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Mercedes spending accelerates to record 325m

NEWS STORY
14/10/2014

Mercedes has revealed that it boosted its spending on Formula One by 17% to a record 325 million last year according to an article in the Independent by Christian Sylt.

Lewis Hamilton's victory in Sunday's Russian Grand Prix didn't merely extend his lead in the Drivers' Championship to 17 points, it also handed Mercedes the constructors' title. The article reveals that the secret to this success is that Mercedes has turbocharged its spending.

Financial statements for the German manufacturer's F1 engine manufacturing division in Northamptonshire show that in 2013 it spent 133.9m which is nearly double the budget it had just three years earlier. Its costs alone now come to nearly double those of F1's lowest-spenders Caterham.

The increase was driven by F1's switch from 2.4-litre V8 engines to 1.6-litre V6 turbos. Though the engines were initially criticised for losing the high-pitched scream of their predecessors Mercedes has been the biggest beneficiary. It has won 13 of the 16 races so far this season and has been on the podium at every Grand Prix.

In addition to the 133.9m cost of its engines, Mercedes spent a staggering 190.7m on running the F1 team. It is a 26.2% increase on the previous year and comes to the highest amount Mercedes has spent since it took over the team at the end of 2009. It has surpassed the magic number of 175.6m which is the amount that the previous constructors' champions Red Bull Racing spent in 2012 according to their latest accounts.

Mercedes' motorsport boss Toto Wolff says that last year "operating costs rose by 39.6 million due to increased expenditure on in-season upgrades to the 2013 race car; increased costs arising from the parallel car programmes for 2013 and 2014; and increased personnel costs." Testimony to this, the team and the engine division took on 72 new staff during the year giving them a total of 1,186.

There are no curbs on F1 costs and this has fuelled an arms race between the leading teams which attempt to outspend each other in a bid to win on track. A 125m budget cap was due to be introduced in 2015 but was rejected in March by the Strategy Group, a body comprising F1's boss Bernie Ecclestone, the FIA and six leading teams including Mercedes.

The costs of Mercedes' F1 team are partly offset by payments to it from sponsors and prize money which increased last year thanks to a new commercial deal with Bernie Ecclestone. Nevertheless, the team still made a net loss of 51.1m.

Mercedes has a 60% stake in its team with 30% in Wolff's hands and the remainder owned by former F1 champion Niki Lauda.

In contrast, Mercedes owns 100% of the F1 engine division and covers the majority of its costs. They are slightly offset by payments from teams which use its engines. Last year Force India and McLaren had a Mercedes under their bonnets and in 2014 it added Williams to its roster.

This year it also benefits from an increase in the amount paid for the new engines. The V6s are far more sophisticated than their predecessors and their price-tag is double at around 16m annually.

Next year Mercedes will lose McLaren as a customer when it switches to Honda engines. However, it has a replacement waiting in the wings as Lotus, which currently languishes in eighth place, confirmed recently that it will switch its Renault engine for a Mercedes in 2015.

It remains to be seen whether Mercedes will be able to maintain its advantage in future as the Strategy Group recently approved the introduction of limited in-season engine development. However, implementing this requires unanimous support from the F1 Commission which counts Mercedes as a member. Unsurprisingly it has objected so, for the moment, it looks like its huge investment will continue paying off.

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1. Posted by NotRocketSurgery, 21/10/2014 18:06

"I am on the side with nealio and very many others. There should be no doubt in anyone's mind what F-1 is, when Bernie, along with representatives from almost every other sport, have stated, "We are in the entertainment business now." The game has changed. Today's "sport" is comprised of layers of profit and loss exercises. Have we not heard "We don't hold races to lose money"? It follows that one could then say "We don't own a team to lose money" and "Really, we don't do anything to lose money." Ask Simona how she feels about that.

On the other hand, look around. Is there anything left in any society which does not face the reality that, given a choice between choosing an action in order to accomplish a good or eliminate a not good without regard to profit (giving away goods or services is choosing a loss) and choosing any kind of compromise or less beneficial action, the result of which is to make a profit ... well, you tell me. The days of doing anything simply because it is good to do or the proper thing to do or beneficial to someone else or to provide oneself with a feeling of satisfaction, are basically over, except maybe at the lowest social levels where "goodness" is driven by need. If one already has met his needs, and already has more than he needs, he continues to be driven by profit. And, I see it getting worse before it get's better as. Being self-ish is always is always more profitable and we are living in the "Me Generation".

Oops. I pontificate. My apologies ... back to racing. Why is Formula E not broadly covered on TV? Darn, here I go again ... "

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2. Posted by Jonno, 15/10/2014 5:25

"Can we have some context here. How much have Ferrari, Renault and Honda spent this year?
"

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3. Posted by bfairey, 14/10/2014 19:07

"Did Mercedes take over the engine plant of Illmore?"

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4. Posted by F One, 14/10/2014 17:01

"Ah so they bought their championship then.

And their voting against any engine development is self serving and disgusting."

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5. Posted by nealio, 14/10/2014 15:11

"That the FIA have allowed the creation of the Strategy Group can only be understood as a grossly negligent act. What possible intelligent, ethical or legal motivation there could be for accepting this new order dominated by CVC ownership and the wealthiest teams self-interest is hard to imagine. The racing plays second fiddle to the politic and I find it impossible to think of F1 as a sport any longer."

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6. Posted by nonickname, 14/10/2014 9:56

"Disgusting!!!"

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