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Formula One shake-up to challenge dominance of Hamilton era



Lewis Hamilton’s win at the Turkish Grand Prix last week secured him a place in history with a record-equalling seventh world championship.

Such predictable dominance is one aspect of the sport new F1 chief executive, Stefano Domenicali, wants to challenge with sweeping changes to stimulate fiercer rivalries on the track — and attract a new, younger audience.

The Lamborghini chief executive and former Ferrari team boss takes charge from January, after the conclusion of the current season.

He will need to lead a financial recovery, following huge losses suffered during the pandemic, but also faces challenges that precede coronavirus.

Formula One driver German Sebastian Vettel (L), from team Ferrari, and former Formula One boss Bernie Ecclestone © Sebastiao Moreira/EPA/Shutterstock
Stefano Domenicali, new F1 chief executive © Krisztian Bocsi/Bloomberg

Industry executives, team owners, managers, and drivers say that, under Mr Domenicali, F1 must reach new television viewers — and sponsors — by becoming more exciting, more digital, more environmentally friendly, and bigger in the US.

Bernie Ecclestone, who led F1 for decades before being ousted by Liberty Media after its takeover, said the new chief executive must be allowed to act without interference from the owners.

“It won’t be easy for him at all but it’ll be easier than if he needs to get permission from someone,” he said. “When I ran the business if I saw something that needed doing I didn’t talk to my grandmother . . . I got on with it.”

Mr Domenicali faces a difficult economic environment that is putting pressure on broadcast and sponsorship budgets.

He also should not expect an easy ride from those at the top of the grid, such as Mercedes, which has no intention of relinquishing its grip over the sport.

“The biggest challenges are to create a spectacle with more variability and more unpredictability,” said Toto Wolff, team principal and minority shareholder in the Mercedes team. “We will do everything to counter that.”

Liberty Media, the group controlled by US billionaire, John Malone, which acquired F1 for $8bn four years ago, has struggled to grow its revenues.

Chase Carey, a Fox Corporation board member and confidant of Rupert Murdoch, who was appointed F1 chief executive in 2017, has repeatedly acknowledged that the sponsorship market has proven tougher to crack than expected. F1 made 15 per cent of revenues from sponsorship last year. Total revenues were $2bn, slightly up from roughly $1.8bn in each of the prior two years.

In the first two quarters of 2020, revenues were just 7 per cent of the $866m generated in the same period a year earlier, due to a four-month delay to the start of the season.

Mr Carey, who will remain chairman, managed to protect vital broadcast income by staging a season, albeit mostly in Europe, set to hold 17 Grands Prix this year.

Column chart of Revenues, trailing 4 quarters ($bn) showing F1 revenues plummet

But despite a rebound in the third quarter, the series incurred operating losses of $363m in the first nine months, because of lower fees from race promoters and a hit to corporate hospitality without fans in attendance. In April, Liberty Media was forced to inject $1.4bn of cash into F1, which furloughed half its workforce and agreed salary cuts with executives to weather the pandemic.

Mr Carey’s reign was consumed by the urgent need to secure commitments from all 10 F1 teams to make the sport more competitive. This year he convinced constructors, including the big three of Ferrari, Mercedes and Red Bull, to sign up to a new “Concorde Agreement”, a deal that governs how money is split.

The revised agreement will divide F1’s revenues more evenly among the teams, while also including a $145m cost cap next season. These measures are designed to reduce the advantages enjoyed by the big three teams, which tend to dominate the podium at the expense of smaller rivals such as Williams.

“A big rule change will dissipate the field,” said Christian Horner, team principal at Red Bull Racing, the last team other than Mercedes to win the championship. “We just hope we’re on the right side of the curve.”

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Under Liberty Media’s ownership, F1 has reached new audiences through the Netflix series, Drive to Survive, which showcased teams and drivers, and spin-off “esports” video gaming events. But the average age of F1 fans remains 40.

Another missing component is the sport’s relatively weak profile in the US, where its only Grand Prix is in Texas. Mr Carey confirmed this month that long-running talks about staging a race in Miami, Florida had been pushed back because of the pandemic.

