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[Finished] Case #10: Is Michael Schumacher overpaid at Ferrari?


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#1 Billy

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Posted 05 February 2001 - 14:20

Sean L has brought the following case to the Atlas F1 Court

Is Michael Schumacher worth the salary paid to him considering that he won two constructor's championships and one driver's championship in the five years that he's been with Ferrari? i.e. Would they have had similar success with another less expensive top driver?


The residing judge is david_martin, assisted by Marcel Schot. Evidence and arguments will be heard from all interested parties for a period of ten days, from April 15th 2001 to April 24th 2001 inclusive, after which a decision will be posted no later than May 1st 2001.

Judge's Preamble:

Michael Schumacher is the highest-paid racing driver in the world. In the history of motor racing, no driver has been paid as much as Ferrari pays Schumacher. The question for the court to decide is: would Ferrari be better off, or in the situation they are in now -- all things considered, both good and bad -- if they had rejected Schumacher's financial demands for the last 5 seasons? Or are Schumacher's financial demands justifiable for the particular situation at Ferrari? This case should consider the actual situation for Ferrari in the years 1996-2000, not some hypothetical scenario of Schumacher's worth on the open market.

The case involves his earnings as a professional racing driver, not his private income. The lucrative Schumacher merchadise business is not relevant to this case. In short, this case cannot decide whether personal sponsors like L'Oréal think he's worth it, it's all about whether he's objectively worth it from Ferrari's point of view, based on what he has brought to the team as a professional racing driver.

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#2 david_martin

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Posted 15 April 2001 - 11:41

As an addendum to the judges preamble, the court feels it would be helpful to this case to provide some reliable public domain information regarding Micheal Schumacher's renumeration from Ferrari.

  • EuroBusiness Magazine's Special Edition, "The Business of Formula One", March 2000, estimates Schumachers 2000 salary at $US 30 million.
  • Forbes estimates his 2000 salary at $US 35 million. (http://www.forbes.co.../1010faces.html)

These figures do not include any of Schumacher's additional income from personal endorsements, merchandising and investments. To provide a comparison with other F1 drivers salaries, here is the EuroBusiness estimates of the entire F1 grid for the 2000 season:
[list=1]

[*]M.Schumacher	  $US 30.0 million

[*]J.Villeneuve	  $US 10.0 million

[*]M.Häkkinen		$US 10.0 million

[*]E.Irvine		  $US 10.0 million

[*]R.Schumacher	  $US  6.0 million

[*]R.Barichello	  $US  5.5 million

[*]G.Fisichella	  $US  4.0 million

[*]H-H.Frentzen	  $US  3.5 million

[*]J.Trulli		  $US  3.3 million

[*]J.Alesi		   $US  3.0 million

[*]D.Coulthard	   $US  2.8 million

[*]R.Zonta		   $US  2.8 million

[*]M.Salo			$US  2.5 million

[*]A.Wurz			$US  1.5 million

[*]J.Herbert		 $US  1.3 million

[*]N.Heidfeld		$US  1.0 million

[*]J.Button		  $US  300k

[*]J.Verstappen	  $US  250k

[*]M.Gene			$US  0

[*]G.Mazzacane	   $US -2.0 million

[*]P.Diniz		   $US -8.0 million

[*]P.de la Rosa	  $US -8.0 million[/list=1]

Both Forbes and Eurobusiness are extremely well respected international publications and their estimates of Schumacher's salary are probably as reliable as any other publically available sources. These figures will be adopted for the purposes of this case.

#3 david_martin

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Posted 15 April 2001 - 14:58

This case is now in session. Best of luck to all the protagonists.

#4 Ali_G

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Posted 15 April 2001 - 15:15

For a start Michael Schumacher is regarded as the best driver in the world. That is basically undoubted.

Now lets look at other sports. look at Tiger Woods. He is the greatest golfer at the moment. And added to that, he is the best paid sportsman in the world. He is on something around 50 million per year.

Added to this are likes of Pugelists who earn roughly the same amounts which are mentioned of Schumacher.

Its like this. These sportstars work day in and day out training, perfecting their technique etc. it doesn't matter what sport it is, its the same.

Added to this Schumacher has a very good past record in the sport. he won the F3 champsionship and won th prestigious F3 Macau race. He is a 3 Times F1 World Champsion with 46 Wins.

He won the championship in both 94 and 95 with an inferior car.
in 94 he was banned for 3 races and yet still ended up winning from Damon Hill. In 95 he won by a vast margin with 9 wins, which equaled Nigel Mansells record in 92. And remember that Mansell had the best car in 92. Schumacher did not.

He thn went on a quest to Ferrari. By his own omission, the Ferrari was a dog that year. yet he brilliantly got 3 wins, one of which, Barcelona was one of his finest. A soaked track, yet it didn't bother him at all.
in 97 again he came close, in 98 even closer. 99 was a shame for Michael. Most believe he would have won tha year only for his broken leg at Silverstone. Later that year he returned, and even with a pin through his leg he outqualified everybody at the remaining races to help his Team mate.

Finally in 2000 he won the champsionship fo Ferrari , in again a second best car.

Surely he deserves his 30 million per year. he has done for Ferrari, what Gilles Villeneuve or Alain Prost could not do.

it is obvious he is worth his 30 million.

Niall

#5 Samurai

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Posted 16 April 2001 - 07:39

If you just take the Michael Schumacher, sans Byrne&Brawne, the driver himself, he is vastly overrated.
I will get into the particular proofs next, but first I have to say Schumacher, the negotiater, the self PR man, the mind-games intrateam intimidator, and as a German native (Ecclestone's wishes, the huge German market, German automakers), has value way above his moderate talent as a driver.

So I think two separate evaluations must be made:
1. Schumacher the driver, his worth based on his naked talent as a driver
2. Team Schumacher the package (Byrne&Brawne and Co.)

First let's take 1.
But how to make a comparison?, since it's difficult to separate man from machine, and a simple comparisons between teammate is not applicable since it is common knowledge that Ferrari=Team Schumacher has team orders.
But indeed there is one occasion when Schumacher was forced out of the picture and another driver stepped into the Ferrari No. 1 shoes---
the '99 season:
Irvine---- 33 points in 5 races as Ferrari No.1 after MS left.
Schumacher---- 32 points in 7 races (8 races if you include Silverstone)
before the accident, not to mention he got some from Irvine too.
Yes, sure Irvine got some points due to rivals retirements and good pitstop strategy, but this is exactly how MS had been getting many of his points too, prior to the monstrously dominant Ferrari '00 and '01.
Anyway Irvine was doing better than MS!! It started to appear that MS had been overrated and it was the Ferrari #1 driver package that was so great.
So things suddenly started obviously to fall apart for Irvine toward the latter part of the season-- 3 wheel pitstop at a crucial point in the WDC race, lack of 100% effort from the development engineering dept. (we have proof of the Ferrari owner's own words and actions concerning this). Anyway, the bottom line was that actually Irvine was doing much better than MS had been doing, and was a serious contender toward the first Ferrari WDC for a long time.

So I would say, if you want an evaluation of Schumacher's intrinsic worth as a driver, sans Byrne&Brawne and Co., his worth is comparable to that of Eddie Irvine and I would pay him the same salary that Eddie Irvine was earning in '99, which is less than 10 mill. =5 million? anyone have the numbers for this?.

2. Next we evaluate Team Schumacher
and this becomes a more formidable combination. Just from the strategic view of things, how many points were lost by McLaren and Williams over their respective competetive years due to inferior pitstop strategy compared to Ferrari?
This can't be ignored. But it's not realistic to just clump the genius' of Byrne and Brawne in the package and say that whatever merits they bring to the team are entirely credited to Schumacher for bringing them in.
The value of Byrne and Brawne may indeed be more than 30 million, but I think this is getting off the spirit of evaluating the worth of Schumacher.

Purely from a standpoint of postives to the team, we have seen negative effects of Team Schumacher in terms of actual demerits for Ferrari:

1. If Schumacher was not in the picture (but Byrne, Brawne and Co. were) in '99 there would be no sabotage from the Team Schumacher element in the team:
(a simple visible example of this---Ferrari manager Todt clearly unhappy with Irvine winning races and not even congratulating him properly
3 wheel pitstop at a crucial point in the WDC race
lack of 100% effort from the development engineering dept., we have proof of the Ferrari owner's own words and actions concerning this)
and the Ferrari No. 1 driver---a driver on the same level or above of Eddie Irvine (this is a large pool---Mika, JV etc.) would have won the '99 WDC.
2. In '97, if it had been Mika Hakkinen for example driving the Ferrari would he have rammed into JV, thus garnering a huge amount of negative PR for Ferrari as a dirty team, and not just losing the WDC? In fact if it had been the fast Mika Hakkinen on board would he have beat JV for the '97 WDC? We have seen that Eddie Irvine could deliver points as Ferrari No.1. Would it be any surprise that Mika Hakk could do more?

So in 1. or 2. actually assuming that Byrne&Brawne and Co. were there with the package, and negative Machillavian or dirty driving that Schumacher brings to the team wasn't, could it be 4 WDCs for Ferrari instead of 2? If this was remotely feasible than the worth of Schumacher is actually much less than Eddie Irvine.

