Vijay Mallya has been a sponsor of Formula One for the past 10 years but he claims no one noticed him before. Now with India on an economic roll, he is one of a new breed of global entrepreneurs where
borders have no barriers. He sees Formula One as a way of continuing India's growth story around the world and his newly-named Force India team along with an Indian Grand Prix will be the spearhead for his assault on global business. On the surface he may appear a colourful playboy, deep down he is a sober businessman who knows clearly what he wants and even more clearly how he is going to get it. Vijay Mallya is a confident man. He is one of the new generation of global billionaires who conduct business in most continents of the world on a 24 hour basis. But he doesn't run any of his businesses himself. He is more of a conductor, and according to the share prices of his companies, a very fine one.
His style is to be a hands-off executive chairman focusing on strategy and leaving his managers to operate day to day. His style works: Forbes magazine recently rated him the 664th richest person in the world at US$1.5 billion but that is probably a considerable underestimate.
Mallya is a hard-working billionaire. He loves his life and makes the most of it. When he is travelling, which is much of the time, his life is non-stop meetings. He likes to pack a lot in. It is not uncommon for him to start his working day at nine o'clock and finish at three o'clock the following morning. A meeting is scheduled every hour, seven days a week, sometimes as many as 20 in a day. If he runs late everyone waits their turn. It is very much a tycoon' way of doing things. He agrees: I work hard, for me it is 24/7. For me I don't look at my watch, much to the disappointment of the people who work with me. I don't recognise weekends as holidays. I just keep going. One of the reasons that I do what I do is because I love what I do, I find it challenging and rewarding. But if Mallya agrees to see you, he will see you. Any meeting with him is not disappointing and he has a way of making things work which is hard to define. As he says: I believe above all in professional management and improving shareholder value. Once you accommodate that mindset then everything falls into place.
He now has many business interests and a collection of diverse, publicly quoted companies in India. His main company is United Breweries Group, which is dominated by beverages, namely the Kingfisher and Whyte & Mackay brands. Then comes his fast-growing airline business also called Kingfisher.
It all started when he inherited a vast Indian conglomerate of companies when his father died in 1983. He was only 27. But he is not just his father's son. Now 51, he has grown what he inherited many times over. But first he stepped back. He believed his father's business was too complicated and set out to simplify it. Once he had focused it he then started growing it again.
For 20 years no one noticed, however, and it was only as India emerged as a strong economic force five years ago that people began to hear about him. By then he had gained the image of a playboy-style figure. He understands that and says: I think it all started 25 years ago when my father passed away. I was 27 and I became the chairman of UB. I lived like a 27-year-old, with the likes that a 27-year-old would normally be expected to have. Whereas all my peers were 50 plus, obviously we were from different generations and maybe they were more conservative than I was, so it began from there.
After he started his Kingfisher airline, he began to be compared with Richard Branson. He doesn't promote that comparison but he also doesn't mind it, as he says: At the end of the day, I am who I am and the way the media promotes it is entirely their own prerogative. I have grown a thick skin and I really don't care about how people perceive me and all I say is look at my share price. Mallya has all the trappings and accoutrements of a billionaire. He has some impressive personal residences and yachts and planes, including the Indian Empress, one of the most impressive private yachts in the world. But they all have a purpose in his business life. It means he can combine business with pleasure and pleasure with business. The amount I travel is more a necessity than a luxury, he says. For sure I have a large yacht and when I want to take some time off I take some time off, but I also use my yachts for my business entertainment and for my business promotion, these are very effective tools. You cannot just use a yacht as a personal tool. It can be a really useful promotional tool. No one doubts that and Mallya's Grand Prix parties in Monaco and Istanbul on his yacht have been spectacular this year.
It was only in 2007 that Formula One began to hear about him, when he emerged as a new sponsor of the Toyota Formula One team. But Mallya has been around motorsport and Formula One for a very long time. He says it is only because India is such an emerging economic nation that people are now interested in him. He says I think that the India story has made international news has a lot to do with it. I think that India has finally woken up a gigantic economy which is growing at a very fast pace; Indian companies going global making international acquisitions, all of which was not anticipated in the past. In fact his Kingfisher beer brand began sponsoring the Benetton team as early as 1992 and he has been involved in the governing body of Indian motorsport for many years. His biographical references on the internet confirm him as a petrolhead and say his car collection numbers 250. He regularly used to drive a Formula One car in the late 1970s in his youth. He says: I have always been involved in Formula One. I have always been involved in motorsport, 35 years of being the chairman of the FIA-affiliated member association. But last month he really arrived in Formula One when he presided over the purchase of the Spyker Formula One team for around US$120 million. For good measure he also made sure a deal was signed that will see an Indian Grand Prix take place in 2010. Both were landmark achievements for him personally and for India.
The deal for the Indian Grand Prix had been a long time coming, but it was relatively straightforward compared to the process of buying the team. That was a complicated debt and equity deal. It appears he has put in around US$60 million to buy the team and put in another US$25 million to underwrite next season's operation. In fact he has only bought half the team, the other half is still owned by Jan Mol and his son Michiel. But he is very much in the driving seat as chairman and managing director.
Mallya has already made a huge difference to the way the team operates. Gone are the money problems that have haunted it for the past five seasons. He is very open and says the team has been told it has US$100 million as its budget for 2008. With US$50 million in the kitty already from sponsor, TV and driver deals, the commercial team has to find another US$50 million.
He is clearly going to be a very demanding owner commercially. As far as performance is concerned, he says he wants to move two places up the grid in 2008 and another two places in 2009. After that he makes no predictions or demands. If the current management can achieve those objectives they will keep their jobs. If they can't then it is anyone's guess.
He regards the two key people at the team as principal, Colin Kolles, and technical head, Mike Gascoyne. They are the two who have to deliver Mallya's performance and commercial vision. It was to ensure there were no barriers to that that he funded the team's budget well in advance.
For the first time he reveals that the team is debt free. He says the mortgage that Alex Shnaider left is completely paid off. Mallya is clear: This is probably the first time in many years that the team has a stable bank balance, so we are not scrounging for day-to-day cash. We have money in the bank, which allows me to increase the accountability for the management team, for the design team, engineering team, whoever it may be. He adds for clarity so there is no doubt: All the debts from the previous owners are all paid off, we paid them off. And that is the secret of Mallya's management style accountability and transparency. Unless he funds the team well in advance, he doesn't believe he can hold the designer or the team principal accountable for their performance. He also has clear reasons for keeping the existing management team in place, as he explains: One of the things that I am particularly proud of when we take over a new acquisition is that we have retained the management teams. I don't subscribe to the idea that you should go in all guns blazing, fire everybody and say, we are coming in'. We put in financial controls; we have actually recruited a financial director in the UK to be in control of the UK finances. So we know which areas we need to control, finance is one of those, and the rest of it, the team management, just carries on. He continues: The technical director is only as good as his resources, it is only now that the team has fully commissioned its windtunnel in Brackley, and the one in Italy, so the team has two windtunnels. In the past Mike (Gascoyne) probably asked for other resources which were not financially available, now Mike knows that I have given him all the technical resources he'd like to demand. He expects performance but he is not expecting miracles: I understand this game enough to know that miracles cannot happen and technical development is a long slow process.
Mallya is also aware that the world expects him to fail. After all, two experienced businessmen Alex Shnaider and Jan Mol have tried and failed in the past two seasons. They both failed on the track and off it. Shnaider shrewdly exited with a profit and Mol has also got out with his shirt, thanks to the generosity of Mallya who could have driven a lot harder bargain to take over the team if he had wanted.
Mallya says: I am not going to comment on the previous owners; I will only say that I have very closely followed Formula One and Jordan F1.
In fact, Mallya has also been praised for his generosity to the Mol family. When he arrived they were effectively a busted flush. Their deal to buy the team had been badly structured in the first place, they had run it badly and they faced the worst possible outcome that the old owner, with debts outstanding, could reclaim the team. But Mallya was not interested in going for the kill, as he says; The Mol family is a very wealthy family. Jan Mol is invested in Spyker Cars in order to buy the team, when Spyker Cars got into trouble and they had to sell the team, Jan Mol wanted to retain the team, which is why he invested in the first place. So I was instrumental in the facility of this.
Basically there were two things here. He had significant amounts of money invested and the second thing is that he recognised that I brought a lot of value to the team with the India story and also the expertise to run the team that he didn't have. He stayed in under the terms of a very clear shareholders' agreement. I have the majority on the board and also I am in charge of management because I have the position of chairman and managing director. So there is nothing wrong with partnerships and he is a good partner to date. He has come up with his percentage of the cash.
Mallya doesn't say so but clearly to maintain his 50 per cent ownership, the Mol family will have to invest a dollar for every dollar Mallya puts in. If the commercial team performs, the Mols will not have to find another cent. If it doesn't they will be diluted out of sight. Mallya admits: We have an agreement that allows a get-out route for either partner, with either a buyout or sell option. But there is absolutely nothing planned, I think Mol wants to stay in the long term and that is what he has told me and I have no reason to disbelieve him. Mallya firmly believes Formula One teams can be run to be successful and make a profit. And he does not believe the two are mutually exclusive either, as he says: I don't believe that Eddie Jordan dipped into his pocket every year to keep his team going. He ran a commercial operation that was successful for many years. Williams has made money successfully, so any suggestion that Formula One is an expensive hobby that does not make commercial sense I will strongly refute. Mallya believes, as many owners do, when they enter the sport, that the franchise, because it is effectively limited to 12, is a valuable one. That may be so but Jan Mol didn't find it so and neither has David Richards. Mallya also believes like others before him, Shnaider with Russia and Mol with Holland, that nationalistic sponsors will follow a national team. In the latter two cases precisely nothing happened. Midland attracted no Russian sponsors and Spyker attracted only a few small Dutch sponsors.
Mallya thinks he is different and that India is different. And that all that will make the difference. He appears not in the slightest bit perturbed that formidable businessmen such as Shnaider and Mol have tried and failed.
It is not arrogance, as Mallya has clearly thought long and hard about what has happened in the past and it is one area that he doesn't want to discuss: It is not something that is very productive for me to talk about, what happened in the past. At the end of the day I have been very closely involved with Formula One in the past. I have seen how Flavio Briatore ran Benetton when Michael Schumacher was there. I am not surprised that Flavio has been hugely successful. The uniqueness of my acquisition of Sypker and subsequent renaming of it to Force India Formula One I think says it all in itself. In fact he says every move he makes globally is based on the fast emergence of India as an economic world power. He explains: My acquisition of the scotch whisky business was predicated on the huge emerging opportunity called India and our group strengths on the emerging opportunity. The decision to buy the Formula One team also is predicated on the huge opportunity that India brings to the table.
