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Nürburgring folly

July 21, 2012

How do you take the world's most famous racetrack, with relatively small financial woes, and turn it into a half-billion-euro hole in less than a decade? The answer's simple: renovate it with things it doesn't need.

The stadium section of the Nürburgring, viewed from above
Image: picture-alliance/ HOCH ZWEI

A bold rescue effort gone awry. That's the verdict many have reached on the multimillion-euro restructuring project for the Nürburgring since the facility's state owners filed for insolvency earlier this week.

That assessment isn't technically false - the plan was very bold, and it has gone utterly awry - but it barely scratches the surface.

The iconic German racetrack had long been plagued by relatively minor ills, but the proposed "cure" for these was a cancer even before the lights went green.

Wilhelm Hahne, an automotive journalist who moved to the western Eifel region decades ago to be near the track, came out of retirement in the late '90s to disdainfully document developments at the circuit. Now in his eighties, he's still posting on his aptly-named website, motor-kritik.de, most days. For years, he has lamented what he describes as flagrant mismanagement of the circuit.

Kurt Beck
Beck put the blame on BrusselsImage: dapd

"That's why what is currently happening is no surprise to me," Hahne told DW. "But the way in which it happened was raw stupidity. It was so stupid, so primitive, that I'm lost for words."

Brussels to blame?

The German state of Rhineland-Palatinate owns the circuit through a company called Nürburgring GmbH. When the firm filed for insolvency on Wednesday, State Premier Kurt Beck told the regional parliament in Mainz the EU was actually to blame.

Spain's banks were set to receive billions without regulation, Beck said, "and yet we were refused a few million euros in transitional loans."

To Hahne, the explanation was "outrageous impudence."

Rhineland-Palatinate has always owned, and often subsidized, the Nürburgring race circuit. That is not out of the ordinary for racetracks. The idea is that motorsports events bring visitors to the region, and they spend money at local businesses and generate tax revenue. This practice is legal under EU anti-trust laws.

McLaren Mercedes driver Lewis Hamilton of Britain, left, leads after the start of the Formula One German Grand Prix at the Nuerburgring circuit, Nuerburg, Germany, Sunday, July 24, 2011. Red Bull driver Mark Webber of Australia and Red Bull driver Sebastian Vettel of Germany on second and third, from right. (Foto:Martin Meissner/AP/dapd)
The ring has hosted the German Grand Prix, most recently in 2011Image: dapd

But by turning the Nürburgring into a leisure complex, suddenly it wasn't so much helping local businesses as competing with them. When Brussels found out that the privately-run complex had received over 500 million euros in state aid, it ruled that this unfairly disadvantaged existing businesses in the region. Unable to continue supporting the track with his own government's funds, Beck was left with no choice but to ask the EU for help instead.

A marriage made in hell

Hahne believes that the EU might have agreed to a loan for the circuit, on one crucial condition.

"One would have had to separate what I call the event section from the motorsports facilities. Though that would not have solved the problem of paying back the debts incurred building the leisure complex," he said. "The dilemma would still have been large, but not as catastrophically hopeless as it is now."

The total debt racked up building the leisure complex is not known. But even after receiving half a billion euros from the state, Nürburgring GmbH has 330 million euros of outstanding debts.

Almost all the major renovations were in the leisure complex instead of the tracks. The additions included a little used hotel, casino and promenade. A rollercoaster was shut down on safety grounds almost immediately after it opened.

Former F1 champion Michael Schumacher on the Nürburgring rollercoaster Ring Racer
Michael Schumacher is one the few ever to ride the broken rollercoasterImage: Nürburgring GmbH

The privatization that never was

The idea behind revamping the Nürburgring was to turn it into a publicly-traded company at least partially owned by private investors.

Two businessmen, Kai Richter and Georg Lindner, combined with then-Nürburgring CEO Walter Kafitz to convince the state government that the project was viable. The pair pledged to contribute to Nürburgring GmbH, and said others would flock to the project once the foundations were laid.

No new investors emerged. Midway through the construction process, Richter and Lindner themselves withdrew, saying they were out of money.

Left with a half-built project, Beck's government decided to buy out Richter and Lindner - taking over all the liabilities - and finish the construction themselves.

Once the state built it, though, Beck's government went back to the departed duo and asked them to run the entire complex as leaseholders. Richter and Lindner formed another company called Nürburgring Automotive GmbH (NAG) and took up the job.

A few months after the EU's 2011 ruling that Rhineland-Palatinate could no longer support the leaseholders with state funds, NAG stopped paying the rent.

Former Nürburgring CEO Dr. Walter Kafitz
Kafitz got into circuit management with help from friends in politicsImage: picture-alliance/dpa

Their contract was formally absolved in February, but the leaseholders still claim they run the circuit.

Richter and Lindner have even issued a statement on the homepage of the circuit they have lost any rights to. They claimed to have a grand plan to save the ring, that they were in contact with Formula One to make racing next year possible, and that employees' futures were secure.

Political price

Germany's biggest motoring federation, the ADAC, could not see matters more differently - just like local journalist Hahne. He has three short-term desires that might save a racetrack he has personally driven on for almost half a century.

"Well, firstly, Richter and Lindner obviously must go!" Hahne said. "Secondly, the racing and 'event' segments of the company must be divided. And thirdly - this is most important - the race tracks must remain in public possession, either at the regional or federal level."

Jörg Lindner and Kai Richter at a press conference
Richter and Lindner again say they have a master planImage: picture-alliance/dpa

His suggestion, in short, is to do everything possible to turn the clock back on five disastrous years, at a great cost to the state and the German taxpayer.

Considering the way the opposition CDU in Rhineland-Palatinate views the scandal, it's possible that Social Democrat Kurt Beck will pay a high political price as well.

Author: Mark Hallam
Editor: Shant Shahrigian