But to return to the original evaluation of Team Schumacher, if you get off the spirit of evaluating the actual worth of Schumacher, the value of Byrne and Brawne and the package that they deliver may indeed be more than 30 million. However, if you assume the package and someone other than Schumacher driving it, then Schumacher's value goes way down (=I would pay him less than Eddie Irvine in '99) because of the Machellevian environment that created the sabotage of Eddie Irvine's WDC bid, and the morally dirty driving in '97.

#6 Dr.Raj

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Posted 16 April 2001 - 13:27

First of all I think its fair to say that Schumacher is the best in F1 at the moment, hence he should be getting paid the most.

One of the most incredible things about Schumacher is his consistency. Not many drivers can boast of matching Michael in this field, none of the current drivers anyway. Even when he seems out of form, it doesn't last long, he always comes back. There hasn't been a 'bad' season for Michael so to speak, some may call it luck but I refuse to believe it. He has been strong in almost all seasons, extracting the maximum out of the cars he drove.
The point I'm trying to make is that when Ferrari pay him 30 million, they're guaranteed a great performance from Schumacher. You can't say that about any of the other current drivers.

Ever since Michael joined Ferrari in '96, they have been the chaser, fighting with the Williams and McLaren. They have always been behind these teams on the technical side, and Schumacher helped them close this gap. He was a pillar in Ferrari's long-term plan to succeed, and they did all they could to keep him in the team.
What we must understand here is that Michael got Ferrari through the first couple of years, putting them in such a position that they were consistently fighting with the front runners rather than the midfielders. Ferrari needed this sort of boost in the beginning to make a come back, Michael put them on a higher level of competition. Schumacher was the one to initiate Ferrari's return to glory.

It's actually quite simple. It's no secret that Ferrari have loads and loads of money. Unlike the Macs or Williams, they haven't always had a car good enough to win WDCs and hence needed a great driver. To be honest, I think Ferrari would be giving a similar salary if another topnotch driver were working for them. They have huge revenues, so I think it comes down to how much the team needs you, and it isn't really fair to just look at numbers and compare drivers. More importantly than this Schumacher has delivered, so I don't think you can say he's overpaid.

Schumacher was in a large part responsible for Ferrari's win in 2000. He was an integral part of Ferrari's plan. I don't think it would have happened if Schumacher hadn't joined Ferrari. I had waited all my life for this moment (literally). The wait that had begun before I was born in '79 was over, bringing joy to the millions of loyal Ferrari maniacs around the world. Money well spent?? I think so;)
The Ferrari fans deserved it.


#7 Greg L

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Posted 16 April 2001 - 16:15

I think Samurai made a crucial point: the team that MS is able to pull into Ferrari makes him very valuable irrespective of his driving ability. He is no doubt an outstanding driver, but I'm not sure if he's worth 3 times any other F1 driver. However, no other F1 driver has the ability to pull in excellent personnel like Byrne and Brawn. Considering everything Michael gives you (the driving, PR, exposure, technical feedback, Byrne, Brawn, etc.), he is probably worth the money. I think the easiest way to assess his worth is to ask whether or not Ferrari would be where they are today without MS and all that he brings. I would argue that they woud not, and MS's salary is therefore justified (whether or not I think he is worth that dollar amount).

#8 stoopid

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Posted 16 April 2001 - 19:00

Ali_G said:

Now lets look at other sports. look at Tiger Woods. He is the greatest golfer at the moment. And added to that, he is the best paid sportsman in the world. He is on something around 50 million per year.


I don't think Tiger Woods' salary can be compared. First of all, that's a very rough estimate. Secondly, much of it is from endorsements, which are not included in Schumacher's 30 million. Tiger's actualy "pay" on the PGA Tour in 2000 was $9,188,321 - his winnings. In addition, he was paid to appear at some events. Can this be considered part of the salary?

Even if exact figures could be compared, comparing a golf player to a driver isn't easy. Tiger Woods is the whole team. Schumacher is only a part of the team.

So what I'm saying is it's not reasonable to compare him to an athlete in an entirely different sport. If comparisons are made, they should be made to other drivers in Formula 1, perhaps other World Champions like Mika Häkkinen and Jacques Villeneuve.

#9 Mr. Salty

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Posted 17 April 2001 - 01:52

http://www.forbes.co...240a_print.html


I couldn't find the article I wanted, but Forbes has Schumacher listed as the Highest Paid Athlete in the World for the year 2000. This article is for 1999, but he was listed then as the Highest SALARIED athlete (first paragraph.)

The entire premise of this case seems silly to me. An athlete in any sport is worth what his employer will pay him. I somehow feel Ferrari is getting a good return on their investment, above and beyond what occurs on the F1 circuit (and he's done well for them there too.)

Usually the argument over how much someone is paid is based in jealousy. While I don't think that is the case here, I'll wager SOME of the people that feel he's overpaid are using jealousy in their argument, consciously or not.

#10 Ross Stonefeld

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Posted 17 April 2001 - 03:39

He is definately overpaid.

Ferrari hired Michael Schumacher to win the World (Driver's) Championship. A feat he has accomplished once in five seasons. Hakkinen has won it twice in seven complete seasons at Mclaren, Hill and Jacques Villeneuve once in four seasons at Williams. A more in depth look at salaries vs championships/seasons % would probably put Schumacher about last in the list.



#11 Dr.Raj

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Posted 17 April 2001 - 06:37

I think it's a misconception that how much a driver is paid is an indication of how good he is or how good his team thinks he is. Schumacher is paid three times more than Mika Hakkinen, does that mean he is three times better than Hakkinen?? Even the most rabid of Schumacher fans wouldn't say that. This case does not boil down to numbers because if it did this would be an open and shut case. There is no way Schumacher is that much better than the rest. Therefore we have to look into the circumstances that lead to this big salary. Several factors play a role in how much a driver is paid, here are a few;

1. How much money does your team have?
2. How badly does the team need you?
3. Is your car good enough?
4. Can the team afford to loose you?

In Ferrari?s case the answers to these questions are like this;

1. How much money does your team have?

Lots and lots of money. What's the relevance? When you have a huge budget, even if you give your driver a huge salary, the fraction of the salary to the budget does not become very large. It's not the same as putting all your hopes and money into the driver. If other teams can't afford this, it doesn't make this driver overpaid. If this was true, then it would be the same as asking, 'Does Ferrari have too much money?'

Therefore we have to look deeper than mere figures. We cannot compare the salaries of the drivers in midfield cars to that of Schumacher.

2. How badly does the team need you?

In '96 Ferrari decided that it was time for their return to the top. Their last WDC came in '79 and it was time for another. They needed the best driver and they picked then 2 times champion Michael Schumacher. They made sure they got him on their side by paying him handsomely. They did what they had to, to get Schumacher. Schumacher did deserve the salary he got because Ferrari was very much a midfield car at the time and he was the reigning champion. He took up the challenge of helping Ferrari get back on top.

McLaren and Williams had strong cars, and didn't need a Schumacher to win.

3. Is your car good enough?

The earlier Ferraris were definitely not up to the mark. They were not technically strong enough to consistently compete with the front-runners. They needed a great driver to close this gap created due their technical disadvantage, and they needed Schumacher. Michael put Ferrari in a respectable position in '96 even with the DNFs and came so close in '97. He outperformed his teammate convincingly, which should be an indication of Michael's contribution.

McLaren and Williams had very strong cars and did not need the best driver. Any team would love to have Schumacher, but why try and match Ferrari's salary when you already have a great car?

4. Can the team afford to loose you?

I think this has been one of the main reasons why Schumacher is paid so much. He has performed very consistently for Ferrari and has been strong in every season. Ferrari had a plan to success and that plan included Schumacher. This plan was working as Ferrari kept getting better every season. They couldn't afford to loose him now, when things were looking so bright. However, things were different for Schumacher because he wasn't winning. He was working his butt off and the results were not coming and it must have been frustrating. While it was a good period for Ferrari it wasn't great for Schumacher. It was understandable if he wanted to move to another team, but Ferrari didn't want this and hence had to pay him a lot of money for him to stay.

It was different for the Williams and Mac drivers as their cars were great. Their salaries were pretty much under the control of the team. Even if they were to leave, what would be their motive?? Who would offer them more money?? Who has a better car for them?? They had no motive to leave and were in no position to demand a huge salary from their team. Michael on the other hand had a motive to leave. His car wasn't the best and he could have got a place in the best team. Sure he wouldn't have got as good a salary but he would have had a greater shot at the WDC. That's tempting enough. He had every right to demand a big salary from his team and Ferrari were willing to pay him.

Ferrari is a special case. They did not have a great car and yet they had one of the biggest budgets. When other teams don't have a great car their budgets correspondingly diminish. Ferrari can afford the best even when their car is not good. When the other teams have a great car they don't need the best driver. That's the difference. Hence we can't compare the Ferrari situation with that of the Mac and Williams.

The only teams you could compare Ferrari to are car are BAR and Jaguar (other teams having big budgets but not good cars), and guess what?? They gave their drivers huge salaries as well. Coincidence?? I think not. It's a different situation with these teams. You're giving the best drivers an incentive to join. You are trying to make up for what the drivers are loosing due to the quality of your car, by giving them big salaries. Call it compensation if you will.

