Bernie Eccestone is at the centre of all things financial in F1

A fearsome battle is brewing in F1 between Bernie Ecclestone – the man who has the biggest say in where money goes in the sport – and the teams, who want a bigger slice of F1′s revenues.

Money is always a hot topic in F1 as too little of the enormous revenues the sport generated are used to sustain the involvement of teams, drivers and circuits in the championship. Here’s a brief guide to where money goes in Formula 1.

Where the money goes in F1 (click to enlarge)

This diagram shows how money is exchanged between the major interests in F1. Here’s a basic explanation of each:

Fans

This one is pretty straightforward. We don’t make money out of F1, but it gets revenue from us in the form of ticket sales (circuits) and merchandise (drivers and teams).

Drivers

Depending on a driver’s status, he may be paid to race for a team or pay them to run him. The latter is increasingly rare in F1 these days, but it is common for a driver to bring sponsors to a team that may directly or indirectly finance his place in the squad.

And of course, the driver pay money to the FIA, in the form of those contentious superlicences. The FIA increased its revenue from superlicences fivefold by putting up the fees last year.

Teams

Where the teams get their money from – and how much of it they need – is central to one of the biggest debates in F1 at the moment, that being cost-cutting.

Some teams are blessed with manuacturer backing – but as car sales plunge the commitment of those manufacturers is being called into question. Others get money from wealthy benefactors, such as Red Bull’s Dietrich Mateschitz, or Force India’s Vijay Mallya.

Sponsorship is another crucial part of teams’ revenues – as Honda found out to their cost by not having enough.

The teams also receive money from Bernie Ecclestone. Although exactly how much they get is a closely guarded secret it is believed to be based on how long they have been in F1, and how successful they have been. A memorandum of understanding agreed last year arranged for 50% of the sport’s revenues to go to the teams, though this is far less than what is seen in many other professional sports.

Circuits

The circuits’ income sources are complicated and some of them are represented by dotted lines here because not all circuits get their funding from the same places.

It is increasingly common for circuits to receive some amount of money from their governments, national or local. Although this is not just limited to Asian venues, circuits in the east generally get more state backing than their western counterparts. In 2007 the Bahraini government put €35.7 (£32.1 / $45m) into its race (according to the Financial Times), the European Grand Prix at the Nürburgring got around a third of that amount, and the British race none at all.

The Monaco Grand Prix is the only event on the calendar where the income from trackside signage during the event goes to the race promoters – otherwise it goes to Ecclestone’s pockets. Some tracks also get support from car manufacturers such as Fuji (Toyota) and Suzuka (Honda).

FIA

As well as getting money from the drivers in the form of licences, the FIA also receives fines. The same goes for teams and circuits but, as this is not a regular source of income for the governing body, I haven’t included it on the diagram.

The FIA also made money by selling the commercial rights to Formula 1 to Bernie Ecclestone. In 2000 it sold a 100-year lease on the rights for €250 (£225m / $315m). But given the huge amounts of money F1 generates (Formula One Management has made over $1bn over the past two years), and the length of the lease, the price seems extremely low.

Bernie Ecclestone and CVC

This brings us to the centre of F1 finance – Bernie Ecclestone. He may only own a minority shareholding in F1 these days, since CVC Capital Partners (a private equity firm) having acquired over 70% of the operation since March 2006, but at 78 Ecclestone is still the man in charge.

He is responsible for ensuring F1 continues to deliver sufficient revenues to CVC to justify their purchase of the sport. That’swhy he’s not willing to offer more money to the teams, and has let the axe fall on races that are failing to deliver enough money (such as Montreal).

But is CVC’s ownership and Ecclestone’s management of F1 the best interests of the sport? On the face of it you have to question the wisdom of allowing so much money to flow away from those without which there would be no F1 – the teams and the circuits. This had led the likes of Mateschitz to suggest that F1 should be owned not by private equity but by the teams themselves.

To confirm how accurate that impression is I’m going to continue adding to and refining this model, bringing in details of how much money goes to which different party. If you want to contribute you can download an editable copy of the Money in F1 diagram from the F1 Fanatic drop.io.