It would only take one or two additional races to make a “big difference” in the US, according to Zak Brown, chief executive of McLaren Racing, a UK-based team.

“A successful US driver is what’s key,” said Mr Brown. “The best thing [F1] can do is try and get a second event there.”

But Mehul Kapadia, chief operating officer of the Motorsport Network, a digital media group, said: “It is an uphill battle to create the same kind of attraction there [the US] as in Europe.”

Formula One Group CEO Chase Carey (L) and Red Bull Racing Team Chief Christian Horner © Valdrin Xhemaj/EPA/Shutterstock
Racing Point’s Canadian driver Lance Stroll © Murad Sezer/AFP/Getty

F1 is planning a record 23-race calendar in 2021, including a new Grand Prix in Saudi Arabia, building on a global sponsorship partnership with state oil company Aramco.

This move threatens further controversy, with Amnesty International accusing Saudi Arabia of “sportswashing” to distract from its record on human rights.

Mr Hamilton, who has been a vocal supporter of the Black Lives Matter campaign, said F1 “cannot ignore the human rights issues” in countries on the circuit.

Sustainability is another key issue for Mr Hamilton. He intends to enter a team into Extreme E, the off-road racing championship for electric SUVs, in its debut season next year. Alejandro Agag, the Spanish businessman who founded Extreme E, also set up Formula E, an electric car racing alternative to F1, has already used its green credentials to woo sponsors.

Column chart of Operating income, trailing 4 quarters ($m) showing F1 earnings veer off track

The pressure is on F1 to act. Honda has decided to quit F1 at the end of next season, partly because it wishes to focus on building electric cars. This leaves three engine manufacturers to supply the 10 teams, another limit to strong competition.

A year ago, F1 pledged to become carbon neutral by 2030 and is looking to build on its shift to V6 hybrid turbo engines from the old gas-guzzling 2.4-litre V8s in 2014.

But Nico Rosberg, the former world champion driver, who was an early investor in Formula E, said F1 had not done enough to communicate the efficiency merits of its hybrid engines.

“As a sport they still have to do a lot more and they’re on course to doing that,” said Mr Rosberg. “Exits like with Honda are a reminder to how quickly F1 needs to move.”

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Iranian TV action thriller delivers warning to Zarif




It is hardly surprising that Mohammad Javad Zarif, Iran’s foreign minister and nuclear negotiator, is not a fan of Gando, a popular television drama that depicts an incompetent minister who scuppers nuclear talks with world powers by hiring dual nationals who turn out to be spies for MI6.

The series — made by an institute believed to be affiliated to the elite and hardline Revolutionary Guards — “is a lie from the beginning to the end” that “damages foreign policy more than me” by fuelling public mistrust, Zarif said.

By focusing on the nuclear talks, the Guards’ motive goes beyond creating compelling drama, reformist analysts say. Iran is in discussion with western powers about reviving the nuclear deal, a key reformist achievement, and hardliners want to deter the popular foreign minister from declaring his interest in the presidency in what is a crucial election year.

“I’ll be grateful to Gando-makers to let us continue our current job,” Zarif said this month, and commented that he would not run for the presidency.

The possibility of nuclear talks with the US and other powers has complicated an already fraught Iranian political scene ahead of the June election. Many reformists are pinning their hopes on Iran’s top diplomat to reinvigorate the nuclear deal and boost support at the ballot box. Hardliners might prefer to negotiate the deal themselves after the election. The polls are also seen as particularly crucial in case supreme leader Ayatollah Ali Khamenei, 81, dies during the next president’s term.

Pendar Akbari, left, and Ashkan Delavari, right, in a scene from ‘Gando’
Pendar Akbari, left, and Ashkan Delavari, right, in a scene from an episode of ‘Gando’. The series title refers to an Iranian crocodile able to distinguish its friends from its enemies © Bahar Asgari/Shahid Avini Cultural and Artistic Institute via AP

The purpose of Gando, which refers to an Iranian crocodile able to distinguish its friends from its enemies, “is to tell Zarif that should he dare to announce his candidacy, he will be destroyed immediately,” said one reformist analyst. “When the intelligence service of the Guards truly believes in the Gando plot lines, it means even if Zarif decides to defy such warnings, he will not be allowed to run.”

