The World Motor Sport Council of the International Automobile Federation (FIA), the sanctioning body of Formula One, announced in Paris on Thursday its regulations for cost cutting in the sport. The Council imposed a spending cap of ?40 million ($58.9 million), ?10 million ($14.8 million) more than the amount originally proposed. The figure was arrived at through a cost analysis that determined 70 per cent of competitors could show a profit on that budget.
A report commissioned by global financial services firm Allianz a few years ago put Formula One fourth on the list of biggest-spending sports, behind the Olympic Games, the FIFA World Cup soccer tournament, and America's Cup yachting. None of those contests is held on an annual basis, making F1 the spendiest sport running every year. The series contests 17 races this year.
The cap, to be in effect from 2010, doesn't cover marketing and hospitality, driver salaries or driver development schemes, FIA fines or penalties, engine costs -- for 2010 only -- costs that can be shown not to affect performance, or dividends, including tax, paid from profits relating to championship participation. Formula One stages championships for constructors and for drivers.
The spending cap is optional. Teams can elect each year whether to participate.
Teams choosing to abide by the cap will be allowed greater technical freedom, primarily use of movable front and rear wings, and unlimited engine revolutions. They also will be allowed unlimited out-of-season testing and wind tunnel use. Engines currently are limited to 18,000 rpm. Cosworth, which dropped out of F1 in 2006, is said to have an affordable engine available that could generate 20,000 rpm.
All teams intending to compete in 2010 are subject to a refueling ban, which is intended to cut costs and promote better fuel mileage. All teams are also subject to a tire-warmer ban.
The Council will name a three-member commission to monitor spending of teams choosing the budget cap. Commissioners will be independent of teams. Teams working under the cap will bear equally the cost of the commission.
A spending cap is seen as particularly beneficial to independent teams, which are thought to lack the funding available to factory-conected teams. A global fall-off in automobile sales, which in part forced Honda out of the sport in December, has hurt factory-backed teams. Toyota and Renault cut F1 budgets. Mercedes parent Daimler this week announced a loss of nearly $2 billion for the quarter ending in March.
The Formula One Teams Association formed last season to influence the FIA in the matter of a budget cap. They agreed a series of cost-cutting measures and will meet next week in London to consider today's announcement.
"Williams has supported the introduction of a budget cap since the idea was first put forward early in 2008," said independent team owner Frank Williams. "Since then, FOTA has made tremendous steps forward on costs, but the rationale for a budget cap has also grown even stronger. We would like to see all the teams operating to one set of regulations and under a budget cap in 2010, and that is the position we will be advocating within FOTA when we meet next week. We understand that this will represent a serious challenge for some of the teams, but we expect that FOTA will work together to find a unified and constructive way to take the FIA's initiative forward."
The Council also opened competition to as many as 13 teams or 26 cars, a number not seen in the sport for 15 years. Ten teams currently put 20 cars on race grids. The FIA will take applications for the 2010 season between May 22 and 29, at which time teams must state if they choose to work under the budget cap. The list of accepted cars and drivers will be published June 12. In addition to a United States-based team that earlier this year announced an intention to compete next year, Lola and iSport have been hinting at an interest in entering the series.
Bernie Ecclestone's Formula One Management, which manages the sport's commercial rights, will include new teams among participation and expense payees. This includes an annual payment of $10 million. FOM also provides each team shipping to non-European races of two chassis and 22,000 pounds of gear, and 20 economy-class air tickets. Teams eligible for FOM consideration must be considered constructors and must prove their capability to produce, finance and run a team.
In other action, the Council announced a change to a previously approved World Rally Championship calendar. Indonesia and Russia did not pass inspection and are not approved to run in 2010. Rally Monte Carlo may ask to rejoin in 2011 instead of 2010. Proven events will take the places of dropped races to fill the calendar.
In Formula Two, the Council approved a scheme for drivers to drop scores from two races.