Mallya maintains that in economic terms it is an unique opportunity: The acquisition of a Formula One team has aroused the interest of the whole nation. You probably saw it when you had famous Brazilian drivers, Senna who was idolised, and I would suspect that is the reason there is a continuing Grand Prix in Brazil. Mallya is already ahead of the ambitions of the previous two owners. Whereas Shnaider, for all his talents and his chutzpah, didn't have the moxy to push through a Russian Grand Prix or Mol the clout to bring back the Dutch Grand Prix, Mallya has already got his Indian Grand Prix.
For him having a team and a race go hand in hand is perfect synergy, as he explains: In India we have a very young demographic, 400 million youngsters under 20 years of age, higher disposable incomes, higher aspiration levels people who clearly want an alternative to cricket. Cricket is almost like a religion; it extends across all social economic classes. The more discerning customer today, or the young consumer, is looking for something that is more differentiated, looking for sport that they can follow, excitement and glamour, all the aspirations that are built on in Formula One. Since I announced the acquisition of the Formula One team and the renaming of it as Force India, the television viewing has jumped significantly in India, and the ratings are currently higher than many of the soaps that are on TV. No one disputes the theory. In India his acquisition has been well received even amongst the more cynical commentators. In India's leading business newspaper, the Business Standard an editorial stated: A closer look suggests that the deal makes good business sense as well, by providing him a springboard to global markets and access to one of the best business networks in the world. These will provide Mr Mallya with an entry into high-value Asian markets to grow his airline and liquor businesses. The Gulf and south-east Asian routes are among the most lucrative for Indian carriers, for example, and China and other Asian Tigers constitute the world's fastest-growing liquor markets. It is typical of the comments being made. Within his own country everyone sees the business logic. But outside India and to many in the Formula One community, he is just another wealthy patron entering the sport to have some fun who will have his trousers taken down and then retire licking his wounds after a few years. But that is not Mallya. It may cost him more money than he envisages, but he is the sort of man who has budgeted for that in advance. He will not be surprised by any surprises. But equally he is determined to get the message across that he will not tolerate them. He expects the commercial team at Spyker to deliver him a profit. He has thought it through and explains: So how do you make two ends meet in a Formula One team? If you run it on a shoestring, then you will end up at the back of the grid and that is certainly not my idea, but you don't necessarily have to go overboard because that doesn't necessarily guarantee performance. You should look at the economics of a Formula One team and therefore the difference between success and failure is in two parts, the expenditure part and the income part. On the expenditure part I was referring to the budgets. If you try and run it on a shoestring you don't get performance, so you need to have a balanced budget. That gives the design team, the engineers all those involved in designing and building the car the chance to do this. That is sound and logical business thinking of a kind not often heard in Formula One, And for a novice Mallya already has a pretty good grasp of the numbers, certainly better than either of his predecessors had: Whatever that number may be, in this case for Force India it is US$100 million. When you look at generating US$100 million to make ends meet, you have therefore an income which everyone gets, then you have a net balance which has to be covered by sponsorship. Mallya says that the budget of US$100 million will be spent. Whether he gets it back depends on the performance of his team and to a certain extent his own efforts.
It is not only the commercial and engineering approach that has changed. Currently the team is conducting a search for a new number one driver. This is a salaried position for the first time in many years. Mallya says simply that rent-a-drivers are a thing of the past for Force India. He says he has too much at stake to take that route. He explains: I will respect all the contracts that I inherited, but I made it very clear that the seats are available, there is no point having the technical team demanding performance if we don't have the appropriate driver with the talent, because we would never get the performance. He was lucky to inherit the Adrian Sutil contract that gives him a driver he would want to hire anyway together with a long contract to bring in sponsorship income and he appreciates that: I said to Colin from day one, I would like to keep Sutil, not because he brings money to the table but because the fact that I saw him, and I think he did an outstanding job in Fuji on the wet and I think he has got a lot of talent. We have a contract with Sutil until 2010 and I intend to keep it. With the other seat we will see what happens over the next few weeks. For the team itself, Mallya believes that sponsorship will come from Indian companies who want to ride on the back of the success of the team and says: I have already been approached by several companies without having gone out and done any serious marketing. They want to advertise on the car because they know that Force India will generate a lot of interest and attract a lot of Indian eyes. You have a trillion-dollar economy in India that is growing at nine per cent a year. With the huge new consuming class, which is at 300 million and estimated to grow to 400 million by 2010, you are talking about a very compelling advertising proposition. All that obviously played a very important part in my decision to buy the team in the first place. I am pretty confident that team Force India will break even or make a little bit of money in the first year, 2008 itself, which will be a totally different environment to what the previous owners had and that is why I would say that our ownership of the team has to be viewed in the context of what we bring the table in terms of India. So Mallya is in no doubt that the income target of US$100 million will be beaten, delivering him a small profit in his first year. Certainly it will not be the relatively easy ride for the team's commercial staff as it has been in the previous two years. Both in 2006 and 2007 they fell well short of selling the car. By any standards it was a poor performance. But next year Mallya will be helping them all the way.
He expects his own Kingfisher airline will put in around US$4 million roughly what it spent with Toyota last year. But he says the decision is not his, it is for the marketing director of the airline. His Whyte & Mackay subsidiary may well contribute a similar amount, but again he says that is a matter for the CEO of Whyte & Mackay and not for him. While he hopes the brands will be on the car, he emphasises there will be no pressure from him.
And he has made clear to everyone what the rules are, as he explains: Let's be very clear, it is a very profitable company in its own right, but it doesn't mean that the management team sit back because they have a parent who pumps out a hell of a lot of cash. I know how to demand performance from my management teams. Let me assure you that the management team of Force India Formula One will be accountable. Absolutely and I would expect that the Kingfisher and White & Mackay marketing teams will demand what they demand from Force India Formula One without any delusion at all, because they are responsible for their budgets and their targets, and the value for money they would otherwise expect. He is adamant he will not influence his team: Whyte & Mackay is sponsoring the London Boat Show next month. At the end of the day that was a decision made by the previous management team and is something that we continue, and obviously my management team is going to extract every last drop of benefit that we could possible attract from such a sponsorship. So if they come along and find that they want to advertise on the car they are under no compulsion to do so, it will be their decision, and if they do decide then they will, and I would expect them to be a demanding sponsor. He has already made the somewhat shrewd decision not to take the obvious route and name the team and car Kingfisher. He thinks that would have been the worst thing he could have done and cites the experience of Red Bull as a prime example. Whilst Dietrich Mateschitz is in Formula One for just one thing to promote his own brand Mallya is in it for a variety of reasons: to have some fun, make a profit and promote his companies. It explains his naming philosophy: Red Bull is almost a captive deal, with the entire car being covered. That is one of the reasons why I didn't put Kingfisher as the name of the team. The minute that I put one of my company names in the team, that I would probably call the team Kingfisher Formula One or Kingfisher India Formula One, it would be obstructive. The reason I did not do that was because I did not want to make the proposition less attractive to other advertisers who may have been overwhelmed by another brand. Having decided not to call the team Kingfisher, there was then a problem of what to call it. Mallya says he looked at many names before settling on Force India: We looked at many names Star India, Orange India, but Force India because it has the Formula One Style, it sits well, and Force' because that is what it is all about. We wanted India into the team, in order to be able to leverage the Indian opportunity and to create the emotional connect between India and the fans and viewer. So the emotional connect was the India' but we needed either a prefix of a suffix as well. Mallya says he has rationalised the complex process of distinguishing the role of owner and sponsor when potentially that entity is the same. Mallya insists he will put a different hat on to assess the performance of the sponsorship but he is clearly sold on that proposition and it was the driving force behind his decision to get involved: I just put the team onto one side and put my Kingfisher hat on, clearly the number of eyeballs that Force India will bring in our whole market. Toyota is one of the losers in this scenario, but Mallya drove such a hard bargain that it will probably be happy to let its sponsorship deal with Kingfisher go. Mallya admits the deal was a cheap one and says: One of my brands is currently sponsoring Toyota, so it doesn't make too much sense to continue sponsoring another team when we have our own team, so clearly I will transfer the sponsorship over to this car. He appears to indicate that Kingfisher's sponsorship is limited to the US$4 million he spent last year, but he doesn't deny that if US$100 million is spent and the income is only US$80 million he will have to pick up the shortfall. However he hates to discuss it as it is not an option he contemplates: That is not the way I would look at it, because it will amount to sending people the message that I will make up any shortfalls. Kingfisher will spend what it wants to spend, and what it believes to be good money for Kingfisher, but there are employees of Force India Formula One, and other employees who will be charged with responsibility of marketing the team and getting sponsorship, and their own performance will be evaluated by the amount of sponsorship they bring in. It is clear that Mallya has been successful before because of his approach to brand building. He feels the brand is what business is really all about. When he last was in Formula One in the early 1990s he had no brand to speak of and no one noticed him. When he returned in 2007 he had a big brand and everyone noticed him.
The Kingfisher brand is now known the world over even though its products are largely still confined to the Indian sub-continent. The airline was the real catalyst for change. Naming it after the beer was a masterstroke.
