The Marussia team’s decision to drop Timo Glock for commercial reasons this week highlighted the financial challenges some teams are currently facing – but there may be an answer to the potential cash crisis.
In 2010, F1 lured in three new teams – Lotus (now Caterham), Virgin (now Marussia) and Campos Meta (which became the now defunct HRT) – with a promise of price-capped racing that never happened. Costs have continued to spiral ever since.
The efforts to introduce a Resource Restriction Agreement were more focused on reeling in extortionate spending from the front-running teams rather than ushering in a low cost solution for all participants on the grid, and now the budgets required to simply stay within the required 107 percent of the leaders are challengingly high.
After continually struggling at the back of the grid, HRT closed its doors this winter despite having some of the best brains and top F1 politicians involved in trying to nurture it and help it survive throughout its short lifetime.
Although HRT never set the sport alight, the team’s passing is a crucial blow to the sport.
Now, the latest move by Marussia to release former Toyota driver Glock, who has been with the team since day one and has been key to helping them achieve improving performance levels in the last year, because the could not afford to keep paying him to race is another chilling reminder of the current commercial pressures in the sport.
It was an open admission that things are not all rosy in the F1 garden – and it’s not just Marussia who are facing up to hard times right now.
The rate card for sponsorship has dropped significantly since the heady days of tobacco money and with most motor manufacturers staying away, the dollars to go racing are harder than ever to secure just at a time when the demands for the finance to keep pace with development is higher than ever.
In 2012’s closely-fought championship, teams right up and down the grid were forced to spend heavily to chase championship positions – because F1’s financially-incentivised prize money system meant a clutch of points could deliver significant returns if it pushed the team up the pecking order.
With that tight competition set to continue this year, teams now face a very difficult dilemma – and now the financial managers could be as vital as the technical teams.
They will need to be extremely careful to balance the temptation to gamble heavily on chasing down financial prizes with the risk of paying the ultimate price of financial stability – in much the same way as some football teams have invested heavily in an effort to reach the cash coffers of the UEFA Champions League only to fail and subsequently tumble down the leagues.
Glock’s departure from Marussia is not unique. Heikki Kovalainen, a former Grand Prix winner, looks set to lose his seat at Caterham for the same reason. At the other end of this trend, young Max Chilton has arrived at Marussia with a pot of money, potentially stopping a more experienced driver securing the seat.
But there is another way.
An F1 team can no longer survive on sponsorship money alone – not even through the hiring of a pay driver – so astute teams are diversifying to create other business ventures that can fund their F1 ‘shopfront’.
Caterham, despite its youth, is expanding its automotive group with the aim of generating profits from an enlarged car range and expert consultancy services to support its F1 adventure.
Williams are a step ahead, having expanded in this way recently with a focus on green technology.
But McLaren are the leaders, having spotted this requirement many years ago. They now have a variety of very well established businesses including McLaren Automotive – which produces extremely exclusive and highly regarded supercars - and McLaren Applied Technologies – which offers F1-honed consultancy services for anything from Olympic champions to the medical profession.
It’s not long since McLaren and Williams were racing wheel-to-wheel at the front – and it was at about that time the Woking-based team was really focusing on diversification. That, and admittedly their strong association with Mercedes, allowed them to stay at the front while Williams dropped away and are only just starting to claw back.
Teams like Marussia (their supercar business aside), Force India and Sauber, which are focused on racing alone, are naturally going to have more of a challenge to raise the funds to go racing.
A racing budget cap that restricts money spent on active development of the cars, not the creation of facilities, would certainly help the teams with lower budgets catch up. But in modern racing, it seems that neither that nor pay drivers are the solution – teams must now think outside the F1 box to survive...