Posted on August 23, 2012
Darren Heath

The Summer break has dragged on, with all F1 factories shut down for two weeks since the last Grand Prix. But that does not mean that nothing has been happening.

Behind the scenes F1 is moving forward on several fronts, at the same time as keeping an eye on the prosecutor’s office in Munich for any signs of a follow up to the conviction of Gerhard Grobkowsky, who said he had accepted a “bribe” from F1 commercial boss Bernie Ecclestone.

The teams are closing in on a deal to secure their involvement for the medium term, the next 8 years. The new Concorde Agreement is pretty much sorted out, but the outstanding issue is the sporting regulation and particularly cost control. And here the danger is that the teams revert to type and think short-term rather than long-term.

Before the break I interviewed Lotus F1 boss Gerard Lopez for a Financial Times feature. One of the subjects in our interview was cost control and it was interesting to hear his take, as a man with extensive business experience outside the sport, on the way the teams have been tying themselves in knots over the Resource Restriction Agreement.

He made a very interesting point about how people whose sole focus is on finding fractions of a second, struggle to see long term and I think he’s right.


“Some of the stuff that happens (in F1) is a bit strange,” says Lopez. “But there is so much at stake in terms of performance. We are talking about tenths and hundredths of a second. So it’s always edgy because the moment you give something up in a contract, you think you are losing something on the track. And the moment you lose something on the track you feel that you have the potential to lose sponsors or prizemoney. So there is an economic angle to whatever decision gets taken.

“The problem is everything is so tight, negotiation becomes really tough because of it. And that’s what marks this sport. When you think in terms of tenths of seconds, how does that combine with long-term thinking? Long term is years. Tenths of seconds is what defines winning and losing and all the contracts that we discuss always have some sort of impact on performance. “

FOTA split over the issue of cost control and the lack of trust between the teams and this loss of perspective is at the heart of it.

It’s easy to see how competitive individuals find it hard to change focus from short-term to long-term. But change they must if F1 is to secure the right formula for the future. A sport turning over the billions F1 does, should not see teams in financial trouble. The payments to the 12 teams in the current Concorde Agreement are well over $600 million, not divided equally of course, but it’s still a lot of money. Teams will always call for more money, while the sport’s owners will want to keep as much as possible. Controlling costs, like a proper business has to be the solution, as long as its the same for everyone.

Another problem that all the stakeholders have been wrestling with this summer is that while Ecclestone’s Formula One Management business is in charge of the Concorde Agreement, which is essentially a commercial contract, the FIA is in control of the sporting regulations, of which cost control is part. Some teams argue that they need to be controlled by the same body. So who should regulate the new RRA?

The answer needs to for be long term – like the thinking that needs to go behind it.

The biggest danger to F1? Short term thinking
63 Responses

  1.   1. Posted By: Andrew Cumbria
        Date: August 23rd, 2012 @ 11:29 am 

    I cant believe that the teams still fall for Bernie’s old tactics of divide and rule.

    The RRA needs to happen and it needs to be enshrined in the concorde agreement that binds the sport together.

    The FIA is the independant arbiter of the sports rules, and logically should be the policeman for the RRA as well.

    I can see their are many issues at play in the RRA. This needs to be split into engine and car RRA’s and seperate technical and financial regulations need to be apllied to each.

    Car manufacturer teams need to ensure proper legal seperation of the F1 team from the road car side, and technology cannot be developed and dragged from one to the other without cost also being transferred too.

    It needs doing and properly with intrusion because otherwise we will never be sure its a fair playingfield.

    That said I cant say I would want to have to do it myself, what a nightmare.

    Andrew

    [Reply]

    James Enocre Reply:

    The RRA is nonsense.

    In an industry which turns over Billions too little goes to the teams. We’re talking about the total budget for all teams being less than one billion. They get a split of the comercial (TV) income. But FOM keeps an aweful lot for what they do.
    Ferrari get more TV money than anyone else. HRT get whatever small change falls on the floor when Bernie’s valet hangs up his trousers. Add to that Sponsorship and prize money. Front running teams get more of both. And all teams spend as much money as they can get
    It’s tough for new team with no legacy of TV income. Small wonder the 3 “new” teams haven’t managed a top 10 finish in 3 seasons. They can’t buy last year’s chasis from a top team which would save money all round.

    We’ve had decade of car makers trying to be engine maker, chasis maker and title sponsor.
    Toyota failed. BMW failed. BAR failed, became Honda, failed dismally and left a legacy to Brawn, which he sold to Mercedes who have (cough) failed. Ford bought Jackie Stewart’s team branded it Jaguar and … failed. Only Renault succeeded – they bought a championship winning team but went back to being a pure engine maker – selling the team with no great upset anywhere. If Mercedes managed to do the same it wouldn’t be any great loss.

