F1 On a Shoestring: The Budget Cap

Andy ShawCorrespondent IApril 30, 2009

SHANGHAI, CHINA - APRIL 19:  Sebastian Vettel of Germany and Red Bull Racing leads from Fernando Alonso of Spain and Renault and Mark Webber of Australia and Red Bull Racing as the race starts under the safety car during the Chinese Formula One Grand Prix at the Shanghai International Circuit on April 19, 2009 in Shanghai, China.  (Photo by Clive Mason/Getty Images)

As McLaren breathe a sigh of relief after their slap on the wrist at the FIA's World Council hearing yesterday, the rest of the Formula One world will eagerly be awaiting the announcement expected today of the budget caps set to be implemented for 2010.

President Max Mosley yesterday confessed that the cap had been set slightly higher than his original proposal of £30m, with pundits guessing that the final figure will be in the region of £45m instead.

This is a drastic cut in the budgets of F1's current main players: Respected F1 journalist James Allen reckons that McLaren will have to lay off half of their staff to make such a budget work, and Toyota's employee numbers will need to be reduced by as much as two-thirds.

The major car manufacturers, most of whom appear to oppose the enforced spending the FIA is set to impose on them, have bemoaned the proposed changes. But a quick history lesson demonstrates that the necessity for these drastic measures was brought about by their own actions.

Aside from Ferrari, whose participation in Formula One has been uninterrupted since the beginnings of the World Championship in 1950, the early 1990s were a particularly lean period for manufacturers.

The customer teams on the grid—of whom there were many—relied mainly on Ford-badged Cosworth engines and Yamaha-badged Hart engines to power their cars, with a works engine deal from a major manufacturer little more than a pipe dream for most.

When Mercedes entered the sport, placing their badge on Sauber's Ilmor engines in 1994 and then upgrading to a full works operation for McLaren the following year, it signalled a sea change in the fabric of Formula One.

Renault briefly pulled out of the sport after 1997, then re-entered in 2001 with a view to buying up the Benetton team. Ford supplied Stewart with works engines before buying out the team, and labelling it after its Jaguar brand, for 2000.

BMW entered into a partnership deal with Williams, which ended acrimoniously and led to BMW buying out the Sauber team in 2005. Even Toyota, a team with no prior F1 history, came into the sport in 2002.

And Honda, who had enjoyed such success in the 1980s as engine suppliers to Williams and McLaren, supplied engines to both Jordan and BAR before abandoning the Irish team halfway through a three-year contract. They instead made preparations to buy BAR, with the buyout coming in 2005.

These manufacturers subscribed to the belief that spending huge amounts of money on Formula One would inevitably buy success.

They hired engineers from the privateer teams and doubled their salaries, they ran wind tunnels and computer simulations on a 24-hour basis, and set in motion a culture of seemingly unlimited spending that would pervade F1 as it entered the new millennium.

The private teams, relying mainly on sponsorship to get by, could not compete with such largesse. One by one the privateers disappeared, until by 2006 only Williams could be said to truly exist only for the purpose of racing.

By then, of course, Ford had gone too, unimpressed with Jaguar's midfield performance; they sold the team to soft drink manufacturer Red Bull in early 2005.

Fast forward to the end of 2008, where the global credit crunch began to seriously hit the automotive markets. Honda, in the face of making an unprecedented loss, decided to pull out of the sport entirely.

The story of the sale of the team to Ross Brawn, and the success they have had so far in 2009, is truly remarkable but beyond the scope of this article.

The point is that the influence of manufacturer teams in Formula One has driven up the costs to such a level as to be unsustainable even for the manufacturers themselves.

The FIA has had to step in, and some would say it is already far too late to repair the damage caused to the sport by unnecessary and ill-advised spending during the boom years.

But step in they must, and with five potential outfits—USF1, Lola, Prodrive, Aston Martin, and iSport—having expressed a possible interest in entering the new budget-capped Formula One, it appears that this idea is far from being universally unpopular.

The reason the FIA has needed to impose such an apparently draconian rule on its teams is that the manufacturers have thus far been unwilling to accept half measures. Only in the face of Honda's withdrawal did top figures like Ferrari's Luca di Montezemolo finally see that F1's rich "old boy's club" could not be allowed to continue any further.

While privateer outfits like Prodrive and Lola have suggested that they may be interested in entering the sport, the chief beneficiaries of the budget cap may well be the manufacturers themselves.

With their vast road car divisions, they can divert the R&D budget for expensive innovations like KERS to their road car projects, thus saving the F1 team money without necessarily impacting on performance.

Privateers like Williams will have no such option, but will doubtless save in other ways, having lived with their own self-imposed budget cap for many years now.

Arguments about enforcing the new rules are to some extent irrelevant: These details can be worked out at some time in the future; the real task is to get everybody pointing in the same direction, maintaining the future of the sport without diluting its essence, which is chiefly the requirement that teams build their own cars.

The budget cap may be unpopular with myopic team principals, who are unable or unwilling to grasp the dire situation Formula One has now found itself in, but it is surely the only way of sustaining the sport's future.