Force India and Sauber's EU complaint

[krisfx]

What I'm trying to understand is how/why that's not allowed according to the law.

Same here.

From a commercial point of view, the teams are all worth different amounts and this is set by external marketing forces. You can't force Manor to be commercially equal in worth to Ferrari because it just isn't. In accordance with this, the commercial arrangements rightly reflect the commercial value of each individual team. In the same way that different football players command different salaries.

Footballists may command different salaries based on commercial value/talent (much like drivers) but in most leagues and certainly the Premier League, the teams are all given an equal share of the commercial TV deal and then some extra is handed out based on "merit" and position - It seems that in F1, the whole lot is based on how old/big you are. I don't know how F1 could be made to operate like this, maybe a number of different funding qualifiers (heritage, position, commercial money) with the rest being made up by the income from the team directly through sponsors etc.

It's certainly unfair that teams such as Ferrari can finish third or whatever and still receive more than the overall champion, in fact it isn't unfair, its absurd!

[mrluke]

The bigger picture here is that Ferrari essentially compete for free whereas Manor are out of pocket by $100m per annum to come last. There are not enough new teams wanting to join the sport and more than half of the teams involved are on the verge of bankruptcy. F1 needs to be seen as more attractive to compete in which will draw more teams, more engine suppliers and more talented drivers rather than pay drivers. Everybody wins.

I dont think anybody disagrees with prize money being awarded to the best teams each year but the main TV / sponsorship / Circuit fees should be split evenly between all of the participants.

[bhall II]

Perhaps this displays the level of desperation some of these teams are facing...?

Or maybe it displays just how little we value accountability.

I can easily sympathize with the affected teams, and I absolutely think they should receive a greater percentage of the sport's revenue. It's only fair.

That said, I also think their biggest problem is chronic mismanagement, and additional income can't fix that.

If you have budget-x and you spend x + 1 for any reason, you have no one to blame but yourself for the consequences. These teams are apparently oblivious to that, because they keep doing it. It's as if they operate under a belief system in which both participation and competitiveness are somehow natural rights.

That the system is clearly flawed and arguably unfair absolves no one from the responsibility to nonetheless operate within the confines of the competitive environment it has created. To do otherwise results in self-inflicted wounds.

[Phil]

If you have budget-x and you spend x + 1 for any reason, you have no one to blame but yourself for the consequences. These teams are apparently oblivious to that, because they keep doing it. It's as if they operate under a belief system in which both participation and competitiveness are somehow natural rights.

In an ideal world where you have a bank account with x in reserves, that may very well be easily feasible. The matter of fact however is, is that for some of these teams, the sport has evolved in a way that has made it very difficult to manage. As an example; We know how important sponsorship is for some of these teams. And sponsorship is difficult to find, when success is limited. And with losing sponsorship, you're also losing valuable money that in turn is important to pay engineers, staff, even racing drivers. It's also crucial for the development of that car, that is perhaps the biggest factor of all in order to get results and attract sponsorship and therefore money.

So it's easy to see that there is a circle here. A circle of success, that is directly connected to income, price-money, sponsorship, development, drivers etc. And it can very well become a negative spiral as it has for many of these teams - and endless slope of losing sponsorship, therefore money, engineers right down to the performance of the car, the ability to develop it and further the ability to score points, positive PR, potential sponsorship etc.

Then there's also the fact that price-money is based on the positions you finish. For some teams, it is crucial where they finish. In example of Sauber; Last year was a horrendous year for them, ending with zero points. Not only that, they also had to foot a much higher bill for engines too. And we all know that the smaller teams were never in favor of these new engine regulations coming about, but in the end, it's either suck it up, SURVIVE or leave because their voice is but an insubstantial one in the big picture. Easy if you're RedBull, Mercedes, Ferrari - any team that has external markets that offers some income. Sauber as an example is purely a race team. Which should get your comment earlier about the mismanagement on Kaltenborns part thinking a bit...

Sure, no one is saying teams like Sauber should assume they'll finish 3rd in the constructors if it's clear they are a 7th. But perhaps without 'overspending' to gain valuable positions that has a direct result on net income in paying those bills, what else are they to do?

Got to love armchair experts though. Here we are criticizing the sport or teams for employing "pay drivers". As if some of them had a choice...

[turbof1]

I think the truth is somewhere in the middle - Sauber did do mismanagement, some of which got leaked out in the media through the vd Garde saga. It proved quite costly in the end as Bernie had to give them an advance on their price money to buy off the contract.

However, on the other side we had HRT, Caterham and Marussia all going bankrupt and with only the latter coming back in the nick of time. We had Lotus who despite a huge restruction of their finances being on the brink of collapse. And we also have Force India struggling to pay its suppliers. Those are too many teams to put all the blame in the mismanagement cookie jar. And Sauber made a very, very good point: there's nothing for them outside F1. It is their core and only business. They have nothing to suck up any losses in F1. Sauber also barely made any updates throughout the season, so one can say that only operating the team, going to races and building materials/parts close to only to keep racing is putting them at a loss already.

