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Financial challenges hit Formula 1

DUBAI, United Arab Emirates (AP) - With the European economic crisis still rattling Formula One, it was no surprise to hear that cash-strapped Marussia and other smaller teams were facing money problems at the start of this season.

But when a storied team like the Swiss-based Sauber appeared on the brink of bankruptcy a few weeks back, the sport took notice. They were eventually bailed out by investors closely linked to the Russian government and included an unusual expectation that an 18-year-old Russian driver might be on the grid for the team next year.

The financial crisis that Sauber called "uncomfortable and embarrassing" highlights a long-standing concern that a majority of the 11 teams of the grid- excluding the big spenders like Ferrari, Red Bull and McLaren- are weighed down with debt and not so far off from needing a similar bailout. Costs are skyrocketing and will continue to be a concern with new engines introduced in 2014.

"We are facing certain challenges especially economic ones which exist in our world. We are feeling them to a certain extent, some teams more, some teams less. The midfield feel it more than the bigger ones," Sauber principal Monisha Kaltenborn said earlier this year in Malaysia. "We first have to look at this economic challenge."

Formula One is one of the world's most glamorous and expensive sports and, until now, has largely followed the edict that the teams with deeper pockets inevitably end up with the faster cars and the most talented drivers. The big teams like Ferrari reportedly spend as much as $250 million a year, according to Formula 1 business consultant Dieter Rencken, or four times as much as the smaller teams like Caterham. In return, they reap the bulk of the $1.2 billion in F1 revenue.

The little guys are expected to take their place at the back of the grid, score few if any points during the season and leave the sport quietly when they collapse- as the Spanish team HRT did last year. Their calls to bring down costs have largely gone unheeded and the gaps between the big and small teams have only gotten wider.

The most recent bid to address costs came in 2009, after the global financial crisis prompted Honda, Toyota and Super Aguri to pull out of the sport. Voluntary controls were approved including a ban on in-season testing. But those modest measures almost destroyed the sport. Ferrari went to court to stop them and the Italian team led a threat by the teams to pull out of the 2010 championship and compete in a breakaway series. That never happened but Ferrari, Red Bull, Toro Rosso and Sauber pulled out of the Formula One Teams Association because over the cost controls.

The debate over money began again in earnest at the start of the 2013 season when some teams seemed intent on sacrificing quality in the chase for additional sponsorship dollars. Caterham and Marussia- the weakest teams on the grid- both jettisoned experienced drivers before the season, going with others who brought financial backing.

"It's definitely not great for the sport. At the end, there should be the best ones fighting," said Timo Glock, who was replaced after two years driving for Marussia and now races for BMW in the DTM touring car series. "But these days, you need a lot of money or a contact to some of the engine suppliers which can help the team out. It was in the past already but not this extreme."

The two teams both defended their choice of drivers and insisted the real problem was that F1 had no real plan to ensure the sport remains sustainable in the future. They have been vocal about the need to address costs with Marussia's President and Sporting Director Graeme Lowdon suggesting F1 needs to follow the lead of American football and basketball leagues by instituting salary caps which have been credited for bringing greater parity to those sports.

"Fans are not that interested in whether we have a bigger balance sheet than Red Bull and their fizzy drinks empire. That is not what real fans are interested in," Lowdon said.

"People tune to watch wheel to wheel racing, the best drivers in the world, the best minds at work on the cars and the only way you can maximize that is by having a well-designed cost control mechanism."

Caterham's Principal Cyril Abiteboul looks at cost as the only way area where teams can impact their bottom line. Sponsorship, he said, was difficult to control and the share of the F1 revenue that smaller teams receive under bilateral agreements with F1 boss Bernie Ecclestone is no more than $15 million in a year- in contrast to the more than $100 million that Ferrari gets. Marussia is in even worse shape, being the only one of 11 teams without a deal with Ecclestone.

But Abiteboul also expressed concerns about how any budget cap would be policed.

"If we all agree that most of the teams struggle on the income side and most of the teams will very much struggle on the botton line, it means that you have think about the cost side of things," Abiteboul said. "Is a budget cap the right answer to cost reductions? I'm not entirely sure this is the best possible one. It's creating a lot of issues. How do you police it? How do you enforce it?"

McLaren boss Martin Whitmarsh, who heads the Formula One Team Association, has fought a sometimes lonely battle for years to convince teams to embrace cost controls. He admitted current voluntary cost controls haven't had the kind of impact he would like and says the answer is handing authority over to the FIA, which governs the sport- something vehemently opposed by the big team who fear ceding too much control.

The FIA, however, has shown no inclination to take the lead on cost controls. Ecclestone, meanwhile, has expressed some sympathy over rising costs- opposing the introduction of new engines in 2014 over their expense. But when asked about the issue in Bahrain, he said the complaints are nothing new in Formula One and the sport has carried on.

"There are always people who have lots of money and people who haven't," he told The Associated Press. "The British teams used to be a little bit short in the finance department and Ferrari was well supported and we were racing all the way thru. I am just going to see (Team Principal) Frank Williams now. (When) Frank started, I don't think he had a budget. He was on a race by race basis. It's always been like that. The world is like that. There are always people who are successful and people not quite successful."

Others have said the answer doesn't lie so much in cost controls but rather building up the F1 brand.

That, they say, will result in more revenue for everyone.


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)

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