    “Cost cutting” bans only moves spending: cutting testing favored teams with the best wind tunnels. Restricted wind tunnels meant a shift to computer simulation – as I understand there are (unenforcable) limits on the amount of computing power teams use but that doesn’t mean less spending, it just means different.
    We’ve got a ban on engine development [appendix 4 of the sporting regs says Engines must be equivalent to March 2008 ones]. Engines and gearboxes must have a minimimum life, no T-Cars … the list goes on. Does anyone think if you tell F1 designers they can’t spend $1 on X they won’t think of how to spend $1 on Y and other $1 on Z ?

    Who tells Dietrich Mateschitz how much he is allowed to spend on his F1 team or McLaren and Ferrari how much they can accept to put a sponsor’s name on their car ? Who polices it ? If a new wing is design is emailed out and CFD results come back who knows and assigns a cost ? When parts come in who checks the invoice value is valid, not part paid by a sponsor ? Trying to limit headcount just moves employees into external consultancies. And so on.

    [Reply]

    daphne Reply:

    These are good questions, towards the end.
    Who polices the RRA? Is it done on an honour system?

    [Reply]

    W Johnson Reply:

    It’s not the teams that fall for Bernie’s old tactics of divide and rule, it’s Ferrari. Always the first to sign up. The smaller F1 racing teams then have left room for manoevre with holding out.

    Was it a coincidence that Ferrari left Fota weeks before decalring they had signed up to a new Concorde Agreement??

    So its quite irksome to hear LdM’s moans about F1 regulations and his irritation with some of the smaller teams when Ferrari could do much more to wrestle back some of the huge F1 More funds would be availabe for the smaller teams and less focus on cost control perhaps.

    Not sure that cost control is the answer unless you want Indy Car racing!

    [Reply]


  2.   2. Posted By: Grabsplatter
        Date: August 23rd, 2012 @ 11:33 am 

    Might the GPDA have a place in this? Some of the drivers seem to have a reasonable understanding of what F1 is actually about and have been known to echo the views of the fans better than more than a few teams (Mark Webber springs to mind).

    As an aside, surely the biggest danger to F1 is how it’ll react to the next death in F1? When Senna and Ratzenberger died, things had changed a great deal in the few years since de Angelis had died. Now we live in a very different world from the one Senna knew. We’ve had a few close calls in the last few years (Massa being the obvious one), and we will lose another driver one day. I hope F1 is prepared for that sad day, because incorrectly handled, it could be the death of our sport.

    [Reply]

    James Allen Reply:

    Given that fortunately we have gone almost 20 years since a fatality, it’s not an immediate danger.

    [Reply]

    Greg Reply:

    What about the Marshalls at the 2000 Italian GP and 2001 Oz GP? I know there were not drivers, but they were still people that died as a direct result of F1 crashes.

    [Reply]

    James Clayton Reply:

    James that comment is pretty ill-advised! Yes safety has improved a great deal and thankfully there has been no fatalities recently. But let us not let complacency set in.

    Also the fact that there’s been none for some 20 years now could lead some to believe that it’s more likely to happen again sooner rather than later. After all there’s been some near misses recently. I seem to remember a certain Marussia test driver escaping death in a rather horrible accident this year, and not too long ago a Ferrari driver being put out of action for a year due to a rather nasty accident.

    I disagree with Grabsplatter’s view that it’s likely to jeopardize the sport in any way, but I don’t think we can say there’s “no intimidate danger” of a fatality happening.

    [Reply]

    SoLiDG Reply:

    The cars are so safe now a fatality would be a freak accident for sure.
    So they don’t need a knee jerk reaction if it does happen again.

    [Reply]

    Pete Reply:

    Don’t tempt fate.

    [Reply]

    Wade Parmino Reply:

    You are right that it is an inevitability that another driver will die in a car. Obviously everyone hopes that it won’t ever happen again. However, motorsport is inherently dangerous and as saftey has improved there has been less and less fatalities and serious injuries.

    But I don’t think it will be completely failsafe. It is a mathematical certainty that further fatalities will occur in future, particularly if an attitude of complacency or carelessness sets in. The best realistic scenario that can be achieved is making the time to death ratio as wide as possible (more years to less deaths).

    With regards to how such a terrible event will be handled, I think F1 is compassionate and considerate enough now to do it right. But having said that, F1 did survive the absolute disgrace that was the 1973 Dutch Grand Prix.

    [Reply]

    KGBVD Reply:

    I don’t follow your logic at all.

