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Want to know how much each grand prix team really spends? DIETER RENCKEN reveals all
Autosport's The True Cost of F1 is now in its third edition, and therefore able to track the sport's commercial trends.
Despite increased spending at the sharp end, the overall picture continues to look bleak - since last year, a team (Caterham) has been lost, while two independents recently confirmed that they had filed official complaints with the EU Commission over the championship's controversial revenue and governance structures.
Another long-standing name - Lotus - relies predominantly on state funding provided by its Venezuelan driver, and stands on the cusp of extinction unless it is saved by Renault, while it is doubtful whether Sauber, Force India and Manor could survive without driver funding.
Indeed, only the continued largesse of Red Bull magnate Dietrich Mateschitz ensures the future of his two teams in the face of serious engine complications.
As McLaren can attest, no title partners or sponsors have come aboard, and existing sponsors are said to be negotiating further downwards off the back of dwindling live attendances and falling TV audiences - the latter having dropped 30 per cent over five years, with no end to the spiral in sight. Even the calendar has taken a knock: this year Germany failed to take up various discounted offers to host its grand prix.
However, it is not all doom and gloom: Honda rejoined the fray - as an engine supplier, again in partnership with McLaren - while next year marks the arrival of the first American team in over 30 years in machine magnate Gene Haas's eponymous operation. Therein, though, lies a stark reality: no start-up can afford F1's costs of entry without billionaire backing.
In any financially driven activity, budget and performance are symbiotic, and thus discrepancies far beyond pure technical and sporting skills or abilities are evident across the grid, with the best-funded teams mainly racing at the sharp end and budget operations generally bringing up the rear. The middle class just survives betwixt and between.
Since the beginning of 2013, Ferrari, Red Bull, McLaren and Williams have received Constructors' Championship Bonus (CCB) payments of varying sizes from commercial rights holder Formula One Management (FOM), with Mercedes receiving an increased windfall from 2016 after winning back-to-back constructors' titles. This structure further widens the gulf between rich and poor, and such payments are identified accordingly. Note: FOM monies are disbursed a year in arrears.
With eight (of 10) teams - including Red Bull Racing, McLaren, Mercedes, Williams and Force India - based in Britain, direct comparisons between UK-domiciled operations are facilitated by Companies House filings.
Such accounts are, though, at least nine months in arrears, and therefore interviews were requested across the board, and mostly granted. Where teams withheld information, educated estimates are applied. Various sources were consulted and cross-referenced, including filings, known variables, informed assumptions and inside information.
A new addition this year is a 'Bang-for-Buck' (B4B) table, whereby team budgets, excluding engine divisions, are divided by championship points scored as at the Brazilian Grand Prix to provide an efficiency index. Less is more, as they say.
Currencies have been converted from Euro (Ferrari/Toro Rosso), Swiss Francs (Sauber) and US Dollars (FOM) to Sterling for ease of comparison. Rates used: ￡1 = �1.35/SFr1.50/$1.50
MERCEDES
Brackley, Britain (German owned)
Full co-operation/input
Mercedes F1's activities are split into two separate units: Mercedes Grand Prix (MGP) (race operation), and High Performance Powertrains (HPP) (self-explanatory - see separate section), which operates autonomously and supplies MGP and others. The former is held 60/30/10 by Daimler, team boss/director Toto Wolff and non-executive chairman Niki Lauda, while the latter is a 100 per cent Daimler subsidiary.
While headcount - and saliently salaries per employee - increased after last year's championship success, sponsor income and FOM revenues followed suit, with Daimler's contribution, effectively viewed as global product advertising expense by the car maker, remaining stable at ￡60m. However, this continuing shortfall remains a worry, potentially causing the board to reconsider its engagement over time should results go south.
Combined, Mercedes constitutes F1's largest global spend - with commensurate headcounts - yet MGP is undoubtedly the most effective B4B operation, delivering the constructors' title at ￡350k per point, and for around ￡60m direct cost. The operation is financed by a combination of Daimler funding, sponsorship, customer activities - notably Force India and other engine customers - and burgeoning FOM revenues.
Having scored consecutive double titles, MGP - already a member of F1's Strategy Group - is now a full CCB operation, therefore qualifying for additional premium payments estimated at ￡25m/annum from 2016. Will these be used to reduce Daimler's contribution or increase already dominant performance levels?
Motorsport director Toto Wolff: "If you see it from Daimler's perspective, it's not bad: a global advertising equivalent value of �3billion in return for its contribution."