Centrist president Hassan Rouhani is due to step down this year after two terms and it is not yet clear who the presidential candidates will be. Politicians register as late as May and then have to be vetted by the Guardian Council, the hardline constitutional watchdog, which can disqualify nominees. Potential hardline candidates include Mohammad Bagher Ghalibaf, the parliament speaker and a former guards commander; Ebrahim Raisi, the judiciary chief; and Ali Larijani, a former speaker of parliament. On the reformist side, speculation has centred on Es’haq Jahangiri, first vice-president, Hassan Khomeini, a grandson of the founder of the Islamic republic, and Zarif.

A US-educated career diplomat widely respected in the west for his pragmatism, Zarif was instrumental in the historic deal in 2015, under which Iran curbed its nuclear activity in exchange for the lifting of sanctions. But Donald Trump abandoned the accord in 2018, imposed sanctions, including on Zarif, and said he would pursue a new accord to contain Iran’s regional and military policies. The US move emboldened hardliners, confirming to them the untrustworthiness of the US.

Zarif’s background in the US both as a university student and as Iran’s head of mission at the UN — during which he met US politicians including then senator Joe Biden — has long made him a source of suspicion for hardliners.

This wariness of both Zarif and the west is evident to viewers of Gando, as is the heroism of the Revolutionary Guards. Mohammad, the action hero protagonist, warns that western negotiators may sabotage refineries as part of nuclear talks. Mohammad works out of elaborate facilities akin to those in a James Bond film. The fictional foreign minister is advised by a media adviser, the main culprit, “to enter into direct talks with the US and accept the conditions of the leader of the global village”.

Vahid Rahbani in a scene from an episode of ‘Gando’
Vahid Rahbani in a scene from an episode of ‘Gando’. State TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run © Hassan Hendi/Shahid Avini Cultural and Artistic Institute via AP

The dramatic scenes reflect, in part, the worldview of some of Zarif’s critics. “Reformists, Mr Zarif and his lobby group in Washington [Iranian dual nationals] should be wiped out from Iran’s politics,” said an aide to a senior hardline politician who is a potential presidential candidate. “We have to get rid of this cancerous tumour once for good.”

Gholamali Jafarzadeh, a former conservative member of parliament, said Zarif “is not a good statesman and should not run for president” while “reformists should know that their choices have no chance to be allowed to run”. 

This month, state TV abruptly stopped broadcasting the series that was less than halfway through its 30-episode run. Local media said broadcasts would resume when the presidential race was over. Iran’s centrist president Hassan Rouhani, whose signature achievement is the nuclear deal — alluded to the show on Wednesday and said “people’s money” should not be spent on “fabrication of the truth” and “distortion of facts”.

After three years of sanctions, many voters are disillusioned by the infighting and the prospect of real change, whatever the outcome of the election. “Whether Zarif or a figure more senior than him runs or not, I’m not going to vote,” said Hamid, a 40-year-old engineer. “Let the Guards win the election as they are the ones who are running the country anyway. Why shall I make a fool of myself?” 

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Rising inflation complicates Brazil’s Covid-19 crisis




After seven months in lockdown, Michele Marques received some unwelcome news when she returned to work: while she was away the prices of almost all the products she uses as a hairdresser had soared.

“A box of gloves rose 200 per cent. Colouring products increased at least 100 per cent,” said the 37-year-old from São Paulo, underlining how costs were rising while her revenue had collapsed. “I had to raise the price of my services, too.”

It is a dynamic that is playing out across Brazil, adding an extra layer of complexity to the country’s coronavirus crisis, which has already claimed the lives of almost 350,000 individuals and pushed hospital services to the brink.

With much of Latin America’s largest economy being shuttered, inflation is surging to its highest level in years, fuelling a silent scourge of hunger among poorer citizens that has run in parallel to the Covid-19 pandemic.