    There is a number of deaths in professional sport every year (be they competitors, volunteers, event workers, or even fans), and I can’t think of a single sport that has been brought down because of it. Can you?

    Brazilian tin tops come to mind, particularly last year at Interlagos (which was a lesson in poor and unsafe race management). And you know what? The series is still stupidly popular, F1 still goes to the track, and Massa even competed in one of the series races a few weeks back.

    Henry Surtees, Dan Wheldon, Gustavo Sondermann, Marco Simoncelli – big names and loses, and the sports survived.

    [Reply]

    Grabsplatter Reply:

    The aftermath of the 1955 Le Mans put F1, and other motorsports, on some very shakey ground, and that was when it was normal for a few drivers to die every season. In F1, races were cancelled, Mercedes pulled out (and didnt’ return for a very long time), Switzerland banned all forms of motorsport for decades…

    As for this not being an immediate threat, we nearly lost Massa a few years ago, we’ve had cars take off, cars ride over the top of other cars inches from drivers heads, a Marussia test that was very close to being fatal…

    [Reply]

    KGBVD Reply:

    Are you actually suggesting that Massa’s or di Villota’s incidents, should the worst have happened, would have been in any way comparable to the deaths of over 80 people and injury of 100′s?

    That’s quite a claim, and actually rather a disgraceful thing to say.

    BUT, on that(just to drive the point home), that ‘most catastrophic racing accident of all time’ resulting in exactly what of consequence for the sport? A few races were cancelled on safety grounds (not unprecedented for any number of reasons, even weather); Merc pulled out (they are about to do the same simply because they aren’t any good); and the Swiss overreacted (everyone knows it, which is why Swiss born Romain Grosjean races for France).

    What did happen of consequence for the sport was a massive ramp up in spectator safety. Much in the same way that Senna’s crash ushered in an era of unprecedented driver safety. When was the last time someone in F1 suffered a career ending crash while racing in F1?

    Also, the FIA spends millions through its national clubs working on ways to improve road safety.


  3.   3. Posted By: Matt W
        Date: August 23rd, 2012 @ 11:51 am 

    For a start they need a proper system in place for how the money is split. It is no longer acceptable in the modern era for Ferrari to continue to get their special payments. If F1 is a sport, you can’t continue to favour certain teams.

    The issue of cost control has long been an issue in F1. There are plenty of other rules the FIA could look into. Such as limiting the number of crew attending each race, possibility of using Kit Cars etc.

    It may not be what people have considered pure F1, but if the survival of the sport is an issue then F1 has to move with the times. I simply don’t believe any large number of fans would desert the sport of some of the lower teams had kit cars.

    [Reply]

    Brukay Reply:

    Matt never forget that for many years ferrari were the only ones that built the complete car engine as well therefore there costs were much higher than Mclaren & Williams for instance, i mention those two as they have been around since the sixties while Ferrari was decade longer many people overlook that issue. I always was disappointed that BRM left F1 as they were the other ones who built the whole product. Of course there have been others more recent I have not forgotten Mercedes but they did leave the sport for quite a few decades before coming back.

    [Reply]

    Tony Reply:

    Agree with Brukay but also, Ferrari have more fans. They put more bums on seats, bring more eyes to the television screen (this in turn helps other teams with potential sponsors) and sell more merchandise than any other team. Add the historical factor, I have no gripe with them getting more money. Having a say on rules however is another issue. Thankfully that’s at an end?

    [Reply]

    MISTER Reply:

    Matt, I have been to my first GP this year at Silverstone and like in any home GP, the McLaren fans were everywhere, but the second were Ferrari fans.
    Also, like Tony mentioned, they sell alot of merchandise. McLaren, Ferrari and RedBull were the only ones having its own mechandise stand. There were other stands which were selling merchandise from all the teams. Redbull had their own stand because they are the champions but I don’t think 2 years ago they had one.

    We need teams to stay in the sport for long periods. We need history and statistics. F1 would not be what it is today if teams come and go every 2-3 years.

    [Reply]

    Matt W Reply:

    I appreciate all you guys say, but if you were to give say Man Utd special payments for competing every season in the premier league it would be vastly unfair.

    Yes Ferrari have the most fans, but that means higher merchandise sales and a wealth of sponsors knocking on the door. Giving them special payments out of the total sporting revenue is just simply not on in a sporting capacity.

    I appreciate all Ferrari have done for the sport and consider myself a Ferrari fan, but unless there is a clear and open system in place that rewards the number of seasons contested for all teams then it is completely unfair.

    Where do you draw the line? How long do Mclaren and Williams need to compete to earn the same payment? Should Renault/Lotus be included given the years the fundamental unit has been in the sport? Should Merc be included for supplying so many engines.