RED BULL
Milton Keynes, Britain (Austrian owned)
Full co-operation/input
Red Bull's UK-based operation draws on two interlinked companies: Red Bull Technology (RBT), which produces cars for Racing Bull Racing (RBR), the race team management entity. RBT also provides gearboxes, hydraulics and other permitted technologies to Scuderia Toro Rosso, as well as various services to other group companies, so RBR's purified budget is ￡200m, on which a modest profit is expected.
RBR, however, drops to fourth in the overall classification this season, precipitating an estimated reduction of ￡10m (for 2016) in FOM revenues. This is, though, partially offset by lower driver retainers after Sebastian Vettel's move to Ferrari and commensurately reduced performance bonuses, while a number of contractors have been appointed to staff positions - inflating payroll, but decreasing overall outsourcing costs.
The racing team's objective remains to reduce dependence on its parent company - ultimately achieving revenue-neutrality - while continuing to generate global brand exposure for the core product through successful campaigns. However, the evident downscaling of Adrian Newey's activities, the uncertain engine situation and reducing FOM revenues will prove challenging.
Team principal Christian Horner: "We've enjoyed a stable sponsor platform, and through tight cost controls have been able to post the only profit amongst British teams in 2014 despite our drop-off in performance."
WILLIAMS
Wantage, Britain (Frankfurt Stock Exchange Listed)
Full co-operation/input
Williams Grand Prix Engineering (WGPE) moved back to the sharp end after totally reinventing itself - in the process snaring Mercedes power - and it certainly paid off on the scoreboard and balance sheet over the past two seasons. WGPE has a unique business model, being F1's only listed team.
The founder Sir Frank Williams retains 52 per cent of stock, US investor Brad Hollinger has 10 per cent and newly knighted co-founder Sir Patrick Head nine per cent, while Toto Wolff (Mercedes) controls 4.9 per cent. Employee funds control 2.5 per cent, with the balance (21.6) being publicly traded on Frankfurt's Stock Exchange.
Having moved away from driver-related funding, Williams has two revenue streams: sponsors and FOM revenues, with the arrival of Unilever and BT contributing to a 50/50 split that is both unique and a lesson to other teams, while Williams Advanced Engineering - a separate business unit - benefits from technical spins-offs and provides a commercial cushion.
Chief executive officer Mike O'Driscoll: "The team's been very lucky - all the work we put in last year is paying off, and obviously that has knock-on effects on commercial discussions as we reach the mid-point of our five-year plan."
FERRARI
Maranello, Italy
Zero co-operation/input
Ferrari is unique in producing an entire car within one industrial complex. It does so by sharing facilities with the road car operation, which supports Gestione Sportiva in lieu of advertising.
This complicates issues, for internal policies make accurate revenue/profit splits impossible - with October's IPO on the New York Stock Exchange serving both to obfuscate matters and divulge previously withheld information.
2015 marks the first year under a totally revised management structure - from president Sergio Marchionne, who committed increased budgets, down - but the new arrivals, particularly team boss Maurizio Arrivabene and quadruple champion Vettel, have largely rejuvenated the team, with the Scuderia now confirmed runner-up in the championship.
This will provide increased FOM revenues, of which Ferrari is already, at ￡110m, the primary beneficiary, further bolstering the war chest of the second-biggest spender in the sport. Add in that Vettel is (allegedly) cheaper than predecessor Fernando Alonso, and Ferrari clearly has more disposable income for the future.
Engines are supplied to two customers teams (three from 2016), enabling costs to be defrayed - these are reported separately to provide a purified base.
Ferrari press office: "Please understand that in view of our IPO we have to be very careful about any financial disclosures. Thus we are unable to help."
McLAREN
Woking, Britain
Input provided
How the mighty have fallen. Once regular contenders for victory and titles, McLaren's cars now battle to make it past Q1. True, this is primarily down to Honda's dire engine performance and reliability, but there's no denying internal issues play their parts. FOM's payouts and partners are, though, unforgiving, and woeful performance has caused McLaren's revenues to plummet as well as sponsors to depart - increasingly so in both instances.
The parent company has restructured itself as McLaren Technology Group, which provides salvation as profits from other activities plugged a ￡30m gap, while Honda has joined as both engine supplier and commercial partner - allegedly contributing ￡35m annually, plus engines - without which matters would look bleaker. Sources indicate that McLaren will approach Honda to address a projected ￡25m shortfall.
