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Leaked letter to Ecclestone shows small F1 teams' desperation over unfair F1 money distribution

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Leaked letter to Ecclestone shows small F1 teams' desperation over unfair F1 money distribution
Nov 17, 2014, 7:44 PM

The F1 Drivers' World Championship is not the only thing coming to a head this weekend - it looks as though the smaller teams in F1 are set to pres...

The F1 Drivers' World Championship is not the only thing coming to a head this weekend - it looks as though the smaller teams in F1 are set to press their case for a fairer distribution of the sport's commercial revenues.

A leaked letter today written by Force India's deputy team principal to F1's commercial boss Bernie Ecclestone and signed by Force India, Sauber and Lotus, calls for an urgent meeting in Abu Dhabi and claims that F1 is heading towards customer cars and grids filled out with "Super GP2" cars.

It highlights that the 2014 Prize Fund will "contain approx. US$ 835 million out of which approximately US$ 412 million is distributed amongst 4 teams in the Strategy Group" (Ferrari, Red Bull, McLaren, Mercedes and Williams).

In contrast the three smaller teams receive income from FOM ranging between US$52 and $64 million per year each.

As the final race of the season approaches this weekend, clearly the smaller teams want to use the occasion with all the attention focussed on it to push for change, "we request you, together with the other stakeholders, to implement a more equitable distribution" Fernley writes.

"Since Austin, Lotus, Sauber and Force India F1 have been in communication with Donald [Mackenzie of CVC] and your good self in order to highlight the critical situation independent constructors in Formula 1 are facing today. From our meetings we noted positively that our concerns were acknowledged and there was a basis for a constructive dialogue. However, after our meeting in Brazil we clearly see the direction of Formula 1 towards customer cars / super GP2. It is equally clear that the Strategy Group has no intention at all to reduce costs."

The letter also says that the smaller teams did not vote for the new hybrid V6 engines, these were forced onto them by the manufacturers, but the teams have to deal with the fact that installing and running these expensive units eats up most of the money they receive from FOM.

"70% - 80% of the FOM income has to be allocated to the engine. For us, as engine customers, the engine technology, i.e V6 or V8 turbo-charged or hybrid, is of much less significance, as opposed to engine manufacturers, who are using Formula One as a marketing tool to showcase high-end technology. Unlike manufacturer-owned teams, our core business is Formula One.

"Yet, we have no choice but to spend most of our income on the engine, and the remaining 30% is by far not enough to construct, enter and run a team over a twenty race season."

Monisha Kaltenborn, Bob Fernley

The smaller teams take exception to the accusation that they are in trouble because they don't know how to run their businesses, claiming that the cost of the V6 hybrid turbos runs to around $43 million per team on average for PU and the cost of installing it, gearboxes etc.

However research by this website has revealed that the cost of the lowest price 2014 Power Unit alone, without gearbox and other in-house costs, is closer to $20 million a season.

The sense of desperation is clear from some inflammatory language in the letter, particularly the use of the word "Cartel" to describe the group of individuals which is now making all the decisions in F1. The letter speaks about the bilateral agreements done between Bernie Ecclestone and the teams, which are the root of the distribution of finds we have in F1 today.

"The shareholder’s (sic) focus during the negotiations was on securing the co-operation with big teams in view of the planned IPO; we were effectively given no room for negotiation. Furthermore, the impact of providing various share options to key people and entities may well have clouded their judgement in respect of creating what is effectively a questionable Cartel comprising, the Commercial Rights Holder, Ferrari, Red Bull, Mercedes, McLaren and Williams, controlling both the governance of Formula One and apparently, the distribution of FOM funds.

"Whilst the FIA are involved in The Strategy Group, they are impotent to act."

Donald Mackenzie, CVC

The smaller teams have put proposals to Ecclestone to control costs without specifically limiting budgets, instead limiting the number of developments allowed per season. As it's impossible to police what work goes on among manufacturer teams like Mercedes, Ferrari and (McLaren) Honda, the idea is to control what is measurable, which is the updates on the cars as they arrive at the track for the Grands Prix.

So, for example, the top teams could spend as much money as they liked on a new front wing, but only on selected occasions in a season, not on a constant and ongoing basis.

What do you think should happen next? Should the smaller teams be given more money to survive or should F1 go to a two tier system with customer cars or Super GP2 cars? Have your say below in the Comments Section
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