The above arguments only explain the big salary Michael was getting in the early years ('96 to '98-'99) when the car wasn't the best. Sow why do Ferrari give him a huge salary now that they have a great car?? Well.....

1. Ferrari have huge budget. They can afford him. Having him doesn't really pinch their budget.

2. Schumacher is good for business. He is easily the most popular F1 personality; there are not many people that haven't heard of the name Schumacher. You get free publicity by having Schumacher in the team. He makes up good part of that huge salary by just being in the team. This is one point that cannot be contested because his fame is without a doubt immense.

3. Lets look at a hypothetical situation. Ferrari sack Schumacher and get another driver, and this driver will not be as good as Schumacher. You have an extra 20 million in your budget. Is that amount going to help them build a better car? Could they make up for Michael's loss by using this extra money in developing the car?? I don't think so because Ferrari already have a huge budget that is pretty much unlimited, so what difference will 20 million make to the car? Plus you will have Michael racing against you. Can someone point out the gain in doing this?? The budget is a limiting factor, more does not mean better car. But with Schumacher you are guaranteed a better performance.

4. Schumacher is doing great and Ferrari have a great car. This is a formidable combination one would think. Why ruin what is already going so great?? As I pointed out in point 3, there is no apparent gain in sacking him.

So how would you say a driver is overpaid??? Simple, it comes down to this. Did he do what was expected of him?? And in Michael Schumacher's case, he definitely delivered, simple as that. He in fact did more than what was expected of him, IMO. Can't say the same for Jax and Eddie though. That's why Michael is not overpaid.

In short Michael is not overpaid because;

1. He has definitely delivered consistently and did not let his team down.

2. It has been Michael decisions that lead to this huge salary. He was taking a risk joining Ferrari and staying there through the rough times.

3. He has earned his salary in the sense that he performed. It's the same as not doing well and getting a big salary like Jax or Eddie.

4. It is well known fact that he is a hard worker. His commitment cannot be doubted. He gave Ferrari everything even during the rough times. He definitely helped develop the car.

5. Like Niall already pointed out Schumacher did what Prost and Gilles couldn't do for Ferrari.


#12 HP

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Posted 17 April 2001 - 09:52

I want to start with a simple observation. F1 is a marketing tool, with one of the highest viewership quotes on TV. Since the unfortunate death of Ayrton Senna, Michael Schumacher was for many the most visible (also hated and admired) figure in F1 until recently. This added to his marketing value. And quite simply. If there is a demand for you (in this case we could say Michael Schumacher is the product), then you can ask for the money.

To me it's not so much his undisputed driving talent. Mika Hakkinen is a similar talent driver. But marketing Mika isn't this easy. First of all Mika doesn't drive for Ferrari. Estimates (seen recently somewhere on AtlasF1) indicate that half of the people interested in F1 are cheering for Ferrari. So driving for Ferrari exposes a driver to the public, much more than any other team (exept maybe in the UK). Add to it, the pressure of long years not to win the WDC added to the marketing value of any superb driver. Mika in 1996 wasn't the 2 times WDC back then, and just made his comeback from a horrible accident, not to mention his poor English skills. Who was available then? If you look back, not many. Damon Hill was too old, Jaques Villeneuve was always reluctant to join Ferrari, so the situation was again favourable for Michael, as he was the only serious possibility for Ferrari.

If you evaluate the situation, Michael had a very favourable position to negotiate from. Ferrari desperate, and no-one else a real alternative. So it shouldn't come as surprise that he is paid such a high salary. I do not know the figures of increased return that Ferrari (and actually Marlboro) get out from the salaray paid to Michael Schumacher, but I know Ferrari got a lot of new fans while Schumacher was with them who buy Ferrari stuff. But it all comes down to business, not sport.

But is Michael Schumachers salary really that high in comparison? Altough I do not know the exact figure, Mika Hakkinen earned a lot of money with his many victories, as the McLaren drivers have a paying by performance clause in their contracts. Some people even claimed that his salary matched almost Michaels in his two WDC seasons. What's the difference then? The employeer. McLaren takes a different approach than Ferrari.

It must also be mentioned that Mercedes who provides engines to Mclaren increased their sales in Germany too (last year according to a report on AtlasF1), not so much because of the McLaren drivers directly, but because the McLaren drivers being able to beat Michael. I am not aware of any other driver that helped the competition to increase their sales, by loosing races! We can say Michael has business value beyond the Ferrari team. Sure the McLaren drivers first had to beat Michael, so I do not want to dimish the McLaren drivers exploits (especially Mika Hakkinen's two WDC's)

And IMO judging poeple in sport on their size of their salary, is to me a bit outlandish anyway. All I would say that Micheal Schuhmacher and his manager are business savvy, while other drivers are not.

It's really simple. If the demand and desparation is there, people pay anything. Capitalism works sometimes this way. To me the salaray reflects really more on business aspects than on Michael Schumacher driving ability. And Michael has made himself into a legend, and that pays off, also for Ferrari, and the F1. Michael is, was and always will be a disputed person, and that's exactly what he understands better than others. That's how you keep yourself in the lime light. For that alone, I say he isn't overpaid.

#13 5319

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Posted 17 April 2001 - 11:14

Originally posted by Samurai
the '99 season:
Irvine---- 33 points in 5 races as Ferrari No.1 after MS left.
Schumacher---- 32 points in 7 races (8 races if you include Silverstone)
before the accident, not to mention he got some from Irvine too.


Samurai,this comparison is pointless.You can compare team-mates only when they drive at the same moment at the same track.Ferrari's reliability,speed or opposition's failures can change throughout the season.



#14 Joe Fan

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Posted 17 April 2001 - 14:04

Most athletes are way overpaid in comparison to health care professionals who save or improve the lives of many people every day. However, what is interesting is how a court would award damages in the case of a wrongful death due to negligence or malpractice of a health car professional. What the court awards is based upon what that individual's life is worth. How is this calculated, in part, by what salary the individual would have generated over the course of the life had they lived.

So this case has some relevance. How? If a doctor operated on Michael Schumacher and his work lead to unfortunate fatal demise. Would the court award damages based upon $30-35 million a year if it was argued that he was overpaid in comparison to his peers? This could be a very successful argument because it is very unusual in any profession for anyone to generate a salary three timer higher than any of their peers. Especially when there has been ample time for the market of F1 drivers to re-establish itself with new contracts.

I think it should be quite obvious. Michael deserves whatever he is offered in salary but this does not neccessarily mean that he is not overpaid. People overpay for things everyday but nonetheless it was a fair deal if they agreed to the sale. I think that is what the essense of this case should be. Not whether Michael is entitled to his current salary or if he really deserves it, but whether he is in fact overpaid.

#15 palmas

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Posted 17 April 2001 - 14:20

Never mind how much Schumacher earns! it is only 5% of total budget (estimated). He he makes results to happen (not necesserely because of his driving, but primarily for his working abilities and attitude towards work), you'll have 5% making the 100% work.

With that in mind 5% is well expended, Schumacher or not.

If you would like to consider extremes, then try 50% sallary and good results or 0% sallary and no results, wich is better?

Schumaker is not overpayd!

#16 John B

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Posted 17 April 2001 - 16:06

While most of the points I was thinking have already been discussed, I think one of the most important is whether the salary detracts from the team. As mentioned Schumacher's salary is not a burden for Ferrari, therefore it justifies them paying for their ace. An analogy in the sports world is the New York Yankees, who have been very successful the last few years mainly by exploiting their financial resources to the maximum (ususally by stockpiling superstar players at the beginning and during the middle of season). If the resource is available, it's unacceptable not to extract the most out of it, especially when there are side benefits such as the personnel mentioned by Samuarai above.

#17 BRG

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Posted 17 April 2001 - 16:29

I don't know that anyone is really addressing the latter part of the case - would Ferrari have had comparable success with another less expensive driver?

Certainly, it should not be surprising that Schumacher is the best paid driver. He is most successful current driver and the best known globally. But if I were Ferrari, I would not pay anyone that much. For a lot less than this sort of money, Ferrari could have had two drivers capable of winning races and championships. Or had an experienced No1 and a young charger gaining experience. Arguably, two equal No 1s might have brought the team along faster to a winning situation. A bit of competition between team mates can be a real spur. As it was, did the Team Schumacher approach actually help or hinder Ferrari? Once the backroom team was in place and sorted, the Schumacher-centric development programme may well have gone more slowly than a proper two driver team.

Then we need to look at actual results. Even the slight talent of Eddie Irvine proved nearly capable of winning the WDC in 1999 - if the driver line-up have been that had been Villeneuve and/or Fisichella and/or Frentzen and/or other decent drivers, they would surely have achieved the WDC a year earlier. Of course Schumacher WOULD have won that year without his broken leg, but without a competent second driver in the team, the WDC slipped away.

I am not sure that any of us can PROVE this one way or another, but subjectively, I cannot see that Ferrari has had good value out of the Schumacher deal . I believe that they might have employed two good drivers for (say) $5-10m each a year and won the WDC and the WCC sooner. Now this might not have achieved the same PR impact - after all, the Alesi/Berger pariing at Ferrari did not generate the global exposure and enthusiasm that Schumacher seems to provide, but is that worth the extra money?

