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F1 budget cap back on the agenda, but top teams still set against
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Posted By: James Allen  |  02 Apr 2012   |  3:15 pm GMT  |  108 comments

Over the past couple of weeks the majority of F1 teams have reached commercial agreements with Bernie Ecclestone to stay in the sport until 2020. Next will come a process by which other details of the next Concorde Agreement will be generated.

One of the most important aspects of securing a stable sport will be agreeing the best method of cost control going forward. Ecclestone has been pushing recently the thorny subject of budget caps and it’s interesting to note that on the official F1 site today, Sauber CEO Monisha Kaltenborn endorses the idea.

Kaltenborn says that the Resource Restriction Agreement, which was put in place by the teams at the end of 2008 when the economic crisis hit and which ultimately led to the break up of the F1 Teams’ Association, because of disagreements over it, has served its purpose to this point. But she added that it’s not the right tool for the next step,

“We now have to evolve it to the next step, and in my view the future should indeed lie in some kind of budget cap under which each and every team could do what they want to, because we all have different strengths,” she said. “Looking at our team, for example, we have a good infrastructure and a good wind tunnel, so it would allow us to benefit from that. Others have other assets.

“Overall I think it would make Formula 1 more interesting as it would also mean that we would all use different strategies and take different approaches to the business and the sport.”

Of course different approaches are what we have at the moment anyway, with Ferrari a completely different type of business from Red Bull Racing, which in turn is different from Sauber. And for this reason it’s very tricky to square the circle and find a ‘one size fits all’ cost control mechanism.

What is interesting about Kaltenborn’s interjection here is that Sauber is politically very close to Ferrari – always has been – and yet is pedalling an idea that is very much against Ferrari’s interests. Ferrari was so against the budget cap idea when it was put forward by then FIA president Max Mosley in 2009, that it was prepared to breakaway from the sport rather than accept it. Part of that was Mosley’s methodology – and it’s worth noting that this time around the agreement of the majority of teams has been reached with hardly any fuss or polemics, which team bosses tell me, has a lot to do with Mosley not being part of the process.

Ferrari does not agree with budget caps because of the difficulties inherent in policing them and because a cap is hard to define. The larger teams are always going to push back on the budget cap idea because they have invested heavily to become bigger and that’s where their competitive advantage comes from.

Kaltenborn’s wider point is that the big teams need to think beyond themselves and remember that without the midfield teams the spectacle of the sport would be greatly diminished. It’s an interesting moment to raise this point because the commercial rights holder has now reached agreements with most of the F1 teams, with the exception, as I understand it of Mercedes and a couple of the smaller teams. So those who are in, are in it for quite a long time and their income has increased under the new deals. Whether or not they can be sustainable and even profitable is down to cost control. Mercedes are important to the sport for a couple of reasons; they bring prestige as one of the world’s leading car brands since the invention of the internal combustion engine (which they had a hand in) and as a supplier of engines to a quarter of the grid.

“I think by now even the big teams should appreciate that Formula One with four teams would not be overwhelmingly attractive to fans,” said the Sauber boss. “That would be a very wrong message. So my hope – and I have to say that most of them have already supported the RRA and have now signalled that they would give their support to taking the next step – is that something is happening very soon.”

The discussions on the best way forward are ongoing. Ideally it would be good to have a way forward agreed for the start of the 2013 season.

There is some support for focussing spending limits on the ‘tangible’ elements, like the number of updates each team may make per year, but Red Bull believe that the RRA ultimately failed because of the impossibility of measuring ‘intangible’ things, like how much support a manufacturer backed team gets from the manufacturers’s off-site resources.

Putting the RRA into a new structure whereby it is managed by a third party and subject to arbitration in the event of dispute is the logical next step – it’s being discussed now – and one that sounds like it is agreeable to Ferrari, but Red Bull and its sister team Toro Rosso need some persuading.

A budget cap remains a step too far; however much the midfield and backmarker teams might want it.

