Shelving in-season upgrades due to big crashes (cost cap)

It was always so for the smaller teams. Nice to see the playing field levelled a bit more.

Some teams ran close to Grosjean. And now they have Mazepin near them.

It is politics from Merc to have a damage fund outside the budget cap. No money left in the cap for a new front wing? O Bottas, could you clip some kerbs with it so we can replace it from the damage fund?

Just deal with it Toto!

My heart cries for Merc.

Poor Toto also so heartbroken that a driver from another team dared to attack a Merc.

Edited by Diablobb81, 19 April 2021 - 11:02.

Is this really effecting them? Apart from some extra carbon fibre, they already have the persons fixing this on contract. I know it's nice to say "a front wing costs about 150.000" but that includes all engineering and man-hours to make it. They still have to pay for those. It's also not like they have to buy a new autoclave or something. The thing is already there and the operators are already being paid a monthly salary.

I guess if a new tub is required then that takes a fair chunk of cash, so whilst teams like Merc, RB, Ferrari etc are probably at or near the limit (as alluded to by Horner himself) then it's an additional cost they could do without and may have to come from other budgeted areas, such as R&D.

Is this really effecting them? Apart from some extra carbon fibre, they already have the persons fixing this on contract. I know it's nice to say "a front wing costs about 150.000" but that includes all engineering and man-hours to make it. They still have to pay for those. It's also not like they have to buy a new autoclave or something. The thing is already there and the operators are already being paid a monthly salary.

There's a couple things at play here.

Surely the raw materials cost of new materials isn't that high. But producing new parts by hand and then bake them in an autoclave is a time consuming effort. And I suppose time is limited due to the reduced resources. Rebuilding half a car will surely be worse use of that time than building and experimenting with new parts. 

https://www.motorspo...pgrade/6343399/

I thought this was interesting from Mercedes - the big Bottas crash in the Imola race might mean they can’t invest in some of the planned in-season upgrades as they have an unplanned cost of replacing the chassis.

Hamilton smashed his front wing yesterday, and Bottas wrote the car off. In the past they’d have just brushed those costs off, but they are now an ‘extra’ cost when compared to other teams that haven’t suffered any crashes yet.

I'm sure they will have a planned cost, but that crash has likely eaten up a hell of a lot of that!

I think Toto has either hired some seriously poor financial guys, or he is flat out lying.

When preparing the budget for this new season, they were explictly aware of the budget cap. Any sane time would include some budget for crash-repairs. There is not a single season in the history of F1 were there was a car that needed zero repairs. They will all have allocated an estimated amount for crash-repairs.

If they haven't done so, feel free to hire me to get your finances up to speed. 

I think Toto has either hired some seriously poor financial guys, or he is flat out lying.

I don't think he is flat out lying, there's nothing untrue in saying that having additional costs in one area will force them to spend less in another.

It's just that they're used to spending so much money that they're itching to spend every penny they can for a sporting advantage but they realise it's not so simple now so they try to gain sympathy about how difficult it's for them, even though there's nothing unusual in this kind of situation. It's the same situation in real life- when a person who has been rich for as long as they can remember suddenly loses their source of income, they often find it difficult to suddenly only spend as much as a regular person even though majority of people around the world live at that level or worse.

It's impossible to predict before the season how much damage you'll get and in an as competitive environment as F1 I doubt they're planning their budget for the worst case scenario only to find out by the end of the year they could've spent a few million more on making the car faster, so I wouldn't call Toto a lier for saying such things, neither would I suggest they don't know what they're doing with their budget.

Toto makes it sound like Mercedes has to lay off employees at Stuttgart 

I don't think he is flat out lying, there's nothing untrue in saying that having additional costs in one area will force them to spend less in another.

 

It's just that they're used to spending so much money that they're itching to spend every penny they can for a sporting advantage but they realise it's not so simple now so they try to gain sympathy about how difficult it's for them, even though there's nothing unusual in this kind of situation. It's the same situation in real life- when a person who has been rich for as long as they can remember suddenly loses their source of income, they often find it difficult to suddenly only spend as much as a regular person even though majority of people around the world live at that level or worse.

 

It's impossible to predict before the season how much damage you'll get and in an as competitive environment as F1 I doubt they're planning their budget for the worst case scenario only to find out by the end of the year they could've spent a few million more on making the car faster, so I wouldn't call Toto a lier for saying such things, neither would I suggest they don't know what they're doing with their budget.

