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. 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.

  2. 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.

  3. 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..

  4. 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 *******!…

  5. 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.

  6. 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.

  7. 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…

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

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

  9. 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

  10. 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.

  11. persempre said on 15th May 2009, 19:49

    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?

  12. Bigbadderboom said on 15th May 2009, 20:20

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

  13. luky said on 15th May 2009, 20:44

    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.

    • Prisoner Monkeys said on 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.

  14. Prisoner Monkeys said on 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.

  15. Leaf said on 16th May 2009, 2:33

    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? :-)

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