So, are Ferrari secretly kicking themselves about blowing a lot of money unnecessarily? Probably not, as they have more money than sense and do not seem to have to justify themselves financially to anyone. Nice work if you can get it!




#18 Dave Ware

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Posted 17 April 2001 - 17:44

Ferrari had been floundering for years as a second-rate team. They brought Gerhard Berger back, paid him 12 million (a lot of money at that time), in hopes that he would pull the team out of it's doldrums. Essentially, they hoped Berger would do for Ferrari what Schumacher has since done. It did not happen. They continued to flounder.

Over the years, organization seemed absent at Ferrari. Luca Montemezolo returned, and Niki Lauda returned as an advisor. The most successful F1 driver in history was sacked and was replaced by a driver who was not up to the task of leading the team. Ferrari had engineering talent like John Barnard and Harvey Postelwaite. Still they floundered.

From the moment Schumacher arrived, the Ferrari team seemed to focus upon him. Yes, Byrne and Brawn are a large part of the equation. But you cannot separate them from Schumacher. There is no evidence to suggest they would have gone to Ferrari without him. There is evidence to suggest that even if they had, they wouldn't have made much difference.

Perhaps by virture of Schumacher's will power, perhaps by the sobering realization of the money they were paying him, or perhaps because they realized they had just hired one of the best drives of all time, Ferrari finally focused. For whatever reason, they listened to Schumacher, gave him what he wanted, and success followed.

I can't imagine any other driver pulling Ferrari out of the doldrums the way Schumacher has done.

For what he's done for Ferrari, Michael Schumacher is the best investment the Scuderia has ever made.

Dave

#19 Samurai

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Posted 18 April 2001 - 06:30

Originally posted by 5319

Samurai,this comparison is pointless.

5319 you're wrong.
8 races is half a whole season,
you don't just statistically ignore such things.

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#20 sensible

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Posted 18 April 2001 - 09:28

"Should consider actual worth not some hypothetical open market value" (to paraphrase the judge). This is the silliest comment I have seen in a court case preamble. How can you not consider his worth on the open market. That is precisely what defines his salary. If McLaren or Williams (or whoever) were not prepared to pay him $30 or thereabouts, there is no way ferrari would. It is like having a case to decide whether or not someone was the greatest driver of all time but disallowing any mention of any championships they won.

After you accept this, whether he is "worth it" or not is a moot point and one only likely to be argued by the most devout of the love him or hate him brigade. That's his market value as judged by his potential employers (ie the teams who could afford him), that's what he got paid. end of story.

#21 Ross Stonefeld

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Posted 18 April 2001 - 18:21

We also need to consider how closely Irvine came to the 99 title for well under 10

#22 Keir

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Posted 18 April 2001 - 23:25

:rolleyes:
Has everyone's TV's gone wacky??

Michael is worth every penny and then some. :smoking:

#23 Thunder

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Posted 19 April 2001 - 21:26

Some here suggest that even with Irvine Ferrari was close to win. First they forget that MS won the 99 malaysia for Irvine if MS was not there he would have loosed it at Malaysia. People seem also to forget that Hakkinen and team McLaren made every possible mistake possible during the abscence of MS. Irvine didnt win a race on merit except the austrian one, against Hakkinen.
You seem to forget also that when MS came back Ferrrai was suddenly well performing showing clearly that MS is the one that makes Ferrari faster, Irvine and else just couldnt setup the car.

People talks about the success coming late and in 5 years. I dont know what they talk about, really. In a tank Michael Schumacher won 3 races. This is the year i forgot about the maestro and started to support MS. For me this year was the best year of MS. In whole this year MS was more successfull than 2000. By far this is the year MS is woth the money. If this year is not success for you , i cannot help you.

In 97 ms was runner up with a car nowhere near the dominant williams and he was runner up. If youlook at preseson statistics you can see that MS made more than 30000 kms of life treatining >200 km/h laps for testing and bring the exceptional reliability to Ferrari which with the help of stupid mistakes from Villeneuve made them compete to be runner up. If this year is not success for you , i cannot help you.

In 98 MS was runner up , against another car which was 1 sec a lap faster than , admitted by Hakkinen and Coulthard , and still was runner up. If this year is not success for you , i cannot help you.

In 99 even Irvine was runner up , i even dont think what would happen if MS was not injured.

In 2000 he won the battle with a slower car again. Why ? If you look at pre 2000 season you can clearly say that Hakkinen outrace Coulthard generally by 30-40 seconds and in 2000 in mysterious 5 races period Hakkinen was outraced by Coulthard. If he was old him and you add this normal 30-40 seconds gap to the races he should easily have won the championship by 2 or 3 races left.

In fact i was against this case to open in this Court because here it is never allowed to discuss x driver is better than y driver, as you see in rejected cases , and basically this is the same kind of tread. Anyteam spend more than 200 millions to win wdc or wcc and if one driver can make the difference he is worth everything up to this money. This is pointed out by Ron Dennis stating there was noone in the same level of Schumacher.

The tread is nonsense again because of the fact that Jaguar and McLaren offered MS more money than Ferrari Marlboro gives him , buy the simple fact that Ron Dennis and Ford knows better than us for sure.

And our judge before making his decision should take into account that MS rebuilt the team Ferrari. So he is not solely a driver. Again to force this i want to remember that Ron Dennis and Mercedes stated that they dont want it to be said " MS won instead of McLaren won" . Here they clearly place MS above others , above Hakkinen, Villeneuve etc, and that MS is not just a driver.

Anyway in my opinion MS deserved every single penny he is given as a package. As a driver he deserved every penny except 2000. He won in 2000 only because Hakkinen was ill and was abscent during 5 races.

People forget again that Luca himself said that because of the f1 battleship their road cars sales topped their records.

And one must thing for BAR and Jaguar , they are in the same position of 96 Ferrari, they have everything in hand but cannot deliver. Ask BAT and Ford what would they pay for MS, just to do whathe did in 96. I am sure they are ready to pay 2 or 3 times the money Ferrari gaves him. Toyota comes and would give MS as much as BAT and Ford for early success.








#24 Dr.Raj

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Posted 20 April 2001 - 06:11

Samurai said,
the '99 season:
Irvine---- 33 points in 5 races as Ferrari No.1 after MS left.
Schumacher---- 32 points in 7 races (8 races if you include Silverstone)


You forgot to mention the little gift Irvine got from Mika Salo, BTW. Samurai, every driver has inconsistencies within a season. Let me give you some data from the 2000 season.
Schumacher?s first 6 races - 46 points
Schumacher?s next 6 races - 16 points
Schumacher?s last 5 races - 46 points
We all know that he went through a rough patch in the middle with some bad luck, but by your reasoning we can ignore that, so this data is admissible. You said that statistics are more important than the events that lead to the statistic. You in fact gave reasons to why Irvine got these points, and yet built your case on these statistics. So I can argue that Schumacher?s best was yet to come in 1999. Statistics do not tell the full story, especially when its from such a small time frame. If you don?t believe me on this, go look at the Gilles Villeneuve case. The case was won in his favour, even though all statistics worked against him.

I would like to make a similar response to Ross Stonefeld?s post. He too used statistics without touching on the variables.

Let me try to explain Eddie?s performance in 1999, no wait Samurai already did that.

Schumacher was way better than Eddie. Its not so hard to drive a competitive car and win. During Eddie?s stay as no. 1, he was driving the second best car. When the Macs didn?t finish he got the points deserving of the second best car. The Macs and the Ferrari?s were far better than the rest, so when the Macs had problems it wasn?t very hard for Eddie to score those points, simply because he had no other rivals. The three-wheel incident was a mistake and nothing more. Samurai?s argument about this being due to lack of commitment from team Scumacher has to be far from true. There are some inconsistencies in his argument.

Samurai said,
Yes, sure Irvine got some points due to rivals retirements and good pitstop strategy,


What are you saying? Team Schumacher were committed enough to come up with a good pit stop strategy for Eddie but not enough to put four wheels on his car?? Who came up with those pit stop strategies? Eddie??

As I have said in my previous posts, Michael got Ferrari through the early days, and laid a foundation for building the Ferrari we see today. His performance was incredible, and this is the period we should pick to compare him to Eddie. Anyone can perform with a competitive car, but its not so easy with a mediocre car.

To make my point more clear, let me quote Mr. Modesty, Eddie Irvine himself. Lets see what he has to say about Schumacher:

Mid-season 1996
"He never lets up either. If he's not testing, he's training, or driving a kart. He's a sad case. I don't know what's wrong with him. Maybe he was an ugly kid, nobody would talk to him and he's getting his own back. There's definitely something wrong!" - Eddie Irvine


Between Magny-Cours and Silverstone 1996
"How Michael does these things, I just don't know, because the car is just so wrong it's unreal." - Eddie Irvine


On going to Jaguar and some other comments. (in 1999)

?Mind you, I haven't worked out how I will beat Michael for as I have also said before, and people doubted my words and motives, he is the number one. He makes the rest of us look ordinary at times.?

?Now it is time to go and I cannot wait to join Jaguar. The timing is fantastic. I was really desperate to get out of Ferrari this season and I am a lucky, lucky guy. I could not have coped with another year because Michael is so damn good - he is a back-breaker. He saps you and the effort of working and competing with him drains you.