Originally it was named to get over the strict alcohol advertising laws in India but it has grown to become a serious business in its own right. But it was a lot cleverer than it sounds. Not many people understand that alcohol advertising was banned in India 35 years ago. Naming his airline after the beer was a way around this as airline advertising was allowed. Mallya says: This is the perception you think that it is a brand of beer, but I think it is just a brand. India has banned alcohol advertising for the last 35 years. Kingfisher was never advertised as a beer, it never could be so in order to build brand Kingfisher and give it an identity one looked at the young emerging demographic of India, one looked to position the brand on a platform that would not go out of style. The style is highly inspirational, the more you succeed the more possibilities you get and then you are looking for a better quality lifestyle so we chose various lifestyle elements to build the Kingfisher brand, so I put it into music, I put it into sport, I put it into fashion, so that was how the Kingfisher brand equity was built over the last three decades. So Kingfisher today stands for lifestyle, it doesn't stand for beer, and before we launched the airline we did a full-blown market research with several over names added in and the consumer overwhelming voted in favour of Kingfisher. The airline, only three years old, has proved a huge success and won Mallya huge respect in his homeland. The comparisons with Britain's Richard Branson started soon afterwards: Nowhere in the world would you see 40 per cent of growth in the number of passenger traffic. It was one of the most undersold areas in the world. When I started in 2004 we had 14 million air passengers in India but things have a context; we have 1.2 billion population with only 14 million travelling by air every year, but Malaysia has a population of 40 million has 14 million air passengers. We have 14 million Indians travelling by train everyday and it's a big country with road transport not at option, so it was obviously a no-brainier. Mallya's pioneering has spawned imitators and he has created a vibrant new market and a host of competitors. He says ruefully: Obviously many players jumped in, price wars took place, everyone was trying to push everyone else out of business, which was invariably the big black cloud, which is still going on, and the inevitable consolidation took place as it does in every industry. Today we are the largest airline in India, we operate 580 flights a day to 17 destinations and we will be going international in 2008. It's a strong success story in a very short space of time. It is clear that in 10 years' time Kingfisher will be a major international airline and Mallya has already ordered a fleet of the world's biggest plane, the Airbus A380 for that purpose. He says: The common thread between all these businesses is about building brands, about building huge brand equities, because it has its only benefits in terms of market leadership and sales, so I focus on that. The Formula One business is no different. If I build a successful Force India brand, sponsorship will automatically apply. And there lies a clue in what he plans. The team is Force India but he plans to leverage that brand in the future in ways he is not yet sure about. He will reverse the process of Benetton and Red Bull. That has been tried before but never on the scale that Mallya is planning. He explains: I think Force India captures the essence of what emerging India is all about. India will be a global economic force and the best it yet to come. It is only now that this has really started, but it is on a roll, it will grow to be sustainable. I think all the critics have been silenced now, people now believe in it, it has started to manifest itself in many ways, including the huge amount of foreign investment from the stock market, in Indian industry and people who are setting up shops in India. So at the end of the day, there is a huge amount of confidence. So Force India, I feel, captures this, so why not a Force India beer. I think that my job is to create a brand and reinforce the brand, and there are multiple ways of doing that; the common stuff such as merchandising or whatever else is taken for granted, but there are more innovative ways that one can build the brand. One problem Mallya must face is the existing main sponsorship deal the team has with the Abu Dhabi government owned companies of Etihad, the national airline and Aldar Properties. Clearly this is a problem, being a clash of airlines and because of the remarkably low price the Abu Dhabi government negotiated when the team was desperate. The three-year deal is said to be worth less than US$10 million a year and is occupying the prime spaces on the car. Mallya cannot put his Fly Kingfisher logos on the car until that is resolved. He is currently just displaying the plain Kingfisher logo, which may offend strict advertising rules in India that prevent alcohol advertising. Mallya admits there is a problem: The sponsorship agreement is not a lot of money, but the way the sponsorship agreement is written clearly specifies that if another sponsor comes along and offers us a higher sum of money, they will not necessary walk away, but for the same money they will have an alternative space on the car. If they decide to walk away completely, for reasons that I can not anticipate at this moment in time, that is a different matter. So if another sponsor comes up with more money, then they will either go higher or match it. Mallya hopes he can keep the US$10 million and reduce the space on the car to accommodate a big sponsor he hopes will come in with around US$30 million. A year or two ago that sort of talk would have been wishful thinking. But make no mistake, a new broom has arrived at Eddie Jordan's old team and this one thinks he has the secret of making it a success.
This article originally appeared in the December issue of BusinessF1
borders have no barriers. He sees Formula One as a way of continuing India's growth story around the world and his newly-named Force India team along with an Indian Grand Prix will be the spearhead for his assault on global business. On the surface he may appear a colourful playboy, deep down he is a sober businessman who knows clearly what he wants and even more clearly how he is going to get it. Vijay Mallya is a confident man. He is one of the new generation of global billionaires who conduct business in most continents of the world on a 24 hour basis. But he doesn't run any of his businesses himself. He is more of a conductor, and according to the share prices of his companies, a very fine one.
His style is to be a hands-off executive chairman focusing on strategy and leaving his managers to operate day to day. His style works: Forbes magazine recently rated him the 664th richest person in the world at US$1.5 billion but that is probably a considerable underestimate.
Mallya is a hard-working billionaire. He loves his life and makes the most of it. When he is travelling, which is much of the time, his life is non-stop meetings. He likes to pack a lot in. It is not uncommon for him to start his working day at nine o'clock and finish at three o'clock the following morning. A meeting is scheduled every hour, seven days a week, sometimes as many as 20 in a day. If he runs late everyone waits their turn. It is very much a tycoon' way of doing things. He agrees: I work hard, for me it is 24/7. For me I don't look at my watch, much to the disappointment of the people who work with me. I don't recognise weekends as holidays. I just keep going. One of the reasons that I do what I do is because I love what I do, I find it challenging and rewarding. But if Mallya agrees to see you, he will see you. Any meeting with him is not disappointing and he has a way of making things work which is hard to define. As he says: I believe above all in professional management and improving shareholder value. Once you accommodate that mindset then everything falls into place.
He now has many business interests and a collection of diverse, publicly quoted companies in India. His main company is United Breweries Group, which is dominated by beverages, namely the Kingfisher and Whyte & Mackay brands. Then comes his fast-growing airline business also called Kingfisher.
It all started when he inherited a vast Indian conglomerate of companies when his father died in 1983. He was only 27. But he is not just his father's son. Now 51, he has grown what he inherited many times over. But first he stepped back. He believed his father's business was too complicated and set out to simplify it. Once he had focused it he then started growing it again.
For 20 years no one noticed, however, and it was only as India emerged as a strong economic force five years ago that people began to hear about him. By then he had gained the image of a playboy-style figure. He understands that and says: I think it all started 25 years ago when my father passed away. I was 27 and I became the chairman of UB. I lived like a 27-year-old, with the likes that a 27-year-old would normally be expected to have. Whereas all my peers were 50 plus, obviously we were from different generations and maybe they were more conservative than I was, so it began from there.
After he started his Kingfisher airline, he began to be compared with Richard Branson. He doesn't promote that comparison but he also doesn't mind it, as he says: At the end of the day, I am who I am and the way the media promotes it is entirely their own prerogative. I have grown a thick skin and I really don't care about how people perceive me and all I say is look at my share price. Mallya has all the trappings and accoutrements of a billionaire. He has some impressive personal residences and yachts and planes, including the Indian Empress, one of the most impressive private yachts in the world. But they all have a purpose in his business life. It means he can combine business with pleasure and pleasure with business. The amount I travel is more a necessity than a luxury, he says. For sure I have a large yacht and when I want to take some time off I take some time off, but I also use my yachts for my business entertainment and for my business promotion, these are very effective tools. You cannot just use a yacht as a personal tool. It can be a really useful promotional tool. No one doubts that and Mallya's Grand Prix parties in Monaco and Istanbul on his yacht have been spectacular this year.
It was only in 2007 that Formula One began to hear about him, when he emerged as a new sponsor of the Toyota Formula One team. But Mallya has been around motorsport and Formula One for a very long time. He says it is only because India is such an emerging economic nation that people are now interested in him. He says I think that the India story has made international news has a lot to do with it. I think that India has finally woken up a gigantic economy which is growing at a very fast pace; Indian companies going global making international acquisitions, all of which was not anticipated in the past. In fact his Kingfisher beer brand began sponsoring the Benetton team as early as 1992 and he has been involved in the governing body of Indian motorsport for many years. His biographical references on the internet confirm him as a petrolhead and say his car collection numbers 250. He regularly used to drive a Formula One car in the late 1970s in his youth. He says: I have always been involved in Formula One. I have always been involved in motorsport, 35 years of being the chairman of the FIA-affiliated member association. But last month he really arrived in Formula One when he presided over the purchase of the Spyker Formula One team for around US$120 million. For good measure he also made sure a deal was signed that will see an Indian Grand Prix take place in 2010. Both were landmark achievements for him personally and for India.
The deal for the Indian Grand Prix had been a long time coming, but it was relatively straightforward compared to the process of buying the team. That was a complicated debt and equity deal. It appears he has put in around US$60 million to buy the team and put in another US$25 million to underwrite next season's operation. In fact he has only bought half the team, the other half is still owned by Jan Mol and his son Michiel. But he is very much in the driving seat as chairman and managing director.
Mallya has already made a huge difference to the way the team operates. Gone are the money problems that have haunted it for the past five seasons. He is very open and says the team has been told it has US$100 million as its budget for 2008. With US$50 million in the kitty already from sponsor, TV and driver deals, the commercial team has to find another US$50 million.
He is clearly going to be a very demanding owner commercially. As far as performance is concerned, he says he wants to move two places up the grid in 2008 and another two places in 2009. After that he makes no predictions or demands. If the current management can achieve those objectives they will keep their jobs. If they can't then it is anyone's guess.
He regards the two key people at the team as principal, Colin Kolles, and technical head, Mike Gascoyne. They are the two who have to deliver Mallya's performance and commercial vision. It was to ensure there were no barriers to that that he funded the team's budget well in advance.
For the first time he reveals that the team is debt free. He says the mortgage that Alex Shnaider left is completely paid off. Mallya is clear: This is probably the first time in many years that the team has a stable bank balance, so we are not scrounging for day-to-day cash. We have money in the bank, which allows me to increase the accountability for the management team, for the design team, engineering team, whoever it may be. He adds for clarity so there is no doubt: All the debts from the previous owners are all paid off, we paid them off. And that is the secret of Mallya's management style accountability and transparency. Unless he funds the team well in advance, he doesn't believe he can hold the designer or the team principal accountable for their performance. He also has clear reasons for keeping the existing management team in place, as he explains: One of the things that I am particularly proud of when we take over a new acquisition is that we have retained the management teams. I don't subscribe to the idea that you should go in all guns blazing, fire everybody and say, we are coming in'. We put in financial controls; we have actually recruited a financial director in the UK to be in control of the UK finances. So we know which areas we need to control, finance is one of those, and the rest of it, the team management, just carries on. He continues: The technical director is only as good as his resources, it is only now that the team has fully commissioned its windtunnel in Brackley, and the one in Italy, so the team has two windtunnels. In the past Mike (Gascoyne) probably asked for other resources which were not financially available, now Mike knows that I have given him all the technical resources he'd like to demand. He expects performance but he is not expecting miracles: I understand this game enough to know that miracles cannot happen and technical development is a long slow process.