    Far simpler to put in place a model similar to the premier league distribution that rewards performance leaving teams to earn revenue through other streams.

    [Reply]

    Brukay Reply:

    Matt you are missing the point Ferrari have much higher costs because they make the whole car including engine Mclaren & Williams dont that is why Ferrari get more ask Frank Williams he is quite happy for Ferrari to get more. James i am supprised you have not explained the situation to your followers why Ferrari get more,i assume you do know the reason. To develope an f1 engine is very costly as Renault. Mecedes and ferrari will face next year,far cheaper to buy the engines.

    Matt W Reply:

    Ferrari don’t get the money because they make the whole car. Renault didn’t get the money when they were a complete package a neither do Mercedes now.

    The special payment is not based on a “cost”, as I understand it the payment is based on the prestige of the brand and the unique commitment to the sport. Whilst Ferrari’s commitment is incredible, you can’t financially favour one team over another in a sport as it gives them an unfair advantage.


  4.   4. Posted By: mayberth
        Date: August 23rd, 2012 @ 12:03 pm 

    James, did Gerald reveal anything on Kimi ‘s stay beyond 2012 in enstone squad??

    [Reply]


  5.   5. Posted By: Baghetti
        Date: August 23rd, 2012 @ 12:28 pm 

    As always: great article James, a lot of things to think about…

    In my opinion the cost control issue in F1 is somewhat different than in a regular business. In a regular business you have only 1 interested party (the group of shareholders, represented by the board) that will always want to control costs in order to maximize EBIT without there being any significant power within the orgazation that has will not feel that way. In F1 it’s not like that: you have the Formula One Management that has to control costs just like in any other organization (especially in view of the upcoming flotation), but you also have the teams as a signficant power with a completely different take: although each team in itself is an organization different from FOM that has to keep costs under control in order to survive, the teams as a group have an interest to spend a lot of money as that is probably the most effective way to get as much as possible out of F1 as a business (through pricemoney, but more importantly through Concorde Agreement money, influance, quoted dividend-generating shares, etc). That makes it essentialy different from a regular business.

    Or to make an easy comparison: although the employees of a company – that have to take care of their own family spending as well – will do everything to earn as much a salary as possible, the most effective way to do so is NOT via private spending as that will have little impact on their salary, but even if they would such private spending by its employees would not become a liability for the company…

    In my opinion the new RRA should be regulated by FIA (cost regulation is Max’s baby after all, and I think he deserves a lot of credit for that), but that regulation should only start after FIA has received clear guidelines from FOM within what margin (read: spending amount) they can regulate in order to avoid that it hurts F1 as business, either by overspending or by underspending which might just as well be the case if FIA would be deciding all by itself.

    [Reply]


  6.   6. Posted By: Michael Roberts
        Date: August 23rd, 2012 @ 12:37 pm 

    I do think that everyone has missed the point here, the next Concorde agreement needed to focus on the circuits and financing the sport in a way that made it viable for them. As far as I can see F1 will be sticking with the current system and it’s 10% increases in fees year-on-year despite the current economic situation.

    There will be a tipping point where fans can no longer afford to go to these races and that is a situation that F1 is not prepared for. The teams are doing a good job of letting the media know that F1 cannot exist without them but equally F1 cannot exist without the circuits that have defined it to this point.

    So yes Silverstone and Monza could drop off the calendar and make way for another Tilke drome in some other part of the world but nobody wants to watch racing in these venues.

    [Reply]

    James Clayton Reply:

    I dunno. Most of the Turkish Grand Prix that I can remember have been better than a lot of the more recent British Grand Prix

    (speaking as a Brit)

    [Reply]


  7.   7. Posted By: Andrew Carter
        Date: August 23rd, 2012 @ 12:54 pm 

    These days I’m firmly of the opinion that F1 needs to be torn up and started again with the FIA firmly in control, and no Bernie. With so many interested parties involved, not least the teams who will never stay united for more than a few years at most, there will always be serious problems to hammering out such deals and the result is that F1 is a mess off track.

    [Reply]

    James Clayton Reply:

    This is all nice wishful thinking, but it doesn’t really have any realistic chance of happening.

    [Reply]

    Andrew Carter Reply:

    Yeah I know, which is a shame because we’re just going to limp from one farce to the next with some particularly useless people sucking the sport dry.

    [Reply]


  8.   8. Posted By: Guillermo
        Date: August 23rd, 2012 @ 1:26 pm 

    I think this is a case of F1 being a victim of its own success. As long as there is value for sponsors in being successful in F1, they will plough in as much money as is needed to win.

