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F1 Budget Cap?


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#101 imaginesix

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Posted 01 January 2008 - 18:38

Actually it's the reverse, Ferrari sold road cars so he could compete in F1. But that's neither here nor there.

The manufacturers could still chose F1 as an advertising venue, it just wouldn't have as much impact as it currently has. Just as some of them sponsor ball and stick sports or music festivals or what-have-you, they could continue to sponsor F1. They just wouldn't BE in F1 themselves, technically.

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#102 imaginesix

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Posted 01 January 2008 - 18:52

In Faaaaact.....!

The team names could be leased by the FIA and any unauthorized use of the names (such as designating a team McLaren-Mercedes) would be pursued in court by the FIA for copyright infringement!

#103 Mat

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Posted 02 January 2008 - 05:35

what about ban NORMALLY ASPIRATED engines? That way all team funding becomes relevant to the entire community and nobody should have any issues with F1 teams spending big?

#104 imaginesix

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Posted 02 January 2008 - 14:38

Are you being sarcastic, and mean to say ban INTERNAL COMBUSTION engines?

#105 Buttoneer

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Posted 02 January 2008 - 15:04

Originally posted by Dudley


F1 would be sponserless in a year.

They're not there for the car coverage, they're there for the ads and personal experiences. With that rule in plae there's little to no point in Santander even being there.

Plus that would mean that Toyota wouldn't be able to use their own cars and drivers in their OWN adverts? You are of course kidding?

Perhaps I didn't make myself clear.

I'm not saying that Lewis couldn't appear in a Santander advert I'm saying that if Santander is already a sponsor of the team, they can't separately pay for Lewis to appear in adverts.

#106 J

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Posted 02 January 2008 - 15:39

Budget caps?

Gentlemen! Start your computers! May the best accountant win!..

Salary caps, for the drivers, though? Hmm..

-J

#107 Mat

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Posted 02 January 2008 - 16:42

Originally posted by imaginesix
Are you being sarcastic, and mean to say ban INTERNAL COMBUSTION engines?


no, im serious if slightly delusional. It aint ever going to happen, but apart from the lack of noise i think it would be a splendid injection into the sport.

#108 imaginesix

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Posted 02 January 2008 - 17:10

Originally posted by J
Salary caps, for the drivers, though? Hmm..

Unless the salary cap is so severe that it allows most teams to hire just about any of the top drivers driver, what's the point?

#109 CrushedDreams

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Posted 02 January 2008 - 18:56

How about a gradual "Open Source"?

Off the top of my head:

Step 1: FIA release previous years aerodynamic efficiency data, Power curve (with HP and Torque), and some type of variable Suspension info (like some type of dampening efficiency on a post test).

This would give the teams an idea of where they are and where they need to be.

Step 2: FIA release schematics, comprehensive data, and etc.; of certain select systems for each teams entry 2 seasons ago.
Under body, materials, suspension's geometry, Areas of Engine and Transmission ... etc.

Step 3: FIA release the full Blueprints of the teams entry from 3 seasons ago.

This being said each team (manufacture) could have 2 IP credits. Each credit would allow a team to "hide" any one system on their entry that would be exempt from this "declassification." This would allow the use of a system that the team feels is too valuable to eventually "give away." (My thinking is to protect a manufacture from trying an idea that may be applied directly to their road car division that they would have to keep secret from their competitors.)

I think this would have a few affects: A team may may lower their experimental R&D budget knowing that their secrets will be somewhat short lived. It would also guide the "lower" budgeted teams.

This could help a lot of areas; it also allows F1 to remain F1. It essentially brings the risk-to-reward equation on a teams spending into line.

Or it could be the worst idea know to F1 kind ;) .

#110 Dudley

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Posted 05 January 2008 - 13:19

Originally posted by imaginesix
And that's the answer.

The only way to get the money out of F1 is to remove (or at least reduce) it's Return on Investment. Right now the return comes for the greatest part in the form of public awareness of the brands involved. So, reducing the audience is one way of reducing the ROI, but that seems impossible to accomplish as demonstrated by the ever increasing fan base despite the FIAs best efforts over the past 5 years. The other way is to reduce the ability for sponsors to expose their brand to the audience.

