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Reaction to the budget cap
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Reaction to the budget cap
Posted By:   |  30 Apr 2009   |  5:09 pm GMT  |  31 comments

The introduction of the £40 million budget cap poses serious problems for half of the F1 teams and the idea of a two-tier system is an issue for everyone.

The reaction I have had today from ringing around the teams is that the independents welcome the move to a budget cap and are pretty happy with the level. They acknowledge that the engines being left out of it for 2010 provides an element of the ‘glide path’ that was being discussed in recent weeks, as does the exclusion of driver salaries and marketing costs. With those added on, for a top team, it’s another £50 to £80 million.

However everyone is unhappy about the two -tier system, whereby teams can spend what they like but will lose out on the chance to have technical freedoms which the capped teams will enjoy, such as moveable front and rear wings and unlimited engine revs. This last one is a bit odd, because the more the engine revs the more it costs, so they can have the freedom, but they have to fit in into the budget.

Ferrari and BMW refuse to comment, but are clearly very unhappy. I get the impression that the manufacturer teams are getting together on this. They believe that there is still room for negotiation, that the story is not finalised yet. Time will tell. If the FIa refuses to budge we could have a serious fight on our hands and I’m not sure what kind of action the manufacturer teams would take.

They would prefer to act through FOTA, but that organisation is split down the middle on this issue, with the five independents in favour of the cap at this level and the five manufcaturers against it. The rallying point is the opposition to the two tier system and that will form the basis of the next FOTA meeting on May 6th.

Fresh from saving his team from sever punishment in Paris, Martin Whitmarsh said,
“As a member of FOTA, Vodafone McLaren Mercedes is of course supportive
of FOTA’s recent efforts to reduce costs in Formula 1.

“Equally, we recognise the excellent work done recently by the FIA in
the area of cost-reduction.

“Having said all that, we understand that some teams’ operational
budgets may still be unnecessarily high in the challenging global
economic situation in which we now find ourselves.

“Nonetheless, we believe that the optimal solution – which may or may
not include a budget cap, but which ideally would not encompass a
two-tier regulatory framework – is most likely to be arrived at via
measured negotiation between all parties.

“We at Vodafone McLaren Mercedes are happy to contribute to that process
as and when required.”

Frank Williams also highlighted the two tier system for comment, although his team believes in the cap and thinks that £40 million in the right level. Williams stands to make a profit of £10- £15 million on that basis.

“Williams has supported the introduction of a budget cap since the idea was first put forward early in 2008,” said Williams. “Since then FOTA has made tremendous steps forward on costs but the rationale for a budget cap has also grown even stronger.

“We would like to see all the teams operating to one set of regulations and under a budget cap in 2010 and that is the position we will be advocating within FOTA when we meet next week.

“We understand that this will represent a serious challenge for some of the teams but we expect that FOTA will work together to find a unified and constructive way to take the FIA’s initiative forward.”

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31 Comments
  1. Rob says:

    Surely if the manufacturer teams opted out of the budget cap, then they could stop the customer teams having unrestricted engine revs as long as they control the supply of engines.

    So unless cosworth or someone else comes along supplying engines then the difference between capped and non-capped would be the movable aero only.

    I read somewhere that Cosworth might come back though?

  2. john g says:

    i understand that most, if not all teams, welcome the initiative for cost cutting, even further to their own ideas, and would not be necessarily unhappy with a reasonable budget cap. this can be achieved through discussion between FOTA and the FIA quite easily i would think.

    however, i don’t hear many teams coming out in favour of the two-tiered approach, and i share their trepidation on that.

    it’s far too easy for a mismatch in the regulations to have a massive impact on competitiveness of capped vs uncapped cars, with the FIA able to change the regulations as they see fit. it has the potential to be a constantly moving goalpost, or even an unfair goalpost with the sole intention of forcing everyone into the capped boat.

    as an example to this, following the FIA’s announcement of the sort of technical freedoms that the capped teams are allowed, they have just added a higher KERS boost capability in addition to moveable aero and higher engine revs. to me the uncapped teams are already dead in the water – RIP the manufacturers.

    hopefully this is a typical example of max putting an outrageous and unnacceptable proposal through, and compromising to get the position he wanted in the first place. i truly think it will be a disaster to have such a split in technical freedom.

  3. Boston F1 Fan says:

    - Didn’t Honda spend $400 million last year? Isn’t this figure pretty unrealistic?
    - Also, Mclaren may agree to spend 40 million quid a year, but don’t they have some billion dollars in facilities?