    In my opinion, the best thing to have happened to F1 in recent years was the departure of the big car manufacturers and the return of private teams. I think the only way to enforce the RRA is to achieve a similar effect by getting the big companies still left (Santander, Red Bull, Mercedes Benz and Philip Morris) to voluntarily restrict the amount of money they pump in.

    Unfortunately, I just don’t think that’s realistic…

    [Reply]


  9.   9. Posted By: Kay
        Date: August 23rd, 2012 @ 1:51 pm 

    Never understood how or why the heck B.Eccelestone is in charge of the commercial side anyway, always seemed a bit odd to me. I’ve always thought the commercial side should also be under FIA’s control.

    [Reply]

    franed Reply:

    You need to read some F1 history, I suggest “Bernie” by Susan Watkins and “Bernie’s Game” by Terry Lovell.

    But basically the FIA had the commercial side taken away by the EU Commission. It was rented out to Bernie for not much at all for 100 years.

    FISA FOCA FOTA FICA FIA it’s a huge roller coaster with some giant characters involved. Nowadays it’s all sweetness and light by comparison with the past.

    [Reply]

    Dizzy Reply:

    ” how or why the heck B.Eccelestone is in charge of the commercial side anyway”

    Maybe because he is the guy that was a big part of F1′s commercial rise.
    It was Bernie that got most the teams to unify & form FOCA in the late 70s, It was Bernie that helped get the teams better commercial deals though the 70s/80s & Bernie played a big role in making a lot of the teams a lot richer than they would have been without him.

    [Reply]


  10.   10. Posted By: ridwan
        Date: August 23rd, 2012 @ 2:28 pm 

    $600m to be shared among the twelve teams?
    Someone tell me how it is shared.

    [Reply]

    JR Reply:

    It’s £438 million (US$690 million)

    £356 million for the top 10 teams.
    £19 million for Ferrari
    £51 million in back payments when the new Concorde is signed.
    And £12 million for the remaining teams.

    [Reply]


  11.   11. Posted By: OzFormula
        Date: August 23rd, 2012 @ 3:13 pm 

    F1 teams are like politicians, they may think 1 year ahead, but rarely more than 3 years.

    Id be willing to bet one of the fairly major teams is either renamed or doesn’t exist within 3 years. (or 3 months if we are talking about Benetton, I mean Renault, I mean Gennii capital)

    [Reply]


  12.   12. Posted By: Stephen Kellett
        Date: August 23rd, 2012 @ 3:22 pm 

    [mod]

    Short term thinking. I don’t think you can stop it in F1. At the end of the day Bernie and his crew think only as far as the next time they can flip the shares for CVC. So they have a time horizon of no more than a few years.

    As to the engineers – how can they have a time horizon any further than maybe a year into the future when they know the regulations change on a rapid basis? It doesn’t make sense to think long term on that basis.

    That leaves the managers. Who are influenced by the engineering concerns and also by the very real short term need for cash flow and sponsorship in a world where you can’t plan your income unless you can guarantee your finishing place in the championship each year.

    OK that makes things easy for the back of the field guys. They are more than likely to stay there, so they can plan for that level of spend.

    But if you’re say a Williams type team where you used to be at the front and think you still should be, how to do you plan into the future with that level of spend when the last decade says otherwise?

    I suspect only Ferrari and RedBull can cast iron plan knowing they have enough money. McLaren, maybe, maybe not.

    [Reply]


  13.   13. Posted By: Elie
        Date: August 23rd, 2012 @ 4:09 pm 

    James you can see why Whitmarsh was quoted as saying …” its better to be a f1 fan than it is to be a team principal” obviously Lopez is feeling the same way. I don’t see this being resolved very quickly and the only way to really deal with this is to take the decision away from the teams.

    I think it’s the FIA that needs to manage this process of cost control as clearly the teams cant reach a consensus.They need to say it’s clear you guys ( the teams ) cannot reach consensus in the manner that will sustain the sport in the long term ( and clearly this is in everybodys’ interests) . Hence the sporting rules will include a framework of budget that will be required in conjunction with the sporting rules that allow all teams to operate fairly well into the future. I don’t see how else it could work because the commercial rights holders are only Interested in return on investment and this could be the Public in the future. At the end of the day it’s only the FIA that could control this or sanction penalties anyway. So they maybe need to get external assistance on this -big Audit Firm springs to mind. I don’t see this happening next year but but from 2014 onwards needs to be the target. This will also work in tandem with the new engine regs.

    I’m sure it will bring some wholesome changes to F1 , but I can’t think of a better time with whats happening with Bernie and his future, the global Financial situation, and the long term goals of the teams themselves ( Mercedes AMG, Force India, spring to mind). The closeness of the racing and generally a greater respect between the teams as a result of FOTA it would be a shame to loose that momentum.

