“Urgent need for action” on cost-cutting – Sauber

2012 F1 season

Sergio Perez, Sauber, Monza, 2012Sauber CEO Monisha Kaltenborn says the need to cut costs in Formula One has become “urgent” as teams discuss the future sharing of revenue within the sport.

“There is an urgent need for action on this issue,” said Kaltenborn in a Q&A released by the team. “For the majority of the teams in Formula One the financial challenges are huge.”

“The Sauber F1 Team is very much in favour of introducing measures to push down costs further still. First and foremost, we hope that the Resource Restriction Agreement will be implemented and monitored effectively from 2013 onwards.

“It is also important that engine costs from 2014 are kept at a sensible level for the privately-run teams. A constructive move here would be to draw up a roadmap setting out the direction of technical development over a period of several years. That would make planning easier and reduce costs substantially.”

The current Concorde Agreement, which governs the sharing of revenue between the teams, is up for renewal at the end of this year.

Kaltenborn said that Sauber had stabilised following the departure of former owner BMW from Formula One three years ago, which has contributed to the team’s improved performance this year:

“Our technical people and engineers have succeeded in building a fine car in the Sauber C31-Ferrari. The weak points of last year?s car have been almost completely eradicated, while the ongoing development of the C31 is taking place at a very high level and extremely efficiently.

“Added to which, stability has returned to the team after a very difficult phase for the company in which we had to deal with the withdrawal of BMW in 2009. Re-establishing this stability has been very important.

“Another factor that should not be understated is that our two young drivers now both have another year of experience under their belts.”

She added the team was now working “extremely efficiently”:

“The extensive package of upgrades we introduced for the races at Barcelona and Silverstone were successful. Our progress at the race track has met our expectations and calculations in full, which is a major feather in the cap of our engineers. And there?s still more to come from the C31.

“We?ll be bringing another series of upgrades to the upcoming races in Asia, at the same time as pushing ahead with the development of next year?s car, of course. So it?s not only a question of the pace of development, but more particularly efficiency.

“Here, the issue of costs clearly plays a critical role. The greater the resources at your disposal, the more intensively you can develop the car, and that is reflected directly in performance.”

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36 comments on “Urgent need for action” on cost-cutting – Sauber

  1. Prisoner Monkeys (@prisoner-monkeys) said on 12th September 2012, 9:58

    Here’s an idea: get rid of the historical multiplier in the Concorde Agreement. It gives teams additional revenue based on their previous performances in the championship, but only Ferrari, Williams and McLaren benefit from it – and the last two haven’t won a Constructors’ Championship in over a decade.

    Rather, the historical multipler could be reimagined to reward teams who come in under budget. At the start of the year, the teams submit their budgets for the upcoming season. At the end of the year, they re-submit their actual expenses and are rewarded based on the amount of money they saved. Eventually, it will get to the point where teams can compete with only the money they get from FOM.

    A budget cap that was properly-implemented wouldn’t hurt much, either.

    • I imagine then that a team budget would look something like this:

      Factory (including composite materials, car construction and employee labour); $200 million
      Driver wages: $10 million

      16 breeding pairs of giant Pandas, Albino Siberian Tigers for marketing purposes; $800 million

      Unobtanium materials research: $1 billion.

      Then at the end of the year:

      Hey look! We saved 1.8 billion from our budget by substituting the tigers and pandas with stuffed animals, and the unobtanium with some chewing gum rolled in glitter!

      Now fork over the bonus from the F1 kitty.

    • MazdaChris (@mazdachris) said on 12th September 2012, 11:22

      personally I agree with DiMontezemolo on this issue. Rather than worrying about budget caps and resource agreements (which demonstrably have loopholes large enough to drive several truckloads of hard cash though, thanks to Red Bull and several others), it would make far more sense to change the technical aspect of the sport so that it’s impossible to spend millions on minutiae which offer no visible improvement to the sport. A move away from aero being the largest differentiating factor between cars would be a good start. Less downforce, more horsepower, and better mechanical grip from the tyres.

      It would be interesting to see whether the rules surrounding reliability have genuinely brought down costs. Would it be cheaper to use more gearboxes each year, which are made more cheaply, rather than having to have them increasingly finely engineered with tolerances you’d never see on a road going vehicle? i.e. on the surface it may be easy to say “use fewer gearboxes, spend less money!” but if you end up having to spend a huge amount of money developing and building gearboxes to meet this criteria, where is the saving? Where’s the benefit to anyone? It would be good to see a little bit more cost analysis going on here.