The most obvious way to do that is to ban sponsors on the cars. Each team would choose their own team colours and would have to leave room for those companies that provide spec parts (tires, ECU, gas). So Ferrari could retain it's Red, McLaren could go with Orange ( :up: :up: :up: )... But that could only be the beginning. The team names themselves would have to be dissociated with any brand of product so that Ferrari, Mercedes, Honda, BMW, Toyota or Renault could not benefit from any direct association between their road cars and F1 teams. Team names would have to be registered and incorporated brands in their own right, with NO income or expenses (except for registration costs, which would be peanuts anyways and the FIA could pay for). So Ferrari might create a company called Scuderia Cavallino Rampante to front for them in F1, Lotus could come in as Team Hethel (in British racing Green, of course). Honda could appropriate their Mugen brand to act as stand-in for their company. Toyota could name their F1 team Toyoda! Fans would know exactly who they are but their ROI would be reduced as they couldn't claim to be participating in F1 directly but only through their association with these teams. The same would be true for team sponsors, they could claim an association with different teams but they couldn't pass the teams off as their own.

Of course, the teams would never approve, but that just kinda shows the power of the idea I think as they would have to be crazy to voluntarily compromise their ROI! Other than that, I think it would work great.


F1 would die instantly. Literally instantly. There would be no 2009 season.

The team names could be leased by the FIA and any unauthorized use of the names (such as designating a team McLaren-Mercedes) would be pursued in court by the FIA for copyright infringement!


And why would McLaren sell their name to the FIA?

Salary caps, for the drivers, though? Hmm..


How many times do people have to point out why that's impossible?

#111 undersquare

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Posted 05 January 2008 - 14:07

The big money is a key part of the show. Look at the coverage from the £100m fine.

I think Bernie and Max must be pulling in opposite directions on this.

#112 imaginesix

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Posted 05 January 2008 - 19:47

Originally posted by Dudley
And why would McLaren sell their name to the FIA?

To be allowed to participate in F1. If the name McLaren is too valuable for them, they can invent a new brand to represent them in F1.

#113 Zarathustra

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Posted 05 January 2008 - 21:36

Originally posted by Dudley
And why would McLaren sell their name to the FIA?

Actually it's thought the concorde agreement gives the Formula One Group some rights over the team names.

#114 Dudley

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Posted 06 January 2008 - 12:04

Originally posted by imaginesix
To be allowed to participate in F1. If the name McLaren is too valuable for them, they can invent a new brand to represent them in F1.

Ahahahaha.

#115 imaginesix

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Posted 06 January 2008 - 15:45

Originally posted by Dudley
Ahahahaha.

:up:
I'm talking about cutting costs in F1 in a real and effective manner. But any real and effective cost cutting will never, can never, happen because of the severe economic implications this brings with it. So all this is all just an intellectual exercise and shouldn't be taken too seriously.

#116 Melbourne Park

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Posted 08 January 2008 - 02:33

Man hours is one way to restrict resources. Services and outside manufactured goods bought in from outside would also have to include a man hours "value", arbitrated by the FIA.

Wealthy teams would likely run short of available man hours - which is the purpose of the system. Poorer teams would have excess man hours available. Such descrepancies could be nicely handled, by allowing the sale of manhours between the teams. Smaller teams who do not use the FIA set maximum manhours available, could then sell their under-utilized man hours to the bigger, wealthier teams. This would increase the incomes and value of the poorer teams, and encourage the larger teams to improve their efficiency by downsizing.

With smaller teams getting higher incomes for selling man hours, such teams would become financially more solid, and could become more attractive to sponsors, and could thereby increase their incomes, and hence improve their performances by eventually being able to increase their man hours and hence become more competitive.

Man hours might be difficult to work out though, but companies would already know that information. Overtime worked would have to be estimated, as many engineers are fixed salaries and would work long hours.

