About the F1 Resource Restriction Agreement

[FoxHound]

Ferrari and any other automotive manufacturer would approve of a budget cap.
So long as the restriction were clear, and that no rule bending can occur as we have seen over the last 3/4 years.

The simple reason is that manufacturer teams are not looking at F1 as a way of spending 200 million anymore. But as a way of marketing for the lowest possible amount of cash.

In every FOTA meeting I can recall, it has been one team in the way of progress. I say 1 team...I mean 1 team and its sister.

[CHT]

Ferrari and any other automotive manufacturer would approve of a budget cap.
So long as the restriction were clear, and that no rule bending can occur as we have seen over the last 3/4 years.

The simple reason is that manufacturer teams are not looking at F1 as a way of spending 200 million anymore. But as a way of marketing for the lowest possible amount of cash.

In every FOTA meeting I can recall, it has been one team in the way of progress. I say 1 team...I mean 1 team and its sister.

The top teams on the grid will have no problem spending 200m a year on F1 as their F1 operation will be capable of generating 200m from prize money, merchandize and sponsorship etc.

[FoxHound]

I meant to say 300/400 million as in the good ol days.

[WhiteBlue]

Even $400m is no problem for Ferrari or Red Bull. Ferrari's Gestione Sportiva alone almost has the revenues to spend that without using income from merchandising or road car profits. The Red Bull teams are generating so much AVE that they can easily justify expenditure on that level to their parent company. Those two are so rich that no cost race will ever scare them. If you are looking for the voice of reason you will have to look at the lesser teams which will not be able to spend 200+ just for the chassis. Mercedes, Lotus and certainly any team below them would find it very difficult to go there. I would have my doubts that McLaren without an automotive sponsor who kicks in free power units and substantial money will be able to compete with Ferrari and Red Bull in an all out cost race.

[WhiteBlue]

Ferrari and any other automotive manufacturer would approve of a budget cap.

That is not valid if you are aware of the history. Ferrari killed the 2008 budget cap talks when all other teams were ready to agree to an FiA controlled budget cap. And we have ample precedent that Ferrari easily repeat their selfish policies when it comes to gaining advantage. You just have to take a look at their behaviour in GPMA, FOTA and with regard to team order to know they will use whatever advantage they can to screw the competition and gain dominance. Ferrari is the last team I would have any trust in doing what is good for the sport and healthy competition. That may sound hard for the Tifosi who love the team but reality and history can be a myth buster. As I have said above Red Bull are probably not far behind Ferrari in their pursuit of dominance but at least they do not have a history of getting away with it as the red team has.

[FoxHound]

In an all out finance war Red Bull would clean up WB.

You are comparing a company with a duty to shareholders(Ferrari) to provide a return on investments, to that of a 100% privately owned company.
There is no way Ferrari can compete with that kind of power without seriously disturbing it's business model and killing any hope of a decent return to investors.

I would love to know what makes you think Ferrari want to go out and spend this money.

[FoxHound]

That is not valid if you are aware of the history.

I'm fully aware of the history, so please try not to invalidate my opinion through condescending rhetoric.

I'm also a bit gobsmacked as to how you can compare 2008 to 2012 and beyond? Back then, Ferrari detested McLaren.
Is that still the case?
Back then Toyota still pumped in 300 million a year.
Still the case?

Times change.

Ferrari had every intention of adhering to the RRA. Every meeting since concerns where raised about the crimson bovines, every team bar the 2 drinks teams where in agreement as to how to move forward.
Odd that a series of meetings can take place over a couple of years regarding costs, and the common denominator was a team constantly walking out of meetings due to "no possible agreement of spending or resources".

[CHT]

That is not valid if you are aware of the history.

I'm fully aware of the history, so please try not to invalidate my opinion through condescending rhetoric.

I'm also a bit gobsmacked as to how you can compare 2008 to 2012 and beyond? Back then, Ferrari detested McLaren.
Is that still the case?
Back then Toyota still pumped in 300 million a year.
Still the case?

Times change.
Ferrari had every intention of adhering to the RRA. Every meeting since concerns where raised about the crimson bovines, every team bar the 2 drinks teams where in agreement as to how to move forward.
Odd that a series of meetings can take place over a couple of years regarding costs, and the common denominator was a team constantly walking out of meetings due to "no possible agreement of spending or resources".

