Budget Cap

[Ruslan 0]

Saw this article today:

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Liberty eyes F1 budget cap for 2021

2017-09-13

Sep.13 (GMM) Liberty Media is looking to introduce a budget cap of EUR 150 million per team from 2021.

Germany's Sport Bild reports that the new F1 owner intends to bring in the dramatic rule to compliment the cheaper engine rules, with teams then allowed to spend a further EUR 50 million on marketing, hospitality and drivers.

The smaller teams are obviously supportive of the move to level the playing field.

"That number (EUR 150m) would actually be an increase for us," said Haas team owner Gene Haas.

"I think the bigger problem is the bigger teams."

Indeed, staff numbers counting 1000 plus are no longer unusual at the top of F1, so the biggest impact of the budget cap would be the forced loss of hundreds of jobs.

"That's where the new owners are going to run into some big obstacles," said Haas. "You just can't change it overnight."

But that's where the pre-2021 'glide path' comes in, with even Mercedes' Toto Wolff saying he is open to budget cap discussions about that.

"I think we all live in the same financial reality, we have all seen teams growing dramatically over the years and we are all very sensible about wanting to somehow contain it," he said.

"The discussions that have been happening are at a very early stage but I think there is no big disagreement."

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About time !!!

Should have been done several years ago, but Bernie scuppered it.

150 Euro cap seems a little low. It should be as high as William's annual budget (which I gather is around 200-250).

 

 

 

[Sakae 0]

13 September 2017   14:45 (CEST)

To what purpose this inane idea will serve? Equality? Marxist ideals in the F1? Well, there is first time for everything, but I doubt this will generate more competitive racing. To service this, teams will need to lay off 55 highly competent engineers, and hire 60 (expensive) accountants and lawyers instead. Good idea? Phew. Question - what will team do when they top budget in May? Fold the tent, go home, and come back 9 months later?

Stuttgart will have foreign auditors from hostile countries audit their books? That I want to see.

[radical-one 0]

They will offshore and outsource to get around it. No way to police it. 

Will be a waste of time.

[Sakae 0]

2 hours ago, radical-one said:

They will offshore and outsource to get around it. No way to police it. 

Will be a waste of time.

13 September 2017   17:13 (CEST)

One of the key points why this loopy idea was rejected in the past, however some people dwell on false analogies from irrelevant sports, and you aren't going to talk them out of it. It would be nice if proponents of this idea could explain what it is they are hoping to achieve (or correct). Firstly, any student of the F1 would know that the series strives on excesses, not Mother Theresa's way of living. I have spend far too much time on this, trying to reason its ineffectiveness, but you don't get a decent argument back which one could debate. Investing the same amount of money into sport doesn't guarantee anything, if technical directives and normative references are too complex. I am not sure if it is mere coincidence that Dr. Zetsche felt necessary to comment on future of MB in the F1 (past 2020) - we will think about it.

[Ruslan 0]

Marxism? Really? So I am free to call your idea's "Social Darwinism?"

I have not seen any better suggestions for 1) how to control costs, and 2) how to provide competition from among more than 2 teams (or 3 on a rare season).

If you have a better way to achieve either, then have at it.

 

 

 

 

 

 

[maure 1]

Budget caps never work and they don't make sense to being with.

Granted, F1 is in such sorry state that teams are not allowed to even have enough tires to go around. Tires! A brilliant coup for a motorsport.

[Ruslan 0]

On ‎9‎/‎16‎/‎2017 at 8:58 PM, maure said:

Budget caps never work and they don't make sense to being with.

Granted, F1 is in such sorry state that teams are not allowed to even have enough tires to go around. Tires! A brilliant coup for a motorsport.

Actually, budget caps do work. They are being used in most professional sports in North America. The most severe one being in the NHL (National Hockey League). It has changed the sport and level of competition where out of 32 teams, they have had 16 different teams in the last 13 years make the Stanley Cup playoffs since the salary cup was imposed in 2004-2005 (and the teams are cheaper to operate and NHL is expanding, vice contracting). No teams have made the Stanley Cup finals more than four times in the last 13 years and there has only been one back-to-back win. Contrast that to F1.

