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F1 Budget Cap?


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#151 Spunout

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Posted 15 May 2008 - 09:01

Melbourne Park,

I have to repeat my earlier point: F1 teams COULD calculate/estimate manhours in semi-effective way. If they wanted, that is. In competitive situation where calculating manhours in "creative" way can bring advantage, you have an utter mess there. Especially since FIA has no resources or even access to check out the books, so to speak.

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.



There would be no audit. That´s the problem. A) FIA has no resources for auditing car manufacturers (eg Toyota has something like 300.000 employees) or even smaller organizations like privateer racing teams B) FIA has no authority to audit the likes of Toyota or BMW. In this case, all FIA could hope for is word of honor - from teams that cannot agree how bargeboards are measured or if fuel is fuel (see FIA vs BAR case). Thanks but no thanks...

You know, I too have done my share of calculations for company that manufactured all kinds of stuff. But this is completely different situation. Had the success of our company depended on our calculations looking "good", we could have cheated like hell without ever getting caught. Imagine the same situation without audit!



I still believe the idea eg Rinehart mentioned is the best, and only solution.

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#152 alfa1

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Posted 15 May 2008 - 11:02

Originally posted by Rinehart
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.


Well of course on this topic they also need to work out the arbitration / appeal procedures (and penalties) before the rule comes into effect, something that the past history of the FIA shows they'll instead just make it up as they go along with application depending on how they feel on the day.




From an earlier message...

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.


That would be quite hard to do with new technology.
For example... the new Ferrari nose with a hole in it. How does one determine an 'appropriate' number of man hours on something they're not even allowed to know about? Is your proposal that all F1 teams must now by law tell all other teams about developments they're working on so the other teams can estimate man hours for them?

#153 Rinehart

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Posted 15 May 2008 - 11:11

Originally posted by alfa1


Is your proposal that all F1 teams must now by law tell all other teams about developments they're working on so the other teams can estimate man hours for them?


If you mean my earlier proposal where after 3 races a team would have to provide to all other teams the specs, drawings and so forth for a new idea, its only a thought, not a proposal. But the idea is that it would theoretically cut costs as smaller teams could copy and larger teams would not go besurk on expenditure for a reduced advantage a new invention would only get 3 races plus the time it took for another team to copy). Secondly, it would also improve competition as the time lag from the top to bottom team having a new 'thing' on the car would be much reduced and thirdly it would all but eliminate another spygate as it would enforce transparency in the pitlane anyway.

Its only a prototype idea and I myself am already thinking its not totally fair to the big teams, but I am convinced that marginalising the effectiveness of spend is better than capping it, so I need to be working on some idea!!!

#154 Spunout

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Posted 15 May 2008 - 11:34

Originally posted by alfa1


That would be quite hard to do with new technology.
For example... the new Ferrari nose with a hole in it. How does one determine an 'appropriate' number of man hours on something they're not even allowed to know about?


Exactly. On top of this, Toyota the car manufacturer and Toyota F1 team aren´t completely separated from each other, and never will be. Part of the stuff they have in F1 cars is based on development for road cars. What if Prototype X Department spends Y number of manhours for new materials that can also be used for F1 cars? The FIA will never know about this, PERIOD. The rival teams will never know about this, either. The FIA cannot even guesstimate how much time the development took, as they A) don´t have the resources B) don´t have the access. All they can do is figure out if the new material is legal or not. Toyota has gained "free" manhours and there is absolutely nothing FIA can do about it.

Is your proposal that all F1 teams must now by law tell all other teams about developments they're working on so the other teams can estimate man hours for them?


I think perspective is the issue here. FIA isn´t government, taxation department or even hired auditor. They have no control over multi-national benemoths like car manufacturers. Max Mosley cannot waltz in and tell Toyota c/o to show him the books. There is no law that allows FIA to do any of this. F1 is small project for Toyota. Yes, you heard me. They have 300.000 employees and turnover with more zeros than some people can count. The moment when FIA even suggests sniffing around and telling them what to do (apart from designing F1 cars that are within the F1 rules), they´ll leave. Don´t get me wrong; IMHO Melbourne Park´s idea is brilliant. Unfortunately, it can never work in competitive situation where huge corporations (that do much more than participate in F1!!!) gain by "interpreting" the rules in certain way.

#155 Dudley

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Posted 15 May 2008 - 12:18

Originally posted by Melbourne Park

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.


So instead Honda Motor Company will do that R+D and sell the results to the team for £1m.

The FIA are not allowed to see HMC's accounts and will never know, or could know, or have any business knowing that the real cost to HMC was £5m. Nor could they sanction the team if they found out.

And even so, what if Honda fit said brake system to a limited number of production cars, say.... 5, and sell them to incredibly rich people. They could claim the money was for that and HF1 just bought a component. This is part of the reason they excluded KERS.

Incidentally what's the ****ing point of a budget cap when it doesn't cover everything. If Ferrari can get in $500m in sponsorship, they're going to SPEND $500m. It's that simple. If you exclude one item from a $100m cap they will spend $400m on it.

Yours is an incredibly smart post, you clearly know the subject and you're correct right up until the point there's more than one company involved and the FIA doesn't have full disclosure.

#156 AFCA

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Posted 02 July 2008 - 15:17

Originally posted by AFCA
The FIA has come up with a the proposal of a budget cap. For half a year now FIA man Tony Purnell is working to find a solution together with experts from the teams. The main problem is how to monitor the team's expenditures. Purnell's expertise will be followed for 95 %. Nevertheless the budget cap will be postponed by a year to 2010. The main reason are the high development costs for the hybrid technology, which will also have financial consequences for 2009.