More on money in F1

• KERS and the argument over costs
• Williams gets £14.5m from Ecclestone
• Drivers expose holes in FIA budget
• F1 drivers’ superlicence dispute over
• Do Ferrari deserve more money? (Poll)
• Toyota has biggest F1 budget – $445.6m

The 2007 spying controversy has been brought up again

Steven Roy reckons the fuss over ‘medals’ is just a big distraction:

I have come to the conclusion that it is a grand deception. There is a technique in business where you take a small problem and make it a big problem. Then solve the big problem using the extra resources you have been given due to the size of the problem. Here I think we have the opposite situation. Bernie and Max did not want us to be complaining about KERS, the new cars, the business climate or Max’s imminent re-elction so they fed us a line and we bit. We have spent weeks discussing a medals system that no-one ever intended to introduce and giving them an easy ride on more important issues.

So what are the more important issues? Let’s take a look at some of the other stories that have emerged in the past week:

Cost cutting

Max Mosley is pushing for deep cost cuts, slashing budgets to €50m per team. What’s more, according to James Allen, Mosley is prepared to force new regulations through without the support of the teams to achieve it. He has already begun making the legal case for it:

We are, how shall I put it, in a situation of force majeure [...] Anybody can go to court and dispute it, but I cannot see a judge saying you are completely wrong, you should allow these people to go bankrupt, and what on earth are you doing?”

Spygate

Mosley made an interesting remark when he revealed that Nigel Stepney and Mike Coughlan – two technicians at the heart of the 2007 Ferrari-McLaren spying controversy – were to be allowed to work in F1 again:

It does seem a little bit mad to make them serve out even longer when the two teams concerned are all making love to each other. So, we have said we will let them forget it.

This remark seems to be aimed at undermining the much improved relations between Ferrari and McLaren.

Ban lifted on Stepney and Coughlan

Re-election

Having said in 2008 he would not stand for re-election this year, Mosley has predictably gone back on his word. Now he is saying that he wishes to solve the sport’s major problems before handing over to someone else.

The implication is that if the teams accept his latest demands on cost-cutting he will step down. Of course, there’s no more reason to take him at his word now than there was last year. As Too Good said:

Once elected he will forget about all these initiatives till next elections, and go on his implementing his own whims till next election time. And wait somewhere mid-term he will definitely give public a false hope by public statements about walking into the sunset.

Old trick of old dog. This time around what that has accomplished is FOTA on his side and Bernie against him, things will change once he gets new term

Meanwhile Jean Todt, perhaps the only man who could be an even less popular choice of president than Mosley, has stepped down from the World Motor Sport Council. Perhaps he has some campaigning to do and wishes to avoid a conflict of interest.

Support for traditional Grands Prix

The FIA may act to support the British Grand Prix

Although Mosley has said he can’t encourage Bernie Ecclestone to reduce his prices for traditional rounds on the F1 calendar, he has suggested offering support to sporting bodies in six specific countries if they’re having trouble preparing for their Grands Prix:

The traditional [races] were the six that were in the championship in 1950 and have been there ever since: Britain, France, Germany, Italy, Monaco and Belgium. But so far, there has never been an ASN coming to us saying we have got a problem, so if they do then we will have to look at it.

Is this a sincere attempt to support F1′s racing heartland – or a cynical ploy to ensure votes come election time?

Superlicence row

The drivers have taken issue with Mosley’s demand that they pay an increased superlicence fee. He has been trying to get them to reveal details of their salaries which the drivers have, of course, refused to do.

Mosley argues: “It would be fairer if the superlicence fee was based on earnings.” But the drivers no doubt suspect that if they provide him with details of how much money they’re earning, he will use it to impose a salary cap.

A salary cap seems a waste of time when the majority of drivers need to re-sign their contracts this year anyway. Only Lewis Hamilton, Kimi Raikkonen and Felipe Massa have signed deals for 2010. If the teams wish to pay their drivers less, they can offer them less.

Number of entries

Bruno Senna testing for Honda at the end of 2008

Mosley optimistically puts the former Honda team’s chances of making the 2009 season at 70%. If they don’t, F1 will be down to just 18 cars on the starting grid for the first race, the lowest number in over three decades.

Even more optimistically, Mosley expects there to be 24 cars on the grid in 2010. There would have been that many last year, had he managed to get regulations allowing customer cars passed, but he failed.

Spankgate

Mosley has also revealed he knows who informed the News of the World about his now infamous sadomasochism sessions with prostitutes.

According to Mosley, the person involved works in F1, their identity will be revealed, and it may come with sporting sanctions.