I feel for my replacement, Rubens Barrichello, because I don't believe he has any idea what he has let himself in for. I don't know if he will be crushed by Schumacher, but I do know he is in for a really hard time. Michael's rest during recuperation from a broken leg has done him a power of good. Until then, there were a few times when I knew I could get him, but since he has been back he has been on a different planet.?

?It will be tough but I am looking forward to it. Not working for Michael will be a big help for me. Ferrari know I am a good driver ... but they also know Michael is unbelievable.?

?We also lead the constructors' championship and as we head to Monaco, where Michael's ability can shine, there is no reason why we cannot increase that margin.

I have said it before and I say it again now, Michael is an unbelievable driver who makes the rest of us seem ordinary. What happened to David Coulthard on Sunday, what he felt after leading and then losing to Michael, is what I have to put up with at close quarters every week.

The guy is something else. Just when you think you are driving on the limit everywhere Michael comes along, goes out and proves in a couple of laps you had better think again for the limit is further away.

He has an ability that demands respect and admiration and I have sympathy for Coulthard, even though he had the best car and the better strategy. His complaints about back-markers holding him up are justified. It happens all the time, but it is the same for everyone.
I have a very professional relationship with Michael. We don't meet up socially because we tend to laugh at different things. But any doubts about how we get on, just look at the scoreboards. That's all teamwork. I need them, they need me.? - Eddie Irvine


There you have it, straight from the horse?s mouth. We learnt that Schumacher is very hard working, much faster than Eddie by his own admission. The break in 1999 did him a lot of good according to Eddie. As he said Michael was much faster when he came back, and this was the time when Irvine?s motivation should have been maximum. These quotes should have significance in this case because they came from Eddie?s lips. He very rarely has positive things to say about people.

So it is yet to be proven that other drivers could have achieved the same feat as Schumacher. I proved that Eddie could not have done it.

Coming to Samurai?s arguments about Brawn/Byrne and Co., it is true that these guys are of great value to the team. Ferrari could not have won had it not been for Schumacher and the same goes for Brawn/Byrne and Co. It was a team effort. But Samurai has totally ignored the hand Schumacher had to play in developing the car. He worked very closely with these guys to get the car 100% for him.

Samurai spoke about how great strategies won Schumacher races. Though this is true, Samurai gave all the credit to team Schumacher. Schumacher had a significant role in these strategies. Many of these strategies have been based on Schumacher?s exceptional and unique abilities as a driver, the most important of them being his ability to drive in the rain. Let me quote Ross Brawn on this.

"Michael seems to be able to extract time out of various set-ups. When you have a driver like that, it is sometimes a little more difficult to find the optimum. He can drive round a problem, but what we have to find is the set-up which is best for the race. Michael, because of his ability, will not have a problem if a car oversteers a lot - even in the fast corners." - Ross Brawn


I think this says a lot about his versatility as a driver, and this gives Brawn/Byrne and Co. a lot of options, options they would not have with other drivers.

Don?t get me wrong, these guys had a huge role to play in Ferrari?s success, but so did Schumacher. Samurai?s argument about Schumacher owing all of his success to his team is a distortion of the truth. Schumacher bought Brawn/Byrne and Co. a lot of time with his brilliance in the early years. He gave them time to develop a great car. It would have all crumbled without Schumacher.

As far as contribution goes these guys should be paid a lot more, but that?s not the way it works. Drivers get paid a lot more, that?s tradition. As pointed out earlier, F1 is a marketing tool; hence these guys don?t get paid nearly as much. To the average F1 fan, the driver is who?s important. You cannot win WDCs without great guys working behind the scenes. Schumacher has a great team working for him, so what?? Which WDC winner didn?t? This should not take away from his worth as a driver.

As for BRG?s argument that Ferrari would have been better off, if they had gotten 2 decent drivers and given them equal status does not sound convincing. I believe Ferrari already tried that through the 80s and some part of the early 90s and it didn?t work. Why would it work now? For a team to benefit from this sort of approach, you need to have a strong car. That is exactly what Ferrari did not have in 1996 and for a good period before that. It took Schumacher and his team to get the car into competitive shape. There is no evidence that suggests that this could have been done through this sort of approach.

BRG said,
Even the slight talent of Eddie Irvine proved nearly capable of winning the WDC in 1999 - if the driver line-up have been that had been Villeneuve and/or Fisichela and/or Frentzen and/or other decent drivers, they would surely have achieved the WDC a year earlier.


BRG has ignored the role Schumacher and his amazing team had to play in developing the car in the period between 1996 and 1998/1999. That car Eddie drove in 1999 would not have existed if not for Schumacher, Byrne, Brawn and Co. The foundation had already been laid in 1999. Again I have to say that its much easier to get good results in competitive cars than in mediocre ones.

Here?s my analysis of the drivers you suggested.

Villeneuve: Nearly lost WDC in a superior car in 1997. King of DNFs. What would he have been able to do in the 1998 Ferrari?

Fisichella: We don?t know much about his performance in the top-level cars. Before Rubens joined Ferrari, I held him in similar regard.

Frentzen: Sucked in 1997 Williams though it was a great car, great performance in 1999 Jordan. Very inconsistent.

Schumacher: Great performance in all seasons at Ferrari, and has become a benchmark for all drivers of his era.

BRG, though your theory sounds good, there is no proof that this would have worked better. These drivers you mentioned don?t seem to have what it takes. As I said earlier, they tried that approach in the 80s and it did not work.


#25 HP

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Posted 20 April 2001 - 07:14

To address this part of the question
Would they have had similar success with another less expensive top driver?

Realistically we have no way to know. The only consideration we can make is the situation when MS entered Ferrari. Let's see at the other that won the WDC after 1996. Damon Hill, Jacques Villeneuve and Mika Hakkinen. Of those Damon Hill and JVi were about the only two dricers being an option for Ferrari. All other drivers were not an option at that time I believe. Damon Hill, might have been able to help develop the car like MS did, but it's highly questionable if Damon would have done better in 1996 than MS did with the Ferrari. After that Damon Hill's f1 career was on the way out. And besides, Damon would have been a short term investment anyway, because of his age.

Jacques Villeneuve then? He is in a better position than MS to develop his team, but the return for BAR is far less than the return Ferrari get's out of MS. JVi is a good driver, but again, judging by his mediocre success at BAR (I'm considering the fact that the BAR was a startup team) I assume he wouldn't have done better.

And Mika, well he came back after the crash, and with Mika's reputation back then, it would have been a gamble to get Mika. Would that gamble have paid off? Depends on the car. Mika himself acknowledges that he hates to drive a car that is understeering. Ferrari would have had to develop a car that suits Mika's driving style. Since MS is known to be able to drive around a cars problem, that would have added to another problem within Ferrari. They needed a second driver who has similar driving style than Mika to have both car's claiming points for the WCC.

Also we have to think about Ross Brawn observation, that Michael is able to change tactics during a race, and that he believes many other drivers are not up to that task. Many races Ferrari has won the last 2-3 years was because of Ross pulling the right strings, and Michael being able to deliver. If you then look at Mika, he most the time lost tactic races to Michael. Would Mika have been able to work with Ross Brawns strategies? I don't have an answer, as we have no experience about that. But somehow races like Germany last year, where Mika made a tyre decision that lost the race for him, compared to Malaysia this year, suggest to me that Mika isn't on the same level when it comes to tactics.

So I don't think other drivers could have pulled it off at Ferrari.

#26 Mario

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Posted 20 April 2001 - 16:22

To the court, I submit the following evidence from Sports Illustrated:

Issue date: March 18, 1991

Head of the class

F1 champion Ayrton Senna opened the season with a romp in Phoenix

World champion Ayrton Senna of Brazil makes about $1million per race.


Prost left Team McLaren after '89 to get away from Senna (a reported $9 million signing bonus and $15 million-a-year salary from Ferrari


This information has been obtained from the web site http://sportsillustr...shback_phoenix/

Hopefully these figures will provide the court with a sense of 'perspective'. Not only did Senna earn $1 million dollars a race but Alain Prost, with the $9 million signing bonus, earned $1.5 million per race. At $30 million dollars, Schumacher earns roughly $1.76 million per grand prix weekend. The common denominator between these 3 men are that they are proven winners and world champions. At only 25 years of age, Schumacher was already a 2-time champion, so for Ferrari to land his services, not only were they going to have to pay world champion type figures, but also global icon type money as well to secure a deal.

On whether or not Ferrari could have achieved similar or greater success without Schumacher, that is highly subjective and if I may suggest, perhaps not worth the distraction from the type of back and forth rhetoric that is commonplace throughout "Reader's Comments". Yes, Ferrari team president Luca di Montezemolo said that he expected the team to win the Championship within three years and anything short of that would be a failure. But is not winning the championship within this time period really a failure? If anything, Schumacher is guilty for being a key figure in returning Ferrari to a high level of competitiveness; perhaps to a level that they have never achieved in all their years in the sport?

Was Damon Hill worth the $15 million for Jordan in 1999? Is Jacques Villeneuve worth the $15 million for BAR this year? Michael Schumacher is simply making the money of a man who is 'recognized by Ferrari' to be in the same light as Senna and Prost. Ferrari rewarded Prost with a tremendous contract and with Schumacher Ferrari are doing the same.

