With the new Formula 1 season almost upon us it is incredible that we still do not know who will take to the grid for the season opener. This season there is an influx of new teams that have swelled the grid to thirteen teams. The new teams are Virgin Racing, Lotus, Campos-Meta and USF1. The later two’s participation is in serious doubts due to financial difficulties. Both are struggling to raise the necessary capital for a full season of racing. Who is to blame for this situation? It’s very easy to say Peter Windsor bit off more than he could chew when he set up a Formula 1 team in Charlotte, North Carolina or that Adrian Campos should have known better than to enter the tendering process with precious few sponsors. But the real reason that these teams are struggling to make the grid has been overlooked by many and it is actually the fault of motorsport’s governing body, the FIA.
When the FIA decided to open its books for new entrants into Formula 1 last summer, then FIA President Max Mosley said that there would be a budget cap of $40 million per team. This decision was taken in order to make it easier for new teams to raise the capital required to enter Formula 1. After the tendering period was over and the new entrants announced, the FIA made a statement confirming that the budget cap would not be implemented and that there would be no restrictions on spending for teams. This left the new teams in a dilemma. Do they continue as planned with the budgets in place or do they look for outside investors to come on board and help finance the operation?
Manor Grand Prix was one of the new teams chosen to enter Formula 1 but when their owner, John Booth, discovered that the budget cap was not to be implemented, he immediately looked to find investors for his team. He found one in Richard Branson and sold his team to Branson’s Virgin group, renaming the team Virgin Racing. With this deal in place the team’s position on the grid was secured and they could concentrate on the development of the car.
The Lotus team was founded with the support of the Malaysian government and many investors from that area including Proton and Tony Fernandez, owner of Air Asia. As a result raising the increased budget hasn’t been a big problem for this team.
That leaves Campos and USF1.
Campos have struggled with funding and Bernie Eccelstone has said at various times that he doubts whether the team will be able to find the budget to go racing. The team has an agreement with the chassis constructor Dallara. However Adrian Campos has been quoted as saying that they are struggling to make payments to Dallara, “Sometimes we pay the instalment of €7 million to Dallara and sometimes we don’t have the money to make the payment.” At this stage for the team to be struggling to make payments on their chassis means that it is highly unlikely that they will be in Formula 1 long term.
USF1 is in a somewhat similar situation to Campos. The team was founded with the aim of making Formula 1 relevant in America. The team planned to do this by basing the majority of their activities in the US and making the team accessible to fans of the sport. At first it seemed that they were on a good footing financially due to the investments made by YouTube founder Chad Hurley and other key parties. Again these investors became involved when the team said that there would be budget caps in place and as a result their investments would not be as large as would otherwise be the case. When the budget caps were not ratified by the FIA Windsor and USF1 had to go back to their investors and make a case for increased investment. Formula 1 does not have a significant television market share in America and as a result it is quite easy to see why Hurley and the other investors have baulked at an increase in financial support. If the team was based in Europe and had pursued investment on this side of the Atlantic it is probable that they would have found investment opportunity easier than the situation in which they currently find themselves in.
The FIA’s decision to backtrack on their commitment to budget caps in Formula 1 could directly lead to the demise of two teams before they even get to the starting grid. Max Mosley initially planned to implement the budget caps to end his time as President of the FIA on a high note with new investors and new teams entering the pinnacle of motorsport. Instead he has left with his reputation in some disarray after poor management of the sport and his personal life. The last three years of his term in office were marred with numerous altercations with teams and manufacturers about the future running of the sport and his sex scandal. There is also a feeling that he used the powers of his office to implement a personal vendetta against individuals within the sport. The budget capping episode will be added to that list and it will become clear over time that Mosley remained in office for one term too many and the improvements that he oversaw in safety will be overshadowed by the controversies in the final years of his presidency.
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