52 GP RACING JULY 2020
he truth isout therein the form
of grim economic statistics posted by
countries thewor ld over: on top of the
disruption to everyday life, and the
hundreds of thousands of unnecessary
deaths, COVID-19 has brought
financial ruination. In the UK alone,
Gross Domestic Product (GDP) – the essential
barometer of a country’s economic health –
plunged moreprecipitously in Aprilthan it did
during the global financial crisis of 2008, or any
other previous recession for that matter.
For that reason, many professional sports
- including Formula 1 – are desperate to get
back to some form of business before the cash
runs out. They are teetering on the brink of that
figurative precipice. Liberty Media, owner of
F1, has reshuffled its finances to afford short-
term protection not just for the commercial
rights holder, but for the competitors who
depend on it. Already facing its own cashflow
issues owing to cancelled and postponed events,
F1 has had to advance payments to struggling
teams. Even then, two of the biggest names in
the business – McLaren and Williams, among
the most successful operations of all time –
face an uncertain future.
So is allthe talk of F1 “coming back stronger”
a realistic aspiration, or mere platitudinous cant?
Is it now just a question of survival?
What the pandemic has done is expose major
structural weaknesses in the F1 ecosystem.
And although the stakeholders have united to
agree a swathe of measures previously thought
impossible topush through – including a
reduced budget cap, and design freezes and
development limits on high-cost parts – all the
businesses that rely on grand prix racing face
a jittery few months.
“We went through a learning process we
are not used to,” says Haasteam principal
Guenther Steiner. “Reacting quickly is something
we’re good at, reacting collectively we’re
normally not...
“We banged our heads together and came
out a bit more united for the time being.
I don’t know how long it will last. What it [the
pandemic] has shown is that as businesses we’re
too much on the edge – any disruptionthreatens
to tip us over the edge. We don’t have any reserve
fuel in the tank, let’s say.”
Sudden economic shocks such as the
interruption wrought by COVID-19 not only
provide the final nudge required to tip an already
struggling business into crisis, they can also
hobblesuccessful enterprises. Williams, for
several seasons now astragg ler at the back of the
grid, was vulnerableto scenarios such asunpai d
sponsorship. What’s most shocking in this case is
that it’s a family-ownedbusiness whose leaders
have previously been adamant that theywould
neversell. Andyet there it is. McLaren, for its
part, had a portfolio of successful businesses
within the group, including a rapidly expanding
high-end road car manufacturer – but the
bottom hasfallen outof that market. In trying
to shoreup its position McLaren has sought to
raise bonds using assets such as its heritage cars
and factory as collateral... but those are already
claimed by holders of a previous bond, issued to
buy Ron Dennis out of the business in 2017, and
now the subject of a court battle
F1’s cost cap, due to come into force nextyear,
has therefore taken on increased relevance. When
first mooted, its critics dismissed its value,saying
that the teams withthe deepest pocketswould
‘pre-load’ by spending as much as possible now.
Circumstances have changed and the budget cap
now offers a lifeline –both to the cash-strapped
independents andthe manufacturer outfits
whose owners are nowpondering the wisdomof
ongoing involvement in racing when they have
showrooms full of unsold cars.
“This pandemic hit at a time when a lot
of our costs were sunk for the season,” says
Racing Point team principal Otmar Szafnauer.
“Designing, building, manufacturing
components, putting the car together – that had
all happened and that’s a big part ofour costs.
So that bit of it we couldn’t really save on.
“However, what we [the teams]did do,
together with the FIA, we made some smart
decisions on homologating components so
that for the rest of this year and next year we
can’t develop themfurther. That will help save
a significant amount of money – because
althoughthere were a lot of sunk costs involved
in getting ready to race in Australia, we would
normally spend a lot of money upgrading
throughout the season.
“So I think we’ve done a smart job with
the token system, and the homologation of
componentsthat are expensive to develop,
such that all teams can save money – which
we haveto, no w that the revenues have
significantly decreased.”
With a denuded calendar – currently eight
Europeanevent s – the amount of incomethe
teams will receive as a share of the prize pot
remains uncertain, hence the push to start
racing again and fulfil contractual obligations
to promoters, broadcasters and so on. This
represents an operational challenge for this
“WE BANGED OUR HEADS
TOGETHER AND CAME OUT
A BIT MORE UNITED
FOR THE TIME BEING.
I DON’T KNOW HOWLONG
IT WILL LAST. WHAT IT
[THE PANDEMIC] HAS
SHOWN IS THAT AS
BUSINESSES WE’RE TOO
MUCH ON THE EDGE – ANY
DISRUPTION THREATENS
TO TIP USOVER THE EDGE.
