How the last global recession affected F1 teams ?σΤιΌΤΗ£ and how the next one might

Jaguar was the last manufacturer team to leave F1 before Honda

Jaguar was the last manufacturer team to leave F1 before Honda

The true impact of the global recession on Formula 1 became clear week as Honda suddenly axed its F1 team.

It?σΤιΌΤδσs not clear how deep and how prolonged the recession will be, but we can get an idea how it will affect F1 by looking back on what the 1989-1992 recession did to the sport.

Yesterday’s Daily Telegraph offered this comparison of the emerging global recession of today with the last major financial downturn:

?σΤιΌ?τThe last recession, between 1989 and 1992, had a five-year impact on the car industry,?σΤιΌ?Ψ says Professor Garel Rhys of Cardiff Business School. This year, around 2.2 million will have been sold in Britain, but Prof Rhys believes that will be 1.75 million next year, and as low as 1.6 million in 2010. ?σΤιΌ?τI?σΤιΌΤδσm not being alarmist about this,?σΤιΌ?Ψ he says. ?σΤιΌ?τI?σΤιΌΤδσm merely tracking the last recession ?σΤιΌΤΗ£ and this one?σΤιΌΤδσs worse.?σΤιΌ?Ψ

Recessions force companies like car manufacturers to make sudden, deep cuts in expenditure, which is exactly what Honda did to its F1 team last week.

So what happened to car manufacturer involvement in F1 during and after the last recession? Here?σΤιΌΤδσs a summary:

1989 ?σΤιΌΤΗ£ In: Renault (engines), Lamborghini (engines)
1991 ?σΤιΌΤΗ£ In: Porsche (engines; Out: Porsche (engines)
1992 ?σΤιΌΤΗ£ Out: Honda (engines)
1993 ?σΤιΌΤΗ£ Out: Lamborghini (engines)
1994 ?σΤιΌΤΗ£ In: Mercedes (engines), Peugeot (engines)
1997 ?σΤιΌΤΗ£ Out: Renault (engines)
2000 ?σΤιΌΤΗ£ In: Honda (engines), BMW (engines), Jaguar (team); Out: Peugeot (engines)
2002 ?σΤιΌΤΗ£ In: Renault (team), Toyota (team)
2004 ?σΤιΌΤΗ£ Out: Jaguar (team)
2006 ?σΤιΌΤΗ£ In: Honda (team), BMW (team)
2008 ?σΤιΌΤΗ£ Out: Honda (team)

There are two patterns here: first, car manufacturers have largely switched from just being engine suppliers to running entire operations.

Second, car manufacturers join F1 during general economic stability and prosperity, and leave when financial conditions worsen. Granted, some have left because they just can’t cut it at the top level: Peugeot in 2000 was an example.

And that’s what makes figuring out the Honda withdrawal difficult: did they go because they were struggling, or because of costs? As I explained yesterday, I’m leaning towards the second explanation, but the coming months will show us whether Honda was just the first in a series of manufacturer withdrawals.

Read more: Honda: a one-off or the first of many?

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16 comments on How the last global recession affected F1 teams ?σΤιΌΤΗ£ and how the next one might

  1. Dan M said on 9th December 2008, 18:27

    They should just allow cigarette companies advertise again. If equally dispersed it would give teams enough money to compete and stay profitable.

  2. Pingguest said on 9th December 2008, 18:58

    The problem is though that most countries have banned tabacco advertisement.

  3. theRoswellite said on 9th December 2008, 20:08

    Honda will return, their history is a good predictor.

    This economic downturn is probably being viewed as a chance to step away from a program amidst a negative vortex of poor design decisions.

    Their vision for the coming decades, both in world auto consumption and the reflexive positioning of motor sport, is certainly shifting towards more eco-friendly vehicles.

    Hybrid technology is, obviously, already in place which pushes any decade-plus R&D work into the area of zero emissions.

    F1 must eventually follow.

    But following does not have to be the role it chooses. It could be a leader in this area without sacrificing either speed, competition, or technological leadership.

    If F1 makes the correct choices, if it positions itself as a player in the new arena, then Honda must return; after all, it is certainly still having….earthdreams.

  4. Keith Collantine (@keithcollantine) said on 9th December 2008, 20:12

    Dan – They’re not really disallowed, Ferrari still gets tons of cash from Marlboro.

    Roswelite – Perhaps Honda will return, but if F1′s economic model is based on the manufacturers joining up when the economy is healthy and bailing when the markets take a tumble, then it’s not one a sound footing.

  5. Terry Fabulous said on 9th December 2008, 21:52

    I think the issue is greater then allowing the smokes companies to come back. The essential nut of this issue is that the teams/maufacturers are not getting enough benefit out of F1 to justify the costs.

    F1 can either increase the benefits to the teams by allowing more prize money, more races etc
    OR
    they can go down the path they are on and reduce the cost of competing. Which is what they are trying to do.