I think the point being made is these things would have been factored into the budget already, so it shouldn't actually make any difference whatsoever to their development plans.  The only way it would would be if they hadn't budgeted anything for damage, which would be a bit short sighted and quite unlikely, so Toto's comments, where he's trying to make out that the accidents this weekend will impact their development resources, are very unlikely to be true.  In which case he's probably saying it for effect, which means he likely is being deliberate and therefore lying wouldn't be inaccurate

I think the point being made is these things would have been factored into the budget already, so it shouldn't actually make any difference whatsoever to their development plans.  The only way it would would be if they hadn't budgeted anything for damage, which would be a bit short sighted and quite unlikely, so Toto's comments, where he's trying to make out that the accidents this weekend will impact their development resources, are very unlikely to be true.  In which case he's probably saying it for effect, which means he likely is being deliberate and therefore lying wouldn't be inaccurate

True, but if a big chunk of your provision for damage is already used by race 2, you may need to make another additional reservation for the remainder of the season. 

I think the point being made is these things would have been factored into the budget already, so it shouldn't actually make any difference whatsoever to their development plans.  The only way it would would be if they hadn't budgeted anything for damage, which would be a bit short sighted and quite unlikely, so Toto's comments, where he's trying to make out that the accidents this weekend will impact their development resources, are very unlikely to be true.  In which case he's probably saying it for effect, which means he likely is being deliberate and therefore lying wouldn't be inaccurate

Again, I've re-read the article and I can't find a single sentence Toto said that sounds untrue to me. I don't subscribe to the  "it shouldn't actually make any difference whatsoever" idea. If their priority when they set up their budget was competitiveness, which I have every reason to believe it was (they wouldn't have scored 8 consecutive double championships if they didn't have that mentality), every crash will make a difference. It's not "either they have these costs already covered in their budgets or they were fools". Most likely they have a few budget variants prepared depending on how things are going for the time being and if they have to go with a more pessimistic one due to enduring a lot of damage to the car so early in the season already, they won't be able to go with a more optimistic one, which would've included more funds allocated to pursuing performance.

Again, I've re-read the article and I can't find a single sentence Toto said that sounds untrue to me. I don't subscribe to the  "it shouldn't actually make any difference whatsoever" idea. If their priority when they set up their budget was competitiveness, which I have every reason to believe it was (they wouldn't have scored 8 consecutive double championships if they didn't have that mentality), every crash will make a difference. It's not "either they have these costs already covered in their budgets or they were fools". Most likely they have a few budget variants prepared depending on how things are going for the time being and if they have to go with a more pessimistic one due to enduring a lot of damage to the car so early in the season already, they won't be able to go with a more optimistic one, which would've included more funds allocated to pursuing performance.

sorry to sound harsh on this but I think if a single crash plus replacement nose is going to impact a team's development plans to any degree then quite simply they haven't managed their budget very well.  If it happened three races on the trot, then maybe, but a single race shouldn't cause that much impact and if it does then they've clearly costed things way too optimistically.  I find that level of mismanagement hard to believe so I'm inclined to think Toto was playing to the audience, which fits the pattern where he likes to make out Merc are underdogs.

Doesnt an F1 car cost something like $7m to $10m .... if that is true, that is decent money. 

Doesnt an F1 car cost something like $7m to $10m .... if that is true, that is decent money. 

Only most people don't know where these prices come from. Lot's of it is engineering and R&D, and these don't change if you wreck 1 or 20 cars.

Just more Toto BS to make it sound like things are harder for Merc than they really are

A lot of the cost is R&D, which is not damaged in a crash

I don't think he is flat out lying, there's nothing untrue in saying that having additional costs in one area will force them to spend less in another.

 

It's just that they're used to spending so much money that they're itching to spend every penny they can for a sporting advantage but they realise it's not so simple now so they try to gain sympathy about how difficult it's for them, even though there's nothing unusual in this kind of situation. It's the same situation in real life- when a person who has been rich for as long as they can remember suddenly loses their source of income, they often find it difficult to suddenly only spend as much as a regular person even though majority of people around the world live at that level or worse.

 

It's impossible to predict before the season how much damage you'll get and in an as competitive environment as F1 I doubt they're planning their budget for the worst case scenario only to find out by the end of the year they could've spent a few million more on making the car faster, so I wouldn't call Toto a lier for saying such things, neither would I suggest they don't know what they're doing with their budget.

