[Rumours] Budget cap revival

[Marbot]

Originally Posted by schead

A car company also has a lot more financial clout to legally make the FIA eat it's words. Lets say that Mercedes and Ferrari are using clever accounting to overcome the limit. Who do you honestly think would win in a legal battle with the FIA vs Merc or Fiat in a corporate slander case? Also, who really thinks that the FIA would even consider ****ing off Ferrari, Mercedes or Renault given the engine situation in F1?

Budget caps are unworkable, as well as being totally against what F1 is about. Keep the poor people out of F1 IMHO. If you can't afford F1, there is always GP2, GP3, FR, FF etc.

F1 is the best of the best, not the people who need drivers to provide funding for an also ran ****ty car to so much as pay for tyres.

If you need a budget cap to be in F1, don't be in F1. End of...

OK. That's fine. How many teams do you think will still be left in F1 if it was left to be a spending competition?

Why do you think it is that even Ferrari are calling for costs to be reduced still further?

"On Wednesday, Montezemolo says on Ferrari's website that F1 cannot "ignore" the crisis anymore and "we need to tackle urgently and with determination the question of costs."

Montezemolo adds "Ferrari is in agreement with the FIA's position that drastic intervention is required ... the question has to be tackled at the highest level, without further delay."

http://espn.go.com/racing/f1/story/_...nancial-crisis

You'll notice that Montezemolo agrees with the FIA.

You see. There's this saying about living in the real world.

Oh and with regard to ******* off Ferrari, etc. If the V6 engines are shelved, it's bye-bye Renault.

Your move.

[schead]

Originally Posted by Marbot

OK. That's fine. How many teams do you think will still be left in F1 if it was left to be a spending competition?

Why do you think it is that even Ferrari are calling for costs to be reduced still further?

"On Wednesday, Montezemolo says on Ferrari's website that F1 cannot "ignore" the crisis anymore and "we need to tackle urgently and with determination the question of costs."

Montezemolo adds "Ferrari is in agreement with the FIA's position that drastic intervention is required ... the question has to be tackled at the highest level, without further delay."

http://espn.go.com/racing/f1/story/_...nancial-crisis

You'll notice that Montezemolo agrees with the FIA.

You see. There's this saying about living in the real world.

Oh and with regard to ******* off Ferrari, etc. If the V6 engines are shelved, it's bye-bye Renault.

Your move.

You see, here is where the likes of Ferrari and Merc differ with Red Bull with regards to cost caps. Ferrari and Merc are all for cost caps on chassis design, whereas Red Bull want the cost caps at the engine level. Are you surprised at this? I certainly am not.

At the end of the day, F1 can afford to tell Red Bull to **** off a lot easier than it can Ferrari or Mercedes.

Anyway, back to the real world. The sort of cost cap to be imposed that Ferrari or Merc want, or that Red Bull want is still so far out of reach for the likes of HRT, Virgin and Caterham that it becomes irrelevant. Red Bull would impose a 100 m on the engine and 300 m on the chassis, whereas merc and Ferrari would be the other way round. Either way, HRT, Virgin and Caterham would still be searching for a couple of million. A budget cap for Ferrari, Merc, Red Bull, McLaren etc is an untouchable dream for the also rans.

[Marbot]

Originally Posted by schead

You see, here is where the likes of Ferrari and Merc differ with Red Bull with regards to cost caps. Ferrari and Merc are all for cost caps on chassis design, whereas Red Bull want the cost caps at the engine level. Are you surprised at this? I certainly am not.

At the end of the day, F1 can afford to tell Red Bull to **** off a lot easier than it can Ferrari or Mercedes.

Anyway, back to the real world. The sort of cost cap to be imposed that Ferrari or Merc want, or that Red Bull want is still so far out of reach for the likes of HRT, Virgin and Caterham that it becomes irrelevant. Red Bull would impose a 100 m on the engine and 300 m on the chassis, whereas merc and Ferrari would be the other way round. Either way, HRT, Virgin and Caterham would still be searching for a couple of million. A budget cap for Ferrari, Merc, Red Bull, McLaren etc is an untouchable dream for the also rans.

To Caterham, Marussia, and HRT, you should also add Sauber, Force India and Williams.

I don't think that Jean Todt was referring just to the 'new' teams when he said that F1 will "lose several teams" when he finally had something to say on the matter.

Those are teams that don't have 200 m to spend, either. Some would say that teams like Marussia have vast amounts more money than Sauber.