    If the manufacturers were getting enough out of the sport to justify the spend they would be lining up to join, instead of milling about at the exit.

  6. Terry Fabulous said on 9th December 2008, 21:53

    Sorry, not normally so serious!

    109 days to Melbourne

  7. I think Honda were terrified of the numbers that came up for vehicle sales last week. They’re all rolling a downward spiral which no senior exec running a car manufacturing company can ever have experienced before. Certainly not in terms of scale.

    The motor trade, just like any other business, likes to be able to predict what will happen in coming months and years, and at the moment they’re in free-fall. Nothing tangible to cling to.

    Not pleasant. Can lead to rash decisions.

  8. Keith – Completely agree with your comment about manufacturers coming and going as it suits them.

    To be sustainable F1 needs a solid core of independent teams and specialist engine suppliers that can be reasonably competitive for a reasonable budget. Since Cosworth’s exit in 2006 every single team on the grid has been either fielded by a manufacturer or provided with an engine supply by a manufacturer. Companies like Honda cannot justify spending hundreds of millions of dollars to run at the back – it isn’t enough for them to just be there and grab a point or two, as it used to be for a team like Minardi.

    But how that can be done is rather more difficult. Customer cars would provide a cheap, simple way for new teams to enter F1 and be competitive. But they aren’t the answer as even the stronger independents like Red Bull and Williams will be shuffled further down the grid by new teams with significantly smaller budgets.

  9. Keith Collantine (@keithcollantine) said on 9th December 2008, 22:56

    Since Cosworth’s exit in 2006 every single team on the grid has been either fielded by a manufacturer or provided with an engine supply by a manufacturer.

    This is one of the more worrying parts I’ve not mentioned yet: Honda closed its F1 engine builder as well as its team, so had another team been dependent on its for engines that would also have been in trouble.

    If Toyota were to quit (and a lot of F1F readers suspect they might) Williams would automatically be in trouble. Ditto Renault and Red Bull.

  10. zerogee said on 9th December 2008, 23:18

    Cigarette money is not needed. Not that I think cigarette advertising makes any difference – it just makes the geese who smoke change brands, I don’t think people take it up on the strength of looking at a car.

    With apologies to smokers…

    There is plenty of TV money in the kitty, it’s just that Bernie looks after it rather than distributing it to the teams. Having said that, teams should have to look after themselves with sponsorship and backing because we’d have a gaggle of teams at the back who are just there to collect the TV money.

    I bet the teams get rather a lot more money already than the yearly budget Max wants to cut down to…

  11. as long as the manufacturers were primarily engine suppliers the manufacturer exit did not affect F1 that much. yes of course if front running team looses good engine (Williams Renault comes to mind) the team suffers in short or long term. but the sport is still fine.

    even now this day there is still available that 2006 V8 Cosworth that after some update to last 3 races instead of two would suit perfectly well to any team on the grid should any manufacturer pull out as an engine supplier

    the big big difference between now and late eighties is that the manufactuerers own more than half of the teams on the grid. the sport is ruled by manufacturers. they drove the expenditures to prohibitove leveles, turned the sport into their own private playground by eliminating almost all the traditional teams. now they have the power to destroy it at will.

  12. NDINYO said on 10th December 2008, 7:43

    There is something that does not ring right about standardizing core parts of the car at Formula 1 level. Somehow, it takes something away from the image of the sport as being on the technological cutting edge. I would prefer a budget cap to the current proposals from MM. If FIA feel a budget of Β£40Million is adequate to run a team, they should set that as the ceiling and let the teams do whatever they want with the technology. Because of the low ceiling, the sport would not afford to venture into irrelevant technology like ultra light wheel nuts for example, but would still be motivated to look for real and significant advantages from the engineering side. Creative ideas of the kind MM has not ever imagined would evolve over time.

    Of course inevitably costs do rise. These increases can be capped to increases in TV Revenues as passed to the teams to ensure teams by default operate at the break even point.

    The unfortunate part of the budget cap model is that it allows little room for corrupt dealings at the FIA level. Giving a tender to one engine manufacturer makes allowances for kick backs to FIA officials which would not be the case in the budget capping model. Maybe that is why MM is so keen ….

  13. But on the other hand, if the Manufacturers can be convinced to stay purely as engine suppliers, the teams can scale down their in-house design teams and find cheaper alternatives for chassis and other things.
    Although most people don’t agree with Max’s thinking about the standardisation of brakes etc, surely there are only two or three possible companies all the teams can go to for certain parts of the car, so there isn’t a lot of difference between standardisation and the the teams own choice – and look how few companies are actively designing KERS systems for F1….

  14. Keith Collantine (@keithcollantine) said on 10th December 2008, 21:02

    NDINYO –

    If FIA feel a budget of Β£40Million is adequate to run a team, they should set that as the ceiling and let the teams do whatever they want with the technology.

    I see what you’re getting at but I just don’t believe the FIA could enforce it.

  15. @ DG – how do you convince Ferrari to be only an engine supplier ? :-)

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