F1 INSIDER
Teams fight for survival, plus F1’s restart plans
Two months on from the aborted season-opening grand prix in Australia, Formula 1’s teams have had to embrace radical measures to shield themselves from the financial impact of not going racing. Cancelled and postponed events, plus sponsorship payments and other business interests being hit by the economic slowdown triggered by the COVID-19 pandemic, have induced an acute cashflow crisis which has moved some teams to seek advanced payments from Formula 1 itself.
Uk-based teams have taken action to reduce their costs including the imposition of ‘temporary’ pay cuts and placing staff on furlough, taking advantage of the government scheme to protect jobs. The commercial rights holder Liberty Media is not immune, since it funded its acquisition of the business through debt, though the underlying strength of the business – underpinned by multi-year contracts with venues – should give it wriggle room if it were to breach leverage covenants.
The credit rating agency Moody’s downgraded F1’s outlook from ‘positive’ to ‘negative’ at the beginning of April to reflect lower earnings expectations, but added, “Formula 1 has strong liquidity and a sufficiently flexible cost base to manage through a severely curtailed 2020 season, which Moody’s consider would likely be able to support a full cancellation.”
While the commercial rights holder may have the
Season could begin in Europe and still include 15 or more events
“IF WE DON’T DRIVE A GRAND PRIX, IT WILL COST ONE AND A HALF TO TWO MILLION. IF WE START RACING IN JULY, WE’LL GET OFF WITH A BLACK EYE”
habits we’re all at extreme risk,” said Mclaren CEO Zak Brown, who went on to accuse Ferrari of “living in denial”.
Since the teams’ share of the commercial rights revenue is paid in monthly instalments, based on the previous season’s income, a truncated or cancelled 2020 season would continue to impact upon teams through next year in the form of a smaller prize ‘pot’. And the nature of the contracts means that teams are already losing revenue – Scuderia Alphatauri team principal Franz Tost put the figure at up to €2m for each lost race.
“The contracts are designed in such a way that we lose revenue proportionately if races are not run, because the agreed amount is then reduced,” he said. “If we don’t drive a grand prix, it will cost one and a half to two million. If we start racing in July, we’ll get off with a black eye.”
F1 has also begun to pay the most cash-strapped teams early. In one of his regular conference calls with Wall Street analysts, Liberty Media CEO Greg Maffei said it was necessary to protect the “ecosystem” of F1.
“We have advanced money in advance of team payments for certain teams already,” he said. “There are cases where we may do more of that; there are other things that we might do to bridge teams that might need help.
“We want to make sure teams are solvent because they are part of what we need to race successfully in 2020, 2021, and beyond. We may be sufficiently capitalised to handle that for 2020, but there are teams which will incur costs, particularly those which don’t have minimum guarantees from F1, and one of the major – if not their major – source of revenue is their share of the profits.”
schedule,” said Carey. “We still have to work out many issues like the procedures for the teams and our other partners to enter and operate in each country. The health and safety of all involved will be priority one and we will only go forward if we are confident we have reliable procedures to address both risks and possible issues.”
Given that COVID-19 is likely to remain endemic for many months, F1’s plans centre on creating a protected environment for staff. The Red Bull Ring has the virtue of being relatively remote, but well serviced by local infrastructure – which includes an airfield. Charter aircraft could fly into Fliegerhorst Hinterstoisser, the military airbase formerly known as Zeltweg – site of the Austrian GP in 1964. At the track, F1 aims to establish what managing director of motorsports Ross Brawn described as a “biosphere”, opening up the possibility of hosting a second grand prix there the following weekend.
“One of the logistical challenges is getting everyone tested and cleared to enter the paddock and enter the racing environment,” said Brawn. “Once we do that, it’s very attractive to keep everyone in that environment, within that kind of biosphere that we want to create, for another race. It’s also pretty challenging to find the right sort of races early on where we can control the environment well enough. Therefore once we’re there, it’s appealing to have another race the following week.”
GP Racing understands the plans would involve a minimum number of operational staff from each team, around 80, all of whom would be tested before departure. Each team would travel together and stay at the same hotel; then, at the venue, they would be screened regularly while avoiding contact with personnel from other teams.
Silverstone has also indicated it could host events under similar protocols. The situation elsewhere is complicated by official restrictions on sporting events in different countries. In France, sporting events likely to attract over 5,000 people are banned until September, which is why
Download and read it on your PC, Mac or ipad
Silverstone has said it could host two grands prix if racing is able to restart
THIS MONTH
were set aside for the common good: Renault staff, including the veteran technical adviser Bob Bell, worked at the Red Bull factory. While the Bluesky ventilator design was ultimately shelved because COVID-19 treatment requires a more sophisticated alternative, teams continued to work collaboratively with a consortium fulfilling over 20,000 orders for the Rapidly Manufactured Ventilator System (RMVS) after it received official approval.
Mercedes and the University College London Hospital co-designed a new continuous positive airway pressure (CPAP) device, suitable for patients not yet requiring a ventilator. The Mercedes-high Performance Powertrains facility in Brixworth was turned over to production of these devices, manufacturing up to 1000 a day.
F1-related activity remained forbidden, though, and at the end of April the FIA bowed to the inevitable, extending the factory shutdown for a second time that month. Having been brought forward from August, the three-week ‘summer’ shutdown was expanded to five weeks and then to 63 days, with the caveat that after 50 days teams could deploy up to ten personnel “to work remotely on long-leadtime projects”.
While F1 is beginning to draw up plans for the resumption of racing, the teams face a separate but related challenge in terms of how factory staff go back to work. In the UK, where the majority of teams are based, the government’s furlough scheme is currently operating until the end of June. As this edition of GP Racing closed for press there was no fixed date for the end of lockdown, but even after restrictions are eased it is likely social distancing will be necessary for months to come – which will have a significant impact on working patterns.
In Italy, Ferrari announced at the start of May that its road car factories in Maranello and Modena would resume operations “gradually” under the company’s Back on Track scheme, which involves blood tests for COVID-19 and a track-and-trace app. This will be extended to those in F1 activities once the mandatory shutdown period ends.
Online racing has grown in popularity for fans starved of action – and for F1’s drivers, too. Lando Norris is at the head of this movement (see Virtual F1, p92) and even Sebastian Vettel, a conspicuous absentee from the world of social media, has bought a simulator rig so he can get involved. F1 has hosted a Virtual GP series including ‘celebrities’ as well as drivers, while Norris has entered the Supercars All Stars Eseries and an Indycar iracing event – though the latter ended badly when he was taken out deliberately by 2019 Indy 500 winner Simon Pagenaud.
“F1 BECAME THE FOCUS OF GOODNEWS STORIES AS THE TEAMS CAME TOGETHER IN ‘PROJECT PITLANE’”
Mercedes co-designed this CPAP device with University College London Hospital and manufactured them at its Brixworth facility
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9
Q10