Monaco preview #1

Depending on how GP2 Asia debts are handled (or pardoned) by the GP2 Gods, Monaco may prove to be the beginning of the end for several teams.  I was probably too generous in my May 4th post predicting when teams would run out of cash, underestimating the impact of the devastating Asia Series and the insufficient cash entering the teams.

Remember that most teams actually receive only part of the cash from drivers at this stage in the season, normally split into 2 or 3 payments.  The risk of a driver not paying his installments, or on the cash-in  being insufficient, could be too much to bear for many teams in this current climate.

Not helping in this situation is the mind-boggling replacement part costs presented to teams this past weekend.  GP2 is pushing simple spares at exorbitant prices, adding more and more wood to the already vivid financial fire that many teams are facing.   The uproar among the GP2 teams was significant, though their pleas as usual will go ignored and unanswered by those “in charge”.   With this philosophy and vision, they will simply accelerate the demise of those teams in trouble – which could be what their ultimate goal is:

trident logoFirst in line is Trident, which regardless of the Sonangol cash brought in by Teixeira is facing its final days as a GP2 team.  Rumours of Hamad Al Fardan jumping on board could save the team, though the Bahraini driver’s budget could serve for little more than delay the inevitable.  Trident’s problems are deep, dragged on from at least 2 seasons of a terrible cash management and vision.  If you recall, Trident started off well in their 2006 season, with Bruni winning a couple of races.  Since then, Trident has raced paying drivers:  Kohei Hirate (Toyota driver), Mike Conway (Honda driver) and Ho-Pin Tung.  Even with this, today they find themselves in the worst financial situation of all, having thrown away their “brand equity” and falling to the pits of GP2.  Some, with very specific detail, would say – as Alan Greenspan would say – it is the result of irrational exhuberance…. Time will be the judge of this.

durango logoDurango joins the rank of troubled teams, with Ivone Pinton searching for buyers left and right.    Pinton is an experienced team owner and his situation, in my opinion, is more strategic than financial.  Pinton knows it’s a good time to look for buyers.  His sporting situation will not improve with Valsecchi underperforming and Panciatici adapting to GP2, so he wants to step to the front of the line, cutting in ahead of Trident, DPR or Coloni.  He has suffered through some up and down seasons before, but he is probably sure his team will not be in the Top 5 any time soon.   A string of mediocre results from average-to-poor drivers (Valerio, García, Puglisi, Chandhok, Hernández) has not helped his case.  He may feel it’s too late and that a radical change is needed.

DPR logo

The DPR situation is a bit different.  As we have written and many have posted comments on, André Herck has no financial problems and can weather this storm.  We can’t forget, though, that Herck is also a successful businessman and this GP2 team will be no exception.  Rumour is he could be driving this team into the ground, increasing his already heavy losses, arriving at a stalemate with the GP2 organization.   Could make sense, since this would be a way to survive his terrible sporting situation, renegotiate and come up with a breath of fresh air from this mess.  If he wants to change his team’s direction, he could start by putting James Jakes in his second car – the only driver left with budget and some ability to aim for Top 10 finishes.

After this brief analysis, question is:  what would happen if Trident can’t be at the Turkish GP at the beginning of June?

1. Will Bruno Michel pay for his expenses?  Hmmmmm… no.  If you don’t pay, you get fined – and instead of helping, Michel will charge €40k per car not on the grid, even if the debt is now approaching €1 million.

2. Is any F3/WSR team waiting for an opportunity to join GP2?   I doubt Prema, Epsilon Euskadi, Mucke, Manor or Carlin are sitting on the sidelines at this point.  No one is willing to bet their own cash, and the lack of sponsors and drivers at this stage of the season and economy make for a general lack of interest.

Monaco will be the perfect setting for these backmarkers to show their cards…

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9 Responses to Monaco preview #1

  1. Fletcher says:

    Seems to me that teams are relying to much on driver sponsorship rather than getting corporate sponsorship for their team and that way get better drivers to race for wins ala Formula One. Their team budgets are set up more like F3 relying on a fast driver with money and there aren´t to many of those driveers to fill the grid hence some teams will vanish sooner or later. Team owners gettng to lazy in my opinion.

    • gp2 insider says:

      Fletcher –
      GP2 teams would love to rely on corporate sponsorship over driver sponsorship so they could pick the drivers with the best chances of winning, much like an F1 team. Unfortunately for them (and the same goes for WSR, F3, F Master, etc.), team sponsors are hard to come by. The value proposition for these sponsors is very limited, basically due to the strength of TV audiences, most of the time not good enough for real and sustained interest. Only truly global brands are interested in a global sport such as motorsport, and GP2 for now is not appealing enough and I’m afraid lower categories may just never be. The few examples we have seen in GP2 is limited to personal contacts – most notably Telefónica and Repsol supporting Alfonso de Orleans’ Racing Engineering team.

      The value for GP2 sponsors is limited to the local impact of supporting a local driver or the value of inviting clients, employees or other guests to F1/GP2 events. This has a lot of impact and is where GP2 team owners need to focus their selling proposition. If they sell TV coverage and brand exposure, they are basically selling hot air.

  2. I am a bit surprised how the Gp2 “Bosses” (Michel, Bernie, Briatore) are letting their “business” going down.
    Where are the cut of costs they promised before the season?
    Why don’t they take measures to protect GP2, like reducing the costs or putting a budget cap?
    All of this seems too strange to me, and don’t fit in the posture assumed by Bernie and Briatore in all of this recent year, with their “business style”.
    Regards

    • gp2 insider says:

      Diogo,

      The cost cuts this season were minimal, limited to some spares but little else. The problem is now they are once again introducing expensive spares and updates, basically canceling out any savings. A budget cap in GP2 is unnecessary, and the main source of savings would be in reducing entry fees, reducing spares even further or engine lease costs.
      My suggestion would be more oriented to sharing TV revenues with GP2 teams. Even €500k would go a long way for teams and I’m sure GP2 can afford it. TV rights are usually bundled with F1 and some money could be returned to the teams, who are the ones actually putting on the show.

  3. fletcher says:

    I agree with Diogo

    How is it possible that GP2 under the umbrella of Ecclestone not have more TV exposure. Forget cost cutting. We need to solve the immediate problem which is attracting corporate sponsorship and the only way is through TV. The rest falls into place. Healthier grids with the best up and coming drivers is what GP2 should be about.

  4. Mekola says:

    I think that if Bernie really wanted to protect GP2, he might persuade TV broadcasters to include it when they reach television rights to show F1 as a “combo”.

    • gp2 insider says:

      I think they already do that, at least in Europe and some Asian countries. Though there is no obligation to retransmit GP2 live, most have the rights for it and probably some go unused. I think CVC (owner of GP2) could afford €6.5 million and give €500k to each team.

  5. Mekola says:

    Generally, in some parts of the world is quite hard to follow the series, for example in the South part of Latin America (except Venezuela and Brazil) we only could see the series in 2006, partial 2008 and this year 2009.

  6. Pingback: …and Rigon is out «

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