Sting culprit works in F1 – Mosley

Diffuser controversy

The Williams and Toyota diffusers are legal, according to Mosley. Or perhaps not. Here’s the FIA’s typically contradictory explanation:

The current FIA view is that Williams and Toyota have been clever and have exploited the wording of the rules in a clever way. But somebody may challenge it and the stewards may take a different view – it could happen.

Over to you…

Do you think the medals debate was a distraction to keep people’s minds off more important matters facing F1? What do you think is the most important problem facing F1 at the moment?

Williams' 2009 car is short on sponsorship

Williams told the world it had the budget in place to compete in F1 in 2009 and 2010 at the launch of its FW31 earlier this week.

But the true scale of its financial plight has been made clear as it emerged that part of that money came in the form of a £14.5m advance from Bernie Ecclestone, as he struggles to prevent another team leaving Formula 1.

The Financial Times (reg. req.) claims similar sums of money are owed to each of the teams and are due to be paid when the new Concorde Agreement is signed:

A total of £130m has been set aside as an incentive for F1’s nine teams to sign the Concorde Agreement, the contract that binds them to race in F1 but which expired at the end of 2007.

The teams now race in F1 under a Memorandum of Understanding (MOU) agreed in 2006 with CVC, the private equity group that has majority control of F1, but this is not legally binding.

The MOU increased the teams’ annual prize money from 25% to 50% of the sport’s underlying profits and these payments began last year. But the teams have not signed a new contract, prompting Mr Ecclestone to say: “We have no contract and no invoice so why are we paying them?”

The report claims the payments are worth 20% of Williams revenues, suggesting a total of £72.5m ($99.7m). Williams had the eighth largest budget of the 11 teams that started the 2008 F1 season, with £116.6 ($160.6m).

The Williams FW31 broke cover on Monday with several sponsors from 2008 missing. Three companies owned by the Baugur investment group – Hamleys, All Saints and MyDiamonds.com – have all left. Lenovo has moved its sponsorship to McLaren and Petrobras has also gone. One of its most prominent sponsors, RBS, saw its share price collapse this week.

Another article in the Financial Times adds:

Adam Parr, Williams’ chief executive, said the scale of the team’s borrowings in the past two years had reached a limit and that it would not have been able to borrow any more.

“I think it would be fair to say we have reached a point where further borrowing is not acceptable to the board of this company,” Mr Parr said.

The financial health of Williams – which employs 550 people in Oxfordshire and has supply contracts placed with 2,000 British companies – and that of other teams have been closely watched in light of Honda’s shock decision last month to quit F1.

Having lost BMW as a partner in 2005, Williams has been forced to rely on sponsorship for two-thirds of its revenues. But it has recently lost Baugur, Petrobas and Lenovo as sponsors and its second biggest sponsor is the struggling Royal Bank of Scotland.

Mr Parr said more than 60% of its sponsorship target was committed for this year and that RBS was tied to two more years of a three-year sponsorship deal. Sir Frank said: “We need to make a profit. To be successful and to be certain of staying in business, we need to be successful financially too. So, we need to make a profit every year. We’ve lost in the last two years, or three, I think, but we have the reserves and resource to manage that.”

Williams, whose team cost about £100m last season, a threefold increase in 10 years, made a £21.4m loss in 2007, on top of a £27.7m loss the previous year, and its net debt for 2007 tripled to £24.7m.

This week there have been fresh rumours about Toyota and Renault’s commitment to Formula 1 as the recession bites deeper. Regardless of whether or not those rumours are founded, F1 is going to have to make sure teams like Williams can continue to compete without concessions from the sport’s owners. Cutting costs in the rules is not enough – Ecclestone must be prepared to give more money to the teams.

Read more

• KERS and the argument over costs
• Ecclestone’s response to Montezemolo is an attempt to break FOTA’s unity
• FOTA wants more money for F1 teams – it should get some for circuits too
• Revenue row rumbles on
• Ferrari claims BMW blocked KERS deferral — F1 Fanatic – The …
• Why teams could build two cars for 2009 to get the maximum out of KERS
• FIA-FOTA agreement: Teams’ proposals accepted as Mosley backs down on KERS

More logos on the 2008 Williams

Lewis Hamilton - F1's third different champion in three years

The 2008 Formula 1 season ended on a high on the track – but the shock withdrawal of Honda was a sting in the tail.

With 2009 almost upon us it’s time to take stock of F1′s position as one season ends and a new year begins: the quality of the competition, the future of the teams and technology, and the ever-present political dimension.

