The problem at the moment appears to be twofold First, the small teams spend a lot of money but cannot really compete, so they come and go with frequency, their time in F1 generally only lasting as long as their financiers' desire to piss away countless millions on negative ROI projects Second, the big teams make indirect $$$ on F1 through it's benefit as an advertising medium. They can afford to spend $300mm or $400mm a year on their F1 effort, because they see a positive ROI through increased sales of road cars or increased market value of their product. For these teams, winning is very important, and they are able and willing to spend in order to make that happen. A straight budget cap won't work, because Ferrari doesn't *want* their results to be normalized to Force India. They want to spend more money and beat them because that is how they maximize their ROI. It is simply impossible to say "nobody can spend over $X" because it does not adequately reconcile the vastly different needs of the small vs the large teams. So... Given that the FIA feels the means exists to monitor and accurately measure team spending, they should come up with some sort of defined budgetary number (not a cap). Let's call it $100mm. Any team is free to spend as much as they like. Any amount they spend OVER that number, they must match 1:1 with money they deposit into a "big spenders fund". Whatever is in that big spenders fund gets distributed proportionally to the teams who are at or below the defined budget number. Now, a few important points 1) The ratio of what you must pay into the fund would vary, such that there is still a benefit to spending more and more $$$, but it would never mean that a lower end team would end up with a larger budget than the top teams 2) The lower level teams would have to commit to spending a mininum amount of their own money - let's say $50mm a year. Otherwise, there would be a line 1,000 people long of "teams" waiting to get into F1 and collect a hundred million a year of Ferrari/McLaren/BMW money. 3) They would need to bring back the 107% rule, or some form of it, to ensure that the little teams do spend on car development and don't live the high life, content to have a crappy car 4) All the numbers would be adjustable, of course... the matching number, the % paid out to the small teams, the budgetary number, the minimum spending level, etc. 5) The split of TV money paid out may need to be adjusted (it should be higher than the current 50% anyway, but the fastest teams MUST continue to get rewarded with higher payouts, but it would not make up for the higher $$ paid into the fund) The end result would be that a well funded team could spend as much as they like, but the return on their investment gets lower and lower as their spending goes up and up. It could even be set up such that the % you must pay into the fund rises as your spending goes up in dollar terms. I hate to say this, but something similar to the tax system, whereby the more you spend, the more you get taxed... and if you're bad off, you become eligible for welfare. The results would be: 1) All of the big and well funded teams would be able to continue to spend like drunken sailors at a bordello, and would still achieve better results with higher investment 2) The small teams would no longer be worried about having to spend $$$ to keep up with the big guys 3) Given that it would become almost instantly profitable to be in Formula 1, there would be NO shortage of teams running to submit their entries. The fans still get to see the big guys up top, we get maybe 12 or 14 teams on the grid, the weak teams naturally fail quicker and with less effect, and everyone is happy. Now, Ferrari may grudge paying $$$ to help out Force India to compete with them, but let's face it - the guys Ferrari are really competing against are the same guys who are going to be spending $$$ also, so they aren't helping their competitors, they are helping teams who fill the grid to let there be a series in the first place, which lets Ferrari get their ROI on that $500mm. Thoughts?
You are actually Obama? IIRC, Bernie tried to set something vaguely similar up a few years ago, a fund to help ailing teams. Back then it was Minardi and Arrows on the ropes, Bernie got a bunch of teams to chip into the pot. Political pissing match occured, all teams but one walked out on the deal. It was Peter Sauber that slid a check across the table to help out Paul Stoddart after the deal fell through. Beyond that, I'm not fond of a tax if the FIA are free to change rules willy-nilly. Rules instability is a huge drain on the minnow's coffers and a tax will do little help them out because they still have to spend BIG money to even have a prayer of competing. In the end, F1 needs to reduce costs, but not at any cost. Mosely introducing a cheap engine was the only smart thing he's done in recent years and it's a step forward. Another step is forcing a cap on the number of employees a team can employ...this returns a direct reduction in $ overhead of employing those people. It also has a direct return on the bottom line because the teams will no longer have the manpower to throw at making rivets more aerodynamic or polishing gears to atom-level smoothness. Limit teams to say, 150 employees and budgets will start to shrink and very rapidly, too.
All those thoughts would work if you are dealing with rational human beings and bean counters, But in this case you are dealing with Ferrari. Ferrari runs on Passion, just one trip to Maranello and you will see it in every face that works there.
IIRC the "fighting fund" was really just charity to Stoddart, and even worse, it was really just Bernie trying to get the teams to pay for something that benefitted him. He proposed they all chip in $$ to keep Minardi afloat. But they got nothing for it in return, and it was really Bernie who'se ass was on the line through contractual issues for showing up at races with less than the requisite # of teams. I agree with you on the rules instability, but I think this is largely the fault of the ego of Max Mosley. Only an arrogant bastard or an ignorant fool could possibly think that going from V10's to V8's would reduce costs. The teams cried bloody murder, but in the end it went through. Theissen even got pissed and talked about the hundreds of millions it cost, and it takes a lot to get a German to emote. The problem with limiting employees lies in the determination of who is an employee Certainly you're not going to count the employees at the company who makes the carbon brakes (for about 1/2 the grid) and charge them to each team. Furthermore, Ferrari has that new air-stream whiz-bang thing to keep Massa cool, do you charge that companies employees? Of course not - so let's say Ferrari decides to outsource wind tunnel development, or they outsource production of their carbon fiber. It would just be an accounting game of re-arranging numbers on a spreadsheet. Ferrari has the money to spend, and they want to spend it. The only way I think to give everyone what they want is to normalize the spending... the more you spend, the more you help your opposition, and you have a declining ROI for each additional dollar spent. If the rules are held constant, and there was a cap (on $$ or employees), what would you suppose would be Ferraris reaction to be getting their asses handed to them by Force India or Minardi or Arrows or Spyker F1? F1 would almost immediately cease to be of value to them. Even if it only cost them $50mm a year, they have an additional $450mm of spending they can and want to do, so wouldn't they find other series as well? Furthermore, if F1 is "worth" $X billion per year, and the costs of competing are going to go from a collective $2-3b, down to a collective $0.5b, that seriously throws the equation out of balance. Where does the rest of that $$$ go? I'm sure Bernie has a good answer, which will be even more detrimental to F1.
First, you need to find out what the high-dollar teams are spending on what, and how much they are spending on it. Next, you need to find out what low-budget teams are skimping on. Then, you need to negate the effects of what the high-dollar teams are spending on, make it so that it makes no sense to spend it. An example is, if Ferrari goes to the wind tunnel X times a year, and spends Y dollars on it, ban team-specific wind tunnel testing. Make it so it is not financially worth it for a team to have their own wind tunnel. Possibly have the teams all pay in to a wind tunnel fund, and if one goes to test, they are ALL invited. If you look at lap times today, they are a helluva lot closer top-to-bottom than they were 30-40-50 years ago, when most of us on here say F1 was in its' pinnacle, the difference is back then, you didn't have 4 or 5 of the top 8 cars finishing a race, which allowed the lower budget teams to actually compete for a win once in awhile, and today, usually the top 6 or 7 cars DO finish the race. And back then a team's entire budget was about half of what the average driver himself makes today. I keep saying, F1 has to decide if it can afford to be the 'pinnacle' of motorsport, or if it has to go 'down' to something like the IRL, or even nascar, and mandate parts and specs. You can't continue to have it both ways, not today.
I like the principle of the idea Mike, just not sure it would work in practise, with the co-operation needed, and Max would still implement his 2 tier penalizing system even if it was not a written rule. As I understand it example : If the budget cap was set at 40mil as Max wants it, and Mclaren or Ferrari or whoever spent 1mil over that amount, it would cost them 2 mil, with 1 mil going into a pot to be shared with the have nots: Requires you in Max's job, and I have no problem with that.. The problem I see, Max's pig headed way of dealing with the problem of cost cutting, I think they may end somewhere near a 75 mil budget to keep the peace even higher, I cannot understand why they can't just all sit round and thrash it out, they are not going to please everyone, but a 2 tier system I would imagine, is one all that all teams do not want. Ferrari it's my ball and if I'am not playing I'am taking with me, well for Luca to make that happen he needs to unite all the teams under the FOTA, so it's plain to me that instead of working on a compromise, Bernie and Max's tactic's are trying to split the FOTA instead of being constructive.
Non of the issues stated by both sides, are really what this is all about. They are just the excuses needed to justify ones position(even if they have validity). This whole saga is about CONTROL of F1 and who is going to have it in the end. The teams in Max and Bernie's mind are NOT going to dictate how F1 will be operated, and the big manufacturers who have put enormous amounts of money into the series have finally had enough of Max and Bernie's nonsense. This situation has become very personal on both sides, and like I stated in another thread, NEVER, EVER under estimate the destruction powerful EGO'S can cause! We are talking about the clash of the Titan Ego's here and it's going to get alot messier before this is all over!