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1

I always felt the budget cap was an intresting proposal although felt the figure Max Moseley suggested ($40m) was a bit too low.

I felt it was intresting because rather than simply having the richest teams able to spend the most to gain performance, You would have everyone have the same budget & you would then see the cleverest design team come out on top rather than the richest.

Go back a few years & remember that Brawn GP’s double diffuser concept was proposed & designed by someone at Super Aguri A team that woudn’t have had the budget to really develop that idea even had they survived into 2009.

There are people at the small teams with some very innovative ideas who simply don’t have the budget to really look into & develop them. Budget-cap of some sort would start everyone out equally & those with the best ideas would come out on top or at least have a better chance of moving forward rather than slipping back.

2
Quillan Rogers

Just quickly James, what is Mclaren’s stance in this? They have been very quiet so far, I did see that last race they were one of the teams that had agreed. Other than that though, they seem pretty quiet.

3

Whitmarsh attended the RAC Club lunch last week, showing solidarity with the Bahrainis there. Apart from that no word, as you say

4
Quillan Rogers

Thanks James, they are usually quiet with these sort of things. If memory serves me right they were also very quiet when FOTA was going head to head with Max Mosely in 2009 too.

5

Budget Cap = Less development and upgrades = Slower cars

I fear F1 becoming a spec car, but then again the true colours of driver talent will be exposed. Look at what’s happening to Vettel. Maybe it’s better, I’m not sure. It’s still good at the moment so I will be following F1 until it tells me not to.

6

A budget cap does not make sense for those who invest more money and the why is very clear. If all the teams spend the same money then when new rules come everyone will be starting exactly from the same point. The very good f1 engineers are more than enough for many teams which would mean that Ferrari and the rest would not be able to just have a better car anymore as they would not have better people from the midfield.

A more competitive f1 means less money for the top teams. So I do find it strange that teams like Maclaren or Ferrari agree for a budget cap and makes me wonder which ways they have found to protect their competitiveness.

7

If F1 was structured something like Indycar where each team is independent and each pays for an engine deal etc from a third party (rather than a competitor), then I could see a budget cap being workable, but I dont see how it can work when some teams design/develop/make their own parts such as engines and gearboxes, whilst others buy from those competitors.

Mercedes, Mclaren and Ferrari etc supply customer engines/gearboxes partly because it helps them spread the cost of development so they’re partially financing the development by selling those parts and services to the third party. Assuming money they earn from a sale of parts can’t be added to the capped budget, if they can’t offset their costs in this way they’re either going to stop selling customer parts or charge the full development cost to the customer team so that both the works team and the customer team have to allocate the same chunk of budget to the part, either through development cost or by purchasing off the shelf.

The only way round this that I can see is if Ferrari / Mercedes / Mclaren etc break off their powertrain development arms into seperate companies that operate outside the budget cap. These become suppliers to F1 and all teams, including the works teams, become customers of the power train companies buying the parts “off the shelf”, but are they really going to want to do that?

8

I would like to see a budget cap introduced gradually over 5 years. So freeze teams budgets as of 2012. Then reduce this by a percentage each year, until the maximum budget is €100m

That won’t effect anyone other than the top teams, it would make for better racing though.

The rules would also need to be relaxed too. i.e do what you like as long as you don’t come over budget.

The truth is though a buget cap can’t work.

How could you stop Fiat selling selling engines to Ferrari for €1 while customers have to pay €5m?

9

A rule that cannot be enforced is a tiger without teeth.

Even if the FIA was monitoring each team’s accounts, the teams would then outsource work and costs to their “technical partners” and Sponsors, who would pay less to nothing for the stickers on their car, but support the teams with development effort from their side. And you can’t really control the acconts and amount of research that these “suppliers” do. McLaren would then get their Aerodynamics shaped by “Vodafone Aero Parts inc.” for pocket money and a Vodafone-sticker, Ferrari would have a ‘Marlboro-Performance-Suspension Systems’-Chassis with Santander-Winglabs-Aerodynamics. You get the picture. Sauber would probably get Telmex-Engines (built by Ferrari) for virtually no money.

