The Fall of the Empire: Part Two, The nuts and bolts of revolution

In part one of this series, we began to explore the notion put abroad that Bernie Ecclestone is the benevolent dictator of Formula One, and as with all dictatorships one day their rule comes to an end.

The conclusion of each dictatorial dominion is of course unique, however there are signs for the critical observer, that Bernie’s number is almost up. CVC are on the brink of appointing Paul Walsh as the head honcho to the Formula One group of companies. Walsh is known to be a savvy and tough operator, which in itself sends out a message of intent from Donald McKenzie, the Co-Founder and Co-Chairman of the private equity company which owns the commercial rights to Formula One.

Ecclestone’s response has been interesting. He invited a number of the English press to his ‘lair’ in West London, described by the Telegraph correspondent as follows.

“With its garish black window frontage, anonymous sign and slightly dated decor, it is like walking into a Roger Moore-era James Bond movie. Ecclestone still lives in a penthouse ‘above the shop’”.

The following 90 minutes was described as the usual ‘riddle’ laden discourse for which Ecclestone is renown, though the self-styled ‘supremo’ was revealing when pressed on certain matters. These demonstrate the sands are shifting beneath Bernie’s feet, as do other indications analysed in part one of this series.

Dictators rarely know when their time is up and succession planning is not usually a part of their management style and make up. To date the matter of life in Formula One after Bernie has in his mind been restricted to quips and conundrums. Notably, when questioned in the paddock about his successor in 2013, Christian Horner happened to be ambling by and so Ecclestone claims that Horner’s presence then, was the sole inspiration for his reply – which suggested the Red Bull Team boss may be a worthy protégé to be mentored and eventually run the Ecclestone Empire.

The millions of wasted words written on the idea of Formula One being run by Horner, may well have been the source of enormous amusement to Bernie, who delights in the fact that his every word is treated as gospel. Yet to those not immersed in the frenzy of the F1 circus, these disseminations have become increasingly frequent over the past months; and the impression they convey to those not familiar with the ‘Ecclestone way’ is of an individual who is barking mad and completely bonkers.

This of course isn’t a problem, when a crazed entrepreneur is responsible for merely their own destiny. However, with billions of pounds on the line, investors such as CVC become nervous as to the effect these rambling performances are having.

The fact that Bernie invited a select group of public opinion shapers to respond to the leaks from CVC regarding the imminent appointment of Paul Walsh, in itself is an indicator as to the mind-set of Ecclestone. Add to this that Bernie addresses the issue of his successor for the first time in a non-frivolous manner and we have another of those ‘Fall of the Empire’ moments before us.

Since the turn of the year, Ecclestone was forced to resign his statutory directorships in all the Formula One group of companies owned by CVC due to his impending criminal trial. CVC could not be seen to do nothing and the alternative many corporations would have opted for would be a suspension on full pay pending the outcome of the trial.

Even though Bernie was ‘acquitted’ by the Bavarian legal system, Mackenzie has been in no hurry to re-instate these statutory powers and Ecclestone’s hands are tied in a number of ways, one of them requires him to refer all matters of a contractual nature to the board for approval.

Therefore the appointment of a hands on chairman such as Walsh, is further indication that CVC are distancing themselves from their once golden goose. Ecclestone is candid about Walsh, “Donald [Mackenzie] is directing it,” Bernie admits. “Do I have any input? Probably not.”

It may appear as though Ecclestone is resigned to his fate when he reveals, “Donald always believes that I need some help. He’s probably right”. Yet the fight has not left the self-made billionaire as he qualifies this by suggesting, “It’s a case of what sort of help and for what. If you want a surgeon don’t get a dentist. Probably we need somebody to help with the marketing. It depends on what the people who employ him think. If he says I’m prepared to accept a position if it was offered to me, but this is what I want to do, then it’s up to the employers.”

Of course Walsh’s CV list a number of global marketing successes, one of which included identifying the US brand Haagen-Dazs and through proper management of the brand created a truly global reach.

Yet Walsh made his name by being ruthless in business. On behalf of Grand Met, he negotiated the sale of “Intercontinental Hotels” to a Japanese consortium for an eye watering $2.3bn in 1988. It became known as the ‘deal of the decade’. City analysts described the price Walsh secured as “off the chart” because the deal was valued at a P/E ratio of 52.

Paul Walsh will not arrive in Formula One to make up the numbers or do a deal here and there with the odd sponsor and Ecclestone has been swift to respond – again with an unusual train of thought.

“What is going to happen is that if I died now, there are enough people here to continue running the company because of the way things are set up. Would they want a frontman, particularly if they want an IPO [initial public offering]? The City would want to see someone, I suppose. The right person would come along; maybe this Mr Walsh is the one. If I was controlling the board, I would probably say this wouldn’t be a bad idea to have a woman as chief executive.”