However, the continued absence of a title sponsor remains a worry, as does McLaren's serial lack of championship success - which impacts all revenue streams - with combined driver salaries being arguably the highest on the grid, even if Honda makes substantial contributions here, too. While McLaren is not yet endangered, how much longer can this situation persist?
Chief operating officer Jonathan Neale: "We're fortunate in having a technology group in which we can at least shelter for some of these difficult times. But it's not something we can sustain indefinitely."
SCUDERIA TORO ROSSO
Faenza, Italy (Austrian owned)
Full co-operation/input
Scuderia Toro Rosso (STR) exists as a finishing school for Red Bull's cadre of development drivers, and came of age with the successive elevations of Vettel, Daniel Ricciardo and Daniil Kvyat to RBR - which bodes well for current drivers Max Verstappen and Carlos Sainz Jr, both of whom are tipped to continue in 2016.
The team continues to expand its Faenza base, while recruitment of staff to service its Bicester (UK) windtunnel remains ongoing.
STR operates on a break-even basis, being funded by an expanding portfolio of external sponsors, with the balance of budget underwritten by Red Bull. STR receives substantial support from RBT, particularly now it runs identical rear-end technology to RBR.
Like sister RBR, engine unreliability has cost STR dearly, with no formally announced solution yet in place for 2016.
Team principal Franz Tost: "We continue to support all cost-saving initiatives that will enable us to further develop our young drivers."
FORCE INDIA
Silverstone, Britain (Indian owned)
Full co-operation/input
Force India's commercial portfolio consists of a balanced mix of shareholder loans, group company support, driver-linked contributions and FOM revenues. None of these components have fluctuated much since last year, so the team's performance hike - one slot up in a confirmed fifth place in the championship - is clearly down to stability and improved use of modest facilities, and an aggressive outsourcing policy.
A technical partnership with Mercedes GP, in which the team uses a full 'rear end' supplied by the reigning champion squad, has paid off handsomely in terms of speed and reliability, as has a switch to Toyota's windtunnel, reckoned by most to be the best in the business.
A further boost is that both drivers have been confirmed for next year. Any wonder the team is targeting a future third-place constructors' finish.
Deputy team principal Robert Fernley: "The biggest thing is the transition from our windtunnel to Toyota's exclusively, and we continue trying to maintain an optimum balance between production and outsourcing of major items."
LOTUS
Witney, Britain (Luxembourg owned)
Full co-operation/input
Beleaguered Lotus needs to secure a big-daddy investor PDQ, with Renault the most likely - if not certain - suitor. The team floats uncomfortably in that middle ground between majors and independents, carrying large-team overheads on modest income streams, yet without CCB safety nets.
Having previously downsized, there is little fat left to cut, and hence a string of energy-consuming and reputation-battering debtor actions that debilitated this once-proud operation.
Following eighth in the 2014 classification, mainly due to Renault's underperformance, both sponsor income and FOM revenue have taken knocks, depleting already thin budgets.
Mercedes power has redressed the performance deficit, but commercially the team is way off where it deserves to be and relies on Pastor Maldonado's PDVSA contribution, so remains vulnerable.
Chief executive officer Matthew Carter: "From a huge loss in 2013 we recorded a modest loss in 2014, and with our improved performance are targeting sixth place overall and improved fortunes going forward."
MANOR
Banbury, Britain
Full co-operation/input
Having exited administration, Manor regrouped after attracting the support of Stephen Fitzpatrick, an energy entrepreneur. Key to the team's survival are its FOM revenues - secured via a top-10 placing in 2014 - which guarantee ￡30m per annum for the next two years, with drivers and a variety of sponsors contributing to the budget required to run 2014 cars powered by year-old Ferrari powertrains.
Next season should provide an upswing if plans reach fruition: Mercedes units will power Manor's new cars, while restructuring will bring new senior faces aboard. Still, it will be tough going...
President Graeme Lowdon: "This has been a pretty difficult season, but that's secondary to the fact that the team continues and that's the most important thing."
SAUBER
Hinwil, Switzerland
Full co-operation/input
Sauber swims mid-stream. Unlike its peers, however, it is disadvantaged by invoicing in US$ but trading in buoyant Swiss Francs. This disparity, compounded by FOM's inequitable revenue structure and its lack of points in 2014, lies at the root of its current travails.
However, two well funded (and capable) drivers have led an upsurge in results, and the future is rosier, if not yet bright.