If the first crash already impacts your budget so significantly, then your budgetting hasn't been done properly. 

It's a season of 22 races and I assume they have analysed the previous seasons diligently to estimate how many crashes per season of damage they have had and what the average costs were per season. This is the first crash of the Mercedes team with significant damage. If you already now start yelling about not being able to bring updates to the car, you are playing politics. Either to force crash update costs outside of the budget cap, or to work on a narrative where the budget cap has been one of the causes for Mercedes to lose...

If the first crash already impacts your budget so significantly, then your budgetting hasn't been done properly. 

 

It's a season of 22 races and I assume they have analysed the previous seasons diligently to estimate how many crashes per season of damage they have had and what the average costs were per season. This is the first crash of the Mercedes team with significant damage. If you already now start yelling about not being able to bring updates to the car, you are playing politics. Either to force crash update costs outside of the budget cap, or to work on a narrative where the budget cap has been one of the causes for Mercedes to lose...

Yeah, and whats even funnier: if you update the car you have to put on new parts anyway

Something seems off here.

Isnt' a power unit basically 20 million? That would make 3 power units for a single customer car over a third of the budget. 6 power units across 2 cars nearly the entire budget cap.   That doesn't sound right to me.  Are the physical power units (and some other bits) excluded? I know power units are excluded development wise, but are they excluded parts wise?

Edited by ARTGP, 19 April 2021 - 15:06.

Only most people don't know where these prices come from. Lot's of it is engineering and R&D, and these don't change if you wreck 1 or 20 cars.

A lot of the cost is R&D, which is not damaged in a crash

Something seems off here.

 

Isnt' a power unit basically 20 million? That would make 3 power units for a single customer car over a third of the budget. 6 power units across 2 cars nearly the entire budget cap.   That doesn't sound right to me.  Are the physical power units (and some other bits) excluded? I know power units are excluded development wise, but are they excluded parts wise?

Lets get serious now - does anyone know or have a good estimate of the additional cost of replacing a damaged F1 car and PU?? 

Eg - the teams agreed to $500,000 each for each team as extra income for the sprint races to cover any extra costs from accidents etc. Is that a more realistic figure for replacing a car than the $7m we always hear about?

It's quite difficult to be accurate on these things.

When you talk about 'the costs', do we include the time spent of employees to work on the whole manufacturing process etc? That's a bit strange, because the costs of those employees are already included in the regular salary costs. 

Do we include the depreciation of the capital investments, such as the machines? Because from an accounting perspective that also is a cost. Do we include the R&D costs? 

Or are we merely talking about the costs of the physical equipment that has to be sourced and manufactured? 

It's a very complicated calculation... 

It's quite difficult to be accurate on these things.

 

When you talk about 'the costs', do we include the time spent of employees to work on the whole manufacturing process etc? That's a bit strange, because the costs of those employees are already included in the regular salary costs. 

 

Do we include the depreciation of the capital investments, such as the machines? Because from an accounting perspective that also is a cost. Do we include the R&D costs? 

 

Or are we merely talking about the costs of the physical equipment that has to be sourced and manufactured? 

 

It's a very complicated calculation... 

No - I am keeping it simple ... basic replacement cost of smashing up a car in the second race of the season .... what is it?

No - I am keeping it simple ... basic replacement cost of smashing up a car in the second race of the season .... what is it?

I'm sure I've read anywhere between £0.5m and £1m for the tub.  Which is a sizeable cost to bare when working under the budget cap.  It's why the teams were chasing extra cash for the petit prix races such was their concern regarding damage incurred during them.

Merc will have various costs budgeted.  If they've potentially just used up 25% or more of expected repairs (which will be based on previous years) then that would be a headache for them as money may therefore have to come from elsewhere later in the season to cover any other accident damage.  I doubt they will be the only major team to face that predicament over the season.

1million is a lot of man hours in developing this years and the 2022 car in a budget car era.  So it could well represent shifting resources away from this year as a result.

At 50,000 Euro per year min lets say for a team member working on the "development" department or R&D scale modelling manufacturing department or wind tunnel department.  Russell destroying Bottas car represents 20 Employees work for the whole year  erased off their books as a result of the new chassis being made.  So if think 100K Euro per year employee, Russell just cost 10 employees their job.

Welcome to F1 2021 and 2022 and forward.  Accidents will 100% wipe out the ability to develop certain things in cars.

