The FIA’s latest decision to put a £40 million budget cap could test the unity of the teams.
The FIA’s decision to introduce $ 59 million budget cap — with the intention of reducing expenditure in this harsh economic environment — is bound to test the unity of members of Formula One Teams Association (FOTA). FOTA was formed in July 2008 to give a united voice to the teams in order to counter the overwhelming influence of FIA and Formula One Management.
It may be recalled that FOTA and FOM, the commercial rights holder, are in discussions over the issue of revenue sharing with the former demanding a bigger share of the pie. However, the latest cost-cap decision could create difference within FOTA members because of the huge disparity in teams’ budgets. This could ultimately result in a two-tier championship for the next year.
According to Formula Money, Toyota was the biggest spender in 2008 with a budget of $ 445.6 million while Force India had the lowest budget of $ 121.85 million. While six teams had budget in excess of $ 350 million, the remaining four managed the 2008 season with expenditure not exceeding $ 165 million. With the kind of sops that have been offered by FIA to those teams who accept the cost cap (movable front and rear wings, an engine which is not subject to a rev limit and double power for KERS), it won’t be surprising if some teams get tempted to accept the cost cap.
The intriguing aspect of FOTA’s decision is the figure of $ 59 million. With sponsors feeling the heat of economic recession, it was clear that the budgets had to be reduced. Even FOTA members had admitted the same. However, the teams had proposed a gradual scaledown in budgets.
For a team that employs hundreds of employees and has massive R&D running cost, cutting the annual budget from $ 400 million to $ 59 million in a single year is impossible. Also, such a drastic reduction would automatically lower the brand value of some of the big teams.
However, teams with budget in the $ 150 million range, could at least weigh the merit of FIA’s proposal if not discard it completely. The May 6 meeting of FOTA, therefore, assumes great significance not only in terms of next year’s championship but also for the future of the sport in general.
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