I did an interview with Max Mosley for the Financial Times on Friday in London, all about the budget cap introduced to F1 for next year, the first part of which was posted yesterday.
We covered a lot of topics, but I couldn’t help asking him about Ron Dennis’ departure from McLaren. He made an interesting comment about how the McLaren situation had played into his hands this week, “I don’t hate Ron Dennis, “ he said. “But he was always very obstructive. And he would have been difficult in this situation (budget caps), whereas Martin Whitmarsh may not agree with us but it will be a rational disagreement not an irrational one.”
This is an interesting twist on the McLaren saga and the timing is significant from Mosley’s point of view. McLaren, having created problems for themselves in March, by acting dishonestly, have engineered the removal of Dennis, which has in turn removed someone who would have provided a major obstacle to the budget cap plans.
Many people, not least Ferrari, are concerned that the FIA will not be able to police the budget cap. Mosley accepts that the system may not be perfect to start with, that there may be ‘grey areas’ as there were in the diffuser rules, so problems cannot be rules out. But he contends that minute attention has gone into planning for how to intervene if foul play is suspected,
“People cheat the Revenue, but the Revenue can’t put even one tax inspector into each business on a permanent basis. We can, we can put several in. the difficulty and danger of cheating would be enormous. If we had the slightest suspicion that anyone was we’d send a team in to check. That’s part of the deal. It’s obviously very annoying to have all these people checking but that’s the price you pay for saving hundreds of millions of euros. In today’s climate people would be prepared to do that.”
“There are going to be grey areas and what we have to do is narrow them down to the point where they become negligeable. We’ve give ourselves enormous scope in the rules.”
As for Montezemolo’s argument that Ferrari have certain ‘rights’ under the deal withe signed in 2005 to extend the Concorde Agreement whereby rules can only to be changed by the F1 commission, Mosley claims that the budget cap rules do not have to affect Ferrari and if they choose not to run ‘capped’ they will enjoy an advanatage, in other words, budget capped teams will be less competitive than the non-capped teams,
“We are saying we’re not interfering with this (Ferrari’s rights), “he says. “We’re saying that all we are doing is bringing new teams in and giving them enough freedom so they can control expenditure. If you want to carry on with unlimited expenditure running at the front we won’t interfere. And we won’t have a cost-capped car running in front of your car so it doesn’t interfere with you because they will be at the back.
“But if Ferrari have any sense at all they will come in under the cap because it would be an instant €200 million to their bottom line.”
What does he expect to happen next? Will the 2010 season start with two different classes of car?
“I’m anticipating a big row and at least to begin with a two-tier system, ” he says. “But eventually they will see sense.”
And the $10 million question, will the cap ever be lifted or is it here to stay?
“I believe that the cost cap is here to stay. There is room for discussion, it might go up or down in 2011 and if the economy picks up after than then it might go up. You might adjust the cap in the interests of the sport, but you’d have everyone on a level playing field. “
“The credit crunch hasn’t really hit F1 yet, obviously we lost Honda, but the real crunch will com when current contracts come to be renewed. At the moment, you see ING, RBS Allianz, big circuit sponsors, but they wouldn’t be there this year if they didn’t have a binding contract. Those contracts were signed before their share prices took a dump. I believe FOM will not be able to give the teams as much money as they have been giving them.”
Final question, how many new teams are out there who seriously want to come in and have the means to do it?
“We’ve got seven quite serious outfits wanting an entry and two less serious ones, its going to be very hard selecting three.”
allenonf1.wordpress.com 
Firstly a deep thought:
If the FIA is so concerned about the financial strains on the teams how come the income split – currently the teams are paid just 47% of the revenue stream – never gets a mention!
And James, how long has Mosley been talking about cutting costs, pretty much a decade right?
And finally in 2010 he might deliver something meaningful aided by the worst economic conditions since the thirties.
And this is leadership!
The constant ineffectual tinkering with the rules, both technical and sporting would have led to a clear out at any other sporting authority with any proper accountability.
Why not at the FIA?
I remember interviewing him for Autosport in 1993 with my mentor, the great Denis Jenkinson, and he was going on about the amount the teams spent then!
James- please write a piece about Denis Jenkinson. His writing got me interested in racing. Thanks.
Weren’t the A1GP organisers interested in setting up a team at one stage for A1GP drivers?
I’ve never really understood the rationale for limiting the grid to 26 cars. If Max is right that he’s got up to nine teams wanting to join F1, why must some teams be turned down?