I’ve seen things like that for things like tax evasion and alike, where companies spun off several small companies (sometimes even staying on the same property) to get benefits for small companies rather than having to suffer the duties of larger companies. A budget cap is a nice idea, but slightly naive.

10

Interesting comment about Sauber being politically ‘very close’ to Ferrari after what happened on the track last time out.

Was all a bit suspect if you ask me.

11

As someone who spends half his professional life dealing with lawyers I should point out that they are great on ideas but rubbish on numbers. How the budget cap will be audited and enforced is mind boggling. There will be so many little backhanders, favours and accounting tricks that the sport will turn into a competition between accountants.

ps Tch tch Mr Allen, spellcheck victim! I think you will find that you peddle an idea, you don’t pedal it.

12

Mon Pen, BINGO!!!

“Lawyers In Love” comes to mind.

13

Yes, we call that “Hollywood Accounting” and it is an art in itself.

14

Thanks for that!

15

You could cut F1 costs Easily, a standard aero pack front wing , rear wing and underbody. No stick on bits like we have now, limit the amount of stuff that can be taken onto the grid to the amount one man can carry. Abolish telemetry or at least the stuff that goes back to base in real time. Give each team a much smaller amount of space in the paddock and limit the amount of vehicles in use.

If teams want in season testing then organise a race for third drivers at the end of testing and let the public in, you then get subsidised testing.

None of the above would affect the spectacle much and costs would be reduced.

16

Slowly the focus is moving back to Max Mosley’s original proposition. He wanted a budget cap, enforced by ring-fencing the team’s accounts and monitoring cash flow. Simple.

No need to measure wind-tunnel hours or whatever. It would probably mean that a lot of complex regulations would disappear. Indeed more leeway could be allowed in some areas because the budget cap would naturally limit at team’s scope and they would have to decide what avenues of development to pursue.

Max was quite confident that the cap could be enforced by FIA because of what auditors had been able to uncover at McLaren in 2007 when it was necessary to establish the provenance of various developments on the 2007 and 2008 cars.

17

James – I always read the pieces on cost containment/reduction etc with interest as it is a worldwide motorsport issue albeit with varying numbers of zeros attached…..

It’s hard to enforce spending caps away from the environment that is not controlled, i.e. away from the race track. However, at the track there is surely big scope in F1 for reductions in spending without going near the cars themselves. We have had a series of caps of a similar nature in V8 Supercars for a number of years and they’ve worked for us. For instance:

1. with the calendar now biased to non-European events there is less justification than ever for the huge team hospitality units. They only get used for half or less of the races yet take multiple trucks and personnel to transport, erect and run. Teams could instead collectively contruct an upmarket marquee arrangement that is the same for everyone at all the venues – rather like the one used by all at the Australian GP. Saves money and also stops the pointless pissing competition.

2. limit teams to two trucks per team at races with a single truck per engine supplier in addition. That would limit the truck costs, running costs and also the amount of “stuff” that teams could bring to each race.

3. impose a strict (low) ceiling on all freight allowed at overseas events whether shipped by air or sea. Ban the transport of parts as “hand baggage” except in exceptional conditions. Very good V8 Supercar rule by the way when we fly to NZ.

4. impose much tougher rules on the number of personnel allowed at races. When V8 Supercars introduced this we all said we couldn’t live with it….but we all adapted very quickly and now we “save ourselves from ourselves” by having to work within the limits.

5. ban external communications outside the race track during actual on track activities including the races in order to stop teams running strategies etc from afar.

I’m sure there are other peripheral things that could be limited that don’t in any real way affect the experience for tv viewers and spectators.

18

The money that the teams saved there would be put into delevopment I guess.

Let’s assume a budget cap won’t work anyway, why not change the angle of attack on the problem?

Would there be a way to make small teams on a rather small budget highly competitive, so spending half a billion bucks on development won’t buy you an advantage big enough to make sense?

