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A Crisis Carol

FEATURE BY MAX NOBLE
22/12/2017

If we cast Bernie as the Ghost of Christmas Past, and Inaction as the Ghost of Christmas Present, who is going to be cast as the Ghost of Christmas Yet to Come?

And will that Ghost push Scrooge McChase into fine new behaviours or, like Marley's Ghost, will the chains of the past pull him under to eternal unrest? For some, that question is going to be far more relevant than others. Let me explain...

As the snow falls and Tiny Tim asks Santa for Human Growth Hormone, the family fun of arguing over budget caps has not been lost on Scrooge McChase. He and kind old uncle Toto had been talking in hushed tones around the crackling fire, when that old grouch Sergio shouts from the roof tops that it is never the season to slash budgets.

Yet none of our characters from this Christmas Carol has acknowledged that the elephant in the room, as kind Uncle Toto has called it, has a name.

And that name is not Budget Cut, or Cost Cap.

Now I'm sure that the net worth of both kind Uncle Toto, and Scrooge McChase are far short of Rupert Murdoch's or King Bernie, yet I'm also sure that just like Lewis Hamilton, both can afford to purchase Big Boy Toys whereby having an army of international tax accountants happily pays for itself each year.

Yet when he, Toto, Christian, Sergio and the gang swap cheery banter over mulled wine and crackling flames about budget caps no one acknowledges the true name of the elephant in the room (Gold Star to Toto for at least pointing out the elephant was at the party).

The actual material costs of Formula One are not that immense. I'm sure Lewis could cover the annual carbon fibre budget for all the teams and not notice the balance decrease in his online saver account.

Manufacturing costs would be a tad higher, as they are complex processes with minimal economy of scale. Yet still they would be manageable if Lewis and the boys had a whip-round after the next GPDA Bridge Night.

No, the big, huge, massive, cost driver is... resourcing costs.

And resourcing costs is a nice way of saying... people.

You know, people not like Lewis or Chase, but people like you and me. People who usually need a job to cover the mortgage, not because they are driven by an inner passion and gifts from God.

People like those that had their lunch taken from them at Manor.

People like those that got crushed in the Global Finance Crisis that saw banks bailed out by tax payers (that's you and me, and Lewis) and bankers taking a financial hair cut by manfully dropping bonuses from the likes of $20,000,000 a year to a totally supportable (with tax payer dollars) $10,000,000. Poor lambs! They were complete businessmen. Or 'Total Bankers' as we often call them - though I'm sure Editor Balfe will correct me if I've misheard that. (Merchant Bankers is the term you're looking for - Ed)

Sorry, back to my point...

Force India and Haas run slim, efficient and professional, racing teams on around 400 people.

Ferrari, Mercedes, Red Bull, Renault, and McLaren all run massive racing organisations around the 1,500 person mark. Not staffing resources. People. Real people. Skilled people. Mortgaged people. Darn hardworking, rearing kids, loving my work, but I need the money, people.

Ferrari claims a total of 3,115 staff as of December 2017. The great man said this about organisations; "I believe factories are made of machines, walls, and people. Ferrari is made most of all by people." Enzo knew people made the final difference.

So if those five giants of the sport are forced to a budget cap it will not be carbon fibre or computer controlled milling machines that feel the hit. It will be people.

So let us assume our Ghost of Christmas Yet to Come, sees Scrooge McChase pushing through his budget cap. He is an American aiding an American team (Haas being much smaller than the big five, would gain under a budget cap) and as a result this decision will not hurt American jobs, so no bad press at home. No, most of the staffing cuts forced by a budget cap will be in the UK, and then mainland Europe. And as Scrooge is levelling the F1 playing field for the fans he will be pumping the positive press as hard as the Ghost of the Future will let him.

Potentially, based on my numbers estimate above, the Ghost of Christmas Yet to Come is going to see in excess of 5,000 highly skilled people out of a job, and out in the cold Winter snow. That's a big number; 5,000 people, many with kids and partners, many with mortgages, all with dreams for the future. All out in the snow while Scrooge and his cronies continue with their festive rounds of private island hopping and attending parties thrown by their international tax accountants.