The drivers

How times change. A few years ago the grid had a handful of race winners and Michael Schumacher was dominating every championship. At the start of 2009 the previous three championships will have had different winners, all of whom will be racing for top teams. We haven’t had that kind of competitiveness in more than a decade.

There are eight former race winners – plus two more if Jenson Button and Rubens Barrichello keep their seats.

Whether any of the drivers on the grid in 2009 bear comparison with the greats of Formula 1 – the Michael Schumachers and Ayrton Sennas – is always up for debate. But in terms of the quality of competition, Formula 1 is in good shape.

The teams

Has the number of car manufacturers in Formula 1 passed its peak and is now in an irreversible slide? Or was the withdrawal of Honda the natural culling of an uncompetitive team that wasn’t raising enough sponsorship revenue?

It’s too early to answer that question confidently, but the far-reaching cost-cutting agreement reached by the teams and the FIA shows all parties are convinced that if the manufacturer teams are going to stay in F1, the competition will have to get a lot cheaper.

The technology

When was the last time Formula 1 saw an upheaval in the technical rules comparable to the scale of changes coming in 2009? The banning of ground effects in 1983? Normally aspirated engines in 1989? Narrow track grooved-tyre cars in 1998?

With their ultra-wide front wings and narrow, long rear wings, 2009-specification F1 cars are strange beasts.

But the expensive new Kinetic Energy Recovery Systems look set to be more of a bone of contention among the teams. Ferrari’s Luca di Montezemolo has criticised them, saying they are too expensive and too specialised to assist in developing KERS for road cars. BMW’s Mario Theissen has defended them. But is this a genuine difference of opinion over the future of F1 technology? Perhaps it has more to do with the fact BMW was testing is KERS car months ago, and Ferrari has publicly admitted it has fallen behind on development.

The politics

Max Mosley: four more years, or finally retiring? He will make his decision known in the summer of 2009.

He first planned his F1 retirement for 2004, but changed his mind and decided to run for election again. Will the same happen next year? He still has the fallout from ‘Spankgate’ to contend with, and appears determined to carry on bringing lawsuits against publication who displayed the notorious photographs of him being whipped by prostitutes. His next stop is the German judiciary.

There are already rumours about potential successors. Nick Craw, the president of the Automobile Competition Committee for the United States (ACCUS), has been tipped as a contender. Mosley referred to Craw in a recent interview, suggesting he was too busy to take over as president of the FIA. Is this a sign Mosley is weighing up the opposition?

The delicate balance of power in Formula 1 seems to be tipped in the teams’ favour at present. As president of the Formula One Teams Association, Montezemolo recently felt confident enough to assert that “the time to divide and conquer to rule in F1 is over.” Having agreed to cost cutting measures on the teams’ terms – no standard engines – Montezemolo now wants a larger share of F1′s revenues, prompting a hostile reaction from Bernie Ecclestone.

At 78, Ecclestone remains unwilling to consider that anyone else might occupy his position in the future. Should Mr Ecclestone become unable to to carry out his duties, one of the most powerful roles in Formula 1 would suddenly become vacant, with no clear indication who his successor should be.

The teams are not just unhappy with the amount of money they receive. Another concern is the gradual loss of traditional F1 venues and countries (France and Canada are just the latest ones) in favour of tracks in new markets which are often of little value to the manufacturers.

Could 2009 be the year we finally see one of F1′s two political titans – Mosley and Ecclestone – step aside? Will we have a fourth new drivers’ champion? Will the manufacturer teams stay? Its an exciting and nervous time to be an F1 fan.

Read more: F1 2009: 10 questions for the off-season

NASCAR pets calendar, high heels, steak branding iron and romance novel

Is there any kind of product you can’t buy with a NASCAR logo on? After a few minutes searching it turns out probably not…

Beyond the usual fare of videos, models, books and games there is some truly weird and wonderful NASCAR tat out there.

With NASCAR play mats and a NASCAR ABC book you can indoctrinate your youngster in the wonders of America’s favourite motor sport.

Show your passion for America’s favourite motor sport in your home with NASCAR curtains and a NASCAR gazebo. Animal lover? Grab a 2009 NASCAR pets calendar.

