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Tom Brooks: How can Formula One be rescued?

  • Published on 06 Nov 2014 13:29
  • comments 2
  • By: Tom Brooks
Formula 1 is a bit of a political mess at moment, we've had the demise of two professional teams, with many others struggling to stay afloat also, and it's mainly due to money.

For sure it's going to cost money to go racing, that's a given, but why is it so expensive? Formula 1 is perceived by many to be the pinnacle of Motorsport and yet when the grid takes shape at Austin later today, there will only be 18 cars on the grid. Compare that to the likes of the British Touring Car Championship, which is at capacity and often has between 25-30 drivers of a weekend.

Indeed, one can also compare it to F1 in the early 90s where around thirty teams would rock up to a race in Australia or America, but with only 25 grid positions available, over half would be thrown-out following pre-qualifying.

So, why has that changed? Well, the Andrea Moda's and the Life's simply couldn't afford to survive as Formula One evolved into what we know it as today. Costs spiralled out of control in the mid-to-late 90s as the sport became more professional, demanding more equipment, personnel and sponsorship. Entry fees soared through the roof and only teams that had the serious financial backing of a major cigarette company or airline seemed to be able to play the game.

The professionalism was good for the sport, no longer was it seen as a series where any Tom, Dick or Harry could turn up with a car that was a poor excuse and just trundle around the back of field for the weekend. The FIA meant business, and that's how things have been run.

The origins of the ever-increasing costs of Formula 1 in this day and age can ultimately be traced back to the Concorde Agreement that was signed in 2009, where Max Mosley was still President of the FIA.

Mosley was in the scene of controversy at this time for his private life encounters, regularly making the front pages of newspapers and being constantly harassed by the media. Despite the extreme regulation changes to the cars in 2009, Mosley wanted more change for 2010, as did the FOM.

There were only 20 cars on the grid and with a proposed budget cap of €40 million for 2010, teams and drivers were in uproar at the changes and the future of the sport if it occurred. A breakaway series was threatened by the Formula One Teams' Association and even a provisional calendar was released to demonstrate their intentions. Needless to say, the FIA backed down and scrapped their plans, securing the future of the sport for the foreseeable future.

That was all well and good for the established teams, however for the three new entrants in 2010, it wasn't the news that they were hoping for. Hispania, Virgin and Lotus Racing were the new teams and it was widely known from the outset that they wouldn't have the budget of the larger outfits – the cap was the equaliser that they were wishing for, in order for the cars to be designed on a more level playing field and therefore closing up the pack during races, whilst increasing the the number of entrants in a race.

Due to the aforementioned reasons, this didn't occur, and with general costs in Formula 1 at around £75m just for transporting the cars and team to the 19 races across the calendar, it is certainly a rich man's game, that many are struggling to play.

The story of Caterham, Marussia and Hispania

Lotus Racing, or Caterham as they were known from 2012 onwards, appeared to have the best chance of success in their opening seasons, with the backing of several highly recognised firms, as well as Team Principal Tony Fernandes' AirAsia airline company playing a major part in financing the team.

Virgin too looked to be in the pound seats, with Richard Branson's billions financing the team and a rather uniquely designed CFD chassis for their debut season, as well as a reputable technical department, the organisation and backing was certainly in place. Following the Marussia merge in 2011, and then buyout in 2012, it gave the team a new Russian identity and hopefully increased sales for their sportscar manufacturer owners.

However, the increasing costs of the sport were even too much for these seemingly financially secure teams. Their fellow new team, Hispania, dissolved at the end of 2012 due to the increasing costs of the sport and their general disorganisation and instability as a team.

It wasn’t until this year that it became apparent that Caterham and Marussia were in financial meltdown.

Caterham’s demise has been somewhat more public than their counterparts. After Tony Fernandes put the team up for sale part-way through the year, it was purchased by a Swiss-Middle Eastern consortium, of whom Fernandes had never met before. The role of Team Principal changed from Cyril Abiteboul to Christijan Albers, and staff were laid off in order to cut costs.

