Businessweek Archives

A Grand Price For A Grand Prix...That Could Make A Man A Champion (Int'l Edition)


International -- Spotlight on Hungary

A GRAND PRICE FOR A GRAND PRIX...THAT COULD MAKE A MAN A CHAMPION (int'l edition)

Hungary's ambassador in London once told officials of Hungary's grand prix that the country gets more attention in one August weekend than the rest of the year put together. "If we bought the publicity," he said, "it would cost millions." In fact, the race does cost Hungary millions, and the government thinks it's money well spent. The big worry now is that this cherished event that helps put Hungary on the map may be spirited away--if not to another country, then to a less lucrative spot on the calendar.

The International Federation of Automobiles, known by its French initials FIA, may move the Formula 1 race to a freshly resurfaced Austrian track. Although officials at the FIA's Paris headquarters say the race is secure until the end of the millennium, the provisional calendar for next year's competition has not yet included Budapest in its 16 events, and the FIA is known for being a high-handed group. It likes its races to be well supported. Austria is considered a die-hard motor-sport nation and Hungary, quite simply, is not.

The glamorous capitalist race was much more than a sporting event to then-communist Hungary when it was first run here in 1986. "The government made a political decision 10 years ago to be primus inter pares in the Socialist bloc," says Janos Berenyi, chairman of Hungaroring Sport, the company named after the track. It didn't really matter that the race never made a profit. According to the race's balance sheet, that's still true today, with losses expected to double this year. The Aug. 11 race is still without a main local sponsor, although Berenyi thinks state-owned oil and gas company MOL will step in at the last minute, as it did last year. The government, however, still coughs up the subsidy in return for the prestige of holding the race.

Of course, the tourist income certainly isn't to be sneezed at. According to Hungaroring figures, 120,000 people showed up last year at the track on the outskirts of Budapest. About half came from Austria and Germany for the weekend, many to work on their beer bellies, spending an estimated $3 million to $4 million. But such sums will plummet if the race is pushed back later than August, Europe's holiday month. As it is, with Hungary's value-added tax rate at 25%, the tourist spending earned the government just about enough to offset last year's $1 million subsidy, which will triple this year, due to track repairs. Alas, the big names associated with racing--international oil and tobacco companies--cut ad deals for all the year's races directly with the FIA, with no revenue heading to Hungaroring.

Significant local sponsorship could put the event into the black, but the media attention--like all Formula 1 events, the race is viewed worldwide--doesn't cut much ice with local business. Ticket sales, estimated at about $3.6 million this year, remain the only feasible way of covering costs of over $6.5 million, including the $4.4 million FIA fee to hold the race. Last year, MOL, Hungary's largest company, spent $1 million on its billboard budget for the race. But it only has gas stations in Hungary, Ukraine, and Romania, and very few of the millions who watch the race on TV will ever drive by any of them.

Hungary has no cars, drivers, or mechanics in the grand prix. But some of the top drivers do feel a strong loyalty to the race here. Britain's Damon Hill, the leader in this year's driver's championship, would certainly miss Budapest if it were no longer on the circuit. He won his first Grand Prix here, in 1993, and then won again last year. Points from a victory this year may just be enough to seal his first world championship.

After winning the championship last year with the Benetton Renault team, Hill's archrival Michael Schumacher may wish he hadn't moved into a blood-red Ferrari. His car hasn't performed like Hill's Williams Renault so far this year and has had to pull out of a number of races. According to Tamas Misur, a Grand Prix expert at Hungarian sports daily Nemzeti Sport, the Hungaroring is perfect for another Hill victory this year. He points out the track surface and sharp bends would put an undependable car like the Ferrari at a disadvantage. But if Schumacher fails to score points in Hungary, his season will be over. If Hill wins, the Hungaroring may have a world champion to champion it.EDITED BY TIM BELKNAP By Rodney Jefferson in BudapestReturn to top


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus