Formula 1: now or never

Formula 1’s bigger teams admit that there is no easy way to cure the sport’s financial woes, as smaller outfits spoke out on Friday about the need for action.

Whilst welcoming the chance to make his point, Lotus Chairman Gerard Lopez said it was time for action rather than further discussion.

“Now is the time to say things as they are. Number one – the distribution of all the revenues is completely wrong,” he declared.  “Whether the size of what is distributed or not is debatable, but when you have teams getting more money just for showing up than some teams spend in an entire season something is entirely wrong with the system. So that cannot be allowed to happen.  And now is not the time to be talking about, but to be acting about it, so we will see what happens in the next couple of weeks.”

Those sentiments were echoed by Force India Team Principal Vijay Mallya who has long championed for a more even split of the sport’s prize money. “The DNA of Formula 1 is to include big and small teams and to provide as level a playing field as is practically possible. I think if all the stakeholders sit together we can find a solution. It doesn’t have to be a radical solution that would dent the hopes and aspirations of the big teams, but could make sure that everyone survives and the sport can continue to be enjoyed by the fan following as well.”

The issue of budget caps was once again raised, with Lopez also questioning the wisdom of unfreezing engine development as he claimed this would also drive up costs.

“We always find excuses not to have a cost cap and there are reasons why certain areas should not be capped, but there are also reasons why certain areas should be. Again now is the time to be acting rather than talking about it,” he stressed. This is an odd sport as we tend to say one thing then do the opposite. I’ll give one example – the birth of the new engine happened when we started to talk about cutting costs. The fact is that the new engine, which from a technology perspective is a great thing, the costs were passed on to all the teams. In our case between the engine and the development we probably spent about $50 or $60 million – that is not cost cutting in our book, that is essentially throwing money out of a window. ”

“So we tend to do the completely the wrong thing and if we unfreeze the engine now, which is the next topic coming up, all we are going to do is force everyone to keep developing and so forth.”

“So at the end of the day the revenue split, the capping of costs and any other sort of position we take have an immediate impact on the sport and not taking these has had an immediate impact on the sport in the last couple of weeks with two teams disappearing. So as far as I am concerned it is interesting to have the press conference, but it is going to be really interesting to see what happens in the next couple of weeks.”

On the other side of the debate was Mercedes’ Head of Motorsport Toto Wolff who, thanks to backing from the German manufacturer, has seen the team spend big to become World Champions.

“If you look at the budget of Marussia and then compare the highest spender, be it Ferrari or Red Bull, we are talking about a gap of £70 million compared to £250 million,” he said.

“So if we are talking about a cost cap how do we do that? Where do you cap it? If you cap it at the lower end do you make two-thirds of the people redundant in the big teams? That is one point.

“The other point is how do you control it? The competition is so fierce at the very top that the cost cap was never implemented because there was no way of policing it and controlling it. Some of the teams have various set-ups and companies and are multinational all around the world in Japan, in Germany, in Italy. If you look at Ferrari they have a severe issue of being transparent enough to cope with the cost cap – if you have everything in one entity and you are building road cars and you are building engines and you are building various race cars from GT to F1 how does it function? Because it is so competitive we need to have clarity on how you control that.”

Lopez struck back by questioning the need to spend such vast sums given the relative performance to a GP2 car which is run for a fraction of the budget. It should be pointed out, however, that all teams use identical Dallara chassis and Renault engines with spare parts purchased through GP2 organisers which keeps costs down as the teams do not have to manufacture parts.

“There is something called the law of diminishing returns,” Lopez added. “If I take a GP2 car and make it run around this track it is not going to be ridiculous, it is going to be down by four, five, six seconds. The whole GP2 team for the season is going to cost €4 million – are we really that much better? Are we really better to the point that a team needs to spend €300 million to be six seconds faster? We are not and I wouldn’t accept that argument from anyone. The top teams are not €300 million better than a GP2 team. So it is a bit ridiculous to say you need to spend that kind of money to have that kind of performance because that makes us the worst managers in the world.”

Whilst some called for an equal split of F1’s monies, Lopez feels success should still be rewarded but also that teams should at least be given enough to pay for essentials.

“If you take Marussia or Caterham I can kind of guess what they must have paid for the engine this year and what they have paid for development to run that engine and I can guarantee that in the budget they have there was not a lot left,” he continued. So it is not like they had a choice. It is all good to talk about how you shouldn’t spend more than you have got, but at the end of the day certain decisions on budget are forced upon you just because that is what the market is giving you. If I told Pastor or Romain that next year they are going to be pedalling their car they are not going to be particularly excited. It would be way cheaper for us and financially as an entrepreneur it make sense as I might actually make money, but it is not going to be very competitive. So if you want to stay competitive at a minimum level you are forced to spend a certain amount. The amounts that need to be given should allow the team to perform at a basic level given the costs that are forced upon that team that have nothing to do with luxury. There is a minimum budget required today to even exist in Formula 1 and that minimum budget has actually killed two teams. And they did not choose to spend their money on the kind of things they had to.”