Need a present for the lady in your life? Treat her to NASCAR high heels and one of over 60 NASCAR romance novels (see more of them here). Here’s a sample of the action:

Years ago, Sylvie had loved Hugo with all the fiery impetuousness of youth. But she’d had a secret that had torn them apart. Now she had a chance to atone for her mistakes…and save the life of the child she’d left behind. But doing so meant dealing with her ex-husband, Hugo, again…and having the strength to finally tell him the real reason she’d left him and the world of NASCAR behind.

NASCAR’s conquest of the kitchen is also complete. You can cook NASCAR recipes on your NASCAR slow cooker, brand your steaks in the number of your favourite NASCAR driver and even decorate your cupcakes accordingly.

NASCAR bacon: it cooks in ten seconds, but can you buy a NASCAR microwave?

If you find real cooking too much of a chore NASCAR’s line of ready-cooked bacon (“microwaveable, ready in 10 seconds!”) and burgers is what you need. Afterwards you can use a NASCAR toothbrush to get the taste out of your mouth.

So what’s my point? That NASCAR is a cash-hungry corporate behemoth that will slap its logo on any old tat? No. Well, maybe a little bit.

But my real point is this: NASCAR knows how to do marketing. Now I’m not interested in buying a Kimi Raikkonen waffle iron or a Lewis Hamilton foot spa – but nor am I any likely to spend £225 on an F1 mouse mat.

Bernie Ecclestone is trying to juggle competing demands for more money from the teams and the need to pay back CVC’s debts. Formula 1′s under-developed marketing and merchandise potential offers a clear opportunity to do that.

NASCAR’s approach is to brand an enormous quantity of mass-market products. The exact same approach would clearly not fit F1′s image. But extending its product range beyond prohibitively expensive watches and wallets could open up huge new revenues for the sport.

Read more about F1 and NASCAR

• Jimmie Johnson is NASCAR ’s #1 again – but how would he fare in F1?
• What F1 can learn (and forget) about NASCAR
• NASCAR has its own ‘Indianapolis 2005′ – but the race goes on
• Poll: do you watch F1 and NASCAR?

F1 engines will be limited to 18,000 rpm and will have to last three races in 2009

Among the proposals agreed by the FIA and the Formula One Teams’ Association to cut costs are a range of money-saving measures targeted at the engines.

The changes include an extension in engine life and severe restrictions in development. Will they achieve the goal of cutting costs while keeping F1 at the technological forefront?

Longer life, fewer races

With just over 100 days until the start of the 2009 season the teams’ options for making immediate cost savings on engines were limited.

The first steps will be to increase the life of an engine from two races to three. This will be accompanied by an overall limit on the total number of engines a team may use in a season: eight per car in the races, and four per team outside of races, for a total of 20 per team

To allow the teams to achieve this 50% increase in engine life, the maximum rev limit will be lowered from 19,000 to 18,000rpm.

This should reduce the number of engines that have to be built and purchased. The manufacturers have agreed to reduce the cost of a year’s engine supply to half its 2008 level next year, with a targeted cost of €5m by 2010.

Development restrictions and future specifications

Internal tuning is to be banned and the same specification of engines will be kept until at least the end of 2012. Renault, who had fallen behind on engine development, has been allowed to make certain alterations to its engine in order to help it achieve parity with the rival manufacturers. The possibility remains for a new engine to be introduced in 2013.

As well as cutting costs, this will further reduce the scope for performance gains to be found through mechanical changes. Inevitably bright F1 minds will find some workarounds to tease more power from the 2.4-litre V8s. But those gains may be limited to areas such as lubricants, where the potential improvements are far smaller.

In some ways it is disappointing to think that the exciting days of dramatic engine improvements from race to race are behind us. It will rob F1 of some of its unpredictability. But that may be the price we have to accept for a Formula 1 that is financially viable.

Read more

• What comes after a ten year engine freeze?
• Engine rules and the F1 monopoly
• Flavio Briatore admits Renault have fallen behind on engine development

Refuelling will be gone in 2010. Three cheers!

Two months ago Max Mosley rubbished FOTA’s suggestion that refuelling during F1 races could be banned.

Now a refuelling ban is on the cards for 2010. What has brought about the happy change of heart at the FIA?

As with tyre warmers I think banning refuelling will both improve the F1 spectacle and reduce costs.

Adds nothing to the spectacle

Since 1994 the FIA has clung to a notion that refuelling somehow adds to ‘the spectacle’ of F1. I don’t see how – in fact, I think it shows a complete failure to understand what is truly spectacular about motor racing. If you want to go to a race and see something stunning, watch the drivers brushing the barriers at Monaco, or twitching through Eau Rouge in the damp, or slipstreaming each other at 200mph. Watching a couple of guys pump petrol into a car isn’t spectacular. You don’t get crowds of people standing around filling stations.