Mallya is also aware that the world expects him to fail. After all, two experienced businessmen Alex Shnaider and Jan Mol have tried and failed in the past two seasons. They both failed on the track and off it. Shnaider shrewdly exited with a profit and Mol has also got out with his shirt, thanks to the generosity of Mallya who could have driven a lot harder bargain to take over the team if he had wanted.
Mallya says: I am not going to comment on the previous owners; I will only say that I have very closely followed Formula One and Jordan F1.
In fact, Mallya has also been praised for his generosity to the Mol family. When he arrived they were effectively a busted flush. Their deal to buy the team had been badly structured in the first place, they had run it badly and they faced the worst possible outcome that the old owner, with debts outstanding, could reclaim the team. But Mallya was not interested in going for the kill, as he says; The Mol family is a very wealthy family. Jan Mol is invested in Spyker Cars in order to buy the team, when Spyker Cars got into trouble and they had to sell the team, Jan Mol wanted to retain the team, which is why he invested in the first place. So I was instrumental in the facility of this.
Basically there were two things here. He had significant amounts of money invested and the second thing is that he recognised that I brought a lot of value to the team with the India story and also the expertise to run the team that he didn't have. He stayed in under the terms of a very clear shareholders' agreement. I have the majority on the board and also I am in charge of management because I have the position of chairman and managing director. So there is nothing wrong with partnerships and he is a good partner to date. He has come up with his percentage of the cash.
Mallya doesn't say so but clearly to maintain his 50 per cent ownership, the Mol family will have to invest a dollar for every dollar Mallya puts in. If the commercial team performs, the Mols will not have to find another cent. If it doesn't they will be diluted out of sight. Mallya admits: We have an agreement that allows a get-out route for either partner, with either a buyout or sell option. But there is absolutely nothing planned, I think Mol wants to stay in the long term and that is what he has told me and I have no reason to disbelieve him. Mallya firmly believes Formula One teams can be run to be successful and make a profit. And he does not believe the two are mutually exclusive either, as he says: I don't believe that Eddie Jordan dipped into his pocket every year to keep his team going. He ran a commercial operation that was successful for many years. Williams has made money successfully, so any suggestion that Formula One is an expensive hobby that does not make commercial sense I will strongly refute. Mallya believes, as many owners do, when they enter the sport, that the franchise, because it is effectively limited to 12, is a valuable one. That may be so but Jan Mol didn't find it so and neither has David Richards. Mallya also believes like others before him, Shnaider with Russia and Mol with Holland, that nationalistic sponsors will follow a national team. In the latter two cases precisely nothing happened. Midland attracted no Russian sponsors and Spyker attracted only a few small Dutch sponsors.
Mallya thinks he is different and that India is different. And that all that will make the difference. He appears not in the slightest bit perturbed that formidable businessmen such as Shnaider and Mol have tried and failed.
It is not arrogance, as Mallya has clearly thought long and hard about what has happened in the past and it is one area that he doesn't want to discuss: It is not something that is very productive for me to talk about, what happened in the past. At the end of the day I have been very closely involved with Formula One in the past. I have seen how Flavio Briatore ran Benetton when Michael Schumacher was there. I am not surprised that Flavio has been hugely successful. The uniqueness of my acquisition of Sypker and subsequent renaming of it to Force India Formula One I think says it all in itself. In fact he says every move he makes globally is based on the fast emergence of India as an economic world power. He explains: My acquisition of the scotch whisky business was predicated on the huge emerging opportunity called India and our group strengths on the emerging opportunity. The decision to buy the Formula One team also is predicated on the huge opportunity that India brings to the table.
Mallya maintains that in economic terms it is an unique opportunity: The acquisition of a Formula One team has aroused the interest of the whole nation. You probably saw it when you had famous Brazilian drivers, Senna who was idolised, and I would suspect that is the reason there is a continuing Grand Prix in Brazil. Mallya is already ahead of the ambitions of the previous two owners. Whereas Shnaider, for all his talents and his chutzpah, didn't have the moxy to push through a Russian Grand Prix or Mol the clout to bring back the Dutch Grand Prix, Mallya has already got his Indian Grand Prix.
For him having a team and a race go hand in hand is perfect synergy, as he explains: In India we have a very young demographic, 400 million youngsters under 20 years of age, higher disposable incomes, higher aspiration levels people who clearly want an alternative to cricket. Cricket is almost like a religion; it extends across all social economic classes. The more discerning customer today, or the young consumer, is looking for something that is more differentiated, looking for sport that they can follow, excitement and glamour, all the aspirations that are built on in Formula One. Since I announced the acquisition of the Formula One team and the renaming of it as Force India, the television viewing has jumped significantly in India, and the ratings are currently higher than many of the soaps that are on TV. No one disputes the theory. In India his acquisition has been well received even amongst the more cynical commentators. In India's leading business newspaper, the Business Standard an editorial stated: A closer look suggests that the deal makes good business sense as well, by providing him a springboard to global markets and access to one of the best business networks in the world. These will provide Mr Mallya with an entry into high-value Asian markets to grow his airline and liquor businesses. The Gulf and south-east Asian routes are among the most lucrative for Indian carriers, for example, and China and other Asian Tigers constitute the world's fastest-growing liquor markets. It is typical of the comments being made. Within his own country everyone sees the business logic. But outside India and to many in the Formula One community, he is just another wealthy patron entering the sport to have some fun who will have his trousers taken down and then retire licking his wounds after a few years. But that is not Mallya. It may cost him more money than he envisages, but he is the sort of man who has budgeted for that in advance. He will not be surprised by any surprises. But equally he is determined to get the message across that he will not tolerate them. He expects the commercial team at Spyker to deliver him a profit. He has thought it through and explains: So how do you make two ends meet in a Formula One team? If you run it on a shoestring, then you will end up at the back of the grid and that is certainly not my idea, but you don't necessarily have to go overboard because that doesn't necessarily guarantee performance. You should look at the economics of a Formula One team and therefore the difference between success and failure is in two parts, the expenditure part and the income part. On the expenditure part I was referring to the budgets. If you try and run it on a shoestring you don't get performance, so you need to have a balanced budget. That gives the design team, the engineers all those involved in designing and building the car the chance to do this. That is sound and logical business thinking of a kind not often heard in Formula One, And for a novice Mallya already has a pretty good grasp of the numbers, certainly better than either of his predecessors had: Whatever that number may be, in this case for Force India it is US$100 million. When you look at generating US$100 million to make ends meet, you have therefore an income which everyone gets, then you have a net balance which has to be covered by sponsorship. Mallya says that the budget of US$100 million will be spent. Whether he gets it back depends on the performance of his team and to a certain extent his own efforts.
It is not only the commercial and engineering approach that has changed. Currently the team is conducting a search for a new number one driver. This is a salaried position for the first time in many years. Mallya says simply that rent-a-drivers are a thing of the past for Force India. He says he has too much at stake to take that route. He explains: I will respect all the contracts that I inherited, but I made it very clear that the seats are available, there is no point having the technical team demanding performance if we don't have the appropriate driver with the talent, because we would never get the performance. He was lucky to inherit the Adrian Sutil contract that gives him a driver he would want to hire anyway together with a long contract to bring in sponsorship income and he appreciates that: I said to Colin from day one, I would like to keep Sutil, not because he brings money to the table but because the fact that I saw him, and I think he did an outstanding job in Fuji on the wet and I think he has got a lot of talent. We have a contract with Sutil until 2010 and I intend to keep it. With the other seat we will see what happens over the next few weeks. For the team itself, Mallya believes that sponsorship will come from Indian companies who want to ride on the back of the success of the team and says: I have already been approached by several companies without having gone out and done any serious marketing. They want to advertise on the car because they know that Force India will generate a lot of interest and attract a lot of Indian eyes. You have a trillion-dollar economy in India that is growing at nine per cent a year. With the huge new consuming class, which is at 300 million and estimated to grow to 400 million by 2010, you are talking about a very compelling advertising proposition. All that obviously played a very important part in my decision to buy the team in the first place. I am pretty confident that team Force India will break even or make a little bit of money in the first year, 2008 itself, which will be a totally different environment to what the previous owners had and that is why I would say that our ownership of the team has to be viewed in the context of what we bring the table in terms of India. So Mallya is in no doubt that the income target of US$100 million will be beaten, delivering him a small profit in his first year. Certainly it will not be the relatively easy ride for the team's commercial staff as it has been in the previous two years. Both in 2006 and 2007 they fell well short of selling the car. By any standards it was a poor performance. But next year Mallya will be helping them all the way.
He expects his own Kingfisher airline will put in around US$4 million roughly what it spent with Toyota last year. But he says the decision is not his, it is for the marketing director of the airline. His Whyte & Mackay subsidiary may well contribute a similar amount, but again he says that is a matter for the CEO of Whyte & Mackay and not for him. While he hopes the brands will be on the car, he emphasises there will be no pressure from him.