Even following the buy-out, rumours began to float around that the Leafield-based outfit were struggling to pay the bills and debt that Fernandes had left the team in, and that the cash-strapped team would not make it past the British Grand Prix at Silverstone.

However, following a series of pay-drivers with Andre Lotterer’s Hype sponsorship allowing him to replace Kobayashi at the Belgian Grand Prix and the Spanish Formula Renault 3.5, Roberto Merhi driving in place of the Japanese driver in several Free Practice 1 sessions, the team appeared to be in financial meltdown once more.

Christijan Albers left the team following the Italian Grand Prix, again throwing the team into uncertainty. Manfred Ravetto then took the helm, and intended to reorganise and restructure the team with a relatively long-term plan.

But, by then it appeared to be too little too late. With no title sponsor following the departure of AirAsia, as well as other minor ones packing up, as well as legal action from the aforementioned staff that were dismissed, it was a bleak period for the team that was made worse when it was discovered that Tony Fernandes was still legally the owner after the consortium, known as Engavest SA, had not paid up. This caused outrage amongst many within the team, none moreso than Fernandes, who tweeted this:




Marussia too, have not had things easy over the past month or so. It originated at the Belgian Grand Prix, after Max Chilton was announced as being replaced by Alexander Rossi for the race due to ‘contractual issues’. These issues were essentially the fact that Max’s money was yet to come through; the team were already strained financially following the collapse of Marussia Motors in May and without Max’s vital money, Rossi would have to step-up to the plate just for the team to be able to complete the weekend.

As we know, Max’s money did eventually come through and he assumed his normal racing position for the team, with everything appearing to be stable once more.

It was the unfortunate crash of Jules Bianchi's that sent the team over the edge, however. There was an incredibly short turnaround between the Japanese and Russian Grand Prix, and with respect to the best wishes of Jules' family, the team opted not to run the second car at Sochi.

This was of course the best compromise for both parties. However, Bianchi's sponsors were not willing to pay if they were not receiving the media coverage.

Some seem to forget about the sponsorship that Bianchi brings to the team; let's not forget that he replaced Luis Razia prior to the start of 2013 due to the Brazilian's financial difficulties, giving reason to believe that Jules' has very deep pockets too.

It seems to be a very cut-throat way of handling things, given the circumstances. But sadly, business is business, and some are only interested in the finance.

However, it's not just the newly-established teams that are struggling. We know that Sauber have been in the 'dog-house' as it were since last year, after the Russian teenager, Sergey Sirotkin was drafted in to pump his many millions of rubles into the team, with the expectation of a race seat in 2014.

Of course, that didn't happen, but he remained as a test driver, therefore giving him time in the car and keeping his sponsors happy.

But the Swiss team have endured their worst season since their inception into the sport in 1993, and have not scored a point to date, meaning that Marussia, who have scored two, are currently ahead of them in the Constructors' Championship, which could give the team a healthy €35 million return at the end of the year and although this would not be enough to 'save' the stricken outfit, it would certainly help a great deal.

Force India too are struggling, Vijay Mallya's Kingfisher beer enterprise is in deep financial difficulty and a potential alcohol advertisement ban, should it come into place, could prove to have great effect on the British-based outfit. Spare a thought for Williams too, with their Martini backing.

Solutions

So, what can be done if these teams go under? Or, more importantly, what can be done to prevent it?

Well, it's a matter of opinion, really. For sure, I agree that Formula One is important, not only for the billions of fans worldwide, but for the economy as well – back in 2011, the sport generated over $1.5 billion in revenue across the year, which I think anyone will agree is quite a sizeable amount.

There is of course the argument for three-car teams, which would of course level the playing field and potentially allow teams to have two established drivers, as well as one ‘development’ driver for a weekend.

The problem that this creates, however, is that it could potentially over-stretch some teams’ resources. Think about it, the likes of Mercedes, Ferrari and McLaren could probably afford to; but who else?