Here’s a glamorous idea: Place weight into each driver’s car according to the driver’s points or championship position and give him the weight in gold at the end of the season.

100 kg of Gold are worth about 4 million Dollars, which is a reasonable price money for a Formula 1 champion.

19

Thanks very much for your contribution, Roland. Good to see you here.

20
Craig in Manila

Agreed.

I think F1 would be very wise to seek input from people with the experience/background of Roland (assuming that he is who I think he is) as many individual motor racing formulae will have cost-reduction methods already in-place that could easily be taken-up by F1 with (I would think) minimal kickback from Teams.

Simply saying “Thou shalt not spend more than X-million per annum” aint gonna work !

21

A resource restriction agreement with a budget cap seems hard to police. People could get special deals where you get supplied some for a special price, in exchange for ads on the car, or even free where as other could pay for it.

I like how they have restricted test days, engine and gear box usage, wind tunnel hours as that hasn’t affected the racing. More measures like this would eventually reduce costs in staff and consumable parts. Its not directly addressing costs but a way of getting around it, where many parties could agree.

Some people would argue the case differently, however this is just my opinion on the matter.

22

As far as I remember, Max Mosley didn’t initiate the budget cap. Ex-BMW F1 boss Mario Thtehthesian (can’t spell his name) initiated it and Max just took it as his own work.

Worst of all is Mario initiated the thing and closed down the F1 operation and left everyone all arguing about it.

So not only Mario stupidly made his team lose out in 2009 on not focusing on Robert for title chase, he also made stupid ideas that didn’t work for everyone.

23

As far as I am aware, Mario didn’t close BMW’s F1 operation, he was dead against closing it – BMW’s board, possibly top management made the decision.

24

Yes and if he had listened to Kubica and chased for 2008 title rather than leave it for the following year which ultimately failed then BMW wouldn’t have considered in pulling out.

So in the end it was Mario’s utter stupidity and bad management.

25

Not sure why some people think that a budget cap is impossible to police. If it seems so difficult then why not use a method that has been proven to work elsewhere. Impose a salary cap for drivers/mechanics/factory and management. All of the major North American sports have salary caps that work well and are easily monitored. If you cheat you go to jail for tax evasion. Teams with good infrastructure will be able to do more with less people.

Then give the teams a maximum amount of fuel for the season, all races and testing. Teams with more fuel efficient engines and better ERS will be able to do more testing than the others. A team that has a serious technical issue that knocks them out of a race will have fuel left over to test and resolve their problems.

And give them a maximum amount of kW of energy to run their wind tunnels. Aerodynamicists will learn to better utilize small scale wind tunnel testing. A 50% scale wind tunnel test will take slower wind speeds than a 60% or full scale test. Or some teams might choose to do limited full scale tests. It will be up to the teams to decide.

Of course some teams will be able to waste more money on materials or high tech gizmos but without extra people they won’t gain much. Teams could also run lean and farm out the building of more wings and use 3rd parties for testing but in that case there would be no competitive advantage as all the teams would have access to the same 3rd party firms.

Maybe not perfect but if there was a will from all the teams I’m sure that someone would be able to develop a plan that worked. Or at the very least would ensure that “cheating” would be in the direction of testing while using less fuel or running wind tunnels with less energy consumption or supporting younger/cheaper drivers in order to put more money into designers or hiring younger designers for less money to be able to afford a championship winning driver.

26

I’m not really in favour of a budget cap, but would rather see a discentive for spending money.

Pick a figure. Let’s say $200m. For every $1m over that figure teams spend, the cars minimum weight requirement will increase by 1kg.

That will quickly encourage them to spend less.

27

How do you think you could evaluate the spending and whether it’s a supplier’s/technical partner’s/sponsor’ or a team’s dollar spent on development?

As I team I would give Vodafone some confidential data and they would pay Eibach or Monroe for a bit of development and donate the result to me as part of their sponsoring. And being asked by the FIA controllers, I would say: “I don’t know how much they spend on it, they (Vodafone) pay it and have it developped by someone I don’t know, we’re just being sponsored.” Problem solved.

