Tech 3 Move to KTM

Tech 3 Move to KTM

Carmelo Ezpeleta's Grand Plan, Or The Long History Behind Tech3's Switch To KTM

Sometimes decisions are a long time in the making. Tech3's decision to leave Yamaha and sign with KTM may have been made in the space of a few months, but the genesis of that choice, the process that made it all possible is ten years in the making. If MotoGP hadn't switched from 990cc to 800cc at the start of the 2007 season, if the ban on tobacco sponsorship in sports hadn't been enforced from 2005, if the financial system hadn't collapsed under the weight of tranches of "ninja" loans, Tech3 would be a Yamaha satellite team for the foreseeable future. Whether they wanted to be or not.

How did MotoGP get to a place where Tech3 could switch to KTM? To make complete sense of the story, we have to go back to the end of the last century. Through the last 1990s, the popularity of Grand Prix racing was waning, while the World Superbike series went from strength to strength. The manufacturers were losing interest in the 500cc class, as two strokes were gradually disappearing from the road.

Big bore four strokes were the flavor of the month among motorcycle buyers, and the factories were investing less and less in their two stroke racers. The manufacturers expressed an interest in racing four strokes in the premier class, and Dorna sketched out a contract with the MSMA, the organization representing the manufacturers, and MotoGP was born.

From 2002, 990cc four-stroke machines would enter the class, and go up against the 500cc two strokes. (The 990cc capacity was chosen to avoid any perceived encroachment onto the territory claimed by World Superbikes, then owned by rival promoters the Flammini brothers, which had bikes with a maximum capacity of 1000cc at the time). From 2003, MotoGP would be completely four stroke, the two strokes banished forever. The agreement was made for five years, Dorna promising stability in the technical rules to allow the factories to get a return on their investment.

The four-stroke lion roars

In 2002, the first four-stroke Grand Prix bikes took to the track. Within half a season, they were dominating the old two-strokes – hardly surprising given that they had nearly twice the capacity. The new class led to a flourish of interest from new manufacturers, with Kawasaki, Aprilia, and Ducati joining the fray. The series was flush with money, motorsports benefiting from the bullying tactics of F1 boss Bernie Ecclestone who had carved out an exception to the ban on tobacco sponsorship. With nowhere else to go, the tobacco firms poured their money into racing, and into MotoGP.

The increased capacity and revitalized technology war led to a massive jump in speeds. In 2002, the first iteration of the four-stroke bikes were hitting around 320km/h down the front straight at Mugello. Two years later, they were 20km/h faster, Loris Capirossi's Ducati hitting 341km/h during the race. Alarmed at the rate at which top speeds were progressing, and at which the bikes were outgrowing the runoff areas at tracks, the Grand Prix Commission (series organizers Dorna, the teams organization IRTA, the manufacturers representative body MSMA, and the international sanctioning FIM) searched for ways to reduce bike speeds.

They settled on reducing capacity from 990cc to 800cc, and reducing fuel limits at the same time. At the start of the new five-year contract period in 2007, the new 800cc bikes took to the track, and top speeds temporarily dropped. Lap times didn't, however: the 800cc bikes needed to be ridden differently, carrying more corner speed and keeping the wheels in line. The reduction in fuel to 21 liters meant factories focused more closely on electronics and fuel management, further hobbling the previously unfettered horsepower. Racing became a war of precision, rather than a battle of bravado.

The noose tightens

The focus on electronics and the extreme revs reached by the 800cc engines drove costs up exponentially. At the same time, teams and factories were struggling to replace the money lost after Ecclestone's exemption from the tobacco sponsorship ban had run out in the middle of 2005. Audiences started to fall as the racing became processional, manufacturers started to creak under the strain of competition, teams ran out of money.

21 bikes lined up on the grid at the first 800cc race in Qatar. Ilmor, a new entry for 2007, dropped out after the first race when they realized the scale of the financial investment required. There were 19 bikes left on the grid at the end of the 2007 season. Another bike went missing before the start of the 2008 season, so there were just 18 bikes on the grid at Qatar that year.

Teams were already struggling financially throughout 2008, teams threatening to withdraw unless they got more financial help from Dorna. Dorna was coming under pressure from the FIM as grids were dwindling. The FIM, after all, had handed Dorna a multi-decade contract to organize MotoGP, and the series was starting to look rather sickly, despite the indisputable quality of riders involved.