      • bananarama (@bananarama) said on 12th September 2012, 12:01

        But isn’t it that you can spend billions on anything if you like? At the moment the way the regulations are you throw exponentially more money towards aero to get equally decreasingly small amounts of time out of it. Once you cut the aero they will do the same with say suspensions or exhaust gases or what have you.
        And if you allow them to use more gearboxes as an example, they will most likely build more equally expensive ones instead of building cheaper ones. The only way to stop that would be saying teams only have a limited budget to build gearboxes but are allowed to build as many as they like, but that would be a budget cap again but this time not for the entire team but for different parts on the car. Doesn’t sound too bad, but not too good either, too much regulation to me and apparetly to you too.

        • MazdaChris (@mazdachris) said on 12th September 2012, 12:25

          Perhaps, but I think that aero is one area where there is no ideal end result and so you can potentially spend an almost infinite amount of money refining it. I don’t think that mechanical areas such as gearboxes fall under the same sort of category. All you can do is make them stronger, lighter, and faster-shifting. All of these things can be controlled by the regulations. Simple material restrictions, for instance, meaning that exotic, ultra expensive materials are not allowed. Seamless shift technology has been available in road cars for years, and again we look to F1 and see rules which make things needlessly expensive; seamless shift in road cars is achieved using dual-clutch, twin layshaft technology. That’s cheap. In F1, you have to have a single clutch and layshaft, so making a seamless shifting design is incredibly expensive. Mandate the cheaper approach to the same objective, and the need for expensive development is removed.

          Yes, it needs a fundamental rethink when it comes to the technology, but I do believe you could create a formula where it wouldn’t be possible to simply spend your way to the front of the grid.

    • bananarama (@bananarama) said on 12th September 2012, 11:29

      I agree, a budget cap (that excludes for example staff salary, I mean we don’t want to cut jobs, we want to cut unnecessary spending) wouldn’t be a bad idea.
      If some teams can leverage their position to negotiate better terms that is surely unfair, but it is difficult to change that, I mean they couldn’t do that if someone could keep them from doing that, right?! I don’t think rewarding teams who save more is a good idea either, this should be a sporting contest not a saving contest.
      I also agree that teams should get more money from FOM, if they continue to move towards pay tv everywhere less people will watch F1 and less viewers means it is less interesting for advertisers and revenue from sponsorship can decrease (I know there are already many contries where it is not free but there are still a lot of markets that can move to pay tv when contracts end). Economically difficult times like at the moment don’t help either. On the other hand the macroeconomic situation also means that whoever owns F1 needs good revenues to keep funding and none of those who wanted to own F1 in the past were people I’d like to see in that position. The teams shouldn’t own F1 either, too many differing interests, too many egos. It is really difficult to find a good solution.

      I don’t know a really satisfying solution for all involved either, but I suppose a well thought through budget cap enforced by the FIA and (somewhat) fair, for the teams better terms with FOM would be the best solution to most problems.

    • HoHum (@hohum) said on 13th September 2012, 3:18

      Of course the teams could demand a greater share of the revenue they generate .

  2. Drop Valencia! said on 12th September 2012, 11:35

    Maybe there could be a budget cap on engines, this could be done by making all suppliers sell engines to any team for $1m ea, that way Merc, Reno and Ferrari can do what they like. but they must make the engine available to any team for $1m apiece, no-one team is disadvantaged.

    • MazdaChris (@mazdachris) said on 12th September 2012, 11:37

      Annoyingly this is exactly what they would do, however an agreement between three companies to provide products at a specific price would run foul of anti-competition law in Europe and the US.

      • Well, I think due to the nature of the sport, any decent court would be able to make an exception would they not?

      • beneboy (@beneboy) said on 12th September 2012, 13:19

        I may be wrong (it’s not unusual) but I think that the European and American anti-competition laws do not apply as the sport is run according to the sporting bodies regulations and the Court of Arbitration for Sport.

        Most major international sports don’t run according to local, national or regional laws and where there is a conflict between any of these laws and the sports regulations the sporting body and CAS generally have the authority to impose their own decisions – organisations such as FIFA and the IOC are able to break local laws such as the right to sell alcohol inside stadiums in countries where this is normally prohibited as well as having the right to ban advertisement within certain areas while their competitions are taking place.