I would guess that there’s a physical limitation at some circuits – a point beyond which there simply isn’t enough room to paint white boxes on the tarmac, a lack of garages. Though someone else might have better insight into this than us…
I also find it very difficult to understand. I assume that the FIA are concerned about traffic if over a certain number of cars run, but three extra teams seems really arbitrary to me. You’d think they could raise the grid to at least 30 cars therefore allowing 5 teams in, which would have the added (and quite considerable) benefit of softening the blow for the redundancies that will inevitably have to happen with the cap, as there would be many more jobs available.
The reason for limiting to 26, is that 26 can start every GP. If you get back to numbers where Pre qualifying, or cars don’t get to start on Sunday, you will see any team perceived to be at any risk of failing to qualify struggling for sponsorship, employing rent a drive pilots, poorly engineered cars, in a vicious circle down. Think Andrea Moda! Better to have a dozen top cars plus another 14 better quality cars, than bottom 8-10 of underfunded dross.
Plus a limited grid, allows a ‘franchisee’ to sell on his franchise, as it will have value in itself, certainly if there are others wanting to buy in.
Saying that you can’t have more than 26 cars because you can’t have more than that on the race grid still doesn’t answer the question of why we’re only allowed 26 cars on the race grid in the first place.
I’m also not convinced by the argument of a lack of space. In the pre-qualifying days, there were more than 26 garages by definition. Even if it’s logistically difficult to fit extra teams in, I can’t imagine it’s an insurmountable problem.
I wonder who the 7 serious and 2 not so serious outfits are?
USGPE, Lola, Prodrive/Aston Martin, iSport and Dallara/ART are probably all serious.
I’m not sure about Racing Engineering, Nick Wirth and Colin Kolles/Franz Himler – but they are probably part of the 9 that Mosley refers to.
Is Hyundai still interested in F1? Maybe they are the 9th team?
Think there are a few GP2 teams, like isport, Racing Engineering, Nicolas Todt and ART GP.
Hi – Can someone explain what “Ferrari’s status meant it had guaranteed rights within the sport” means in plain English – what are these rights and guarantees Montezemolo is talking about ?
Thanks
Pat, read the letter from Montezemolo to Mosley post, it’s all in there.
What about NBA system, they have budget cap too. Teams can spend beyond budget cap, but for every dollar spend beyond budget cap they pay extra dollar to the league. I believe it’s called luxury tax.
This way most of the teams tend to stay within budget cap. And if you want to spend even more on testing, development, designer, etc. you have to pay to FIA, FOM, FOTA, whoever …
Unlike the NBA system, uncapped teams should be forced to provide blueprints for their technology to all capped teams, not pay more cash to those that would only spend it on bad haircuts and questionable role-playing games!
There would be no incentive to be un-capped becuase you would spend $millions on R&D but immediately be pegged back by capped teams who “legally copy” your technology.
Plus uncapped teams would not have to share the technology they develop, perhaps even giving them a slight edge on the rich kids.
So he’s guaranteeing that no budget capped teams will beat Ferrari? Or any other non-capped team?
Doesn’t seem likely to create an interesting season.
If you want to carry on with unlimited expenditure running at the front we won’t interfere. And we won’t have a cost-capped car running in front of your car so it doesn’t interfere with you because they will be at the back.
This bears out my own view that the uncapped teams will be at the front at least for the first couple of years and is in contradiction to your stated opinion (several times) James, that uncapped teams could not be competitive.
It will take a long time with virtually no development budget to make free flaps work (ok I know its only 10% on the front and although I already have an idea how to use that very effectively and differently into corners, it may take years to perfect). The increase allowed in KERS (not free KERS as predicted) will require a huge leap in cooling capacity to be of any use, but again the development budget will not be there. Superconductor technology will need to be adapted for use in the cars, but against a restricted budget it will be a very long hard struggle.
There may be 3 or 4 uncapped teams or more when they realise that can stay at the front, while their capped competitors develop new ideas for them.
Very interesting James.
Your site has become my go to place for insight and news on F1 with Autosport just behind.
Get some bloody ads on here and make it pay!! lol
Keep it up James
The FIA is already glacial in dealing with cases as close to black and white as diffusers and cheating, I can picture vast chunks of next season happening under a cloud of hearings and appeals as they attempt to prove improper spending within a vastly complex corporation.
