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The future of the Formula One racing series is uncertain after negotiations between the FIA, the sport’s governing body, and FOTA, the racing teams’ association, broke down over the FIA’s plan to impose a budget cap for next season.

Last Friday, eight of the twelve teams announced plans to leave Formula One and start a competing racing series. The FIA responded with a threat to sue.

This illustrates a very important component of leverage – identifying your best alternative, or Plan B, and then taking steps to improve it. Here, the unhappy racing teams identified starting a competing racing series as their best alternative. Then by publicly announcing their decision to leave the FIA, they took a tangible step towards make their Plan B a real possibility.

This also created a much poorer Plan B for the FIA. Loosing their highest profile teams and drivers would negatively impact the value of the Formula One brand and undermine the FIA’s relationships with its venues, broadcasters and advertisers.

FOTA’s strategy appears to be working because on Monday, FIA president Max Moseley communicated a willingness to drop his plan for legal action. Bernie Ecclestone, Formula One’s commercial rights holder, also indicated a willingness to postpone or drop the budget cap.

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