FIA introduces £30m budget cap

[Rob W]

The solution to one set of rules is quite simple. The rich teams decide to pocket a huge profit and join the budget cap club.

I'd guess that economic forces would prevail - sponsors wouldn't be prepared pay as much to be associated with a team which has changed it's image in terms of their aspirations, technical prowess etc.

[czt]

... the big boys should be allowed to raise whatever budget they can and deploy it how they like.

that would bring down F1 in 1-2 seasons. F1 was good competition until the fat cats emerged from the middle of the 90ties. Then it all went downhill with opportunities for new guys. You had to have an entry ticket close to a billion dollars to build a new team to competiotive levels. B MW have proven that they can do it. Still they spend such vast amounts to get there.

If you can't raise the money, why right have you got to be competitive?

I'd like to see a return to the days where you could buy an engine and box of the shelf, build yourself a car and go racing such as in the late 80's and early 90's. Sure, most of those teams didn't stick around too long but the occasional one managed to make it stick.

Look at what Aguri was able to achieve with absolute minimal resources - it's a shame that the marketing/finance side of the team couldn't match the performances put in by some of the other departments.

[safeaschuck]

Rob,
I like the cut of your jib mate, you are dead right, but there are a couple of things which make F1 something of a freak of nature. For any given component there are only a handful of companies worldwide that can do the job, on time, to spec.
It's not simply a case of getting it done somewhere cheaper or using less expensive materials, although this would sure become prolific should the rules be adhered to. Bodywork from india, gearbox casings made in china?
Driving down the cost of composite manufacture? a noble goal in all of this pandemonium? Must be an accidental side effect!
Also, when selling into F1 the costs of each part are quite often set by what the market will stand as opposed to the cost plus method that any rational company would use. O.K. so it's the end of the season and they have $2 left, whose going to make them a set of tyres? Thats all the market will stand from next year
And whose to say sub-contractors can't sell their products at a loss, some have been doing it for years because of the 'Halo' effect of F1 involvement.

[WhiteBlue]

czt you are making my point

Super Aguri is an excellent example for a team with high merit that got squashed by the fat cats.

[czt]

czt you are making my point

Super Aguri is an excellent example for a team with high merit that got squashed by the fat cats.

Not at all, they got squashed because they couldn't pull a sponsor!

Pandering to the lowest common denominator is prevalent is the rest of our everyday lives, I'd rather not see it introduced into F1!

[WhiteBlue]

have your point of view. You are entitled to it. But if the Darwinist approach had continued the grid had eroded beyond repair. In my view Aguri had every right to compete by the performance they produced on a shoe string budget. They got shot down by the big mouth Fry who never managed to achieve anything in life but piss away his investors money.

[WhiteBlue]

.. sponsors wouldn't be prepared pay as much to be associated with a team which has changed it's image in terms of their aspirations, technical prowess etc.

I reckon sponsor care a lot more who wins than what the budget of the winning team is.

[czt]

have your point of view. You are entitled to it. But if the Darwinist approach had continued the grid had eroded beyond repair. In my view Aguri had every right to compete by the performance they produced on a shoe string budget. They got shot down by the big mouth Fry who never managed to achieve anything in life but piss away his investors money.

Can't disagree with you about the cheshire cat! He may have struck the final blow, but the seeds were sown when the team failed to lure any meaningful sponsorship apart from SS United who didn't pay up anyway....

You may be right about the grid eroding beyond repair under the current regs. it's just a shame that there hasn't been the availability of capped cost powertrains before the recent proposals as I genuinely believe that this would support a bedrock of independent entries which would make up the numbers and be around when the big boys throw their toys out of the pram and take their money elsewhere.

[WhiteBlue]

Budget cuts lead Formula One revolution

Edward Gorman, Motor Racing Correspondent
Why has the FIA resorted to such radical measures?

Max Mosley, the FIA president, believes that attempts by the Formula One teams to cut costs in recent months have been well-intentioned but not unlike rearranging the deckchairs on the Titanic. He thinks that the worldwide recession is far more severe than would be suggested by the collective response of the teams through the newly formed Formula One Teams Association (Fota) and that radical measures are required.

Is £30 million a realistic budget for a Formula One team?

This is hard to say. The gut reaction of many in the sport last night was that £30 million is too low and that the jump from the present expenditure levels to Mosley's new threshold will be almost impossible to achieve by this time next year, and could cause chaos. It is bound to lead to huge job losses in the Formula One industry, much of which is based in Britain. There is also a real fear that, as Luca di Montezemolo, the Ferrari president, suggested, Formula One could lose its identity and become just another cut-price motor racing championship.

So how is it going to work?

Mosley has cleverly got the FIA to agree to a voluntary budget cap but, at the same time, his changes to the rules make it almost a no-brainer for nearly all the present teams on the grid to go with the capped regulations. Not only will the capped cars be allowed almost complete freedom in the design sphere, they will have unrestricted engines and teams will be free to spend their budget as they see fit. The result is that a budget-capped car could beat a car on which many, many more millions have been spent. Once they have grasped this, Mosley and Bernie Ecclestone, the Formula One commercial rights-holder, believe that the only rational decision for independent teams and manufacturer-supported outfits is to go with the cap.

What about the drivers?

Again Mosley has been crafty. On the one hand, he says that all costs associated with running a Formula One team must come out of the headline £30 million figure. This would appear to be bad news for men such as Kimi Raikkonen, of Ferrari, who is earning more than £20 million a year, and Lewis Hamilton, who drove his McLaren Mercedes to the world championship last year and is paid at least £10 million. But Mosley also allows that drivers, along with other key personnel such as chief designers and team principals, could be shareholders in the teams they work for and could be paid dividends. So there may be pay cuts for the likes of Raikkonen and Hamilton, but the scale is hard to estimate.