28

Formula 1 will also have a new logo. A red background with a hammer and sickle on it. Money doesn’t always buy success, look at Toyota. Ferrari and Mclaren do spend alot but they know how to use it and have built up to this position throgh decades of dedication to the sport. HRT etc should stick at it for 20 to 30 years and they can prove through progression they are worthy of increased investment then one day they may have a big budget and know how to use it.

30

Here’s what I’d like to see:

1. Remove the restrictions from design. Outside of engine size, four wheels and weight, allow the teams to design whatever they can think of that will win the championship. This way, we can go back to the days of the best design will win.

2. Introduce a tiered spending cap. The big four teams have a lower spending threshold than the smaller teams. That way, for example, if a small team can get a hold of $45 million, they can spend it all if they want to. If they win the championship, then the earnings of FOM money might place them in a tier where they can’t spend as much.

3. Engine suppliers have a frozen formula for 3 years. This way they can recoup their investment whilst also planning future improvements that can introduce green technology into the sport.

These are some random thoughts while I’m sitting at my desk avoiding work. I think F1 needs to shake things up and I like the idea of a new concept being able to be created outside of the current regulations. Would Colin Chapman been able to create the Lotus 71 or Patrick Head the FW7 under today’s restrictive climate?

31

1. Get G-forces and cornering speeds that are unmanageable by drivers. You want them to faint in the middle of a fast corner? Also: Where do you put the crash tests and mount points and other security features, such as crane and camera mounts into the equation? How do you think that would limit the costs for aerodynamics? And what makes you sure that the cars don’t snap in the corner, when the aero gets out of balance on bumps, like the wing cars occasionally, especially when the skirts got stuck in a raised position.

2. How do you think you could enforce that facing strategies like outsourcing?

3. The current formula is already frozen and will be for more than three years until 2014´, the return of the turbo era.

32

As a business, why shouldn’t you be able to spend what you want. On the other side is sustainability. I think back to when there was pre-qualifying to see who would be able to enter the qualifying session itself. It isn’t that long ago but teams were in abundance. If you don’t have some form of budget restriction new teams will not enter. Motor manufacures come and go and I doubt Mercedes are in it for the long haul. HRT get alot of criticism, and rightly so, but compare their budget AND performance to that of Red Bull, are they as bad as they are made out to be?

The teams themselves couldn’t manage the RRA, partly because Red Bull flouted it. Red Bull don’t want the FIA to manage it because they will be caught flouting it again.

I wonder how much Red Bull spent on their flexible front wings. That alone must have run into millions.

In the interest of attracting new teams, there has to be some sort of budget restriction. One thing I do detest is teams flying out parts on private jets etc. If you haven’t got it at the circuit, go without.

Here’s a thought, pro rata the prize money according to your budget. The smaller the budget, the greater the prize money. So if a team with a 50 million budget scores a point, that points earns them ten times more prize money than a team scoring one point with a 500 million budget.

It might make some teams become a bit more realistic.

33
Sterling Mindenhall

James: Perhaps Sauber is still being loyal to Ferrari. It’s not a stretch to extend her reasoning to Ferrari being able to once again take advantage of Fiorano.

34

How about increasing the budget cap for certain teams just as they do for distributing the profits from the TV rights (older teams allowed more) and based on the finishing position of the teams in the constructors championship.

This would at least allow some flexibility to keep the majority happy.

35

Ferrari have a point, it will take 3 years of investigation of teams accounts, purchasing, personnel and outsourcing records to determine if they are keeping to the budget cap.

The teams are very successful at circumventing the Tech and Sporting regs, so there is no reason to suppose they will be any less devious with financial regs.

36

Not surpising that the larger teams are against budget caps. Not surprised smaller teams are in favor either. It’s just like in football. Ofcourse smaller teams would like to see a budget cap. Afterall they don’t have as much money as the bigger teams so it would serve their benefit to remove the limitation of money and ofcourse big teams are against it for the opposite reason.