What evidence do you have that "budget caps never work?" All the evidence I can see is that they work just fine. There is a reason most major sports in North America are now implementing them.

On the other hand, I do not like the current tire formula. I believe there should be multiple tire manufacturers (within a budget cap).

 

 

 

[Sakae 0]

21 September 2017   16:01 (CEST)

How anyone can compare salary cap on a hockey roster with the technology field? Racing car - F1 of today - is composition from  over 75000 components. Here is the challenge to police development on that scale. Second issue, NA based professional teams do hire one MBA who is good with cross puzzles, he is busy for a month, tells them how to solve Rubric's cube, and then crawls back into his cave. F1 pretty much presents dynamic environment whole year around, day and night, 7/24. I have no habit to cheat, but I could think of many ways how to avoid detection by auditors.

Imposition of budget limit is a product of lazy minds and certain incompetence. It is not a practical solution to controlling cost, or lowering cost. George Will Ph.D. advised once congress not to make laws, which cannot be enforced. Loopy ideas like imposing budget cap on technology sector and pretend it solves anything simply exceeds my comprehension how that would work in some meaningful manner.

My alternative solutions - I offer two of them. (i) Invite only entities which they can afford to play F1 style (expensive) game. (ii) Change technical system. I don't think automakers will go for it, but build normally aspirated engines, and let them test on real tracks. (Maybe I add one more - hire competent people for a change).

[maure 1]

12 hours ago, Ruslan said:

Actually, budget caps do work. They are being used in most professional sports in North America. The most severe one being in the NHL (National Hockey League). It has changed the sport and level of competition where out of 32 teams, they have had 16 different teams in the last 13 years make the Stanley Cup playoffs since the salary cup was imposed in 2004-2005 (and the teams are cheaper to operate and NHL is expanding, vice contracting). No teams have made the Stanley Cup finals more than four times in the last 13 years and there has only been one back-to-back win. Contrast that to F1.

What evidence do you have that "budget caps never work?" All the evidence I can see is that they work just fine. There is a reason most major sports in North America are now implementing them.

On the other hand, I do not like the current tire formula. I believe there should be multiple tire manufacturers (within a budget cap).

Like he said...

11 hours ago, Sakae said:

21 September 2017   16:01 (CEST)

How anyone can compare salary cap on a hockey roster with the technology field? Racing car - F1 of today - is composition from  over 75000 components. Here is the challenge to police development on that scale. Second issue, NA based professional teams do hire one MBA who is good with cross puzzles, he is busy for a month, tells them how to solve Rubric's cube, and then crawls back into his cave. F1 pretty much presents dynamic environment whole year around, day and night, 7/24. I have no habit to cheat, but I could think of many ways how to avoid detection by auditors.

Imposition of budget limit is a product of lazy minds and certain incompetence. It is not a practical solution to controlling cost, or lowering cost. George Will Ph.D. advised once congress not to make laws, which cannot be enforced. Loopy ideas like imposing budget cap on technology sector and pretend it solves anything simply exceeds my comprehension how that would work in some meaningful manner.

My alternative solutions - I offer two of them. (i) Invite only entities which they can afford to play F1 style (expensive) game. (ii) Change technical system. I don't think automakers will go for it, but build normally aspirated engines, and let them test on real tracks. (Maybe I add one more - hire competent people for a change).

 

[Ruslan 0]

As always.....no real solutions. You guys like to claim that budget caps won't work....not that you can show that to be the case, and then offer something that accomplishes nothing.

Yet, F1 management keeps coming back to that solution. Why is that?

We shall see if Liberty imposes a budget cap in 2021. I am sure there will some resistance from some of the (wealthier) teams.

