Briatore advocates enforcing F1 budgets

[USAF1FAN]

Autosport.com, February 10, 2006
"Briatore: manufacturers should commit to F1"
By Jonathan Noble

... And Briatore has even suggested that the best solution would be for the sport to impose a budget cap - which would be enforced by the FIA in the same way that the Inland Revenue oversees company's accounts.

"The ideal situation would be to have a budget cap of 100 million dollars for each team," he said. "The job of the FIA would then be to police the budgets, just like the tax office is controlling your income and expenses. In such a formula, efficiency would win. Who makes the most with a given amount of money?"


I wrote this on this forum on Dec. 23rd.:

GPMA-online.com was asking for suggestions from the public. I asked why FIA doesn't simply limit budgets and this was their response:

"This idea has indeed discussed, following detailed suggestions by Jaguar Racing in 2004. Unfortunately, the (majority of the) other teams could not support its implementation so it was taken off the agenda."

If the limit was $100 million dollars can anyone reasonably argue that it's not enough money to run two cars? The only argument one could make is that it could hinder innovation, but FIA is doing that now, especially with the 2008 proposal that includes, "Banning new technologies that give teams a clear performance advantage..." I don't even understand that.

A limit on a team's budget would be easy to enforce simply by installing auditors. FIA polices everything else, why not budgets?

[GuestAgain]

They cant and should not have such power. The teams are a business and no other body other than a state tax or revenue institution should have that power or authority to audit the finances of a business/company. The FIA should only have the power to 'audit' the cars against sporting/tech regs. this is mainly because that will also mean auditing the global businesses of red bull, toyota, ferrari (remember they also make and sell cars etc), daimler chrysler, BMW, Renault and even williams (just 'cos they are a private team does not mean their business is solely restricted to racing). The current troubles of F1 stems mainly from the fact that the FIA has become a law unto itself and answers to no one. Can you imagine giving it this kind of power?
Flav more than anyone else should know better.

[USAF1FAN]

Non government entities audit businesses now; insurance companies, for example.

Limiting budgets makes more sense than limiting technology to reduce budgets--which doesn't work anyway.

[GuestAgain]

Non goverment entities do not audit a business' finances/accounts. Rather they ensure they comply with regulations eg insurance regulations. Said regulations set by the state. In a way its similar to the FIA auditing F1 cars (not teams) to ensure they comply with tech/sport regs.

[GuestAgain]

In fact when you think about it, next thing will be the FIA setting a Maximum pay for a driver or other team personel etc or setting how much can be spent on anything or everything F1 related. Where does it end?

[USAF1FAN]

Non goverment entities do not audit a business' finances/accounts. Rather they ensure they comply with regulations eg insurance regulations. Said regulations set by the state. In a way its similar to the FIA auditing F1 cars (not teams) to ensure they comply with tech/sport regs.

I really don't want to argue this, but as a retired commercial insurance broker, I can assure you that insurance companies do audit revenues, payroll, and when settling claims they will audit expenses and profit accounts--it's the only way to determine business interruption losses.

FIA would not have to audit Toyota's or Renault's entire operation, just the racing operation. The reason we don't have budgets in F1 now is because the manufacturers have not agreed to it--they want unlimited budgets.

[DaveKillens]

I seriously doubt if any major automotive corporation like Toyota or Honda will willingly allow themselves to be audited just because of involvement in a racing series. If I was the CEO of such a company, I would drop the racing program and invest in advertising, because no one but governments have the authority to audit the company. And to really put a serious cap on budgets, the entire corporation would have to be audited because so much could be hidden. Who knows what wind tunnel is doing research on F1 or their new compact sedan?
Such a move would drive away the large companies, and they would go elsewhere.

[GuestAgain]

I really don't want to argue this, but as a retired commercial insurance broker, I can assure you that insurance companies do audit revenues, payroll, and when settling claims they will audit expenses and profit accounts--it's the only way to determine business interruption losses.

FIA would not have to audit Toyota's or Renault's entire operation, just the racing operation. The reason we don't have budgets in F1 now is because the manufacturers have not agreed to it--they want unlimited budgets.

I agree they audit revenues, payrolls, expence accounts etc, every company does but are these audits performed by accounts auditors or insurance regulators?

With regards to the FIA not having to audit toyota et al's entire operation, that is the problem and why I made the comment about 'auditing the global business'. I think the biggest chunk of a teams budget is spent on R&D which will most likely be done by a subsidiary of the parent company. Therefore to succesfully audit or police a team's budget you would have to police the entire operation of the company. Taking ferrari as an example again, what/who can say which chunck of money is for road car R&D and not F1? And this applies to every single one of the teams, private or otherwise.
No one would agree to such a thing and neither would any member of this forum if they were a team boss serious about their business.

