It’s time for the FIA and FOM to get tough with the teams

budget

To budget cap or not to budget cap – THAT is the question.

The arguments on both side of this debate have raged for what seems like an eternity.

Those against this proposition believe that teams with associated automotive manufacturing operations can secretly conduct their R&D away from the Formula One team both physically and without financial impact on their officially stated expenditure.

However, proponents of this viewpoint argue that self-regulation together with sample auditing techniques will be sufficient to enforce budget caps to the extent that the costs of running a top Formula One team are significantly reduced.

TJ13 has previously revealed, when an engine manufacturer delivers a shiny new F1 engine into service, it is impossible for the FIA scrutinisers led by Joe Baur to know whether some illegal modifications have not been made.

When engine modification requests are made to the FIA under the safety/reliability mandate, the result is often that a peer review is conducted. The FIA canvas the other engine manufacturers who decide whether this application meets the criteria laid out.

When asked about the possibility of engines being illegally modified, TJ13 was informed by one of the manufacturers that the ‘fear factor’ of being discovered is a highly effective policeman in what is a self-regulating system based on honesty and trust.

So in a Formula One team, a budget would be set out for team’s total spend within a calendar year, and the final results assembled and then checked by an audit.

If team’s decide to cut expenditure in one area and increase it in another – it’s not a complex matter to adjust the numbers accordingly.

It would be pretty clear if a team had manufactured 45 new front wings in a season, that the spend for this item in the final accounts should be somewhere in the region of $4-5 million. If the final accounts state just $2 million, then ‘Houston – we have a problem’.

A team could lie about the number of wings they manufactured, but they can at present lie about the details of modifications made to an engine.

The point is that whilst there will always be grey areas – a budget cap of $150m would be almost impossible to balloon to $450m without some evidence being discovered.

If like Mercedes – a UK company claims to employ around 1600 people and declare their employment spend at under £24 million, then on average the numbers demonstrate that each person is paid just the minimum wage.  This of course would be highly suspicious.

Vijay Mallya is currently learning that inter-company transfers of assets and costs are not so difficult to unearth – if enough effort is made. Equally the arguments that Mercedes could make tens of millions of expenditure invisible in Stuttgart – is mere scaremongering.

Max Moseley is suggesting that teams who are prepared to sign up for a budget cap be granted a greater degree of design and regulatory freedom in exchange for the voluntary budget cap. Those who refuse, face a different a more stringent and restrictive set of design and technical regulations.

“I could imagine that very soon all the teams would be within the budget cap camp,” the ex-FIA president tells AMuS.

“They would realise that for 100 million, you could have great motorsport and build technically advanced cars.”

100 million what – is the question?  – Euro funny money, dollars or pounds? This makes a big difference.

Further even £100m would not be achievable immediately. However, a schedule of budget cap reduction – year on year – would also assist the teams who need to plan a reduction in the operations.

As doable as this seems – it fails to deal with the fundamental problems faced by the teams like Lotus, Force India, Sauber, Manor F1 and even Williams to a certain degree. The money they receive from FOM is below the survival line and the bigger teams cutting their ‘arms race’ like spending doesn’t help them one jot.

Conversely, if the teams refuse to agree this in the F1 strategy group, FOM and the FIA could agree to tighten regulations and restrictions enforcing for example just four new front wings allowed each season – and other similar constraints.

Love him or loathe him, Max Mosley knew Formulas One inside out – and still has a contribution to make in breaking this deadlock.

Mr Todt on the other hand….. [fill in the blank]

22 responses to “It’s time for the FIA and FOM to get tough with the teams

  1. I agree F1 could use a budget cap, but enforcement will always be a problem. Some teams will always push the limits of legality and beyond.

    • … but this would be to a matter of degree… It would be impossible for the bigger teams to spend three and four times the amount above the cap….