The recent McLaren's new MP4-23 has been quoted as having had 14,000 manufacturing man hours used to put the car together. I presume that is for one car, although two will shortly be available. Since there is downtime associated with such job shop work, for arguments sake I have estimated that a McLaren manufacturing man hour represents 75% of a McLaren manufacturing employee's employment time, and that he is employed for 40 hours per week. So 14,000/30 hours (75%) = 466 individual man weeks to manufacture the MP4-23. If the car took 6 weeks to put together, then 466/6= 77 people were utilized in the cars manufacture.

Manhours might be a neater way to equalize things than dollars IMO, for two reasons:
1- One could barter man hours between the teams, hence allowing teams to change sizes over time and also close the competitive gap between the highly manufacturer teams and the non manufacturer teams.
2 - Estimating dollar values for outside work would be difficult when the outside organisation is the company's own parent organization, manhours should be an easier calculation, verifiable by other teams own knowledge of how long it takes to do things.



#117 Dudley

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Posted 08 January 2008 - 08:30

Originally posted by Melbourne Park
[B]Man hours is one way to restrict resources. Services and outside manufactured goods bought in from outside would also have to include a man hours "value", arbitrated by the FIA.

a) The FIA would have to spend a billion a year monitoring this.

b) Still doesn't solve either the problem of drivers effectively being paid on the side or Honda hiding development from the FIA in road cars.

#118 Melbourne Park

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Posted 08 January 2008 - 19:55

Originally posted by Dudley


a) The FIA would have to spend a billion a year monitoring this.

b) Still doesn't solve either the problem of drivers effectively being paid on the side or Honda hiding development from the FIA in road cars.


The FIA would not have to spend huge amounts. As I said, such figures can be calculated by other teams. Concerning using parent company resources, the parent companies would be loath to lie - their reputations are quite valuable.

I think the driver issue is separate. And why shouldn't they market themselves and earn from such efforts, outside of the F1 effort?

The key suggestion from man hours is that poorer teams could trade their unused man hours for cash. IMO that would not only stimulate efficiency, but it would assist the smaller teams financially and it would also increase their competitiveness.

#119 scdecade

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Posted 08 January 2008 - 21:47

Like everything else in F1 this smacks of self-dealing. Honda have just completed a massive capital expediture on infrastructure: new wind tunnel, facilities, data center, etc. So of course they want to limit budgets now. Would they agree to include the existing capital value of facilities in their "fair" fixed budget so that Force India could spend more on their factory to catch up? Haha, of course not. All Honda are trying to do is pull the ladder up after themselves when they've already climbed the tree. Pretty silly really.

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#120 tifosi

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Posted 08 January 2008 - 22:28

Originally posted by Melbourne Park


The FIA would not have to spend huge amounts. As I said, such figures can be calculated by other teams. Concerning using parent company resources, the parent companies would be loath to lie - their reputations are quite valuable.


I love this idea. FIAT just so happnes to have developed a nice little V8 that puts out enourmous horsepower. Total manhours for Ferrari to install it = 2.

#121 Spunout

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Posted 08 January 2008 - 22:45

Originally posted by tifosi


I love this idea. FIAT just so happnes to have developed a nice little V8 that puts out enourmous horsepower. Total manhours for Ferrari to install it = 2.


Don´t forget the new McLaren V8-powered sports car that has absolutely fantastic gearbox, and all the new space age materials used in their other projects.

But hey, surely little disputes like these would be easy to solve. All it takes is some common sense and honesty - both things F1 teams are famous of...

#122 Melbourne Park

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Posted 08 January 2008 - 23:50

Originally posted by Spunout


Don´t forget the new McLaren V8-powered sports car that has absolutely fantastic gearbox, and all the new space age materials used in their other projects.

But hey, surely little disputes like these would be easy to solve. All it takes is some common sense and honesty - both things F1 teams are famous of...


The system I am suggesting would have experts who would be able to provide manhour estimates. Namely, the poorer teams. They know how much it would cost them to for instance put a new gearbox into the car, and how much extra to put a state of the art one in. Its simple with such a system - just ask the lesser teams who would want to sell their under used manhours for estimates on how long something would have taken.

And as I said - the big companies would not want to be found to be lying, as corporate governance is a major issue, and its not worth compromising it on a small marketing arm that is what an F1 team is.