      • Anti-competition laws would come into play, if the manufacturers would agree to a minimum price for the engines. But this talk is about setting a maximum price for the engines, and the manufacturers could still sell them cheaper, if they want to compete on price (although I think its hardly likely).

    • AndrewTanner (@andrewtanner) said on 12th September 2012, 13:40

      Nahhh. These companies still have to make money and why shoudn’t they? There should be some sort of budget factor, but similarly so F1 isn’t a charity.

    • HoHum (@hohum) said on 13th September 2012, 3:28

      The new engines should not cost anything like 1mil. they will have the same number of components made of the same materials as current mass manufactured V6 turbo car engines.

  3. MazdaChris (@mazdachris) said on 12th September 2012, 11:59

    I just think that budget caps approach the problem from the wrong direction. It doesn’t make sense that you have a formula with technical regulations which, by their nature, make it very expensive to make even midfield level cars, then you try to tell people not to spend too much money.

    Surely a better approach would involve a little more blue sky thinking. Start with a blank sheet of paper and try to thrash out some regulations which could result in cars which are broadly as fast as they are now, but which are significantly cheaper to make. Look at engine regulations as they currently stand. On what planet is a small displacement, normally aspirated V8 revving to 18,000rpm, a good cheap solution? F1 engines make between 7-800bhp. There are supercars on the road with engines which make that power reliably for 50,000 miles plus, and cost a fraction of the amount an F1 engine does. Of course these are large, heavy engines which aren’t hugely sophisticated. And yet look at other racing series’; Le Mans prototypes make that power, and their engines are high tech and complex, stressed components, with more road relevance than F1 engines, yet they’re comparatively very cheap and even more reliable. So what’s all that money spent in F1 actually achieving? A nice noise?

    If you sat down with a group of very good F1 engineers, and set them a goal of coming up with a formula which gave you cars which could get round a circuit as quickly as they do now, but cost half the money to develop and build, I bet they could do it. I bet they’d be even more reliable than they are now. This is what annoys me about budget caps; the sport is unnecessarily expensive in the first place. The change in engines in 2014 is going to make it even more expensive than it is now. And that’s with no appreciable improvement in the aesthetics or the nature of competition. Why start with a formula which is fundamentally hugely expensive, and then tell teams off for spending lots of money on competing, when surely the sensible thing is to look at how you can make the sport much cheaper in the first place.

    • bananarama (@bananarama) said on 12th September 2012, 12:30

      I think your idea is a very good one if teams were only fair sportsmen who also try to cut spending. But are they? Just because you can build a car as fast as today for half the money, what stops you from spending all that saved money on developing small parts of it further to gain another half second over the competition? Or even just a few thousands of a second by spending another 10 million? If I have the resources to do it, why wouldn’t I?
      (I have too much time apparently..sitting in a train :-/ )

      • MazdaChris (@mazdachris) said on 12th September 2012, 12:50

        I agree, this is the challenge isn’t it. But I think you can eliminate a lot of that by carefully adjusting the rules to prevent as many avenues as possible for these minute changes which bring very small performance advantages for very large amounts of spending.

        Imagine if you’re an engine designer. The team comes to you and says “I’d like more power please” so you reply “of course. I’ll make the pistons a little bigger, you’ll get another 50 horsepower. It will cost $15000″. This is the simplest and easiest way for you to deliver the power increase the team wants. But the rules prevent you from making the engine bigger. So instead you say “ok, I’ll raise the rpm limit. Instead of 12,000rpm, it’ll now do 14,000rpm. You’ll get another 50 horsepower. It will cost $200,000 for the development of the new valvetrain and bearings, and there will be an increase in cost for each unit we sell you. By the way your new engines will be about 20% more likely to blow up so, uh, just take it easy”.

        Now in that hypothetical situation, what have the technical restrictions actually achieved? The team is still getting their extra 50 horsepower, yet the cost is much much greater. This is what I mean about looking at the regulations from a whole new angle, with the idea of removing avenues of expense from the development path of the cars and the various components.

      • Bananas said on 12th September 2012, 12:55

        Well if you’ve got plenty of time (and resources), why don’t you think of a username that doesn’t rip off mine. I was here first. Try something original, like “Monkeys dserve to be in Jail” or “Gold Chrissmith”.

