Red Bull's F1 costs accelerate by 30%

01/11/2010
NEWS STORY

Anyone who thinks that costs in F1 have been decreasing across the board is in for a surprise. Writing in the Daily Telegraph, Pitpass' business editor Chris Sylt reveals that Red Bull spent £107m on Red Bull Racing in 2009. This increased by a whopping £25m year-on-year giving a 30% boost to the drinks company's total investment in its flagship F1 team.

Red Bull Racing's costs increased 8.8% to £156.9m in 2009 which makes one wonder exactly what the Resource Restriction Agreement between the teams really means. One thing that's for sure is that the team's increased spending hasn't gone to waste.

To maximise lead time, development work on F1 cars is done the year before they are introduced and Red Bull currently leads the constructors' championship points standings with two races remaining.

The funding from Red Bull comprised the lion's share of the team's £160.8m turnover with the balance coming from prize money and sponsorship. Increasing costs could put in motion somewhat of a vicious circle since the more successful the team becomes, the more sponsors will be attracted to it and the more money it will be able to spend.

In 2010 alone, Red Bull Racing's sponsorship budget increased by £13.7m according to F1's industry monitor Formula Money and, as Pitpass revealed earlier this year, Red Bull's chief executive Dietrich Mateschitz has not ruled out taking on a title sponsor. Interestingly, under the list of partners on its website, Red Bull Racing has a space which has not yet been filled for what it calls a 'premium partner'.

The boost in funding from Red Bull led to the team's turnover increasing 11% year-on-year in 2009 so, despite the rise in costs, it was left with a pre-tax profit of £3.9m which was up more than six fold on 2008. The team's single biggest outgoing believed to be the £57.2m it spent on research and development. This increased 18.8% year-on-year but it was far from the only focus of the team's investment drive. It spent £4.9m on improving its engineering facilities and although staff numbers remained stable at 592 their total pay increased 21.9% to £45.9m. It's not a bad way to incentivise staff in a title bid but it seems hardly commensurate with cost-cutting.

Earlier this year Mateschitz told Sylt that "in F1 we have no long or medium term business plans," but he added that the secret to the team's success "is all about people. We have recruited the best and most professional people for all the key positions."

At the top of this list is its chief technical officer Adrian Newey who joined from McLaren in 2006 on a salary which is now estimated to come to £8m annually. Red Bull's performance has steadily climbed since he came onboard and Mateschitz says that "the goal is to reach the top as quickly as possible and stay there for as long as possible."

The team's shareholders' funds increased 61% to £10.2m last year but "Mateschitz says that "the only success and return on investment is the marketing value, which depends on the race performance and results." With the team on the verge of clinching the constructors' title Mateschitz is on track to make a bumper return. Spending, not saving, still seems to be the best way to do it.

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Published: 01/11/2010
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