#27 CVAndrw

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Posted 20 April 2001 - 17:41

I researched and argued this on another forum in 1996, when Schumacher became known as $chumacher- I don't really have accurate numbers to quote since then, and they may not be a matter of public record anyway, but the principle remains the same:

Since Marlboro switched their sponsorship from BRM to Ferrari, back in, what, 1973? my understanding, supported by public comments from Niki Lauda, to name one, has been that a large part, if not all, of Ferrari drivers' salaries were covered directly by the sponsor. To make a very simple observation: tobacco advertising is now and has been for a long time banned in many of the EU countries- certainly Germany, France and the UK. This is the part that I believe can only be argued through informed guesswork:

If tobacco advertising WERE permitted in Western Europe, what do you suppose Marlboro's advertising budget would be for those three countries alone? Schumacher's percentage of on-air F1 TV exposure has been documented, at least by Ecclestone's minions, and remember that most of the time that Schumacher or Ferrari is visible onscreen or in print media, the Marlboro logo is simultaneously, prominently visible.

Thus, I feel comfortable asserting that, at least from Philip Morris' point of view, Schumacher's salary is, in fact, a bargain!

Go ahead, prove me wrong!

#28 Billy

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Posted 21 April 2001 - 06:38

In 1995, Ferrari were in a desperate situation. They had not won a world championship for 16 years, and things were getting worse, not better. In the years 1981-1985, they won 12 races, in the years 1986-1990, they won 12 races, but in the years 1991-1995 they only won 2 races.

To make matters worse, in 1994 and 1995 an upstart Italian-owned team had won the world championship. This situation was intolerable to the Ferrari management. Sales of Ferrari cars were declining, and the company was making a very low profit. Giovanni Agnelli, the chief executive of FIAT (the parent company to Ferrari), approved the deal to sign Schumacher as a solution to these problems.

Ferrari is unique as a car manufacturer because its main expenditure on marketing is by racing in Formula One. There are no Ferrari advertising campaigns in the mass media like you see for Porsche, BMW and Mercedes. The entire corporation lives or dies according to the success of its racing team. In the old days, Enzo Ferrari only made road cars to raise cash to go racing, but in modern times, Ferrari is a serious car manufacturer, one of the world's most prestigious and recognized brands.

By recruiting Schumacher, and consequently the key technical staff from their rivals Benetton, Ferrari were therefore in a position to duplicate the success that Benetton achieved in 1994 and 1995. Naturally this also guaranteed that Benetton would no longer be a threat to their status as the #1 Italian team.

Schumacher has said: "When I came to Ferrari, it was a third-class team. There were some very good people, but there was too much emotion and not enough direction."

When he first visited the Maranello factory he said "To be honest, I did not think about how special or atmospheric it was . . .Instead, I was quite shocked, when I first saw the factory. I just thought everything looked very old and very out-of-date. It was a bit like visiting a museum."

In the years 1996-2000, the revitalised Ferrari racing team produced 30 victories (25 MS, 4 EI, 1 RB), a massive improvement over the 2 victories achieved from 1991-1995. They won the Constructor's World Championship twice and were in the running for the World Drivers Championship from 1997-2000, finally achieving that goal in 2000.

With Schumacher, Ferrari achieved very wide marketing exposure during those 5 years due to the fact that he was always in contention for race victories and was very often in a battle for the World Championship. This made their car very attractive to their sponsors, Marlboro and Shell, who were very happy to contribute an enormous amount of cash to pay for this new level of success. Marlboro even dropped their long association with McLaren to maximise their exposure with the Ferrari team, who in turn painted their previously scarlet cars a shade of red to match the Marlboro cigarette packet.

In 1995 Ferrari declared a profit of 3.8 billion lire, on turnover of 730 billion.
In 1996 Ferrari declared a profit of 12 billion lire, on turnover of 877 billion.
In 1997 Ferrari declared a profit of 38 billion lire, on turnover of 1044 billion.
In 1999 Ferrari declared a profit of 91 billion lire, on turnover of 1467 billion.

(In $US, this 1999 profit result is approximately 45 million, with turnover of 700 million.)

The turnaround in the fortunes of the racing team has brought immense fortunes to the entire company, which has doubled its turnover in the last 5 years, and increased its profitability by a factor of more than ten times.

You can be sure that the management and owners of Ferrari recognise the unique value that Schumacher brings to their organisation, and are quite happy to meet his extraordinary financial demands.



#29 Ross Stonefeld

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Posted 21 April 2001 - 18:49

Is there any information to deduct that the race team's fortunes affected those of the road cars, other than the coincidental improvement over the last few years of both manufacturing and race teams?

#30 Samurai

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Posted 22 April 2001 - 02:10

Originally posted by Dr.Raj
"You forgot to mention the little gift Irvine got from Mika Salo, BTW."

You conveniently forgot to mention the gift that Schumacher got from Irvine---which I did NOT include in the numbers I posted--I actually favored Schumacher in the statistics I gave.
He still came out worse than Eddie's numbers.
--------------------------------------------

Originally posted by Dr.Raj
"Schumacher was way better than Eddie. Its not so hard to drive a competitive car and win."

The subjective statements here are completely sabotaging your own arguments.
Since it was not so hard to win for Eddie and Schumacher is way better than Eddie, the fact that Schumacher could not get more
points than Eddie (this is the bottom line) only 32 points in 8 races, and he also got some of those points thanks to his Ferrari No.2 Eddie
is strange, unless your arguments are wrong.
(I did not even include the fact in my numbers, that Eddie won a race in the beginning part of the season, either)
--------------------------------------------

Originally posted by Dr.Raj
"What are you saying? Team Schumacher were committed enough to come up with a good pit stop strategy for Eddie but not enough to put four wheels on his car?? Who came up with those pit stop strategies? Eddie??"

Please do not misrepresent my points to try to win any argument-- I think this actually detrimental to your case.
I have clearly stated that the shoddy pitstop and fall off in performance in development happened after it became clear that the average Irvine was completely capable of stealing Schumacher's thunder. The owner of Ferrari was so upset at this "sabotage" that he dressed down Todt and Co. citing this very drop off in effort.
In case you missed the fact, Irvine was the leading contender for the first Ferrari WDC in years.
I post again:
Irvine---- 33 points in 5 races as Ferrari No.1 after MS left.
Schumacher---- 32 points in 7 races (8 races if you include Silverstone)
before the accident, not to mention he got some from Irvine too.
-------------------------------------------------


#31 Billy

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Posted 22 April 2001 - 09:47

Ross,

Gian Luigi Longinotti-Buitoni, the CEO of Ferrari North America, has written a book about marketing called "Selling Dreams: how to make any product irresistible".

Here are excerpts from a book review in the Wall Street Journal, showing how the recent sporting and commercial successes are linked:

The book explores why I, and countless other testosterone-addled males, harbor dreams about fast cars and graphite tennis rackets. And why our sisters and sweet-hearts long for closets full of Armani, Chanel, Versace, Prada and Ralph Lauren. And why people with or without the Y chromosome muse wistfully about being able to outbid the sheiks and the nerd-tycoons for the Renoir at Christie's.

Such products range from the little luxuries, like Coca-Cola and Godiva and Nikes, to the true founts of dreams - the diamond necklace, the vacation home, the Mediterranean cruise, and yes, the Ferrari. While much of the earth's population still struggles with poverty, people in ever-greater numbers are suffused with necessities and have substantial discretionary income.

These are the targets of what Mr. L-B calls dream marketing.

In such a world, Mr. L-B argues, you must own the customer, must make him aspire to possess your product until he has it, and immediately want the next version after he does. It isn't enough to employ the best design, the best manufacturing program, the best distribution system. You must, he says, "seize any possible chance to modify the customer's perceived added value," to swathe him in imagery that sustains and magnifies the dream's impact.

He offers no pat formula for doing that. Instead, he provides a fascinating array of success stories: how Salvatore Ferragamo parlayed a last-minute movie assignment into a shoe empire, how Gulfstream lures CEOs to buy its executive jets, how Diana Brooks of Sotheby's created the buzz around the auction of Kennedy family memorabilia, how Rene' Lalique at one stroke transformed the worlds of jewelry - and decorative glassware.

And then, of course, he talks about his own company, Ferrari. In the late 1980s and early 1990s - the greed-is-good era - it lost its way for a time. "Ferrari was mainly attracting people interested in the status symbol and the glamour, rather than the design and technological beauty," he says. They bid prices up to quadruple the already stratospheric level, then suddenly deserted the market. The result was a crash in prices and something of a crisis. The solution: a major dose of racing and a dollop of sex. The company began pouring money back into racing - it now spends 20% of revenue this way - and re-established its products with true aficionados. It also retained screen siren Sharon Stone for a critical new model launch in 1992, just as she was emerging as a star. The impact, Mr. L-B writes, was to put Ferrari's dreamscape - and sales - back on track.

"If Ferrari is the most famous automotive company on earth with the least marketing resources, it is for one reason only: Ferrari has transformed an automobile, a product built to satisfy the very precise need of transporting people, into a dream."