With regards to the 'real world'. I don't think that the budget cap figure would be anywhere near to what you think that it might be. You are talking about figures there that were around what teams were spending back in 2007-8. I wouldn't be at all surprised to see a figure much nearer to that which Max Mosley was proposing rather than the extremely exaggerated figures that you seem to think will be nearer the mark. A figure of around 80 million Euros with a ramp system for the larger teams to get down to that figure, seems to be doing the rounds at the moment.

It would also seem that Red Bull are the ones with all the cash, and some other teams are getting a little bit concerned by this. Not surprisingly, they are the ones who can run two teams and don't want to spend a penny less on doing that. They have their F1 strategy worked out good and proper at the moment.

I don't know. But F1 with four teams with three cars each, just isn't going to work.

[Marbot]

Bernie has some more thoughts about a budget cap...err...budget ceiling.

Bernie wants teams to be able to be competitive without having to spend the amounts that the top teams do. But he also wants a maximum 'ceiling' of overall spending.

"Someone who starts a team shouldn't be be any more disadvantaged than someone who has got an enormous budget".

http://www.pitpass.com/47458-Ecclest...ng-for-budgets

Also: HRT open to customer cars

http://www.autosport.com/news/report.php/id/103011

[chillibowl]

Originally Posted by schead

A car company also has a lot more financial clout to legally make the FIA eat it's words. Lets say that Mercedes and Ferrari are using clever accounting to overcome the limit. Who do you honestly think would win in a legal battle with the FIA vs Merc or Fiat in a corporate slander case?

its not the FIA that they would have to answer too. its the shareholders of those corporations who would want answers. they already prepare very detailed audited financials which are then scrutinized by major investors. asking them to hide costs associated with their F1 team would expose them to major crimes that would very likely land them in jail for violating their oaths as responsible corporate officers.

not saying that there aren't those that wouldn't stoop to that level but just saying that its more than the FIA they would have to answer too. F1 being a monopoly sport they would probably find themselves in an EU anti trust court and they have significantly more authority...and then the tax man will come knocking.

the framework for auditing companies is already in place at all levels of gov't. all that needs to happen is for the teams to agree on both a level and a system of penalties for violators. thats the problem and not a forensic accounting firms ability to get to the bottom of it.

[Marbot]

Originally Posted by chillibowl

its not the FIA that they would have to answer too. its the shareholders of those corporations who would want answers. they already prepare very detailed audited financials which are then scrutinized by major investors. asking them to hide costs associated with their F1 team would expose them to major crimes that would very likely land them in jail for violating their oaths as responsible corporate officers.

not saying that there aren't those that wouldn't stoop to that level but just saying that its more than the FIA they would have to answer too. F1 being a monopoly sport they would probably find themselves in an EU anti trust court and they have significantly more authority...and then the tax man will come knocking.

the framework for auditing companies is already in place at all levels of gov't. all that needs to happen is for the teams to agree on both a level and a system of penalties for violators. thats the problem and not a forensic accounting firms ability to get to the bottom of it.

[schead]

Originally Posted by chillibowl

its not the FIA that they would have to answer too. its the shareholders of those corporations who would want answers. they already prepare very detailed audited financials which are then scrutinized by major investors. asking them to hide costs associated with their F1 team would expose them to major crimes that would very likely land them in jail for violating their oaths as responsible corporate officers.

not saying that there aren't those that wouldn't stoop to that level but just saying that its more than the FIA they would have to answer too. F1 being a monopoly sport they would probably find themselves in an EU anti trust court and they have significantly more authority...and then the tax man will come knocking.

the framework for auditing companies is already in place at all levels of gov't. all that needs to happen is for the teams to agree on both a level and a system of penalties for violators. thats the problem and not a forensic accounting firms ability to get to the bottom of it.

Sorry, no offence intended, but poppycock.

EU Anti trust courts??? The FIA doesn't dictate EU law. It is a non profit making charity FFS. The FIA could mandate as many "rules" as it wants, it would have no meaning to EU Law. There is nothing illegal about representing certain costs as being associated with certain activities if they pay tax on this. The tax man doesn't give a rats arse if 200 million spent on road cars engine reliability is really spent on F1 cars performance, as long as it pays the tax on it. It isn't like it's road car division is exempt from tax.

The FIA, as a charity, have no rights to demand anything from the manufacturers. Indeed, the only law that could come under question, is that of a charity demanding financial records from legal entities. The FIA is the only entity in this that could be clouted by the law.

[Marbot]

And this is why the FIA wants the teams to agree to being audited in respect of their spending activities in F1.