        • Bananas said on 12th September 2012, 13:03

          On a serious note, completely agree. Has the FIA stated though what the sanctions would be for non-compliance with RRA or similar? Hard to imagine Ferrari getting disqualified from the constructors championship for going over budget.

        • bananarama (@bananarama) said on 12th September 2012, 14:37

          I don’t know who you are. I don’t know what you want. If you are looking for ransom, I can tell you I don’t have money. But what I do have are a very particular set of skills; skills I have acquired over a very long career. Skills that make me a nightmare for people like you. If you let my username go now, that’ll be the end of it. I will not look for you, I will not pursue you. But if you don’t I will look for you and I will find you and I will make you change your username instead, because I’m certainly the one who was here first. And if not, well..nevermind, I’ll keep my name anyway.

    • Sean N (@sean-p-newmanlive-co-uk) said on 12th September 2012, 13:03

      I agree budget caps will never work. The best way to save money is to stop changing the rules and stop increasing the entry fees. Rule stability saves money in two ways. New rules can massively increase the time and money spent on new development. New rules also tend to reduce the kind of close competition we have had this year. Closer competition give the smaller teams opportunity to run at or nearer the front. This improves their chances to earn Concodre/prizemoney and attract new sponsors. From this point of view the 2014 regs are just a joke (the kind that nobody will laugh at).

      It seems strange to hear people in F1 say we have to start saving money because F1 is fundamentally the very antithesis of this. It’s always been true that the more money is spent the greater the chance of winning. Until we can find a way around that issue there cannot be a solution.

      It’s like saying I want a gold ring but I only want it to cost the same as a copper one. Therefore there are two options. Either gold plate the copper one or don’t have a ring at all. If we don’t find a way to gold plate F1 we will lose it.

      • HoHum (@hohum) said on 13th September 2012, 3:40

        Sometimes the restrictions themselves cost the teams more because of the law of diminishing returns. “the more money spent the greater the chance of winning” I don’t think Coopers Garage outspent Ferrari, Vanwall et al when they put the engine in the back and cleaned up.

        • Sean N (@sean-p-newmanlive-co-uk) said on 13th September 2012, 9:18

          Your point is taken and of course you are correct up to a point, but had there been a rule against rear engined cars it wouldn’t have happened and it can’t happen again. All of the cars have the engine in the back! The point I was making is that if the rules don’t change all avenues of innovation are all gradually explored and exploited (F1 designers say the same). There will always be new ideas but if we don’t change the rules they will become less effectual.
          In terms of diminishing returns that is exactly the effect we need!!! Teams will have a choice of what is their target regarding lap time gained versus cost. If this is zero or very close then it won’t matter how much is spent. Teams can spend within budget and still be competitive.

          I realise this is a bit of a radical viewpoint, but I think its a problem that can only have a radical solution.

    • beneboy (@beneboy) said on 12th September 2012, 13:22

      This is probably the most sensible comment I’ve heard from anyone on the subject !

    • verstappen (@verstappen) said on 12th September 2012, 22:24

      If you are Adrian Newey and you are basically just as fast with half the money, how fast would you be if you add that other half?

      What I’m trying to point out is that those engineers are already doing it. If they weren’t they cannot survive in F1.

      I don’t know what Kaltenborn expects from a roadmap, but where I come from, at the end of the day it’ll be used as toiletpaper. Maybe she thinks she can fool sponsors?

  4. Kimi4WDC said on 12th September 2012, 13:54

    Bla bla bla, just adapt or leave and make way for people who will. This is competition not charity.

  5. Timothy Katz (@timothykatz) said on 12th September 2012, 14:09

    Hmmm. It sounds as though Sauber are still running at a defecit. Is this a warning from Kaltenborn that Sauber would have to leave at the end of 2013 if nothing changes? And that the ‘road map’ for 2014 onwards is necessary in order to avoid spending development money in dead-end directions?

    • Kimi4WDC said on 12th September 2012, 23:55

      They won’t leave. They just want easy cake. If nothing changes they still will have to work hard or harder to maintain their good position.

      All this rubbish is due to Bernie is preparing for retirement and not as strict as he used to, so every second stake holder of Formula 1 now is an expert who knows best how to run it.

  6. xeroxpt (@) said on 12th September 2012, 20:47

    How will Monisha justify to her father how much money she needs, her father is probably already milking the indians to the max. Social reality, nothing more.

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