 

[Sakae 0]

22 September 2017   9:50 (CEST)

Why FOG management chooses this path could be perhaps explained by their American background, and exposure to influence how caps were imposed there. I am not here to guess their motives, but I do question their MO. On second point, I have interjected into discussion several issues of concern with the proposal, which support my contrarian point of view, yet in return I have not hear one - just one - counterargument, which would lead me out of "darkness". All what I am hearing is, well if NA sports do it, complex technical sport such as F1 can "do that" as well. My own background is technical, and since I am also somewhat familiar how professional hockey cap works, I do retain opinion that we are comparing two completely dissimilar systems which are on the table, and to make this situation even more suspect, FOG has not publicly stated what are their objectives which they are hoping to achieve with such measures. My objection is based merely on assumption, that there is somewhere hidden desire to increase competitiveness for British teams such as McLaren and Williams, and to that end they will send everyone into tail spin dive for it. 

How you can trust this mess?

Today in news:

Former F1 owners in mass share sell off

I can guess why that would be. Can you?

[Ruslan 0]

On ‎9‎/‎22‎/‎2017 at 4:10 AM, Sakae said:

22 September 2017   9:50 (CEST)

Why FOG management chooses this path could be perhaps explained by their American background, and exposure to influence how caps were imposed there. I am not here to guess their motives, but I do question their MO. On second point, I have interjected into discussion several issues of concern with the proposal, which support my contrarian point of view, yet in return I have not hear one - just one - counterargument, which would lead me out of "darkness". All what I am hearing is, well if NA sports do it, complex technical sport such as F1 can "do that" as well. My own background is technical, and since I am also somewhat familiar how professional hockey cap works, I do retain opinion that we are comparing two completely dissimilar systems which are on the table, and to make this situation even more suspect, FOG has not publicly stated what are their objectives which they are hoping to achieve with such measures. My objection is based merely on assumption, that there is somewhere hidden desire to increase competitiveness for British teams such as McLaren and Williams, and to that end they will send everyone into tail spin dive for it. 

How you can trust this mess?

Today in news:

Former F1 owners in mass share sell off

I can guess why that would be. Can you?

<<Why FOG management chooses this path could be perhaps explained by their American background, and exposure to influence how caps were imposed there.>>

Well, a budget cap was to be imposed by Jean Todt, who last I checked was French with strong ties to an Italian team. Max Mosley also supposed budget caps. He was English with strong ties to Germans/Austrians. It is really not just an "American thing."

My background is running my own business. A budget cap seems like a simple administration issue. Certainly it is not more difficult that patrolling all the current technical regulations. I keep hearing from nay-sayers that is budget cap won't work. For the life of me, I can't understand why. Accounting is not rocket science.

<<My objection is based merely on assumption, that there is somewhere hidden desire to increase competitiveness for British teams such as McLaren and Williams, and to that end they will send everyone into tail spin dive for it. >>

Really. That is the basis for your objection?

Anyhow, I remember the days when Formula One has 15+ teams, 30+ drivers, and at the start of the season, it was not certain who would win the championship. Would kind of like to go back to that. I want to watch 24-26 drivers race....not 2. In a good season we get to watch 2 drivers race. Half the seasons, we don't even have that.

[Quiet One 15]

This.

[Sakae 0]

7 hours ago, Ruslan said:

<<Why FOG management chooses this path could be perhaps explained by their American background, and exposure to influence how caps were imposed there.>>

Well, a budget cap was to be imposed by Jean Todt, who last I checked was French with strong ties to an Italian team. Max Mosley also supposed budget caps. He was English with strong ties to Germans/Austrians. It is really not just an "American thing."

My background is running my own business. A budget cap seems like a simple administration issue. Certainly it is not more difficult that patrolling all the current technical regulations. I keep hearing from nay-sayers that is budget cap won't work. For the life of me, I can't understand why. Accounting is not rocket science.

<<My objection is based merely on assumption, that there is somewhere hidden desire to increase competitiveness for British teams such as McLaren and Williams, and to that end they will send everyone into tail spin dive for it. >>

Really. That is the basis for your objection?

Anyhow, I remember the days when Formula One has 15+ teams, 30+ drivers, and at the start of the season, it was not certain who would win the championship. Would kind of like to go back to that. I want to watch 24-26 drivers race....not 2. In a good season we get to watch 2 drivers race. Half the seasons, we don't even have that.