5,000 people, not even counting suppliers cut out of the loop, and the knock-on impact of 5,000 well paid people no longer nipping to the local pub or buying cars, loaves of bread, or private educations for their kids. That's a huge impact.

Now Sergio and the gang are not complaining about the issue in these terms, because as business men they know staff cuts are part of the strategic business cycle, and they do not want to give labour unions a bullet now with which to shoot them later. Hence caution in their language.

But the leaders of the big five teams have been visited by the Ghost of Christmas Yet to Come. They have all seen the human side of the future. Sure, they might be personally concerned about loss of income and perceived power, but they all know one thing for certain, the Ghost has shown them that budget cuts, and cost caps, mean staff cuts. If Scrooge McChase gets his way, it will be massive staff cuts.

While he is probably sick of visits from the Ghost of Christmas Past (Bernie), McChase had better be aware that 5,000 Marley's Ghosts are going to be chasing him in one possible future. While they will be thanking him in an alternate future.

So as festive music rings in his ears this Christmas, and the Ghost of Christmas Present is as silent as the night, I hope Scrooge McChase has the inner wisdom, and peace of heart, to listen to the right Ghosts in order to avoid the screaming of a Crisis Carol in the long dark winters that might be ahead if the warnings go unheeded.

And you, dear reader, as the frost lays deep and crisp and even, remember that in all this talk of elephants and money, what those dear old men gathered around the crackling fire are really talking about is the cold hard cash for salaries, which is the human face of this, or any other, Christmas.

It will be those "boys and girls back at the factory" that feel the slash of the budget cut knife, not the hero standing on the podium, or Scrooge McChase.

Merry Christmas Mister Scrooge.

Max Noble.

Learn more about Max and check out his previous features, here

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READERS COMMENTS

 

1. Posted by NS Biker, 18/01/2018 18:29

"Certainly nice to see an enlightened discussion of the longer term ramifications for ..."Budget Cuts".
From a competitive perspective, Force India doesn't get half of the credit they are due. Punching above their weight is an understatement and their performance should be an embarrassment to the bigger teams.

No one likes to get The Pink Slip, boot or shown the door, but it happens and you move on. Minimizing this should not be too difficult if some of the wunch of bankers can see beyond the vapor of what is melting in the glass.
Between now and the "Brave New Order" that is rumored to be coming in 2021, teams could reduce staff without cuts, simply through attrition. It happens and once people know that there are reductions in the future (2021), it lets those most likely to be affected, control their own destiny, and they will.
If, and this is a big IF, the W of B's can sort out engine regulations (sorry, Power Units), the distribution of revenues can be fixed (because it definitely needs fixing) and a reasonable resource or cost structure can be put in place, then there should be interest and opportunity for one or two more teams in F1. If that occurs, there would likely be a net shortage of skilled people, not the dire prediction of hundreds (or thousands) lining the streets.
Here's hoping that sanity prevails."

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2. Posted by Max Noble, 11/01/2018 9:04

"@Uffen - good differentiation. I’m toying with the keyboard on a potential “complexities of business” article and you raise a good point about the need for “tough love” from senior management if a company is to survive in a harsh business world. "

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3. Posted by Uffen, 10/01/2018 22:46

"You're right, Max, I was a bit rough. Sergio doesn't care about team morale is closer to the mark, I guess. Still, he says he isn't kidding. In reality when does a team get "too big to fail"?
Yes, I, too, hope they care but so far all I know of was Peter Sauber's rescue of his namesake team.
It is a tough reality."

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4. Posted by Max Noble, 09/01/2018 12:15

"@Canuck - fully agree with all your rule issues. I think the key to leveling the playing field as far as possible is boosting the income of the lower teams, and then centralising major facilities such as wind tunnels, so all teams have equal time and equipment and have to use superior thinking to gain an advantage.

As I’ve previpusly written, one of my few complaints about Max Moseley’s cunning was his belief that making things last longer was cheaper. One can only assume he never compared an early Hyundai with an S Class Merc or 5 series BMW. Making cheap and powerful engines that are binned every two races is easier for a small team than one that lasts a third of a season!

