Formula One: Crisis Averted

Posted by: Mark Scott on June 25

So that’s it. Faster than you can say Michael Schumacher, the spat between Formula One and teams like Ferrari and McLaren is over. The result? The teams won’t set up a rival championship, and the sport’s governing body, the Federation Internationale de l’Automobile (FIA), has relaxed attempts to cut costs.

As I said before, some sort of compromise was always likely to happen. What’s more interesting, though, is why. The official line is that both sides buried the hatchet. The truth, though, could lie with Luxembourg-based mega private equity firm CVC Capital Partners. The company bought the commercial rights to F1 between 2005 and 2006 for an estimated $3 billion — mostly funded through debt.

That’s a lot of money to pay back. So when most of the big teams voiced plans to jump ship, it’s understandable CVC was fretting about owning a franchise that could have lacked big name teams, big name drivers, and — most importantly — big name sponsors.

For now, CVC’s investment looks safe. Formula One teams agreed to reduce their costs and support new teams with equipment. The FIA also mollified its proposals and controversial FIA president, Max Mosley, has taken a back seat and won’t run for re-election in October.

Now, CVC must be hoping people’s attention will turn back to motor racing.