25 September 2017   16:44 (CEST)

Jean Todt is under pressure to implement a change, and he is cooperating. This is not unilateral-action on his part. Commercial branch has no mandate to act on its own, thus it is he who has to table it, and commission has to ratify it. BTW, is it the same J. Todt, who advised teams about a year ago after he had to absorb a dose of whining - if you cannot afford F1, please leave?

Accounting is not a rocket science, so much is true, but that is not a core issue here. In substantive terms it is rather a question, what problem is F1 trying to solve with the budget cap, who will pay for it, and is accounting right tool for that, yet to be defined, objective?  Resources (tooling people, etc.) are optimized for large budgets, and contraction is not going to be free of cost. Who would know at what level cap should be imposed, unless someone knows what the objective is, and how that cap correlates to relevant normative references we have right now in place?  BTW, where does cost accounting will get their data, unless they interfere with private businesses (asking them to open books, letting them into plant, etc.)?

I have no time to write for next one hour, but I would challenge anyone on this forum that he or she knows what the issue is, however do not come here with a generic statement that F1 is expensive. That might be true for some, and falsehood for others.

A year or two years ago one of the VPs for MB's advertising stated, that F1 is one of the least expensive platforms available to Stuttgart for their global brand exposure. Looks to me then that it all depends whom you talk to about expenses. Some teams can afford it, others do not, so what? If there are handful of teams fighting it out on the track, its good enough for me.

"Anyhow, I remember the days..." Nothing like turning a clock back, and reviving old good times, hey? Is 19 century far enough? Good luck with vision that F1 will return into seventies, we will race overcharged lawnmowers and FOM/CVC/Liberty shall return all money they took out of the sport. 

BTW, is Hamilton take pay-cut to meet the budget? Maybe 500k, Kvyat 50k, per season etc.

 

 

 

[Ruslan 0]

<<Jean Todt is under pressure to implement a change, and he is cooperating. This is not unilateral-action on his part. Commercial branch has no mandate to act on its own, thus it is he who has to table it, and commission has to ratify it. BTW, is it the same J. Todt, who advised teams about a year ago after he had to absorb a dose of whining - if you cannot afford F1, please leave?>>

Jean Todt was very much behind and supported the previous budget cap that was supposed to be implemented several years ago that Ecclestone and several teams on the Strategy Group scuppered. He was very much behind it and basically said there are really no other options other than a budget cap.

<< BTW, where does cost accounting will get their data, unless they interfere with private businesses (asking them to open books, letting them into plant, etc.)?>>

I do not know what FIA was planning with the previous cap, but it could be something as simple as having a single auditable bank account for each F1 team and specifically banning any expenditures and materials coming into the team that does not go through that one account. Any money coming from another source would be banned. 

<<If there are handful of teams fighting it out on the track, its good enough for me.>>

But we haven't even had that. What was the handful of teams fighting of the championship the previous three years?

<<"Anyhow, I remember the days..." Nothing like turning a clock back, and reviving old good times, hey? Is 19 century far enough? Good luck with vision that F1 will return into seventies, we will race overcharged lawnmowers and FOM/CVC/Liberty shall return all money they took out of the sport. >>

Yes...the competition in F1 used to be better, more cars, more drivers, more race winners. Do you think that more competition is a bad thing? Do you think that this is not a worthy goal? Are you really happy with a F1 series where Ferrari takes the championship five seasons in a row, Red Bull takes the championship four season in a row, Mercedes takes the championship four season in a row? This is the F1 we should have going forward?

 

 

 

[Ruslan 0]

This article was posted up last week: https://www.gpguide.com/News.aspx?articleId=MXwxMC8xMS8yMDE3IDAwOjAwOjAwfExpYmVydHkgcG9pc2VkIHRvIHRlbGwgdGVhbXMgRjEgZnV0dXJlIHBsYW5z

What caught my attention was the last line "It is believed Liberty is also proposing to scrap the F1 Commission and strategy group, and unveil on 7 November its plans for a budget cap to be installed as soon as 2019."

Interested to see what they come up with on November 7. Can Liberty scrap the Strategy Group without the agreement of the Strategy Group? 

