Once again, Formula One, the world’s leading global auto-racing series, rescued itself from a controversial week with its performance on the track at the U.S. Grand Prix in Texas last weekend.
The reduced 18-car starting grid in Austin, the smallest in Formula One since the 2005 Monaco Grand Prix, resulted from the withdrawal of the financially strapped Caterham and Marussia teams only days before the race. An accident on the first lap then cut the pack further, leaving only 16 cars.
This weekend, the series arrives at the Interlagos circuit outside São Paulo for the Brazilian Grand Prix, one of its most popular, historic and often hotly disputed races, with one apparent consolation amid this latest crisis: It seems far better to have great racing with fewer cars than to have a processional race with the full 22.
But the rumor of a boycott by three other struggling teams — Sauber, Force India and Lotus — raises the possibility of even fewer cars on the grid for the remaining two of the season’s 19 races.
The race in Texas brought back memories of a time not so long ago — the 1980s and ’90s — when Formula One cars were so unreliable that half of them often dropped out before the end of the race. Yet as long as the racing remained tightly contested — as it did in Austin — none of the excitement was lost.
But the current financial situation has thrown Formula One into soul-searching of a kind that has arisen periodically throughout its history.
Paradoxically, at issue is not a lack of money, but rather too much money distributed too poorly. The series earns about $1.7 billion in annual commercial rights, with half going to the controlling shareholder, CVC Capital Partners, and the rest split among the teams according to individual contracts that each signed with the promoter of the Formula One series, Bernie Ecclestone.
Those contracts vary so much that some teams, such as Ferrari, may earn as much as $90 million simply for showing up, while other teams, like Marussia and Caterham, may be lucky to get $20 million with prize money included. Given that team directors estimate that the minimum cost of building and running a team and traveling to and operating it at the races is around $120 million a year, it is inevitable that some teams will not survive on sponsorship alone.
When he made the deals a couple of years ago, Ecclestone had been under pressure to sign some of the bigger, richer teams to long-term contracts.
By the middle of last weekend, he was acknowledging that the crisis was perhaps his fault. “The problem is there is too much money probably being distributed badly, probably my fault,” he said on Saturday in Austin. “But like lots of agreements people make, they seemed a good idea at the time,” he added, referring to the individual deals.
His proposal in Austin to have the richer teams share a percentage of their prize money with the poorer teams, with him matching those contributions, was not well-received by team directors.
“We have signed agreements, and I am not convinced that even if you double the money to Caterham and Marussia it would have solved their issues,” said Christian Horner, director of the Red Bull team. “Their issues are more fundamental on what are the cost-drivers rather than what is the income.”
There has also been talk of the struggling teams receiving an extra base payment from CVC Capital Partners to help them stay in business.
The crisis has been building since at least 2010, when the series added three new teams, including Marussia and Caterham, with the promise to cap budgets at $40 million a season.
Since then, possible solutions to the financial problems have included increasing the number of cars on the grid, with teams running three cars instead of two, or having richer teams sell cars to poorer teams, rather than requiring each team to make its own car.
Monisha Kaltenborn, director and part owner of the Sauber team, said that not only would buying a chassis be expensive for small teams, but it would make getting sponsors even more difficult.
“How could we get sponsors when we tell them we never have a chance to win with that car?” she said, suggesting that a chassis from Ferrari, for example, would never be better operated and improved than by and for the Ferrari team.
As for racing three cars, Felipe Massa, a driver on the Williams team, said Formula One would have to change all the rules to avoid other problems. The same front-of the-grid teams might well score even more points than they do now, he said, pushing the other teams out of the points.
“Just thinking about this year, putting a third car on the track, the championship would have been finished in the middle of the season,” Massa said. “You will have had three Mercedes all the time, first, second or third in most of the races. So in the middle of the season the championship is finished.”
Also, a possible cap on team budgets has been floated for a decade, but the idea has always been rejected by the richer teams.
“How can you bridge the gap between the very top and the very bottom?” asked Toto Wolff, director of the Mercedes team. “If you look at the budgets of Marussia and then you compare the highest spender, whoever it is, Ferrari or Red Bull, you are talking about a gap from $70 million to $250 million. So if you want to start with a cost cap, how do you do that? Where do you cap it? And if you cap it on the lower end, well, do you make two thirds of the people redundant in the big teams?”
More than 160 teams have participated in the series since it began in 1950. While there have been 10 to 12 teams each season for most of the past two decades, in the early days, during what many consider to be the golden age of the series, there were seven or eight teams.
But team directors today say that Formula One has evolved so much under Ecclestone’s commercial leadership that the eras can’t be compared.
“Today we don’t live in those times,” Kaltenborn said. “Through manufacturers coming in, bigger companies coming in, costs have just gone sky-high. We have to start right there and bring it down to decent levels.”
Gérard Lopez, a team owner and director for the Lotus team, pointed out that in the Formula One support series known as GP2 — which is also run by Ecclestone — cars race only four to six seconds slower per lap than in Formula One and a GP2 team’s full season costs €4 million.
“Are we really better to the point that a team needs to spend €300 million to be six seconds faster?” Lopez asked. “We’re not. I wouldn’t accept that argument from anybody. So it’s a bit ridiculous to say that you need to spend that kind of money to have that kind of performance, because that makes us the worst managers in the world.”
Wolff, whose Mercedes team has already won the constructors’ series this year and will also win the drivers’ title, thanks to one of its drivers — Lewis Hamilton or Nico Rosberg — agreed that Formula One is a business as well as a sport. But he said that the crisis really came down to the fact that not everyone could succeed.
“Like in any other sport, like in any other industry, this is the pinnacle,” he said. “This is the pinnacle of motor racing and if you want to compete at the pinnacle of motor racing then you need to have the resources of competing there. This is a high-entry-barrier sport.”
“If you want to set up an airline tomorrow, it’s going to be difficult, because Lufthansa is going to eat you up,” he added. “If you want to go motor racing and you want to do Formula One like the new teams decided four or five years ago, you need to understand that this is the very top.”
That raises the question of whether the common interest of the series is served by a smaller or a larger grid of cars and teams.
“You can’t have Formula One with only manufacturer teams — you need smaller teams,” said Vijay Mallya, the owner of Force India, one such smaller team. “It’s part of the DNA of Formula One for several decades, and the F.I.A. on the one hand and the commercial rights holder on the other hand must both work closely to ensure that it is viable and sustainable going forward.”
With the stakes so high at the top, there is little doubt among insiders that the series will be able to find an answer as quickly as they are able to make the world’s fastest cars circle a racetrack.
“F1 has some problems, but it is not the end of civilization as we know it,” Joe Saward, a longtime Formula One pundit, wrote on his blog this week. “The distribution of money has to change or we will lose more cars.” He added: “And anyone who gets in the way of a settlement will go under the bus. It is a time for compromise and a goal of sustainability.”