I don’t want ‘interesting strategies’ I want pure, unadulterated, heart-pumping racing.

The FIA doesn’t seem to understand this. Back when it surveyed the fans on what they wanted from F1 in 2005 and 2006, it never even bothered to ask whether anyone liked refuelling. When FOTA first raised the possibility of banning refuelling Max Mosley said rather sniffily that he would not consider proposals that threatened to change ‘the show’.

Either he has been convinced that refuelling will not affect the show, or it will improve it, or FOTA have got the better of him politically.

A worthless cost

I expect the decision to drop refuelling isn’t about spectacle, it’s about cutting costs. At present each team has two refuelling rigs, meaning a total of at least twenty that have to be flown and driven around the world. They only make races interesting when they fail (and they do that too often – remember all the fires at Hungary this year?) so they are not worth having around.

More good news: at a stroke it would make qualifying better by removing the confusing, excitement-sapping ‘race fuel’ element. And it would largely solve the problem of drivers having to pit for fuel during pit lane closures and getting penalties.

The FIA has also said it will conduct research into whether F1 races should be shorter. There is no reason why Grands Prix would need to be shorter if refuelling were banned – race were not made longer when refuelling was introduced in 1994. The teams would simply have to use larger fuel tanks in 2010, and there’s plenty of time for them to factor that into their designs.

Getting rid of refuelling would be worth doing even if it cost money. As it is, this is a win-win scenario for F1, and I looked forward to refuelling-free racing in 2010.

Read more

• FOTA discusses F1 refuelling ban
• Bad safety car rules catch out Heidfeld
• Refuelling rig fires and failures hit race
• Two good reasons to ban refuelling
• A brief history of pit stops in F1 (video)
• The FIA Survey: How to fix Formula One

Originally set for a 2009 ban, tyre warmers will be outlawed in F1 from 2010

One of the surprising changes to be announced by the FIA and FOTA was the ban on tyre warmers from the beginning of 2010.

These were originally going to be banned for 2009, but the change was dropped following objections from drivers. Why are they now slated to be banned again?

The FIA clearly feels (and FOTA presumably agrees) that tyre warmers are an unnecessary expense that add nothing to the Formula 1 spectacle. Last time we did a poll on this two-thirds of F1 Fanatic readers were against a ban on tyre warmers. But I agree with the FIA on this one.

“Another Senna situation”?

Few if any other major motor racing series use tyre warmers, which are used to pre-heat tyres before they are put on an F1 car to ensure optimum grip from the moment the driver puts his foot on the accelerator.

It’s exactly a year to the day since David Coulthard reacted to his first test without tyre warmers as “another Senna situation.” He warned that cold tyres would lead to more crashes.

But against the dire safety warnings it must be remembered that tyre warmers were not brought in for safety reasons when they were introduced in the mid-1980s. They were brought in to improve performance by reducing the amount of time it took drivers to get their tyres up to temperature. And it seems practically every other racing series copes well enough without them.

Will it save money?

It’s hard to imagine how great the cost savings of banning tyre warmers would be. However the thermal imaging camera used at some F1 rounds this year showed the pre-heated tyres going onto cars during pit stops were hotter than the tyres coming off the car. That much heating must consume an awful lot of energy.

The FIA will also have to take great care in how it frames the regulation banning tyre warmers to guard against workaround.

Otherwise, I’m all in favour of the tyre warmers ban. It will place a greater emphasis on the drivers’ skill, it will save money (however little) and I’m sure the safety concerns can be addressed.

Read more

• David Coulthard: “This is another Senna situation”
• Tyre warmers set for 2009 ban
• FIA set to allow tyre warmers in 2009
• Poll: should tyre warmers be banned?
• FIA announces detail of cost cut plans including refuelling and tyre warmer bans

Audi is drastically cutting back its sports car programme

While Honda joins Audi and Seat in scaling back its motor racing programmes for 2009, Porsche is doing the opposite.

But the German premium marque isn’t joining rivals BMW and Mercedes in Formula 1 – it’s chosen the American Grand-Am sports car championship. What, if anything, does this tell us about F1’s appeal to car manufacturers?

