Team sponsorship

[Super Tourer]

What is an achievable budget?

We have had several threads on ‘cost cutting’ in F1 recently, many of us have reached the view that manufactures are not ‘really’ interested in cutting budgets, while they have the money available they will spend it, when they don’t they will pull out – the logic being that even $10M in savings is currently neither here nor there in relation to a $250M budget.

I thought I would examine 2003 F1 budgets in relation to ‘real sponsorship’ actually achieved. One thing that becomes clear is that many teams effectively under sell their sponsorship or maybe they cannot achieve more…

For example, the viewing public would assume that William’s major backing came from HP. Their branding on the car and the drivers is more prominent than BMW for example. HP having the inside rear wing, side pods, and the front element of the front wing and the largest area of the driver’s suit.

But they would be wrong. BMW’s contribution to William's in 2003 was $120M (52% of the total), whereas HP’s sponsorship was $38M (16% of the total). If you look at other areas of the car, the rear wing endplate which Petrobras had, was charged at $5M, the second element on the front wing, which Fed Ex took came out at $6.5M.

The actual sponsorship total on the William's cars comes to $90M for year 2003, of you add the small trade sponsors plus the FIA package of $18M – you end up with a ‘real’ budget of $110M.

This puts into perspective what a good job Sauber does, who raise $100M independent of any car manufacturers.

Using William’s as an example again, imagine if they not only had no manufacturer support, but also had to buy engines – after that cost they would end up with a budget to run the team, etc of around $90M.

Bernie E has voiced his concerns about rising costs and the commercial viability that goes with it. Not only are the costs too high, but the money they are spending is irreplaceable, it’s clear that even the most successful teams could only raise less than half what they now spend, if they had to rely on commercial sponsorship.

The story with the other teams is more or less that same, Ferrari excepted, who raise the major part of their budget from pure sponsorship.

McLaren – 2003 budget $270M - in 2003 the viewer would assume that West largely funded the team, but their input was only $50M against Mercedes $150M. In fact McLaren’s total visible sponsors on the 2003 contributed around $120M.

Same story with Renault – once again you would assume that Mild Seven were hugely funding the team, yet their contribution came in at $40M against the $160M that Renault themselves funded. Their 2003 total on car sponsorship value came to around $80M.

This leads me to think that in fact $100M is the budget that teams can realistically raise. If, and is still if, the car makers do start to think again about their future in F1, this is the sort of figure even leading teams would be left with.

[Smokey 6 litre]

thats quite a lot of work gone into that post, well done.

I guess i'd never really thought about it, £200+ million budgets and where most of the money comes from.

[Raglanparade]

The slightest world economic hiccup and the privateers are stuffed.

[paulzinho]

Just like Prost and Arrows...

[grumpy1]

Super Tourer you must have a migrian after reserching that lot.Great job.So now BAR have lost JV and his multi million dollar price tag they should have extra cash to out into the car.Therefor they should win a race this year.

The Grumpy1

[Armco Bender]

It must actually be hard to put a dollar value on what a company like BMW give to Williams though,$120 million worth of motors may be there cash value but the "expertise" and technical knowledge that they can call on must be worth $100's of million more than the physical value of the motors themselves.
Where as, if say Mild Seven came to Minardi with $40million cash from cigarette sales they would only be able to go buy $40 million of someone elses know how,which would say cash is good for F1 teams but cash and technological back up is even better if you are going to win.
And at the end of the day winning counts in F1,how many car manufacturers advertise we came third in the championship?.

[Super Tourer]

The $120M that BMW fund Williams with is split across support and pure cash sponsorship.

Of the $120M - $90M is classed as 'non-cash', which we assume are the engines and technical support, with a further $30M shown as 'cash' - ie pure sponsorship.

ST

[Raglanparade]

I think it would be interesting to see what would happen if they introduced a salary cap system to F1 ?

How do u think this would work.
Each team has a salary cap of 100 Million.
They are only allowed to spend 100 million a year, and only allowed to generate 100 million. If a team manages to make a profit then the profits go into a central fund and are divided among all teams equally, so this discourages teams from raising too much money.
How much better would f1 be is a salary cap was introduced.
the 100 million a season would have to cover

Chassis
Engine
Repairs through the season
Tyres
Drivers

For example if the teams are given free engines or make there own engines... eg. Ferrari, Renault, McLaren, Williams, Toyota, Jag, BAR.
then they are to deduct the cost of those engines off there budgets. A minimum of 12 million must be deducted for engines to stop teams cheating by there partners selling them "cheap" power plants.

this system would make f1 a lot less costly and benefit those teams that can economise everything in the right way.

penalties apply for teams luring drivers with non budget cash.

-jason

[Super Tourer]

I don't think that any cost cutting regualtion will work. If you look at where cap's have been introduced - like DTM for example where the 'price' of the car is capped (as it was in the WSC), all that happens is that the car ends up as an effective lost leader, in that the car maker still spends millions, yet places the capped value on the car.

Whatever cost rule was implemented, I can guarantee that a way around it would be found.

In the end cost cutting will happen via natural selection. Jordan only spends $60M (for example) because they have $60M to spend, if they had $100M they would spend that.

It's only when and if the supply of money is cut, that teams will actually cut their cloth accordingly.

[Raglanparade]

Maybe all the sponsers give there money to uncle bernie and he dishes out 100 mil per team.
that way he can provide a check on the money going to teams. Auditors keep a close eye on F1 teams to make sure they get no extra money as strange gifts.

[Skam85]

Maybe sponsorship will be 'reinvented' in 05 (?) when tobaco advertising is banned. That'sll throw a few teams into disarray. Starngely, I think Jordan will benefit, you can tell that they are slowly making the partnership with B&H less and less. Dont see that on Ferrari, Renault, BAR