Compromise, stalemate, war: What will be the outcome of F1’s budget cap talks?

Toyota is among the teams demanding better governance of Formula 1

Toyota is among the teams demanding better governance of Formula 1

Ferrari, Toyota, Red Bull, Toro Rosso and Renault are threatening not to participate in the 2010 world championship.

With the deadline for entries just two weeks away, the teams’ representatives are meeting FIA president Max Mosley and commercial boss Bernie Ecclestone to hammer out a deal.

Will they get the job done? Will the impasse drag on closer to the deadline? Or will F1 take another step towards civil war?

What Mosley wants

Mosley claims his interest is ensuring F1 has a decent complement of teams. That means the likes of USGPE, Prodrive, iSport, Litespeed, Lola (the latter two making significant announcements yesterday) or others entering next year.

Alternatively, it means getting the present manufacturer-backed teams to give a commitment to stay. As Mosley wrote in his letter to Luca di Montezemolo:

We have already lost one manufacturer [Honda]. Despite my repeated requests, not a single manufacturer has given us a legally-binding undertaking that it will continue in Formula 1.
Max Mosley

In the absence of guarantees from the manufacturer teams (although Ferrari did agree in 2005 to extend its terms with the FIA from 2008 to 2012, for which they received a substantial cash reward), Mosley is pushing for a budget cap to ensure new teams can join at short notice.

It’s worth putting Mosley’s latest demand into context. Twelve months ago he was arguing for a budget cap of ??140m in 2010 and ??110m in 2011, excluding the cost of engines, KERS, marketing and salaries for drivers and team principals.

Since then cost cuts agreed by FOTA have gone some way towards achieving that reduction without resorting to budget caps.

Mosley’s latest budget cap proposal calls for a ??40m (??44.6m) budget cap which excludes marketing costs and driver salaries but includes engine and KERS costs, and staff salaries.

Mosley has vacillated between a number of seemingly contradictory positions. He has repeatedly called for car parts that are not ‘performance differentiators’ to be standardised to save money. Yet now he is criticising the teams for opposing his budget cap proposal which would allow for greater technical freedom. From the same letter:

We would eliminate the need for the depressing restrictions on technology which the existing teams are discussing with a view to reducing costs.
Max Mosley

It’s hard to escape the depressing view that Mosley only wants to have an argument and win it, with little regard to the consequences.

What the teams want

Ferrari’s threat to quit F1 has garnered much attention (there’s a lesson here for anyone who underestimates their importance to F1). Yesterday they produced Piero Ferrari, sat him in front of a huge photograph of his father Enzo, and had him talk about how their threat to quit the sport is perfectly serious.

The budget caps aspect has gained the most attention so far but many (perhaps all) of the teams are not objecting to this in principle, just the low level it has been set at.

Above all, they are complaining about the inherent problems the FIA’s ‘two-tier’ system would cause and the manner in which it was introduced:

If you consider the single thread running through all team’s similar statements it is a wish to establish a correct and proper basis of governance for the sport.

There is clearly a genuine wish for all to continue to compete in Formula 1 but only if future stability is assured.

To secure this, the priority for the future is a process of governance which ensures all competitors compete under the same rules, that the regulations are stable and which establishes a platform from which costs can be sensibly and actively reduced without destroying the core DNA of the sport.
John Howett, Toyota

Mosley claims the budget cap was agreed at the World Motor Sports Council meeting on March 17th. Also, although he does not go so far as to use the words ‘force majeure’, he also argues in his letter the Montezemolo that the prevailing economic conditions make it necessary for the rules to be forced through.

Would the teams go so far as to demand Mosley steps down in exchange for their commitment to participate in the future? They will surely remind him that, while canvassing to win a vote of confidence from the FIA Senate last year, he promised not to contest the forthcoming FIA president elections.

Which brings us to the third party in the room: Bernie Ecclestone. If the manufacturers promised to stay if Mosley stepped down from the presidency, who would Ecclestone back?

What Ecclestone wants

As ever the short answer is “money”.

And that means keeping the manufacturers in the sport. Ever since Mosley’s boast that “F1 could survive without Ferrari” Ecclestone has been at pains to keep the Scuderia on-side:

Formula 1 is Ferrari and Ferrari is Formula 1. It’s just a marriage made in heaven, one of those super things that work well.

This might be putting things rather generously, but it gets close to the heart of the situation.

As Dieter Rencken argues in Autosport this month (sub. req.), without Ferrari and many of the other manufacturer teams F1 would be poorer not just figuratively, but literally as well. Why else would the proposed budget cap leave their marketing spend unrestricted?

Striking a deal

Either because of the huge sums of money involved, or the equally large egos, or both, it seems F1 is incapable of sorting out its problems without generating massive antagonism.