Thank you Michael for taking the time to put so much thought into this. There is nothing wrong with a budget cap of $40 mill pounds. That figure if I remember correctly came from FOTA. What is wrong is the two tier system. The budget cap should be phased in over a 2 year period. A team like Ferrari or Toyota can not go from a $500 mill budget to $100 mill in 9 months. I do not have the exact solution, as I do not know all of the parameters facing the teams and the FIA. What I do know is that new teams must come into F1 soon. And that a break away series would be a disaster likely having only 10-12 cars on the grid, if that. Not to mention the issue of who would run it, and the cost to establish. Not all teams currently on the F1 grid would join the break away series. Ferrari must come to grips with the fact that new teams are needed to keep F1 alive, and unless Ferrari will subsidize these new teams, there will have to be a budget cap that can be governed. I think instead of coming up with the "play by my rules or I take my ball and go home" attitude, Luca and the board should have spent their time coming up with a viable solution to this problem. They can get a billion e-mails from fans, but that does not affect the reality of F1 participation.
Ron, Curious to hear your thoughts on this.... Let's say there is a $50mm cap. Now, Ferrari has an equal budget to Force India and all the other teams. Now, they can spend more on drivers and such, but we know the car is the majority of it. So Ferrari starts getting beaten by Force India. Hasn't F1 just lost a LOT of it's benefit to Ferrari, in that case? It's not just being IN F1, but WINNING in F1 that matters, IMO. If Ferrari feels that racing is worth $1b a year to them, and therefore they spend $500mm and take $500mm in profit from their racing ventures, then if the investment shrinks to $50mm, but the benefit also shrinks to $200mm, they are going to look at it and say "we were making $300mm a year more before!", aren't they? It's not like the teams will get less from Bernie, who will also reduce the fees to the tracks, who will reduce ticket prices. I don't think you can cap spending and expect the teams to not spend on racing up to an appropriate ROI. Now, maybe Ferrari will jump into Le Mans or something (which I would love), but if not, I think this budget cap will be very short lived. As soon as Ferraris start getting their asses handed to them by Minardis, all hell is going to break loose. P.S. Ron I got your PM, gimme a little time, I am putting something cool together... just gotta make it for ya first. Cheers
That sounds like a good deal. In scenario 1. they invest $500m and make $500m profit, an ROI of 100%. In scenario 2. they invest $50m and make $200m, an ROI of 400%, plus they still have the $450m they didn't spend, so in scenario 2. they are up by $150m over scenario 1. The bottom line for those of us who are F1 fans is that we want to see a competitive race series, as opposed to those who are not F1 fans - e.g. those on here who would stop watching if Ferrari left because they don't care if it's competitive as long as Ferrari always wins. To have a competitive series we need to have a level playing field where a team's skills, intelligence and inventiveness are the keys to success, not how much money it can throw at it. Yes, winning in F1 matters, it matters to most of the teams; so what incentive is there for 'lesser' teams to be involved in F1 if they know from the outset that they'll never be competitive because they can't match the bigger teams' financial muscle?
Here is my opinion, bound to create a stir: If Ferrari has a budget equal to Force India, and Ferrari is getting beaten, it isn't the budget that is making them lose. Brawn with a smaller budget this season is whipping Ferrari with an unlimited budget. Get the picture? If Ferrari can not compete head to head with equal budgets with other teams, 1) they deserve to get their asses beaten, and 2) they need to get out of racing completely and find a safer publicity venue that they can control. Like go karts. Buyng a victory is not the same as earning a victory. In reality, I believe that the budget cap is not the issue, even with Ferrari, it is the transition to the budget cap that is the issue. But if Ferrari does not realize that new teams are necessary for F1's long term survival, and the only way for this to happen is budget caps, then I hope Ferrari leaves F1 and goes go kart racing. To me, the survival of F1 is MUCH more important than Ferrari. I am beginning to resent Montezemelo's egotistical attitude as much as I resent Ecclestones. I have no reason to change my mind about what I said earlier in another thread, Ferrari will back down, forget idealism this is 2009 the budget caps are necessary. A break away series is impractical, and near impossible. I would not want to watch 6 teams with three cars each. Just watch as the other teams that say they would not do F1 in 2010 suddenly change their minds at the last minute and leave Ferrari out in the cold. Luca is gambling with a weak hand.
I like the idea of putting this on monetary terms. I believe that both the NBA and major league baseball do this. It would not achieve parity, but that is as it should be, since there would be no incentive to exceed the cap if it were. Here's an example: if there were 12 teams and 3 exceeded the cap and were penalized 50% of their excess spending, the 9 teams that did not exceed the cap would each receive 1/6 of the amount over spent. One drawback to such a system is that no one ends up at the cap. If FIA were serious about holding the cap they would spend the money on something like improving certain aspects of the older tracks or services for the fans (now there's a radical thought). I'm not familar with how the other sports do this, but I would suggest a quadratic formula. This penalizes the teams an increasing percent for the more they spend. It works like this: aXX+bX+c=P. a,b,&c are plug in factors. P is the Penalty, X is the amount the cap is exceeded by, and XX is X squared. Example: let's say c=$5,000,000 so that if a team exceeded the cap by even a penny it cost them $5,000,000. If you wanted a team who exceeded the cap by 50% to pay the same amount in fine, you could use .25 for b, and .000000025 for a and you have $10,000,000+$5,000,000+$5,000,000=$20,000,000. Using the same formula, if the cap ($40,000,000) was exceeded by the full $40,000,000 the penalty would be $55,000,000. Obviously, when you change the factors (a,b,c) the outcome changes. If you assigned the development of the formula to Max, you might be able to keep him out of trouble for weeks.