  4. Skandy says:

    I believe the bigger teams will start their junior teams to split the personnel and also adjust the development cost between the teams’ budgets. This way they wouldn’t have to layoff people and also perform the testing on the junior car before the parts can be put in their title challenging cars. Isnt that what Redbull is doing?

  5. Harry says:

    How will this cap affect things like the purchase of facilities, or the land the facilities are built on, ect. They are extraordinary costs that don’t nesesarilly increase competitive advantage. The McLaren technology center springs to mind.

    On a more important level this could affect new teams starting up, and encourage some leasing options that would make the team infrastructure cheaper, but less stable of a working environment.

    It could also have a large affect on the location of F1 teams, as the advantage of decreased structural costs for real property, and lower wages for the manufacturing process would pay large dividends by freeing up budget space for development and testing. Welcome Force Belarus!

    I don’t know if any of that is good or bad (all the persons who will lose their jobs over the budget cap in the first place is bad, but not as bad as the team going out of business), and my mind is reeling from the possibilities that this budget cap raises for changing F1 as we know it.

  6. Bill says:

    For all intents and purposes, there is currently a two-tier system in place now with some teams running KERS/adjustable fromt wings and others not; it has made for some great racing so far.

  7. jw1980 says:

    James, some excellent articles here. The budget cap has to be introduced. I think it’s fantastic that we could have new teams next year. A return to the days of 26 car grids would be great. Some of the potential new teams have real credibility.
    Regardless of what rules, budget caps, etc there are next year you would think that at least one manufacturer team will quit because of the global recession. Would F1 miss Toyota? Would F1 miss BMW? Williams have achieved alot more than these teams ever have or likely ever will. Williams will be competitive again. As a previous article by yourself pointed out both Brawn and Red Bull will become major contenders. I still think McLaren will be near the top. A cap should benefit Renault as well. Lets hope Ferrari do not quit because of their history.
    All in all 2010 could be a great season, even better than this one.
    One interesting thought though. Teams are going to have to operate on a reduced budget. Will the same happen elsewhere in the sport i.e. costs to hold gps reduced so that some of the traditional circuits can stay on the calendar? Surely this goes hand in hand?

  8. @PaulNUK says:

    Typo in the above article James, “sever” instead of “severe” :-)

  9. Gavin says:

    Personally I feel for the many hundreds (maybe over 1000?) people that stand to lose their jobs over this when teams have to make drastic cuts to their staffing levels.

  10. Tom P says:

    There is not a chance in hell that this two-tiered rubbish will be brought in. Budget caps yes, but not a split technical championship.

    This is just Max flexing his “muscle” in a slightly more un-subtle way compared to before.

  11. Seymour Quilter says:

    This is without doubt the best thing to happen to F1. The idea at the heart of this is F1 is about innovation and not how much money can buy success. Should have been done 10 years ago.

  12. Jason says:

    This is seriously going to challenge the glue that holds FOTA together. I cant say that Bernie Max don’t know what they are doing…because, politically, I think they do.

    Here’s to hoping that FOTA can come to some agreement and that they can work with the FIA – or rather vice versa…that the FIA will work with FOTA to get something that everyone is happy about put in place. Somehow, I don’t see it happening though.

  13. rpaco says:

    Also note the refuelling and tyre warmer bans. Of these the tyre warmer removal has previously loudly been declared dangerous by David Coulthard.

    The current tyre compounds seem exceptionally difficult to warm to working temperature for many teams; possibly because they were developed and tested with much greater downforce. Thus I would suggest a change of compound will be necessary when the warmers are no longer allowed. Much formula ford style sliding off on cold tyres will probably happen.

    It will be interesting to see everyone in Q3 with a full fuel load, however this will take away some of the advantages of the great strategists, during the race and effectively dumb down the tactics.
    Some of us will remember drivers being told to slow down purely in order to conserve fuel sufficient to finish the race.

    The FIA have not mentioned in their press release, changes to the KERS parameters which were expected, we shall have to wait a few days for the tech regs for 2010.

    So now the teams know that much of their development work this year will be wasted for the future, they can spend an extra 50% of next year’s budget this year, on developing their next cars, but fully adjustable wings will take a lot longer than one season to develop, and the permitted control methods have not been mentioned, the rear wing flaps will need a great deal of force and probably an extension of the hydraulic system to actuate.

    The free engine revs is inexplicable, especially as we have had successively reduced rev caps and this is a reversal with no ecological benefit, but obviously more power can be generated at higher revs, with a correspondingly shorter lifespan.

