Crisis? What Crisis? F1 in denial as many teams will struggle to survive in new era 29 December, 2013 Is much of the money in F1 going down the drain? Glamorous, high-tech and hugely profitable: With the lure of races from Monaco to Singapore, Formula 1 just keeps on giving – as far as the money men controlling the motor sport are concerned. The business, in which private equity firm CVC is the largest shareholder, had turnover of $1.35 billion in 2012 and generated an operating profit of $426 million once payments to its 11 teams had been deducted. That might suggest unconstrained happiness up and down the paddock but appearances are deceptive. Behind the luxury brands, the celebrity guests and the lavish hospitality suites, many of the smaller teams are battling to survive. It is bleak news as the sport heads into a brand new era – with hugely expensive technology coming into effect – with expenditure at an all time high. To sabotage a cliche: while Rome burns some watch the fiddlers play as they chomp on canapé’s in VIP hospitality, apparently ignoring that the sport is in crisis. “I don’t THINK there is one. There IS one,” AirAsia airline entrepreneur and Caterham team owner Tony Fernandes told Reuters last week when asked whether the sport faced a cost crisis. “You hear about people not having been paid, suppliers taking a long time to be paid. These are certainly not happy days,” added the Malaysian, whose team finished last in 2013 and has yet to score a point in four years of trying. Tony Fernandes warns that crisis is already taking place Four teams – Champions Red Bull, runners-up Mercedes, Fiat-owned Ferrari, and McLaren – have annual budgets of $200 million or more and benefit most from the division of revenues overseen by Formula 1 chief executive Bernie Ecclestone, long the dominant figure in the sport. Ecclestone, who is facing a series of legal battles linked to the deal that brought CVC on board eight years ago, has built a unique business model that controls broadcasting rights, race hosting fees, sponsorship and licensing. The teams shared around $750 million of the income last year but are questioning a structure that takes so much money out of a sport with a high cost base for teams flying around the world to 19 annual races. The division between the rich and the also-rans is evident on the track, where Red Bull’s Sebastian Vettel ended the season winning the last nine races and his fourth title in a row, with such predictability testing the patience of many fans. “At the end of the day there may be only five Formula 1 teams if it carries on the way it is,” said Fernandes. HRT were the last F1 team to go bust – their demise came at the end of the 2012 season Teams come and go, more than 100 of them down the decades with Spanish-owned HRT the most recent to exit at the end of 2012, but this year has been more unsettling than usual. When 2007 World Champion Kimi Raikkonen told reporters that Lotus, winners of the season-opener in Australia and regular contenders, had not paid his wages all season he confirmed widespread concerns about the health of the sport. The talk now is of the urgency of taking costs in hand, with the governing International Automobile Federation (FIA) announcing this month that teams will have a cost cap from 2015 with the precise rules to be drawn up by mid-2014. The FIA has also sought expressions of interest from would-be teams wanting to come in from 2015, a move variously interpreted as a sign that they fear losing a current competitor or that they already have a potential entrant waiting in the wings. Previous attempts to curb spending have fallen apart, with companies such as Austrian soft drinks firm Red Bull prepared to bankroll a winning team to build their brand. Red Bull Red Bull Energy Station running costs are akin to the budget of a lesser F1 team “It’s a straightforward statement of fact that teams are under financial pressure,” said Marussia chief executive Graeme Lowdon, whose team has one of the smallest budgets on the grid at around 65 million pounds ($106 million) and has also never scored a point. “There is a large disparity in the distribution of money and the controls on cost don’t appear to be as effective as they could be. It’s not good for the sport and it’s not good for the fans. Without them there is no commercial model.” The teams are facing an engine bill twice as big as the current rate next year, when a new and more complicated turbocharged V6 with energy recovery systems is introduced, and fear the gulf between rich and poor is becoming unbridgeable. Even McLaren, one of the bigger teams, is yet to unveil a new title sponsor for next season after Vodafone ended a partnership dating back to 2007. Swiss-based Sauber, the fourth-longest serving team, and Lotus – previously known as the title-winning Renault and Benetton outfits – have both hit trouble this year. Times are tough admits Sauber boss Monisha Kaltenborn “There is something terribly flawed in the system,” Sauber principal Monisha Kaltenborn, whose team has struggled to pay suppliers, told reporters in Abu Dhabi in November. “This is a competition and the best win. But if the best are simply defined by the financial resources you have, then something is not right.” Lotus finished fourth overall but raced against a backdrop of constant speculation. The team’s Luxembourg-based owners Genii announced in June they had sold a 35 percent stake to a consortium of private investors, but then subsequently had to admit that the deal was not done. The shadowy would-be investors changed their name from Infinity to Quantum but month after month went by with no sign of any money despite regular assurances it was coming. Raikkonen meanwhile opted to rejoin Ferrari. “Of course it’s not a good sign, drivers not being paid and suppliers or employees not being paid. It’s not what we want to hear or see,” said Mercedes motorsport head Toto Wolff, whose team is