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

Posted on | Author Keith Collantine

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?

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

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  1. I read Dieter Rencken`s column in Autosport & found it interesting, too, Keith. I`m not so sure his A1GP hunch is correct, though.
    As to today`s meeting, I thought Max naming names over who was trying to stage a walk-out was pretty low. (Before the avid anti-Ferrari element start it wasn`t them!)
    Mosley`s vision for the future of F1 looks more akin to a pub pool league but I doubt Bernie will charge accordingly, do you?

  2. Bigbadderboom
    15th May 2009, 20:20

    Well at least they have agreed that there will be only one set of regs.

  3. one set of rules for all teams was agreed so it says fota are already winners. max lost.

    but fota will now chase for more blood. best defense is maximum attack.

    1. Prisoner Monkeys
      16th May 2009, 4:26

      Actually, that would be just pushing their luck. If they get what they want and start demanding more, the FIA is more likely to dig their heels in which is just going to cause it all to collape in upon itself. The idea is to work out an arrangement where all parties are satisfied, not to have one side defeat the other in a gladatorial showdown. The FIA and FOTA are not in a war to be the lone superpower in the sport, even if Bernie and Max might want FOTA split down the middle. So long as one of them exists, the other will.

  4. Prisoner Monkeys
    16th May 2009, 1:59

    I think that both the FIA and FOTA are being their own worst enemies. For once, neither side seems to be in the wrong here: to me, the demands of both sides seem to be perfectly reasonable. The FIA wants to see Formula One expand while the teams want everyone to play by the same set of rules. The problem is that egos are getting in the way, and the end result is what amounts to a game of chicken. Neither side wants to back down, and they’re trying to call the other side’s bluff by making as much noise as possible.

  5. I do believe Max Mosley likes to start an argument, about anything, so he can win it. That is sport to him, not F1. He may be Bernies pit bull, but Bernie wants the manufacturers to stay. There is more money in that than the grid being made up of all independent teams. If L40M is the number they will have to reach it by steps. For sure most of the teams have spent that on next years car already. Also, if L40M is the number I’ll bet it will slow down the rate of development. Or lead to extreme innovation. I wonder how much it cost Colin Chapman to develop ground effects? :-)

  6. MacademiaNut
    16th May 2009, 4:31

    It is ridiculous what FIA is proposing. I don’t think it should matter how much money or time a team wishes to spend on their technology. FIA has been the best of motor technology and it should remain that way. Max should stop messing with the sport.

    I think it’s high time Max leaves the scene.

    1. Prisoner Monkeys
      16th May 2009, 6:45

      So you’d prefer that only two teams can win simply because then can afford to spend ten times as next as the third-place team?

      Way to make the sport uncompetitive.

    2. MacademiaNut
      16th May 2009, 15:21

      Well, there’s no way for FIA to monitor how much money one spends. You can put as much technical regulations as you want, but you cannot say how much money one spends in trying to get a better car that meets the technical regulations.

      This is like preparing for an exam. I can say that these are the chapters. The exam is for two hours. You cannot use calculators; one page of cheat sheet allowed. Some students have paid tutors, some students can’t afford, so they form study groups. Who cares? I cannot say that the students should not study outside of class for more than 4 hours for the exam.. that’s simply silly.

      All that Max or FIA should do is simply to put the technical regulations and let the teams meet those technical regulations. The technical regulations must be such that they could be met with 40 million pounds. Anything beyond that would be incremental benefit.

  7. If money were all it took to win in F1 then Toyota would have been picking up the Championships for years, Prisoner Monkeys.
    Success in F1 depends on many more factors than how much money a team has.

    I think the thing to ask ourselves is why, when across the years F1 has always lost teams through lack of finance, Max suddenly thinks the present situation is different? My personal guess is that he fears a depleted grid less than he fears a strong team alliance.

  8. The compromise is Ferrari’s court action. No doubt they will seek an injunction blocking the new regulations until the courts can sort out the issues.

    The result will be 2010 with the same fundamental rules package as 2009, other than aero, refueling, and other changes all teams agree on.

    This also saves face for Mosley because he can say he didn’t back down, and the time will allow for a more reasoned discussion, compromise and a settlement of the suit.

  9. AND: All of these Mosley driven changes are further justification for his continuance in his office, isn’t it? Whenever there is a chance of him giving up the presidency he seems to generate some kind of controversy that won’t allow his departure.

    He is truly despicable with no honor. See Spankgate for the no honor reference.

  10. theRoswellite
    16th May 2009, 15:01

    “..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.” John Howett

    If you consider how frustrating it is for so many F1 fans (read this site on any given day) to always be dealing with off track issues, can you imagine the near apoplexy which must grip most of the team principles when they first read yet another unilateral realignment of the most basic conditions under which they must operate their teams?

    It would be interesting to know how history is going to view the brilliant Mr. Mosley.

  11. Yet another nice post, I like it. I needed to say I just learn more matters on right here and I loved it. Cudos.

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