Doesn’t sound like fun to me. Sounds like another year, another Mosley upheaval that will cost millions to implement/enforce and never succeed in bringing any real enjoyment to the fans. Sounds like KERS.
Isn’t there massive potential for abuse with these new rules?
For example a big manufacturer team, currently not under the Budget capped rules, could spend millions of £’s developing next years car to fit the specifications of the budget capped rules over the course of the season (a little like Honda developing the current Brawn car last year) and the following season agree to the Budget cap rules to gain advantage of the Budget cap specifications while not having a limit on their budget for a significant amount of their development time?
Max also says that there wont be a cost cutting car in front of a Ferrari, but if this really is true (despite the technical advantages!), is a budget cap really needed as a privater team can current come into F1 spend £40 million and come dead last!
I understand the need to cut costs but I’m worried this budget cap/two tier nonsense is going to become another of the increasing common farces for Formula 1. I sure cant wait for the McLaren hearing about overspending next season! 😉
[…] Mosley on Ron Dennis and budget caps – James Allen on F1 (tags: maxmosley RonDennis BudgetCap ferrari LucaDiMontezemolo costs economy business money TwoTiers) […]
James,
I’ve followed F1 for over 20yrs but I’ve never entirely understood the full role of the FIA. Fair enough, I can see that they are important for track safety and car safety but when it comes down to team finances is that not out of their domain? I guess I’m asking this – is there anything that the FIA do not have control over? Since Ecclestone OWNS the sport is it not his decision to get involved in the finances more so than the FIA?
Friends who don’t know much about F1 often ask me why the FIA continually meddle and how they have so much power. To be honest, I can’t actually come up with an intelligent logical answer. From the outside, it looks ridiculous to see such continual almost communistic meddling.
I’d love to know your thoughts.
Thanks,
Andrew
Andrew, the FIA owns the F1 world championship, there is no doubt about that. And they have sold the commercial rights for 100 years to Bernie Ecclestone’s company, FOM , of which the venture capital firm CVC Partners is the 75% shareholder. The FIA is the regulator. An agreement called the Concorde Agreement was in place up until a few years ago, which tied in the FIA, FOM and the teams and there are mechanisms in place in the CA for setting rules etc. The problem now is that there is no CA currently in place, it has not yet been signed by everyone, although the commercial terms have been carried on from before, although the teams have a memorandum of understanding with FOM so they get their share of money. But there is a bit of a vacuum/ grey area as far as setting the rules is concerned. We are in that territory with what is going on at the moment.
And yet both the tech and sporting regs contain firm articles on how the rules my be changed, the CA is not mentioned. Thus if the CA is not currently in operation all the rule changes so far are illegal.
Following the luxury tax idea used in the NBA but instead of giving the money to FIA/FOM give it back to the teams.
Set a limit e.g. £40 million. Any team that spends over that amount has to pay a percentage of this overspend to a central pool. This central pool of money is then redistributed to the teams who came in under budget.
All cars can run the same regulations removing the two-tier effect.
This does sound like a better idea than the current budget cap idea…
I am not in favour of a budget cap but know that something needs to be done. More importantly I am definitely against a two-tier set of rules.
Doing this will allow:
– The all teams to operate with the same rules. The two-tier system will be impossible to allow parity between to the capped and non-capped teams
– If teams want to “overspend”, they would also assist the smaller teams, this will help to ensure that smaller teams keep going and also assist new teams comming in
One other thing that I do not see mentioned regarding the budget cap is reliability. Over the last couple of years, we have seen far fewer retirements due to reliability issues. if teams are forced to cut budgets whilst also trying to innovate will reliability suffer as a consequence?
Hi James,
Doesn’t the view of the joe-soap fan count anymore?
All we hear is Max Mosley harping on about the budget cap is good for the teams, Bernie is worried about his TV rights, and ploughing ahead with races in countries that haven’t any interest in F1 at the expense of the French GP, Hockenheim, even the British GP is under threat now.
I bet at the Chinese Grand Prix the local government were paying people to fill grandstands near where the TV cameras were located – just to make the place look full!
Bernie & Max should really think about asking the fans what they want… surely the fans are what make F1 successful… after all we’re the ones who buy race tickets, merchandise and watch it on TV. Without the fans F1 will be like A1GP… a rather wet blanket!
I really think the bigger teams should set up a new independent championship… and the money they earn from the sale of the TV rights would give the teams plenty of cash to fund the season… cut out Bernie the middle man!
