The F1 engine supply mess

THe current complicated negotiations involving Mclaren, Honda, and Scuderia Toro Rosso are said to be reaching a conclusion over the Monza Grand Prix weekend.
The situation is complicated partly because none of the other F1 power unit suppliers are keen to supply Mclaren. Earlier in the season, Mclaren was said to have an outline deal in place to return to being a Mercedes customer from 2018. However, that proposal seems to have disappeared off the table. Mclaren cannot sensibly obtain Ferrari power units because the two companies compete in the luxury car market. That left only Renault, but the French company is publicly reluctant to expand to supplying a fourth team.
Numerically, the three other power unit suppliers currently supply three teams each. Under the terms of the current power unit regulations, if Honda withdraws from Formula 1, one of those suppliers will end up supplying Mclaren in 2018. Here is a summary explanation from Fabrice Lom, the FIA Head of Powertrain:

For the obligation to supply: the idea was to have no team that is not able to have access to a power unit. This was a big part of the discussion because we also don’t want people to be able to play with that and to change from one power unit to another from one year to another in order to have the best one. So there is a quite complex system in place, but the basic [premise] is that if you are a team with no offer, so nobody is offering you a power unit, you can ask the FIA to have one and there is a system of ballots. So we will take the power unit that has the smallest number of customers. If there is only one, this will be the one that will be required to give the power unit. If there is more than one there will be a ballot between the two to decide which one will supply, and there is a low price of €12m from 2018 for this supply.

This rule is one that none of the power unit suppliers wants to see invoked. If Honda does withdraw, one of the current suppliers will, by ballot, be told to supply Mclaren with power units for 2018 for the bargain price of €12m, a price which may not even cover their costs.
So…Mercedes, Ferrari and Renault would much prefer that Honda stays, in order to avoid that scenario. They want to negotiate their own power unit supply contracts, not have a supply contract mandated for them.
So, there is a deep imperative by the FIA and LibertyF1 to ensure that Honda stays in F1. The ideal current solution is essentially a power unit supply swap where Toro Rosso has Honda power units in 2018, and Mclaren has Renault power units. However, that requires Mclaren to negotiate an end to its current contract with Honda. Since that contract was 10 years in duration with lots of money attached, that is proving difficult. Honda is also said to be demanding that any Toro Rosso contract contains the option for Honda to supply Red Bull racing from 2019 onwards, since the Toro Rosso driver line up does not contain a world champion.
So, all of this, as Jean Todt admitted, complicated…

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