Innovation versus specification

The differences between Grand-Am and the American Le Mans Series – both American-based sports car championships – were explained by Gary Watkins in an article for MotorSport in March:

In the ALMS, the cars are the stars. High-technology is the name of the game in a series where prototype classes, LMP1 and LMP2, are dominated by factory teams fielded by major car manufacturers…[ALMS boss Scott] Atherton describes Grand-Am as ‘NASCAR goes road racing’. In fact, a series that was started by the NASCAR-owning France family has blazed a trail now followed in other parts of its empire. Its Daytona Prototype, introduced in 2003, could be regarded as a forerunner to NASCAR’s Car of Tomorrow concept. Strict rules, both in terms of dimensions and materials, mean that the bodywork of any DP should fit, more or less, onto the chassis of any rival.

It’s clear how this relates to the debate over the future F1 technical rules. Should Formula 1 be a no-cost-spared technological free-for-all closer to the ALMS philosophy, or must it impose ever tighter restrictions on innovation to keep costs down?

F1′s choice

Could F1 turn into another DTM, with just two manufacturers involved?

In the wake of Honda’s withdrawal from F1 this discussion is centred around which philosophy will keep the manufacturers in the sport. Some manufacturers demand freedom in the regulations to spend what they want – like Ferrari and Toyota who threatened to quit F1 over Max Mosley’s desire to introduced standard engines. The problem is, Honda was another one of those manufacturers who demanded they be allowed to build their own engines – and they ended up pricing themselves out of the game.

Now it seems some manufacturers are changing their minds about how free a technological contest F1 should be. Mercedes’ Norbert Haug argued that KERS should be abandoned to save money. Autosport claims Renault is prepared to support fixed-specification standard engines. (Though one might argue this is just a matter of expedience because their RS28 has fallen behind in the power stakes).

F1 needs to decide two things: first, what it wants to be; second, which of these competiting philosophies of motor sport it should adopt to achieve its aims.

If it wants to be the pinnacle of motor racing technology it can be. But it will probably have to accept a scenario where only a small number of the richest manufacturers stay in and the independent teams go to the wall. The rest of the grid would be filled by B- and C-grade outfits running older versions of the manufacturers’ chassis and engines and the drivers from their development programme. This situation, similar in concept to McLaren’s arrangement with Force India, could see F1 ending up like the DTM with as few as two manufacturer teams.

It it wants to be the premiere international motor racing championship for car manufacturers it can be. But it will have to savagely slash costs and take the risk of the likes of Ferrari and Toyota quitting on principle. It will have to hope that more manufacturers are attracted to competing by the vastly reduced budgets.

Max Mosley’s increasingly vocal demands for cost cutting suggests he believes in the latter option. He said last week:

I think there are at least two manufacturers who would have been in F1 some time ago were it not for the outrageous costs.

What do the manufacturers really want?

Porsche has had a supporting presence in F1 for many years through its Porsche Pirelli Supercup races. But it hasn’t competed in a Grand Prix Michele Alboreto qualified a Footwork-Porsche in last place at Monaco in 1991.

While it moves into Grand-Am, Audi is doing the opposite in the LMS and ALMS. It won the Le Mans 24 Hours last year along with the (European) Le Mans Series and the American Le Mans Series. So what is it doing for 2009? Cutting its LMS and ALMS programmes – it will only appear at the Sebring 12 Hours and Le Mans 24 Hours.

Are manufacturers increasingly favouring fixed-specification motor racing? Is this just an American phenomenon? And which philosophy should F1 adopt in the future? Have your say in the comments.

Read more

• How the last global recession affected F1 teams – and how the next one might
• Honda: a one-off or the first of many?
• How many teams does F1 need?
• Ferrari and Toyota threaten to quit F1 if Max Mosley forces standard engines
• Will Force India make a leap forward in 2009 after their McLaren deal?

Rubens Barrichello in Honda's final Grand Prix at Brazil

Did Honda drop its F1 team because it was performing too poorly to be worth keeping? Or are car manufacturers going to begin cutting their F1 teams, irrespective of how well they’re doing, to save money?

A one-off

This side of the argument insists that although Honda was faced with severe economic pressures, the board wouldn’t have dropped its F1 team had it been more successful. Therefore, Honda’s withdrawal from F1 was just a one-off: the natural culling of an un-competitive outfit.

