Why the Big F1 Teams Must Embrace Cost Cutting to Preserve their Dominace

The political storm of 2014 is brewing and its not to do with rear suspension, turbo fan covers or double points; its a war that has been brewing since 2008 when the financial crash happened in the US and Europe and sent car manufacturers and sponsors running to the hills. This came shortly after the forced withdrawal of Tobacco sponsorship due to pan European health legislation, the exception being Philip Morris who still fund Ducati and Ferrari, mostly for Corporate hospitality and point of sale advertising in countries where it is still permitted (I remember seeing prominent Valentino Rossi posters advertising Marlboro in shops in Bulgaria in 2012).

This has lead to teams in Motorsport facing a significant cash flow problem, one that is yet to be solved. Moto GP had to take the radical approach of creating a new sub class of bikes called CRT, which allowed for modified super bike engines to be run in prototype frames allowing sub 1 million euro places to appear on the grid (compared to the 20 million upwards it takes to run full factory teams). After two seasons however they faced an issue, the CRT teams were catching the satellite bikes as they were permitted more fuel and engines, this season will see the creation of open class bikes and factory option bikes. The factory teams will get only 20 litres of fuel and 5 engines to last a season, in return they get to write their own software for the new spec ECU. Choose open class and you will get 24 litres of fuel and 12 engines for the season but will have to run the complete spec ECU.

These rules have been pushed forward by Honda, the longest serving manufacturer in Moto GP and Yamaha have by in large gone along with it arguing that they use the sport for R&D for their road bikes and need to be set engineering challenges. The problem however is that it has prevented new manufactures from coming into the sport with Suzuki and Aprilla both readying challenges to the two grand old teams of the sport, both have put plans on hold as the new rules create a strange artificial difficulty. But there has been a defector.

This all out cost war on bikes further and further from road relevance has worn out the patience of Ducati who look set to switch their entire entry to the open class format. One would then assume that Aprilla would not spend the incredible amount of money to create a Factory bike when there is Ducati to take on with their battle ready CRT bike from last year. Suzuki have admitted the new format is difficult and are working on porting their software but the defection of Ducati could spell the end for the “Factory option”. Furthermore Aleix Espargaro has been in the top 6 in testing on his open Yamaha engine running in a FTR chassis. If Suzuki and Aprilla go open with their entries, all it would take is for Yamaha to switch to the open format and it would render the Factory option all but irrelevant. All this because Honda refused to reduce costs in a sensible manner to preserve their dominance of the premier class.

Formula 1 has gotten a lot more expensive this year, the new power trains are hugely more expensive than the previously frozen V8 engines, thus there are several teams who are in serious financial trouble. There are three options for the sport to go in, two of which Moto GP tried which have lead to the only available option:

1. Don’t reduce costs but introduce customer cars / 3 car teams

One idea that has been floated a few times by the top teams has been allowing customer cars (selling cars to other teams) or running 3 car teams. This is what happened over the last few seasons in Moto GP prior to the CRT revolution. The rising costs and falling revenues lead to the withdrawal of Kawasaki, Aprilla, Suzuki, Blata, Proton, Moriwaki, Harris WCM and Kenny Roberts (in the space of 8 years) leaving only 3 manufactures left in the sport, this lead them to all create “junior” or “satellite” teams which helps fund the development and fill the grid. However while it gives the smaller teams more competitive machinery it creates a glass ceiling where they can’t have the latest developments and thus can’t really ever compete with the top teams.

Furthermore these customer teams are forced to run riders they don’t want as part of the deal and still having to pay large sums to the top teams for bikes. However they don’t gain anything in return as they never own the bikes so they gain no assets other than a livery space for the year, meaning Dorna (the commercial rights holder) had to financially support these customer teams to maintain the grid size.

By 2011 the problem had reached critical levels with Suzuki down to one bike and about to pull out it left Moto GP with too few manufactures to fill the grid. They were faced with a possible grid size of only 14 riders for the following year so the sport had to act fast, therefore they went to option 2:

2. Create a cheaper second tier class for the small/independent teams

In 2012 Dorna launched a new cut price formula called “Claiming Rule Teams”, they would race in the top class but allowed to run prototype chassis’s alongside a modified superbike engine. The teams would gain more fuel and more engines but their engines could be “claimed” for a price of 30,000 Euro to prevent any expensive development. The claiming rule was there to protect the class and there was a gentleman’s agreement between the 3 factories that they wouldn’t ever use it unless requested to.

This lead to a swelling of the grid, despite each factory limited to running only 4 of their own bikes. It also saw the return of Aprilla, Suter, FTR, Ioda and the appearance of BMW to the sport as independent teams took up the challenge of entering the sport and creating their own bikes. The teams pretty much fought amongst themselves but thanks mostly to the efforts of Aprilla and Aleix Espargaro started picking off satellite riders and regularly qualifying in the top 10.

Dorna then moved to remove the claiming rule and forced the factory teams to contribute to the independent teams, with Yamaha leasing M1 engines for use in the newly christened open class and Honda producing a complete bike. Those specifications while being more expensive than some of the previous efforts will go head to head with a heavily updated Aprilla ART bike (the previous champions of the CRT’s) however as the rules are now joined Ducati are looking to move down. This option of two classes will lead to people who are struggling for budget or for victories to move down into the cheaper set of rules to compete properly.

All this will eventually lead the sport to option 3:

3. Drastically reduce costs in the sport

Moto GP is looking likely to see teams only run in the open class and represents a victory for Dorna and the value of decent competition rather than a outright spending race. The big teams have not only lost a political battle, but they will have lost their influence over the rules as Dorna allowed them their changes in exchange for the creating of their class. Furthermore they will have lost ground on the other teams who will have more experience developing and running these bikes to their rivals who embraced the change.

This self preservation has lead to the complete opposite, self destruction – Formula 1 could do with taking heed.

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