Cost Cap Cuts F1 Spend BIGTIME
Posted on November 1, 2019 Tags: Austin Texas COTA IS F1 Grand Prix
Alex, Max, Valtteri and Daniel at play in LA. Image: MercedesAMG.
Reducing the Dollar Gulf
As fans flock to the Circuit of The Americas this weekend for the US F1 Grand Prix in Austin, Texas, the sport’s regulators – for the first time in the championship’s history – have dramatically capped the team spending.
From 2021, that is slashed to a mere $254 million in Aussie dollars – a figure created to limit the amount a team can spend in a calendar year to compete in F1.
It covers expenditure directly related to the race car’s performance (similar to world sports limiting the amount teams can spend on players’ salaries).
“The aim is to deliver a more competitive championship that features a more level playing field, while ensuring the drive for creating unique and boundary-breaking technology and engineering remains.”
F1.com
“The correlation between success and a Team’s budget is undoubted.“AC
F1’s top three – Mercedes Benz, Ferrari and Aston Martin Red Bull – each employ close to 1000 staffers, nearly half in their engine departments.
Their 2019 reported budgets: Ferrari $607m, Mercedes $580m, Red Bull $456m.
And we all know Lewis is destined for his 6th World Title.
By contrast the US-owned Haas Racing Team has 250 employees and operates on a budget of $188m.
The cost cap will apply equally to all teams.
So how are the guns going to exist on 2021’s $254m?
Well, for starters, the cap excludes all marketing costs, race driver fees and the costs of the team’s three highest paid personnel.
Merc’s boss Toto Wolff (above), for example, currently is paid an annual salary of $13m.
Other Exclusions:
All corporate income tax and other non-F1 activities.
Property costs – such as the Team’s factory.
Employee bonus costs, and fees to enter the championship and purchase SuperLicences.
Purchase costs of a customer engine supply deal (capped at $25m).
The cap runs for a calendar year and is based on there being 21 Grands Prix – curiously one fewer than scheduled next year.
A powerful Cost Cap Administration will monitor compliance of the Financial Regulations, with Auditors Deloitte appointed to provide independent oversight of every team’s compliance.
There will be compulsory interim accounting through the year.
There’s also a dummy run during 2020 (don’t ask me? I haven’t yet figured out how that’ll work). But no team will be sanctioned if they’re caught out during the trial run.
Three categories of potential breaches
• Procedural (ie, late or inaccurate submission of accounts).
• Minor overspend breach (ie, exceeding the cost cap by less than five percent).
• Material overspend (ie, exceeding the cost cap by more than five percent).
PENALTIES
Once a breach has been identified, three forms of penalty are possible:
The first is Financial
The second, a Minor sporting penalty (ie, a combination of a reprimand, deduction of constructors and/or drivers points; a ban for a certain number of races; limitations on testing – both CFD and on-track; and/or a reduction of their cost cap.
The third, a Material sporting penalty.
Material Sporting Penalty is the most serious breach and can involve all of the above.
And exclusion from the World Championship!
EDITED by AC
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