Reputational fallout from Pirelli’s F1 blowouts

In the mainstream media's reporting of Formula 1 the word tyre is quickly becoming a profanity. F1's lowest point in recent years came during the 2005 US Grand Prix where only six cars started the race on Bridgestone tyres because of Michelin's unwillingness to allow teams running its tyres to race over safety concerns in the banked sections of the Indianapolis circuit. The fallout from this race ultimately led to Michelin's withdrawal from the sport at the end of 2006 and F1's powers-that-be deciding not to stage a race in the US for five years after 2007.hideOn Pirelli's return to the sport in 2011, it exactly fulfilled the brief handed down by F1's governing body, the Federation International d'Automobile [FIA], to manufacture a tyre that degrades as to equalise performance between different racing cars over the full race duration. In doing so-at a stroke-it eliminated dull, procession racing that often led to Grands Prix being decided during Saturday's qualifying session. Dedicated and educated F1 fans love the way that Pirelli's approach to tyre construction has revolutionised the sport's on-track racing. But to the casual spectator-who might only watch their national F1 race and who might not understand the nuanced nature of the tyre's role within the sport-Pirelli's involvement in F1 now represents a downside reputational risk to the firm. Twenty-one minutes into Sunday afternoon's British Grand Prix the high-profile tyre failure of race leader Lewis Hamilton, and subsequent tyre problems experienced by other teams using Pirelli's tyres, brought this risk to the fore. To its credit, the tyre manufacturer earlier this season offered the teams a switch to an alternative tyre. But the shadowy and omnipotent Concorde Agreement between the F1 teams requires unanimous decisions for in-season rule changes-in this instance a change of tyre construction. But the teams said no. Or strictly speaking, some teams said no, to protect their own competitive advantage. Everyone else, but most prominently Pirelli, has to abide by the Concorde Agreement's unanimity rule. Therefore, under the terms of its contract with the sport, Pirelli cannot, unilaterally, bring a new tyre construction to a race without the sign-off from all F1 teams. It's a Catch-22. Pirelli are the experts, but the teams form the committee that says yes or no to changing the tyres on which they race, usually influenced by self-interested sporting reasons. Pirelli's hands are tied. They are putting their head on the block without having the power and influence to protect their reputation. Pirelli, race after race, week-in-week-out, has to trust the security of its brand image to the hands of both the F1 teams, the structure of the sport's governance and its Byzantine politics. F1 is now in the situation where its drivers are writing letters of petition over safety to the FIA. The drivers represent the third pillar (and power brokers) of the sport after the teams and the conjoined twins of the FIA and its F1 management company run by the sport's svengali Bernie Ecclestone. But their entry into the fray may eventually bring about a resolution. This would represent a double-edged sword for Pirelli however, given it's the drivers to which the watching public pay most attention. Since Sunday's race, moves have been made to stop teams and their drivers from voting on tyre changes, but these have yet to be approved. Furthermore, the FIA has now said that it will allow a one-off in-season testing session of Pirelli tyres by teams and their main drivers, rather than leaving this to young drivers, as was previously the case. This week Pirelli has also announced a range of measures to improve the performance of its tyres. For this weekend's German Grand Prix Pirelli will use a belt made of Kelver-a high strength synthetic fibre more resistant to punctures-instead of the previous steel. Pirelli also plans to introduce a further new tyre that fuses the structure, construction and belt from last year's F1 tyres with the compounds from this season's set of rubbers at the Hungarian Grand Prix at the end of this month. Pirelli has also, this week, demanded F1 teams abide by the minimum tyre pressure and wheel camber angles that they specify. They have also asked for access to in-race, real-time data on tyre conditions. It has been reported that teams are running lower than recommended tyre pressures in a bid to gain a grip advantage, despite this enhancing the risk of a tyre blowout. But has the damage to reputation already occurred and in the most part because Pirelli was simply producing a product demanded by its FIA customer? It just highlights once again the difficulties in managing reputation risk, the speed at which things can go wrong and the lack of control companies have over the risk. Pirelli's huge contribution to the competitive aspect of the F1 sport is widely accepted. The tyres produced by their predecessors in F1, Bridgestone, were perceived as bulletproof but boring. However, maybe that is the better way to promote your brand in a sport as complex as F1, in which many commentators are quick to criticise but not so quick to praise the tyre suppliers.

Reputational fallout from Pirelli’s F1 blowouts

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