F1 set to resume but team's economic curve flattened
Beginning the 2020 F1 season is looking more certain with the Austrian government officially giving the green light for racing to be held at the Red Bull ring from July 3-5, with a second race a week later.
The revised F1 calendar will likely see the F1 circus then move to Budapest for the Hungarian GP, followed by two races at Silverstone in England, where seven of 10 teams in the championship, are based.
The first race at Silverstone would be held on August 2, but it seems the UK government will exempt elite sport from the 14-day quarantine period for anyone entering the UK.
There is even a suggestion that the Austrian events at least may not be strictly “closed events” with possibly an extra 500 people allowed to attend.
Details about that are yet to be confirmed, but while F1 supporters will see it as a positive step in the right direction, given the lockdowns worldwide due to the coronavirus pandemic, the reality is the races will be television events only, with the fans literally shut out.
Those fans of course inject millions of dollars towards the cost of running an F1 race. A race promoter pays a promotional fee of around $50m to the owners of F1 for the rights to hold an event.
They rely on the fans who purchase tickets, to help meet the cost of holding an event.
The team’s sponsors rely on those races to promote their product.
If a team loses a major sponsor because they perceive they are not getting a bang for their bucks, the team’s ability to pay drivers, team personnel and meet the running costs of the team, are severely dented.
The situation for F1 reflects what is happening in most countries around the world.
As the battle to beat the coronavirus disease is slowly but surely being won, with the curve flattened, the economic consequences of the lockdown is being felt as companies go broke and people lose their jobs.
The economy has been flattened along with the virus.
A good example is what is happening with midfield teams like McLaren and Renault, and Williams, who for the last two seasons have been at the rear end of the grid.
The World Motor Sport Council [WMSC] has sent the teams that are struggling a financial lifeline by reducing from 2021 onwards, the previously agreed cap on team spending in a year from $175m to $145m.
Budget caps have previously been canvassed by the mid-to lower order teams, to create a more even playing field, so they could challenge the might of Mercedes, Ferrari and Red Bull.
Just how dominant those top three teams are is confirmed by the fact that last year Mercedes won 15 out of 21 grand prix, while Ferrari and Red Bull scoring three wins apiece.
In only two races did a driver not from the three top teams stand on a podium.
Danil Kyvat in a Toro Rosso was third in a rain-affected German GP, while it took a collision between Ferrari drivers Charles Leclerc and Sebastian Vettel, and a demotion of Lewis Hamilton, to enable Toro Rosso driver Pierre Gasly and McLaren’s Carlos Sainz, to join race winner Max Verstappen in the Red Bull, on the podium in Brazil.
It is the team’s financial losses, calculated as being at least $2m per race, which has forced the WMSC to reduce the budget cap.
But it may be too late for some teams, especially if this season is reduced to just a handful of races.
Take for example, the situation at McLaren, the team that finished fourth, ‘best of the rest’ last year.
The McLaren Group will reportedly be making 1200 staff redundant to cut costs.
Most of those redundancies will be in the company’s automotive section, but this will still affect the F1 team.
For the first quarter of 2020, McLaren’s revenue has dropped from £284m (NZ$557m) to £109m.
A similar result is expected for the second quarter, but with hope of a recovery in the second half as F1 resumes.
Daniel Ricciardo is leaving Renault to join McLaren next year and will apparently be halving his salary. He is reportedly paid €25m at Renault but will receive only €10m plus bonuses for a top-three result, by joining McLaren.
He will not be exactly leaving a sinking ship at Renault, but that team is also in financial difficulty.
Although F1 managing director Cyril Abiteboul says Renault will be in F1 for a “very, very long time”, it too is facing taking cost-saving measures.
According to German publication Autobild, the “Renault Group has its back to the wall.” It reports Renault is applying to the French government for a loan of €5 billion.
Meanwhile, the Williams team has announced it is parting ways with principal sponsor ROKiT, a telecommunications company, with no reason given, and is in the process of raising funds or selling the team.
Deputy team principal Claire Williams couldn’t give a timeframe on that when asked by Autosport.
“We haven’t put a timeframe on this process, but we want to complete it within the next three to four months,” Williams said. “We like to do things fast in F1 don’t we? And we feel that we can achieve it in that timeframe.”
Sir Frank Williams, the team founder, has always been against selling the team, but Claire says “this is not about the Williams family, and putting Williams up for sale. This is about trying to secure the future of our team.”
“What Frank has always done is to ensure that he puts the team, the business and our people first. And that’s what we’re doing now. Equally Frank always wants to be as competitive as possible.”
Haas F1 team principal Guenther Steiner, says team owner Gene Haas will decide on whether the team continues in F1 next year on the basis of the new commercial agreement with F1, not the budget cap.
“Formula 1 has done a good job in reacting to the situation and coming up with a plan that ought to be good for everyone in the long run,” Steiner says.
“Gene is happy, but the budget cap
As the battle to beat the coronavirus disease is slowly but surely being
won, with the curve flattened, the economic
consequences of the lockdown is being felt as companies go broke and
people lose their jobs.
that has been agreed doesn’t really impact him, as we are already spending under that limit. What he needs to see is the new commercial agreement, which we should have next year, giving a more equitable return for the teams.”
“What we all want and need to do is to go racing. We opened up the factory at the start of this week. Because we were among the first teams to shut down straight after Australia.”
Racing Point technical director Andrew Green think the change in regulations for 2021 will work in favour of the teams who are used to operating with limited resources.
Green was asked if a team needed to employ around ‘800 people’ to win races?
“If you’d asked that question a year or so ago, you would have said yes but not now, not in the current climate and not with the regulations coming in starting in 2022,” Green replied.
“Those teams now are dinosaurs. You’ve got to be small, lean, efficient and I think that’s our strength. As far as the financial side of the regulations are concerned, they are coming to us. They’re definitely going to allow us to be able to compete with what used to be big teams because they can’t be big teams anymore.”
In the case of Mercedes, it will mean reducing it’s spending from $484m in 2019, to $145m ... basically reducing its costs by more than two thirds.
Ferrari spent $463m in 2019 and Red Bull $445m, so they will also find it more difficult to run a team, and win, with vastly reduced resources.
Daimler has confirmed Mercedes are in F1 long term and has stated reports they were set to quit as being “unfounded and irresponsible”.
Those reports include the fate of team boss Toto Wolff, who has bought shares in Racing Point, that will race as Aston Martin in 2021, leading to speculation he may move to that team which is 25 per cent owned by his good friend Lawrence Stroll.
“The sport has taken the right measures to address the consequences of the Covid-19 pandemic and its future financial sustainability, and we welcome these steps,” a Daimler statement read.
“It’s our clear intention to continue competing in Formula One as a Mercedes-Benz works team in the years to come, and to do so with our managing partner Toto Wolff.”
That statement should in theory put an end to the rumours Mercedes might quit F1, and Wolff may move on, but it wouldn’t be F1 if there were any guarantees or certainties.
Former F1 commentator Murray Walker used to say F1 spelt backwards meant “if’.
Not technically correct Murray, but we get the point.
There is still a big IF hanging over a season that won’t start until the second half of a year everyone will soon want to forget, but the consequences of the pandemic are such that nobody will escape it’s impact on the present, or the future, and F1 is no exception.