With world markets sliding and the credit crisis upon us, is it any wonder that F1 is being impacted? Sponsors rely on sales/revenue and stock prices to und their investment in F1, Teams rely on sponsor money to fund their programs, manufacturers rely on sales of cars to fund their racing programs, Mr. Ecclestone relies on Middle East and Asian money to keep his F1 machine churning at world-class venues with world-class fees and TV rights, the FIA relies on F1’s need of governance to benefit financially from their duties performed on behalf of the sport(along with sanctioning fees and membership fees).
So all of this comes home to roost eventually at the doorstep of F1. How can they sustain the astronomical expenditures? In a recent interview, Max Mosley says they can’t. In what seems to be foreshadowing of untold disaster, Max signals an immediate need for cost reduction in F1. While it may be fleeting, money is what makes this machine run and Bernie has done a yeoman’s job of cramming as much of it in the F1 program as possible. Even to the point of taking the show to the Asian and Middle East markets where the current pockets of exorbitant wealth are located. He’s even divorced many fans who lament the loss of great races. Most recently this weeks announcement that the Canadian Grand Prix has been cut from the 2009 calendar. This has had a serious backlash of outraged fans but in order to keep the show going, you have to feed the system and Canada was not paying as much as these other emerging markets are willing to pay.
So where is the ceiling? How much higher can Bernie or the teams take this sport in terms of expenditure? Max says we’ve already passed that time. Any chance Max can work with FOTA? Now that he has been authorized by the FIA to engage in talks with FOTA? Anyone else find that wording interesting?
“It has become apparent, long before the present economic difficulties, that Formula One was unsustainable,” Mosley told the BBC.
“Very crudely expressed, one of the teams at the back of the grid cannot possibly hope to raise more than – including the money they get from Bernie (Ecclestone) – say 40 million Euro, let’s say Â£30-35 million, which in the real world is a huge sum of money, but that’s the most they can raise. To compete today, they need two or three times that and even then they’re at the back of the grid.
“You can’t run a business where the outgoings are two to three times the income. Not for very long. It depends at the moment on millionaires – or billionaires, we don’t have millionaires any more – millionaires subsidising them, people like Vijay Mallya of Kingfisher or Dietrich Mateschitz of Red Bull. Without them, those teams wouldn’t be there.
“We’ve already got two gaps, we’re likely to lose two or three more of the independent teams. Formula One cannot continue like that, that’s been obvious for some time.
“At the moment we’ve got 20 cars. If we lost two teams we’d have 16, three teams 14. It then would cease to be a credible grid.
“Some of the manufacturers may be in difficulty now as well, because if you look at their share prices, their profitability, their sales, the days when they could just toss out 100, 200, 300 million Euro a year, which is what Formula One costs those big companies, I think they’re finished. I really think it’s a serious situation.
“If we can’t get this done for 2010, we would be in serious difficulty. I think we can survive through 2009, but if we don’t get it done in 2010, we may be in serious problems.”
“There are various things we can do, but the most obvious would be to reduce the cost of the drivetrain,” he said.
“At present, if you can believe this, the engine and gearbox together, for an independent team, is upwards of 30 million Euro a year. That could be done for probably five per cent of that cost without the person in the grandstand noticing any difference at all.
“Even those big spenders, if they’re given the opportunity to save 100 or 200 million Euro a year, they’ll do so. And we’ve got various means of making sure they don’t spend the money, but it does need some draconian changes.”