83 replies to this topic

[D.M.N.]

http://www.fia.com/f...ulation-changes

 

 

Following a meeting of the F1 Strategy Group and the Formula One Commission in Paris today, the following items have been unanimously approved:

•    Cost cap

The principle of a global cost cap has been adopted. The limit will be applied from January 2015.

 

I wonder what the limit is? And surprised that everyone approved, too.

[dau]

First reaction: YES! The second: If everyone agreed, the cap is probably too high to have much of an effect. Reading it for the second time, it only says that the 'principle' has been adopted, wonder what that means. I also wonder whether it will be controlled by FIA or whether it's just self-regulation as with the RRA. That was one of the major discussion points after all.

[rhukkas]

Que F1 teams setting up multiple new companies which they will 'sun-contract' development too.... 

[Ross Stonefeld]

It's F1, the cap will be half a billion dollars. A team. Not including driver salaries, marketing, or travel.

[dau]

Que F1 teams setting up multiple new companies which they will 'sun-contract' development too.... 

Because absolutely no one will ever notice.

[HuddersfieldTerrier1986]

Can only assume everyone agreed because they realised too many teams are treading too close to the edge of oblivion (plus maybe the issue of teams going for money over talent, perfect example being Maldonado over Hulkenburg at Lotus). Wonder what the limit is though......

[Markn93]

Don't believe for a second everyone will keep to it. Sponsors will pay drivers salaries so they can lower that hit on the cap, etc (loopholes will be found, inevitably). Hopefully everyone stays afloat as a result though.

[Knot]

Wonder what the limit is though......

 

The limit will be high enough not to impair the top teams, while doing exactly nothing for the smaller teams.

 

A toothless lion.

[dau]

Can only assume everyone agreed because they realised too many teams are treading too close to the edge of oblivion (plus maybe the issue of teams going for money over talent, perfect example being Maldonado over Hulkenburg at Lotus). Wonder what the limit is though......

I think the last limits discussed were in excess of $200m in the first year, then progressively shrinking in the following seasons. That's not including driver salaries and some other stuff. I can't remember the final amount, but it's not going to be even close to Mosley's cost cap plans.

Edited by dau, 09 December 2013 - 19:07.

[FBJim]

I would be happy about this if I thought for a second that it was enforceable, which I seriously doubt it would be.

[Fastcake]

http://www.fia.com/f...ulation-changes

 

 

I wonder what the limit is? And surprised that everyone approved, too.

 

I heard rumours several months back that Ferrari is struggling to compete financially with Red Bull and potentially Mercedes... So presuming that was true, getting Ferrari and their political power on board would of made it remarkably easier to override the lone voice of Red Bull.

 

A cost cap in F1 is long past due. The voluntary RRA was a failure so I hope a proper limit can be set and enforced. I used to be rather sceptical that it would be enforceable, but if the FIA gets some proper accountants to police the teams it could be really effective. It's quite an eye-opener when you learn just what these people can find out; if forensic accountants can chase laundered money through a hundred different off-shore entities, they should be able to manage to police a racing series.

 

Hopefully there will be stringent penalties for non-compliance. A disqualification or two might convince the teams to focus their efforts on violating the technical regualtions.

[KWSN - DSM]

Teams would not be treading water financially, were the earnings of the sport distributed fairly. As an article pointed out last week, the big teams have in excess of 500, 600 and 700 employees. Should the international federation really arrange for 200, 300 or 400 of those to lose their jobs? And as usual the big teams / manufacturers can surely do something about moving employees from team to engine manufacturing, sports marketing of nasty drinks or something to that effect.

 

I am against cost cap as a matter of principle, so no matter what they decide I am against it.

 

[JHSingo]

Haven't we been here before?

 

Wonder if Todt will be more effective than Mosley was in sorting the inevitable problems out.

[AvranaKern]

I won't be surprised that it would become a "budget cap different for each team based on their championship position in the preceding year" rule.

[ConsiderAndGo]

If Ferrari agreed, it must be quite an enormous sum..... remember 2009 when they didn't get their own way!