Well Don, the FIA did two large scale fan surveys in recent years, so they feel they have a pretty good grasp on what the fans want. It’s interesting, because prior to the surveys Max used to say that no-one is interested in technology outside of the teams and engineers, but after the two surveys came back saying that most fans wanted F1 to be cutting edge technology, he changed his tune and this latest idea of a budget cap is his idea to encourage people to innovate, but to take away the ‘refinement’ the teams do, spending lots of money on making something slightly better. He reckons that his plans encourage innovation more than FOTA’s. Ferrari certainly don’ agree with that and feel that vital research will be lost with the budget cap. It’ll be interesting to see what response FOTA come up with on Tuesday at their meeting.
What about the survey about Points vs. Wins for the championship title. Are they largely ignoring the fan’s reaction to that one? I ask because the response that I have seen on various blogs and news sites has been overwhelmingly negative to the FIA’s desire for a ‘Most Wins – Wins’ championship.
Well, we did a lot on this when it was being discussed a few months ago…
I thought the surveys were not up to much. For example, the question about which tracks should be dropped, they never listed all tracks, assuming that no one would vote for Monaco to go.
I’d have listed Monaco and Hungary to be dropped. Sure, Monaco is a test for the driver and it gives you spectacular crashes. But for racing, its pointless, you can’t overtake there – even DC in his McLaren counldn’t get past an Arrows for 18 laps – the two cars were at opposite ends of the grid but he couldn’t get past.
Its a useless circuit for racing, pays Bernie £0 per year for hosting, yet Silverstone is an excellent circuit for racing and has to pay £shedloads. The only time you get anything interesting at Monaco, is the same as Hungary, when it rains.
I’m sure lots will disagree with me, but if you are interested in racing, rather than pitstop racing, you’d drop Monaco and Hungary.
[…] Mosley on Ron Dennis and budget caps I did an interview with Max Mosley for the Financial Times on Friday in London, all about the budget cap introduced to […] […]
How many of these teams are that serious James, if you where new to the game and sitting back and watching why would you sign up.
The head of the FIA publicly announcing you will be back of the field.Sponsor’s love that.
The FIA without any reason changing the rules that you signed up for saying it’s “it’s for the good of the sport”
Large grey areas in the regulations that can be interpreted in any way you see fit. [bonus]
The company not being able to tell you how they reached the figure they got for you to buy business.[Accountants love this]
No ability to get the state of art technology that the other teams have as they won’t give it to you.
No ability to get the state of art technology thet the other teams have as you dont have enough money.
So far this isn’t looking that good .
I think the problem here is FOM/CVC. I don’t understand what value their management services provide, that give them a right to over 50 something % of the revenues of this sport?
Without the lustre of names like Ferrari, Mercedes, McLaren, Williams etc, what is Formula 1?
Until the CRH reduces their exploitation of F1 revenues, to say a more hedge fund model of 2/20 (2% management fee, 20% of the profits), rather than the Caligula model they have now, it’s hard to take any cost cutting exercise seriously.
It’s interesting Mosley’s comments here though, that he expects uncapped teams to be more competitive than capped teams. I quite thought the aim might have been the reverse.
James, two questions:
1.- Mosley is a very smart person, he takes attention with budget cap (I personaly think it’s a good idea) and make us forget about past affairs. FIA is against a strong FOTA and the suspended ban to McLaren is very suspicious. Has FIA a new ally in McLaren? It looks like. “If you don’t help us you will miss the championship…” Martin Whitmarsh had to take a wise decision and it looks like he did.
2.- I don’t know F1 rules, but with next year “Winner takes all” system, Barrichello would be second to Button, Berger to Vettel, etc. I don’t think drivers would like that. Wouldn’t be possible one car / one driver teams? Red Bull will have next year two teams, this means double budget, Ferrari could have four teams with his actual budget. If FIA want to take costs down, and more teams on the grid, this could be a good solution. What do you think?