I think in the current format it's not viable to have teams aside from the top 5 to compete without making crippling financial losses. F1 should take a look at how tv money is distributed in the premier league, which is much more linear and the difference between the first and the last is not even 50%.

[bhall II]

Got to love armchair experts though. Here we are criticizing the sport or teams for employing "pay drivers". As if some of them had a choice...

Again, no one is guaranteed, or obliged to do, anything. If the cost to play is too great, then don't play.

And you don't have to be a rocket surgeon to understand that overbooking a team's race seats by 300% might cause a few problems. The resulting lawsuit against Sauber cost $16 million to settle, which is nearly 15% of the team's total budget this year.

In hindsight, I probably should have said grossly mismanaged.

This is what accountability looks like...

The automotive division is not merely an attempt to capitalise on a strong brand created by the racing division, however.

It has also come about out of necessity, Mr Dennis insists.

"Formula 1 will absorb any money you throw at it," he says.

"The economics of a Formula 1 team is precarious at best."

So McLaren has taken great strides in recent years to diversify its business.

In addition to the racing and automotive divisions, it also includes an electronics business that supplies the entire Formula 1 field as well as control systems for the next generation of civil aviation engines.

McLaren's applied technologies business, meanwhile, is working with the health care industry to develop a body monitoring system that is being used by British canoeists, cyclists and rowers ahead of the 2012 Olympic Games.

Mr Dennis says such diversification, combined with tight cost controls, are vital to ensure the group's long-term survival.

"Since McLaren first stepped into the pit lane in 1966, 109 Formula 1 teams have come and gone, and the only two teams that have been going are Ferrari and ourselves.

"I don't want to be number 110."

[Phil]

Again, no one is guaranteed, or obliged to do, anything. If the cost to play is too great, then don't play.

And you don't have to be a rocket surgeon to understand that overbooking a team's race seats by 300% might cause a few problems. The resulting lawsuit against Sauber cost $16 million to settle, which is nearly 15% of the team's total budget this year.

The problems started way before they started overbooking race seats (to which there is context too, not just simple "mismanagement" - but I'll let you go read up on it in the Sauber thread - it's rather well documented). If you already start with a line of thought, why not go all the way and complete it? The answers to many of these teams problems are easily found and it's not due to "mismanagement". By sweeping these issues under the carpet, doesn't make these issues go away either.

Of course, to some, the solution is simple; Who needs these teams in debt if we can have teams like RedBull & TR pumping millions into the sport and investing in new exciting non-pay-drivers? Oh wait, they might actually not be around next year, my bad. Okay then - lets have 3 or 4 cars per team. Great, so we will have Mercedes 1-4 next year and Ferrari relegated to 5th. Does anyone seriously think they put up with that for long? Might as well go all the way and have a Mercedes spec-series...

It's time people wake up from their fantasies and accept that there are real issues at hand here. Not saying that Sauber and ForceIndia are in the right by going to the EU court - but I seriously think it's time to take their problems more serious instead of shrugging it off as mere mismanagement.

[FW17]

Got to love armchair experts though. Here we are criticizing the sport or teams for employing "pay drivers". As if some of them had a choice...

Again, no one is guaranteed, or obliged to do, anything. If the cost to play is too great, then don't play.

And you don't have to be a rocket surgeon to understand that overbooking a team's race seats by 300% might cause a few problems. The resulting lawsuit against Sauber cost $16 million to settle, which is nearly 15% of the team's total budget this year.

In hindsight, I probably should have said grossly mismanaged.

This is what accountability looks like...

The automotive division is not merely an attempt to capitalise on a strong brand created by the racing division, however.

It has also come about out of necessity, Mr Dennis insists.

"Formula 1 will absorb any money you throw at it," he says.

"The economics of a Formula 1 team is precarious at best."

So McLaren has taken great strides in recent years to diversify its business.

In addition to the racing and automotive divisions, it also includes an electronics business that supplies the entire Formula 1 field as well as control systems for the next generation of civil aviation engines.

McLaren's applied technologies business, meanwhile, is working with the health care industry to develop a body monitoring system that is being used by British canoeists, cyclists and rowers ahead of the 2012 Olympic Games.

Mr Dennis says such diversification, combined with tight cost controls, are vital to ensure the group's long-term survival.

"Since McLaren first stepped into the pit lane in 1966, 109 Formula 1 teams have come and gone, and the only two teams that have been going are Ferrari and ourselves.

"I don't want to be number 110."

What do you think is the minimum you require to compete in F1?

As a bench mark if you take Haas who is coming in with 110 million as the minimum required?

[bhall II]

What do you think is the minimum you require to compete in F1?

I don't think anyone knows, because we've not yet seen a team willing to do only what's necessary to comply with the sport's 107% rule.


Source: Autosport

An equitable disbursement of the so-called "premium" payments results in each team collecting roughly $24.9 million.

Adjusted 2015 budget (actual 2015 budget):

• Red Bull Racing - $486 million ($530 million)
• Mercedes - $520 million ($529 million)
• McLaren Honda - $517 million ($526 million)
• Ferrari - $401 million ($473 million)
• Williams - $225 million ($210 million)
• Lotus - $182 million ($157 million)
• Toro Rosso - $180 million ($155 million)
• Force India - $171 million ($147 million)
• Sauber - $142 million ($117 million)
• Manor - $118 million ($94 million)

Mercedes and Red Bull swap places. Otherwise, the running order remains the same. (Incidentally, the 10th place F1 team earns considerably more than most other series' champions.)