This reference is of course to Sacha Woodward-Hill, Ecclestone’s right hand woman. Her legal training has seen Bernie successfully navigate through the perils of a number of litigation matters in the past few years and she is a director of 17 of the Formula One companies.

When pressed on several occasions about reports Walsh was being lined up to ‘reign him in’, Ecclestone curtly retorted, “He would be unique if he could do that,” adding, “First he’s got to be appointed, hasn’t he?”

Bernie believes he still has some leverage in his association with Mackenzie and CVC. “I don’t need to do anything with anybody. I’ve still got a few dollars in the bank, so I’m not looking for a job. I’m happy here as long as the board are happy. When I don’t think I can deliver I’ll retire. I’m not at that stage yet”.

So is the Ecclestone dictatorship fatally wounded? The answer must be yes. That Bernie has volunteered Sacha W-Hill as his successor to the role of “chief executive” whilst Walsh as chairman looks set to attempt to create some big value for CVC.

Roger Petersen, author of ‘Resistance and Rebellion: Lessons from Eastern Europe’ suggests the fall of dictatorships is first seen in the shift in attitude from ‘neutrality’ to one of ‘resistance’.

2014 has seen many more column inches written about Bernie Ecclestone than in recent times. This has intensified over the past weeks, such that barely a day passes without the self-styled F1 Supremo popping up with a comment on something.

However, Ecclestone’s attitude has been questioned by those previously neutral toward his regime. Martin Brundle remarked in Austin. “It’s not very helpful when your CEO expresses those views”. This followed an impromptu interview by Ted Kravitz where Ecclestone said that race promoters had been contractually short changed by the new engine sounds and he was working hard to deliver a return to the V8’s.

Brundle’s response to the idea of returning to the V8’s was – “nonsense”.

Bernie appears obsessed with fighting a losing battle over the new V6 Power Units. His latest declaration is that he will deliver change for 2016 and he intends to force a vote on the matter at the F1 Strategy Group meeting on December 18th.

However, the numbers just don’t add up. Ecclestone requires 4 teams to agree to change for 2016 by a simple majority vote. Yet Mercedes, Force India/Lotus, Williams and McLaren are highly unlikely to agree to Ferrari and Red Bull proposals.

Hitler had an obsession – called Operation Barbarossa (the 2nd front) – which historians point to as the turning point in the fortunes of the third Reich.

CVC are unhappy at the constant negativity surrounding the sport and how it affects its valuation and their investment. Instead of celebrating the technological wonder that are the new F1 PU’s their chief executive is persistently kicking up a dust storm over the matter – and it will be this which must see Ecclestone pay the ultimate price.

7 responses to “The Fall of the Empire: Part Two, The nuts and bolts of revolution

  1. Difficult times ahead I fear for all involved on every battle-front. It will be interesting if there turns out to be a massive power struggle causing shockwaves throughout the sport, or a quiet, ‘soft’ hand-over. If Bernie feels threatened he may just employ a scorched earth policy and leave as much mayhem in his departing wake as he is capable of causing. I can’t see Ferrari jumping in to back up his threats of a breakaway series, not with the change that is going on there right now, so Bernie is left to go down shooting from the hip……

    Luca de Montizemolo and Bernie Ecclestone, F1’s answer to Butch and Sundance, just older!

    • … I suspect Ferrari are in fact weaker than they’ve ever been… Luca had time served and respect for a period of major success…

      Ecclestone does appear to be firing rounds out randomly – which has no strategic sense.

      • I don’t understand why he just can’t let go of F1. Surely that court case was a perfect time to step down, he’s getting close to 90 years old and richer than most of the UK’s collective wealth! I’ve never understood what the point of making so much money is, that you can’t even spend it all and then just taking it to your grave!
        Imagine how the sport could prosper if it was spread amongst the teams when he pops his clogs.
        All the stuff coming out of his mouth is the sign of a man who knows he’s pn his way out so is going to ruin things as much as possible before he goes, after all it his sport. I don’t make a habit of hating people I’ve never really met but he is one of the most deplorable people I’ve seen. Let’s hope he’s out the door before he can cause too much damage.

          • I get that, but my point was really how much money does one person need! His kids don’t need that much and their kids don’t need that much.
            It’s just greed to a pyschopathic level

  2. Who will own the sport in the future? Mercedes, Ferrari, red Bull? Or sky (Murdoch)? Or a Swiss-Arab consortium? Oil companies?

    Sad and fun at the same time, this.

  3. I suspect that Sacha will be a non-starter as a replacement for Bernie–too closely involved with him for anyone to trust her.

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