@Uffen - bit rough... I hope they care a fraction more than that...

"

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5. Posted by Uffen, 08/01/2018 19:28

"Yes, losing a job is awful. But if we want a level playing field do we cap the employee number at the current maximum (i.e. Ferrari's) and put revenue streams in place to allow Haas and the rest to reach that number?
Sergio doesn't seem to care about Ferrari's F1 employees because, after all, Ferrari will just pull out of F1 if they don't like what they see. So, if Sergio doesn't care, why should Carey? We all know that Mercedes will pull the plug one day, and no one outside the Daimler Board of Directors can stop that. So, they don't really care, either. Toro Rosso is for sale, from what I hear, so will Red Bull, Inc. keep them going indefinitely if no one buys?"

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6. Posted by Canuck, 07/01/2018 16:01

"@Max Noble - with the current costs and current stupid rules, there is no way to bring in new teams, unless as Toto Wolf suggests B teams such as Torro Rosso and now Alfa Romeo Sauber. Team member can be hidden in the B-Team, Ferrari may be able to reduce the number of staff associated with Ferrari and claiming they are Alfa staff both on engine and chassis. Although I fail to see a Mercedes B Team called SMART.
As far as stupid rules, when will the FIA realize that reducing to the 3 engines per year for 21 races actually cost more development dollars/pounds/etc than engines that need to last a shorter period? Why increase the RPM on engines when they cant use the maximum now? Why are Friday's called testing when they have to use one of the race engines? Why does a transmission have to be able to withstand a crash or undergo penalty a grid penalty for a change? Same goes for the engine. Why does Williams suffer a grid penalty if the Merc engine blows? Or Haas for a blown Ferrari PU component? Why do teams get penalized for the stupidity of the FIA?
Why can't they find a less destructive way of limiting track boundaries, i.e sensors in the track that would cause the car to lose power for 1 or 2 secs when track limits are exceeded?
Too many rules and not enough reason."

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7. Posted by Max Noble, 06/01/2018 13:02

"@Canuck - agree on the staff hiding. Not so sure about attracting new teams. We shall see! At least Christian and the gang are giving Shakespearean level performances in their world class moaning. :-) love it. :-)"

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8. Posted by Canuck, 05/01/2018 12:36

"Budget caps could not be implemented overnight but phased in over a few years. This has to be planned so as to not destroy teams completely. Mercedes, Ferrari, Renault, Red Bull (with their new title sponsor) and any new factory associated team, can hide staff on the factory side so the impact may be lessened.

There could be a very positive side to cost caps --- New Teams. Although not immediately, these could provide employment to the displaced. This could also improve the show, imagine 26 or 28 cars on the starting grid. "

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9. Posted by Max Noble, 28/12/2017 11:20

"@Steve W - Scrooge is right with you on that approach. As is JP Morgan... And Lehman Brothers... let the most Sociopathic take the prize and Devil take the hind most. No problem here. Once the robots take over we will all have more time to reflect and bond. "

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10. Posted by Steve W, 28/12/2017 8:21

"Hey, I've been laid-off from a few jobs in my life. What you do is deal with it. Find something else. Move on. Employment is not guaranteed. "

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11. Posted by Max Noble, 24/12/2017 0:10

"@Greybeard - my thanks for the terminology education! I will take care to use precise language when next dealing with these fine folk! Wishing you (and all our dear readers) a fine, safe, and enjoyable holiday season."

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12. Posted by Greybeard, 23/12/2017 15:06

"Your comments are as apposite as ever and I have no argument with them.

However, I trust you won't mind if I point out that while 'Total Bankers' is accurate as a description I have discovered that the correct collective noun for these people is 'Wunch'. As in: 'A Wunch of Bankers'.

The precise etymology of the term so far eludes me and I have found no useful translation into other languages. Nonetheless I believe it expresses your sentiments perfectly.

I can't wait to hear the F1BS which will accompany any public discussion on the matter of cost caps."

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