Here is a good article highlighting why RRA will not work.

http://www.bbc.co.uk/sport/0/formula1/20110248

[FoxHound]

@CHT

I'm pretty sure I know why it wouldn't work too. That's not really the point though.

The point is there was broad and general consenus in F1 that costs should be cut. And again there was broad and general consensus of the ways and means to do this.
In current the fiscal climate nothing is certain. If Berlusconi gets back into power and rescinds Italy's austerity measures, most profitable Italian companies will be hit hard. Their profits will be taxed to eyewatering levels to get the money the chancellor needs to keep the country going.

Ferrari falls in this bracket.

WB going on about how Ferrari operate and how they have this legendary spending power is logical in 2008....not in 2012/13.

All it would take is the stroke of a pen, or a black Wednesday and Ferrari could go back to being in red with an ailing mother company(FIAT) on it's knees.
The risk for Ferrari to go back to those big spending days is high. Red Bull however are not as exposed to these forces as the automotive sector. And as they are privately owned...can spend how mateschitz and his partner see fit.

[CHT]

@CHT

I'm pretty sure I know why it wouldn't work too. That's not really the point though.

The point is there was broad and general consenus in F1 that costs should be cut. And again there was broad and general consensus of the ways and means to do this.
In current the fiscal climate nothing is certain. If Berlusconi gets back into power and rescinds Italy's austerity measures, most profitable Italian companies will be hit hard. Their profits will be taxed to eyewatering levels to get the money the chancellor needs to keep the country going.

Ferrari falls in this bracket.

WB going on about how Ferrari operate and how they have this legendary spending power is logical in 2008....not in 2012/13.

All it would take is the stroke of a pen, or a black Wednesday and Ferrari could go back to being in red with an ailing mother company(FIAT) on it's knees.
The risk for Ferrari to go back to those big spending days is high. Red Bull however are not as exposed to these forces as the automotive sector. And as they are privately owned...can spend how mateschitz and his partner see fit.

All these talk about RRA is no difference to what the world leaders says about climate change, they can talk as much as they want but they will never agree on the implementation.

F1 is an elitist sports, it is a sports where people involved are pretty much immune to recession. IMO the biggest "recession" for F1 is when FIA decided to ban tobacco sponsorship. And even with that, they didnt just survive, they thrive

[WhiteBlue]

Here is a good article highlighting why RRA will not work.

That article is one that described the 2012 situation and the positions of Whitmarsh and Horner. It did not give reasons why the RRA did not work. Here are the opinions of the two proponents:

It [£155m] sounds like quite a lot of money, so I don't know how much it's going to help too many teams. The philosophy of controlling costs in F1 is important to our sport. I think we all agree on that. There is a difference of opinion about how you best achieve that.

Bernie wants one that controls driver salaries and all those things. I think what we should be trying to do is ensure we are spending money in the appropriate places. I think we should be controlling excessive spend in development. The budget cap by Bernie is everything - everything you spend money on. Total cap. It has the elegance that you can describe it very quickly but it is very difficult then to find out where that money is and to control it.

The RRA says: 'Well, what is easy to define?' How much do you spend externally and how many people do you have? Difficult to hide either of those. And then it gets on to wind-tunnel hours, CFD (computational fluid dynamics), teraflops, etc. It effectively says we should be free to pay drivers whatever we want but we should be finding the easy, clear, measurable definable elements of spend and control those. They're both trying to do the same thing so they're not against each other, it's just a different philosophy.

Horner's objection is that the document is flawed as the teams are different in their nature - he believes teams associated with road-car manufacturers such as Ferrari and Mercedes can easily hide extra work done on F1 in other departments. Horner also wants engine development costs to be controlled. These are currently outside the RRA.

I would agree with many things that Martin Whitmarsh said. The one he obviously got wrong is the idea that controlling the amount teams spend on services is any easier than controlling the tottal team budget. Both approaches require the same methodology if you want to do it right. It may be easier to check a head count. I agree with that, but if you allow any external head count by allowing service charges for outsourced services at all you introduce the need for stringent auditing and verification just as if you intend to control the total budget.

Of course Horner also has some valid objections. If the chassis developing contructors are resource and budget controlled you have to apply the same to F1 power train developers or you distort the competition. And naturally you have to make sure that all expenditure is allocated at the appropriate controlled entity which is something that was not done by the RRA. Why would Christian Horner insiste on these point unless they are currently all violated by the ongoing practise?