And he has made clear to everyone what the rules are, as he explains: Let's be very clear, it is a very profitable company in its own right, but it doesn't mean that the management team sit back because they have a parent who pumps out a hell of a lot of cash. I know how to demand performance from my management teams. Let me assure you that the management team of Force India Formula One will be accountable. Absolutely and I would expect that the Kingfisher and White & Mackay marketing teams will demand what they demand from Force India Formula One without any delusion at all, because they are responsible for their budgets and their targets, and the value for money they would otherwise expect. He is adamant he will not influence his team: Whyte & Mackay is sponsoring the London Boat Show next month. At the end of the day that was a decision made by the previous management team and is something that we continue, and obviously my management team is going to extract every last drop of benefit that we could possible attract from such a sponsorship. So if they come along and find that they want to advertise on the car they are under no compulsion to do so, it will be their decision, and if they do decide then they will, and I would expect them to be a demanding sponsor. He has already made the somewhat shrewd decision not to take the obvious route and name the team and car Kingfisher. He thinks that would have been the worst thing he could have done and cites the experience of Red Bull as a prime example. Whilst Dietrich Mateschitz is in Formula One for just one thing to promote his own brand Mallya is in it for a variety of reasons: to have some fun, make a profit and promote his companies. It explains his naming philosophy: Red Bull is almost a captive deal, with the entire car being covered. That is one of the reasons why I didn't put Kingfisher as the name of the team. The minute that I put one of my company names in the team, that I would probably call the team Kingfisher Formula One or Kingfisher India Formula One, it would be obstructive. The reason I did not do that was because I did not want to make the proposition less attractive to other advertisers who may have been overwhelmed by another brand. Having decided not to call the team Kingfisher, there was then a problem of what to call it. Mallya says he looked at many names before settling on Force India: We looked at many names Star India, Orange India, but Force India because it has the Formula One Style, it sits well, and Force' because that is what it is all about. We wanted India into the team, in order to be able to leverage the Indian opportunity and to create the emotional connect between India and the fans and viewer. So the emotional connect was the India' but we needed either a prefix of a suffix as well. Mallya says he has rationalised the complex process of distinguishing the role of owner and sponsor when potentially that entity is the same. Mallya insists he will put a different hat on to assess the performance of the sponsorship but he is clearly sold on that proposition and it was the driving force behind his decision to get involved: I just put the team onto one side and put my Kingfisher hat on, clearly the number of eyeballs that Force India will bring in our whole market. Toyota is one of the losers in this scenario, but Mallya drove such a hard bargain that it will probably be happy to let its sponsorship deal with Kingfisher go. Mallya admits the deal was a cheap one and says: One of my brands is currently sponsoring Toyota, so it doesn't make too much sense to continue sponsoring another team when we have our own team, so clearly I will transfer the sponsorship over to this car. He appears to indicate that Kingfisher's sponsorship is limited to the US$4 million he spent last year, but he doesn't deny that if US$100 million is spent and the income is only US$80 million he will have to pick up the shortfall. However he hates to discuss it as it is not an option he contemplates: That is not the way I would look at it, because it will amount to sending people the message that I will make up any shortfalls. Kingfisher will spend what it wants to spend, and what it believes to be good money for Kingfisher, but there are employees of Force India Formula One, and other employees who will be charged with responsibility of marketing the team and getting sponsorship, and their own performance will be evaluated by the amount of sponsorship they bring in. It is clear that Mallya has been successful before because of his approach to brand building. He feels the brand is what business is really all about. When he last was in Formula One in the early 1990s he had no brand to speak of and no one noticed him. When he returned in 2007 he had a big brand and everyone noticed him.
The Kingfisher brand is now known the world over even though its products are largely still confined to the Indian sub-continent. The airline was the real catalyst for change. Naming it after the beer was a masterstroke.
Originally it was named to get over the strict alcohol advertising laws in India but it has grown to become a serious business in its own right. But it was a lot cleverer than it sounds. Not many people understand that alcohol advertising was banned in India 35 years ago. Naming his airline after the beer was a way around this as airline advertising was allowed. Mallya says: This is the perception you think that it is a brand of beer, but I think it is just a brand. India has banned alcohol advertising for the last 35 years. Kingfisher was never advertised as a beer, it never could be so in order to build brand Kingfisher and give it an identity one looked at the young emerging demographic of India, one looked to position the brand on a platform that would not go out of style. The style is highly inspirational, the more you succeed the more possibilities you get and then you are looking for a better quality lifestyle so we chose various lifestyle elements to build the Kingfisher brand, so I put it into music, I put it into sport, I put it into fashion, so that was how the Kingfisher brand equity was built over the last three decades. So Kingfisher today stands for lifestyle, it doesn't stand for beer, and before we launched the airline we did a full-blown market research with several over names added in and the consumer overwhelming voted in favour of Kingfisher. The airline, only three years old, has proved a huge success and won Mallya huge respect in his homeland. The comparisons with Britain's Richard Branson started soon afterwards: Nowhere in the world would you see 40 per cent of growth in the number of passenger traffic. It was one of the most undersold areas in the world. When I started in 2004 we had 14 million air passengers in India but things have a context; we have 1.2 billion population with only 14 million travelling by air every year, but Malaysia has a population of 40 million has 14 million air passengers. We have 14 million Indians travelling by train everyday and it's a big country with road transport not at option, so it was obviously a no-brainier. Mallya's pioneering has spawned imitators and he has created a vibrant new market and a host of competitors. He says ruefully: Obviously many players jumped in, price wars took place, everyone was trying to push everyone else out of business, which was invariably the big black cloud, which is still going on, and the inevitable consolidation took place as it does in every industry. Today we are the largest airline in India, we operate 580 flights a day to 17 destinations and we will be going international in 2008. It's a strong success story in a very short space of time. It is clear that in 10 years' time Kingfisher will be a major international airline and Mallya has already ordered a fleet of the world's biggest plane, the Airbus A380 for that purpose. He says: The common thread between all these businesses is about building brands, about building huge brand equities, because it has its only benefits in terms of market leadership and sales, so I focus on that. The Formula One business is no different. If I build a successful Force India brand, sponsorship will automatically apply. And there lies a clue in what he plans. The team is Force India but he plans to leverage that brand in the future in ways he is not yet sure about. He will reverse the process of Benetton and Red Bull. That has been tried before but never on the scale that Mallya is planning. He explains: I think Force India captures the essence of what emerging India is all about. India will be a global economic force and the best it yet to come. It is only now that this has really started, but it is on a roll, it will grow to be sustainable. I think all the critics have been silenced now, people now believe in it, it has started to manifest itself in many ways, including the huge amount of foreign investment from the stock market, in Indian industry and people who are setting up shops in India. So at the end of the day, there is a huge amount of confidence. So Force India, I feel, captures this, so why not a Force India beer. I think that my job is to create a brand and reinforce the brand, and there are multiple ways of doing that; the common stuff such as merchandising or whatever else is taken for granted, but there are more innovative ways that one can build the brand. One problem Mallya must face is the existing main sponsorship deal the team has with the Abu Dhabi government owned companies of Etihad, the national airline and Aldar Properties. Clearly this is a problem, being a clash of airlines and because of the remarkably low price the Abu Dhabi government negotiated when the team was desperate. The three-year deal is said to be worth less than US$10 million a year and is occupying the prime spaces on the car. Mallya cannot put his Fly Kingfisher logos on the car until that is resolved. He is currently just displaying the plain Kingfisher logo, which may offend strict advertising rules in India that prevent alcohol advertising. Mallya admits there is a problem: The sponsorship agreement is not a lot of money, but the way the sponsorship agreement is written clearly specifies that if another sponsor comes along and offers us a higher sum of money, they will not necessary walk away, but for the same money they will have an alternative space on the car. If they decide to walk away completely, for reasons that I can not anticipate at this moment in time, that is a different matter. So if another sponsor comes up with more money, then they will either go higher or match it. Mallya hopes he can keep the US$10 million and reduce the space on the car to accommodate a big sponsor he hopes will come in with around US$30 million. A year or two ago that sort of talk would have been wishful thinking. But make no mistake, a new broom has arrived at Eddie Jordan's old team and this one thinks he has the secret of making it a success.
This article originally appeared in the December issue of BusinessF1
2008-01-14 06:31:29
The dramatic circumstances of the Italian Grand Prix and Michael Schumacher’s retirement will live on for a long time. After his rival was sidelined by a bizarre stewards’ decision, Schumacher won the race and then announced his retirement. But it was an amazing few hours, worthy of a scripted piece of drama. BusinessF1 retraced the moves that led to that startling finish.
By Tom Rubython
On Sunday 10th September 2006 at 3:25pm, precisely the same time as Michael Schumacher passed the checkered flag to win the Italian Grand Prix, the staff of Ferrari’s press supremo, Luca Colajanni, started handing an A4 sheet of paper to journalists outside the team’s motorhome. It was a one-page press release announcing the retirement of the most successful racing driver in history, a driver at the top of his game challenging for the world championship. Colajanni had been given precise orders by Ferrari chairman Luca di Montezemolo about just what he had to do and when he had to do it.
It was strange timing, as Schumacher was about to make the announcement himself in the winner’s press conference after the podium ceremony. Normally press releases are handed out after an announcement has been made, or during it – but rarely before. It takes away the point. As so it turned out when half an hour later Schumacher found himself announcing what everybody already knew.
The Ferrari team’s haste to announce its driver’s retirement was indeed bizarre. Colajanni had wanted to pre-empt the driver’s own announcement as if to make sure there was no turning back.
Montezemolo had exercised a strong presence in the Ferrari garage at Monza Park all weekend. On qualifying day he hovered around the Ferrari motorhome waving away journalists’ enquiries about what was going on. On race-day he had arrived with John Elkann, the most senior member of the Agnelli family working at Fiat, and Sergio Marchionne, the chief executive of Fiat. He also had Piero Ferrari in his party. One observer was mystified at the presence of all these big guns and said: “It was as though Luca wanted reinforcements.” But reinforcements for what? It was soon to become clear. Although everything looked normal in the Ferrari garage and motorhome, underneath the surface a civil war was concluding, in Montezemolo’s favour. It had run all summer, but was finally coming to an end. All that Montezemolo now required was for Jean Todt, the team principal, and Michael Schumacher, the number one driver, to run up the white flag.
In truth no one knew what was about to happen. Schumacher didn’t want to retire, at least not that day. And he thought he still retained enough power to get his way. But Montezemolo had long before given him a deadline of Monza and told him (expressly against Jean Todt’s wishes) that it was either driving alongside Kimi Räikkönen in 2007 – or retirement.
In a previous age no one had dared tell Michael Schumacher what to do. He had been king of Formula One for 12 years and for half of them was easily the sport’s most powerful man, eclipsing even Bernie Ecclestone.
Montezemolo hated this situation and had also come to resent Jean Todt’s role in the Michael Schumacher show. He took the Enzo Ferrari view that drivers were employees who performed at the behest of their employers. Todt on the other hand took a collegiate view; the top people at the team, including Schumacher, were his close friends and far from being his employees.
But there is no doubt that this combination of opposing management styles got the job done. And for that reason each had tolerated the other.
Only once before in the 11 seasons that Schumacher had been a Ferrari driver, in 1999, had Montezemolo insisted on getting his way.
Officially, of course, none of the above occurred. The official line was that Schumacher had simply decided to retire many months before and that Ferrari had signed Räikkönen to take his place, end of story. In fact, Todt suggested anyone who thought any different was “stupid”.
Everyone, then, is stupid.
There was clearly tension between Todt and Montezemolo that weekend in Monza. On Friday and Saturday, there had been an uneasy peace as both men went about their business. Then, on race-day, with less than 15 minutes to the start, Montezemolo broke away from Ferrari on the grid and went up to Räikkönen’s car. He leaned over the cockpit and gave a thumbs-up sign, as if indicating that all was going to plan. It was a strange action to pursue with his team’s close competitor at Ferrari’s home race.
After Schumacher’s race victory, Montezemolo was delirious with joy and, flanked by Elkann and Marchionne, in the full glare of television, he embraced Jean Todt and kissed him. But as Montezemolo kissed him Italian style and threw his arms around his shoulders, Todt quickly turned away. It resembled the scene in ‘The Godfather Part III’ when Michael Corleone embraces his brother Fredo whilst whispering his death sentence.