backed by German car giant Daimler. Hard times in F1 attract shady would be investors “The whole world is in bad shape, the whole environment is in bad shape and we have to all look at how we finance our operations and the same applies to us. You can’t overspend.” Formula 1 might be self-financing in an ideal world but past threats of rival series have come to nothing, with teams lacking the resolve, and the resources, to make the break from the business built by the 83-year-old Ecclestone. “I have been an awful long time in Formula 1 and owned and ran a team for 18 years,” said Ecclestone, who has been in the sport since the 1950s as both poacher and gamekeeper. “Ever since I have been in F1, there have been the haves and have nots. Whatever sport there is, people will spend what they think they have to spend in order to win,” the British billionaire told Reuters. “What we are going to try to do is set a cap on the amount a team can spend. We’re going to try to save them from themselves.” (Reuters) Subbed by AJN. Tweet haha Keeping up appearances. I think it’s a shame Mallya is still posing like in Monaco with his “who has the biggest” boat while his staff and drivers are not paid and his airline company is on the verge of bankrupcy with most of his airline staff unpaid. Same goes for Gerard Lopez at Lotus. Only Peter Sauber and Frank Williams deserve better they are genuinly concerned about their team and staff. Posers like Mallya and Lopez shouldn’t be in F1. Also Toyota, Honda and Red Bull haven’t helped either with their big budgets. I’m not mentioning Ferrari or Mclaren because with a cost cut or fix maximum they can win WC’s, the 3 mentioned before can not and that’s fact. Also Red Bull cheats with max. staff allowed, with the limited garage time during gp’s they cheat and probaly they have an illegal car since 2010 or even 2009. I have been watching all f1 season reviews from 1950 till 2008, from 2009 it went downhill and verry steep. Plus if you watch it you can not deny that Clark and Fangio were the greatest ever, Lauda, Piquet, Moss, Stewart, Villeneuve, Senna, Schumi and now Vettel. Numbers say shit, that’s all. Cevert and Peterson would have been multiple champions if not for that crash. Bec Sponsorship revenue dwindling, as sponsors AVE drops due to increased pay wall deals. samraj F40 Hey mr.haha who the f**k are you to say.force india is the 2nd bet value for money team next to ferrari as they are more hungry team than say the 500 employee team williams. williams have had enoug success in the past.now it is lotus and force india’s chance. McLarenfan The only ones to profit big time are Bernie, CVC, The FIA & Ferrari who get a huge back hander from Bernie. Taskmaster The minute F1 began crushing innovation in favor of uniform engine, chassis, suspension, gearbox, aero, and single tire supplier, they set up a spending war. Teams spend huge amounts on wind tunnel testing and simulators – replacing innovation with constant finite fiddling. The idea of forcing budget constraints is furthering stupid policy caused by the failure of an overly restrictive formula. GP racing is dead, killed off by the FIA, F1 Bernie, and CVS, who’ve turned it into an entertainment to make themselves rich. F1 lives on historic GP imagery that no longer exists – and has become an expensive bore because of it. Not that any of the wealthy clods running this into the ground care a whit what any of us think at this point. Stewy33 F1 will crush and liquidate any team before its SUPER RICH takes a pay cut for the sport to survive. Ninjamonk You have to wonder if they standardised components and took away the development costs of those components and allowed 3rd party companies to sell them. It could even help teams mid field teams make some money selling these components. I think they could standardise the whole chassis, suspension, drive trains, gearboxes and braking systems. The only thing that the teams would have to do them selves is design the body shell and wings. Maybe even the rear wings could be standardised. SteveisGreat Ninjamonk: that isn’t F1. Force India and Sauber have consistently made very fast and sometimes competitive cars with a fraction of Mclaren, Ferrari, or Red Bull’s budget. Williams does as well, but as for champions and well established technological leaders, not to mention a larger budget and team, more is expected from them than FI or Sauber. Toro also has been known to do well since 2008/Vettel… hell, Vergne gave them a 4th this year! Anyway I say if a team can’t survive then piss on them. F1 doesn’t need a team that doesn’t pay it’s bills and are mobile chicanes! I’m looking at you Caterham! How on earth did they lose to a team using a Cosworth??? I don’t agree that 10 teams get a slice of the revenue and one team doesn’t. I think there should be a standard annual percentage and the rest be based on performance (points). Not popularity like the $60 million Ferrari gets just for being Ferrari or like the joke of a series Formula E is turning out to be – more performance for twitter followers? Ridiculous! Anyway, I like Williams and Sauber and Force India (depite Vijay’s airline woes) they’ve all demonstrated a serious commitment to F1 and improving themselves… I’d vote for Toro too but I suspect them of too much data sharing with RBR, tbf. Marussia has steadily improved too, but we’ll see what happens in Melbourne. Caterham should cancel their F1 involvement just like they have in the junior series. No one will even miss them. David Absolutely right, Taskmaster. F1 governance is a parallel to just about every national government on the globe, the priorities are to protect privilege, to ensure they stay in power and to suck as much money as possible from “them at the bottom”. When I watch and enjoy Historic racing I feel a kind of alienation from what F1 has become. My first Le Mans in 2013 was also a revelation and WEC is now more attractive to me and many others.