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?

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