[Fastcake]

Teams would not be treading water financially, were the earnings of the sport distributed fairly. As an article pointed out last week, the big teams have in excess of 500, 600 and 700 employees. Should the international federation really arrange for 200, 300 or 400 of those to lose their jobs? And as usual the big teams / manufacturers can surely do something about moving employees from team to engine manufacturing, sports marketing of nasty drinks or something to that effect.

 

I am against cost cap as a matter of principle, so no matter what they decide I am against it.

 

 

It would be sad if a cost cap led to job losses from the highly staffed teams. However, if nothing is done there is the very real possibility that whole teams could go under with their entire staff laid off. 

 

A fair distribution of the sport's revenue is a very important issue, but that alone would not solve the problems. We need both to be implemented.

[Khars]

'It is not clear how the budget cap will be structured, although previous proposals have included exemptions for marketing and driver wages.' http://www.autosport...t.php/id/111798

 

If it is only a general idea to accept (as V6 turbo or not), than means no real change, as many forum members mentioned below.

If it will be a strict rule, I wonder, in how big is the cap and how will it controlled... (and who will control?)

[stanga]

Yay! Now accountants can have fun finding technical loopholes as much as the aero guys! 

[SenorSjon]

Yay! Now accountants can have fun finding technical loopholes as much as the aero guys! 

Maybe we can freeze them, just like they did to the engines?

[billm99uk]

Yay! Now accountants can have fun finding technical loopholes as much as the aero guys! 

 

Maybe we can freeze them, just like they did to the engines?

 

As an accountant, I must strenuously object to the prospect of my fellow book-keepers being frozen!

[Ross Stonefeld]

 

 

I am against cost cap as a matter of principle, so no matter what they decide I am against it.

 

 

Strange that you'd even be on a discussion forum.

[William Hunt]

won't work if the teams can participate in deciding how low (or better how high) the cap will be

[KWSN - DSM]

Strange that you'd even be on a discussion forum.

 

I can be convinced to change my opinion through well formulated arguments, your comment do not meet that requirement.

 

[Ross Stonefeld]

You said you were against it no matter what they decide. You're against the principle when we don't even know what the principles at stake are.

[Frank Tuesday]

I can see it now.  Adrian Newey  starts his own company and signs a contractor agreement for $1/year to provide technical assistance to Red Bull Racing.  Red Bull GmbH features Newey in a commercial and pays him $100M in appearance fees.  Maybe Renault provides engines to Red Bull Racing for $1.  Completely unrelated, Red Bulls pays for advertising in all Renault user manuals to the tune of $50M/year.  Red Bull Racing has only spent $2 so far.     

 

Instead of a budget cap, they just need to fix the prize money distribution.  I think $2M increase for each position in the CC is fine.  Based on $700M, Red Bull would get $73M, and Caterham would get $53M.  That is enough incentive to do well, but would fund the lower teams to a reasonable level.  They may not win with $50M, but at least they can survive. 

Edited by Frank Tuesday, 09 December 2013 - 21:50.

[sopa]

If they want to make a budget cap work, they need to also think, how to distribute the earnings more evenly. In a situation, where Ferrari and RBR earn almost the double (WCC + bonus) FOM money than any other team, their income from FOM alone is so big maybe it wouldn't fit under the budget cap! While back-end-teams would still struggle.

 

It is advisable to start with sharing the FOM money evenly. This automatically would enable back-end-teams to be more competitive than the possibly slightly articifial budget cap. Though I think it is good they are trying to do at least something.

[noikeee]

Well the double points thing was pretty damn bad, this day would need to have some pretty brilliant F1 news to compensate for it and you know what, this might be it. At last. I'm not much into communist sports - see the great communist associations of NFL, NHL, NBA... I'd swear the Americans turn into Soviets when it comes to sport - but something needed to be done to keep F1 down to earth.

 

Now I expect the cap to be something silly like 600 millions though, rendering it meaningless.

[EvanRainer]

People who hope for a budget cut as a way to stop the big teams out-developing others are just silly.