Sauber certainly wouldn’t be able too – they’re cash-strapped enough as it is, and that is evident in their two most recent signings of Marcus Ericsson and Felipe Nasr, who both bring a fair few millions euros apiece. Force India too, for the aforementioned financial reasons of Vijay Mallaya. I should imagine that Williams would also be pushing it, despite their backing, and what about Caterham and Marussia should they find buyers? Forget it.

If you find that hard to believe, Ferrari’s racing budget for last year was £250 million, Red Bull’s £235m and Mercedes and McLaren’s a mere £160m in comparison. Compare this to Caterham’s £65m or Marussia’s just £51m, and with costs of running a single car in the sport at around £20m, you can see the problem. However, if Bernie decided to eradicate five of the zeros from those numbers, and it might be more viable.

The other problem that three-car teams creates is that, given the dominance of Mercedes this year, it would be highly likely to see a Mercedes (or another team if they step up their game) 1-2-3 podium lockout.

Now, whilst that would keep Dieter Zetsche happy I’m sure, the fans would probably not be. Although we’ve had some great racing with Nico and Lewis’s duels this year, it would probably be a fair assumption to believe that Mercedes would prefer to play it safe it they were in a 1-2-3 scenario and opt for their drivers to come home with maximum points as opposed to none, which would cause viewers to become uninterested and switch off.

That brings me onto my second question, what can be done to prevent these smaller minnows from falling into obscurity? This next part, I should state, is going to be entirely opinion-based.

Personally I believe that a budget cap is the main viable option for Formula One’s future. Sure, there will be people who argue, stating that “F1 should be about pushing everything to the maximum, I don’t want to see a spending limit!” For sure, they have a valid point – it’s a rich man’s sport and some believe it should stay that way.

But if, say, a cap of Є40m was put in place (the original proposal for 2010) then surely it would level the playing field somewhat.

Okay, I understand it’s not quite as easy as that, as there will be teams that just have better resources to start with. For example, McLaren and Ferrari can afford a more successful designer than say the likes of Force India or Sauber. But, if they’re all working to strict budgets, then it would be a case of who can innovate more and create the more successful package, whilst not blowing the bank. There’s also the added bonus of perhaps an ambitious design paying off, a-la March’s 881 or the F-Ducts that sprung up in 2010.

Just think. If a team that is down on its luck this year, could produce a car that could potentially be a world-beater, within the next couple of years all due to limiting the amount of money that is put into the design and development. Surely it would increase publicity for the sport and allow teams to continue racing closely throughout the season, due to the lack of significant development, which would in-turn increase the footfall at race events as well as viewership, allowing the FOM to create more revenue per annum.

It’s a thought, though a long-shot, I admit. But I do think that a budget cap is the way forward for the sport, otherwise Formula One will only end up digging its own grave.

Thank you for reading.

Tom Brooks
UK Editor

Replies (2)

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  • jimac

    Posts: 30

    Nobody seems to be mentioning it, so I'll bring up the elephant in the room.
    Formula 1 is too expensive because of the huge amount of cash CVC take out of it.

    • + 0
    • Nov 6 2014 - 21:22
  • I can't disagree with Mr. Brooks' conclusion, but suggest that discussion of an annual cap amount will likely have to begin at much more than 40 miilion Euros, perhaps twice that amount. I believe that I read some months ago that Sauber has figured its fully-burdened cost for each F1 car entry at around $40 millions - to cover FIA and entrance fees, travel, driver contracts, pit crews, R&D, tires, parts and fuels, home office expenses, etc. etc. AND the PU unit costs charged by Ferrari in 2014. In fact, the Ferrari charges were a huge shock to Sauber which didn't expect anything that high, but what could it do? It had chasses ready to go, and needed PU's to race them. It wasn't until later that they - like the rest of us - learned that those new Ferrari PU's were 2nd rate at best, despite all of the vaunted expertise, time and money invested by Ferrari (without budget cap) to design and build them. And that's a point - performance of purchased PU's - that falls outside budget capping, but that can cripple a customer team just as surely as budget explosion. How do you handle that?

    • + 0
    • Nov 7 2014 - 07:25

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