Next year the FIA is willing to carry out a test. The teams will probably have to do with a budget of € 175 million, which must not be exceeded. But no one will be punished if more money is spend. The FIA is only willing to try out the monitoring mechanisms. From 2010 onwards Mosley will not show mercy to those exceeding the budget cap. He even wants to include the engine costs in the prefixed budget. So far they were excluded from the budget together driver's wages.

There's still no agreement over the height of the limit, which should be introduced in three steps. Some manufacturers like Honda are not willing to go below € 150 million (after the three steps). Renault deems a cap of € 90 million justifible, engine costs included. Toro Rosso even pleads for € 60 million a year. Tost: ''With € 60 million the cars will at most be half a second slower per lap. So we won't be having a single fan less.''


Amus writes that next year the FIA, under the guidance of Purnell, will indeed be carrying out this complicated test. Horner: ''The devil is in the details. A classic race team is easier to supervise than a manufacturer that is able to hide development work within the company.''

The teams don't agree on where to start with the budget cap. Honda, Toyota, BMW and even Red Bull plead for € 175 million. Renault and Williams would rather have a cap of € 150 million, which is what Force India would be happy about too. Toro Rosso prefers commencing with a € 120 million budget and like Tost (^ quote ^), Berger thinks ending with € 60 million in the final stage is feasable: ''That's still twenty times more than the budget of the GP2 teams.''

Though Williams contradicts: ''€ 100 million is the minimum. New F1 teams shouldn't be facilitated too much.'' The 66-year old fears that the starting fees and the television revenues must be divided over more (/ too many) teams when F1 get's too cheap.

Renault pleads for having a € 90 million budget cap at the end of the three step plan. A high ranked Renault man: ''Our president Carlos Ghosn will stick to Formula 1 if we can show him a plan that sends out signal that we will be able to cut down the costs in the next three years. But the Renault Formula 1 project is in danger if succes is dependent on spending huge amounts of money.''

Renault holds a different opinion in comparison to the other manufacture-teams. The manufacturers are not willing to go under € 150 million being afraid of having to fire too many employees. This could be seen as a defensive lie. In this world no jobs are lost. The less money Formula 1 costs, the more teams (from other racing formula's) can afford to get into F1. And they obviously need engineers, mechanics, managers, etc.

So Mosley is also willing to include the engine costs in the budget cap (^ quote ^). The price for customer engines will be arranged, in Red Bull's case they have to pay Renault $ 16 million. There's an exception for those that build engines themselves: they're are allowed to add extra development costs to the prearranged cap.

As far as the windtunnels are concerned: dependent on the infrastructure of the teams (some use only one windtunnel, Honda use four !), a certain part of the usage will be included in the budget. Clearly though, Ferrari's plan to limit the amount of windtunnels, their usage and to cut the number of employees in the area of computer simulations, has been whipped off the table. Williams was threatening to go the European Court of Justice in case he would be limited to fully make use of his windtunnels.

#157 kar

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Posted 02 July 2008 - 15:23

Originally posted by AFCA


Amus writes that next year the FIA, under the guidance of Purnell, will indeed be carrying out this complicated test. Horner: ''The devil is in the details. A classic race team is easier to supervise than a manufacturer that is able to hide development work within the company.''

The teams don't agree on where to start with the budget cap. Honda, Toyota, BMW and even Red Bull plead for € 175 million. Renault and Williams would rather have a cap of € 150 million, which is what Force India would be happy about too. Toro Rosso prefers commencing with a € 120 million budget and like Tost (^ quote ^), Berger thinks ending with € 60 million in the final stage is feasable: ''That's still twenty times more than the budget of the GP2 teams.''

Though Williams contradicts: ''€ 100 million is the minimum. New F1 teams shouldn't be facilitated too much.'' The 66-year old fears that the starting fees and the television revenues must be divided over more (/ too many) teams when F1 get's too cheap.

Renault pleads for having a € 90 million budget cap at the end of the three step plan. A high ranked Renault man: ''Our president Carlos Ghosn will stick to Formula 1 if we can show him a plan that sends out signal that we will be able to cut down the costs in the next three years. But the Renault Formula 1 project is in danger if succes is dependent on spending huge amounts of money.''

Renault holds a different opinion in comparison to the other manufacture-teams. The manufacturers are not willing to go under € 150 million being afraid of having to fire too many employees. This could be seen as a defensive lie. In this world no jobs are lost. The less money Formula 1 costs, the more teams (from other racing formula's) can afford to get into F1. And they obviously need engineers, mechanics, managers, etc.

So Mosley is also willing to include the engine costs in the budget cap (^ quote ^). The price for customer engines will be arranged, in Red Bull's case they have to pay Renault $ 16 million. There's an exception for those that build engines themselves: they're are allowed to add extra development costs to the prearranged cap.

As far as the windtunnels are concerned: dependent on the infrastructure of the teams (some use only one windtunnel, Honda use four !), a certain part of the usage will be included in the budget. Clearly though, Ferrari's plan to limit the amount of windtunnels, their usage and to cut the number of employees in the area of computer simulations, has been whipped off the table. Williams was threatening to go the European Court of Justice in case he would be limited to fully make use of his windtunnels.


It was a good article that one, I've been reading the German media a lot more of late and I'm surprised that they seem to run the financial stories well ahead of the English speaking press? Or is that just of late?

#158 AFCA

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Posted 02 July 2008 - 15:26

AMuS and MSa are well on top of my list in terms of F1 news, far beyond all the other media.

#159 shonguiz

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Posted 03 July 2008 - 19:50

I don't understand why mosley had urged teams to take measures to cut by half F1 costs when he plan to apply the Budget cap, does that means that they abondonned it due to the almost impossible effective monitoring ?