54 GP RACING JULY 2020
the circumstances, although an element of risk
remains which will require constant vigilance.
Shortly before this issue ofGP Racingclosed for
press, for example, New Zealand declared itself
free of COVID-19 and released its lockdown
measures (which included sports such as Super
Rugby being played in front of live crowds), only
for two British visitors to test positive. Likewise,
China experienced a spike in cases in Beijing.
“The financial impact for sure will be this
year,” says Szafnauer. “I don’t know how
significant because we don’t know whether we’ll
get to 15, 16, 18 races. I hope weget that many in.
And I also don’t know how many will have fans
and how many won’t, so unless you have that
definition it’s really hard to pinpoint the revenue.
Hopefully by nextyear we’ll be back to normal.
“We’re working through what the payment
profiles look like for our sponsors based on how
many races we do. Some sponsors are saying,
‘Well, we’ve committed to this, sowe’ll pay you
in full.’ Others are saying a pro rata amount
works better for them. I can understand both.
Long-term sponsors generally take the view
that the relationship is for more than one season
and they’re prepared to stick with you through
thick and thin.”
Although Racing Point halted construction
of its new factory in March, it still intends to
complete the project. It now intends to occupy
the premises a year later thanplanned, in the
summer of 2022 rather than 2021. It is also
continuing to recruit at a time when other teams,
notably McLaren, are downsizing.
“The nicething with us is that apart from
Haas – which has a completely different business
model, with a lot of outsourcing –we still have
the smallest number of employees,” explains
Szafnauer. “Inclusive of Haas, I’m pretty sure
we have the smallest budget. When something
like this hits, and you’re the most efficient –
or you have the least number of employees and
the smallest budget – it’s easier to ride the storm,
so to speak.
“We had plans to continue hiring up to a
certain level and we’re still doingso, eventhough
I understand there areother teams that are
letting peoplego. Our strategy inexpan ding
hasn’t changed. We weren’t going to expand to
anywhere near the numbers some of the bigger
teams have, but definitely bigger than we were.We’ve gone from 405 to 465 from the time it was
Force India to now, andwe will probably add
in the region of the same again, maybe 50 more
people. But that’s about it.
“525 or so is still pretty smallwhen you have
around 1100 at Mercedes and over 900 at Red
Bull. The cost cap I think will mean they have
to look at getting smaller, having a smaller
workforce, but we won’t. We will ‘rightsize’
the business for what weplan to do fr om a
competitive standpoint, and that won’t be
impacted by the cost cap.”
Having been theproverbial bone of contention
for several years now, prompting the likes of
Ferrari to threatento flounce out ofFormu la 1
as recently as last April, the budget cap may
now be the saviour of the category. Noless
an eminence than F1 managing director of
motorports Ross Brawn has said it has proved
vital to the continued involvement of both
manufacturers and independents.
A salient question, though, is whether the
budget cap is realistic enough. Too high and it
could be irrelevant; too low and the human cost
of large teams forcibly downsizing would be
painful. Initially pegged in the region of $200m,
then $175m, it has been negotiated down to
$145m with a glide path insubsequent seasons
through $140m to $135m by 2023. That’s lower
than some stakeholders wanted but a higher
figure than others had demanded.
“Is that $145m figure, with the glide path, the
correct one? I don’t know,” says Szafnauer. We
came down to $145m, mainly as a result of the
pressures of the pandemic andlooking at it and
saying, ‘If this is going to be the new normal,
then perhaps $175m is too high andFormu la 1
has to do a better job on the cost cap such that
we are financially sustainable.’ Some teams
wanted the $145m to be lower –they’d have
been happier at $100m – and the big teams were
happy at $175m. Having it at $145m with a glide
path, to me, seems like a good compromise.
I always say that if the big teams and the small
teams areequally happy, or equally unhappy,
then it’s agood compromise.
“Is this indicative of F1 coming tous
[independents such as Racing Point]? Our sweet
spot wouldprobably have been below that level“SOME SPONSORS ARE
SAYING, ‘WELL, WE’VE
COMMITTEDTO THIS, SO
WE’LLPAY YOU IN FULL.’
OTHERS ARE SAYING A
PRO RATA AMOUNTWORKS
BETTER FOR THEM. I CAN
UNDERSTAND BOTH.
LONG-TERM SPONSORS
GENERALLYTAKE THE VIEW
THAT THEY’RE PREPAREDTO
STICK WITHYOU THROUGH
THICK AND THIN”
OTMAR SZAFNAUERFORMULA1 GROUP REVENUES FELL
BY 84%IN THE FIRST QUARTER OF
2020, OWING TO THE EFFECTS OF
THE COVID-19 PANDEMIC54 GP RACING JULY 2020
the circumstances, although an element of risk
remains which will require constant vigilance.