 

You can't put a cap on developing technology, no one has a right to do that it's ridiculous.

 

What you want to do is control costs. If you think there are some luxuries or other things certain teams can't afford then help them. Same with better revenue sharing. 

[KWSN - DSM]

You said you were against it no matter what they decide. You're against the principle when we don't even know what the principles at stake are.

 

I know that you are smarter that you pretend to be.

 

[Fastcake]

I can see it now.  Adrian Newey  starts his own company and signs a contractor agreement for $1/year to provide technical assistance to Red Bull Racing.  Red Bull GmbH features Newey in a commercial and pays him $100M in appearance fees.  Maybe Renault provides engines to Red Bull Racing for $1.  Completely unrelated, Red Bulls pays for advertising in all Renault user manuals to the tune of $50M/year.  Red Bull Racing has only spent $2 so far.     

 

Which is why the FIA needs to employ professional accountants to police the cost cap. The money spent on each component and its origin will be detailed somewhere, a proper look through the accounts will make it extremely difficult to hide the payments. Even if you do start playing silly buggers through subsidiaries and the like. The teams have an advantage over the FIA on the technical front, by having the resources to hire large teams of the best engineers in the business, which has made it difficult to write the rules as recent controversies have shown. But for this, providing the FIA does it properly, the teams would need to burn through large piles of their own money hiring outside experts to try and find ways of hiding extra spending.

 

I would imagine the rules would have to be structured something like this:

 

1. You get $X million in total. Possibly this will exclude driver salaries, marketing and other sundry expenses.

2. Full accounts containing total spend on each component, engineer salaries, payments to external suppliers, etc, are to be made available to the FIA.

3. As a condition of entry, accountants employed by the FIA have the right to go through the teams books to ensure compliance.

4. Any violation of the rules can be penalised by anything from a reprimand to exclusion from the championship.

[KWSN - DSM]

Which is why the FIA needs to employ professional accountants to police the cost cap. The money spent on each component and its origin will be detailed somewhere, a proper look through the accounts will make it extremely difficult to hide the payments. Even if you do start playing silly buggers through subsidiaries and the like. The teams have an advantage over the FIA on the technical front, by having the resources to hire large teams of the best engineers in the business, which has made it difficult to write the rules as recent controversies have shown. But for this, providing the FIA does it properly, the teams would need to burn through large piles of their own money hiring outside experts to try and find ways of hiding extra spending.

 

I would imagine the rules would have to be structured something like this:

 

1. You get $X million in total. Possibly this will exclude driver salaries, marketing and other sundry expenses.

2. Full accounts containing total spend on each component, engineer salaries, payments to external suppliers, etc, are to be made available to the FIA.

3. As a condition of entry, accountants employed by the FIA have the right to go through the teams books to ensure compliance.

4. Any violation of the rules can be penalised by anything from a reprimand to exclusion from the championship.

 

I agree that would be the way to police it, but was this not the reason it failed the last time? That no one wanted any outside come in and see their books?

 

[EvanRainer]

It fails because teams try to use it to their advantage.

 

-what do we suck at and the others are good at? aero?

-we propose cost cutting should be done by cutting aero budgets.

Edited by EvanRainer, 09 December 2013 - 23:54.

[EvanRainer]

The ideas of F1 being a technological league and a complete budget cap on all areas simply do not go together.

[Fastcake]

I agree that would be the way to police it, but was this not the reason it failed the last time? That no one wanted any outside come in and see their books?

 

 

They will have no choice in the matter, if they wish to compete in the championship. There just needs to be enough will power to force this through any objection by the big spenders.

 

The ideas of F1 being a technological league and a complete budget cap on all areas simply do not go together.

 

How?

[DanardiF1]

This is really good news. At last some way of controlling the spiralling costs of F1 that are making it inherently more difficult for any team to climb the competitive order.

