Yesterday’s news from the FIA world council was the appetiser, but today comes the main dish, the real story; the announcement of the full budget cap plan, which is set to redraw the business model of Formula 1.
It will be the first time in the sport’s history that the amount a team can spend is controlled. You could argue that this should have happened years ago, before the manufacturers drove the costs through the roof.
The teams have already been informed of the details but are not willing to comment ahead of the official announcement. My understanding is that the cap is in the £40-45 million range, which is slightly more than the original £30 million voted through at the last world council in March, but low enough to attract new teams. To operate on that basis a team would have no more than 350 employees, roughly a third of what Toyota employ and less than half of McLaren’s staff number. There is going to be a massive laying off of highly skilled people once this comes through.
The clever twist in the original plan was that teams who did not want to be capped, could spend what they want, but the capped teams would have more technical freedoms to achieve parity of performance. This would give rise to a two-class F1, something Ferrari and BMW in particular find completely unacceptable. There could be some refinement to this element, to give Ferrari and BMW something to work with.
As he left the FIA office in Paris, FIA president Max Mosley, the architect of the budget cap plan said,
“Everything is going ahead as planned. It’s a little bit more than £30 million but we have been successful.
“”I suspect when they see the figures everybody will come in under the cost cut, which will come in straightaway. I certainly hope so,” Mosley said. “The budget is a little bit more than 30 million pounds, but it’s important we get it in place because if not then we are going to lose a lot of the teams.”
“I think when [Ferrari] do see it they may find it attractive. Like everybody else they need to save money. They have to think of their shareholders’ money and not just spend like in the old days.”
The interesting line here is the one about the cap coming in immediately. As budgets are already set and partially spent for 2009, this must mean for 2010. We’ll see what the mechanism for changing it is.
The alternative is to run ‘uncapped’, but face spending more money to have a less competitive car, which makes no sense, and would be hard to justify, especially when Mercedes has just announced a loss of over £1 billion for the first quarter of 2009.
Ferrari are very unhappy about all of this and in a clever piece of news management, president Luca di Montezemolo has let it be known that he will be at the Le Mans 24 Hours in June, giving the starting signal. This is a reminder of a time in the 1980s when Enzo Ferrari was so unhappy about a rule proposal from the FIA that he commissioned the build of a Ferrari Indycar. Montezemolo wants the FIA to think that he could take his brand elsewhere. BMW indicated at the weekend that they would not be interested in a two tier budget capped F1.
It’s likely that there will be a brief window in which the teams are obliged to make an entry for 2010, probably quite soon too. All of them have commercial agreements in place with FOM for the next two seasons, but they still have to make an entry with the FIA and there are other teams waiting in the wings to fill up the places.
At the same time Bernie Ecclestone is looking for a commitment; he’s saying in the Financial Times today that if the teams do not sign up to the Concorde Agreement, then he may cut their prize money.
The teams may wish to react together as FOTA, rather than as individuals. It will be interesting to see which way that one plays out, because FOTA unity has been severely tested lately over the diffuser issue and I know that at least six teams are in favour of a budget cap of around £50 million, so how unified could they be today as a group on that basis?
Mosley canvassed the teams for their view on the right level for the budget cap last week, but gave them only 24 hours to reply. The teams are due to meet as FOTA on May 6th in London. The budget cap and standardised KERS are on the agenda.