#123 Spunout

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Posted 09 January 2008 - 09:52

Originally posted by Melbourne Park


The system I am suggesting would have experts who would be able to provide manhour estimates. Namely, the poorer teams. They know how much it would cost them to for instance put a new gearbox into the car, and how much extra to put a state of the art one in. Its simple with such a system - just ask the lesser teams who would want to sell their under used manhours for estimates on how long something would have taken.

And as I said - the big companies would not want to be found to be lying, as corporate governance is a major issue, and its not worth compromising it on a small marketing arm that is what an F1 team is.


Really? Then how come we have teams banned from races or receiving 100 million fines? I´d say big companies don´t like losing, either. The thing is, years ago I was doing manhour estimates...cost estimates...etc for company far smaller than Toyota or Honda, and for projects far smaller than running an F1 team. Big part of my work was waste of time, simply because the numbers were never accurate no matter how well they were calculated. Eventually attempts to produce better reports led to unbearable costs. Quite simply: policing budget cap would take an army of FIA people...and that´s for independent teams. When it comes to car manufacturers, the whole idea is ludicrous. There is no way to guarantee they cannot use "road car" knowledge and research in F1.

Think about it: would Max order Toyota to scrap their new prototype because it happens to have solutions similar with F1 cars? Would he record every single meeting and lunch break of Honda staff to make sure the "road car" engineers don´t talk about F1 stuff? Would he stop trading between say, two different companies...both tied to BMW?

What we are talking about here is nightmare of monitoring, loopholes and gray areas.

#124 Melbourne Park

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Posted 09 January 2008 - 22:45

Originally posted by Spunout


Really? Then how come we have teams banned from races or receiving 100 million fines? I´d say big companies don´t like losing, either. The thing is, years ago I was doing manhour estimates...cost estimates...etc for company far smaller than Toyota or Honda, and for projects far smaller than running an F1 team. Big part of my work was waste of time, simply because the numbers were never accurate no matter how well they were calculated. Eventually attempts to produce better reports led to unbearable costs. Quite simply: policing budget cap would take an army of FIA people...and that´s for independent teams. When it comes to car manufacturers, the whole idea is ludicrous. There is no way to guarantee they cannot use "road car" knowledge and research in F1.

Think about it: would Max order Toyota to scrap their new prototype because it happens to have solutions similar with F1 cars? Would he record every single meeting and lunch break of Honda staff to make sure the "road car" engineers don´t talk about F1 stuff? Would he stop trading between say, two different companies...both tied to BMW?

What we are talking about here is nightmare of monitoring, loopholes and gray areas.


I agree about the difficulty of financial numbers.

I think that manhours could work. The man hours do not have to be accurate though - but they would have to be valued. So if a team bought a gearbox from another company, that gearbox would have an agreed number of man hours attached to it.

The key aim would be to restrict overall man hours, and to allow the smaller teams (such as Williams) to sell their excess man hours to the larger teams (such as McLaren or Ferrari or Honda). This would both award the efficient small teams, and act as an incentive for the big teams to reduce expenditure. Afterall if man hours are restricted, then the large teams would have to reduce their expenditures. If they chose to leave them the same, they could do so - by purchasing excess man hours from the smaller teams. Each year, total man hours could be progressively reduced each year.

There could be a table of man hour values for different items too - such as a gearbox. That would be interesting reading. Such a system would also reward efficiency, which would appeal to every business.

The man hours of the F1 teams are easy to evaluate of course. For outside assistance, then the FIA would decide on the number of man hours they think would be appropriate, based upon not only their own estimates but based upon some F1 teams own estimates.

#125 Spunout

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Posted 10 January 2008 - 09:47

That kind of system would murder the independents. There is no credible way to stop car manufacturers using their "road car" people and facilities with F1 projects. Not to mention all the know-how, financial/political connections, etc. There would be no excess manhours for independents. Toyota and Honda engineers would invent state-of-the-art gearbox in 2 seconds. Next month we would find out their new prototype has similar thing.

This would not work at all...sorry :)

You need 12 Big Brother houses where the teams build cars under FIA surveillance. The same components and materials for everyone. Anything less is between failure and farce.