[Steven]

I've thought about such an idea myself too, and quite deep into it.
However, there is a huge problem with such an idea. I'll explain:

Suppose I am Flavio Briatore and I manage RenaultF1 and I'm ruled by Renault. I have a budget of $100M and I spend that completely. However, I want my car to be quicker, and I go talk to Renault. Mr Ghosn then acknowledges the problem. We make a deal to secretly sponsor Carbon Inc to research a carbon cased gearbox. To mislead the FIA I also sponsor them with some money and in return RenaultF1 can run that box exclusively.

It's simple and called fraud. This will be all around with budget caps as everyone wants to be the fastest. And when you have money to spend, you find ways to do so.

It's a nice idea, but somehow the same as with traction control. The whole thing will be uncontrollable.

[USAF1FAN]

Even at Ferrari, racing is completely separate from road car manufacturing. Mercedes doesn't make F1 engines, Ilmore does--I think they bought the company, but it has nothing to do with their general manufacturing. Toyota builds their cars in Germany, Hondas and Renaults are built in England. This idea that these huge car companies are building race cars is wrong--they just pay for it. For marketing purposes, they want you to think it's a collaboration, but it is not.

That's why people are talking about an energy drink company having a chance to beat the likes of Toyota--cause they can afford it.

If the FIA tries to enforce budgets, can the teams cheat? Of course they can. Cheating has always been a part of racing, but it can be easily policed with full-time auditors and the threat of sanctions for violations. And, by the way, manufacturers are not objecting to auditing, they are objecting to limited budgets.

STOP DUMBING DOWN TECHNOLOGY IN THE NAME OF COST SAVINGS--AGREE ON A BUDGET!

[guestAgain]

Even at Ferrari, racing is completely separate from road car manufacturing. Mercedes doesn't make F1 engines, Ilmore does--I think they bought the company, but it has nothing to do with their general manufacturing. Toyota builds their cars in Germany, Hondas and Renaults are built in England. This idea that these huge car companies are building race cars is wrong--they just pay for it. For marketing purposes, they want you to think it's a collaboration, but it is not.

Yes racing at Ferrari is seperate from road car operation but budget wise can you tell which is which? And mercedes do in fact make F1 engines and thats the point. Ilmore is no longer involved in F1. Its mercedes now. Take Mclaren as an example. there is:
Mclaren Automotive
Mclaren Applied Technology
Mclaren Electronic systems
Mclaren Racing.
and others. And thats not even saying anything about Mercedes yet or chrysler since both now own 60% of the group. So which part is to be policed, racing? If so, then thats fine. However the bulk of their racing R&D operation is carried out by the other members of the group plus the other mercedes subsidiaries. So short of auditing ALL of daimler chrysler and the Mclaren group as a whole, which cant be allowed, how do you police their budget? And all this pales in comparison when you start to think about toyota and the size of their operation.
But say you could cap the budget, the money will always flow to the winners or best teams. Thats the nature of any kind competion. So we cap at say 100M. But only one team manages to raise that and they always win. Next there will be a major cry to reduce the cap and so on. If toyota claim a bugdet of say 30M who can prove otherwise if everything, except the racing, is done somewhere else in their operation - eg by lexus?

I dont agree with a budget cap not because it is impractical to enforce but because it is the same as having a one make series and gives the FIA way too much power to tinker. Next thing they will be issuing guidlines on how to run a business.
The reason they are even contemplating a budget cap is 'cos FIA cannot tell its elbow from its 4RS3 and has been changing rules irresponsibly for so long and the tech regs are now so strict that there is virtually no room left for innovation, the cornerstone of the sport. So now, for the tiniest of gains/advantage on track, vasts amounts of money must be spent.
The FIA is looking for an easy way out of a mess it created.

[DaveKillens]

I believe Briatore's comments are more complex than what they appear on the surface. When Renault won the titles, he bragged that they did it on a lesser budget that "other" teams. I believe he was referring to McLaren. Since then, McLaren, and more specifically, Ron Dennis stole Alonso from under his nose. And since then, Briatore has displayed an open distaste and dislike for Ron Dennis.
http://www.f1racing.net/en/news.php?newsID=109328
http://www.f1racing.net/en/news.php?newsID=108714
http://www.f1racing.net/en/news.php?newsID=108608
http://www.f1racing.net/en/news.php?newsID=107583

If a budget cap was ever put in place, it would hurt McLaren a lot more than Renault. That is why he supports a budget cap.

[guestAgain]

I agree there is more to Flav's comments than meets the eye. However I dont think a budget cap will hurt Mclaren more 'cos I think they have more scope to do a lot of work outside of their racing operation. With flav, it seems sometimes his brain disconnects. Plus flav is a team boss employed by Renault, so cap or no cap, he gets paid. He's done it with Benetton and Renault. So if Renault goes bust, someone else will hire him. If Mclaren or Williams go bust, RD or Williams go bust.
I think Flav has more to gain by aligning himself with Bernie/Max but forgets that the very thing which kills a dog, stops its pups from opening their eyes. ("I made you rich now shut-up and bend over")