 

 

[Ruslan 0]

Article today on Briatore's thoughts: http://www.grandprix.com/ns/ns37674.html

While Briatore is often primarily remembered now for his race cheating scandal, he used to be a big mover and shaker on the grid. A few comments from him:

1. "Ross Brawn called me in the spring and we agreed that the diver should be back in the spotlight and that it should no longer be an engineering world championship."

2. "But Briatore said it is actually 'high time' F1 introduced a budget cap.

3. "I was with Fernando Alonso at the Indy 500 this year where a top car costs $10 million for an entire season. That's a twentieth the cost of F1 but the show is better."

Anyhow, I gather Ferrari is going to fight the budget cap (as I assume so will Mercedes and Red Bull). We shall see if it finally happens. I gather there is broad support for it among the people actually running the sport.

 

[Ruslan 0]

Ok, we have some details of the new budget cap: https://www.gpguide.com/News.aspx?articleId=MXwxMS8wMy8yMDE3IDAwOjAwOjAwfE1hcmNoaW9ubmUgaXNzdWVzIG5ldyBGZXJyYXJpIHF1aXQgdGhyZWF0

1. Budget cap is for 2019 (new engine regulations are in 2021).

2. It is a 'trail year" the first year (no penalties for overspending).

3. The cap is $100-$200 million (keep in mind the top budgets of Indy Car teams are $10 million).

4. Cap does not include driver, top management or marketing costs.

5. Each team will get an independent FIA accountant assigned to them.

I gather Ferrari is threatening to quit (they always do).

Couple of questions:

1. What are they doing about engines? Are they part of the budget cap? How do they address those that build their own (Mercedes, Ferrari and Renault) and those that rent/buy engines (the rest of the field).

2. What are they doing about capital goods and assets? If you build a new wind tunnel, is that part of the budget cap? Does some people having more advanced facilities get to maintain an advantage?

 

[Sakae 0]

5 November 2017   13:04 (CET)

I am considering it a dirty, politically motivated  trial balloon having one aim only, to solicit various responses from teams in order to get sense which way is wind blowing. IMO badly presented, badly thought out, solving nothing but designed as primary objective to divide and conquer teams and owners alike. Whatever the second objective might be, it is not to generate savings for actively racing participants, or some kind of genius-like strategy aimed brining in new entrants. Don't ask what else I think of it. Dirty language is not allowed around here.

[Sakae 0]

6 November 2017   9:06 (CET)

Good read.

Negative Camber is an American, a fan watching the F1 since 1972 and his articles are one of a few places where I go to make sense of things happening in and around F1:

[Ruslan 0]

Actually, Ferrari's threat is lessened with other big name legendary manufacturers in F1 (read: Mercedes).

They always threaten to leave...they never will. The only one who ever quit F1 were the "garagistas" back in 1981. One team cannot create a new series to rival F1. 

[Sakae 0]

6 November 2017   21:20 (CET)

Whether Ferrari will leave or stay depends on satisfaction of the negotiated deal. I for one am convinced that they have contingency plan (or working on one) for such decision. Difference this time is a will of SM. BE is correct IMO in assertion that SM has shallow relationship to the F1 and dropping it will not make him to loose any sleep over that.

MB in the past had potentially one major problem, which was centered around legal trouble FOM found himself with Germany banking authorities. Under internal laws of MB, the firm is not permitted to enter into business with people who are in trouble, or have a record. Once that obstacle was cleared, Lauda was hired, and he smoothen path to a bilateral CA deal with Ecclestone. His current position was payback for his help. Brawn couldn't do it on his own. Momentarily I do not recall any other "threat's".

[Ruslan 0]

I don't think Ferrari has any practical contingency plan. Go sports car racing maybe.

Ferrari's threat is just their initial posture in the negotiations. They have a lot of protect 1) their "veto" power, 2) their special payments for being Ferrari, 3) the beneficial payments made to the top teams, 4) their financial status as one of the 3 top-funded teams, etc. So......they will bluster...negotiate...and bluster some more. In the end, we shall see what compromises they come up with for a final result.

 

[Sakae 0]

How the other teams will benefit from Liberty browbeat Ferrari for a few bucks? Whilst money will be a sticking point, thick red lines are however being drawn on technical side, and that's where collision is expected.