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The commentary has gotten rather blunt in Formula 1 now that the FIA are getting serious about a cost cap for the sport. As teams weight the reality of instituting a cost cap, the push back from top teams such as Red Bull, Ferrari and Mercedes has meandered from mildly concerned to outright defiance.

Today’s latest commentary comes from Red Bull owner Dietrich Mateschitz himself telling AUTOSPORT:

“To enforce a budget cap you have to clearly state what is included and what not – what about marketing, drivers’ salaries etc?” he said.

“And what if you are a manufacturer and can hide several expenses in other budgets?”

Dietrich is stating the most common themes or concerns over the cost cap and to sharpen the point, it’s often times more important to determine what isn’t included in an initiative than what is included.

When you weigh a balance sheet of a Formula 1 team, the assets are often present and tangible—infrastructure, materials, intellectual property, revenue, etc. The liabilities get a little more dodgy and less tangible. Time and employee grey matter spent on design, wind tunnel time, fabrication time, CFD time, R&D on new materials or aerodynamic designs and theories etc. How do we account for these functions?

To be perfectly blunt, and echoing Bernie Ecclestone’s comments, the recent 2014 regulation changes and new engine format have doen more damage to any potential cost capping in recent F1 history. Teams may have been spending a lot during the last set of regulations but the amount of money spent developing the new ERS, engine and chassis regulations is enormous. Mateschitz said:

“Given all the costs the manufacturers and teams had to take by the new engine formula, we spent close to a billion euros all together,” he said.

“Is there any questioning on this?

“And the windtunnel hours: we use an existing work tool that is already there, so what?

“These expenses are clearly less than those for new rules and engines.”

As a 4-time champion it is easy to dismiss Red Bull’s position as the have’s versus have not’s but if you consider the commentary and ascribe it to Williams, Marussia, Sauber or Lotus F1, you can still see the same concerns.

These teams are going to bear the brunt of the R&D costs of the ERS and engine development in expensive supplier contracts so the concept of this regulation change only impacting the teams who make the engines doesn’t hold water.

Red Bull doesn’t roll their own either. They are a customer team just like Williams F1 or Lotus F1. As to whether they are paying for their engines or not is a contractual element I am not privy to but suffice to say, they are paying for R&D regarding the power plant in some fashion. No team exists in a vacuum.

We’ve talked about the thought of a cost cap and how that might work but my hunch is the issue is a long way from settled if Dietrich is still offering this line of commentary on the matter. Could we see a heavy-handed move in 2014 by the FIA for a cost cap reform now that the regulatory body doesn’t need unanimous consent from all teams?

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An F1 fan since 1972, NC has spent over 25 years in the technology industry and as a CTO, he focuses on technology integration in commercial workspace design, AV systems integration, digital media strategies, technology planning, consulting, speaking, presenting, sales, content strategy, marketing and brand building.
  • Rapierman

    I think the better question is: Do teams need a heavy hand? Do they need a light hand? Maybe an even hand. Teams are like the human race: There are elements who understand why the way things are what they are and even agree that it should be what they are. Those guys will only need a light hand because you know that they will do what they’re supposed to do. Others, you do need a heavy hand, because they are the ones who will do whatever the hell they want and don’t give a damn about anything but themselves. That’s what the “heavy hand is for”, because they are the greatest threat to society, and you have to be ready to use that iron hand (up to and including, if necessary, the Death Penalty).

    Teams are the same way: You know who will only need the light hand, who needs the medium hand, and who needs the heavy hand. This will be on a case-by-case basis. You can’t go blanket them without hurting someone. You have to pick and choose and determine which hand is needed, and that can only be done through careful observation. Some are overt about what they will do. Some are not. It’s going to have to be a little “guess-and-gosh”, but only past statements and past actions will tell you what each team is like in terms of attitude and each will tell you what the appropriate response will be.

  • Tom Firth

    Without the backing of Red Bull , Ferrari and Daimler it won’t work.

    • Rapierman

      Those are the ones that need the “heavy hand”.

      • Tom Firth

        It won’t make a difference. F1 can’t afford to lose them, All three can afford to dump F1. It would be more complicated for Ferrari but not impossible.

        Pretty much, they have the better hand of cards.

        Cost caps don’t work. Bail on the good ship if it starts to sink is what will happen.

  • Tom

    I’m very skeptical of all cost-cutting measures. Rich teams will always find a way to spend. All it will do is to create one more bureaucracy, one more field for legal battles.

    F1 must reverse. Their move towards a spec series is just wrong. Open it up again…and I mean completely. Let Ferrari drive with a V12 if they want to. Get rid of all rules and start over with a blank slate. Maybe a minimum weight and a maximum fuel consumption plus some basic rules like four wheels, etc. (and I would argue no wings whatsoever, but that’s not the point here).

    Apart from becoming more of an engineering competition once more, it would become prohibitively expensive for everyone, no matter how rich you are, to tackle all potential areas of development. Which means that every team would have to choose their battles, which in return could reward ingenuity over mere financial firepower. The way things are now, small teams have almost no chance to break through, everything is so restricted that only sheer brute force can bring those tiny advances that are so crucial. Which is ironic. F1 has probably never been so tight in terms of absolute performance, yet it has never been more difficult for a small team to break through. Within this tight ruleset, there simply is no room for that brilliant idea that could change everything anymore.

  • mini696

    Why do they even need cost cuts?

  • KevinW

    The FIA is barely able to regulate its own rules, is frequently falling for the lies and cheats of teams, and is a political quagmire. There is absolutely no way it will be able to define a budget restriction that is not so full of holes it fails to accomplish anything, and then regulate and monitor it. The FIA spews its budget malarkey out one side of its face, then slams the entire sport with the most expensive regulation change in the sports history, higher fees than ever, and a race schedule that maximizes costs of participation. This issue is obviously being driven by someone with an ulterior motive, or the work of idiots – or both. Further, teams will never be able to create a universal budget restriction without adding little holes and back doors that suit their own agenda. The entire issues is nothing but noise, smoke and mirrors. with no magic solution.