#32 bira

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Posted 22 April 2001 - 11:41

This is from an interview with Luca di Montezemolo, published in Eurobusiness in March 2000:

In the last four years Ferrari has been the world's fastest growing carmaker, with sales rising from €379 million in 1995 to over €600 million last year. [...] The renaissance has been a mixture of everything. More cars sold, better marketing, better marketing coverage. higher prices and more income from the racing team. The race team is now a very important part of the balance sheet. Its sponsorship income is getting on for the fifth of the whole factory's sales. Contrary to what others think Fiat no longer pumps millions - the team has become self-supporting, with Fiat chipping in as little as US$15 million or so a year in sponsorship.


Schumacher is currently considered the largest selling factor in Formula One. Again, from that Eurobusiness issue:

But for all that, the biggest operation in F1 is nothing to do with the teams or the motor manufacturers. It belongs to Michael Schumacher.

Michael Schumacher is the most famous German alive. Coverage of Formula One is often carried on the main evening news on German TV channels. And Internet in F1 has exploded in Germany more than in any other country.


From the man in charge of Jordan's licensing and merchandising (same issue):

Sweeney has done a lot of research and estimates that total license income for Formula One [...] indicates a level of retail sales of around US$1.1 billion. Sweeney accepts that a large part of that is due to Schumacher.



I would like to ask the court a question, if I may: how does one quantify value and worth?

I cannot, for the life of me, understand why Julia Roberts would get $20 Million dollars for a movie. But she does. Does that mean the world is unfair? Sure.

If you measure success divided by salary, what does it say about Jacques Villeneuve, who is now making $20 million? He's making 2/3rd of what Schumacher is making. I don't see him making a contribution to his team that equals 2/3rds of what Schumacher has contributed to Ferrari.


To me, money is a matter of the bottom line financially, and only financially. You think Schumacher was hired to win the WC and you are basically right, but that is so naive and is just as naive as saying that Julia Roberts was hired to play Erin Brokovich to win the Oscar.

No, she got $20 million to bring that movie a guaranteed income of $200 million; Same goes for Schumacher.

Because whether you like it or not, sports in the 21st century - in fact in the past decade - is to no small measures part of showbiz. It's true for F1 as it's true for every other pro sport (tennis, golf, etc).

#33 JForce

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Posted 24 April 2001 - 05:56

I think many of the entries here are overlooking the issue. The question of whether MS is worth his salary means that his salary cannot be compared with the salary of others. What the other earn, and what they contribute to their teams are irrelevant. The only relevance is to MS slary, and his contribution to the team.
The many criteria one uses to judge worth in F1 are the only ones applicable. What Julia Roberts, or indeed Tiger Woods earns is equally irrelevant. If we were to take a mere 3 of the seemingly endless number of criteria to measure F1 worth, Number of wins, effort, overall success (broad as these criteria are), it could be seen that MS is indeed worth his salary. Figures published throughout this hearing all prove how much he has contributed to his team, and his number of wins are now the second highest of all time. And no-one can deny the amount of effort MS puts in, throughout testing, race weekend, sponsorship duties, etc. It has been well documented that Schumacher is often the first to arrive, and the last to leave, a test session.

Finally, if one were merely to measure his worth to Ferrari in a monetary sense, if you were to ask Ferrari if he has bought them enough revenue to be worth his salary, I'm sure they would say yes.



#34 355 boy

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Posted 24 April 2001 - 12:46

I'm not sure how many of you have studied elementary economics but I see this as a simple Price/Quantity diagram. Let me explain...

Assumptions :

1. MS is accepted as the best driver in the world.
2. The next tier consists of drivers such as JVil and MH, possibly DC, etc. and the list goes on as the 'quality' of driver (which can only really be measured subjectively) goes down.

This diagram would show a rapidly escalating (almost logarithmic) frontier where MS would occupy the absolute pinnacle - i.e seeing as there is only 1 'best' driver, his value to those who require his services is automatically amplified relative to those lesser drivers, of which there may be several at or about the same level.

In addition to this - do you really think Ferrari just plucked $30m out of the air as a figure? Yes, I'm sure Willy Weber is a shrewd negotiator when it comes to his client but there must have been some incentive for Ferrari to pay this much. To be honest, I doubht that we'll ever know exactly what the exact reasoning was but I'd imagine that it'd be a combination of the following factors :-

1. Others required MS's services - of course they did; he was a 2x WDC at such a young age. The question that remains is ,'would anyone have matched Ferraris offer?". This, however, cannot be examined as a stand alone fact. Firstly, Ferrari knew that they were an under-performing team and MS liked to win therefore they'd have to lure him to Ferrari, which would entail paying more than another top flight team that realistically stood a better chance of winning the WDC in the following year. MS knew he wouldn't win (the WDC) in his first year - he knew he'd be lucky to pick up a few race wins.

2. Ferrari needed him to help develop the car, pull the team together and entice other top flight members (Bryne, Brawn, etc). No, they are not part of the immediate question but in considering MS's worth, we must examine the whole picture. Would the rest of 'Team Schumacher' have joined if MS wasn't there? Probably not. Ferrari wanted to win and to win you need a good team.This is a vicious circle as most good teams like to win so how do you attract a good team to an outfit with a crap record for the past 16 years? Maybe if you lured the best driver to the team??? So even if you don't think MS is worth the $30m for his direct contribution to the team, one must always consider indirect contributions, such as attracting other personnel.



#35 30ft penguin

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Posted 24 April 2001 - 12:56

What I am about to say has been in part mentioned already by others, but I want to elaborate a bit on it.

First, one has to keep in mind that for Ferrari, the amount of money they pay for their drivers right now is - relative to the whole of their F1 budget - not that much more than what smaller teams pay. Even though MS receives thirty millions, it is not that large a part of the whole budget Ferrari has. Ferrari can afford more expensive drivers than other teams, so they will do so if the see an advantage in it.

When Michael came to Ferrari in '96, the team was middle class. They knew that they could not go from middle class to champion in a single season, so they planned a multi-season strategy. Race wins in the first season, championship contender in the second, champion in the third. Or something like that at least. So they needed a very good driver who also was interested in joining a team which still needed development. Michael back then was the ideal candidate. He had two championships in the last two seasons, and he wanted a "challenge". Of course it was obvious to Michael that the first year would be pretty hard, and Ferrari wanted him to join for several years, so Michael needed some financial incentive: a compensation for race wins he would miss out, and some incentive to make him sign a contract for several years.

Did it pay out ? Ferrari had in that first season (without Ross Brawn) more race wins that in any of the previous ones. Michael definitely helped in developing the car and what's more - he was the deciding factor in "luring" Ross Brawn to Ferrari. So Ferrari effectively paid not only for Michael, they got the "right" to having Ross Brawn at the same time, which was very important for the development of the team. So I would say that for the first years, the money Ferrari paid for Michael was spent well. Ferrari got what they paid for - the multi-season strategy worked, Ferrari definitely developed from a middle-class team to a team which had the capability of winning the championship. Would it have worked with a different, less expensive driver ? I do not think so. First, there was no other driver of the same quality available back then. And of course Ross Brawn would not have changed to Ferrari, either.

Is Michael worth the money even now ? I guess it has to do with the fact that as soon as Michael quits his job at Ferrari, the team would fall back down to a "nearly top" team. In the effort to build a top class team, Ferrari concentrated only on Michael. Without Michael, and with another top class driver instead, the team would need at least one season to reorganize appropriately. But Ferrari wants to enjoy the status they have achieved for a while, they do not want to change the "winning combination" yet. And Ross Brawn as well as Jean Todt have stated in public that they only will stay for another one or two seasons because Michael stays, too. So, in order to secure the combination which has won last year for another one or two seasons, they had to make sure that Michael stays. Which means paying his very high salary.

This is the key point, I think. Other teams pay ten million dollars to get one driver. Ferrari pays thirty million dollars to get a driver and the guarantee that the proven combination of MS, Ross and Jean stays for at least one or two additional seasons. They simply do not want to break up this combination, no matter the cost - it would not work with another driver.


#36 Billy

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Posted 24 April 2001 - 14:31

In an October 2000 interview with InsideF1.com, Luca di Montezemolo confirmed that

Fiat is not among the top four of our sponsors. We have Philip Morris, Shell, Ferrero, Italcom and Fedex ahead of Fiat.

In previous evidence presented to the court, we have heard Montezemolo admit

sponsorship income is getting on for the fifth of the whole factory's sales. Contrary to what others think Fiat no longer pumps millions - the team has become self-supporting, with Fiat chipping in as little as US$15 million or so a year in sponsorship.

According to the balance sheet presented in previous evidence, total Ferrari revenue is approximately $US 700 million. Montezemolo says that sponsorship income is approximately one fifth of that amount, which equates to a racing team budget of $US 140 million. Of this amount, $15 million is from FIAT, the owner of Ferrari. This is only 11 percent of the budget. According to Montezemolo, five other companies contribute more than this, so we can estimate that the $140 million sponsorship income consists of:

1. Marlboro: $35 million
2. Shell: $25 million
3. Ferrero: $20 million
4. Italcom: $15 million
5. Fedex: $15 million
6. FIAT: $15 million
7. total of other smaller sponsors: $15 million

According to previous evidence, the CEO of Ferrari North America said when Ferrari started investing in racing again in the early 1990s (Luca di Montezemolo came back to Ferrari in 1992),

The company began pouring money back into racing - it now spends 20% of revenue this way.