Every chassis right off costs anywhere betweeen 10-20 employees ability to do their jobs for the entire year.

So if its a 200K Sr. Engineer, he can only do half of what he may have wanted for example.  Toto and Co could be put in a position to tell Sr. Staffing, sorry.. stop that work.. we don't have the budget to continue down that path.

If their Budget is itemized down limiting X hours to manufacture... then every time a major chassis is written off, it means the department has ZERO capacity to produce R&D spec parts for the wind tunnel, for track testing etc. cause they may then not have the budget to make race parts. 

It will be a delicate balance of ensuring enough parts are available for racing and enough development work happening for the 2021 car and keep the pressure up on RB as well as make enough to test in the wind tunnel for the 2022 car.

So Toto has EVERY reason to be pissed at Russell.  He set back Mercedes program very significant with that bonehead decision to pass Bottas in a very impossible section of track in the wet no less.  Russell could have cost Mercedes a championship if they can't keep the R&D pressure on RB or set back Mercedes 2022 a tiny bit if they have to divert planned resources from 2022 into 2021 to make up for it (ie 1million Euro man hours / material budget loss).

Edited by Paco, 19 April 2021 - 16:19.

There will be fewer accidents then if drivers know how much being silly cost.

Yeah I don't believe this is the truth at all just Toto being Toto.

Why does everyone seem to be concerned about this? It has happened for decades on smaller teams and no one seemed to care about it. If Toto doesn't like it, then go create his own football league championship.

It won't have much impact on Mercedes imho but it will have a much larger impact on Williams who work with a smaller budget as Mercedes.

The tub will have been build at some point anyway.

Something seems off here.

 

Isnt' a power unit basically 20 million? That would make 3 power units for a single customer car over a third of the budget. 6 power units across 2 cars nearly the entire budget cap.   That doesn't sound right to me.  Are the physical power units (and some other bits) excluded? I know power units are excluded development wise, but are they excluded parts wise?

 A power unit is nowhere near 20 million, be that $ or €.

The cost of a year's supply of PUs for both of a team's cars is capped at €15m.

If the team consumes extra PUs owing to things within its own responsibility (crashes, failure to follow supplier guidance, et al.), it may have to pay extra for an incremental unit - I don't know.

It won't have much impact on Mercedes imho but it will have a much larger impact on Williams who work with a smaller budget as Mercedes.

In terms of the budget cap I'm sure it won't affect Williams at all. In terms of the actual budget surely it will affect Williams much more. 

The tub will have been build at some point anyway.

I'd imagine the teams have a strategy with regards to spare parts. Having to use a spare tub surely means constructing another one. You're not going to risk not running your car at a next event because you skimmed on the spare parts. 

I think George Russell should take some extra hours to help earn money for that Merc

What is the core cost though of an additional chassis? Forget the man hours etc, as those salaries are presumably paid for (unless it requires unexpected/unplanned overtime)

But the costs of the materials and running of the machines.... a replacement chassis can’t cost the same as the costs to create the very first one from scratch.

Yeah, therein lies the issue imo.

When teams talk about 'the cost of the car', I'd expect they include all the R&D costs. R&D costs are basically salary costs of dedicated staff. To simplify it. If an employee is only working on designing the car the whole year, the 'cost' of the car includes his full salary. 

The mere purchasing of raw materials and producing them is the least expensive part. It's largely the man hours. But they are already budgeted for within the budget cap. So the only additional costs to be incurred would be the sourcing of the extra (raw) materials I think? 

Another issue for them might be that employee X and Y will be working on manufacturing older parts and therefore don't have time to work on newer parts. In the past they might have allocated resourches differently, but now they most likely cannot do that anymore...

Edited by Requiem84, 19 April 2021 - 17:04.

Why does everyone seem to be concerned about this? It has happened for decades on smaller teams and no one seemed to care about it. If Toto doesn't like it, then go create his own football league championship.

I'm all for fairness in F1 to be honest.   RB and Mercedes will now have to make decisions not unlike the smaller teams have needed to for a decade or more.

However, for some not realize the effect of 1million Euros in a budget cap era and it not having an influence in the team is just odd as well..  20 FT or 10 FT yearly employees of work is significant budget offset that Russell caused. 

The tub will have been build at some point anyway.

Yes they have end of life failure rates but based on Renault keeping their tub supposedly from other years etc.  I doubt Mercedes had a planned tub replacement in 2021 unnecessarily considering they want as much resources as possible for 2022 and some in 2021.  Especially as well since the 2021 tub wont be used for 2022 ruleset for a team like Mercedes I would imagine.