I'm fully aware of the history, so please try not to invalidate my opinion through condescending rhetoric.
I'm also a bit gobsmacked as to how you can compare 2008 to 2012 and beyond? Back then, Ferrari detested McLaren.
Is that still the case? Back then Toyota still pumped in 300 million a year. Still the case? Times change.

There is no condescending rhetoric in my post, at least it is not intended that way. But I can imagine that any negative fact about Ferrari is painful to the Tifosi. A comparison of 2006, 2008 and 2012 is very relevant. Ferrari's competition policies and spending policies aren't likely to change in a few years or when one or another mid grid competitor drops out. If you had followed my team finance analysis in this forum you would know that Ferrari is financially much more healthy and capable now then they were in 2006 or 2008. They have no reason to change their historic attitude towards spending and outspending. This is also documented by their exit from FOTA one year ago. They are no better than Red Bull in that regard, if not worse.

Ferrari had every intention of adhering to the RRA.

We only have your word for that and it is contradicted by long experience.

Odd that a series of meetings can take place over a couple of years regarding costs, and the common denominator was a team constantly walking out of meetings due to "no possible agreement of spending or resources"

I would challenge the assertion that just one team had objections. Regarding Horner's objections I fully agree that restrictions on chassis constructors only without restrictions on power train manufacturers cannot work or would unfairly distort competition.

[WhiteBlue]

It appears that I have to quote my financial analysis from page 28 of this thread:

There are several things that have to be considered when we read about budgets, revenues, team valuation, sponsorship, advertising value equivalence and the like.
1. When you look at company house figures as the Züricher Zeitung did you have to consolidate the figure and not simply add them up, because RBR and RBT had internal sales that have to be consolidated. You also have to basically add all figure for RBR and STR if you want to make them comparable to Ferrari. At least that is what is often done in some of the reports on brand value.
2. Budget must not be mixed up with revenues. Revenues mainly come from FOM pay out and sponsorship. Revenues will split into budgets and potentially profits. Revenues and profits are driving the valuation of teams and brands.
3. Advertising value equivalence are non cash revenues and generate an option to avoid other costly advertising expenditure for your product. It is significant when you are the title sponsor of one or more teams like Ferrari and Red Bull. AVE in F1 is $1.5-2bn. A team brand can forgo sponsorship revenue and go for maximizing AVE as Red Bull does with both F1 teams. They almost completely use their four cars and two teams to advertise Red Bull. If you consider the Red Bull strategy strange to maximise the AVE you only need to look at global sales of the two brands to find the explanation. Ferrari had global sales of $1.5bn and Red Bull had $5.25bn. It means that every advertising dollar Red Bull spends is likely to generate 3.5 times as much additional sales as it would do for Ferrari. It is simple to do the math who is going to do more advertising or better convert more revenues to AVR.
Having said all that one can put together some comparative data for Red Bull and Ferrari. Red Bull in those figures always stands for two teams cumulatively:

-------------Team Value----------Budget---------------Revenues----------AVE---------------Profit--------AVE+REV-----Profit+AVE
_____________________________________________________________________________________________________
Red Bull....$535(400+135)m...$195(125+70)m.....$185(160+25)m...$360m(24%).....-$10m.......$545m.......$535
Ferrari......$1,150m............$125m................$384m.............$90m(6%).........$259m......$474m.......$349

What we see is that Ferrari is by a wide margin the group with the highest income. They do not spend money on F1 they profit to the tune of $259m or $349 if you include AVE.
Red Bull have a negative profit of -$10m because they forgo much sponsorship potential in favour of generating AVE. When you look at combined profit including AVE Red Bull is pushing very strong with $535m.
These figures explain why Red Bull are currently generating Team value much faster than Ferrari. Ferrari took many years to build up the huge team value. Red Bull are still playing catch up but they are doing it very smartly.

If one speculates how both teams will operate under a budget race one only has to look at the huge reserves of revenues of Ferrari and the huge AVE of Red Bull to conclude that they can easily double their budget if they want to.