#126 Charles E Taylor

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Posted 10 January 2008 - 19:46

If I recall,

Pat Symonds suggested that to control budgets in F1 you need to limit the wingspan of the Private Jets.


Moreover a real control would be that any winning car must be offered for sale at a fixed price, Say $1.0m

Then there would be little cause to cheat or to spend too much. Allow private entrants to buy the cars and even Dave Richards might smile.

#127 Melbourne Park

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Posted 10 January 2008 - 21:00

Originally posted by Spunout
This would not work at all...sorry :)

Since you don't read what I have said, it not surprising that you have not changed your opinion.

#128 undersquare

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Posted 10 January 2008 - 21:23

The amount of money flowing into F1 wouldn't go down with a team budget cap, there would just be even more for Billionnaire Bernie and the do-nothing private equity owners.

I can't see why the teams would go for that.

And really the amount of money isn't the problem, is how it's distributed. Give all the teams an equal share of joint revenues, let them add sponsorship as they are able, job done.

If they cut the FoM share to, say, 20%, F1 needn't cost the teams a penny.

Finally, change the rules back so there's scope for innovation, and clever but poor teams can work their way up the ladder.

#129 Spunout

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Posted 10 January 2008 - 22:02

Originally posted by Melbourne Park
Since you don't read what I have said, it not surprising that you have not changed your opinion.


I did read it, and responded to the best of my ability. For any system based on manhours to work, you need to monitor and police them effectively. Car manufacturers could keep manhours low - ON PAPER - by using their other divisions to do majority of the work. It´s that simple. I could go on and on about additional issues (eg having more expensive technology around can lower manhours considerably), but frankly I don´t think that is necessary.

#130 Spunout

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Posted 10 January 2008 - 22:05

Originally posted by undersquare
Finally, change the rules back so there's scope for innovation, and clever but poor teams can work their way up the ladder.


Those times are gone. Nowadays developing new stuff requires loads of money. No more gut instinct or guesstimates, it´s computers and state-of-the-art wind tunnels. Not to mention, the most innovative engineers work for teams that can afford better salaries. In other words, for big teams.

#131 undersquare

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Posted 10 January 2008 - 22:54

Originally posted by Spunout


Those times are gone. Nowadays developing new stuff requires loads of money. No more gut instinct or guesstimates, it´s computers and state-of-the-art wind tunnels. Not to mention, the most innovative engineers work for teams that can afford better salaries. In other words, for big teams.


By "poor" I mean $200m or so :D

Quite doable if the money is spread around more.

And the most innovative engineers only command big salaries once they've had some success.

#132 Spunout

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Posted 11 January 2008 - 00:46

Originally posted by undersquare


By "poor" I mean $200m or so :D

Quite doable if the money is spread around more.

And the most innovative engineers only command big salaries once they've had some success.


And the best place to have some success is teams that can offer the best resources...;)

#133 Mika Mika

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Posted 14 May 2008 - 11:26

http://www.autosport...rt.php/id/67410

110Euro...

BTW I think flav is talking BS....

#134 Buttoneer

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Posted 14 May 2008 - 11:37

This is interesting;
"Renault boss Flavio Briatore said his team were already spending less than the suggested cap.

"I already pay 40 per cent less than the cap. If I want to keep to the limit then I need to spend more. It's nonsense.""

#135 F1Fanatic.co.uk

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Posted 14 May 2008 - 11:59

So Briatore says Renault are spending 40% of the proposed cap.

If he's referring to the 2009 cap of €175m/$269m then he's saying Renault are spending $161.4m

If he's referring to the 2011 cap of €110/$169m, then he's saying Renault are spending $101m.

According to their 2005 financial results Renault's turnover in 2005 was $229m.

Do those figures seem realistic?

(Edit: I meant "40% less than the proposed cap" - which is what I calculated)

#136 Mika Mika

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Posted 14 May 2008 - 12:04

Originally posted by F1Fanatic.co.uk
So Briatore says Renault are spending 40% of the proposed cap.

If he's referring to the 2009 cap of €175m/$269m then he's saying Renault are spending $161.4m

If he's referring to the 2011 cap of €110/$169m, then he's saying Renault are spending $101m.

According to their 2005 financial results Renault's turnover in 2005 was $229m.