Once you have done that, then the governing body has the upper hand. If a team like Red Bull doesn't like that, then perhaps they should do something else?

[chillibowl]

Originally Posted by schead

Sorry, no offence intended, but poppycock.

EU Anti trust courts??? The FIA doesn't dictate EU law.

no offense taken.

but the FIA is subject to EU laws and the FIA have been before the Euro competition commission before for that precise reason.

http://www.autosport.com/news/atlasf...t.php/id/3464/

granted this example had to do with broadcasting rights, however, violation to fair competition (ie teams violating the agreed upon rules of their controlling organization) is precisely where a small team would take their complaints if the FIA fails to act. so its serious.

maybe its a bit more serious in N.America, but when a professional sport league (major league baseball, and NFL) fails to uphold their own agreed upon rules they are subject to congressional or senate oversight since they enjoy numerous exemptions aimed at not allowing other leagues to compete against them. they take it seriously because if they lose their protected status then a whole lot of people will lose a whole lot of money.

so if a small team cannot compete because a big team overspends its not like they can join a rival series...hence violating a budget cap is anti competitive and subject to decisions of a much more powerful organization (EU competition commission) so they have leverage to keep teams from doing it.

Originally Posted by schead

It isn't like it's road car division is exempt from tax.

exactly, which is why if Merc Gmbh (for example) deducts 200mil in expenses against their income (hence paying less in tax) for a team they sponsor it would be very simply tax fraud and very much an issue for the tax man and an issue for investors of Merc Gmbh who would see an unexplained reduction of 200mil in their company's turnover and a corresponding reduction on their ROI...im sure they will notice because they also have accountants analyzing financials.

anyways that was all just speculation. the point is the legal mechanisms to prevent teams and the manu's from hiding their spending already exists so im not sure why you think thats the issue here.

[Marbot]

From bad to worse for Mallya.

http://www.pitpass.com/47467-Problems-for-Mallya

I'm sure that he'd be in favour of some sort of budget cap with regard to airline competitiveness.

[wnut]

Originally Posted by chillibowl

no offense taken.

but the FIA is subject to EU laws and the FIA have been before the Euro competition commission before for that precise reason.

http://www.autosport.com/news/atlasf...t.php/id/3464/

granted this example had to do with broadcasting rights, however, violation to fair competition (ie teams violating the agreed upon rules of their controlling organization) is precisely where a small team would take their complaints if the FIA fails to act. so its serious.

maybe its a bit more serious in N.America, but when a professional sport league (major league baseball, and NFL) fails to uphold their own agreed upon rules they are subject to congressional or senate oversight since they enjoy numerous exemptions aimed at not allowing other leagues to compete against them. they take it seriously because if they lose their protected status then a whole lot of people will lose a whole lot of money.

so if a small team cannot compete because a big team overspends its not like they can join a rival series...hence violating a budget cap is anti competitive and subject to decisions of a much more powerful organization (EU competition commission) so they have leverage to keep teams from doing it.



exactly, which is why if Merc Gmbh (for example) deducts 200mil in expenses against their income (hence paying less in tax) for a team they sponsor it would be very simply tax fraud and very much an issue for the tax man and an issue for investors of Merc Gmbh who would see an unexplained reduction of 200mil in their company's turnover and a corresponding reduction on their ROI...im sure they will notice because they also have accountants analyzing financials.

anyways that was all just speculation. the point is the legal mechanisms to prevent teams and the manu's from hiding their spending already exists so im not sure why you think thats the issue here.

Probably cost more to comply with all this red tape than it would to just spend the money on open development!

[Marbot]

Originally Posted by wnut

Probably cost more to comply with all this red tape than it would to just spend the money on open development!

Err, no. Definitely not.

[wolfhound]

A cost cap has been proposed in the strategy group but only for engines.

http://www.autosport.com/news/report.php/id/120814

I suspect there is a good chance of this getting getting through as there will be 3 teams paying for their engines on it (Williams, Force India & Red Bull). I would assume the FIA is in favour but where Bernie stands you never know but he should be in favour if he wants the independent teams to survive.
I think we will see some sort of cost cap on engines in the near future. I think it is a case of watch this space.

[VIVA GT]

Originally Posted by wolfhound

A cost cap has been proposed in the strategy group but only for engines.

http://www.autosport.com/news/report.php/id/120814

I suspect there is a good chance of this getting getting through as there will be 3 teams paying for their engines on it (Williams, Force India & Red Bull). I would assume the FIA is in favour but where Bernie stands you never know but he should be in favour if he wants the independent teams to survive.
I think we will see some sort of cost cap on engines in the near future. I think it is a case of watch this space.