Can they finally reach a compromise? Will brinkmanship drive the parties to the eve of the May 29th deadline before reaching an agreement? Or will the sport take another perilous step towards a split?

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70 comments on Compromise, stalemate, war: What will be the outcome of F1’s budget cap talks?

  1. CJD said on 15th May 2009, 12:51

    I have been puzzling why everyone who knows him says that Mosley is so very clever while all we see in the North Korean model of governance.
    Could it be that he wants to retrieve his greatest disaster by using the teams to disenfranchise FOG/etc.
    This would also appeal to the conspiracy theorists among us and regain the affection of F1 fans.
    Weight is lent to this by his readiness to replace FOTA with F2, Indy Car and go-cart teams, perhaps with added sound like a Euro electrical car and bring back the era where my team leader could do her ironing while watching a race, the only sport where that was possible. (Lewis wrecked that and now Jenson too)
    He could offer the umbrella of FIA to the breakaway group 2 years down the line with agreed stability once FOG/etc are gone. And retire into the sunset loved by all who knew his blessed name. Yeah.

  2. Bigbadderboom said on 15th May 2009, 13:06

    I really don’t think we can underestimate the seriousness of the Ferrari threat, however as this situation has developed through the press and various forums i read, i get the distinct feeling Max’s position is weakening.

    If Ferrari and another big name pull out where does FOM stand with contractual obligations to the TV rights owners?

    If the budget cap is considerably increased (as most suspect) where does that leave the 3 new potential teams looking to enter for 2010? LOLA are looking to race for £40 million, as are USGP.

    F1 is the pinnacle of motorsport, and it’s governance has increasingly come into question this season. There are some very clever and powerful people involoved, Max normally comes out on top in any 1 to 1 battle, this time I think he has bitten off more than he can chew.

    Bernies support for Max runs only as deep as the pile of cash he sits on. His tune has already softened. Although he says his biggest regret in his life was “letting down his good friend” over the sex scandal, I wouldn’t bet against Bernie switching sides again!!

    Are we seeing the beggining of the end for Max? God I hope so!

    • Charlie said on 15th May 2009, 14:53

      I guess the choice is between Ferrari and Renault etc, leaving, and Lola, USGP etc. joining. Which one would you choose (if you couldn’t have both)?

  3. John H said on 15th May 2009, 13:12

    It’s hard to escape the ‘depressing’ view that Mosley only wants to have an argument and win it, with little regard to the consequences.

    That sentence pretty much summed up the whole affair for me in a nutshell! I really thing we’re on the cusp of something major here.

  4. schumi the greatest said on 15th May 2009, 13:15

    well another scandal that f1 brings on itself.

    i remember the dozens of comments on this site after “liar-gate” (i hate it when every scandal becomes so&so-gate) lets get back to the racing.

    couple of weeks later here we are again.

    I think the budget cap is a great idea because the ridiculous amounts of money beiong spent had to come to an end.

    I Think realistically max didnt expect to get the teams down to 40mil. he knew that no matter what figure he said the top teams would want to push that back up a bit. the problem is the two tire rules which is just pure luncay!

    is thre going to be sperate championship for the capped and un capped teams??

    if f1 becomes like that i dont think il be watching it!

    ive just finished readin eddie jordans biography (i bought it before i realised how annoying he would be on the bbc) when he 1st started in f1 Jordan grand prix had 45 team members. in 2002 it had 265. in 2002 they were employing 225 more people to do the same job. this just shows the utter madness of f1. and jordan was 1 of the smaller teams.

    Bernie needs to stop fleecing everyone, hes a billionaire for god sake he doesnt need the money. max just has to go plain and simple the guy is a control freak and an utter prat!

    the teams & circuits should be receiving much more of the profits from the sport.

  5. I predict there will be a compromise. Each side will claim they stood their ground, didn’t back down and got what they wanted when in reality the compromise will satisfy neither side entirely and the sport will likely be the all the worse for it. Also somewhere will be something, possibly in the small print or even unmentioned, that was not on the agenda and was not part of the furor but that will be significant and unexpected! Well that’s me done playing Mystic Meg see you in the future.

  6. GooddayBruce said on 15th May 2009, 13:36

    It’s hard to escape the depressing view that Mosley only wants to have an argument and win it, with little regard to the consequences.

    Bang on Keith! This is what he has been doing for years. Ever since his good work on safety since Senna died he has just been causing trouble. He approaches everything as an intellectual duel and he really get on my nerves.

    Time to go Max!

  7. Sasquatsch said on 15th May 2009, 13:48

    A compromise is the only sensible solution as Max and Bernie (and the manufacturers) surely know. It’s just politics to take a stand and for the opposition to take another stand and ultimately come together in the middle.

