Formula One targets cost as credit crunch bites
LONDON: Formula One looked in fine fettle at Sunday's stunning night-time grand prix in Singapore but the worry lines are always more apparent in the cold light of day.
Money is the lifeblood of the billion-dollar sport and, with the credit crunch biting deep into the global economy, those involved know they cannot continue to spend like there is no tomorrow.
"Formula One is in rude good health...and I think that it can stay in great health provided that we take action," Williams team chief executive Adam Parr said.
"Formula One is marketing itself very well in terms of establishing new races in key areas but we need to do more.
"Costs have grown exponentially in the last 10 years and it's time to put an end to that."
International Automobile Federation (FIA) president Max Mosley warned in July that Formula One was "becoming unsustainable" and the global economic climate has only deteriorated since then.
Honda-backed Super Aguri folded in May, leaving Formula One with 10 teams and no prospect of anyone new coming in. Some insiders fear others could also head for the exit unless changes are made.
Toro Rosso, co-owned by Red Bull energy drink billionaire Dietrich Mateschitz, have a guaranteed budget for 2009 but their future remains uncertain beyond that.
Red Bull Technology currently design the cars for both Toro Rosso and Red Bull Racing but in 2010 each team will be required to design and make their own, a huge burden for the smaller, Italy-based outfit.
"I would struggle to carry on alone," Toro Rosso co-owner Gerhard Berger told Italy's Gazzetta dello Sport last month. "I need the backing of a car manufacturer. Which isn't there."
Red Bull use their two teams to promote and sell their product while Force India are bankrolled by aviation and drinks billionaire Vijay Mallya, who says he is in for the long haul.
Williams, the only team without a manufacturer or billionaire behind them, reported losses of 21.4 million pounds ($38.17 million) for 2007 on Tuesday but said they were well-funded for the future.
In a sport where sponsorship contracts are generally negotiated to run for three and sometimes five years, and spaced out to ensure they do not all expire at once, the former champions can expect to weather the immediate storm.
However big-spending manufacturer teams may be more vulnerable to the parent company's board looking at the bottom line and deciding enough is enough.
"It's a lot of money that can be addressed with one swish of the red pen," said Parr.
BMW, Fiat (Ferrari), Honda, Mercedes (McLaren), Renault and Toyota all either wholly or part own teams - some with budgets of more than $400 million a year - against a backdrop of dwindling sales and sinking share prices.
Some, such as Toyota, have pumped billions of dollars into the sport with little to show for their investment. Honda, whose car promotes environmental awareness rather than any major external sponsor, have also spent hugely.
"Those teams that are very dependent on car manufacturers for funding and don't have commercial sponsors might be under more pressure," former Benetton and BAR team boss David Richards said.
"But there is unlikely to be any knee-jerk reaction. It (withdrawal) is such a high-profile decision to make."
To try to bring down the costs, the teams have formed an association to work with the FIA and commercial rights holders.
"I think it is absolutely urgent," Parr said of the need for cost-cutting. "Whatever measures we take must be in place for 2010. Anything beyond that is too late, both the teams and the FIA recognize that.
"The car manufacturers could halve their spending in Formula One tomorrow," he added. "I know that because, guess what, I know what we are spending. Why does anyone have to spend more than Williams spend on going racing?"
Agencies
(China Daily 10/03/2008 page11)