However just like in football, I don’t think a budget cap in F1 would work. Besides the fact that there is no way of policing the budget cap, how about teams buying tech or teams that develop engines? What would be a fair budget for Force India that just buys a mclaren back end for their car? What would be a fair budget for teams that develop their own engines? Or how about teams that buy a engine from a company with no team in F1 (cosworth/renault)?

Besides that, its also against the nature of F1. F1 has always been about developing the fastest car you can. With all the rules in place these days adding a budget cap would mean you might as well turn F1 into a specced series and just get over with the whole argument of on team having a better car than others.

If any they should fight against the money spend on aero. F1 cars are cars, not upside down airplanes. Yet most of the budget is spent on aerodynamic wizerdry along with all the downsides of cars not being able to pass and having to use DRS like devices. Just settle for simple aero like in the early 90’s (would make cars look better too) and let them use ground effect again.

Then allow them to start spending money on things that actually matter like engine development and better energy recovery systems. If the FIA really cares about F1 being ”green” allowing teams to invest in such tech would be much better. It would also be much more relevant to car manafacturers as they have 0 benefit from designing a F-duct, dubble decker defuser, front F-duct or blown defuser. However building high performance, fuel efficient engines with highly efficient KERS DOES have real world benefit.

37

DuDe I’d love an F-Duct on My Car, think about it cruising down the Highway and I ca’t get past a little old Lady who is driving the same spec car as I have, but low and behold i move my knees/hand to bloch a hole in the chassis/cockpit and zoom BE-BYE granny F-Duct Away. Or Or a double decker dffuser, picture this an M3 flys past u and all uhave is a 318i (with a Double Decker Diffuser, maybe even the EBD) I’d nail that M3 in the bends. Maybe even DRS would help me to get past PESKY GrANNY as long as I can get within the 1 second window and then ZOOM. And what about Stepped Noses on your FIAT so that when u T-Bone someone at an intersection you dont cause too much damage by having ur Bonnet inside his Car.

DUDE all these innovations are very much road relevent we just don’t want to embrace them.

instead of fettling with your engine just shed drag, save fuel.

38

I think I had a bit of an epipheny today….I have always followed th eline that F1 leads to passenger car development and innovation and that the rules should lean that way.

But in reality most of us watch F1 for the innovation and excitement it brings to the sport, not to the eventual filter down thery.

As well as the fact that the real innovations come from left field development, the more restrictive the rules are the less unique or valuable will the “new” concept be.

In an era of ridiculous, blown out budgets etc, somehow we need to encourage innovation and magic. To a certain degree f-ducts etc do this within the bounds of the fairly tight rules….if the rules were looser but the funding restricted I can see innovation becoming the most valuable commodity rather than hudreds of millions of dollars and man hours in fine tuning and refinement as we see currently….

For all the moaning of RBR’s “front wing” and mercedes f duct, these are the things that add the spice and intrigue to the sport we love…

Does anyone know how RBR wing worked even now?

Magic!

39

Thank god Max Mosley is gone! Jean Todt may not be the most astute of politician but he has restored the teams faith in the FIA.

Looks like they will get an agreement this year and we wont waste the summer talking about politic instead the fantastic racing we’ve had and will have.

I hope Mercedes doesn’t leave the sport, It would make a big mess of 2 top teams.

40

It is a no-brainer. Say they cap the budget to 100m$/year, forget about policing, the sheer experience,ability to attract the best talents and drivers by the virtue of brands will make sure that the current top 5 teams will remain in top 5. Just because there is a budget cap, does anybody here think HRT or Marussia will beat Mclaren and RBR ? No. We have enough artificial restrictions on F1 that has curbed its technical side. If they allowed free development on engines but limiting the fuel available, it could have led to new innovations. The sooner Bernie retires ( he is 81, how long does he wants to stand around?), the better for F1.

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