Will the global economic crisis effect F1?

[Conceptual]

Lots of countries that are home to F1 teams are having serious financial issues.

Does anyone have some foresight on how it may effect F1?

Discuss.

[heosat]

Everything in the global economy is interconnected so to generally answer your question: yes F1 will feel it in some way.

I think the primary teams that will feel the pinch the most will be Toyota and Honda and then to some extent McLaren and BMW. In the US alone year-on-year sales of automobiles have fallen ~30% which can easily push a mass market producer into the red for a year or two and this could alter their F1 spending. BMW and Mercedes are in a slightly different boat as usually the rich stay rich in a recession but there have been quite a few reports in my local area (Sydney, Australia) pointing to high returns of sports cars due to margin calls.

Of course advertisers may also feel that their money is better spent elsewhere, perhaps R&D in the company, so they may lower their payments but that's an area that isn't my forte.

[Belatti]

As an example:

Before the 90´s economic crisis there were 19 F1 teams.
In 1991 there were 18
1992 season started with 16 teams and finished with 14
In 1993 there were 13
1995 started with 13 and ended with 11
In 1996 there were 10 when Forti left.

[myurr]

Everything in the global economy is interconnected so to generally answer your question: yes F1 will feel it in some way.

I think the primary teams that will feel the pinch the most will be Toyota and Honda and then to some extent McLaren and BMW. In the US alone year-on-year sales of automobiles have fallen ~30% which can easily push a mass market producer into the red for a year or two and this could alter their F1 spending. BMW and Mercedes are in a slightly different boat as usually the rich stay rich in a recession but there have been quite a few reports in my local area (Sydney, Australia) pointing to high returns of sports cars due to margin calls.

Of course advertisers may also feel that their money is better spent elsewhere, perhaps R&D in the company, so they may lower their payments but that's an area that isn't my forte.

The problem for BMW in particular is that they aren't really a premium manufacturer. BMW sold more cars in the UK last year (I think it was last year, but may have been the year before) than any other manufacturer. This is because of people stretching themselves aspiring for the premium brand. As the masses have their income affected, and as all forms of credit including car financing become more difficult and more expensive to obtain, expect these sales to drop dramatically.

At the higher end I think brands like Ferrari will be hit just as hard. In these challenging times the super rich will still have the money to buy Ferraris, but all those rich bankers and city hot shots have had their bonuses taken away that were once thrown away on status symbols. They will also have FIAT feeling the pinch, and squeezing from the other end.

In the end I'd expect all the F1 teams to feel the pinch to more or less the same extent - sponsors will be looking to reduce advertising costs, manufacturers will be selling less cars, private investors may be looking to shore up investments in other areas.

[Conceptual]

I would imagine that the move would be to hard assets, so the Ferrari and top end BMW's may still move well, expecting them to retain their value after the market rebuilds.

I just wish that people understood that the Free Market is a reflection of human nature, and these regulations that have been paid for by the market's corporate lobbyists to pry open niches is coming back to haunt them.

The free market is a living thing given life by human nature. And human nature gives life to market regulation to create competitive advantage in closed niches.

In the end, the nature of all humans is more powerful than the controls of a few humans. Market correction is a backlash punishment for human interference. You can harness the creature and ride it, but you can never, ever cage it.

Today's market shock is proof of that, and it isnt over yet!

[mx_tifoso]

What's happening in the market is down to pure greed and the need to keep up appearances. Sadly this has risen into an extreme level and is causing a lot of problems around the world, hopefully everyone who did not play the 'rat race' will end up safe and sound. Most people thought that they knew what they were doing, but as soon as things got rough every one started jumping ship and facing bankruptcy or foreclosure.
If what I'm saying is not applicable to every market outside of the U.S., then at least it is just for the U.S. Since this is what I have seen happen all around me.

So the market issues might affect the Formula One teams, but primarily the road car manufacturers who depend on the average consumer, who may or may not be facing economic difficulties. But I doubt it, because the Formula One teams are independant organizations and have different forms of revenue to supply their needs for competetion.

As a side note, I would appreciate having 'checkered's' point of view on this subject. In case he's reading this.

[Conceptual]

The first US car manufacturer that produces a 1.25 scale golf cart will win complete market dominance.

If the US dollar is rejected, and the US goes bankrupt in the process, it is funny how it will actually grant the people the one thing that ALL Americans are promised.

True freedom, and the responsibilities it brings.

All i know is that it doesn't look good from here. BTW, does anyone know where I can change $60K USD into silver bullion? I am thinking of putting my savings into hard assets, and I think that silver is at the best price right now.

If anyone knows where to buy this, PLEASE PM me!

[woohoo]

I am under the impression that any serious bank should be able to help you with that.
Whether you want to invest in metal, or stocks or bonds, they should know.


