Inflation dispute over F1 budget cap: Nice penalties

At press conferences in Monte Carlo, supporters and opponents of surcharges for inflation in the budget ceiling were once again able to shake off the momentum. First, Mattia Binotto, Christian Horner and Mercedes chief engineer Andrew Shovlin announced an exemption. Then Otmar Sefnauer of the Alps and Frédéric Vasseur shot hard against her. McLaren boss Andreas Seidl wants more cash, but wants the exception to remain the exception.


Opponents of the budget increase are concerned about raising the cost ceiling through the back door to the level that the big teams once wanted. That was $175 million. Even Binotto admitted: “We wouldn’t have a problem with that amount.”


This is doubtful. Even with a higher threshold, the big teams would have maxed out and then found that wasn’t enough. You have to ask yourself why are they still using 800 to 900 people. It was clear from the outset that the share of the development budget would be reduced as a result.


layoffs as justification

Ferrari, Mercedes and Red Bull insist on force majeure. The Ukraine war and the associated increase in costs was no one on the bill. Mercedes team boss Toto Wolff has revealed that freight and energy costs have tripled in recent years. “For me too,” replied his friend Wasser from Sauber.


Binotto already admits that he does not see a chance for Ferrari to stay within the allowance of $141.2 million for 2022. Horner explains his statement that many teams would have to finish the season early: “It was supposed to be equivalent to what we missed if the season continued and cost us so much.” Mercedes chief engineer Andrew Shovlin spoke of a challenge that was “no longer manageable”.


The top teams are already charting mass layoffs as an answer to the problem, with Horner warning: “The layoffs don’t have an immediate budget impact, and probably won’t help us at all right now. But it can’t be in the spirit of Formula 1, that we’re losing a lot of people.” . However, it is a popular argument. On the one hand, to increase pressure, and on the other hand, to prevent deliberately exceeding the budget ceiling. So even publicly listed companies like Ferrari and Mercedes can afford to break the rules.

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The big teams will have to stop developing cars soon.

Whoever wins, wins

The top three teams are openly threatening to overshoot the budget by five percent. This is still considered a minor offense. This is just a light penalty. However, Horner fears: “If one exceeds 4.9 percent, and the other just 4.7 percent, that could be the difference in promotion and setting the world championship. Do we want that?”


There is also the concern that there will be a lot of trench warfare in the second half of the season which could hurt Formula 1. And always when a team shows up with new parts, even though they’ve already pushed the limits athletically.


None of this matters to Szafnauer and Vasseur. In their view, colleagues simply conducted poor management and are now demanding a pardon for it. Kind of like the weight limit, when the FIA ​​gave up because 90 percent of the teams went over the limit.


“They changed the rule because nine teams weren’t able to reach the minimum weight,” Vasseur said. “We can’t do the same when it comes to capping the budget. Otherwise, the whole principle will die.”


The budget is the ceiling of the budget

Albin and Sauber consider the protest of force majeure a cheap excuse. “Budgets have been planned for November and December. Inflation in England was already over seven percent at the time. We took that into account. And although shipping costs are a little higher, we can make ends meet. Do the same.”, Szafnauer laments.


And his fellow Alfa Sauber also shows no sympathy for the big business’s concerns: “My budget ceiling is my budget. And that’s less than ten million from my limit. If inflation comes now, I can’t say: I want more. I can only spend money.” that I own.”


Haas is still hesitant. The Americans are not under any pressure because they also do not exhaust the budget ceiling. Team boss Gunther Steiner put it in perspective: “The dollar has risen sharply. We get dollars, but we pay in euros or pounds. And that offsets part of the inflation.”

Alfa Romeo - Spanish Grand Prix 2022

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Not only is it expensive to make upgrades, parts to old specifications also cost a lot of money.

Three teams are enough for a veto

Alpine, Sauber and Williams all claim that the rules are strictly followed. Hoping, of course, that the teams on the field will have to stop their development early, have more strength to survive and thus reduce the gap to the top. It is also to some extent the intention of setting a budget ceiling.


According to Ferrari, many teams will be doomed to do nothing after the Canadian Grand Prix. Because then the development budget is exhausted. Shovlin states that it’s not just about the new parts. “Every part has a life. Even new old parts cost money.”


McLaren boss Andreas Seidl despairs: “Here everyone has their own agenda.” That’s why he wants a strong hand from the FIA ​​and F1 management to untie the Gordian knot for everyone’s benefit. But it is not so easy after the new majority when voting. The FIA, Formula 1 and the teams each have ten votes. 28 out of 30 votes are needed for an immediate amendment to the financial regulations, 26 out of 30 votes to one with a 2023 deadline.


Adding inflation fees as a threat

There is danger and opportunity. Alpine, Alpha and Williams can prevent everything in the short term. So you have to entice them with a smart compromise. For example, the increase in 2022 will be withdrawn next year and the surcharge will be calculated based on the $135 million and the prevailing inflation rate in September, as stipulated by the regulations. Then there is no going back. Smaller teams can also be absorbed by deducting nominal development costs for purchased parts.


There is also discussion of introducing soft penalties for those who break the budget. But what would the soft punishment be? For example, a fine or a point deduction for the probationary period. Anyone who skips this year should not do so next year. Otherwise it will be worth it. Binotto thinks everything will be easier next year anyway, although the cost cap will drop by another five million dollars. “Then we can take over parts from last year’s car again. That saves us more money.”


But there is also the blackmail scenario. The three counties could be threatened with adding additional inflation fees from 2022 and 2023 and including them in the 2023 rules in the range of up to $15 million. It only needs 26 out of 30 votes for that. Then the veto by Albin, Sauber and Williams was no longer worth anything. Formula 1 wants to take the topic off the table by the Canadian GP at the latest.


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