House of cards

Then, on 15th September 2008, Lehman Brothers, a major Wall Street investment bank, went bust. The Ponzi scheme of sliced, diced, and repackaged mortgages, of CDOs and CDSs came tumbling down, bringing the global economy down with it. Business panicked, and put any projects not generating an immediate financial return on investment on hold. Companies went bust, the construction sector being particularly hard hit. Especially in Spain, which had been a prime source of funding for many teams in the sport.

Money dried up. Kawasaki announced they would withdraw from MotoGP for the 2009 season. It took serious negotiation and some legal bullying to get the Japanese factory to go some way towards honoring the commitments it had made when it signed the contract for the five-year period from 2007-2011. Even Honda came perilously close to withdrawing from MotoGP, only high-level meetings and their historical and existential commitment to racing keeping them in the sport.

Grids fell once again. Suzuki went from two bikes to just one. At Qatar in 2010, just 17 bikes lined up for the first race of the season. The sport was clearly no longer sustainable in its current form.

The Empire fights back

Dorna had a plan. Inside Dorna and IRTA, key personnel put their heads together to try to fix the problem. Racing had to be made cheaper, and it had to be made more competitive. Dorna boss Carmelo Ezpeleta, with input from a number of people inside IRTA including then Technical Director (and now Race Director) Mike Webb pushed for spec electronics and a rev limit.

Those two things, Dorna believed, would be enough to slow the bikes so they didn't go too fast for the circuits, reduce costs by diminishing the advantage in electronics which factory teams had over private teams, and reduce costs by stressing the engine less with fewer revs.

The problem was that the MSMA had a veto right over the technical regulations, and were dead set against both those measures. If any changes were to be made, the factories' veto would have to be curtailed in the negotiations for the next round of contracts for 2012-2017. Even if they allowed their negotiating power to be curtailed, the factories still held another form of veto. Push through spec electronics, factory bosses warned, and we will walk away from the sport.

They made those threats in public, too. "I don't think Suzuki would see the point in racing in MotoGP if they couldn't develop their electronics," former Suzuki team boss Paul Denning told me in 2010. "Honda would have no interest in MotoGP without electronics development," then HRC boss Shuhei Nakamoto told me the same year. The point of MotoGP, the manufacturers insisted, was to develop technology to be passed down to street bikes. Proprietary electronics and tight fuel limits had provided valuable engineering data for Honda's road bikes, Nakamoto said, especially in metering fuel and providing good throttle response at part throttle openings. Which is where road bikes and scooters spend 90% of their time.

Hard ball

Behind the scenes, negotiations became extremely tough. There are no official records or reports of the negotiations, but rumors seeped out from time to time. HRC boss Nakamoto threatened to walk away if Dorna were to impose a spec ECU. A source with knowledge of those discussions told me that Ezpeleta had called his bluff. Knowing how much Nakamoto loved racing, the Dorna boss allegedly said to him, "Fine, go home. And next year, when we go to Mugello, I will be at the track in the middle of the races, while you sit at home and watch them on TV."

Ezpeleta drew some concessions, offering something in return. From 2012, MotoGP would return to 1000cc – closer to the road bikes the factories were developing, and therefore more marketable – but the engines would be limited to four cylinders, and a maximum bore limit set at 81mm. That was supposed to provide a de facto rev limit, which, for a time, it succeeded at.

But Ezpeleta still needed the costs of racing to come down so he could fill out the grid. The Dorna brains trust hit on the idea of what would become the Claiming Rules Teams: in effect, tuned production engines in prototype chassis, with teams allowed to claim engines from each other for a fixed price to prevent them from gaining a huge advantage. Sure, they were no match for the full factory bikes, but they made the cost of entry into MotoGP a great deal cheaper.

Ezpeleta's ploy worked. At Qatar in 2011, the last year of the 800cc bikes, there were 17 bikes on the grid for the first race. A year later, with MotoGP at 1000cc again, and CRT teams helping to pad out the field, there were 21 bikes again.

The CRT bikes were overweight, underpowered, and private chassis designers proved to be no match for the mountains of data and experience the manufacturers had amassed over the previous 20-odd years. The CRT machines were consistently two seconds or more slower than the front runners. It was clear that they would never compete.

