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Brown: Engines and driver salaries should be included in budget

NEWS STORY
20/05/2020

Though not widely publicised, when the budget cap is introduced next year a number of items are not included, these being driver salaries, the salaries of a number of leading team members and marketing.

As any aficionado of Fantasy F1 games will tell you, when setting up your ideal team one has to weigh-up whether to splash-out on the best driver, chassis or engine, spend equally on all three or favour engine and chassis and go with a rookie in the hope that he's more of a Lando than a Haryanto.

To many it seems bizarre that while teams are seemingly being restricted to $145m - with some arguing the cap should be set even lower - in terms of driver salaries and those of top designers and engineers spending will continue more or less unfettered.

McLaren boss, Zak Brown believes that F1 should think again, and include not only driver salaries but the cost of engine development, a move that would not please the likes of Ferrari or indeed his own new partner from next season, Mercedes.

"I think anything that is performance-related, engine, driver etc, should sit inside the cap," he tells Forbes. "I am in favour of including everything in an all-in-one figure.

What should sit outside of it are things like marketing and motorhomes," adds the (ahem) marketing guru, "because they don't make you go faster and are part of your brand's DNA.

"So if you want to spend twice as much as the next guy on a motorhome, go for it. It is not going to make you go any faster but if that is what you need to do to support your brand or your sponsors, have at it.

"I think that part of the glamor side of Formula One is what the teams' brands look like so that should sit outside the cap."

Brown believes that keeping anything that doesn't affect performance out of the cap "accentuates Formula One's DNA which is making it an engineering and technical contest by saying to teams that they have a fixed amount of money so he who is smartest, wins. Whereas now it is he who spends the most wins.

"In my opinion, the ideal scenario is a lower budget cap with more technical freedom," he continues, "because then you get into really seeing who makes the best use of their money.

"That becomes an engineering challenge: do I want to pay a driver $20 million and spend $10 million on my car or do I want to spend $20 million on my car and $10 million on my driver? That's part of the DNA of Formula One... How do I want to spend my money? What do I think is going to get me my best on track product?"

In terms of the recent suggestion that the smaller teams be allowed to buy their bigger rivals year-old cars, he says that this "may help to solve the fiscal side but it does nothing for the sporting side".

"How are you going to beat this year's car with one from last year?" he continues. "I think the teams that are suggesting this think that the teams they refer to as backmarkers should accept being backmarkers. It helps one problem but actually reinforces another... the haves and have nots."

"The strong majority of the teams are in total support, of a lower budget cap, $125 million or $130 million," he adds. "I think some would definitely be supportive of 100."

One of Ferrari's objections to the cap is the resultant loss of jobs, with claims that across the paddock there could be upwards of 1,600 redundancies.

With 714 staff and costs of 237m ($293m) in 2018, McLaren, like its rivals, will need to shed staff, however Brown is confident that the company's diversification into other series will help.

"The nice thing is we are now entering IndyCar, we are looking at sports cars, we have got a big automotive business," he says. "So I do sympathize immensely with everyone who has got to make tough decisions because in any business, people are your strongest asset. So that is all under review right now and fortunately we will end up with probably a variety of different ways we can handle the situation.

"Because of everything we are going through now, we don't know yet what percentage of staff can be saved by being moved to other divisions of the company. I think every company in the world is reviewing its business, its model and what is it going to do differently.

"You have two things going on. It would be one thing if it was just the budget cap in a stable environment but we are dealing with the moving target of what is going on with the world as well as the budget cap. So it is all intertwined."

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1. Posted by nmw01223, 23/05/2020 6:07

"I too find it hard to see conceptually why anything performance related should be outside a budget cap, but it should include technology transfer. Ie if team A sells parts to team B, then that is a cost to team B within their cap but that same cost could be offset against team As budget cap. Some 'fair pricing' mechanism would also be needed.

The only case where something should be allowed at a loss (eg engine development - costs more than you get back, or tyres) is if the supplier does not compete directly, and in that case whatever that supplier produces must be available equally to all. This might drive manufacturer teams out - difficult for Ferrari!

