Ferrari CEO Again Threatens F1 Exit, Implies Start of Competing Series

At the company’s annual Christmas meeting, Ferrari (RACE) CEO Sergio Marchionne reiterated that the team will be leaving F1 (FWONK) if Liberty Media execs institute plans to standardize parts and revise power plant rules. Marchionne said, “we are not interested in cars being the same, with simple and cheap engines like NASCAR. If they decide to make us all the same, we will go in 3 seconds”. Should the team decide to leave the sport, Marchionne indicated Ferrari would look to form an “alternative championship from 2020/2021.”

Howie Long-ShortFWONK fell 4.7% on Wednesday following Marchionne’s statement. Shares are down 12.3% over the last 30 days, a loss of nearly $1 billion in value. As for RACE, the company posted strong Q3 results with net profit +24% YOY (to $166 million). Now there are rumors circulating the company may be looking to increase production 12% (from ’16 numbers) by 2019, which should excite investors.

Fan Marino: Standardizing engines take away one of Ferrari’s biggest advantages, as one of the series’ biggest spenders. Any leveling of the racing field will have a direct negative impact on the team’s bottom line, in a sport where the winner’s pool was already cut 13% this (down to $273 million); so, it’s understandable why the team is opposed. Former F1 CEO Bernie Ecclestone certainly doesn’t think F1 should cater to Ferrari’s demands, saying, “democracy has no place in Formula 1”, adding this type of behavior is nothing new from the sport’s most famous team “if they don’t win there is usually panic.”

Ferrari Claims It Could Leave Formula 1, Start Its Own Series

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Ferrari Contemplates Exit from Formula One, Could Save $119 Million/Year

Ferrari (RACE) could be leaving Formula 1 (FWONK) at the expiration of their contract following the 2020 season. RACE, F1’s oldest team (67 seasons), opposes the organization’s plan to introduce a new version of its engine to the racing series and its intention to redistribute prize money beginning with the 2021 season. The introduction of a new engine will increase RACE’s expenses and a balancing of prize money would likely cost the company its guaranteed annual bonus payment ($94 million/year). Ferrari Chairman Sergio Marchionne has been quoted as saying an exit would be “totally beneficial” to Ferrari’s bottom line.

Howie Long-Short: There is a narrative that should RACE pull out of Formula 1, the company would see an increase of $119 million to its bottom line; the team’s annual deficit. I don’t believe the number is nearly that high. Marchionne has already said that if the company were to leave F1, it would join another racing circuit. Even if you believe F1 R&D is irrelevant to the development of Ferrari street road vehicles (and theoretically draw the expenditure down to $0), competing on another circuit is going to require some level of R&D capital. An exit from F1 may reduce the required spend, but it doesn’t eliminate line item.

Fan Marino: Red Bull team principal Christian Horner is calling Ferrari’s bluff saying, “they’ll bluster that they don’t need Formula One, but what other form of motor racing is going to give Ferrari the platform that Formula One does? I think when the music stops they’ll be there.” He may be right as to the latter, but Ferrari doesn’t need F1 as a marketing platform; and certainly, not like F1 needs Ferrari. As well-respected motorsport journalist Peter Windsor recently said “the key to everything in Formula 1 is keeping Ferrari happy and part of the programme. Without Ferrari, Formula 1 is just another motor racing championship”. In that scenario, Ferrari would form its own racing circuit (and likely not miss a beat).

Ferrari on track for £100m boost in profits if team leaves Formula 1

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