  14. HKS7MGT says:

    Hang on a minute, if the ‘economic crisis’ is forcing this decision, isn’t it in the best interest of the ‘economic crisis’ to encourage the spending money, not preventing it??? If we all stopped spending money, the global recession will be inevitable and there might not be a F1

  15. onemoresolo says:

    Has nobody picked up on the fact that the KERS output is doubled to 120kw for the capped teams?

  16. phil says:

    Max you have lost it. Whilst this figure sounds great, the non manufacture teams will not have the cash to develop. All the teams use a manufacture engine of which Ferrari, merc or any of them for that matter will not agree to improve the engine, nor could they afford too. As for KERS, none of the manufacture teams will sell kers to the private teams if it means they will loose out. At what cost could they sell it to the teams, no one will sell it. This will fly in the face of max and he cant do anything about it. The teams control F1. Without the teams f1 is dead. The private teams know they can not survive without the big teams, I would not be surprised if no one take on the cap. Private teams can enter f1. But they will be under appeal every weekend because how does a new teams build a new engine under 40mil. They cant, how can they develop kers under 40mil they cant, I don’t think Ferrari will supply any teams and neither will any of the other teams. Max has gone nuts and he needs to be stopped. F1 is goin to be split. I hope all the teams stay united and leave the sport. The FIA will go broke and Bernie will go broke because every one will line up to sue him.

  17. jeremy says:

    I’m a tad confused regarding the engine regs. They are excluded, but the development is limited, with the exception of revs? or the purchase of the engines is the only exclusion? will the new engine regs allow smaller displacement/cylinders? Will we see a resurgence of the turbo era?

  18. Barry says:

    Surely a budget cap would hold back newer teams, I mean look at the McLaren Technology Centre, it’s all paid for but for any team to match facilities on that level would require en enormous investment. Would this expenditure fall into the budget?

    Max has not thought this through, and Bernie probably doesn’t care as long as countries are stacked up ready to pay his race fees. The only thing I like out of all of this is a 26 car grid from next season.

  19. jamie says:

    Interesting but what if a manufacturer happened to run un-capped for one year and put all their resorces into the benifits the capped teams get to run the following year? much like the brawn/honda of last year starting development so early on in the season through uncompetative’ness. Or would the way the FiA sign the teams up each year come into that??

  20. sean says:

    The team’s with the most money alway’s win in F1 that’s the way it’s all ways been and will remain.That is why Toyota, Bmw,Red bull and Honda spent so much money they wanted to win.These were the rule’s of F1 . Now we have one person driving these value’s out the door as quickly as he possible can.The reason we all watch and love F1 is because of what it is :THE GREATEST TECHNOLOGY,THE GREATEST TEAM’S, THE MOST AMOUNT OF MONEY SPENT.These team’s all signed up knowing what they are getting into IF YOU WANT TO PLAY YOU MUST PAY.So max is doing his level best to dumb down the sport just make it another open wheel category.How you can produce are car on these tiny budget’s to be competitive is beyond me the afore mentioned team’s haven’t been able up until now. Red Bull’s spending 10mill on Newey not to mention how much he’s spending on increasing the budget of there tech and aero department and o me GOD they won.Obviously max has got another figure in mind that it will take to build a car that’s competitive at this level and please donot use brawn as an example of how you can build a car cheaply and be a race winner we all know how much honda spend on that car. This is a joke and this year is turning into a joke this is going way past making the sport more accessible to more teams it’s about Max controlling it his way and to hell with the rest his track record in these endeavors aint to go if this goes threw the sport will be all the poorer for it and this could drive more team,s away than any credit crunch .If we loose Toyota,Mercedes,Bmw and Renault as manufacture,s then this could be the the beginning of the end these team’s have all publicly bemoaned the shifting nature of the sport they go and we have the “cosworth “series with all the cars with the same engine and similar body work be good for Ferrari they’ll clean up.

  21. phil says:

    Max and the FIA should be retired. Who are they to interfere into a sport. Budget caps are one things but if it couldn’t work in the Aussie V8 supercar series with 3million bucks how will it work in f1. You cannot control it. How do the estimate the cost of existing facilities?

    The F1 teams need to tell the FIA and Bernie to bugger off. Why can’t the teams organise there own championship. Bernie and Max know without the manufactures and there drivers the draw cards to an f1 weekend, f1 is dead in the water. A1gp has failed because it doesn’t have the manufactures names and drivers associated with it. This championship will be a joke. The manufactures do not need to supply any engines or kers to any team, as the teams have not signed a Concorde Agreement. No engine manufacturer will allow another team to rebuild there engine. No team will allow another team an unfair advantage.

