Formula 1's Politics Are As Fatally Flawed As Real Politics (UPDATED)

I'm back earlier than expected, so that, predictably, I can get an big angry rant out of my system.

[Updates at the bottom of the article]

For those of you following Formula 1 - while I sadly no longer have the freedom to write race reports and such, I do still follow the sport closely - it is not news to you that F1 2014 started with a grid of 22 cars, yet will most-likely finish with a grid of just 18. Caterham and Marussia, perennial backmarkers since they first appeared as Team Lotus and Virgin Racing in 2010 (along with the farcical Hispania Racing Team, who folded after 2012), have both gone into administration this week and will miss the US and Brazilian Grands Prix, potentially also missing the double-points finale in Abu Dhabi in three weeks' time. Caterham's financial woes have been widely publicised for some time now, with buyers appearing and disappearing, bailiffs ravaging their Leafield factory and outgoing owner Tony Fernandes desperate to get away from it, but Marussia's issues haven't been so prominent, perhaps partially because all such issues are dwarfed by their star driver Jules Bianchi being comatose and in a critical condition in Japan after hitting a tractor in heavy rain at around 120mph at Suzuka a month or so ago.

It is easy to point and laugh, especially at Caterham who have never scored points, adopted a pay-to-drive system earlier in the season (with endurance racer Andre Lotterer appearing seemingly at random for the Belgian GP) and have a hideous and utterly unreliable car that looks dreadful to drive and usually finishes last. The fact is, though, that competing in Formula 1 is ferociously expensive. An Autosport article recently laid bare what an average team - the likes of Sauber, Lotus and Force India - are spending just on building and running two F1 cars (in US dollars):

Hybrid power system
$28 million
Gearbox and hydraulics
$5 million
Fuel and lubricants
$1.5 million
Tyres (previously free)
$1.8 million
$1.95 million
$3 million
Salaries (EXCLUDING drivers)
$20 million
Travel and track-side facilities
$12 million
Chassis production/manufacturing
$20 million
Windtunnel/CFD facilities
$18.5 million
Utilities and factory maintenance
$2 million
HR and professional services
$1.5 million
$5 million

TOTAL: $120,250,000

Bear in mind that ON TOP OF THESE expenditures, they then have to spend money on driver salaries (anywhere from half a million to over ten million and beyond), building leases, hospitality, marketing and media. Also bear in mind that this is for mid-field teams. The big teams spend a hell of a lot more than that. Caterham and Marussia don't even have that much money at all, and they're not the only teams struggling for finance; Sauber and Lotus have been hanging on by the skin of their teeth, even though both have - under one name or another - been in the sport for decades. Williams also posted a loss of £20m ($32m USD) in the first half of this year as they invested in their future.

But what about the money that goes in? The teams get around $55 million from commercial rights, roughly half what is needed on average, while the rest comes from their sponsors and, crucially, where they finish in the World Constructor's Championship each year. The prize money they get varies by tens of millions. If you want a full breakdown then click here (opens in new tab), but the bottom line is that while 10th-place Marussia got $14m at the end of last year, champions Red Bull got nearly $102m. Ferrari "earned" $81m under the current two-column reward system, but on top of that, they get at least 2.5% of the total prize money fund every year ($17.5m in 2013, more than Marussia earned at all), just for staying in F1. Because they're special or something.

2014 US Grand Prix, team's press conference
The team's press conference this evening essentially demonstrated the fundamental issues with the way Formula 1 is run.

Because the teams have to agree unanimously on allowing changes to the sport - even the rules and regulations - nothing in the area of financing has changed. A budget cap has been proposed multiple times in the last 5-10 years (first £40m, then £100m IIRC) and not accepted, because the top teams would probably lose their advantage.

This evening we had the bosses of Lotus, Sauber and Force India on the back row, with the Mercedes-Benz and McLaren bosses up front (Claire Williams couldn't make it to the USA, so only five team principles were present). The back row expressed clear concerns and know exactly where the flaws are with the financial structure of the sport - unbalanced distribution of funds and so on, which lead to an ever-bigger gap between rich and poor teams - and yet Toto Wolff, boss of Mercedes, just sat there saying "just spend only what you have." That's a very easy position to take as both the new World Constructor's Champion and the highest-spending team in the sport. McLaren boss Eric Boullier was less obnoxious because he was only recently at Lotus and knows what the back-row teams are dealing with, but still shrugged off or talked his way around the ideas that were put forward to solve the issues.

So the rich teams defend themselves by being obnoxious (especially Toto) while the struggling teams try to get through to them. As with many political issues, stubbornness and greed are blocking perfectly feasible changes.