Then it was Michael Schumacher’s turn. After being pecked by Montezemolo, he too resisted his boss’s celebratory embraces and looked blankly over his shoulder. For Montezemolo, as he embraced the two men he knew the press release signalling his victory was being handed out to journalists.
It was now clear to insiders that Montezemolo had won his internal battle with Todt to turn Räikkönen’s option into a firm contract drive for Ferrari in 2007. And it was clear that Schumacher’s ultimatum of ‘Räikkönen’s or me’ had been ignored.
It was a battle Montezemolo had been determined to win. Six years earlier, to give the team the very best chance of winning, he had wanted to hire Mika Häkkinen as team-mate to Schumacher. But he had been blocked by the twin powers of Schumacher and Todt. This time he was determined to prevail. He wanted Räikkönen, and if that meant Schumacher’s departure, then so be it. And he also made it clear he was not prepared to carry on paying Schumacher his US$45 million a year in his twilight years. In any case that money was no longer available, it had been allocated to Räikkönen in a deal skilfully negotiated by the driver’s manager David Robertson.
In truth Schumacher was not simply being pushed out of Ferrari, he was not prepared to carry on under the terms that were being offered. So he reluctantly decided to retire. And in any event it was good timing – he was going out at the peak of his powers.
Naturally, in the circumstances, the two press conferences, first for TV and then for the press were sad affairs. Schumacher was very morose. He clearly saw no happiness in retirement. But he played the company line and did not vent any feelings of being pushed out. That was not Schumacher’s way. And the timing of the press release before his own announcement had given him no room for manoeuvre. It was done on the express orders of Montezemolo to ensure that he, and not Schumacher, was setting the agenda.
The sense of despair from Schumacher was obvious. He is the one driver on the grid who genuinely loves Formula One. He lives and breathes it. Whilst some other multiple world champions have rushed into retirement, he seemed set to drive on into his 40s. He was clearly not ready to retire after 16 seasons of racing, nearly double the average career span and equalling the career of Ricardo Patrese.
But at the age of 37, he found, like many others, that as far as Montezemolo was concerned he was past his sell-by date. As Schumacher’s long-time manager, Willi Weber, woefully observed in a passing comment to a journalist at Monza: “Michael found he no longer has the power he thought at Ferrari.” So Schumacher’s retirement was just as controversial as his entry into the sport at the Belgian Grand Prix in first practice on Friday 23rd August 1991.
The countdown for Schumacher’s demise had begun on 25th August 2005 when Räikkönen signed a one-year option which gave Ferrari the right, within a certain time period, to employ him, at a salary of around US$45 million, for three years from 2007 to 2009 with options to renew beyond that. The option price had never been confirmed but was rumoured around the paddock to be US$5 million.
Everybody knew that the drivers’ market was headed for a shake-up in 2007. It became clear that the contracts of the three best drivers in the world, Schumacher, Räikkönen and Fernando Alonso were all expiring at the same time – at end of 2006. It was a unique event in Formula One history and meant that all three could be driving at different teams in 2007. In normal circumstances one or two of the top drivers might be out of contract at the same time, but never three. However, in truth nobody expected any of the three to move from their incumbent teams. Schumacher was an absolute fixture at Ferrari and showing no sign of retiring. Alonso was winning everything at Renault so why would he move, especially as Flavio Briatore, the Renault team principal, was his manager? And Räikkönen, despite coming to the end of his contract, had options for the future and really nowhere else to go.
And that was how it looked in the summer of 2005 as Räikkönen’s manager, David Robertson, and McLaren Mercedes team principal, Ron Dennis, sat down to discuss the Finnish driver’s future. It was to be the first of the big driver negotiations for 2007.
As far as Robertson was concerned, it was all going to be pretty straightforward. He couldn’t comprehend Räikkönen leaving. The contract was up but Dennis had options to renew it well into the future. These options all stemmed from the original contract Räikkönen had signed in September 2001. Dennis had paid a small fortune to secure Räikkönen’s services including a rumoured US$14 million to compensate Peter Sauber. It was a complex contract – two years (2002 and 2003) at a modest salary and then three years (2004-2006) for a much larger retainer culminating in the near US$45 million he was being paid in 2006. But Räikkönen was far from a free agent at the end of his McLaren contract. By all accounts it was at Dennis’s option to take up another three years if he was willing to pay an escalating salary.
Dennis had security, but at a price. There is no way of telling what that price was but it was likely to mean Räikkönen receiving at least US$60-US$70 million a year by 2009. But Dennis, who had been bamboozled into agreeing the high price four years before in 2001, just before the 9/11 terrorist attacks when economic conditions had been very different, did not want to pay, although he still wanted Räikkönen to drive for him.
By all accounts Robertson was somewhat surprised, even if he didn’t show it, when Dennis said he wasn’t taking up the option. Although there is no independent confirmation of this it appears that Dennis believed he could cancel the option, and thereby his commitment, and open negotiations with Robertson at a more sensible retainer. After all Dennis believed, and it certainly looked the case, that Räikkönen had nowhere else to go.
It appears Dennis genuinely believed Robertson would simply agree a lower retainer, probably something nearer US$35 million. But it proved Dennis did not know the man at all. Robertson is an extremely shrewd individual. Even his critics say he can read the minds of team principals. He is believed to study their psyche in his spare time so that he can deal with them more effectively. In his short career in the paddock he has already negotiated with Frank Williams, Flavio Briatore, Ron Dennis and Jean Todt, and bested all of them.
Anyone who has had negotiations with him of any kind is aware of his skills. As one associate says: “He is the sort of man, and this is not said impolitely, with whom one counts ones fingers after shaking his hand. He probably secretly relishes that reputation.”
It is important to emphasise that at that stage of the 2005 season, in spite of Robertson’s reputation, Dennis thought he held all the cards. Räikkönen was dominating the latter half of the 2005 season and McLaren was the top team. Conversely Ferrari was in the doldrums – why would Räikkönen want to go there even if he could?
And Renault was out of the equation. Everyone thought Alonso was a fixture at Renault. When Dennis let Räikkönen’s option lapse he knew, or at least thought he knew, that he could simply wait for Robertson to accept his offer.
But Robertson sensed something different. He sensed discontent in the McLaren organisation, a sense of drift. He had picked up that Adrian Newey was leaving and that Nick Tombazis might do the same. He also thought most of Ferrari’s problems were tyre related and solvable; he knew that Ross Brawn and Rory Byrne had not suddenly become bad engineers.
But Robertson kept his counsel with Dennis and said he would get back to him.
Robertson considered his options and marched over to the Ferrari motorhome to get the lie of the land. He imagined negotiations with Todt alone would be a waste of time. So he sought to engage Montezemolo and Todt together. Again the wily operator had picked up their differences on his radar and thought he might be able to divide and conquer. He was absolutely correct. Whilst Todt was cool to the idea of hiring Räikkönen, Montezemolo was more than keen. But there were complications. Ferrari already had an option with Valentino Rossi and Todt doubted openly that Schumacher would want Räikkönen alongside him. But Robertson spoke privately to Montezemolo. Soon the two men agreed to sign Räikkönen to an option in Ferrari’s favour for a year, and to pay for the privilege.
But Robertson was not out of the woods. At that point he did not think Ferrari would actually sign Räikkönen. But it was his leverage on Ron Dennis. Robertson made sure by judicious leaks to journalist friends that it got around the paddock about Ferrari’s option. Dennis’s bluff had been publicly called.
And so matters rested, until the end of the season when Dennis heard on the grapevine that Räikkönen had signed for Ferrari. Although it was only an option he guessed immediately what was going on and decided he was not about to be kept on a string for a year whilst Ferrari decided his future.
By then the situation with the third driver in the loop, Fernando Alonso, was becoming clouded as rumours spread that Renault would withdraw from Formula One at the end of 2006. One very highly placed pundit whispered in Dennis’s ear that he had heard this would definitely happen. As sad as that might be for Formula One, Dennis realised it was very good news for him. As the rumour gained currency, whatever its truth, it effectively put Alonso into play.
Dennis made an approach for Alonso. He understood, as did everyone else in the paddock, that at around US$6 million a year, Alonso was underpaid. Dennis offered Alonso US$16 million a year. The timing of the move was perfect.
At that point Renault’s prospects for 2007 were at their lowest and McLaren’s, after its storming season, at their highest. McLaren had also just announced it had signed Vodafone as title sponsor for 2007; it had more cash than ever. With all things considered Alonso’s manager Flavio Briatore had no choice but to advise his driver to accept Dennis’s offer. He knew Renault at that moment in time would not match it (although later the situation was to change).
Dennis attached one condition to his offer – he wanted to announce it immediately despite the disruption it would cause to his existing drivers. Close friends say he was driven by a desire to get back at David Robertson and tell the Formula One world how clever he was.
Alonso’s signing was announced to an unsuspecting world just before Christmas 2005. It caused a sensation, mainly revolving around Briatore’s position and the obvious conflict of interest. Briatore took it all in his stride. Interestingly he and Dennis came up with entirely different stories of how Alonso was signed. But by then it didn’t matter. After the ravages inflicted on his bank account by David Robertson, Dennis considered it a good day’s work to get Alonso for just US$16 million.
But Dennis had seriously piqued his existing drivers and when they heard the news both vowed to leave the team at the end of 2006. They felt they had been double-crossed. Räikkönen’s position for 2007 suddenly looked precarious.
Over at Ferrari, Michael Schumacher was as entrenched as ever and the Italian team had signed an option with Valentino Rossi for 2007, this one at the driver’s behest. If Rossi decided to take up his option there would be no room for Räikkönen. The situation was slightly complicated when Rubens Barrichello read the tea leaves and saw that he also would be out at the end of 2006. Honda was desperate to sign him and he negotiated a release from his contract to take a big money, three-year deal. To replace him the team signed Felipe Massa on a one-year contract as a stop-gap. Schumacher expected that it would be him and Rossi in the cockpit for 2007.
But as 2006 began, Montezemolo realised he didn’t want that. Signing Rossi was Todt and Schumacher’s plan. He wanted Räikkönen, his man, in the car for 2007, and started scheming to get his way.
