Formula One must learn to weather the economic storm
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Virtually no one is immune to the global economic crisis -- not even the billionaire boys club that is Formula One.
In the last decade or so, Formula One has morphed into a near-complete corporate marketing toy, mercilessly hacking away passionate private owners such as Eddie Jordan and Giancarlo Minardi in favor of companies such as BMW and Red Bull. As a result, top-flight Formula One teams typically now spend around $150 million to $445 million a season, with 10 teams in 2008 supposedly spending close to a collective $3 billion.
FIA President Max Mosley has been a die-hard advocate of cutting costs, and the teams have accepted rule changes such as a freeze in engine development as a way for the sport to maintain financial viability. New regulations in 2009 regarding restrictions of aerodynamic development on the cars are also designed to keep costs in check and increase overtaking (I’m not so sure about the latter, though).
Although these rule changes will help keep costs in check, they’re not going to make it much easier for private owners who are not on Forbes’ billionaires list from breaking into Formula One. And now that corporate sponsors such as ING and Credit Suisse and others (Royal Bank of Scotland should be on that list -- sorry, Williams) are fleeing from the sport to save face with governments and shareholders, Formula One is going to have to do a serious slash job on itself if it wants to stay in business.
The current in-season testing ban is a good start, even though I’m not sure how smart it is to ban testing with all the new regulation changes. Unfortunately, I’m not a big fan of the engine development freeze or the new rules restricting aerodynamic development. Teams still will be running wind tunnels and supercomputers nonstop, willing to spend millions of dollars to make the car lap half a second faster.
Here’s my solution to the mess:
1. Like Renault team principal Flavio Briatore says, establish a majority-wins voting system in the Formula One Teams Assn. rather than the current unanimous one.
2. Establish a floating annual spending cap based on FOTA revenue that the majority of teams agree upon (probably something in the $150-million range). Formula One czar Bernie Ecclestone has supported a cap as a way to stabilize costs.
3. Instigate a luxury tax that penalizes a team $2 for every dollar over the spending cap. The tax would go to every team under the spending cap, allowing big teams the ability to spend more money if they choose to.
4. The Formula One Group (CVC Capital Partners, J.P.Morgan and Ecclestone) should give teams a bigger slice of television revenue. Also, high-profile temporary street-circuit promoters in Albert Park and Singapore should be given monetary assistance.
5. Release stringent regulations regarding engine and car development. Allow Formula One to continue its reputation as the most technically advanced form of motorsport.
There’s no guarantee this would make the racing more competitive, but it would encourage private teams to enter the sport, and it would allow Formula One to continue independent development (even if it’s in a subdued form).
Formula One team bosses have to face facts. There’s a very good chance only 18 cars will be on the grid when the season starts March 29 in Melbourne, Australia (unless Richard Branson saves Honda Racing), and the world economy doesn’t look like it’s going to recover anytime soon.
All it takes is a boardroom decision for a team like Toyota, BMW, Red Bull or Renault to leave the sport. It takes a lot more for a passionate motorsport lover like a Frank Williams or Ken Tyrell to say goodbye -- and that’s who should be competing in Formula One.
-- Austin Knoblauch
Top photo: McLaren Mercedes driver Heikki Kovalainen takes out his team’s new car during a test session at Circuito de Jerez in Spain on Feb. 10. Credit: Cristina Quicler / AFP/Getty Images. Lower photo: Bernie Ecclestone, Formula One management and administration president and CEO, at the 2008 FIA prize-giving gala. Credit: Valery Hache / Associated Press