Oh, by the way, bigger teams running three cars is not a feasible solution, because to keep it fair the third car wouldn't count in the Constructor's Championship. So if a third Mercedes finishes P3, nobody scores those 15 points. They're not passed down. It would just make it even harder for smaller teams to succeed, plus the third car can act as a "rear gunner" when championships are on the line. Thankfully we won't need to worry about the effect of this system unless we lose another team, as the minimum grid size allowed is 16 cars (not 18 as initially reported by the press).

Worse still, the governing body is NOT governing. The core issue aside from financial imbalance is that the teams have too much power. The FIA needs to strap on a pair, step in and take the decision out of their hands so that a decision is actually made. But the FIA is staffed by dinosaurs of equal greed, and the commercial rights holders include Bribey Ecclestone and bribe-able CVC.

So, if nothing changes, more teams will fall by the wayside. One point made by Lotus boss Gerard Lopez is that no major sponsors have entered F1 in the last two years [in fact, at the end of 2013, Vodafone pulled out after 11 years]. The only new teams trying to enter are hopeless optimists starting from scratch who will have no chance of victory, as demonstrated by HRT, Caterham and Marussia since 2010. Honda are only brave enough to re-enter as an engine supplier - not as a whole team - largely because of the new marketing-friendly Hybrid Power-Units they can use to justify the eventual NSX Hybrid sports car. Audi joining in 2016 is pure hear-say generated by ex-Ferrari boss Stefano Domenicali joining Audi Sport and journalists subsequently joining some floating dots together to make it believable. Don't believe it.

Nobody else is interested. Porsche, Toyota and now Nissan have all decided that the World Endurance Championship is a far better/more relevant avenue to pursue, and frankly seeing the first of those two genuinely taking the fight to dominant Audi at Le Mans this year was pretty awesome. More exciting than a single manufacturer team strolling off into the distance, like in F1 this year...

If the small teams continue to drop and new teams continue to disappoint, then we'll only have Mercedes, Ferrari, Infiniti-Red Bull and McLaren left. If any of those four keep losing the championship - and three of them have to lose each year, of course - then they'll no longer be able to justify staying and they'll pull out too, like Toyota and BMW did in 2010. If everyone had a "B-Team" (like Toro Rosso to Red Bull), as has also been suggested by some, then one of the Big Four pulling out could see two teams disappear instead of one.

Then Formula 1 essentially dies.

This is why the old fogies at the FIA need to grow a spine and take control. The teams aren't going to do it on their own, because the ones at the top don't want to. It shouldn't be their decision anyway...

The rich want to stay rich to the point of ignoring those who struggle, meaning the poor stay poor. Greed cockblocks fairly straightforward change and there's bribery and corruption at the top. It's just like running a country!!

This was written by Michael Gooderham for Small Blog V8 on 31/10/2014. If you see this writing elsewhere (aside from Formula Freak), it has been stolen.


UPDATE (2nd November): Someone sent me a link to an 11-year-old Autosport Forum post regarding money distribution in Formula 1 at that time. In it, Ron Dennis outlines (in the 2003 Australian GP press conference) how the Prize Money was handed out at the end of the 2002 season.

This is how much things have changed:

In 2002 the World Constructor's Champions (Ferrari) got twice as much as 10th place (Toyota). $22m vs $11m.

In 2013 the World Constructor's Champions (Red Bull) got MORE THAN SEVEN TIMES as much money as 10th place (Marussia). $101.5m vs $14m.

Oh, and because Caterham have finished 10th enough times in previous seasons, they actually got more than twice as much as Marussia, despite finishing behind them. There's a two-column system that rewards teams who have been around a while, see. A kind of combo bonus. Marussia didn't get "Column 1" money because they hadn't finished 10th before 2013.

So, assuming all is accurate, the gap between 11th and 10th last year was bigger than the gap between 1st and 10th a decade and a bit ago.

And the big teams are shrugging this off?!?! How is this possibly NOT a problem?!


UPDATE (6th November): F1 journo Joe Saward recently put together this infographic as an approximation of how the system works (the historical payments in particular are educated guesses):

From his blog:

"It is impossible to give correct figures in relation to the Formula 1 payment structure because they are based on the financial returns of each year and then a complex web of percentages, mixed with fixed payments in places. Plus, of course, the whole thing is confidential and so no-one is supposed to provide the world with details. However, this is the structure that I believe is correct (although no-one can complain if they do not make the real numbers public). The reality is that this is pretty close to what happens, although the historical payments are still rather vague (and may have been one-off payments)."