If you were a for-profit enterprise, and you had 2 options... spend $50mm and make $200mm, or spend $500mm and earn $500mm, and you wanted to do the former because the ROI% was better, you'd get fired What you're missing in the above example is that the ROI doesn't represent absolute dollars necessarily, as much as it represents market share. Ferrari can afford to spend $500mm on F1 because they get that much of a benefit from it. If they are constrained to $50mm, but are now equal to Force India and Minardi and Arrows, it loses it's appeal. They are no longer showing themselves to be a superior car company who are at the pinnacle of racing, but rather they are showing they are no better than anyone else. The idea that they should still be able to win because they are Ferrari doesn't hold water... the teams would all have access to the same talent pools and same resources, so the difference would only be in the names. And the names (and brands) would be precisely what would get diluted under a budget cap. I completely disagree about needing to have a level playing field. If one team can spend a billion and come up with something amazing, I want them to be able to. I also disagree about innovation and inventiveness being the keys to success - no, ultimately it is about money. Minardi never won based on guile instead of based on gold. If you have more $$, you can pay more for the better engineers. If all else is equal, then to think that Ferrari will get better talent than Minardi is a pipe dream... they would have all the same resources. Racing isn't about being equal... in series' with vast differences between teams, they have classes, just like in LeMans. The F1 teams have said they do not want classes, and Ferrari will not want to be on par with some rinky-dink team with an equal budget, not should they be.
I think that having the $$$ go to the slower teams is a necessity, because it means that the more Ferrari spends, the more they enable Minardi to catch up. And it's true nobody would be at the cap, but it would be OK, because all the extra $$ would be coming from teams who chose to spend over the cap... so it would have no detrimental impact on a low-spending team, actually it would help them immensely
You want to see something amazing? Give two race engineers $1 million. The engineer that is the better of the two will come up with somthing amazing. The budget caps will not stop technological progress, they would actually push the enginners to a higher level. Knowing you have an unlimited budget gives you an advantage. Knowing you have an equal budget to everyone else gives you an incentive. You show you are a better team by out thinking the rest. You are the team that comes up with the double diffusers. If the only way to show you are a superior car company is by spending more money, then you really are not the more superior car company. Using your example, and using this 2009 season, I would guess that Red Bull although not a poor team, does not have the budget of Ferrari. Yet they are an equal car, actually a superior car because they do not even use the double decker extra cheese and mayo diffusers. So it would appear that having the bigger budget does not make you superior. One can use Brawn instead of Red Bull in this example. Dollar for dollar, using your theory, proportionately Ferrari is a on the level of Force India. For a team to take the attitude we do not want to be on par with some "rinky dink"team is not in the spirt of competition, it just shows weakness and fear. Ferrari is not a good team if with equal budgets they can not win. If true, they should leave the sport. Personally, I am not interested in supporting this kind of team. I will support a team that works for their success. Like Brawn and Red Bull.
Limiting #of employees is far less easy to game then fudging numbers on a balance sheet. I can guarantee that the teams will fudge every penny if they can and trying to keep track of everything would make Sarbanes-Oxley look like 3rd grade accounting. Easy way of limiting gaming of employee count is to look at previous out sources and ban any un-approved new out sources. Also look at components previously produced in house and require the continued in house production of such. Sure, all the top teams will fudge wherever they can, but the fudging won't be as deep or as large scale of financial legerdemain that will invariably occur under your system or Max's. Beyond that, all this theorycrafting is just rubbish. Mine, yours and triple especially Max's. KISS Concept comes into play here. My best idea isn't about budget caps or employee caps, but 4 or 5-year plans on rules stability coupled with easy to monitor caps on wind tunnel time and CFD development, in conjunction with a halt on development of engines, gearboxes and brakes, coupled with the new restrictions on aero. This way the superteams of the paddock can still have their mega motorhouses and whatever, and the minnows look at the sport and say hey, you know, if the rules don't radically change in any time span less than four years, maybe we can mount a reasonable effort instead of waddling about the ass end of the grids looking like ****s.