It may seem ridiculous that Montezemolo had effectively to politic within his own company, but that is the way it was. Todt had made Ferrari his own fiefdom, much to the annoyance of Montezemolo. The two had already clashed earlier this year when Montezemolo wanted to take Marlboro off the car for 2007 and find a non-tobacco sponsor. Todt wanted to stay with an eager Marlboro. Montezemolo tried everything he could to find an alternative and even invited Sir Martin Sorrell, chief executive of WPP Group, the world’s biggest advertising agency group, to visit him in Maranello. Ostensibly he wanted to discuss whether WPP and its network of sponsorship agencies could help with finding a new title sponsor for 2007.
But Todt found out about Sorrell’s visit. And when Sorrell arrived at Maranello, he did not meet with Montezemolo but with the Frenchman. Predictably the discussions went nowhere. Todt told Sorrell he already had a title sponsor for 2007 and asked him why he was there. Sorrell wondered that himself and the visit had effectively been a waste of his time. But as Sorrell was leaving, walking down the corridor on his way to Ferrari’s reception, Montezemolo jumped out of a door in front of him and ushered him into a small adjacent conference room. He asked him what had been discussed with Todt and when Sorrell told him, begged him to find an alternative to Marlboro. It was all over in 10 minutes and Sorrell left Maranello shaking his head at the shenanigans he had witnessed between the two men. Sorrell had no intention of wasting his time trying to find a title sponsor for a team that already had one. Todt had already told Sorrell he had done a deal with his friend Louis Camilleri, the chairman of Altria, the Marlboro parent company. Camilleri had agreed a five-year deal from 2007 to pay US$200 million a year. It was the biggest sponsorship deal ever in Formula One and an offer the team could not turn down.
Montezemolo was in despair after the Marlboro deal was signed. It made Todt, now seen as a top rainmaker, even more powerful inside the team. In fact Montezemolo had begun to feel like a stranger in his own factory. Continually away on Fiat and Italian business, Montezemolo realised he had made a mistake when he had promoted Todt the year before to head the whole Ferrari car factory. He had expected him to fall flat on his face but instead he rose to the task and Ferrari, which had been in the financial doldrums, began a remarkable recovery under Todt’s stewardship.
Montezemolo felt he had created a monster in Todt that he could no longer control. Although the two men had worked together for more than a decade, they were like chalk and cheese. Behind the rough exterior, Todt is a self-made, cultured man, an art lover with impeccable taste. In 2005 he had teamed up with Hollywood actress, Michelle Yeoh, got engaged to her and was in many ways beginning to outshine Montezemolo himself.
By contrast Montezemolo is a proud aristocrat. A member of the Agnelli family by any other name, he is regarded within the Fiat empire as a marketing wunderkind.
No one in Maranello can understand why the Todt-Montezemolo alliance has lasted so long. One observer said: “It is a mystery, Todt’s not Luca’s sort of person and vice versa.”
It was never part of Montezemolo’s plan to get rid of Todt, he simply wanted to break up the Todt-Brawn-Schumacher alliance that so effectively controlled the team. And it appears that the battleground was drawn over Michael Schumacher, with both men determined to get their way.
But Montezemolo was more determined.
Montezemolo was not overawed by Michael Schumacher as so clearly was Jean Todt. That was shown in 1999 when the two men faced up to each other after Schumacher broke his leg at the British Grand Prix. Even after he had recovered enough to go testing Schumacher announced on Sunday 3rd October that he would not be fit enough to take part in the remaining two races of the year in Malaysia and Japan.
After the accident Eddie Irvine had taken up the running for the world championship title and badly needed the help of a strong team-mate. But the last thing Schumacher appeared to want was his team-mate to win the world championship and he had clearly decided, with Todt’s collaboration, to see the last two races out. Irvine pleaded with Montezemolo to intervene.
What happened next was instructive in the differing relationships Schumacher enjoyed with Todt and Montezemolo. On the afternoon of Tuesday 5th October 1999, Montezemolo rang Schumacher at his home in Switzerland to ask if he would change his mind and drive. But Schumacher’s young daughter Gina-Maria answered the phone and told Montezemolo that her Daddy was “getting out of his football boots”. Montezemolo questioned the little girl more closely and ascertained that she and her brother had been enjoying a rough game of football in the garden with their father. When Schumacher finally came to the phone, Montezemolo asked him if indeed he had been playing football. The German had no choice but to be truthful. Once Montezemolo heard that, he said to him that if he was fit enough to play football he was fit enough to drive in Malaysia and Japan. When Schumacher resisted, Montezemolo reminded him that he was being paid US$2 million a race and would do as he was told. Schumacher had no choice but to comply and on Friday 8th October the team announced he would indeed be returning for the last two races.
The incident had been a lesson for Montezemolo, who realised that a secret conspiracy existed between Todt and Schumacher.
He had run up against it before when he had wanted to hire Mika Häkkinen to partner Schumacher. Then Todt had told Montezemolo that Schumacher would not have it and would leave. In effect Schumacher was so powerful he could dictate terms and Montezemolo could not risk calling his bluff. But Montezemolo believed Schumacher would have stayed and was left smarting by his rebuttal at the hands of the two men.
So when the chance came to sign Kimi Räïkkönen in the summer of 2005, Montezemolo was determined to grab it. After a poor season when the team had won nothing bar the controversial United States Grand Prix, Montezemolo sensed that Schumacher’s reign was coming to an end. He would be nearly 38 when his last contract ended in 2006.
So when David Robertson came calling, Montezemolo was all ears. Robertson brilliantly played off Montezemolo and Todt against each other. According to sources at Ferrari, Montezemolo didn’t want to get into a situation next year where he was looking for a top-line driver and everyone was signed up. Montezemolo is in instinctive man and, as one person close to Ferrari observes: “He decided to put the bunsen-burner under the situation.”
That person confirms that Montezemolo had been bitterly disappointed when he couldn’t sign Häkkinen and it had always rankled: “The aggravation with Todt has been there the whole time but came to a head at Monza. Luca had wanted to see Häkkinen in the other car. He believes it is 200 per cent about the drivers.”
During the 2005 season Montezemolo decided he didn’t want Valentino Rossi even though he had a firm option to join the team. He persuaded Rossi not to take it up and stay in MotoGP. This decision upset Schumacher who could see what it meant. Rossi had had a programme mapped out to familiarise himself with the car prior to a 2007 debut. Schumacher
said at the time: “We are sad not to see him here. I think he has a very high talent
and could have done it in terms of driving.” Ross Brawn, the Ferrari technical director and a strong Todt-Schumacher ally was also upset and said: “We were very impressed with what he was able to do. It would have been very exciting. He was very impressive in all the running we did, otherwise we wouldn’t have taken him so seriously. It would have been a nice challenge to have. It’s a shame.”
Rossi’s announcement fuelled speculation that Ferrari had already decided upon its 2007 driver line-up and that Kimi Räikkönen would be named as Michael Schumacher’s team-mate for next season. But by midsummer it was far from decided and a full-scale battle was going on inside Ferrari. There was a stand-off, which would continue until the deadline to take up Räikkönen’s option.
Meanwhile, David Robertson was sensing that Ferrari might not take up Räikkönen’s option and that Schumacher would not drive alongside him. That prompted him to renew relations with Ron Dennis and make sure his options were still open there. But with McLaren’s 2006 car having flopped and the three top technical men, led by Adrian Newey, having left the team, conditions were totally different. So in May, Robertson started serious negotiations with Flavio Briatore to take Räikkönen to Renault. Robertson found a team principal who very badly wanted to do a deal. The downside was that the retainer was half what he had been getting at McLaren and half of what he had been offered at Ferrari. But against that was a very competitive car; in May it was the most competitive car.
The negotiations were a surprise as Briatore had clashed with Robertson in 2001 and openly criticised him and his methods. But now the Italian turned on the charm offensive and entertained Robertson, and his son Steve, on his boat in Monte Carlo. He also introduced them to his ravishing new girlfriend, Elisabetta Gregoracci, and she worked her own charms on the two men as they toured the Renault team principal’s new yacht in Monaco harbour.
Briatore was ready to forget the past if there was a deal to be done. And he badly needed the deal. By this time his position was very different to how it had been in December 2005. Now the future was clear and Carlos Ghosn, the Renault chairman, had made a long-term commitment to the team and even turned on the cash spigot. Briatore was able to offer Räikkönen a decent retainer, said to be US$21 million but with the added opportunity to accept outside endorsements, which could have been worth another US$10 million.
The two men held detailed negotiations and Briatore personally spent a lot of time wooing Robertson. Later Briatore would angrily tell friends that he felt Robertson had been wasting his time and had been committed to Ferrari at the same time as he was offering Räikkönen to Renault. However, this was not the case. Robertson had been negotiating in the genuine belief that Ferrari would not take up its option because of Schumacher.
All through the early summer, civil war raged behind the scenes at Maranello. But Schumacher found his power to get his way had gone. Montezemolo appeared not to care whether he stayed or went. At the
German Grand Prix, which Schumacher won with Massa second and Räikkönen third, the Ferrari number one driver put on a very public show of affection for his team-mate and totally ignored Räikkönen. It was a classic Schumacher display: he was demonstrating publicly to Montezemolo how he wanted it to be and how good it could be. But Montezemolo was totally unmoved. In fact insiders say it hardened his resolve to dislodge the superstar. And in August, Robertson was proved wrong when Montezemolo signed the contract with him. No one close to Ferrari was surprised, as one insider says: “Luca, being the politician that he is, closed off every rat hole.”
When Schumacher learned the news, he told Montezemolo he wanted until the end of the season to make up his mind about whether he would stay and partner Räikkönen. In the meantime, he didn’t want any announcement made about Räikkönen. But Montezemolo was not having any of that. He wanted the situation resolved and told Schumacher he wanted his decision by Monza, when he would announce Räikkönen. By then it appears Ross Brawn had also decided he would leave if Schumacher did. That news was leaked to journalists to pile pressure on Montezemolo.
The writing was on the wall. Montezemolo had come this far and was not about to turn back.
Montezemolo won the battle: Schumacher would not drive with Räikkönen and would
instead announce his retirement. But the
decision was very much against his will.
He would have rather carried on with Felipe Massa as his team-mate. Now the seven
times world champion, still only 37, has to decide what to do next and where life will take him.
Meanwhile, none of the pronouncements so far can be taken for granted. Despite the 17 years since Enzo Ferrari’s death, Ferrari is still a very Machiavellian organisation and Jean Todt, predictably, is seething about losing this public battle with Montezemolo. He knows he will never have the same type of relationship with Räikkönen that he has had with Schumacher. Insiders, however, insist that Todt’s job is safe and that he has too many friends inside Fiat for Montezemolo to contemplate sacking him. And they
add that Montezemolo, who is not regarded as malicious, genuinely doesn’t want that and knows Todt is the best man to run
Ferrari. One says: “Whatever Luca is, he isn’t stupid.”