    Is there a time frame that the teams have considered for budget restrictions and is it the usual parties that are still against it ? Wasn’t it Lotus themselves that relaxed their stand on the matter given new long term sponsorship deals – and no doubt improving championship performance.
    Cheers

    [Reply]


  14.   14. Posted By: Dunky
        Date: August 23rd, 2012 @ 4:25 pm 

    Visioning is important whatever industry you work in. Good leaders should provide this.

    People need to know what they are working towards.

    [Reply]


  15.   15. Posted By: franed
        Date: August 23rd, 2012 @ 6:25 pm 

    James off topic sorry.
    Have you heard from Lewis lately? Last we heard he had rushed back to the UK to see his Aunt who is in hospital with cancer. This could upset his state of mind for the remainder of the season.

    [Reply]


  16.   16. Posted By: Sebee
        Date: August 23rd, 2012 @ 6:42 pm 

    What FOM has done with this 5 week break can only be described as a form of torture. They are darn lucky it’s followed by Spa because it has crossed my mind to protest by torturing myself further by not watching the first race back.

    Poor Spa – can only accomodate 50K or so, and now will get poor TV ratings as everyone has forgotten about F1.

    Quick, we have 7 days to brew up a scandal and get in all the papers. Ideas?

    [Reply]


  17.   17. Posted By: Johan
        Date: August 23rd, 2012 @ 7:13 pm 

    I think the article is spot on regarding the importance of thinking in the long term but your´e not going be there in the long run if you dont make it in the short run :)

    Kind regards
    Johan

    [Reply]


  18.   18. Posted By: Rich C
        Date: August 23rd, 2012 @ 8:30 pm 

    An always contentious issue.

    I think its got to come down to FIA requiring teams be reorganized in such a manner that some cast iron accounting rules can be implemented and a large (and expensive) firm appointed to oversee it. And there would be plenty of “Hollywood Accounting” attempts, I am sure!

    Many ppl as always blame Bernie and wonder why the FIA doesn’t run the whole thing. Apparently those ppl have a short memory.

    FIA *can’t run the whole thing. The EU courts stripped them of that role.

    Bernie and his investors saved it, plain and simple. And made it what it is today.

    You may claim others could have done better etc etc but the fact is they did not step up.

    So that is all ‘coulda/shoulda/woulda’ wishful thinking. You are criticisig the goose that laid the golden eggs.

    [Reply]


  19.   19. Posted By: Mark V
        Date: August 24th, 2012 @ 12:22 am 

    We’ve been hearing about cost cutting for 4 years now and though I follow this site and others I am still rather in the dark where all the money goes. It would be nice to see some kind of basic breakdown of what a team spends money on.

    If most teams buy their engines from a supplier I am inclined to believe the chassis and aerodynamics takes up a big chunk since Virgin tried to save money by forgoing the prohibitive cost of a wind tunnel and doing everything in a computer.

    If the teams share on-track testing facilities, would it save money by also sharing other costly things such as wind tunnels?

    [Reply]


  20.   20. Posted By: jpinx
        Date: August 24th, 2012 @ 3:40 am 

    In reality the RRA is “un-police-able”. The competitive edge will always make teams find ways around it, same as they do with the tech regs. The only realistic way to make the sport more affordable for small teams is to do the same as has been done on engines, powertrains and (effectively) tyres on lots of other parts. For example, making wings standard would save a lot since the development engineers seem to spend a lot of time on wings.

    Allowing the smaller teams to use more of other makers kit would make life lots cheaper for them. Last years cars should be available to them, maybe with certain exclusions and additions.

    F1 has not to decide about the RRA, it has to decide what it wants to be. The pinnacle of motor sport is not achieved by restricting budgets.

    [Reply]

    Wade Parmino Reply:

    Here is a somewhat outrageous idea. Instead of restricting resources, all the technical regulations could be completely dropped. True, smaller teams could be at a disadvantage however, there is a point where no additional money is going to make any significant difference at all. I personally don’t believe that a budget of $1 billion is necessarily going to deliver any further results on track than a budget of $400 million.

    The key point in this is revolutionary, innovative ideas which, with all technical restrictions removed, a ‘lesser’ team with a relatively smaller budget could potentially come up with a completely ‘out of the box’ idea and win with it.

    All the cars on the grid look pretty much the same these days. In the 70′s there was all these weird and wonderful concepts being fielded; some serious diversity amongst the cars was the result.

    Technology and designs like traction control, ground effect, active suspension, continuously variable transmission, ABS, moving aerodynamic parts, KERS, TERS, blown diffusers, multiple wheels, different size tyres and many others should all be fair game. I am sure there will be other brilliant innovations that engineers are yet to conceive.