 

If all teams have a limit of say £150m each season, naturally some of the smaller teams might not have that much money, but the gap between what they can afford and the 250m+ that Red Bull and Ferrari have been spending is greatly reduced... If two teams are spending exactly 150m, it's down to how well they spend that money, rather than previously just finding another 5m behind the couch to do some more R&D trial-and-error stuff.

 

This is good news... I hope the limit is sensible: not too draconian on teams that have money, and not too high for team's that don't.

[EthanM]

This is really good news. At last some way of controlling the spiralling costs of F1 that are making it inherently more difficult for any team to climb the competitive order.

 

If all teams have a limit of say £150m each season, naturally some of the smaller teams might not have that much money, but the gap between what they can afford and the 250m+ that Red Bull and Ferrari have been spending is greatly reduced... If two teams are spending exactly 150m, it's down to how well they spend that money, rather than previously just finding another 5m behind the couch to do some more R&D trial-and-error stuff.

 

This is good news... I hope the limit is sensible: not too draconian on teams that have money, and not too high for team's that don't.

 

 

-Hello, is this Renault?

-Yes

-Hi this is Red Bull. I wonder how much do your engines cost per season?

-Oh our off the shelf price is 18 million, but since we like you folks we would like to sell them to you for 50 pence and an egg sandwich

-Awesome

-By the way, we were thinking of creating a new blue version of the Megane Sport, would you be interested in badging it the Renault Red Bull Megane Sport ?

-Certainly, how much do you think that will cost

-Oh about 18 million

-Deal

[Atreiu]

No matter what the cap is, now there can be limits set on how much TV and hosting fees money teams can get. Afterall, it's not like they will work on limitless budgets anymore.

 

"The budget cap is X, I'll allow you Y% based on WCC position. If you don't like it, too bad. My job is to promote the show and make a profit, your is to find sponsors and race."

[DanardiF1]

-Hello, is this Renault?

-Yes

-Hi this is Red Bull. I wonder how much do your engines cost per season?

-Oh our off the shelf price is 18 million, but since we like you folks we would like to sell them to you for 50 pence and an egg sandwich

-Awesome

-By the way, we were thinking of creating a new blue version of the Megane Sport, would you be interested in badging it the Renault Red Bull Megane Sport ?

-Certainly, how much do you think that will cost

-Oh about 18 million

-Deal

 

Well considering Mr E is in court currently over charges of undervaluing F1 to get a preferred buyer, I suspect that the FIA accountants will see this blatant overvaluing of marketing services and have the requisite provisions in the budget cap regs to punish them.

[f1RacingForever]

Will it be controlled/enforced? It's pointless otherwise.

[pizzalover]

Just needs a level playing field, not caps.

 

We all know certain teams are still allowed tobacco sponsorship and special appearance fees.

 

Why have prize money? It's just another barrier to the "big boys club".

[Thomas99]

The problem with this is the FiA are too scared of teams leaving the sport to ever punish everyone. We are in a situation in which the teams have so much political sway that they can get away with anything. If Ferrari got punished they would just threaten to leave.

[Atreiu]

Well considering Mr E is in court currently over charges of undervaluing F1 to get a preferred buyer, I suspect that the FIA accountants will see this blatant overvaluing of marketing services and have the requisite provisions in the budget cap regs to punish them.

 

I am somehow suspicious of FIA's abilities to overlook and analize the books for huge coporations like Renault, Mercedes, etc. Not to mention first gaining full access to them. They can barely keep up with their own rulebook, hence the whole diffuser saga ever since 2009, with with one loophole and intepretation leading to the next.

[Frank Tuesday]

There could be rules that any supplier must make available same goods at same prices for any buyers.  So if Renault tried to sell engines to Red Bull for $1000, they'd have to sell to any team for the same $1000.  There could also be rules to prevent any contract work that isn't for deliverable goods (and those deliverables would fall under the previous rule.)  This would prevent an outside contractor from providing only engineering work that the team would then manufacture themselves.

 

Of course, what to make of Ferrari's interest in Le Mans, which would use an engine based on the F1 engine?  How could you prevent bits made with the Le Mans budget from entering the F1 stream?