Do those figures seem realistic?


£229M GBP Which is much closer to 290M Euro or $450M

As I say Flav Talking BS...

#137 DigDig

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Posted 14 May 2008 - 12:10

You have to keep in mind that the budget cap figure Flavio is on about is a different calculation than an overall budget as it does not include engine expenses, driver salaries, marketing costs, team principle salaries and even kers development.

Therefore their current budget - those expenses could be closer to what he's saying, I still think 40% is a bit off, IMO if he said 60 - 80% I would have believed him.

#138 Mika Mika

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Posted 14 May 2008 - 12:12

Originally posted by DigDig
You have to keep in mind that the budget cap figure Flavio is on about is a different calculation than an overall budget as it does not include engine expenses, driver salaries, marketing costs, team principle salaries and even kers development.

Therefore their current budget - those expenses could be closer to what he's saying, I still think 40% is a bit off, IMO if he said 60 - 80% I would have believed him.


I have a Breakdown of the 2003 Costs at home, i'll fish is out...

#139 F1Fanatic.co.uk

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Posted 14 May 2008 - 12:30

Originally posted by Mika Mika
£229M GBP Which is much closer to 290M Euro or $450M

As I say Flav Talking BS...

No sorry typo on that article, it is $229m - http://www.grandprix...ns/ns17768.html

Originally posted by Mika Mika
I have a Breakdown of the 2003 Costs at home, i'll fish is out...

Please do :up:

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#140 MikeTekRacing

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Posted 14 May 2008 - 12:38

Originally posted by F1Fanatic.co.uk
So Briatore says Renault are spending 40% of the proposed cap.?

no, he says he is spending 40% less than the cap

#141 Hippo

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Posted 14 May 2008 - 12:47

Originally posted by F1Fanatic.co.uk

No sorry typo on that article, it is $229m - http://www.grandprix...ns/ns17768.html


Well, that would mean they had a total budget of approx €150 at current exchange rates. This is including engines, drivers and all the other stuff, that shall be excluded from the budget cap. Even if the budget has increased slightly i can easily imagine them being far below the suggested 09 budget cap.

I don't know what the FIA plans there. Those caps are not affecting independent teams obviously. Maybe FIA tries to brake down the top teams. Last i heard McLaren and Ferrari were reported to have budgets of €300+ so those caps would basicly cut that in half.

#142 Rinehart

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Posted 14 May 2008 - 12:56

I've always felt that the way to curb costs is to ensure that it is possible to compete and win for say £100m, so if teams want to go and spend £500m, because they can, that's their business.

But the problem is at the moment you need to spend £500m to win.

So to do this, the answer is not in budget caps, but in marginalising the effectiveness of incremental spend over £100m.

The way to do this is along the lines of:

1. Allow customer cars to compete - but do not distrubute any F1 income to them. (Perhaps have 3 championships, 'Teams', 'Constructors' and 'Drivers'.

2. Constructors/Manufacturers must be obliged to sell engines, chassis, etc - to at least on other team for a maximum price.

3. Technical specs of any newly developed part approved by the FIA to race (e.g. a new brake system) - provided to all other teams, 3 races after the debut by 'inventing' team. Full plans of new cars would also be released 3 races after launch. The only part not covered would be engines.

My feeling is that the budget cap won't work for a host of reasons but as Spunout put it, its open to such absue by the manufacturers channeling man hours through their non motorsport departments. Also, its plainly obvious that because personel for example are outside the budget, their rates will go up, so this would largely be a redistrubution of funds. Same goes for KERS and Engines, more spend would go in that direction, rather than limiting spend. But what about things like safety - surely because this is covered by the budget, spend and focus here would go down? How does that sit with the claim that Mosley is responsible for safety improvement in F1?

#143 AFCA

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Posted 14 May 2008 - 14:10

Recently Mosley was pushing to have a budget cap of € 150 million at first, then € 130 million and finally €110 million.

#144 Dudley

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Posted 14 May 2008 - 22:34

Originally posted by DigDig
You have to keep in mind that the budget cap figure Flavio is on about is a different calculation than an overall budget as it does not include engine expenses, driver salaries, marketing costs, team principle salaries and even kers development.