However a budget cap really just addresses the symptom not the problem. The problem is and always has been that in a technological sport like this, money buys performance. If I played tennis with Roger Federer's racquet it really wouldn't help, but in motorsport dollars equals performance. It may therefore be insoluble as the clever people in F1 find ways of circumventing the cap to their advantage, or the manufacturers lose their competitive edge, see no bottom line advantage and pull out. In the end F1 may become unsustainable when it consumes all the resources in its ecosystem, and implodes, and the cycle begins again."

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2. Posted by Bill Hopgood, 21/05/2020 20:02

"I like Brown's idea because, like me, it's rather simple.
Regarding the development costs by the PU suppliers, that can easily be sorted by making those divisions seperate from the race teams.
Set up PU companies so that all the race teams have to itemise the purchases from them.
Keep the rule that all teams get the same edition of PU then that would mean that the manufacturer based chassis team doesn't get the jump on their competition.
In short, all race teams would be customer teams to make sure the items purchased can be itemised.
Now, I actually don't like budget caps per se.
As far as I'm concerned part of the challenge of going racing in F1 is getting the commercial side of things right and all the competitors know this. Unfortunately, since 1999 costs have gotten completely out of control.
Part of this is because of manufacturers coming and going.
Toyota, Honda and BMW left the last time things got fiscally tough or did not suit their image and they must have spent gazillions trying to win, pushing and pulling the other teams to do the same in a spending war.
Then there is the regulation changes to hybrid (which is all about image when you think about it) and the R&D costs associated.
I have little sympathy for manufacturers that pushed for engine changes and now bitch about the cost of making the PU to match.
I mean, thinking back t the V8s with KERS and as that was roughly stable for a number of years, and the 2012 season where there were something like 8 winners, including Williams.
That's what we want to see, good close racing with opportunities for all teams to have an opportunity to not just get some points but to get on the podium.
Whatever F1 do they need to try and keep it simple so that everyone knows what is in and out of costs so that the competitors and the fans understand the rules.
The last thing we need is for three months after the end of the championship for the results to be overturned due to off track accounting irregularities."

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3. Posted by Canuck, 21/05/2020 15:34

"The budget cap cannot be the same for teams that develop and sell components to other teams, as for team that purchase those products. Honda, Ferrari, Renault and Mercedes spend more on PU development than what is seen and I am sure spend more that what they receive in payment for those parts. Will Red Bull and Alpha Tauri get free or cheap engines from Honda who use RB and AT as an advertizing arm. So what would be included in their cost vis a vis the budget cap? Ferrari uses F1 as their main advertizing arm for their road cars and I believe that McLaren are also using F1 for the same reason more and more. How does that work into the equation? How does their revenue from selling advertizing space on their car work into the equation, does that mean that some teams could be running free from their revenue? I am sure Merc advertizing panels for their sponsors cost more per sq cm than on Williams advert space.If selling parts to other teams is done at a loss, does that get deducted from their operating costs?
The whole cost cap should be done on an incremental basis, where the cap gets reduced over time. Also with lower costs new teams could be interested in joining, needing personnel that would become available form the reduction in other teams. "

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4. Posted by Egalitarian, 21/05/2020 3:16

"And it should also include team principal's salaries too.
In principle, a budget cap is fine, but there are so many ways around this budget cap that it is barely worth having.
I would like to see truly independent (ha!) auditing of every team's accounts, Liberty Media's accounts and the FIA's accounts. This should include all bonuses, travel perks, any fringe benefits such as road cars and holidays, mysterious personal mortgage payments - the whole lot."

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5. Posted by USA1, 21/05/2020 0:09

"The best thing for F1 would be a budget cap and leave everything else open when it comes to regulations just stay within your budget cap, that would be the only way we could still call it F1"

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6. Posted by USA1, 21/05/2020 0:06

"Disagree Mr Brown the cap should be on the Car and Engine but Definitely not on the Driver!"

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