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The growing F1 budget cap row

12 May 2009 - 14:30

Going back years and years, FIA president Max Mosley has been banging the drum of cost reduction in F1. He didn't have many ears for this until the global economy went down the pan in 2008. In the meantime the FIA had put restrictions on the number of engines used during the season and the amount of testing mileage teams could do. They also proposed many other cost-cutting measure that never made it for one reason or another.

It was always clear however that all these measures were just like squeezing a sausage - sure you could limit the amount of money spent on one thing, say engines, but teams that had the budget would just spend it on another, weight reduction or more wind-tunnel hours for example. The only real way to reduce costs was to limit budgets. And that is what the FIA first proposed last year and now has put a figure on - a figure that has most of the current teams up in arms.

The current FIA budget cap proposal is for an budget of 40 million US dollars per season. The FIA know that most teams are currently spend more than that - the big three spenders (McLaren, Ferrari and Toyota) by several times - and as such they haven't made the budget cap mandatory. It probably couldn't be forced on the teams anyway. In return for agreeing to this budget cap, the FIA say that teams will be allowed some technical freedom to make their cars more competitive. They will also be exempt from some current restrictions such as the ban on in-season testing, since those restrictions were only brought in to cut costs.

This has created fears of a "two-tier" formula harking back to the days when some Grand Prix featured F5000 cars alongside F1 cars. The essential problem is that it's impossible to make the FIA's new system completely fair. If the technical freedoms allowed to the budget-capped teams are too small they will always be backmarkers. If they are too great they will win races and the teams that spent many times more money and have all the experience and expertise will rightly be upset. Max wants to set a low budget cap figure to encourage new teams into the sport as well as to maintain current independent teams, hence the $40M figure, but what team is going to join if they are going to be condemned to the back of the field constantly. And yet if the capped teams win races, the other teams are forced to agree to the cap themselves and lay off a large percentage of their workforce overnight.

The only way to reasonably introduce budget caps into F1 is gradually. Come up with a figure that McLaren, Ferrari and Toyota can live with immediately, say $160M say, then bring it down to the level that teams like Renault are reputed to be spending, $120M. Then gradually down to whatever seems reasonable for independents to support in the end. Of course that means new teams would be unlikely to join for a few more years, but it would be viable without pissing off too many people. 

At the moment you have what will be most of the grid - the manufacturer teams plus Red Bull's two outfits - threatening to not enter for 2010 if the current proposals are enforced. Of course nobody expects Ferrari to really pull out of F1 - remember that the company was founded race in Grand Prix and Enzo only made road cars to fund the racing. Negotiations between the FIA and FOTA will be intense over the next few months. I expect the teams to try and extract changes in for the following order of preference: Abandonment of the whole budget cap concept; An initially high budget that ratchets down over several years as above; A promise that technical freedoms afforded to budget-capped teams will not put them ahead of the uncapped teams.

It seems F1 is always in some kind of turmoil or another and it always works out in the end - McLaren weren't banned, the manufacturer teams didn't form a breakaway series, etc. Still, it'll be interesting to see how this one plays out. It would be truely epic of multiple teams, especially long-standing ones, did pull out over the issue. On the other hand, the expected growth of the grid to 26 cars should the $40M cap go ahead, would also be a big change.

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The growing F1 budget cap row

12 May 2009 - 14:30

Going back years and years, FIA president Max Mosley has been banging the drum of cost reduction in F1. He didn't have many ears for this until the global economy went down the pan in 2008. In the meantime the FIA had put restrictions on the number of engines used during the season and the amount of testing mileage teams could do. They also proposed many other cost-cutting measure that never made it for one reason or another.

It was always clear however that all these measures were just like squeezing a sausage - sure you could limit the amount of money spent on one thing, say engines, but teams that had the budget would just spend it on another, weight reduction or more wind-tunnel hours for example. The only real way to reduce costs was to limit budgets. And that is what the FIA first proposed last year and now has put a figure on - a figure that has most of the current teams up in arms.

The current FIA budget cap proposal is for an budget of 40 million US dollars per season. The FIA know that most teams are currently spend more than that - the big three spenders (McLaren, Ferrari and Toyota) by several times - and as such they haven't made the budget cap mandatory. It probably couldn't be forced on the teams anyway. In return for agreeing to this budget cap, the FIA say that teams will be allowed some technical freedom to make their cars more competitive. They will also be exempt from some current restrictions such as the ban on in-season testing, since those restrictions were only brought in to cut costs.

This has created fears of a "two-tier" formula harking back to the days when some Grand Prix featured F5000 cars alongside F1 cars. The essential problem is that it's impossible to make the FIA's new system completely fair. If the technical freedoms allowed to the budget-capped teams are too small they will always be backmarkers. If they are too great they will win races and the teams that spent many times more money and have all the experience and expertise will rightly be upset. Max wants to set a low budget cap figure to encourage new teams into the sport as well as to maintain current independent teams, hence the $40M figure, but what team is going to join if they are going to be condemned to the back of the field constantly. And yet if the capped teams win races, the other teams are forced to agree to the cap themselves and lay off a large percentage of their workforce overnight.

The only way to reasonably introduce budget caps into F1 is gradually. Come up with a figure that McLaren, Ferrari and Toyota can live with immediately, say $160M say, then bring it down to the level that teams like Renault are reputed to be spending, $120M. Then gradually down to whatever seems reasonable for independents to support in the end. Of course that means new teams would be unlikely to join for a few more years, but it would be viable without pissing off too many people. 

At the moment you have what will be most of the grid - the manufacturer teams plus Red Bull's two outfits - threatening to not enter for 2010 if the current proposals are enforced. Of course nobody expects Ferrari to really pull out of F1 - remember that the company was founded race in Grand Prix and Enzo only made road cars to fund the racing. Negotiations between the FIA and FOTA will be intense over the next few months. I expect the teams to try and extract changes in for the following order of preference: Abandonment of the whole budget cap concept; An initially high budget that ratchets down over several years as above; A promise that technical freedoms afforded to budget-capped teams will not put them ahead of the uncapped teams.

It seems F1 is always in some kind of turmoil or another and it always works out in the end - McLaren weren't banned, the manufacturer teams didn't form a breakaway series, etc. Still, it'll be interesting to see how this one plays out. It would be truely epic of multiple teams, especially long-standing ones, did pull out over the issue. On the other hand, the expected growth of the grid to 26 cars should the $40M cap go ahead, would also be a big change.

/ No comments / §

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