The CRT gambit

They didn't have to, though. The purpose of the CRT bikes was not to take on the might of HRC and beat them at their own game, it was to demonstrate to the bigwigs at Honda, Yamaha, even Ducati that if they left, MotoGP would continue to exist. Sure, it wouldn't be the same, but fans tuned in to watch the best riders in the world do battle, and most of them were less worried about the details of the machines than about the heroes riding them.

Calling the factories' bluff proved to be stunningly effective. The factories promised to make cheap bikes available to the teams at a fixed price. €1 million was the price Carmelo Ezpeleta demanded, and what the factories gave him was not that far off the mark.

The factories demanded a few concessions in return, however. The Claiming Rule was killed off, and in its place came the Open Class teams. In 2014, the factories accepted spec ECU hardware (but not software), but in return, they demanded a cut in fuel allowance and a reduction in the number of engines allowed per season to give themselves an engineering challenge. The Open Class bikes would use spec ECU hardware and software, but have more fuel and more engines to compensate.

That made a big difference. The Open bikes were more competitive than the old CRT machines had ever been, though the gap to the fast guys at the front was still significant. The bigger battle had been won, however: the manufacturers were being forced to concede bit by bit that MotoGP was primarily a marketing exercise, rather than an R&D exercise, as they had previously claimed. The popularity of the sport was growing again, and new TV money was helping to keep the sport financially healthy.

Conceding defeat

In 2015, the factories finally capitulated. From the 2016 season, all MotoGP bikes would use Dorna's specially commissioned Unified Software on the spec ECU. Spec electronics had come to MotoGP.

With spec electronics had come new factories too. Suzuki had returned to the series in 2015, lured by the new regulations. Aprilia had gone from just supplying a souped-up version of their RSV4 WorldSBK machine to working with Gresini to run a full factory effort. The spec electronics was a factor for Suzuki, team boss Davide Brivio admitted, saying it reduced costs, but most of all, it created a much more level playing field. There was one less area which needed a truckload of money thrown at it to succeed.

At the same time, KTM started their project to return to MotoGP, building on the success of their Moto3 program and throwing all their weight into making a competitive machine. The RC16 made its first appearance at Valencia in 2016, before entering the series as a two-rider factory team the following year.

Money talks

The technical regulations were only half the story, however. The second prong of Carmelo Ezpeleta's long-term plan was to put the private teams on a firmer financial footing. As part of the new contracts with the teams and with the factories, there was a radical reshuffling of the finances. Dorna's contribution to the teams went up drastically, from €800,000 per rider to €2,800,000 per rider (link is external), once all factors were taken into account.

The subsidy to the factories was cut, but Dorna was still paying them around €1 million per bike on the grid. Factories agreed to supply bikes to the teams for a maximum price €2.1 million per rider. More importantly, they committed to supplying any satellite team who were willing to pay them that maximum price per rider.

All of a sudden, the teams had money, and the teams had a choice. The introduction of spec electronics, together with engine development freezes for successful factories and development and testing concessions for manufacturers who have yet to score a podium closed the gap between the various factories. The switch from Bridgestone to Michelin helped shake up the racing, the French tire manufacturer bringing a wider range of tires all of which could be used in the race. Ducati used their experience with the Open bikes to get up to speed more quickly with the Unified Software.

The rider matters

As the gap between the factories got smaller, two factors began to have an ever greater influence. First, the rider is able to make more of a difference again, tire management becoming a crucial skill once again. Secondly, the amount of data collected became more important: having two strong riders on the same bike was no longer enough. In the search for improvement, the only place to find it was in the detail, and the more data there was, the more details to sift through.

All of these factors taken together have had a profound effect on not just the racing, but the way that racing is organized, and the balance of power inside the paddock. I spoke to one senior paddock figure who asked to remain anonymous, and put it to them that the balance of power had shifted in favor of the teams. My source was a little more cautious: "It's not so much that the teams have the power now, but we do have a much more level playing field, and that's great for the sport," they said.

The satellite teams were once just a source of income for the factories. Tech3 were in effect sponsoring the factory Yamaha team, my source explained, and with Tech3 gone, Yamaha faced a budget shortfall of between €5 and €6 million. For the past decade or so, Tech3 had little choice: without either a Yamaha or a Honda, they would not be competitive, but they were also dependent on Yamaha for the performance of the bike.