If the teams are spending £30 million a year, surely they will easily make a profit from the income they receive from Ecclestone's company for the sale of television rights for Formula One?

Correct. Although the sport will be running on a relative shoestring should Mosley's plans come into being, the teams will be very profitable businesses, with even the tenth-placed team likely to be able to break even on Ecclestone money alone, and that is before any commercial sponsorship is taken into account. This is another reason why Mosley and Ecclestone believe the new scheme makes sense and will make Formula One attractive to new independent teams and others.

How is a budget cap going to be policed?

There are many areas where the simplicity of Mosley's idea appears to run into difficulty once you start considering the detail, and policing is one of them. The FIA has investigated how this could be carried out in consultation with Deloitte, the accountancy firm, and the governing body believes that the “vast majority” of payments are traceable, while any benefits in kind “can be valued”. Team members are not so sure and point to the long and inglorious history of Formula One teams bending the rules, at the very least, to gain an advantage, or resorting to out-and-out cheating.

What is the “political” significance of all this?

Mosley has a history of wielding a big stick to frighten the horses only to compromise and adjust his ideas through subsequent negotiation. If that is the case this time, expect to see a series of amendments to a remarkably pure concept and the budget limit figure to increase. However, there was no mistaking the mood of those close to Mosley yesterday - they genuinely believe that they have come up with the answer to Formula One's long-term health problems. The reaction of Fota was viewed as weak by Mosley's coterie and there can be little doubt that the FIA president and Ecclestone regard this initiative as firmly putting the teams in their collective place. And, as one source put it: “The Max and Bernie show is rolling into action in vintage form.”

Do we know which teams are likely to go for this and which will find it hard to accept?

The two old-stagers, Ferrari and McLaren, are likely to find this very hard to stomach. Most of the others are likely to see it - or something like it - as a realistic way forward and, if the FIA is correct, the new rules should also tempt newcomers to the grid at a time when Formula One has looked a particularly hard sell.

Pretty sensible outlook by Gorman in the Times, I say.

[ISLAMATRON]

now thats gangsta!

[safeaschuck]

I'd quite happily be convinced this is a good idea, but for the moment I will maintain that it is dreadfully ill thought out and way more open to 'interpretation' than any of the equally ridiculous engineering restrictions.

If this is such a good idea what's to stop every one and there aunt copying it? it is within the budget of most rival series, as I'm learning today!
More to the point, why isn't it being done already elsewhere?

Thats it, I'm off to the land of nod, the bin's wait for no man.

[Rob W]

.. sponsors wouldn't be prepared pay as much to be associated with a team..

I reckon sponsor care a lot more who wins than what the budget of the winning team is.

Oh, I absolutely agree. I wasn't clear in my point. I meant that, in a situation where costs are much lower (and known to be so quite publicly) a sponsor will not have the same perception of F1 and how much it takes to get on-board. I think that will affect the average value a sponsor places for a given coverage, especially if there are two distinct groups of teams.

I also think some will even assume that lower budget will mean less innovation by the team, therefore some types of company will have less want to be associated with a team.

Max's argument goes: voluntary low budget = more innovation because of relaxed technical limitations... but I could see how might end up that they instead just pursue the simple, straight-forward known avenues of improvement which other teams don't have access too such as upping the engine revs etc and not bother much with the tiny incremental improvements through innovation. This all the while the teams who have the big budgets roll on with testing hundreds or more of these innovations/inventions, many of which come to nothing.

It'll be interesting to see who takes it on. Imagine if BMW and Renault did automatically.. then stopped their major aero development basically in exchange for having a better ground kit and another 1000rpm on their engine. Having those alone might be a bigger improvement year-long than thousands of extra hours of wind-tunnel time and whatnot.

Also, I wonder if, after given another 1000rpm the teams who chose to do so are still way behind (due in-part because they've cut down on aero devp) will just say, 'can we have another 500rpm please'... etc until they're almost level with the big boys. Hey presto, near equality through possibly artificial and dubious logic which Max himself has already said will be a criteria for deciding how far teams will be allowed to alter things (until they're level with the others) etc.

[meves]

Ok so to put some figures behind this in 1992 the budget generally was made up of the following constituent parts: 20% for the engine; 20% for the drivers; 35% for the salaries and 25% for the cost of the research, development and construction of the cars.

Using those general percentages it was proposed by FOTA that a customer team can obtain a full powertrain for 6.5million euros (£5.8million).

Multiply £5.8million by 5 and you get £29million.... We're going back to 1992!

and it's nice to see that Bernie is sticking by his guns and thinks that 1 day later 30 million is too low!!!

"In the end the truth of the matter is we should just have a cap for everybody, although maybe 30 million is a bit too low."

[Shaddock]

czt you are making my point

Super Aguri is an excellent example for a team with high merit that got squashed by the fat cats.

SA budget was still rumoured to be about $80 Mil per season.

[timbo]

But if they stay with the present rules it is no problem either. The adjustments between classes will have to be made on a per race basis. The FIA can simply run a rolling data base of all lap times of the two classes and adjust the handicap or advantage on a dayly basis. So no huge performance gap between the classes can develop.

That is simply against everything that F1 is.
Let's exploit that idea further and handicap drivers based on their performance.
What a great fight that would be! Imagine Alex Yoong fighting with 500kg handicapped Michael Schumacher!