    The proposal of the two-tier system (and low budget cap) is nothing more than a provocation of the teams to come with a better solution, a mandatory budget cap somewhere around 100 mln pounds. An agreement might not be reached before May 29th, but definitely an agreement will be reached!

    Neither FIA or FOTA can allow a split to happen, because then both parties are worse off than what they have now.

  8. Chaz said on 15th May 2009, 14:19

    I bet a lot of the teams are cursing more of them did not gang up to have Max kicked out during the ‘spankgate’ scandal…

    • Chris said on 15th May 2009, 15:07

      I agree with you completely. They missed a real opportunity to get rid of a dangerous rival and now they’re paying for it.

    • They couldn’t. The teams have no real power within the FIA compared to Moseley who apparently has a lot of friends.

    • Patrickl said on 15th May 2009, 17:10

      They should have formed a new racing league the previous time the teams had a big problem with FIA and FOM. Now the same problem still exists and they run into it again.

  9. Leaf said on 15th May 2009, 15:43

    I don’t think the manufacturers will be in the sport forever, exception being Ferrari. However, the point here is that whoever the teams are that make up the F1 grid, they must have a voice in the governance of the sport that they invest in. So far, since FOTA has been formed, the ideas come up with by the teams have all been pretty good. FIA doesn’t like sharing power, for that matter neither does FOM. As long as the money keeps rolling in all is good for them. FOTA needs to identify a candidate and run that person against Mosley in the FIA elections coming up. If they are unable to do that, (unseat him),there will most likely be fallout in the form of manufacturers leaving the sport by 2010.

  10. Bigbadderboom said on 15th May 2009, 16:45

    While there is 1 vote per membership country Max will always hold the power at the FIA, he has the smaller countries over a barrel with threats and promises over all kinds of motorsport events which bring considerable injections of cash into their sometimes desperate local economies. The F1 teams hold very little power over the FIA presidency. The point they are fighting is over F1 governing from the FIA, all the teams want is a greater say in how the sport is ruled.

    They need terms of governance in writing, and future policy and rule changes made in an appropriate manner, not by some kind of self appointed king who can change the rules in a whim.

    My prediction is they will do away with 2 tier ruling and adopt a 140 million budget cap which will be reduced over the next 3 Seasons, I can’t see the manufacturers settling for much less.

  11. Internet said on 15th May 2009, 17:14

    Those 4 teams wouldn’t be a great loss to F1. F1 has survived the loss of bigger teams. There’s also the fact that more teams are planning to join F1 next year, so they won’t be missed.

    Ferrari bluffed and Max called them out on it. Now they are taking Max to courts to save face. I will dance with joy the day Ferrari leaves F1!

    • Bigbadderboom said on 15th May 2009, 21:03

      @ Internet; Are you serious, i am no big Ferrari fan but the modern sport is all about the manufacturers, we cannot afford to loose any of them, privateer teams have their place and I applaud them, but F1 is the pinnacle of maotorsport and to generate true competetion in finding the best of the best, we need the manufacturers and believe it or not we need their money to keep the sport moving forward both in terms of development and competetion.

  12. al_amana said on 15th May 2009, 17:20

    Bigbadderboom has pointed out what I was going to, that is that the FIA is not dependant on the existence of F1 as it is the governing body for a majority of international motorsports.

    From my point of view I just wish we could be talking about how talented a driver “that guy” is or what about how hot the brakes are getting on “that car” and I wonder what their engineers are going to do about it, instead of this rubbish. But then to top it all off there’s this team that’s come out of no where, with two cars that were going no where and two drivers that were also going no where, winning every race because of some pretty dodgy rule changes and other bending of the rules.

    It might actually be a good thing if F1 collapses and is rebuilt from scratch!?

  13. PJA said on 15th May 2009, 17:25

    The Friday meeting betwen the FIA and the teams has ended without any agreement.

  14. Bigbadderboom said on 15th May 2009, 17:27

    Looks like its getting messy.

    Just read a report saying the FIA are refusig to back down at all and insist on 2 tier £40 million cap.

    Ferrari have lodged legal proceedings with a french court blocking the rule changes as they have that written veto over rule changes.

    I think this is going to be far more complicated than most people think, this is more than politicol positioning, I really can see it coming to a major head. Max will loose, i am sure of it.

    • CRM said on 15th May 2009, 17:37

      I agree. Many people (i.e. Anthony Davidson on radio 5 last night) saying this will blow over and the teams and FIA will come to a compromise.

      However, I think the failure to reach any agreement on friday and now the threats of legal action mean this whole situation has become a lot more serious for the future of F1.

  15. Martin Bell said on 15th May 2009, 17:43

    I really hate the football analogies that crop up on F1 forums, but in this case I would say that it’s nil-nil at half time. F1 politics is, after all, about as interesting as football.

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