Credit crunch threatens Formula One's budgets

LONDON, England (AP) -- Formula One sells itself as the most glamorous sport on the planet.
Formula One teams depend heavily on sponsorship to fatten their lavish budgets.

Its reputation is based on high speeds, good-looking young drivers, pit babes, photogenic locations and the wining and dining of VIPs and celebrities.

But someone has to pay for that champagne lifestyle and at a time when economies in the West are struggling, is F1 headed for a fall?

It has been estimated that nearly 300 sponsors invest $500m across the 10 teams.

Key backers such as Vodafone with McLaren and Marlboro with Ferrari are tied into long-term deals, offering those teams the kind of security lacking further down the grid.

Backmarkers Super Aguri have already fallen this season, pushed out of business after sponsors did not deliver on funding promises.

But they were the first F1 team to fold since 2002, when the Prost and Arrows teams fell victim to the economic fallout of 9/11.

Since then the sport has seen teams change hands, investment arrive from new parts of the world and untapped markets emerge to become what F1 ringmaster Bernie Ecclestone views as the future of the sport.

And while FIA president Max Mosley has attempted to curb the teams' expenditure, there is concern F1 will struggle to carry on in its current .

"People in Formula One still believe that whatever happens in the economic world, the sport will still carry on," Renault managing director Flavio Briatore told Autosport.com.

"We've seen so many examples of it -- the most recent being Super Aguri. We never learn from our mistakes, we just spend more money."

However, John Howett, president of Toyota motorsport, disagreed.

"F1 is still one of the strongest sports in the world in terms of its appeal, coverage and popularity -- particularly in developing markets like Russia, China, India and the whole of South America. We've yet to really tap into alternative sources of revenue in these new expanding markets."

The credit crunch began in America and 2008 is the first season without an F1 race there since its return to the calendar eight years ago.

Honda chief executive officer Nick Fry says the U.S. has an influence on F1, even minus a grand prix.

"For the automotive industry, the North American market is clearly a concern -- and Honda has declared lower profits," he said.

"That might not necessarily have an impact on our budget in the short-term but it definitely affects thinking behind budgets for the future."

Many of the world's biggest car manufacturers are in the sport, but there can be only one winner each season. Ford, for example, pulled the plug on the Jaguar team after five mediocre seasons.

How long the other big manufacturers can justify spending hundreds of millions on teams that return few points remains to be seen. F1 is a marketing tool for them, but under performance in motorsport's premier formula does not sell road cars.

F1 is not immune to the outside world's economic problems -- the loss of Super Aguri proves that.

 

At least in the States, racing fans are some of the most loyal consumers which is why NASCAR draws so many sponsors. Critics of the sport like to call the fans sheep, but the reality is, they're showing their appreciation to the sponsors by purchasing their products over the 12 competitors who don't support the sport they love. I don't know if there is the same amount of impact for F1 sponsors. I would assume so, otherwise why spend the money?

 

"Prost and Arrows teams fell victim to the economic fallout of 9/11."
Come on. How about because they sucked?

" Ford, for example, pulled the plug on the Jaguar team after five mediocre seasons."
Same reasons, and Stewart was on the up.




America's "credit crunch" has nothing to do with Max and Bernie's extortionist ways that TG couldn't afford due to poor attendance and lousy TV revenue in the U.S.