It’s not difficult to paint a picture of Honda as a struggling team: The Brackley outfit had been on a downward trajectory since 2004, when the team was still called BAR and run by David Richards. Once Nick Fry took over things began to go wrong: starting with the 2005 fuel tank controversy and the team’s poor form, failing to score at all in the first half of the season.

It over-promised in the off-season before 2006 and then under-delivered, except at the Hungaroring, where Jenson Button took a fortunate win thanks to wet weather. The team’s woeful 2007 and 2008 campaigns revealed its true performance level, and when the credit crunch came Honda had no reason not to strike a line through its $400m entry on the balance sheet.

Even if you don’t agree with that pessimistic assessment of Honda’s three years as a full-blooded F1 constructor, its decision to focus development in 2008 to maximise its opportunity with the new 2009 regulations may have added another nail to its coffin. If the RA108′s development had not been sacrificed for the RA109′s, perhaps it could have been a regular points scorer in 2008 and things might have been different.

Either way, although Honda needed to cut costs, it wouldn’t have canned its F1 team if it had been doing better. Therefore, the other manufacturers are unlikely to leave, as four out of the five won races this year and can expect to be in championship contention in 2009.

The first of many

Are more F1 teams going to quit the sport?

The counter-argument to that says that car manufacturing is in such grave trouble and F1 costs are so high that it is inevitable more manufacturers will withdraw.

Yes, F1′s major manufacturers re-affirmed their commitment to the sport in the wake of the Honda pull-out. But not all their words came from the CEOs, the Carlos Ghosns and the Norbert Reithofers. They either came from the manufacturers’ motor sports directors such as Norbert Haug, or as unattributed statements. As Max Mosley himself admitted:

The man who runs the competition department wants a big department with the maximum budget and maximum employees. Those on the board want the maximum success from motor sport with the minimum cost. It is really only the man on the board that is concerned with cost.

The people who run the motor sport team won’t make the decision to cut it or keep it. This quote from James Allen reveals the dizzying speed with which an F1 team gets axed in the present economic climate:

It seems that the November sales figures arrived on [Honda CEO Takeo] Fukui’s desk on Thursday and were far worse than expected. Against that backdrop Fukui took the decision. Interestingly Honda had held a press conference on Thursday to announce a new car and he made no mention of F1 then. When quizzed about this after the withdrawl announcement on Friday morning Fukui said that it had been a sudden decision.

And Honda isn’t the only car maker in trouble: Toyota’s US sales fell by 34% in November. BMW’s worldwide sales fell 25% in November. Mercedes’ fell by 27%. Most F1 sponsors are taking a hammering too.

At these times a nine-figure sum on a balance sheet is going to attract attention a long time before an eight-figure one. The fact that Honda has withdrawn from F1 but not British Superbikes, Moto GP and the Indy Racing League proves two things: the motor sport is a justifiable activity for a car manufacturer to be involved in at these times, providing costs are sensible, and that success is not a pre-requisite for their involvement to continue.

Had the FIA imposed greater cost cuts sooner things might have been different. But, although Max Mosley has been pushing for cost cuts for some time, they have not gone nearly far enough. The car manufacturers take some of the blame for not pushing for greater cuts, but the FIA is also accountable.

This season past was supposed to be the first year of legal customer cars, allowing independent teams to compete more cost-effectively in a manner which was commonplace in F1 in the past. But the FIA failed to get the rules sorted, and so the putative Prodrive team (which planned to use ex-McLaren chassis) was put on hold. Then the FIA dallied with the fantasy of budget capping and restricting the amount of time teams could run their wind tunnels for, which came to nothing.

The FIA either couldn’t decide how to cut costs or lacked the will to do it properly. When Mosley found his back against the wall in April he had no trouble finding the backing to keep himself in a job. Might that political capital have been better spent on guaranteeing the long-term survival of Formula 1?

Mosley’s offer of cut-price standard engines may be too little, too late. It may even signify that he has given up on the idea that the manufacturers will remain in the sport and it laying the ground to usher a new era of independent teams into the sport. It is only a matter of time before more teams announce their withdrawal. F1 in 2008 is in the same position the British Touring Car Championship was one decade earlier.

What do you think

I’m not sure which side of this debate I fall on just yet. But the shocking speed with which the axe fell at Honda makes me paranoid that more will follow.

So I’m leaning towards the ‘first of many’ side of the debate. And, like many of you, my suspicion falls on Honda’s Japanese rivals Toyota as the next most likely domino to topple.