Volkswagen Group Flirting with Formula One

Now that Ferdinand Piëch is no longer standing in the way, Formula One Chief Executive Bernie Ecclestone is mounting a major charm offensive on Volkswagen, but the company should resist the lure of racing's biggest game, says our author.
Nico Rosberg took the cup at Monaco at the weekend, but not all teams can be sure of emulating Mercedes' success.

Bernie Ecclestone can be accused of many things, but a lack of business sense isn’t one of them.

Volkswagen patriarch Ferdinand Piëch, who nursed a hearty dislike of Mr. Ecclestone and made sure VW had nothing to do with F1 racing, had barely stepped down from his exalted position in the car empire when the 84-year old Methuselah of racing launched a new charm offensive.

“It would be great if you would come,” the F1 chief executive said recently, openly courting favor with the Wolfsburg-based carmaker.

That’s why Mercedes driver Lewis Hamilton’s new contract was likely not the only topic of conversation when the who's who of Formula One met in Monaco at the weekend. There were surely many conversations about possible VW scenarios.

Already, there is talk in the frustrated Red Bull team about approaching Volkswagen’s luxury brand Audi as a possible new partner. Although VW executives don't see this as an option, Mr. Ecclestone is not letting up. He and the other F1 bigwigs would welcome Volkswagen with open arms.

Landing Volkswagen would be an urgently needed and prestigious coup for the geriatric Brit, who for decades has pulled the strings of the master class of the motor racing world from his office in London. Mr. Ecclestone has faced criticisms, primarily from smaller teams.

And with good reason. Formula One is a billion-dollar business, but only the industry giants cover their costs.

Success never materialized for BMW and it waved goodbye to Formula One in 2009, saying auto racing no longer fit its green image.

Recently, the former chairman of Ferrari, Luca di Montezemolo, pointedly demanded reforms at Formula One, a barb directed at Mr. Ecclestone that would bounce off if VW were to join the party. No wonder F1 leadership and its copyright owner, CVC, are rolling out the red carpet for Wolfsburg.

Yet the situation facing the Volkswagen Group is decidedly more complicated. The company’s leading premium brands, Porsche and Audi, have been active in motor sports for a long time, even competing against each other in the 24 Hour Le Mans. And last year, Audi signed Stefano Domenicali, the former principal of the Ferrari F1 team, to develop “new business areas in services and mobility.” This job description has prompted many to start dreaming, even those outside the corporate group.

But is the come-hither from London really that enticing? There should be some measure of doubt, particularly when considering how many competitors have already crashed and burned. The problem is that the winner takes all, and for most of the race teams, the F1 circus doesn’t pay off. The best they can hope for after spending millions to participate is to be kindly ignored. In the worst cases, it can even cause negative headlines.

Toyota learned this lesson. So did BMW.

VW Volkswagen – Employees, Vehicles Sold and Market Share-01

Toyota was convinced lots of money would buy lots of success when the Japanese auto giant joined the circuit in 2001. It built an F1 factory in Cologne, but never developed the expertise to compete, and gave up after eight years with a record of zero victories in 139 Grand Prix races.

BMW also entered the competition with a goal of winning the world championship, but never came close. BMW was originally contracted to deliver motors for Williams before it bought the Swiss Sauber team in 2005.

But success never materialized and it waved goodbye to the Formula One in 2009, saying auto racing no longer fit its green image.

This is why the reluctance of VW Chief Executive Martin Winterkorn and Audi Chief Executive Rupert Stadler is justified. Mr. Piëch is no longer in the background blocking involvement, but that doesn’t mean his dictum of “thanks but no thanks” wasn’t grounded in fact. The problems at VW, which employs 600,000 workers, haven’t gone away with Mr. Piëch. Management continues to face an array of vexing challenges.

Management in Wolfsburg would be well advised to concentrate on the areas needing improvement within the company, rather than creating a new one by joining the motor racing circuit.


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