Sorry for my english 🙂
quike
Quike, thanks for your post. I’m not sure that it worked out quite that way with McLaren, but we will see. As for your second question, you cannot have one car teams, you have to field two cars. I think it’s possible you could see teams entering a second team, yes.
mosley telling private businesses and individuals how to spend their own money is bad enough; fair-do’s, he saw the main chance, thought ‘never let a good crisis go to waste’ and went for the grab
… but if he thinks he can get away with playing fast and loose with CVC’s debt mountain, i can’t help feeling he’s ultimately in for a rude awakening. (it’s always other people’s money, what’s that about maxwell?)
trying to read the on-again-off-again bernie/max waltz has been confusing for the last few years, but when the music stops this time, we all know who bernie is going home with.
the CVC collective sphincters must be in overdrive with all this “we don’t need ferrari” talk.
the loan was what, 2.5billion, before slicing their 50% chunk out of the sport, that means they need the F1 circus to bring home a profit of 500million bucks per year, just to let them service the interest payments.
another few hundred million after that would be nice, to payback some of the debt. so we need to see a billion a year through to 2014. (when the debt will be refinanced)
those numbers right there surely mean only one thing for certain, there will definitely be red cars on the TV … if it’s an either/or, then where that leaves the FIA budget cap bottom-inspectors*, as they say “do the math(s)”
(* Bottom Inspectors, © VIZ, circa 1989).
Re Mosley quote: “I don’t hate Ron Dennis, “ he said. “But he was always very obstructive. And he would have been difficult in this situation (budget caps), whereas Martin Whitmarsh may not agree with us but it will be a rational disagreement not an irrational one.”
Now how disgusting is this, I ask you. And you want to make a bet? This guy is by no means going to step down in October this year when his term is up. He’s one of these guys that loves power way to much.
Now I am not at all sure whether he had anything to do with Ron Dennis being shown the door, but the way he is using his departure is appalling (not to use abusive language).
I find the issue of budget capping interesting although slightly perplexing.
Firstly and as many other have pointed out it has taken Mosley rather a while to get round to this. I can’t help but feel that the credit crunch is a rather convienient hook. Sure there is pressure with honda and its honda light (aka super aguri) leaving the sport but this isn’t anything new. Look back half a dozen years and see retreat ofteams such as jordan, stewart and minardi.
Obviously something need to be done to encourage new teams to enter however it does feel like these new proposals are a little outdated and would have been more suited to the previous collapse of teams
I guess my point is that when you look at modern road cars you see so much technology that has come from developments in F1 – most obvious being flappy panel gear change. Seeing as we’ve about killed all but the last few polar bears and are on the brink of screwing up future natural resources wouldn’t it be better to have an option of you cap your budgets OR you invest is sustainable green technology?
Ok ok I know what some are thinking and ill go back to huging my tree and saving the whale in a min BUT the current global economy is a bit pants to say the least so why not invest the money in new jobs developing this green technology? As its a highly underfunded and untapped area the money set to be made from being the first to come up with some piece of revolutionary technology could be mind blowingly huge.
Therefore while smaller teams that aren’t attached to car manufactures can work towards achieve better performance so that they can almost match the front runners and therefore gain grater funding from sponsors. The front runners who do mainly happen to be major car manufactures can rest easy in the knowledge that they can probably out perform most of the field (bar freak weather reliability and typical F1 luck) whilst making their money no from sponsors but the rights to the green technology the invent, therefore leaving more sponsors to go round the smaller teams
Yer I know it wouldn’t quite work out like that and there would be hitches in my plan BUT I think overall it has legs 🙂
Oh and also like the idea of a tax going into a central pot by those teams that want to spend like its going out of fashion
HOWEVER rather than pop it back into teams that underspend.. wouldn’t it be better in investing in race tracks that can’t afford bernies idea of lavish and some what w*****y vip facilities? Surely not what F1 is about is it? Yes I know you need to impress sponsors but not the kind that care more about comfy seats from prestigous vantage points and all the champagne they can neck?
Yes I know the sport needs to update but it means the great european race tracks get squeezed out because chinas political dictatorship allows money to be spent on a lavish race track racer than addressing there numerous human rights issues (don’t get me started) or yet another oil rich nation looking to boost their ego by being able to afford the sport?
That way race tracks wouldn’t have to pass the stupid costs on to fans in the prices of the tickets just to stay affloat and more people could actually enjoy the sport live??
Contravesial I know and not where F1 is currently headed but then I have several bones to pick with mr eccelstone re that subject, first of which involves him owing me at least half a race due rubbish secheduling to maximise his tv revenue…… Not that I am at all a sceptic 🙂
I guess a budget cap is needed since the cars are now so ugly it hurts. I would not put my company logo on a 2009 F1 car.
Would someone please get rid of Max Mosley. How much did teams have to spend to switch from a V10 to a V8 (in the name of saving money)? I did not understand the logic behind that.
Is it my imagination or does Max, seemingly arbitrarily, draft new regulations too often? Weren’t we supposed to switch to turbos in 2010?