I think that a cost cap on customer engines is a very good idea. From what I've read the (escalating) cost of engines (well, PSU's to be strictly correct) has been the biggest reason that the smaller teams have fallen into financial problems.
Could it be that a cost cap is introduced, but the development token system is eased slightly? That way, if these manufacturers want to get their engines up to speed compared to the competition, they can do, but at their own cost.

[Mike Harte]

Originally Posted by VIVA GT

I think that a cost cap on customer engines is a very good idea. From what I've read the (escalating) cost of engines (well, PSU's to be strictly correct) has been the biggest reason that the smaller teams have fallen into financial problems.
Could it be that a cost cap is introduced, but the development token system is eased slightly? That way, if these manufacturers want to get their engines up to speed compared to the competition, they can do, but at their own cost.

The problem, as far as I can see it, is that the damage has already been done, and under the current R & Rs, nothing significant can be done about it. Mercedes, and well done to them for the design of their PSU, will have an in-built advantage over the other unit providers because they all have to be homologated and re-designs are not permitted until a new specification is introduced by the FIA.

So, whilst Mercedes will be able to upgrade their units year on year, the other providers are in effect just tinkering at the edges to try to get more horses out of their units. Obviously that is being overly simplistic.

Whilst bringing in a cost cap on the units may be beneficial to the financially strapped teams, again this is closing the stable gate after the horse has bolted, and may well be unfair to the providers who are all owned by outside shareholders. It may well be that they only obtained permission to spend as much as they did on the new units on the understanding that they would be able to repay the investment by leasing the units to other teams at commercial rates. It could well be that the boards of directors may have refused to grant permission if they had been told prior to the investment that they might not get a return on it. This is the problem you get when you start messing around with regulations way after they have been introduced.

[littleman]

Yet again, it is the incompetence of the FIA that has led to this situation.

Hybrid engines should never have been adopted in the first place.The technology is still fairly new, they are complex, very expensive to develop and require considerable expertise to run them properly.

It should come as no surprise then that only a handful of global mega manufacturers would have anything like the resources necessary to produce them. As a consequence, the engine options available was always going to be tiny and very expensive.

What the FIA should have done, and should still do, is come up with an engine specification which allows a relatively cheap engine to be competitive so many,many more manufacturers and specialist engine builders could consider entering F1 and provide every team with a wide choice of motors. This would likely result in more teams joining in and a more competitive grid.

[Mike Harte]

Originally Posted by littleman

Yet again, it is the incompetence of the FIA that has led to this situation.

Hybrid engines should never have been adopted in the first place.The technology is still fairly new, they are complex, very expensive to develop and require considerable expertise to run them properly.

It should come as no surprise then that only a handful of global mega manufacturers would have anything like the resources necessary to produce them. As a consequence, the engine options available was always going to be tiny and very expensive.

What the FIA should have done, and should still do, is come up with an engine specification which allows a relatively cheap engine to be competitive so many,many more manufacturers and specialist engine builders could consider entering F1 and provide every team with a wide choice of motors. This would likely result in more teams joining in and a more competitive grid.

As much as I might like it at times, we cannot live in the past. Hybrid power-units are here on the track and on the road, and until something better for economies and the environment comes along, they are here to stay. And if they can get them right in the WEC, they should be able to get them right in F1.

Unfortunately, we have probably seen the last of the likes Cosworth producing world class, world beating, engines. You only need to cast your mind back a handfull of years to remember that neither Cosworth nor Hart nor others could produce an engine that was even competative with the likes of the Renaults and Ferraris, etc. And you mustn't forget that the Ford Motor Co sunk a fortune in to the Cosworth project that resulted in the DFV. I also long to return to those days, when men were men and all that, but it ain't going to happen.

So, we are where we are. However, whatever they come up with, they mustn't "punish" Mercedes just because they had better designers and engineers working on the PSU project. The rule making needs to be repatriated to the FIA without the teams meddling with the regulations, and outside engineers or those who have left F1, and can be relied upon to not be biased in favour of their old teams, should be brought on board by the FIA to come up with compromises that all the teams can live with.

[littleman]

I don't disagree with any of your comments but I still believe the key to putting F1 back on the right path lies with the FIA.......it's their Championship after all !

They need to produce F1 regs which allow numerous teams to be ultra competitive without having to spend hundreds of millions of pounds. The first place to start would be with the engines.

