It’s a tough time for Formula One’s smaller teams at the moment. Financial worries are causing ructions within all but the largest teams and disappointingly no action seems to be in the pipeline.
Force India replaced Paul di Resta with Sergio Perez this week and with it gained an estimated $10 million from his Mexican backers and sponsors.
Many fans decried the fact that a very talented driver had lost out to a guy with a fat wallet. Yet this is harsh on Perez, a man who gave a world champion, Jenson Button, a decent challenge in a tricky car.
Indeed it’s arguable that Perez and di Resta are on the same level, unlikely to be world champions but capable of winning races when given the machinery. It’s not Force India’s fault that they need all the money they can get and it’s certainly not Force India’s fault that no other team has picked him up.
However, this deal is yet another sign that Formula One’s financial model needs to change. Another driver who is supported by a large amount of corporate money and another good driver destined to spend the rest of his career in sportscar racing, IndyCar or the DTM.
The answer is simple but it will be a complicated political process to implement it. The owners of Formula One, a private equity named CVC Capital Partners. With over $46 billion in investments and no passion for motor sport, their number one priority is squeezing profit out of Formula One and they do this very successfully.
For example in 2012 Formula One revenues were estimated at around $1.5 billion and CVC took a colossal $865 million from that. From the remaining revenues, the FIA takes a small percentage and then the teams take their share, decided by the all-important Constructors’ Championship standings.
Hidden within this share is a hugely unfair element however. Recently the teams signed up to a new payment structure which gives bonuses to teams who have won championships in recent years – Ferrari, McLaren, Red Bull – and also Mercedes thanks to an agreement between Bernie Ecclestone and the team that kept them in the sport.
So unfair is this structure that Ferrari could score zero points in next year’s championship and still receive more money than if Lotus managed to win the championship.
Why sign up to the thing then, you may ask? Well, it was forced upon them after Red Bull and Ferrari first signed it. Rumours swirled that the remaining teams had no other option than to sign up or else face watching a Ferrari Formula One World Championship sponsored by Red Bull with two constructors providing customer cars to the smaller teams.
Thanks to this unequal agreement and a bizarre lack of interest from sponsors, most teams are now struggling to stay afloat with soaring costs and declining revenues combining to crush their accounts.
If only there was a spare $800 million that could be shared between the grid. However, CVC will not give up this money easily. Aware of the financial difficulties they have an alternative answer: have five ‘constructors’ and five ‘customers’ which would sharply reduce costs for the smaller teams and allow CVC to keep even more of the revenues for themselves.
This isn’t an acceptable answer. It would reduce Formula One to a shadow of the fair, engineering battle that it is supposed to be and if one big team quit, the customer would be taken down with it.
The true answer as CVC are unlikely to be moved aside, is a budget cap. For this to happen Red Bull and Ferrari would have to accept that the good of the sport should be prioritised over the good of their teams.
Whether this will happen will be the background story throughout the 2014 season.