    [Reply]

    jpinx Reply:

    That’s more or less my point. One would think that the pinnacle of motor racing is the pinnacle of technical diversity. We can watch any number of racing series where the cars are pretty much the same, and F1 has always purported to be greater than that, but now we have locked-down engines, powertrains, control systems, tyres, etc. The *only* area of significant diversity is aero, which in itself is not so interesting to fans, and consumes a vast percentage of the budgets.

    I can only repeat that this issue is not about the RRA – that’s only the short term view. I ask this question – What defines the pinnacle of motor sport?

    [Reply]

    James Clayton Reply:

    “all the technical regulations could be completely dropped.”

    And just watch the amount of cars flying into walls and breakneck speeds… It’s a solution to the ‘not enough chances for newer drivers’, but not a very practical one!

    [Reply]

    Wade Parmino Reply:

    Ridiculous! Safety standards would still be high and besides, teams do want their cars to finish.

    Active suspension, traction control, ABS and other technologies would actually make the cars safer to drive. This is why high end road cars feature these systems.


  21.   21. Posted By: Heinzman
        Date: August 24th, 2012 @ 6:35 am 

    Pie in the sky stuff here. Could we somehow team each of the top half teams with the bottom half for technology/resource sharing?

    [Reply]


  22.   22. Posted By: Bobster
        Date: August 24th, 2012 @ 7:01 am 

    The RRA is problematic because it requires “resources” to be defined and quantified – and this in a sport which is full of clever people and which has a culture of looking for and exploiting loop holes. The original plan, as proposed by Max Mosley was far better – just limit what the teams can spend on the activities of designing, running and developing their car.

    This has nothing to do with their income from FOM or from sponsors, and it specifically excluded driver salaries so that you could still, if you could afford to, offer packages that would attract the best drivers.

    But let’s say that monitoring of “resources” is continued but with FIA auditing and having the power to impose meaningful penalties. There is no conflict between this and the Concorde. The Concorde controls how much money teams get from the revenues directly generated by F1. The RRA or cost capping or whatever is about limiting what you can spend on the car – it’s a limit on expenditure, not on income.

    [Reply]


  23.   23. Posted By: Monza01
        Date: August 24th, 2012 @ 10:30 am 

    By far the biggest problem with F1 is that too much money leaves the sport and that’s Bernie’s fault for being too greedy and selling the rights to CVC and others for huge sums. Rightly, they demand a return on their investment.

    However, taking FOM out of the picture and leaving F1 in the hands of the FIA would actually be worse.

    The FIA is run by an old boys network consisting the heads of national clubs from all over the world. It’s essentially a political organisation and that’s why it was so disasterously run by previous two appointed heads.

    Much to my surprise, Jean Todt appears non-partisan and keeping a low profile.

    Unfortunately another Concorde agreement just perpetuates the problem with vast sums being drained from the sport and entities like CVC contributing nothing in return.

    A breakaway series run by the teams without FOM or the FIA would have been the best option for the fans and race organisers :

    Ticket prices could be lowered, free to air TV guaranteed and at the same time European race promoters would be left with some money to invest in their facilities and they might even make a profit ! Oh, and pigs might fly……….

    [Reply]

    James Clayton Reply:

    I was excited for the breakaway series last time it “seriously” came about. I knew it was never going to happen, but how cool would it have been?

    For a start there’s be two series to follow for a while, while one or the other deteriorated, meaning even more boozy race weekends! :)

    [Reply]

    Dizzy Reply:

    “A breakaway series run by the teams without FOM or the FIA would have been the best option for the fans and race organisers”

    That actually would have been worse. If teams can’t get together to decide how to put together a young drivers test how do you expect them to run a series?

    Also look what happened to CART, Lots of internal politics, teams doing what was best for them & not the series.
    While CART looked great on the outside it was a shambles on the inside as teams internal politics ripped things apart.

    [Reply]


  24.   24. Posted By: ArJay
        Date: August 24th, 2012 @ 12:06 pm 

    Biggest danger to F1?
    Long-term recession – not short-term thinking.

    A RRA would be impossible to monitor and is nonsense in a sport so highly dependent on rapid technological development.

    If you’re having to ‘grossly out-spend’ rivals to gain a 1/10th second advantage is it because you’re employing the ‘wrong’ people or do the ‘right’ people simply demand better compensation for their expertise and more sophisticated resources with which to work?

    [Reply]


  25.   25. Posted By: Steve Selasky
        Date: August 24th, 2012 @ 1:28 pm 

    Agree the RRA is nonsense. You need the following:

    One group running both commerical and sport
    Budget cap for the team

    The budget cap will never happen because it will have the effect of reducing the valuation of the existing F1 teams. You will never – get anyone to agree to it….

