The first thing to know about the Formula 1 budget cap is that it’s a work in progress. People in F1 aren’t talking about it. Ask a Liberty Media official and you’re stonewalled. Formula 1 is a listed company, and officials are careful what they say to avoid any claims they are trying to manipulate the share price. Ask around the F1 paddock and you get different answers. However, the idea that Ford Motor Co.’s Richard Parry-Jones first raised back in 2004, amid much laughter, is gaining traction. Everyone, it seems, agrees that F1 costs need to be controlled, but officials would rather talk about a future night race planned for Las Vegas than discuss team budgets. In 2004, it made sense for a manufacturer to talk about limiting F1’s budget. Grand Prix racing was expensive then. It’s more expensive now, and money is a bigger weapon than ever. The more money you have, the more competitive you can be—if you know how to spend it. One thing is clear, though few say it out loud: The planned cap is $150 million a year. There are reports about gradually easing in a cap, with a hard cap in 2021. Others say the manufacturers have successfully kicked the can to 2023.
Regardless, a $150 million annual cap means half the teams aren’t involved because their budgets are already less than that. Those teams care more about revenue redistribution and how they would use the money (if it comes) to create profits and thus increase their team’s value. The $150 million isn’t expected to include marketing, driver salaries or even how much the highest-paid employee makes. There would be severe penalties if an independent accounting body finds anyone cheating. In the modern world of transparency and corporate responsibility, no manufacturer would condone cheating, and with the constant flow of people and knowledge between teams, any transgressions would quickly come to light. In the end, the big teams would police themselves, and the smaller ones would not need policing. FIA president Jean Todt is confident a deal is near. “(F1 Management) wants it,” he says, “the FIA wants it and the teams want it. So we should be able to do a good job. I think it is good for the sport.”
Ferrari’s objection was a big problem early on. Ferrari argued that a cap would change the sport’s nature. There was even an implied threat Ferrari would quit, but it’s unlikely a manufacturer wanting to be in F1 walks away because it’s being forced to save money. The late Ferrari CEO, Sergio Marchionne, knew it was a poor argument and began to soften Ferrari’s opposition before his death in July. His replacement, Louis Camillieri, is a bit of a wild card on this topic. Todt says he’s a talented businessman who loves racing but “has a very different character to Marchionne.” Ferrari team principal Mauricio Arrivabene says he will not be the one making the decision. “I think, in the end, we will find a solution. The question is not the what, it’s the how. How do we want to maintain Formula 1 at the pinnacle of motorsport as it is?” Mercedes F1 boss Toto Wolff prefers not to talk publicly about his company’s position on this, but Mercedes wants to stay and enjoy the promotional value the sport creates.Renault says that a budget cap has to happen. “A sport with two tiers and no way to move from one tier to the other is starting to become unsustainable,” Renault team boss Cyril Abiteboul says.
Abiteboul believes the best path is to make the distinction between corporations and their racing divisions. “If manufacturers get the same return for a third of the cost, then they will be more than happy,” he says. “It will be very complex to implement, but is that a good enough reason not to do it? I still think the necessity is greater than the difficulty.” And surely F1 does not want to lose any manufacturers. “We want the big teams to remain,” says Liberty Media sporting boss Ross Brawn. “The problem is that the gap between them and the rest of the field is too big, and we want to stop that by bringing in constraints. At the moment, a top team spends around twice the amount a midfield team spends, and we want to reduce that margin to around 10 or 20 percent. “There will still be an aura around the big teams, but a midfield team doing a great job will be able to compete. We are making progress on the economic initiatives. We are looking to introduce it in a soft form, with dry runs in 2019 and 2020 and then it will be become regulatory in 2021. I would say that barring some last-minute discussions, that’s pretty much finalized now. We hope this will make smaller teams more sustainable.”
Source: Read Full Article