Making the cap fit for all the Formula One teams

Even the rich sport is feeling the pinch and, Gary Meenaghan writes, teams are looking at ways to limit budgets and give all teams an equal chance.

Teams such as Red Bull Racing and McLaren-Mercedes – pictured above during a pit stop in a practice session yesterday– have larger budgets than other teams .

As the F1 circus returned to its traditional European base this week ahead of the Spanish Grand Prix, the race teams' gargantuan motorhomes made their first outing of the season. With their finger buffets, plush leather seats, spiralling staircases and state-of-the-art technology they, as they always do, dominate Barcelona's Circuit de Catalunya like opulent, overbearing relatives at a family reunion.

However, as F1 continues to evolve and expand - the sport returns to the United States this season for the first time since 2007 - it does so amid an unrelenting and globally felt financial gloom. And for all their displays of decadence, teams too are writhing in the aftershocks of a recession.

It is little wonder Bernie Ecclestone, the chief commercial rights owner of Formula One and the sport's supremo, recently recommended teams "refocus again on the basics - on racing, spending on the sport - and not on baronial motorhomes and all kinds of entertainment".

Financial instability has been an issue in F1 for many years, but it reached its nadir at the height of the recession in the late 2000s when Honda, Toyota and BMW all felt it necessary to quit the sport.

Max Mosley, the former president of the governing body for world motorsport, had prophesied the scenario and earlier insisted a budget cap was essential to curtail spending and avoid further pull-outs.

The Englishman, however, was vilified for his suggestions and eventually ousted from his role as head of the Federation Internationale de l'Automobile. One of his biggest critics was, ironically, BMW.

Yet since then, while three new teams have joined the sport in the form of Hispania, Caterham and Marussia, the issue of cost cutting has remained prominent on the agenda.

When the Concorde Agreement - a three-way contract between the teams, the FIA and Ecclestone that lays out how Formula One is run and its revenues distributed - went unsigned until the clause including a budget cap was removed, it was supplemented instead with what was titled the Resource Restriction Agreement (RRA).

The RRA is a complicated beast, courtesy of its ambiguity. The agreement was described on August 1, 2009 in an FIA statement announcing the successful negotiations as a way "to return expenditure to the levels that prevailed in the early 1990s".

The resultant problem, however, is there is no definitive figure with which teams must work within. The likes of Red Bull Racing and McLaren-Mercedes operate on a far greater budget than the three new teams.

With rumours swirling around the paddock that more than three teams are in serious financial trouble and with the current Concorde Agreement expiring at the end of this year, urgency for clearer cost control is growing. A letter was sent to the FIA at the start of the season asking the federation to continue the process of looking at expenditure reduction, but it was only signed by 10 of the 12 race teams. Red Bull and sister team Toro Rosso refused.

Martin Whitmarsh, the McLaren team principal, said "the fact is at the moment we all know there are Formula One teams that are struggling to survive," while Stefano Domenicali, the Ferrari team manager, said: "We know the situation of Formula One is not so stable."

He added: "We know that there are a lot of struggles around so we need to put aside our self-interest a little bit, to make sure that we can look ahead in order to make sure that we are a lot competing in Formula One, because this is a very critical period, where everyone is smiling, but we know that it's very tough."

Luis Perez-Sala, the team principal of back markers Hispania Racing Team, has had to repeatedly deny reports that his marque may not have the finances to reach the end of the season. He insists this season's budget is in place and financial constraints will not become an issue this year.

He said he is not opposed to a limit being put on expenditure, but would rather the FIA focus on finding a solution that allows teams to operate at the same level, or higher, while spending less money.

"For us, it is not the budget cap that is important because we are well below the other teams' expenditure," he said. "What we would like are regulations that mean spending less money and ways we can manage that."

The Spaniard said while the enforcement of a summer shutdown - a mandatory break that sees teams lock their factories and take a three-week break in August - is a forward step, more regulations must now be added. "Things are moving in the right direction. The most important thing for us is for the small teams to have the possibility to be quicker without spending such large amounts of money. Maybe we can try to get more things from the big teams," Perez-Sala said.

Monisha Kaltenborn, the Sauber chief executive who has in the past backed the idea of a budget cap, said yesterday that the Formula One Teams Association and each of the teams who do not fall under the Fota umbrella are putting together their own individual proposals as to how to reduce expenditure. These will then be submitted to the FIA, who will be tasked with the job of compiling a document that takes into account each team's interests.

Perez-Sala said he hopes an outcome will be reached "in the next three or four months".

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