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. 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!

  2. 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.

  3. 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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!?

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

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

    http://www.autosport.com/news/report.php/id/75324

  9. 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.

  10. 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.

  11. steve said on 15th May 2009, 17:44

    There was a time when this was a sport – in which enthusiasts made cars and raced them. Ferrari have become a bloated insult to their own memory and to the passion of their founder. Toyota a corporate edifice of hopeless management (How much spent on not winning?) will just walk away like Honda likewise BMW and nothing will be left – just empty pit garages.

    Bring us back this sport, reclaim its soul and its passion. A budget cap of 40 million should do it – with almost no regulations, just human ingenuity. The budget cap is easy to enforce. You pay 40 million to enter, its top-sliced for engines and tyres etc then the money is redistributed via a claim back to the teams to spend as they will.

    It will be great to see how they balance, driver against designer, simulation, aero, etc

    • Journeyer (@journeyer) said on 15th May 2009, 17:52

      steve, given where the teams are now, it’s not easy to leap down to 40m right away. most of these teams have started work on their 2010 cars 6 months ago! f1 is too complex a sport for a budget cap to work properly, especially if it’s for 2010.

      Ferrari have become a bloated insult to their own memory and to the passion of their founder.

      they won from 99-04, and 07-08. i’m not sure how that can be an insult.

  12. steve said on 15th May 2009, 17:48

    In real terms an F1 team in the 1970s ran on about 2 million (in todays terms) but then F1 was crap then wasn’t it…..I mean you had nothing to do except to watch cars racing, the girls and drivers with personality – there was no corporate hospitality to divert you……more Moet Mr Ecclestone?

    • Journeyer (@journeyer) said on 15th May 2009, 17:55

      In real terms an F1 team in the 1970s ran on about 2 million (in todays terms)

      you’re referencing an era 40 years ago. that wasn’t even a realistic budget by the time james hunt won for mclaren in 1976. how can 40m be realistic now?

      give the teams time to adjust to the cap. don’t drop it like a bomb.

  13. really getting sick of max and his ****..

    budgets definitely have to be reigned in, we can’t be spending 400 million and above forever..a cap is ok but not 40 million at the highest level of motorsports..why can’t they just set it at a level that the manufacturers are agreeable to say 120 million..then whoever wants to spend that much or not, it’s up to them..if u have it and want to spend, go ahead..if you can’t don’t..it is a cap after all, that is what a cap is all about..it caps at the top..your options are between 0 and the cap..up to you..

    allow technical freedom to everybody under the cap..if you spend 40 million and are smart, you’ll still beat somebody who spends 120 million but is not so smart..

    whatever the outcome, please just get rid of max..whatever it is he is bad for the sport..

  14. Mikeman said on 15th May 2009, 18:14

    It’s official – they are going to french courts of law to try to stop FIA from ruining it all. It’s done!

    FIA didn’t even negociate, those *******!…

  15. scunnyman said on 15th May 2009, 18:21

    Well according to Autosport.com it is apparent that Max Mosley is currently residing on planet pluto. He obviously really does not grasp the seriousness of the situation we have at the moment. Of course the teams do not want to leave Formula One, but they still want to have a fairer run sport.
    I don’t want F1 to be split, but at the same time the teams have to stand up for their rights. They cannot be seen to be bluffing. If they give in now then they will never win anything from the FIA ever again. Max already thinks he is god, don’t give him more ammunition to think so more.
    As for his opinion that other teams will come along to fill the void left by the likes of Ferrari, Renault, toyota etc… he is living in cloud cuckoo land if he thinks F1 will be the same. I for one would have serious doubts i’d carry on following such a watered down sport. I stopped watching indy car for that same reason.

  16. luky said on 15th May 2009, 18:37

    mosley must surely go. he already stated that last year when facing a vote of confidence after his sex scandal. maybe he’s forgetting it…

    fom needs another leader. the trigger is on.

    great ups for luca de montezemolo and all other manufactures.

    bringing the privater’s to f1 is quite good but certainly not in a way that puts gp racing side with a1gp. i for one not interested.

  17. IDR said on 15th May 2009, 18:57

    Don`t get me wrong but I think this is not a Mosley issue. He’s just the pitbull of Bernie as he aways has been.

    I heard Bernie and the teams have not reached any agreement and IMHO this is the real issue.

    Turbulent waters, we will see how far this goes… Ferrari, Toyota, RBR, Renault are now in the position of doing what they have declared or make the biggest ridiculous in F1 history.

    I’m afraid they will not…

  18. P5ycH0 said on 15th May 2009, 19:08

    F*ck the FIA & start a new series.
    I’ve had it with Berny & Mosley.

  19. CJD said on 15th May 2009, 19:26

    I fail to see how major companies can do other than form a new entity. Formula One is dead, a silly title, how did one explain it to anyone outside the sport.

    Long live the World Motor Racing Championships

  20. John H said on 15th May 2009, 19:27

    Well I never… seems like the two-tier system has gone, according to Bernie and Max on the BBC.

    Now we await the £40m decision. I still think £60m will be the comprimise.

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