Shortly before this issue ofGP Racingclosed for
press, for example, New Zealand declared itself
free of COVID-19 and released its lockdown
measures (which included sports such as Super
Rugby being played in front of live crowds), only
for two British visitors to test positive. Likewise,
China experienced a spike in cases in Beijing.
“The financial impact for sure will be this
year,” says Szafnauer. “I don’t know how
significant because we don’t know whether we’ll
get to 15, 16, 18 races. I hope weget that many in.
And I also don’t know how many will have fans
and how many won’t, so unless you have that
definition it’s really hard to pinpoint the revenue.
Hopefully by nextyear we’ll be back to normal.
“We’re working through what the payment
profiles look like for our sponsors based on how
many races we do. Some sponsors are saying,
‘Well, we’ve committed to this, sowe’ll pay you
in full.’ Others are saying a pro rata amount
works better for them. I can understand both.
Long-term sponsors generally take the view
that the relationship is for more than one season
and they’re prepared to stick with you through
thick and thin.”
Although Racing Point halted construction
of its new factory in March, it still intends to
complete the project. It now intends to occupy
the premises a year later thanplanned, in the
summer of 2022 rather than 2021. It is also
continuing to recruit at a time when other teams,
notably McLaren, are downsizing.
“The nicething with us is that apart from
Haas – which has a completely different business
model, with a lot of outsourcing –we still have
the smallest number of employees,” explains
Szafnauer. “Inclusive of Haas, I’m pretty sure
we have the smallest budget. When something
like this hits, and you’re the most efficient –
or you have the least number of employees and
the smallest budget – it’s easier to ride the storm,
so to speak.
“We had plans to continue hiring up to a
certain level and we’re still doingso, eventhough
I understand there areother teams that are
letting peoplego. Our strategy inexpan ding
hasn’t changed. We weren’t going to expand to
anywhere near the numbers some of the bigger
teams have, but definitely bigger than we were.
We’ve gone from 405 to 465 from the time it was
Force India to now, andwe will probably add
in the region of the same again, maybe 50 more
people. But that’s about it.
“525 or so is still pretty smallwhen you have
around 1100 at Mercedes and over 900 at Red
Bull. The cost cap I think will mean they have
to look at getting smaller, having a smaller
workforce, but we won’t. We will ‘rightsize’
the business for what weplan to do fr om a
competitive standpoint, and that won’t be
impacted by the cost cap.”
Having been theproverbial bone of contention
for several years now, prompting the likes of
Ferrari to threatento flounce out ofFormu la 1
as recently as last April, the budget cap may
now be the saviour of the category. Noless
an eminence than F1 managing director of
motorports Ross Brawn has said it has proved
vital to the continued involvement of both
manufacturers and independents.
A salient question, though, is whether the
budget cap is realistic enough. Too high and it
could be irrelevant; too low and the human cost
of large teams forcibly downsizing would be
painful. Initially pegged in the region of $200m,
then $175m, it has been negotiated down to
$145m with a glide path insubsequent seasons
through $140m to $135m by 2023. That’s lower
than some stakeholders wanted but a higher
figure than others had demanded.
“Is that $145m figure, with the glide path, the
correct one? I don’t know,” says Szafnauer. We
came down to $145m, mainly as a result of the
pressures of the pandemic andlooking at it and
saying, ‘If this is going to be the new normal,
then perhaps $175m is too high andFormu la 1
has to do a better job on the cost cap such that
we are financially sustainable.’ Some teams
wanted the $145m to be lower –they’d have
been happier at $100m – and the big teams were
happy at $175m. Having it at $145m with a glide
path, to me, seems like a good compromise.
I always say that if the big teams and the small
teams areequally happy, or equally unhappy,
then it’s agood compromise.
“Is this indicative of F1 coming tous
[independents such as Racing Point]? Our sweet
spot wouldprobably have been below that level“SOME SPONSORS ARE
SAYING, ‘WELL, WE’VE
COMMITTED TO THIS, SO
WE’LL PAY YOU IN FULL.’
OTHERS ARE SAYING A
PRO RATA AMOUNTWORKS
BETTER FOR THEM. I CAN
UNDERSTAND BOTH.
LONG-TERM SPONSORS
GENERALLY TAKE THE VIEW
THAT THEY’RE PREPARED TO
STICK WITH YOU THROUGH
THICK AND THIN”
OTMAR SZAFNAUERFORMULA1 GROUP REVENUES FELL
BY 84%IN THE FIRST QUARTER OF
2020, OWING TO THE EFFECTS OF
THE COVID-19 PANDEMIC