Sources:
http://www.forbes.com/sites/chrissmith/ ... able-team/
http://asia.eurosport.com/formula-1/bus ... tory.shtml
http://www.google.de/url?sa=t&rct=j&q=& ... GwopCtYf0Q
http://www.nzz.ch/nzzas/nzz-am-sonntag/ ... 1.17757702[/quote]

[WhiteBlue]

WB going on about how Ferrari operate and how they have this legendary spending power is logical in 2008....not in 2012/13. All it would take is the stroke of a pen, or a black Wednesday and Ferrari could go back to being in red with an ailing mother company(FIAT) on it's knees. The risk for Ferrari to go back to those big spending days is high. Red Bull however are not as exposed to these forces as the automotive sector. And as they are privately owned...can spend how mateschitz and his partner see fit.

This post shows a basic lack of understanding the economic and historic realities. Ferrari are a profit center of Fiat. Gestione Sportiva (the Ferrari F1 team) is a profit center for Ferrari SPA. Both entities do not depend on their respective parent organizations for budgetary purposes. They are huge cash cows and more than self financed. Please read my financial analysis further up that shows $ 384m revenues for Gestione Sportiva alone. This amount is far greater than the revenues in 2008 because FOM significantly increased the payment schedule and GS gained significant sponsorship (compare Santander). Ferrari SPA has also increased sales and profits considerably over the past four years mainly pushed by the road car business but also fuelled by merchandising sales. So the notion of Ferrari being shy to use their increased budget power to gain competitive advantage is contradicted by all available financial data and historic precedents.

[FoxHound]

You say this...

Both entities do not depend on their respective parent organizations for budgetary purposes

Then have a freudian slip moment...

They are huge cash cows

Cash cows provide cash for parent companies WB.

Now you can provide whatever statistics on cash that you like WB, but that is once again missing the point.
First off you have not addressed the fact that Red Bull have no shareholder's to pander to...Ferrari have FIAT.
This in itself nulliefies any accounts you can provide regards profitable divisions within Ferrari.

They cannot spend what they want, when they want. They have commitments to FIAT before a penny goes anywhere near the F1 team.
And then you have Di montezemolo...
http://www.bbc.co.uk/sport/0/formula1/18421007

Why would Ferrari want cuts you ask WB? It's all there.

I read in the news now that Red Bull are going to fund an Austrian GP event, costing a fair few million euros. They are now also promoting the rally formula....

http://www.autosport.com/news/report.php/id/102926

Red Bull have cash to burn, everyone can see that.

Ferrari are not on the same planet, hell I'd say solar system, in comparison. Can you imagine, Fiat losing millions of euros, along with Chrysler...and Ferrari burning and extra 100 million + to race Red bull?

[bhall]

HSBC, the British banking giant, said Tuesday it will pay $1.9 billion to settle a money-laundering probe by federal and state authorities in the United States.

The probe of the bank — Europe's largest by market value — has focused on the transfer of billions of dollars on behalf of nations like Iran, which are under international sanctions, and the transfer of money through the U.S. financial system from Mexican drug cartels.

[...]

[...]

— Credit Suisse, Switzerland's second-largest bank, agreed to pay $536 million. The authorities said the bank violated U.S. economic sanctions by hiding the booming illegal business it was doing for Iranian banks.

— Barclays paid $298 million. The big British bank allegedly engaged in $500 million in illegal transactions with banks in Cuba, Iran, Libya, Sudan and Myanmar for more than a decade.

— Lloyds, another major British bank, agreed to forfeit $350 million for allegedly helping customers skirt U.S. sanctions on business transactions with Sudan, Iran and Libya.

— Dutch bank ING paid $619 million to settle charges that it secretly moved billions of dollars through the U.S. financial system on behalf of Cuban and Iranian customers. [And one staged accident in Singapore upset them?]

— Royal Bank of Scotland paid $500 million for alleged money laundering at Dutch bank ABN Amro for customers from Iran, Libya, Cuba, the Sudan and other countries subject to U.S. sanctions. ABN Amro was bought in 2007 by a RBS-led consortium.

Standard Chartered Bank has agreed to pay $327 million to settle federal and New York charges it laundered money on behalf of four countries that were subject to U.S. economic sanctions from 2001 through 2007.

[...]

[...]

According to Ben-Artzi's calculations, there were billions in liabilities that should have appeared on the bank's balance sheet but didn't. The former risk analyst is convinced that Deutsche Bank whitewashed the figures for high-risk transactions, and that in doing so it acted illegally. According to Ben-Artzi, "that is fraud."

[...]