This is clearly no longer the case, as the owners of Ferrari only contribute $15 million, which is 2% of its $700 million revenue. By Ferrari investing in racing, and achieving success with Schumacher, the racing team is now a profitable business in its own right, and can afford to pay Schumacher even more than his current salary of $30 million a year.

Note that the above sponsorships were for the 2000 season, arranged well before Ferrari became world champions. These amounts surely will increase. No wonder Luca di Montezemolo said
in September 2000

Without wishing to gloat in any way, we can say that Ferrari is living through really exceptional times. In 1993, we sold only 220 cars. By the end of August of this year, sales were already up by 18% compared with the same period in 1999.



#37 Billy

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Posted 24 April 2001 - 15:32

Samurai raised the important point that in 1999 Irvine would have been world champion, except that the performance of his Ferrari was not up to it's usual standard late in the season:

So things suddenly started obviously to fall apart for Irvine toward the latter part of the season-- 3 wheel pitstop at a crucial point in the WDC race, lack of 100% effort from the development engineering dept. (we have proof of the Ferrari owner's own words and actions concerning this).

In the three races before Schumacher returned, Irvine qualified 6th in Belgium, 8th in Italy and 9th in the European Grand Prix. This clearly indicates that the car was not as fast as it should have been, as his season average qualifying position was 4th on the grid.

Ross Brawn explained this drop off in performance:

All credit to Eddie, he picked up the baton after Michael's accident and ran with it, but after a few races it began to dry up a little bit because we didn't have Michael there. Eddie is a good driver, gives good input, but with with Michael there we are much stronger. It would be same the other way around; if Eddie wasn't there Michael wouldn't be as strong. Until Michael came back in Malaysia, it had started to hurt Eddie not having a good partner.

It was not through a lack of effort. It's true we didn't make as much progress as we had in previous years but, it was quite a complex set of circumstances and conditions that didn't help in that respect. Everything -- testing, feedback, and so on -- suffered a little bit because Michael was not here. That led to a lot of inconsistency.

Irvine said

Ferrari would not have been able to play for those titles at the last race if Michael weren't a great driver and now it would not be such a strong car if Michael hadn't worked so hard to develop it.

Samurai refers to

the Machiavellian environment that created the sabotage of Eddie Irvine's WDC bid.

In The Prince, (written in 1513, Florence) Niccolo Machiavelli outlines the political principles by which a prince can rule his kingdom. Relevant to Irvine's situation are the following passages

Men nearly always follow the tracks made by others and proceed in their affairs by imitation, even though they cannot entirely keep to the track of others or emulate the prowess of their models. So a prudent man must always follow in the footsteps of great men and imitate those who have been outstanding. If his own prowess fails to compare with theirs, at least it has an air of greatness about it. He must behave like those archers who, if they are skilful, when the target seems too distant, know the capabilities of their bow and aim a good deal higher than their objective, not in order to shoot so high but so that by aiming high they can reach their target.

Citizens who become princes purely by good fortune do so with little exertion on their part; but subsequently they maintain their position only by considerable exertion. They make the journey as if they had wings; their problems start when they alight. They do not know how to maintain their position, and they cannot do so. They do not know how, because, unless they possess considerable talent and prowess, they are incapable of commanding. So they are destroyed in the first bad spell. This is inevitable unless those who have suddenly become princes are of such prowess that overnight they can learn to to preserve what fortune has suddenly tossed into their laps, and unless they can then lay foundations such as other princes would have already been building on.



#38 Marcel Schot

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Posted 24 April 2001 - 19:37

The session is now closed.

Thank you all for participating. We will review all your arguments and come forth with a judgement within seven days.

#39 david_martin

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Posted 17 May 2001 - 19:38

Apologies to all interested parties as to the tardiness of this verdict.

Preamble
As a driver, the racing record of Michael Schumacher from 1996 to the present is impressive, and the Court does not consider his results as a racing driver to be a major issue in this case. Leaving aside all of the controversy which has surrounded Schumacher, even the most ardent critics would have to admit that Michael Schumacher is one of the elite driving talents of recent times. What is open to question, however, is the remarkable salary he receives from Ferrari, which is far in excess of his peers in Formula 1 and puts him amongst the highest paid professional sports people ever seen.

The Decision
At the core this case is the notion of what constitutes the value of a driver to a team, and how the remuneration that Michael Schumacher receives from Ferrari compares to his intrinsic value to the team. We might choose to apply simple quantitative measures, such as points or wins per salary dollar, to evaluate the worth of a driver. To do so would, in the opinion of the Court, fail to consider the "intangible" contributions, both positive and negative, which a driver makes to a team and which influence a team's evaluation of the drivers worth. There is the question of the "compatibility" of driver and team - how a driver's personality and work ethic fit in with the culture of the team. Other contributions might include things such as the drivers "media-saviness", the ability of the team and driver combination to attract sponsorship, investment, and partnership, and the ability to attract and keep high calibre technical personnel. These latter items are of paramount importance given the commercial and technical realities of modern Formula 1. There are probably as many business and marketing imperatives in the sport today as there are racing ones. It is the opinion of the Court that all of these factors should be considered when evaluating a drivers value.

A considerable amount of evidence and opinion has been offered to the court surrounding the events of 1999. Several interpretations of the performance of Ferrari in Schumacher's absence have been presented. On one hand Eddie Irvine's performances during 1999 have been interpreted as clear evidence that Scuderia Ferrari were and continue to be in a position where any of the current crop of leading F1 drivers could have challenged for and possibly won the World Drivers Championship, were they to drive for Ferrari. On the basis that these drivers would probably have attracted a smaller remuneration that Ferrari pays Schumacher, this has been proffered as proof that Schumacher is overpaid. Suggestions have also been made in evidence that Ferrari may have directly or indirectly impeded Eddie Irvine's attempts to win the 1999 World Drivers Championship. The Court has formed no opinion on this implied perfidy. On the other hand, evidence has also been provided (including quotations from Ferrari personnel) suggesting that the loss of momentum which Ferrari experienced during the last third of the 1999 season was as a direct result of the absence of Schumacher's input during testing and development.

Several economic arguments have also been offered to the court in relation to Schumacher's salary compared with the earnings of other Formula 1 drivers, and elite athletes from other sports. The Court has heard evidence of precedents for Schumacher's salary within Formula 1 during the last decade. While the submitted comparisons between the salary Schumacher receives and the earnings of other elite athletes help to contextualise the Formula 1 drivers market, the Court takes the few that such evidence is not at the core of the present case. The Court has also been presented with a classical macro-economic interpretation of the Formula 1 driver market. It has been proposed that the law of supply and demand predicts that the most highly rated driver should have a value which is disproportionately higher than other drivers, and if the supposition that Schumacher is the most highly rated driver in the market is accepted, his salary should reflect this.

Evidence presented to the court suggests that Ferrari S.p.A, probably more than any other participant in Formula 1, relies on its racing division as a brand building and marketing tool. The fortunes of the company and the racing division appear to be inextricably related, and racing success is given a high priority by Ferrari and its shareholders. It is indisputable that the early to mid 1990's represent a nadir seen only rarely during the long history of SEFAC Ferrari. The team only achieved two Formula 1 race wins between 1991 and 1995 and had to endure some lamentable performances, particularly during 1992 and 1993. The on-track fortunes of Ferrari since 1996 are in stark contrast to those which immediately preceded them. Ferrari and Michael Schumacher have enjoyed a period of success between 1996 and the present that is almost without parallel in the team's rich and successful history. During this time Scuderia Ferrari has re-invented itself, with renewal of team's technical base in Maranello, and recruitment of some of the most highly regarded technical staff in racing. The team is now a benchmark by which other motorsport organisations are judged. Evidence has also been offered describing the fortunes of Ferrari S.p.A as a boutique automotive manufacturer, which have mirrored those of the race team. It has also been suggested that Ferrari S.p.A has enjoyed something of a "fiscal renaissance" in recent times, coincident with the improvement in performances by the race team. In a market sector where image and branding are paramount, it has been suggested that the Cavallino Rampante (with the F1 team as the prime advertising and marketing tool) continues to be the benchmark by which all other prestige automakers and their brands are judged.

How much of this success can we attribute to Michael Schumacher? The transformation of Scuderia Ferrari during the last five years has clearly been the result of changes which have occurred from the Ferrari boardroom right through to the Maranello factory floor. No individual can claim sole responsibility for such a massive organisational change, least of all a driver. The Court is, however, of the opinion that the self-confidence and the culture of success which has emerged within Ferrari since 1996 has grown from its on track performances and in this Michael Schumacher has certainly been the central figure. Without doubt, Schumacher is one of the world's most recognisable motor sport figures, and he has become synonymous with Ferrari since he joined the team in 1996. The brand building and financial benefits Ferrari S.p.A have enjoyed from this on-track success and publicity which Schumacher brings to the company are considerable.

Verdict
From the evidence presented in this case, the Court finds that the allegation that Michael Schumacher is overpaid by Ferrari is not proven.