“The high price of staple foods — rice and beans, for example — has led to the disappearance of these items from the table of millions of Brazilians,” said Ana Maria Segall, a researcher at the Brazilian Research Network on Food and Nutritional Sovereignty and Security. In the 12 months to the end of March, the price of rice increased 64 per cent and black beans 51 per cent.

“In Brazil currently food inflation has penalised the very poorest, preventing them from having adequate access to food and in many situations leading to hunger,” she said, adding that rising unemployment and the curtailment of social programmes were also contributing factors.

Volunteers hand out food in São Paulo © Alexandre Schneider/Getty Images

Less than half of Brazil’s population of 212m now has access to adequate food all the time, with 19m people, or 9 per cent of its inhabitants, facing hunger, according to a recent report by Segall’s group.

“I’m doing some odd jobs, but it’s not enough to keep us going,” said Jonathan, a 28-year-old who lost his job in the kitchen of a Chinese restaurant in São Paulo when the pandemic began. He said he now struggles to provide enough food for his three young children and pregnant wife.

On a 12-month basis, inflation in June is expected to surpass 8 per cent, far above earlier estimates. In the 12 months to March, food prices jumped 18.5 per cent, while the price of agricultural commodities in local currency surged 55 per cent and the cost of fuel increased almost 92 per cent.

Line chart of Percentage increase over past 12 months showing The price of rice in Brazil is soaring

The developments pose a fresh challenge to President Jair Bolsonaro, who is already under fire for his handling of the Covid-19 pandemic. Across Brazil’s biggest cities, graffiti has sprung up labelling the populist leader “Bolsocaro” — a portmanteau of his name and the Portuguese word for expensive.

The rising prices are also likely to provide useful ammunition to leftist former president Luiz Inácio Lula da Silva, who returned to the political fray last month and may challenge Bolsonaro in elections next year.

“Bolsonaro is to blame for the increase in food prices, he is to blame for everything. They have to remove this guy,” said Maria Izabel de Jesus, a retiree from São Paulo.

Armando Castelar, a researcher at the Brazilian Institute of Economics, said the government had underestimated inflation both in terms of the numbers and also “how much a concern it should be”.

He attributed the rising prices to the devaluation of the Brazilian currency, triggered in part by the stimulus packages passed by the US government — which helped to bolster the dollar and led to higher Treasury yields — and the brighter economic outlook outside Latin America.

“You have a situation where commodity prices are going up because the global economy is going to grow a lot this year. With the growth in the US, interest rates are going up and the dollar is strengthening. This puts a lot of pressure on the exchange rate in Brazil and emerging markets in general,” he said.

As the spectre of inflation loomed last month, the Brazilian central bank raised its key interest rate by 75 basis points, higher than the half-percentage point many economists had expected. A further rate rise is expected next month.

“The central bank acted correctly, but it cannot stop there. It is important not to be too lenient in dealing with this,” said Castelar.

Silvia Matos, a co-ordinator at the Brazilian Economy Institute, also pointed to Brazil’s weakening currency as a contributing factor to inflation. But she said the slide in the real was triggered by investor concerns over Brazil’s deteriorating public finances.

Following the creation of two separate stimulus packages to mitigate the impact of Covid-19, government debt has risen to about 90 per cent of gross domestic product, a high level for an emerging market economy.

The rollout of the second of these packages began this month, with 45m Brazilians set to receive $50 a month for four months.

Critics said, however, these stipends were not nearly enough to keep people both fed and at home in lockdown.

“It is essential that the emergency aid is of a greater value, so that people do not leave the house but no one also stays at home starving,” said Marcelo Freixo, a federal lawmaker with the leftwing PSOL party.

“We need to reduce the circulation of the disease. Brazil is already experiencing 4,000 deaths per day. We will reach 500,000 total deaths by the middle of the year.”

Matos says that inflation had hit poorer citizens much harder than middle-class and rich Brazilians because a larger portion of their income was dedicated to food, the price of which has increased substantially.

“The only thing that could help right now is to get out of this pandemic,” she said.

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Can CVC pull off a $20bn ‘deal of the century’ at Toshiba?




Proposed management buyout looks like an improbable win for the Japanese conglomerate’s embattled CEO

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