WE DON’T HAVE ANY
RESERVE FUEL IN
THE TANK”
T
GUENTHERSTEINER
McLARENANNOUNCED1,200
REDUNDANCIESDUETO THEPANDEMIC,
OFWHICHAPPROXIMATEL Y70 WILL
COMEFROMTHE 800 - STRONGF1TEAM
52 GP RACING JULY 2020
he truth isout therein the form
of grim economic statistics posted by
countries thewor ld over: on top of the
disruption to everyday life, and the
hundreds of thousands of unnecessary
deaths, COVID-19 has brought
financial ruination. In the UK alone,
Gross Domestic Product (GDP) – the essential
barometer of a country’s economic health –
plunged moreprecipitously in Aprilthan it did
during the global financial crisis of 2008, or any
other previous recession for that matter.
For that reason, many professional sports
- including Formula 1 – are desperate to get
back to some form of business before the cash
runs out. They are teetering on the brink of that
figurative precipice. Liberty Media, owner of
F1, has reshuffled its finances to afford short-
term protection not just for the commercial
rights holder, but for the competitors who
depend on it. Already facing its own cashflow
issues owing to cancelled and postponed events,
F1 has had to advance payments to struggling
teams. Even then, two of the biggest names in
the business – McLaren and Williams, among
the most successful operations of all time –
face an uncertain future.
So is allthe talk of F1 “coming back stronger”
a realistic aspiration, or mere platitudinous cant?
Is it now just a question of survival?
What the pandemic has done is expose major
structural weaknesses in the F1 ecosystem.
And although the stakeholders have united to
agree a swathe of measures previously thought
impossible topush through – including a
reduced budget cap, and design freezes and
development limits on high-cost parts – all the
businesses that rely on grand prix racing face
a jittery few months.
“We went through a learning process we
are not used to,” says Haasteam principal
Guenther Steiner. “Reacting quickly is something
we’re good at, reacting collectively we’re
normally not...
“We banged our heads together and came
out a bit more united for the time being.
I don’t know how long it will last. What it [the
pandemic] has shown is that as businesses we’re
too much on the edge – any disruptionthreatens
to tip us over the edge. We don’t have any reserve
fuel in the tank, let’s say.”
Sudden economic shocks such as the
interruption wrought by COVID-19 not only
provide the final nudge required to tip an already
struggling business into crisis, they can also
hobblesuccessful enterprises. Williams, for
several seasons now astragg ler at the back of the
grid, was vulnerableto scenarios such asunpai d
sponsorship. What’s most shocking in this case is
that it’s a family-ownedbusiness whose leaders
have previously been adamant that theywould
neversell. Andyet there it is. McLaren, for its
part, had a portfolio of successful businesses
within the group, including a rapidly expanding
high-end road car manufacturer – but the
bottom hasfallen outof that market. In trying
to shoreup its position McLaren has sought to
raise bonds using assets such as its heritage cars
and factory as collateral... but those are already
claimed by holders of a previous bond, issued to
buy Ron Dennis out of the business in 2017, and
now the subject of a court battle
F1’s cost cap, due to come into force nextyear,
has therefore taken on increased relevance. When
first mooted, its critics dismissed its value,saying
that the teams withthe deepest pocketswould
‘pre-load’ by spending as much as possible now.
Circumstances have changed and the budget cap
now offers a lifeline –both to the cash-strapped
independents andthe manufacturer outfits
whose owners are nowpondering the wisdomof
ongoing involvement in racing when they have
showrooms full of unsold cars.
“This pandemic hit at a time when a lot
of our costs were sunk for the season,” says
Racing Point team principal Otmar Szafnauer.
“Designing, building, manufacturing
components, putting the car together – that had
all happened and that’s a big part ofour costs.
So that bit of it we couldn’t really save on.
“However, what we [the teams]did do,
together with the FIA, we made some smart
decisions on homologating components so
that for the rest of this year and next year we
can’t develop themfurther. That will help save
a significant amount of money – because
althoughthere were a lot of sunk costs involved
in getting ready to race in Australia, we would
normally spend a lot of money upgrading
throughout the season.
“So I think we’ve done a smart job with
the token system, and the homologation of
componentsthat are expensive to develop,
such that all teams can save money – which
we haveto, no w that the revenues have
significantly decreased.”
With a denuded calendar – currently eight
Europeanevent s – the amount of incomethe
teams will receive as a share of the prize pot
remains uncertain, hence the push to start
racing again and fulfil contractual obligations
to promoters, broadcasters and so on. This
represents an operational challenge for this
“WE BANGED OUR HEADS
TOGETHER AND CAME OUT
A BIT MORE UNITED
FOR THE TIME BEING.
I DON’T KNOW HOWLONG
IT WILL LAST. WHAT IT
[THE PANDEMIC] HAS
SHOWN IS THATAS
BUSINESSES WE’RE TOO
MUCH ON THE EDGE – ANY
DISRUPTION THREATENS
TO TIP USOVER THE EDGE.
WE DON’T HAVE ANY
RESERVE FUEL IN
THE TANK”
T
GUENTHERSTEINER
McLARENANNOUNCED1,200
REDUNDANCIESDUETO THEPANDEMIC,
OFWHICHAPPROXIMATEL Y70 WILL
COMEFROMTHE 800 - STRONGF1TEAM