FIA, FOTA at Odds Over Budget Caps, Teams Contemplate Boycott/Split

Kyle LavigneAnalyst IMay 17, 2009

MONTREAL, QC - JUNE 07:  F1 supremo Bernie Ecclestone is seen in the FIA motorhome before qualifying for the Canadian Formula One Grand Prix at the Circuit Gilles Villeneuve June 7, 2008 in Montreal, Canada.  (Photo by Mark Thompson/Getty Images)

When FOTA (the Formula One Teams’ Association) was formed a year ago, I pondered about if this would lead to a Grand Prix Racing split. Surely, after what we saw happen to American Open Wheel Racing, the FIA would find a way to work with FOTA in harmony to give them what they want, but also keep them in line.

Apparently, that isn’t going smoothly. The recently proposed budget cap(s) for next season saw every team (sans the Brawn, Williams, and Force India outfits) threaten to withdraw, or start their own series, separate from F1.

That number might have been higher, but the three teams who haven’t crossed the picket line may only be doing so because they, literally, can’t afford to.

Of course, this isn’t the first time the FIA has come to heads with a team organization/union. Going to the late 1970s and early '80s, the FIA (the FISA) was involved the now famous FISA/FOCA war. That multi-year conflict eventually led to the FOCA teams’ boycotting of the 1982 San Marino Grand Prix.

So, what has led us to this point, and what might be a resolution? Well, the latter can’t be answered at the moment, but the first can absolutely be. We’ll just speculate about that when we get there.


The Budget Caps

It is widely agreed that a budget cap is necessary for Formula 1 teams. The massive budgets that some teams have (Toyota’s has been said to be over $500 million at times) is making the series teeter on a dangerous ledge: there are only a few teams capable of such a budget (and those are dwindling fast).

The more expensive F1 is, the more likely it is that we’ll lose teams, simply because the costs of competing will be too high.

With the grid only at 20 cars right now, the sport won’t want to lose any more teams, and will want to promote others to get involved.

The most recent proposed cap had two tiers to it. One allowed the teams to spend as much as they want, but must adhere to all sorts of technical restrictions, severely hindering performance.

The other tier gave teams $58 million to spend, but with complete technical freedom. The money would be theirs to spend and develop what ever pieces they want, including more boost from KERS units and movable aerodynamics.

The FIA’s intent with this, however, was not to create a scenario in which both would be used. What they wanted to do was force teams to adhere to a strict budget cap by giving heavy incentives to those who would follow it and brutally penalizing those who didn’t accept it.

Imagine the advantage that would be had by a car with150 bhp boost from KERS, or a rear wing that lays down on long straights and stands back upright under breaking for turns (I speak hypothetically here).

Cars with those elements would have a HUGE advantage over the ones that can have $400 million in them, but have to meet incredibly stringent and tight regulations.

But, this proposed system was never going to put all the teams under the same umbrella with the rules. We all know that some would take the tier with unlimited spending, because they would have the money to do so and didn’t want to be limited to $58 million.

The teams don’t want a system that could potentially create two “classes;” they want everyone to be under the same umbrella regulations.

The “multi-classism,” as that proposal had been termed, was not a road that the teams wanted to go down. Martin Whitmarsh, the Mclaren team principal, even called it “dangerous.”

Mario Thiessen, the head of the BMW Sauber outfit, echoed those sentiments in Autosport. “In my view the budget cap is not the problem, I even think it makes more sense than too many individual technical restrictions on the technical side,” he said. “The problem is to have an A and B league. That is something we cannot support.”

Thankfully, Bernie came forward and said this idea will tabled for 2010. No multi-tier budget cap system will be in place. But, no resolution was found; Friday’s meeting in London saw both sides hit a stalemate regarding an official cap for next year…and the team will meet themselves in Monaco on Tuesday to discuss the matter.

The Solution

All but three of the teams have threatened to boycott the championship in 2010 should this proposal go through. As I said earlier, the three that haven’t would do so, but wouldn’t be able to survive sitting a season out. Otherwise, every single member of FOTA is standing strong against the FIA here.

This is a very delicate situation that FIA needs to handle with some common sense (yes, I did mention “FIA” and “common sense” in the same sentence). While Bernie and Max do run the show, they can’t ignore the teams’ wants and wishes.

After all, what good is Formula One if only three teams compete next year, and the likes of Ferrari and Mclaren are on the sidelines? Answer: not much.

Flavio Briatore gave the impression that there is a sense of desperation and frustration going in to this. “We are living in a difficult moment and we must find a solution at all costs. I hope [Max] Mosley and his men will mend their ways, in order to start over in full harmony,” he told Autosport Thursday.

He also mentioned that, even though it’s a last resort, a breakaway series may loom. Of course though, that would be the last thing they want to do. Again, I’ll reference the current state of American Open Wheel Racing as evidence of why a split is more damaging than anything.

What might be done to fix this whole fiasco? Well, they got the first part correct and listened to the teams complaints about the original proposal. It won’t be a part of the 2010 season.

Secondly, find out what the teams exact budgets currently are and negotiate an appropriate amount to cap them at. I’ll refer back to the proposed $58 million cap, even if it was part of an idea that was scrapped. While making them spend no more than $58 million would save them a lot of money, it may not be a realistic

Consider this: Kimi Raikkonen’s salary with Ferrari is rumored to be more than $20 million. That would leave them $38 million to pay Felipe Massa, as well as the other employees at the factory, and build and develop a car.

That doesn’t sound very feasible to me. At this time, the technical side of F1 is easily worth more than $100 million (and I’m being very modest in the estimate).

My solution: start the negotiations at a cap that’s around $100 million (or a little over even)…and take in feedback from the teams about it! They know how much they spend, and they know how much they can realistically be capped at.

Again, they want to limit how much can be spent, but they want to be heard…and well! Note to Bernie and Max: don’t make the teams call their bluff on boycotting or breaking away from Formula One. CART did that with Tony George, and look what happened?