But another outside observer says that Todt has been wounded by what has transpired and doesn’t believe the story is concluded, as he says: “Todt is the most malicious person on two legs and he will hold that against Luca.”
Next month to mark the end of Michael Schumacher’s final year in Formula One, BusinessF1 writers look back at Schumacher’s extraordinary career off-track. From the secret backer who financed his early career to the astonishing battle between his first two managers, Willi Weber and Burkhard Nuppenny, for control of his career. The amazing tussle between Jordan and Benetton for his services. His contract machinations with Flavio Briatore and his wooing by Jean Todt. We look closely at how he earned nearly US$600 million in 15-and-a-half years of competing in the sport.
2007-04-05 12:14:10
The editor of BusinessF1 Magazine, Tom Rubython, yesterday won a libel action in the High Court against Richard Woods, director of communications for the Federation Internationale de l' Automobile (FIA).
For immediate release Thursday 22 March 2007
BusinessF1 wins libel action against Richard Woods
The editor of BusinessF1 Magazine, Tom Rubython, yesterday won a libel action in the High Court against Richard Woods, director of communications for the Federation Internationale de l' Automobile (FIA).
After a three-day trial before a jury Mr. Rubython was awarded damages of 17,000 (english pounds) and Mr. Justice Gray ordered Mr. Woods should pay Mr. Rubython's costs on an indemnity basis from June 2006 onwards. The total costs, payable by Mr. Woods, of both Mr. Rubython and the magazine plus those of Mr. Woods are approximately UK 250,000 pounds(US $480,000).
The FIA, which supported Mr. Woods during the action, had previously stated in open court that they were funding the action and the FIA are therefore likely to have to foot the bill for both side's legal costs. It is not known whether Mr. Woods will be left to pay the damages personally.
Background
Tom Rubython sued Richard Woods after an anonymous Internet and email attack was mounted against him. Mr. Woods admitted posting an article on the Wikipedia website on 6th January using a false name and then being responsible for the sending of emails ( which were also send with false names) containing the article to motorsport industry personalities on 9th January 2006. Mr. Woods denied responsibility for the three more websites created anonymously that also contained similar material.
Mr. Woods accuses Mr. Rubython of continually surrounding himself with criminals during his 25 year career in business and journalism. Mr. Rubython initially asked only for an apology and undertaking not to repeat the allegations but the jury rejected his defense returning a unanimous verdict in favour of Mr. Rubython.
Tom Robython said: "The injustice of this anonymous attack on me personally by Richard Woods has been shown. If Mr. Woods had apologized a year ago none of this would have been necessary but I was determined to clear my name of the slur that I had surrounded myself with criminals for my entire career."
Indemnity Costs Order
Mr. Woods was ordered to pay indeminty costs (rather than on the standard basis) after he had sued Mr. Rubython for an article that he had published about him in BusinessF1 in April 2006. (At an earlier hearing on 25th October 2006 Mr. Rubython had offered a settlement involving mutual apologies and undertaking in relation to their respective claims. Mr. Woods rejected this offer which turned out to be substantially more generous to Mr. Woods than the final outcome following the trial by jury yesterday.
Notes:
Mr. Rubython was represented by Marvin Simons of Seddons Solicitors and Mr. Harry Boggis-Rolfe.
Mr. Woods was represented by Dominic Crossley of Steeles Law and Mr. William Bennett.
2007-03-23 13:37:26
Jacques Villeneuve won the 1997 world championship even though Michael Schumacher, and, it now appears, the whole Ferrari team did their very best to stop him. With Schumacher’s retirement the old stories are coming out of the woodwork. But few better, or more damning, than the one told by Norberto Fontana.
By Tom Rubython
Nine years after the world championship showdown at the Spanish circuit, Jerez de la Frontera, between Jacques Villeneuve and Michael Schumacher in 1997, the then-Sauber driver Norberto Fontana has decided to tell the story of what happened to him and his part in that highly-charged weekend.
Fontana was a talented driver who had won the German Formula Three Championship two years before, beating Ralf Schumacher, Jarno Trulli and Alexander Wurz in the process. But the Argentinian’s career stalled and he finally got an opportunity in Formula One deputising for the injured Gianni Morbidelli at the Sauber Petronas team for four races at the end of 1997. After the Jerez race, he never competed in Formula One again, going to America and into obscurity. Few remember his Formula One career except in Argentina where he is still a minor celebrity.
At Jerez on that day, Sunday 26th October, Fontana had qualified 18th out of 22 and gone about his weekend totally unnoticed. He was 1.3 seconds slower than his team-mate Johnny Herbert in qualifying. But Ferrari team principal, Jean Todt, had spotted his potential in 18th place, although not for the usual reasons. In a recent interview with the daily Argentinian sports magazine Ole, the now 31-year-old Fontana claims two or three hours before the race, Todt visited the Sauber motorhome where the two drivers were having a pre-race massage. The Swiss team used Ferrari engines at the time. What happened next shocked all those present. Todt told the three men that the Saubers must block Jacques Villeneuve’s Williams Renault if they were in a position to do so in order to help Michael Schumacher win the world championship. The order was given to Fontana and Herbert, the team’s number one driver.
In reality it was unlikely either of the Sauber drivers would have had a serious chance to block Villeneuve, but Todt apparently made it very clear what they must do it if they had. Fontana says now: “We were in Peter Sauber’s motorhome with the masseur and Johnny Herbert, softening the muscles. It was two or three hours until the race started. Jean Todt entered and went straight to the point: ‘By strict order of Ferrari, Villeneuve must be held up if you come across him on the track. To whoever this applies.’ And this applied to me.” Todt didn’t appear to know who Fontana was but realised as a slower backmarker he might have more chance to block Villeneuve than Herbert would.
It was an astonishing situation for the young driver to be in. But according to Fontana, Peter Sauber told him that whatever the morality he had little choice but to comply. Sauber had an engine contract with Ferrari, then in its first year, which obliged it to comply.
Peter Sauber has since strongly refuted this version of events in an interview with his close friend, the journalist Roger Benoit. But he cannot know for sure as he was not present in the motorhome when Todt made the request. Nevertheless, in an interview published in Blick, the Swiss daily newspaper, Sauber called Fontana a liar and vigorously denies Fontana’s claim.
Sauber told Blick that in the nine years Ferrari and Sauber worked together, the Italians never asked his team to block other drivers. He told Benoit: “Ferrari never expressed the desire that we should obstruct an opponent of Schumacher on the track.”
Benoit is a journalist of the highest regard and with the highest standards, and would have printed exactly what Sauber told him. That Sauber denies it cannot be refuted.
However the television footage appears to prove Sauber wrong rather than Fontana. It clearly shows Fontana blocking Villeneuve for three corners when he came up to be lapped on lap 32. Fontana describes how he did it: “When I came to taking a turn, I held Jacques back by three or four curves, not more.”
As well as the television footage, it is also backed up by a sequence of remarks between Murray Walker and Martin Brundle, the ITV commentators for the English-language broadcast of the event. The exchange went like this:
“Case of champagne from Ferrari to Sauber,” said Walker.
“Because the Argentinian newcomer Norberto Fontana, up from Formula Three, really, really, helped Michael Schumacher on his way there,” he added.
“What engine have they got in that Sauber, Murray?” said Brundle.
“Isn’t it a Ferrari?” he said.
“Well, it is, yes,” said Walker. “Martin you are a cynical chap.”
Walker and Brundle had no doubt what had happened, and although they didn’t know why at the time, by their comments they suspected some doubtful behaviour by Ferrari.
Fontana is adamant he did his job well and blocked Villeneuve for three or four corners and cost him around three seconds.
In the end, of course, it didn’t matter as when Villeneuve challenged Michael Schumacher for the lead, the cars collided and Schumacher got the worst of it and retired from the race and championship contention. Villeneuve won the world championship and Schumacher was later stripped of his second-place for pushing Villeneuve’s Williams Renault off the track. The race also had another controversy that enabled Todt to get away with his ruse: the Williams Renault and McLaren Mercedes openly colluded to alter the course of events, although not negatively as Todt had planned. Frank Williams agreed that if the McLaren drivers Mika Häkkinen and David Coulthard helped Villeneuve then the Canadian would hand the win to either of the McLaren drivers if he didn’t need the points at the end of the race. But this was certainly not collusion to the extent of trying to disrupt Villeneuve’s race as Fontana was ordered to do.
And there the secret would have lain if Fontana had not harnessed bitter feelings about the incident and been telephoned by a reporter from Ole to comment on Schumacher’s retirement on the evening of the 10th September 2006. The article duly appeared in the following day’s edition.
Fontana was bitter because he claimed that neither Schumacher nor Todt ever thanked him for what he did. Fontana believes the incident harmed his career and his chances of attracting another drive with another team. He says: “It was incredible at the time but already it’s history, a story.”
Fontana said he was telling the story now because time had passed and Schumacher was retiring: “Now that time has passed, I can tell the story. After all, who remembers?”
He says: “It harmed me. First, Schumacher never thanked me for it and Todt, as they lost the championship, they left the motorhomes heated and I never spoke with him again. And, months later, that situation finished me.” More than anything else, he was angry about not being thanked.
Fontana was a friend of Schumacher’s from his German Formula Three days, as he says: “We had a lot of contact when I raced in the German Formula Three, because Ralf was there.” Schumacher was once quoted as saying of Fontana: “Who is that boy? Fontana, an Argentinian? He goes very well, that boy he goes well.” Fontana remembers eating pizza with Schumacher and becoming friends.
Fontana did go on to secure a drive with Tyrrell in 1998, but after the team was bought by Craig Pollock he blocked the move. Fontana maintains it was because Pollock was Villeneuve’s manager and remembered what had happened. He explains: “Pollock finished me and gave me the thumbs down for that manoeuvre.”
Now Fontana is sanguine about the incident and ruminates about what might have led from that Tyrrell drive: “I had more to lose than to gain. I did what I had to do. But it is a done thing.”
But Todt may not be out of the woods. There is now enough published evidence for Max Mosley, the FIA president, to haul Todt up in front of the FIA World Motorsport Council for what he did. But will he?
2006-12-06 05:49:49
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2005-05-26 06:31:29
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