[alfa1]

Reading it for the second time, it only says that the 'principle' has been adopted, wonder what that means.

 

If its just a "principle" that has been adopted then that means everyone said "yes" so that they would all look like good guys, knowing that they can kill it stone dead later on during the discussions about actual implimentation.

[ardbeg]

I guess they all said yes hoping some competitors would try to stay within the cap. It will not work. It can not work.

[Reinmuster]

I hope they will implement cost cutting rules like football's UEFA Financial Fair Play that require football club only spent what they get.

[metz]

If they want to make a budget cap work, they need to also think, how to distribute the earnings more evenly. In a situation, where Ferrari and RBR earn almost the double (WCC + bonus) FOM money than any other team, their income from FOM alone is so big maybe it wouldn't fit under the budget cap! While back-end-teams would still struggle.

 

It is advisable to start with sharing the FOM money evenly. This automatically would enable back-end-teams to be more competitive

Precisely what the big teams don't want.

It's all rigged to protect the status quo.

[metz]

If there is a budget cap, they must get rid of all the other restrictions that are currently in place to attempt this.

Test restrictions, Overtime hours, Engine life, Transmission penalties, trackside staff, etc, etc.

[Hans V]

F1 has been a financial arms race for a long time now. Ferrari has traditionally been the one leading this race, but is now being outspent by Red Bull and perhaps Mercedes. The sign of the times are that McLaren, the premier advertising object in F1, apparently is struggling to land a new title sponsor, Lotus the number 3 team in F1 is haemorrhaging  money and on the verge of bankruptcy.  Sauber is also in financial dire straits and betting their future on some shady Russians. Force India is depending on regular cash injections from its owners who both are in all kinds of financial troubles. There surely a lot more bad financial news in F1.

 

To be really competitive you need a budget of approximately half a billion dollars. Half a billion dollars to field two racing cars in twenty races! Quite a large slice of that money goes to aerodynamic R&D. F1 combined is spending billions of dollars on aerodynamics that has very little or no relevance to anything outside F1. That is just plain absurd.  

 

I think a budget cap, although not optimal, is the best solution given the current situation, the inability of the team principals to think of anything else than their own short term interests  -and the fact that F1 is turning into a dinosaur facing extinction (demographics are aging and increasingly uninteresting for sponsors) in a not too distant future. As a Financial Director for many years I believe the budget cap is enforceable. Given that the rules are crystal clear and sanctions will be seriously harsh. It will require a lot of auditing, which will cost quite a bit, but peanuts compared to the savings. It should, however, be combined with cost effective rules-changes. Like single plate standard wings (without the DRS nonsense).

[Hans V]

F1 has been a financial arms race for a long time now. Ferrari has traditionally been the one leading this race, but is now being outspent by Red Bull and perhaps Mercedes. The sign of the times are that McLaren, the premier advertising object in F1, apparently is struggling to land a new title sponsor, Lotus the number 3 team in F1 is haemorrhaging  money and on the verge of bankruptcy.  Sauber is also in financial dire straits and betting their future on some shady Russians. Force India is depending on regular cash injections from its owners who both are in all kinds of financial troubles. There surely a lot more bad financial news in F1.

 

To be really competitive you need a budget of approximately half a billion dollars a year. Half a billion dollars to field two racing cars in twenty races! Quite a large slice of that money goes to aerodynamic R&D. F1 combined is each year spending billions of dollars on aerodynamics that has very little or no relevance to anything outside F1. That is just plain absurd.  

 

I think a budget cap, although not optimal, is the best solution given the current situation, the inability of the team principals to think of anything else than their own short term interests  -and the fact that F1 is turning into a dinosaur facing extinction (demographics are aging and increasingly uninteresting for sponsors) in a not too distant future. As a Financial Director for many years I believe the budget cap is enforceable. Given that the rules are crystal clear and sanctions will be seriously harsh. It will require a lot of auditing, which will cost quite a bit, but peanuts compared to the savings. It should, however, be combined with cost effective rules-changes. Like single plate standard wings (without the DRS nonsense).