That tension had rarely surfaced, but there had been signs of it for the last couple of years. Tech3 team boss Hervé Poncharal was unfailingly polite about Yamaha, always expressed his gratitude to them for their support, but he sometimes let his frustration with the situation show through. He pointed to the increased support offered by Honda to LCR and Ducati to Pramac as an example of how to improve the package overall. But with no real alternative to Yamaha, Poncharal knew he was stuck.

A changing climate

Fortunately for Tech3, Carmelo Ezpeleta's plan has started to bear fruit. There are four competitive factories in MotoGP right now – Honda, Yamaha, Ducati, and by the look of things, Suzuki – and so private teams have more of a choice. Factories want more data from their satellite teams, which comes at the price of supplying competitive equipment: Honda have Cal Crutchlow on a third factory bike at LCR, Ducati have Danilo Petrucci at Pramac, Ducati engineers work closely with the other Ducati satellite teams on the grid.

The new factories understand that they need the extra data too. Suzuki have arrived at the point where they understand they have more to gain from running a satellite team with fairly equal equipment than they have to lose. KTM have followed in the footsteps of Ducati, and signed Tech3 up to be the factory junior team, an extension of the factory team with full factory support and the same bike as the factory team. The KTM RC16 may not be a podium bike at this point of the season, but with KTM and Red Bull putting €250 million over five years, they have the resources to push forward development.

And so, the tables have turned on the factories over the past decade. No longer do they dictate terms and dispense bikes like a Medieval King would dispense privilege to favored subjects. "Yamaha are suffering the consequences of their arrogance," was how one paddock figure put it, requesting anonymity to speak freely. There is now much more of a partnership between the manufacturers and the teams. The factories need the private teams as much as the private teams need them. The factories are still in charge, but they have to work a lot harder to keep their satellite teams happy.

Silly season spreads its wings

The success of Dorna's long game is playing out in other teams as well. It is almost certain that Marc VDS will no longer be racing Hondas in 2019. Instead, the team is talking to both Yamaha and Suzuki about a future partnership, and weighing up the pros and cons of each factory. The Angel Nieto (formerly Aspar) Team have meetings lined up for Qatar, both with Ducati but also with Yamaha, about taking the bikes vacated by Tech3. They will also have discussions with Suzuki, though they are behind Marc VDS in the pecking order because the Belgian team moved much faster than they could. Avintia, too, have expressed an interest in the Yamahas, and are hoping to have talks about this at Qatar. There are talks that Aprilia, too, are interested in supplying satellite bikes if the right deal can be struck.

Silly Season is not just for the riders any more. Teams can choose factories, and factories can choose teams, making for much more flexibility and more options for chasing success. The satellite teams enter discussions not as supplicants any longer, but as negotiating partners.

This is having a knock-on effect in the rider market as well. At the start of the year, it looked like most riders would stay more or less where they are for 2019. But with teams swapping bikes, a rich vein of young talent waiting in the wings of Moto2, and more factories with competitive equipment, there could be massive changes coming. That is a subject which will need a separate article, so more about that tomorrow.

Reversion to the mean

Lest anyone believes we have arrived in MotoGP Utopia thanks to Carmelo Ezpeleta, and that nothing more needs to be done, this is also a dangerous moment for racing. It is a particularly luxurious danger to have to face, however: the biggest threat now is one of complacency. If MotoGP rests on its laurels, then the series can easily start to slide back into its old ways.

There are downsides to having so many manufacturers being competitive: factory team bosses have to show their boards results, but the wins are spread exceeding thin when all factories are equal. Only one rider can win the championship, and only one manufacturer can win the manufacturer's crown. Small failings and minor mistakes can quickly mount up and render a factory uncompetitive: look how Yamaha has gone from world champion in 2015, to struggling throughout testing in 2018. If KTM doesn't deliver before 2022, then they too will have to reconsider their project. If Aprilia keeps coming up short, how much longer will Piaggio be willing to support them?

Right now, MotoGP is at its zenith, largely as a result of the plan set out by Carmelo Ezpeleta in the wake of the financial crisis. But the trouble with being at the peak of your success is that the only way left to go is down. How Ezpeleta and Dorna handle that will be even more important than how they got here.

Leave a comment