    So my question is this – what/where is the “Tipping Point” in all this…

    [Reply]


  26.   26. Posted By: jjpm
        Date: August 25th, 2012 @ 12:23 pm 

    KGBVD wrote :
    …”Much in the same way that Senna’s crash ushered in an era of unprecedented driver safety. When was the last time someone in F1 suffered a career ending crash while racing in F1?”…

    The day before (April 30th) : Roland Ratzenberger

    [Reply]


  27.   27. Posted By: Sebee
        Date: August 26th, 2012 @ 1:29 am 

    Now that they had the ball to take Lance’s 7 TDF victories is Schumi the only 7 time champion of a sport? I remember how those two were reaching their win counts at the same time – what an amazing 5 year period for sport that was. Whatever you want to say about the Schumi era it was darn fun to watch. And so was the Lance era.

    [Reply]

    Lee Reply:

    Sebastian Loeb. 8 going on 9.

    [Reply]

    Sebee Reply:

    Figures that Loeb would end my small dream of F1 having the only 7 time champ.

    Now if there was ever a combination of driver/car in a series that caused manufacturers to withdraw – Loeb is it. He’s so dominating that not only do I forget to watch WRC, I forgot WRC existed thanks to his steam roller ways. I’m shocked he’s only at 8!

    It’s a good time for me to be named Sebastian. Seems Sebastian club memebers are champions in motorsport everywhere. Need a Sebastian @ LeMans…

    [Reply]


  28.   28. Posted By: red
        Date: August 26th, 2012 @ 4:16 pm 

    I think that at this time spending needs to come down (obviously) but the thing that worries me is the way that the FIA is trying to cut costs. The best example of this for me anyway is engine development and limiting the engine rpms. Obviously don’t give mercedes ferrari and renault unlimited budgets, but say each manufacturer gets a set budget to spend on engine design and development. F1 just needs to avoid becoming a spec series while all of this financial “stuff” is going on

    [Reply]


  29.   29. Posted By: Christopher M.
        Date: August 26th, 2012 @ 8:26 pm 

    “Teams will always call for more money, while the sport’s owners will want to keep as much as possible.”

    That statement is the crux of F1′s problem. Why is it that F1 is a for-profit enterprise for FOM/CVC? Ideally, FOM would serve the purpose of managing and marketing the sports (hence, Formula One Management). As it stands, FOM’s job is to generate as much revenue as possible for its owners (CVC and the other entities that have come to own shares). FOM takes from the tracks, takes from the television rights, and technical partners. A fraction of that should be able to pay FOM operational costs (not to mention FOM doesn’t even market or have a marketing department). The majority of that revenue should be divided amongst teams, and television revenues should go back to the tracks to keep them financially viable.

    The fact that much of the pie goes to shareholders, and the rest to the teams makes for a financially untennable situation for those left outside of those two bodies.

    Additionally idllyic:

    For the teams, sponsorship revenue + prize money from FOM should be more than enough to finance a grand prix team, with room to turn a profit.

    For venues, reduced FOM fee + gate (with tickets at a reasonable price) + local government/private funding + percentage payout from FOM television renevue should be more than enough to finance the operations of a track, with room to turn a profit.

    Create a platform in which teams and tracks can break even or turn a profit, and you’ll have more teams and more tracks knocking on the door to participate.

    [Reply]


  30.   30. Posted By: JoeP
        Date: August 27th, 2012 @ 3:50 pm 

    Why would a team that could otherwise afford to outspend its competitors year-in and year-out agree to the restriction of the very resources providing it with a competitive advantage, if it’s in no danger of losing access to those resources by failing to secure/renew sponsors?

    If a team is adept at marketing itself and its sponsors (almost one in the same), and it can consistently find and sign-up high-value commercial partners that derive value from their association with the team and placement in the F1 milieu, what incentive do they have to curtail the practice and effectively give away a portion of their competitive force?

    By its very nature a resource restriction agreement cuts against the massive spending of enormous sums of money sufficient to attract the beautiful people to F1 who make it such a glamorous and exclusive sport. The last thing F1 needs is the kind of democratization that will result in the replacement of the fabled denizens of Monte Carlo with the fat, disgusting, piggish-slobs who chunder their way through Indy and NASCAR in the States.

    [Reply]


  31.   31. Posted By: Lewis
        Date: August 28th, 2012 @ 5:32 pm 

    Where does the $600m – 690m come from?
    Sounds like a very high annual figure.

    TV rights must only make up about $300m at most, so that leaves the rest from the circuit fees?

    [Reply]

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