Force India says $150m is a good F1 Budget

Otmar Szafnauer, Force India’s COO suggests setting a cost cap for the team’s spending to bring in fairness to the huge disparity in team budgets that plagues Formula 1. The cap needs to be realistic and should not be at expense of people’s jobs. He feels a $150 million is a realistic limit.

Liberty Media, Formula 1 ‘s new owner is keen to cut the expenditures involved in operating a Formula 1 team.

The group has started a few discussions about bringing in standard parts to help cut costs. They are also planning to group the F1 schedule into regions (like Europe, Americas and Asia) to reduce the transport costs.

Talking to ESPN Szafnauer said, “We have to be pragmatic. Say the cost cap comes in a couple of years and there are people spending $250 million and have 1,000 employees – which is not farfetched – and then suddenly you say next year 100 million less, you might have to get rid of 300-500 employees and that’s a difficult thing to do. We’ve got to be pragmatic.

“But I personally think that if we say $150 million, that’s a lot of money to go racing and that’s probably an order of magnitude more than other car racing series.

“We should be able to do a fantastic job for the fans by only spending $150 million, so I think that’s a realistic figure – not to mention that half the teams don’t spend that much already.

“Although there is a cost cap, half of us would be way under and would have to do nothing. It’s just half of those teams that would have to come down to that figure, probably four out of ten spend over that.”

But the problem with a cost cap is that the manufacturing teams like Mercedes and Ferrari, who are already spending over a $150m might simply shift the F1 development to another department or find another way to skirt the limit.

How would FIA police such activities, Szafnauer said: “That’s always the question that comes up, that if we cost cap are people going to go around it?

“I think there should be methods and mechanisms to prevent that, for example, governments and taxes – there’s a huge incentive not to pay your tax because that means you keep more money, but the governments have mechanisms to test and check and prod. I’m sure there’s a lot of people getting away with it that we don’t know about, but every once in a while there is a huge fine.

“If that punishment is big enough when you get caught, then I think you can police it. And to me, the biggest deterrent in our sport is when people leave one team for another with the knowledge of what’s going on and then saying ‘you know what these guys are doing? They are circumventing the 150 million cap by this’. So whistleblowing is probably the biggest deterrent.”

While a cost cap sounds like an ideal choice coming from a team with a small budget, it may hamper progress in technology which comes out of the competition. The big teams spend lots of money because they want to innovate faster, win  races and make money from sponsorship. A Cost cap might hurt that agenda and ultimately the sport.