      Sometimes you just have to start the journey… and see where it leads…

      • simple. a few of the teams dump their entire budget into an fia account. zero gets done w/o a withdrawal. a new wing with no withdrawal equals a defacto breach and event exclusion. smaller teams simply make payments into their account. and I rather like the idea of a personnel cap too. nothing will be flawless, but…

  2. Come on, you must have worked out why there’s a push for a budget cap? If the teams are limited in their spending – Bernie will continue to get away with giving the teams peanuts.
    It’s no coincidence that the most noise is coming from Mosley, who was practically a siamese twin with the greedy little man. Restricting spending was a reoccuring theme once CVC got their mitts on F1, and every time it was Mosley attempting to make the changes. Have people forgotten that Bernie and Mosley shared an office?

    • I agree entirely.
      A cap is a sensible idea, but bringing it in absent reform of F1’s finances is stupid.

      Conversely, a cap might be made more attractive to the generality of teams if accompanied by an increased – and more equitable – distribution of the revenues.
      One might even then see competition to compete in F1.

  3. I have always been against any budget cap. If a team does things right, it will logically be more attractive to sponsors so, What if a team can raise much more money than the others ? Will it be deprived from the fruit of its work ?
    It is not only a question of money. Toyota and Honda used to spend fortunes but achieved very little !
    F1 has always been expensive. According to Colin Chapman : ” F1 costs as much as you can spend ! ”
    All this mantra about caps, equitable distribution of revenues ( based on what ? ) sounds bringing communism to F1 and we all know how it ended.

    • … @Zinho Efímero In an ideal world you are right. But Chapman was not having to spend 25% of his budget on engines. There is a minimum cost to competing in Formula One which is in like for like terms a lot higher today than in the 70’s when things were much simpler.

      A budget cap without a better distribution of funds to the smaller teams is pointless.

      • That is why, on another post a few days ago, I said that, given the enormous amount of money that F1 generates, FIA should embark on a project to build its own engines. This engine would be available to anyone at the cheapest possible price thus allowing small teams not to depend on large manufacturers, whom F1 is only a mean of exposing their brands, nothing else.

        I suppose that the idea behind the cap is get an even field but, does anyone know how much costs a good idea ?
        Take the example of the Mercedes’ split turbo. I am sure that their engineers were not paid more than others. Despite having no cap in force, which means that all engine makers could spend as much as they wanted to make the best engine possible, Mercedes emerged with the best engine thanks to a better idea at no extra cost. How capping ideas ?

        It is true that things were simpler in the 70s but it also true that there were less money available so, at the end, everybody used to spend as much as they could. Just as today.

        Besides, would incomes be capped too ?
        Would the fees that organizers and TVs have to pay be reduced and capped too ?

  4. If they could tie in a budget cap with an opening up of development then it could work. Be actually able to reward clever idea’s finally. When you think how many rules have come in to curb spending in the last 10 years who knows what the cars could have ended up like.

    • I like this idea of tying a budget cap to opening development. Adding revenue sharing to the two, with much smaller monetary prizes for the WCC would complete the fairness to all teams issue quite nicely.

  5. Would I be right in thinking that a couple of years ago there was talk of Red Bull absorbing (or hiding, to put it another way) some of the costs of their racing team to try and mask how much they were really spending? I seem to remember there being some dodginess (I know – it’s so unlike them :p) going on behind the scenes somewhere but can’t recall the specifics.

  6. Here’s my ‘2 cents’… The Engines/Power Units are too expensive. That’s what’s actually killing the mid-field/bottom feeders. ….But they are not going to change no matter how much us peasants lobby. I think (and its only an uneducated opinion) that engines should legally be the same across manufacturers and their customers… What’s the point of buying a PU from Mercedes when in the contract it states that you will have less performance than the works team… or that there’s an order of performance (merc-Wiliams-lotus-etc etc); bearing in mind that it’s the customers who are actually paying for all of the R&D.

    Here’s how my ‘2 cents’ can possibly turn into ‘3 cents’… If the performance advantage is equal among manufacturers and their teams (im thinking Mercedes here), then there will be more fights=more of a show.

    Let’s face it… Ferrari will not be happy with less of a payout.. neither will the Spice boys… and as far as i can see Bernie is not one to part with an extra Mil or two so easily as we saw with his rant about Manor paying their logistics bill in the Australian GP.

    I’m so fed up of hearing about the financial politics of F1 when we all know (or have an idea of) the amount of revenue it creates. F1 being the pinnacle of motor-sports should be just that… The best drivers… The most technological (and fastest) cars… all all out pedal to the floor.