    These new rules suck, what happens when the cars hit 400km down the straight at monza, with moveable wings that is possible. The cars have enough horsepower to do it. Max will introduce speed limits. Its pathetic and not well thought through.

    How does max propose the budget cap will work when a car is totalled in an accident and the teams run out of cash. Do they not turn up for the remaining events. He wants to slash the cost of the teams yet pays accounts and detectives millions and millions of pounds to see if teams breach stupid rules. Defeats the

  22. Michel says:

    The engine ECU is FIA-regulated, so I don’t see how engine manufacturers can control how their customers use the engines.

    A more powerful KERS, plus the ability to increase engine revs beyond the limit prescribed to uncapped teams, makes for a powerful aid to overtaking.

    Naturally, the capped teams won’t actually rev their engine at the maximum all the time. The reliability issue is overblown, I think.

  23. adrian says:

    This is an extremely ill-thought through proposal. *Nobody* – neither the competitors nor the viewing public want a two-tier series, still less does anyone want to see a Lola beating a Ferrari because of an artificial competitive advantage. There are also countless problems with policing any cost-cap as people have already identified – e.g. what happens if someone runs out of money mid-season; what happens in relation to all the fixed assets of existing teams etc. etc. Countless other problems will also be identified.

    What happens to the likes of Ferrari and McLaren whose whole raison d’etre is to be at the peak of motorsport – are they going to p**s £400million up the wall to compete on an unfair playing field? Those teams are capable of attracting huge amounts in sponsorship (surely good for F1), but with the cap, that money will just not come.

    What F1 *does* need is a period of stability, in terms of regulations but also generally: not the FIA changing the goalposts autocratically from year to year. This year is a case in point – any budget saving will be far offset by the costs of developing to the new rules.

    Presumably, this is another example of the usual Mosley / Ecclestone style of ‘negotiating’: put something ridiculous on the table, p**s everyone off and then start talking about the real issues. Sooner or later, though, the teams will call their bluff.

  24. rpaco says:

    Did anyone notice that little bit the FIA slipped in which said they can give a superlicense to anybody they like the look of regardless of total lack of qualification. This could lead to even more dubious stewards decisions in the future.

  25. Shaun says:

    could honda be thinking of buying into brawn GP :-)

    ‘we appreciate the fact that you have bank rolled us this year and your name is not on the car and it is all thanks to your development money, but honestly, a merc engine is so much nicer…..’

    http://petitions.number10.gov.uk/BritishF1GP/

  26. rpaco says:

    Some interesting possibilities and restrictions from the new capped tech regs.
    Front flaps need not be operated in unison, [I foresee air brakes here.]

    For ALL cars, KERS must not be operated over 300kph. This may cause severe problems on electrical KERS.
    The KERS packaging is also now defined as between the front face of the engine and the driver’s back. Does the Williams flywheel fit?

  27. rpaco says:

    Hi Mod, cant find the right thread for this on James’s site maybe we need a new thread.

    Winner takes all is back in the sporting regs for 2010, having been comprehensively denounced by all interested parties except the instigator and his henchman. (the road warrior)

    One can only assume that Max is beholden to Bernie, and has to do whatever he wants. It is very clear that the only benefit of winner takes all is that Bernie’s ego can brag that he has forced upon the sport, something which was well discussed and rejected by all it affected and is a symbol of his absolute power. One cannot help wondering whether some other hidden part of the secret agreements means that he can keep even more money when winner takes all is implemented. Maybe it is that the season will finish just after the halfway point thus saving him large amounts in transport and prize money.

    It is now very clear that Bernie makes the rules not the FIA.

    Bring back Jean Marie Ballestre! (at least that will give Renault a better chance :-)).

  28. adam says:

    Actually, the word can’t spell is severer !

  29. Mon Pen says:

    It’s called “leapfrogging” in financial circles and it’s a valid point. Opt in one year, opt out the next. Up and down, develop next year’s car in an uncapped year, drive it in a capped year. What with that coupled with the fact that existing teams have all the infrastructure already up and paid for, whereby new entrants have to struggle with their setup costs, it’s a mockery. The FIA should sue and sack their accountants for being so negligent, allowing such a hare-brained scheme to be aired. It smacks though of window dressing. Look at how green we are, look at how cost efficient we are, when in fact it’s just empty and unworkable.

  30. James Allen says:

    I think we all need to take the time to think this through. Why should F1 cost £400 million a year?

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