Given the typical relationship between budget and success...

In general, teams with bigger budgets are more successful. Below, I plotted the percentage of total possible constructors’ points scored by each team versus their budget, normalized by dividing by the average team budget in each year. This includes all teams from 1999-2014.



In general, the points follow a sensible relationship. Teams with very very low budgets (less than half the mean budget) are unlikely to score more than 10% of the available points. Teams that are between half the mean budget and the mean budget fare slightly better, with some impressive outliers in this range. Teams that spend more than the mean budget have the best chance of scoring a large number of points, although there is great variability in this range. Interestingly, the four points furthest to the right all fall below where one would expect, showing that money alone does not guarantee success.

The trend line is intended to be illustrative — it is a least-squares two-sigmoid fit to the points, excluding the labeled outliers. Notably, most of the outliers are from either 2009 or 2014. These were both years in which there were massive changes to the technical regulations, showing that in these time periods teams can excel (or fail) based on the ingenuity of their response to the regulations (aerodynamics in 2009 and engines in 2014), rather than raw budgets. When rules are static, the big-spenders seem to pull away.

...it's unlikely competitive balance would shift.

In other words, the system would be more fair, which I've always supported in principle, but the change would ultimately prove inconsequential. So, any team that wants to improve its station will have to do so without FOM/F1 support. (There's a reason McLaren and WIlliams have diversified over the years.)

[Phil]

Given the typical relationship between budget and success...

...

...it's unlikely competitive balance would shift.

In other words, the system would be more fair, which I've always supported in principle, but the change would ultimately prove inconsequential. So, any team that wants to improve its station will have to do so without FOM/F1 support. (There's a reason McLaren and WIlliams have diversified over the years.)

What the graph fails to illustrate, by only looking at the top performers, is that at some point there is no correlation between how much a team spends after a certain threshold. There is no guarantee that will net more success. By the same token; one could argue, you could have 10 Neweys working for you, the result will not be 10 times better, but the costs will.

If you go further down the ladder to where these smaller teams operate, you will find that a higher budget will make a sizeable difference because they are 'fighting for scraps'. They are on the verge of surviving, hence very limited development. A 10 million rise in budget there will add significantly higher success rate than if one of the top teams in the top3 add another 10 million. Probably holds true too if we go for percentages. Another easy example; Instead of paying for talented drivers, they need to resort to pay drivers who... in some cases bring millions, but crash every 2nd race.

[bhall II]

What the graph fails to illustrate, by only looking at the top performers...

It plots all teams from 1999 to 2014.

C'mon, man. I know you know how to read.

[Phil]

My fault. Doesn't really change my point however, which you so eloquently evaded. So again, how so is it mismanagement that these teams are in the position they are in - overspending as you put it? Your graph itself goes on to state that there seems to be some correlation between spending and achieving points. Or should they just give up, realizing that their budget is insignificant and close down their factory and not compete at all?

No one is expecting Sauber to fight for wins. A team like Sauber is expecting to be competitive in the field they are in. A team with a small budged fighting for 8th and 9th every 3rd race and perhaps for 8th in the championship should have a viable chance to do so without going bankrupt. Is this even possible for midfield teams (without outside money to offset any losses within F1) to be viable longterm?

[Cold Fussion]

Your point is predicated on the graph only showing top performance, that fact that it doesn't nullifies your speculation. I don't see how operating fraudulently can be constitute anything less than mismanagement.

[dans79]

My fault. Doesn't really change my point however, which you so eloquently evaded. So again, how so is it mismanagement that these teams are in the position they are in - overspending as you put it? Your graph itself goes on to state that there seems to be some correlation between spending and achieving points. Or should they just give up, realizing that their budget is insignificant and close down their factory and not compete at all?

The Sauber has a lot of space available for sponsor logos on it. A big issue is it's fashionable in F1 to have a handful of sponsors at most. Compare that to NASCAR where most teams have dozens, specially the small to midsize teams. As far as I'm concerned this is a management issue.

[bhall II]

Or should they just give up, realizing that their budget is insignificant and close down their factory and not compete at all?

If expenses incurred while competing against other teams within the same "budget bracket" are currently unsustainable, which is the implicit claim of those involved, how can any single team benefit from a reform that increases the budgets of every team in that "bracket"? In other words, if Team-Z can counter Team-Y's increased budget with an increased budget of its own, has anything really changed, or is it the same situation with different numbers?

The cost of genuinely competing is ultimately determined by those at the top. Until those figures come down, which is unlikely to happen for a myriad reasons, there's not a whole lot a team at the bottom can do but hang on. It's obviously not ideal. But, it is realistic for a disciplined team with an awareness for when to fight and when to lay low.

I fully acknowledge that I've taken a hard line here. It's because I tend to think opportunities for meaningful change are finite, and this is wasting one of them, because a win won't change anything.