If the regs meant you could win races on a budget of £50m to £80m, then why would anyone need to spend 3 or 4 times as much? It's become far too elitist and expensive.....wind it back a bit.

Budget caps will never work but this concept might.

[chillibowl]

how is it different then the Resource Restriction Agreement from several years back?

i agree that the FIA needs to step in a) create a mechanism to monitor the costs and b) implement real punishments for failure to comply...if this rule goes through of course.

let me play devil's advocate moment (as i do support moves towards budget caps and equal distribution of prize money), some teams have money and for the first time in a very long time that number is more then 2.

currently we have 3 teams capable of spending at the top level (Merc, Ferrari, RBR), then we have Mclaren-Honda who have deep pockets but short on a title sponsor, Williams are healthier then they have been in over a decade,despite rumours to the contrary Force India are staying in the fight, and Lotus may soon be a works team again presumably (hopefully) with works level funding.

arguably F1 is healthier at the top then it has been for a very long time.

so is the bigger problem money/budget caps or the freeze and the inability to develop the power units?

[JeremySmith]

Originally Posted by littleman

Yet again, it is the incompetence of the FIA that has led to this situation.

Hybrid engines should never have been adopted in the first place.The technology is still fairly new, they are complex, very expensive to develop and require considerable expertise to run them properly.

It should come as no surprise then that only a handful of global mega manufacturers would have anything like the resources necessary to produce them. As a consequence, the engine options available was always going to be tiny and very expensive.

What the FIA should have done, and should still do, is come up with an engine specification which allows a relatively cheap engine to be competitive so many,many more manufacturers and specialist engine builders could consider entering F1 and provide every team with a wide choice of motors. This would likely result in more teams joining in and a more competitive grid.

The Toyota Prius is ten years old ..hardly new technolgy is it !

[wnut]

Originally Posted by littleman

I don't disagree with any of your comments but I still believe the key to putting F1 back on the right path lies with the FIA.......it's their Championship after all !

They need to produce F1 regs which allow numerous teams to be ultra competitive without having to spend hundreds of millions of pounds. The first place to start would be with the engines.

If the regs meant you could win races on a budget of £50m to £80m, then why would anyone need to spend 3 or 4 times as much? It's become far too elitist and expensive.....wind it back a bit.

Budget caps will never work but this concept might.

Plus 1.

I still contend that Mercedes have spent an unbelievable amount of money on the development of the current engine. I think they took a look at the current regulations and appreciated that if they could spend the R&D upfront and establish a huge advantage then nobody would be able to compete with them because of the restrictive rules.
The competition did not have the capital to invest up front, or did not appreciate how restricted the development would be.

Now we have a sport that is going down the tubes and a manufacturer enjoying its dominance and protecting a huge vested interest.
Any cost cap now would just further entrench their position.

The regs need to be changed and comparatively cheap engines need to be made available as per littleman's post above.

[wnut]

Originally Posted by JeremySmith

The Toyota Prius is ten years old ..hardly new technolgy is it !

So what is the point spending billions of dollars implementing a limited and outdated application of an existing technology that just makes racing cars fat and unwieldy?

[jee]

Originally Posted by littleman

They need to produce F1 regs which allow numerous teams to be ultra competitive without having to spend hundreds of millions of pounds.

Originally Posted by chillibowl

i agree that the FIA needs to step in a) create a mechanism to monitor the costs and b) implement real punishments for failure to comply...if this rule goes through of course.

This is both the wrong approach in my opinion to solve the problem of F1, the real issue it that it does not pay to race for the backmarker teams.

Why limit the budget for all teams instead of giving small teams a chance to compete? They just need a better price money distribution, it is really rediculous that some teams can even afford to run without major sponsor on their cars, while others struggle even with sponsors.

There is no reason why the WCC winning team should get more than 10 times the price money of tenth place, while every worse team get nothing for competing.

I agree that they should get more, but it should be quite marginal as they are already more attractive for big sponsors.

After all, racing teams do not excist to win, but to make a living out of their business. Success in competition is just a bonus.

[old man]

Intersting discussion that needs a little tweaking I think, The race I watched on Sunday had a Ferrari engine beating a Renault engine and both of them beating a Mercedes, have we moved on perhaps?

[wolfhound]

Bob Fernley of Force India proposed a championship for independents with a budget cap of $100million to the other independent teams however Toro Rosso and Williams were against the idea.

All teams would still be part of the constructors championship but there would also be a championship for cost capped teams. However as not enough teams were willing to consider it, it did not go any further.

http://classic.autosport.com/news/report.php/id/125591