under a new licence. New entries to the sport do not receive ‘Column 1’ money until they have finished in the top 10 in two out of three consecutive seasons.

Asked by RaceFans at Monza today, Haas team principal Guenther Steiner confirmed his team has not signed for Force India to continue to receive the money after becoming a new entrant.

“With the new licence, we didn’t sign for that,” he said. “We still need to understand why it should be different.”

“Not signing doesn’t mean that you are right,” Steiner added, saying the team is awaiting further explanations from FOM and FIA.

“What you need to understand is with the new licence, why would there be a reason not to be treated like a new licence?” he said. “That is what we need to understand. We cannot explain it to ourselves, somebody has to explain it to us, and that hasn’t happened yet.”

Steiner said he was not aware whether other teams are also yet to agree the same terms.


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#63 Rad-oh-yeah?

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Posted 05 September 2018 - 18:49

Dzin Has najavio da ce da tuzi "sve koji su odobrili da Strol dobije novac od prethodnih rezultata Fors Indije" jer kao nova ekipa oni po pravilima dve godine nemaju prava na to. U slucaju da se insistira da Strol dobije taj novac, Has ce traziti da se ista suma isplati i njima za njihove prve dve sezone u F1.


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#64 Hertzog

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Posted 05 September 2018 - 22:34

Sasvim logicno i nadam se da ce dobiti ovu bitku. Pojeli su ogromno govno sa FI ove sezone
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#65 Rad-oh-yeah?

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Posted 13 September 2018 - 15:14

Esteban Ocon admits his prospects of staying on the Formula 1 grid next year are getting slimmer.

 

Kako stvari stoje, lako je moguce da ni kraj ove sezone nece docekati na gridu, jerbo je Lorens Strulovic namerio tu da ugura svog sina.


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#66 Rad-oh-yeah?

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Posted 17 September 2018 - 16:29

Force India will impose team orders that prevent Sergio Perez and Esteban Ocon racing each other on the opening lap after colliding at the start of the Singapore Grand Prix.

Ocon was attempting to pass Perez around the outside of Turn 3 but the two Force Indias touched, with Ocon being launched into the wall as a result. Perez claimed he was not aware his teammate was alongside him at the time, but team principal Szafnauer says there is no excuse for not leaving another space for the other car.

“It’s unacceptable for them to come together like that in an area there’s no run-off room,” Szafnauer told Sky Sports. “They’ve got to leave each other room. The team is more important than any one individual and we’ll have to go back to the rules we instilled on them last year.

“If that’s what they’re going to do we’re going to have to take control from here. Once they’re in the car it’s hard to control what they do but prior to that we can control them.”

“You say to (Perez) that it’s unacceptable. There’s enough room on the left-hand side as I can see and you’ve got to give your teammate enough room. If it’s somebody else, if it’s not your teammate then it’s a racing incident but if it’s your teammate you’ve got to give room.

Force India previously imposed orders on the pair after they came together in Azerbaijan and again in Belgium last season. Not only is Szafnauer planning on returning to those previous rules, he suggests there remains the option to stop them racing each other at any stage.

“It’s been over a year since it happened and it was in Baku last year that we installed the rules. It was after Spa, if you remember, and from Spa until here it hasn’t happened so we are back to the old rules.

“We allowed them to race on lap one whereas in the past we didn’t allow them to race on lap one and now we can remove that. If they continue to do this, even on lap one, then there’s other ways to separate them which we hope that we don’t ever have to employ.”


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