    • The engines the manufacturers supply do have to be the same as their own. How the engine interacts with the rest of the car (in terms of the chassis/aero) is obviously down to the team though, hence Williams being fast in a straight line last year but not having much downforce. It sounds like this year they tried to sort that lack of downforce out which has now resulted in them losing some of their straight line speed from last year, but then being caught out by the resurgence of Ferrari too.

      When Massa made some claims to the press about what he perceived was a difference in engine performance to Mercedes Rob Smedley went against that and said:
      ““Mercedes has always given complete parity between the works team and all the other teams,” he said when asked by Crash.net if he agreed with his driver. “If you look at our speeds in qualifying and the race, we have the same offset to MGP and to the other teams.

      “They have gone out of their way to be absolutely fair and that is a good thing, you are working with a serious outfit. They give us a great product, we shouldn’t’ bleat and say it isn’t because they have. As you can see it has won three races and are happy with the service that we get from them.””

      Referring to Mercedes specifically, I doubt that Williams were too unhappy with Mercedes last year either way with Mercedes having the cheapest engines out of the trio of suppliers, and playing a large part in Williams jumping up to 3rd in the WCC (and the associated extra prize money they’d receive for that).

      • “The engines the manufacturers supply do have to be the same as their own.”

        Concerning the physical side of the engine, yes. But I haven’t seen any rules on the software side. If the manufacturer distributes only binaries to customer teams, what is there to prevent them from inserting smth like this?

        for(i in 1:10000000000000){
        cat(“Want power you dumb bastards?”)
        }
        do.power()

        There are no rules concerning the software side, all too important this year, and there is little to prevent manufacturers from releasing unoptimized code to customers, or manipulating which customers get which code… Even with access to the source code, which I’m not sure customers are granted, it would take a significant team to make sense of the code and understand what it does, and if it’s optimal or not.

      • When i said “same engine”, i was obviously not clear… But what UpsideDown said… The software may be the issue. What will be nice to see is the same PU Performance across customer teams. Yes, i agree that chassis and Aero plays a huge part but i’m not convinced that the customer teams are getting the ‘bang’ for their buck.

  7. Mr Todt seems to be a classic panic freeze; overwhelmed and not knowing where or how to start. At least Max wasn’t one to stand still and watch as others took over, even though I hated his guys as FIA president.

    Or maybe Todt’s masterplan just takes a very long time to materialize and thus the illusion of his uselessness and inertia.

    • “At least Max wasn’t one to stand still and watch…”

      Are you sure? I seem to recall some images of him standing and watching. Must have been someone else… 😉

  8. How about the FIA pays for 10 staff (ie 1 per team) permanently embedded in each team with powers to go see whatever they wish and to police costs. The wages costs would be miniscule compared with the savings overall.

  9. What’s killing the bottom teams is quite simply that they don’t get a big enough share of the pie. F1 reinforces success; the higher you finish, the more cash you get (really much more), and so the more you can spend next year and so the harder it is for somebody else to overtake you (metaphorically and physically!). So advantages tend to be self-sustaining.

    Compare to American Football. Teams that win are handicapped by having fewer/lower draft picks next season; teams that do badly are helped by having more/better draft picks. So the pendulum swings from year to year and era to era. In UK Football they have the same winner-gets-more as F1 (if not as pronounced) and the result is a small elite – there’s probably a 95% chance the winner in 10 years time will be from the same group of say 4-5 teams as it will be this year and has been for the last 10 or more years. In US football, like it or otherwise, that simply isn’t true – ANY team could be on top in 10 years time. Well, almost!

    Similarly in horse-racing. Horses that win are handicapped, because it then makes for better racing down the line. If horseracing were F1, they’d handicap by putting extra weight on the horses that lose!! And we wonder why the bottom teams struggle!

    I suppose we could handicap in F1 with weight, but even if we did it’d only be trying to undo the unbalancing effect of the prize money distribution. So why not fix that first? Well, apart from the minor issue of the teams who currently get most of the money being in charge of who gets most money that is… :-/

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