Anyway, I think that IF the crisis affects F1, it will level the field a bit.
Development costs allot, and have the big ones would have the money to invest in new things, and the midfield might not have to play catchup..

[heosat]

All i know is that it doesn't look good from here. BTW, does anyone know where I can change $60K USD into silver bullion? I am thinking of putting my savings into hard assets, and I think that silver is at the best price right now.

If anyone knows where to buy this, PLEASE PM me!

Why would you want to put your money in metal? Inflation doesn't look to be of concern in the short-term and in fact we will probably see deflation which means you'll lose money off the metal!

The best thing to do when the market falls, which effectively means it is having a sale, is to find excellent companies and buy wads of them. Not only do excellent companies grow when the world goes backwards but they are excellent inflation hedges as they can raise prices whenever they want.

[donskar]

As an example:

Before the 90´s economic crisis there were 19 F1 teams.
In 1991 there were 18
1992 season started with 16 teams and finished with 14
In 1993 there were 13
1995 started with 13 and ended with 11
In 1996 there were 10 when Forti left.

For those who care to read and think, this says a very great deal at multiple levels.

Imagine 30+ F1 cars and drivers battling to just qualify. In fact, there was a pre-qualifying session to determine which teams would get a chance to attempt to qualify.
=D>

What happened? That would take a very meaty thread to discuss.

[donskar]

I should think that Renault will be reconsidering their participation in F1 because Ghosn is a notorious cost-cutter.

Toyota can go on forever. They have enough cash to buy GM AND Ford, so their F1 budget could be untouched.

As for Ferrari and BMW, rich people buy them, and that group always has plenty of money -- they have the advisors, bankers, and lawyers to make money no matter how badly the rest of us get hit. (Use Porsche as an example - they sell fewer cars but make so much $ they can buy VW and Audi.

[guy_smiley]

The problem for BMW in particular is that they aren't really a premium manufacturer.

Actually in 2006 BMW was one of the top ten "brands" in the world...they were up there with google, microsoft, coca-cola, starbucks, citi, etc.

ferrari, mercedes, porsche, bentley, aston, were not up there, but BMW was.

last year BMW were 14th, well ahead of mercedes and all those others... (but i have to admit, toyota came in 10th place!)

anyway i guess my point is: what exactly is the definition of premium, considering BMW was ranked ahead of every other car manufacturer in 2006, and ranked 2nd in 2007? does 'premium' mean most expensive? does it mean most bhp? these results would suggest not....
I have to think that some way or another, F1 will certainly be affected. Credit Suisse is abandoning F1 (BMW in particular), Lehman Brothers, a big stakeholder, has gone bankrupt. some sponsors, depending on their business, will be more heavily affected than others. a couple of people have said it might level the playing field, but my opinion is that this can only favor the teams with more money. i mean, if things get really tight, who do you think is going to go first: spyker or mclaren, williams or honda?

[Chaparral]

Hi Guy its funny you should mention the top 10 brands in 2006 - a friend of mine who owns an IT company was telling me that straight after that BMW were banned by Google for a 3 month period for using a marketing company that essentially 'spammed' the BMW name everywhere - Google dont like that

I also read somewhere recently that the BMW team have to find $50 pa in sponsorship quickly otherwise there will be a hole in the budget I dont believe BMW head office will front the money - maybe thats because of the Credit Suisse pull out - there seems to be some nervousness there at BMW with finances could be wrong though.

The Lehman collapse is covered via Barkleys in the UK who took over the debt (well I think the deal went through) so the F1 debt of $2.7 billion (not the reported $1.3 billion) should be fine.

At some stage if the problems persist globally it will hurt F1 especially the government funding of GPs - I hear India are in meltdown tonight and things look very gloomy there more as it happens.

[ESPImperium]

I think there could be a few teams with some problems;

Williams with RBS and Renault with ING being banking sponsors, BMW are to loose Credit Suisse next year, has this been confirmed??? FIF1 have the major Indian bank ICICI, pontenial problems there???

I think F1 will have to cut its cloth accordingly, some drivers may have to take wage cuts to get a drive, some teams may need to "thin out" the cars development to keep an even keel financially, some mid feild cars will drift to the rear of the mid field, and some top teams may drop to the mid field.

But they are all a buisness, and if things need to be done to keep financially sound, those decisions will be made, if they have to let a driver go to be replaced by a "cheaper" option or a bunch of people need to be made redundant, the team will make that difficult decision to be arround for they long term or just to make it to the end of the season.

I know the decision id choose, and it would be for the longjevity of the buisness.

[Conceptual]

Does anyone think that this may be the door re-opening to Tobacco sponsorship?

I cannot see Bernie or Max allowing the budgets in F1 drop to 1950's levels, and tobacco might be the only interested sponsor after the banks bail out...

Very interesting.