Edited by Paco, 19 April 2021 - 17:26.

 

So Toto has EVERY reason to be pissed at Russell.  He set back Mercedes program very significant with that bonehead decision to pass Bottas in a very impossible section of track in the wet no less.  Russell could have cost Mercedes a championship if they can't keep the R&D pressure on RB or set back Mercedes 2022 a tiny bit if they have to divert planned resources from 2022 into 2021 to make up for it (ie 1million Euro man hours / material budget loss).

If thats actually a concern for Toto, he should sack Bottas and replace him with a slowcoach driver who will drive around the back and thus wouldn't be risking damaging the car and upsetting the development for Lewis' car. Or he could tell Bottas that he's not allowed to overtake people and has to pull over when someone gets close to him.

Accidents happen and they will always happen at the wrong time. Thats life.

Yeah, therein lies the issue imo.

 

When teams talk about 'the cost of the car', I'd expect they include all the R&D costs. R&D costs are basically salary costs of dedicated staff. To simplify it. If an employee is only working on designing the car the whole year, the 'cost' of the car includes his full salary. 

 

The mere purchasing of raw materials and producing them is the least expensive part. It's largely the man hours. But they are already budgeted for within the budget cap. So the only additional costs to be incurred would be the sourcing of the extra (raw) materials I think? 

 

Another issue for them might be that employee X and Y will be working on manufacturing older parts and therefore don't have time to work on newer parts. In the past they might have allocated resourches differently, but now they most likely cannot do that anymore...

This ... now we just need some numbers to make it more practical .... and the same for the (rough) cost of upgrading the car ... and then we can figure out if what he said is BS or not. 

Even though cash cost might not matter so much to opportunity cost - that might be a time cost issue.... and then what Toto said can make sense.  

But either way, I still think this moves the discussion forward. 

If thats actually a concern for Toto, he should sack Bottas and replace him with a slowcoach driver who will drive around the back and thus wouldn't be risking damaging the car and upsetting the development for Lewis' car. Or he could tell Bottas that he's not allowed to overtake people and has to pull over when someone gets close to him.

 

Accidents happen and they will always happen at the wrong time. Thats life.

Tell that to your boss when you make accidents and then report back what was his response

If it is a legitimate concern for Mercedes, I can imagine the AlphaTauri mission objective will change significantly from now on. 

There will be fewer accidents then if drivers know how much being silly cost.

Exactly, just like Williams tippy toeing around on cotton balls not to damage the car 2 years ago cause they didn't have spare parts.  That will be more common for sure.

Edited by Paco, 19 April 2021 - 19:04.

It was always so for the smaller teams. Nice to see the playing field levelled a bit more.

Does this mean we will be seeing cars turning up at race starts patched up in fibreglass and gaffa tape and plastik pudding/bondo in the quest to save a few quid here there!

What is the core cost though of an additional chassis? Forget the man hours etc, as those salaries are presumably paid for (unless it requires unexpected/unplanned overtime)

But the costs of the materials and running of the machines.... a replacement chassis can’t cost the same as the costs to create the very first one from scratch.

Sure, molds would have been made etc so the 2nd one is cheaper no doubt.

But man-hours is a real thing as is 1million dollars needing to be diverted.    There is NO WAY Around it.

If Mercedes for 2021 had said:

150million dollar budget for example:

25milion for travel

125million for car development

50million for 2021 in season stuff

75million for 2022

and then get hit with a 1million dollar hit.. they need to take it from somewhere.  either stop work on certain projects of 2021 or pull "time" from 2022 car.  They can't just inflate it.  Its locked in.   The sprint race concern is this as well cause it will lead to greater accidents.   

Edited by Paco, 19 April 2021 - 19:07.

Does this mean we will be seeing cars turning up at race starts patched up in fibreglass and gaffa tape and plastik pudding/bondo in the quest to save a few quid here there!

Williams has no???     Pretty sure we've seen teams use crazy glue and epoxy as well and frankly, duct tape...on not crash structure parts.

There's a couple things at play here.
Surely the raw materials cost of new materials isn't that high. But producing new parts by hand and then bake them in an autoclave is a time consuming effort. And I suppose time is limited due to the reduced resources. Rebuilding half a car will surely be worse use of that time than building and experimenting with new parts.