Cutting the Cost of Formula 1 Professor Mark Jenkins March 2009 AK
The global economic downturn has had a significant impact on Formula 1 over the last six months. Just before Christmas we had Honda pull out of the sport and last week it was announced that Toyota very nearly did the same thing. I am joined today by Professor Mark Jenkins to look at the FIA proposals to reduce costs. So Mark, what is coming out of the meeting in Paris? MJ The really exciting thing about the meeting the other week is that the teams now have the option from 2010 to cap their budget to £30m, but have virtually unlimited technical freedoms to develop the car that is going to give them the best performance. When you consider that currently these teams have budgets around £300m a year, that is a 90% cut – very radical, but very exciting because you get the technical freedom to go with it. AK And the FIA want to go much further than the teams themselves? MJ Yes, the teams themselves would like to go more slowly. They are presenting a 50% cut in costs – it’s a bit like getting turkeys to vote for Christmas, the teams have huge infrastructure, huge investment and they want to reduce those slowly. The FIA are saying, no we don’t have the luxury of that, we really need to cut costs now to get new entrants in because the car manufacturers are not going to sustain the kind of investment that we are having to make at present. AK How will this impact on the competitive landscape of the sport in a few years time? I am sure it will benefit the smaller teams. MJ I think it is very exciting. You can get many different new entrants; organisations, teams who perhaps wouldn’t have thought Formula 1 was a possibility could now consider it. It also means that some teams, perhaps like McLaren and Ferrari, could develop their engine power train capability, their monocoque manufacturing capability and offer services to all these new entrants. So potentially we have a more dynamic, more competitive landscape evolving. AK So with any budget cuts, there must be job implications? MJ Absolutely. That is the downside. But if you look at what has happened in Formula 1, it just wasn’t sustainable – people’s salaries escalating, Professor Mark Jenkins numbers of people escalating. It really has to cut back to make itself sustainable in the long term. AK Mark, thank you very much for the update. MJ Thank you. Page 2