Mark Hughes: F1’s hostility to Andretti smacks of greed

Although the FIA, as the sport’s governing body, has given its all-clear for Michael Andretti’s IndyCar team to join F1 from 2025 or ’26, the arguments continue to rage about whether the team can reach a deal with Liberty, F1’s commercial rights holder. Under the terms of governance the FIA has 12 team slots it can allocate, only 10 of which are currently taken up. But Liberty must approve – and a big part of that is the new team reaching a commercial agreement for its share of F1 income generated from hosting fees, TV rights, etc, something the existing 10 teams are opposed to.

The opposition of the existing teams to this idea is not difficult to fathom. They’d rather not have their share of F1’s income split 11 ways. They don’t get an actual veto, but their collective view carries a lot of weight. They were the original 10 signatories to the commercial deal with Liberty before the Netflix-driven boost in popularity supercharged the value of the teams, as franchise holders. Liberty in turn wants to keep its existing franchise holders happy and is somewhat caught in the middle between the FIA and the teams. It would rather the Andretti problem be solved through it buying an existing team, but Andretti already has a team and has spent millions in preparation for the bid. It has no wish to buy an existing team, especially since having its hands burned trying to buy Sauber in ’21. That deal was reportedly within 48 hours of completing when the terms were changed massively upwards (and soon afterwards Sauber reached agreement to sell to Audi).

But if F1 would like Andretti to stay away, it would very much like the partner Andretti has secured – Cadillac – to join the party. As the prestige brand of General Motors, it’s highly desirable. It’s as if the nightclub doorman has denied you entry but invited your girlfriend to step right in.

So is the existing teams’ position based purely on greed? Williams team principal James Vowles put the case for why that’s not so: “Williams is against the addition of an 11th team, and strongly against,” he said to Sky F1. “My responsibility is to the 900 employees within my company. If you look at Companies House, you can go and look it up for Williams. You will see from 2021 to ’22 [our] losses are in the tens of millions. The ’23 numbers you won’t see yet but it’s multiples above that.

“The reason why is we are investing in this sport to become better. We believe in where the sport is going. We believe in the direction of travel. We actually have a sustainable entity for once. But it should be known that this isn’t just us that aren’t financially stable. I’d say probably half the grid aren’t. I think the addition of an 11th team is a sensible thing – but only at the point where the 10th team on the grid is financially stable. I’m fortunate to have owners [Dorilton] that really believe in what we’re doing and invest in what we’re doing. But we need to take care as a sport to make sure we look after that. Everyone says we’re in a good place – we are in some regards.

“But there is hundreds of millions being invested [by the teams] to make the sport better. It becomes therefore clear why we’re very careful about diluting what we’ve already got. Because it’s just more losses on the table. We’re more than happy to bring in new entities, but the pie has to grow as a result of it, not shrink.”

“There is a genuine belief that some teams could be valued at $1bn”

These losses he talks of are on the balance sheet as teams are heavily investing in capital expenditure (up to the limits of what is allowed within the cost cap regulations). Those capital expenditure limits have recently been increased, largely at Williams’ urging, as it attempts to update infrastructure which is 20 years old or more, investments that the bigger teams were able to make before the cost cap when Williams could not. But the point is, these investments show up as a loss on the snapshot in time that is a balance sheet but they are increasing the value of the team. It is only because of the recent boom in F1 and the increased revenues of the teams that investors such as Dorilton and Lawrence Stroll will have been confident in committing to upgrading them. It’s not that those teams are in bad financial shape overall.

Those that made those investments before the cost cap are now very profitable. Mercedes F1 for example made £113m profit in 2022.

Part of any new team’s commercial deal is the requirement to provide an anti-dilution fee (currently set at $200m – £165m) which is shared out among the teams. That would cover about five years’ worth of the 10% reduction in the slice of the pie for the 10 existing teams. But this number could change by the time Andretti would be coming in. Ironically, it was set at $200m because that was what Williams had recently been sold for to Dorilton. Since then, Audi’s purchase of Sauber for around three times that amount indicates how the valuation of teams has rocketed. There is a genuine belief that some teams could be valued at $1bn – or £820m.

It’s difficult not to see this resistance to Andretti’s entry as anything other than greed. This now looks set to be a grind of endurance. How long will Andretti continue to pump money into getting on the grid, how many more swingeing financial commitments will it have to make before F1 finally accepts it needs to do a deal to allow it in?

Since he began covering grand prix racing in 2000, Mark Hughes has forged a reputation as the finest Formula 1 analyst of his generation
Follow Mark on Twitter @SportmphMark