Therefore their current budget - those expenses could be closer to what he's saying, I still think 40% is a bit off, IMO if he said 60 - 80% I would have believed him.


He IS saying 60%.

#145 Dudley

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Posted 14 May 2008 - 22:36

Yes, the championship becomes once again a little more less about racing. It's now possible to make a big difference simply by having a parent company to funnel through.

The FIA can "task force" all they like. They can't legally ask for Honda Motor Company's finance docs, nor would they have any chance of getting them.

#146 clipper

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Posted 14 May 2008 - 23:56

Originally posted by Rinehart
I've always felt that the way to curb costs is to ensure that it is possible to compete and win for say £100m, so if teams want to go and spend £500m, because they can, that's their business.

But the problem is at the moment you need to spend £500m to win.

So to do this, the answer is not in budget caps, but in marginalising the effectiveness of incremental spend over £100m.


I like the idea of marginalising the effectiveness of over $100m. I look to something that they have in the NBA called the luxary tax threshold, which basically means if you want to spend over the cap, thats fine, but for every dollar you spend you are paying a dollar of tax.

so for example with the budget cap is at 110 million, and ferrari chooses to go over that by another 100 million, then ferrari would have to pay another $100 million in tax, which then can be distributed in any means possible either to the teams, or into FIA sponsored programs.

#147 Melbourne Park

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Posted 15 May 2008 - 00:21

Originally posted by Rinehart

My feeling is that the budget cap won't work for a host of reasons but as Spunout put it, its open to such absue by the manufacturers channeling man hours through their non motorsport departments.


I have been involved in manufacturing for the majority of my working life, and calculating man hours is not only a standard procedure, but its the core value that car manufacturers use for their vehicles. Car manufacturers will tell you that one vehicle takes 22 man hours to make, another 27, another 45. Its the key criteria on efficiency.

Its very easy to apply manhours to components. All you have to do is estimate the manhours for a component, and then find out how many the team manufacturers, which is all available already. Teams place orders for parts and for components, for everything, they know exactly how many things are done.

The same applies to R&D. For instance, recall that mcLaren had 8 projects for their rear brake balance - each project would attract a man hour figure, even though none would have gone into production (McLaren were not allowed to use that concept due to the court case). An audit of man hours for R&D is more complex, but its still available. And if the big teams lied, they'd be in huge trouble legally when caught, and also in trouble with their shareholders.

My concept is that if say Ferrari is allowed to use X number of man hours per year, and they find themselves having used 20% more than X man hours, then they could pay money for virtual man hours from a smaller team. This would mean that if Williams used only 50% of the man hours allowed, then Ferrari could pay money to buy the "virtual" man hours from Williams. This would mean that Williams would make money, from building a car with less than the permitted man hours.

So Williams would sell a 20% virtual man hour allocation to Ferrari, who would then be able to continue on with a team that used 20% extra man hours for their operation. And Williams would still have a 30% virtual man hour allocation left, to sell to say McLaren or Honda or Toyota, if those teams were also over the F1 man hour allocation.

Companies would also be able to market their efficiency. One could image the prestige for a team like Williams, who might be beating teams that they had sold virtual man hours too!

The virtual man hour concept of mine, is virtual a tax on efficiency, and its a tax that gets paid to the efficient teams. IMO that would benefit teams that do not have immense manufacturer based marketing budgets that cross subsidize their racing teams. Those teams can afford to over spend - Williams cannot, its not a massive auto manufacturer. This scheme would keep smaller teams in business, and would increase the value of the F1 license. I am not sure how to handle a paper F1 team though - that is a team like Super Aguri, who might be there just to sell its man hours to Honda. Someone else needs to think of a solution for that dilemma!

Over time, the size of teams would be able to be reduced by reducing the total man hours.

If there were no virtual man hours available to purchase from other companies, then maybe the FIA could sell their own virtual man hours themselves to the teams to allow the teams to meet the man hour limit?

#148 Dmitriy_Guller

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Posted 15 May 2008 - 00:49

Originally posted by Rinehart
So to do this, the answer is not in budget caps, but in marginalising the effectiveness of incremental spend over £100m.

