After a seven-month process of due diligence, Andretti Cadillac has been given the green light by the FIA to enter Formula 1. That makes Andretti the only one of the seven entities to throw its hat into the ring to have been accepted by F1's governing body. Following a careful examination of its bid, the FIA is satisfied that the American team has the financial and technical resources to compete in F1 for the long term.
That is not the end of the story, however. After the go-ahead by the FIA, Andretti now also needs to reach a deal with FOM, F1's commercial rights holder owned by Liberty Media, to be accepted. This is proving to be a much bigger hurdle than getting through the FIA's initial application process. FOM is also having to look after the interests of F1's 10 existing teams, many of which are vehemently against Andretti joining the grid at the current terms.
If Andretti were to join as an 11th expansion team, it would mean the current prize pool divided by the teams, over one billion dollars, would have to be shared with an extra party and therefore the current teams would see their slice of the pie shrink.
F1's Concorde Agreement, the three-way commercial contract that the FIA, F1 and its teams operate under, has catered for a $200 million anti-dilution fee, an amount that a new entrant would have to pay up front to join F1. That money will then be distributed among the existing teams to make up for their loss of revenue by having to share its income with another party.
However, most teams feel this fee is way too low. It was conceived during a period when many F1 teams were struggling to stay afloat, while F1's popularity boom and its budget cap have now made their values soar. Teams therefore want to see this figure at least tripled, not only to offset the revenue shared with Andretti but also to protect their overall value. Teams like Williams and Haas feel they should be rewarded for having weathered the financial storm in the wake of COVID-19 pandemic, with their respective owners pumping in many millions to keep their teams afloat.
Naturally, team owner Michael Andretti – son of 1978 F1 champion Mario and owner of the Andretti Autosport IndyCar team - doesn't agree with their reasoning. Andretti is confident that through raising sponsorship and through marketing spend from his partner Cadillac his team will actually bring in additional revenue to the point where the existing teams won't lose any income. It is now up to Andretti and the GM brand to convince FOM that it will grow the pie rather than slice it into more pieces.
With F1 keen to attract more OEMs to build their own power units, the fact that GM and Cadillac are appearing to treat F1 as just a branding exercise isn't helping Andretti's cause. Andretti had a provisional deal in place with Renault to supply engines, an agreement which has since lapsed but could be revisited.
Source: Autosport