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Hope for Honda as costs set to fall?

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Hope for Honda as costs set to fall?
Feb 4, 2009, 1:08 PM

There is a deafening silence coming out of Honda at the moment.

There is a deafening silence coming out of Honda at the moment. The initial deadline of 31st January has passed and now it seems that efforts are focussing on a management buyout. This, of course, requires capital funding, which is in very short supply in the world at this time.

Honda likes the idea of a management buyout because it will turn out to be much cheaper for them than simply shutting the factory down and laying off all the workers. There is some interest in the assets of the team, should they be sold off. I'm told that one of the America's Cup yacht racing teams is interested in the new wind-tunnel which was commissioned just a couple of years ago.

But the picture seems to be that there are some players out there interested in F1 if the budgets can be brought down to a realistic level. There are people willing to play for £50 million a year, but none willing to play for £150 million. Cost containment is an area where much work is going on at the moment within the FIA and FOTA, the teams' association and, from what I've learned in the past week, the next month will see some dramatic changes there.

What's important to remember is that a team like Honda, which finished 9th in the world championship last season, will receive around £40 million from Bernie Ecclestones FOM company, its share of the TV and other commercial revenues. This is a pretty good start, if your total budget is only £50 million per year, but a drop in the ocean if you need £150 million to compete.

The hope for Honda is that over the next months the FIA is looking to slash the costs of competing to such an extent that it is realistic to go racing on a budget of around £50 million for an independent team.

Having discarded the idea of budget caps, the FIA and the teams now believes that the way to contain costs, while offering a fair and level playing field, is to reduce the number of areas in which the teams compete with each other technically.

The key question is how many areas you make non-compete? In a time of economic crisis like this, if you only allow teams to compete in a few areas of the car, or at least outlaw competition in certain expensive areas, which are also invisible to the public, then you can maintain the 'awesome technology' brand, on which F1 trades, while keeping the costs to a minimum and thus holding on to the teams you have. That is the FIA's view. If effort is focussed on obvious things which the public can talk about and get excited about, there is no suggestion of dumbing down the sport.

When the good times come back and there is more money available, you can increase the areas of the car the teams can compete with each other on, although the FIA will want those to be relevant to society, so will have a strong fuel efficiency slant.

The teams, especially the front runners like BMW, Ferrari and McLaren will resist this. They do not want to see many areas of non-compete, not least because they have built huge factories and staff and their business models are not based on low-cost F1.

Ron Dennis says that if you go too far down that road then the drivers will make the difference and all the money will go on paying them. I see his point, but isn't an F1 where the driver makes the difference precisely what most fans want?

As long as you have some 'awesome technology' which people can see and marvel at and chat about in the pub it is still F1. Most of you reading this are real fans, do you know or care about the endless refinements in the wind tunnel which go into a brake duct?

Already engines are a 'non-compete' area (although you won't get the teams to admit that, for image reasons), this was agreed in December. Now the idea is that gearboxes will become a non-compete area and so will the corners of the car, the wheels, brakes and suspensions and plenty more. These are areas of the car the public does not see, nor cares about, where huge amounts of money are spent on continuous development. KERS, the hybrid technology new for 2009, has proved to be an expensive idea and it may well be standardised for 2010, as the electronic control unit was in 2007.

Under the new plan, teams who opt to compete in a certain area of technology from 2010 onwards will be allowed to spend money on it, if they like, but they have to allow other teams to purchase their technology at a capped rate.

On this basis, without overtly dumbing down the sport, it should be possible to have independent teams operating on a budget of £50 million per season, of which £30 million is fixed costs (factory, staff, travel and racing) and £20 million is building the car. Top teams might be expected to spend £20-50 million more but with diminishing returns.

But even with the discrepancy between the manufacturers and the independents' budgets, the enforced technology transfer in areas of competition will mean that it should be possible for the smaller teams to be competitive, think Toro Rosso last year, but even more so.

If this all happens, 'Son of Honda' if there is to be one, will not be a top team, clearly. But it can be a very respectable one, which can aim to survive and compete in F1.

If they can get the rules and costs lined up properly in the next few weeks, so should everyone else.
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