Budget cap to be introduced in 2009 - 18th Jan 2008 2:47pm
Formula 1 teams will no longer be able to spend their way to success under radical new regulations to be implemented next year.
From the start of 2009 teams will be subject to a budget cap covering large areas of their activities, FIA president Max Mosley has confirmed.
In a letter sent to 11 teams on Wednesday and seen by ITV-F1.com, Mosley stated that overall spending limits will be introduced after the proposal received broad support at a meeting of F1’s key participants in Paris last Friday.
The budget cap idea is a departure from the current approach to cost-cutting through ever more prescriptive technical and sporting regulations, which has proved less effective than the FIA had hoped because well-heeled teams have simply diverted resources into other areas such as wind tunnel development.
The cap will apply to all expenditure except engines (where separate cost-cutting measures have already been agreed), marketing and promotion, and the salaries of drivers and team principals.
“Starting in 2009, there will be a cap on expenditure for all Formula 1 costs other than engines, drivers and expenditure exclusively for promotion and marketing,” Mosley wrote in the letter.
“Because of the variety of arrangements, particularly shareholdings, team principals’ remuneration will not be included in the cap.”
The FIA will decide on a figure for the cap after a meeting between its technical advisor Tony Purnell and financial representatives of the teams in Paris on January 31.
It is understood that a proposed ceiling of $150m per season was mooted at last week’s summit, but did not win unanimous support.
The governing body will set up a Financial Working Group to devise a satisfactory method of policing the cap that will enable detailed regulations to be drawn up by the end of June.
If agreement is not reached by that time, Mosley is threatening more drastic cost-cutting measures, such as a ban on the use of wind tunnels and other research tools.
“If the Financial Working Group are unable to devise a satisfactory method of checking expenditure or if a majority of the competing teams do not agree the proposals by 30 June 2008, the cost reduction measures voted by the World Motor Sport Council on 7 December 2007 will be adopted for 2009 in their entirety,” Mosley wrote.
The letter also confirms that the “total freeze” on engine development will apply for the next five years rather than 10 as previously planned.
New power plants will be introduced in 2013 “to reflect the latest developments in modern engines”.
The FIA is targeting the start of next year as the deadline to reach agreement on objectives for the new engines with the manufacturers currently involved in F1 – with detailed regulations to be published on June 30, 2010.
While the specifics will have to be fleshed out, the governing body expects the objectives to include “low cost, long life, inexpensive running costs for independent teams and consistency with industry requirements for efficiency and low carbon emissions”.
From the start of 2009 teams will be subject to a budget cap covering large areas of their activities, FIA president Max Mosley has confirmed.
In a letter sent to 11 teams on Wednesday and seen by ITV-F1.com, Mosley stated that overall spending limits will be introduced after the proposal received broad support at a meeting of F1’s key participants in Paris last Friday.
The budget cap idea is a departure from the current approach to cost-cutting through ever more prescriptive technical and sporting regulations, which has proved less effective than the FIA had hoped because well-heeled teams have simply diverted resources into other areas such as wind tunnel development.
The cap will apply to all expenditure except engines (where separate cost-cutting measures have already been agreed), marketing and promotion, and the salaries of drivers and team principals.
“Starting in 2009, there will be a cap on expenditure for all Formula 1 costs other than engines, drivers and expenditure exclusively for promotion and marketing,” Mosley wrote in the letter.
“Because of the variety of arrangements, particularly shareholdings, team principals’ remuneration will not be included in the cap.”
The FIA will decide on a figure for the cap after a meeting between its technical advisor Tony Purnell and financial representatives of the teams in Paris on January 31.
It is understood that a proposed ceiling of $150m per season was mooted at last week’s summit, but did not win unanimous support.
The governing body will set up a Financial Working Group to devise a satisfactory method of policing the cap that will enable detailed regulations to be drawn up by the end of June.
If agreement is not reached by that time, Mosley is threatening more drastic cost-cutting measures, such as a ban on the use of wind tunnels and other research tools.
“If the Financial Working Group are unable to devise a satisfactory method of checking expenditure or if a majority of the competing teams do not agree the proposals by 30 June 2008, the cost reduction measures voted by the World Motor Sport Council on 7 December 2007 will be adopted for 2009 in their entirety,” Mosley wrote.
The letter also confirms that the “total freeze” on engine development will apply for the next five years rather than 10 as previously planned.
New power plants will be introduced in 2013 “to reflect the latest developments in modern engines”.
The FIA is targeting the start of next year as the deadline to reach agreement on objectives for the new engines with the manufacturers currently involved in F1 – with detailed regulations to be published on June 30, 2010.
While the specifics will have to be fleshed out, the governing body expects the objectives to include “low cost, long life, inexpensive running costs for independent teams and consistency with industry requirements for efficiency and low carbon emissions”.