You hit the nail right on the head. :up: :up: :up:

#149 Rinehart

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Posted 15 May 2008 - 08:37

Originally posted by clipper


I like the idea of marginalising the effectiveness of over $100m. I look to something that they have in the NBA called the luxary tax threshold, which basically means if you want to spend over the cap, thats fine, but for every dollar you spend you are paying a dollar of tax.

so for example with the budget cap is at 110 million, and ferrari chooses to go over that by another 100 million, then ferrari would have to pay another $100 million in tax, which then can be distributed in any means possible either to the teams, or into FIA sponsored programs.


Interesting possibilities there.

#150 Rinehart

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Posted 15 May 2008 - 08:54

Originally posted by Melbourne Park


I have been involved in manufacturing for the majority of my working life, and calculating man hours is not only a standard procedure, but its the core value that car manufacturers use for their vehicles. Car manufacturers will tell you that one vehicle takes 22 man hours to make, another 27, another 45. Its the key criteria on efficiency.

Its very easy to apply manhours to components. All you have to do is estimate the manhours for a component, and then find out how many the team manufacturers, which is all available already. Teams place orders for parts and for components, for everything, they know exactly how many things are done.

The same applies to R&D. For instance, recall that mcLaren had 8 projects for their rear brake balance - each project would attract a man hour figure, even though none would have gone into production (McLaren were not allowed to use that concept due to the court case). An audit of man hours for R&D is more complex, but its still available. And if the big teams lied, they'd be in huge trouble legally when caught, and also in trouble with their shareholders.

My concept is that if say Ferrari is allowed to use X number of man hours per year, and they find themselves having used 20% more than X man hours, then they could pay money for virtual man hours from a smaller team. This would mean that if Williams used only 50% of the man hours allowed, then Ferrari could pay money to buy the "virtual" man hours from Williams. This would mean that Williams would make money, from building a car with less than the permitted man hours.

So Williams would sell a 20% virtual man hour allocation to Ferrari, who would then be able to continue on with a team that used 20% extra man hours for their operation. And Williams would still have a 30% virtual man hour allocation left, to sell to say McLaren or Honda or Toyota, if those teams were also over the F1 man hour allocation.

Companies would also be able to market their efficiency. One could image the prestige for a team like Williams, who might be beating teams that they had sold virtual man hours too!

The virtual man hour concept of mine, is virtual a tax on efficiency, and its a tax that gets paid to the efficient teams. IMO that would benefit teams that do not have immense manufacturer based marketing budgets that cross subsidize their racing teams. Those teams can afford to over spend - Williams cannot, its not a massive auto manufacturer. This scheme would keep smaller teams in business, and would increase the value of the F1 license. I am not sure how to handle a paper F1 team though - that is a team like Super Aguri, who might be there just to sell its man hours to Honda. Someone else needs to think of a solution for that dilemma!

Over time, the size of teams would be able to be reduced by reducing the total man hours.

If there were no virtual man hours available to purchase from other companies, then maybe the FIA could sell their own virtual man hours themselves to the teams to allow the teams to meet the man hour limit?


As others have pointed out MP, your belief that man hours can be acurately estimated and calculated (a belief you hold from your actual career experience) rather naively forgets that, the company you work for are INTERESTED in calculating ACURATE MAN HOURS so as to acurately establish production costs, lets say, whereas to use man hours as a yardstick to measure an F1 teams spend would simply incentivise grossly UNDERESTIMATING these hours as the benefit of this 'cheating' would be to get more man hours out of your team, within the rules. So what you need to be focusing on is not that it is possible to accurately measure hours, if you so choose, but a method to ensure this is the case, where the reason to do otherwise might be very great.

Tell me, if McLaren declare 20 man hours accross various departments, to design, test and build an innovative new exhaust system, and coincidentally, Ferrari develop a very similar thing but declare 40 hours, is the implication that McLaren have cheated on their hours declaration, or are they simply a more efficient company?

I can see this farcical system being open to the sort of interpretation that led to the spygate scandal. You could have all sorts of inconsistent results up and down the pitlane, but the FIA could build a case of 'cheating' against one example if they so chose.