Sauber's state-of-art facilities are its salvation, being rented out to supplement budgets. The balance of funding is made up of a mix of team sponsorship, driver contributions and FOM monies.
Team principal Monisha Kaltenborn: "We have consolidated our partnerships and strengthened our third-party business, but in this environment it remains a permanent challenge."
MERCEDES GETS MOST BANG FOR ITS BUCK
Points as of 2015 Brazilian GP. Budget does not include engines
In addition to dominating both championships, as expected, Mercedes wins Autosport's inaugural bang-for-buck Efficiency Index hands-down with a per-point spend of ￡0.35m/point, while Williams excelled itself to place second despite having only the fifth-largest budget.
Third, as expected, is Ferrari, with Force India doing a superb job on limited resource to place fourth. Fifth is Red Bull Racing after another fraught year.
Not only is McLaren's on-track performance disappointing, but it brings up the rear of the scorers with a per-point spend almost 20 times that of the champion team, while point-less Manor has the worst ratio.
It will be interesting to see where Haas F1, with its unique model of outsourcing where permitted, slots in next year.
In addition to detailing the index, the analysis provides a vital pointer: the total spent by all 10 teams during the 2015 season amounts to ￡1.395bn, or an average of ￡140m each.
Only four teams are above the median - Constructors' Championship Bonus teams all crucially enjoying premium payments - while the rest survive on FOM's scraps. Is it any wonder F1's revenue structure is heading for the EU Commission?
Equally, of the teams' ￡1.4bn spend, just ￡588m (42 per cent) was derived from FOM, with the balance generated by commercial sources. Yet, F1's commercial rights holder pockets around ￡300m from all its streams, or more than even the championship-winning team spent on its entire campaign.
F1's MONEY (POWER)TRAIN
Formula 1 currently has four engine suppliers, but there are effectively only two providers of customer units - Mercedes and Ferrari - with the other two concentrating, whether by design or circumstance, on dedicated operations: Renault supplies both Red Bull teams, and Honda partners only McLaren.
Each supplier operates to its own business model, with Mercedes-Benz High Performance Powertrains being a 100 per cent subsidiary of Daimler AG, and additionally undertaking research projects on behalf of various group companies, while Ferrari's F1 engine operation operates side-by-side with both the Scuderia and the road car engine division.
Renault Sport F1 in Viry-Chatillon is, after last year's corporate restructure, a sub-division within the mother company's Renault Sport division - and operates mainly on a sub-contractor basis with suppliers. Honda operates its F1 programme as an R&D project, funded in co-operation with Honda Motor Company's marketing division, with project management jointly in the hands of R&D, Marketing and McLaren.
All four engine suppliers operate under disparate national and corporate financial reporting conventions, while their operational models are also vastly different - with their levels of outsourcing varying commensurately. The same applies to engine pricing: Ferrari adjusts internally, Mercedes has fixed (subsidised) prices, whether for supply to its own team or customers, while Renault's marketing division absorbs the difference between cost and price.
Different, too, are their levels of customer activity. Mercedes supplies three teams - Williams, Force India and Lotus - in addition to its own outfit. Ferrari supplies its own team and Sauber with current-spec engines, while Manor currently laps up its 2014-spec hardware - but switches to Mercedes next year. Renault supports just the two Red Bull squad, although doubtless it wishes it had a larger customer base to defray costs.
By contrast, Honda, which supplies 'free' engines to McLaren as part of the partnership agreement, granted the team right of refusal over supplying rival teams. There also appear to be no prospective suppliers on the horizon, which could cause complications should Renault exit F1 any time soon, as has often been threatened.
As a result, the FIA recently called for expressions of interest to supply a 'dumbed-down' standard-specification engine, which will further muddy matters by either forcing down prices or attracting existing Mercedes and Ferrari customers. Is it any wonder that Ferrari recently invoked its veto against engine cost caps; and is it also any wonder that Mercedes motorsport boss Toto Wolff said the proposal "does my head in"? It appears to have been halted for now by the F1 Commission.
All these factors make direct comparisons between engine suppliers fundamentally impossible. However, in order to provide an insight into the economics of F1 engine supply, the financial statements filed by Mercedes HPP in terms of British law have been analysed, and reported in a similar format to that used for teams.
CASE STUDY: MERCEDES HIGH PERFORMANCE POWERTRAINS
Brixworth, Britain (German owned)
HPP, as the company is known within Mercedes, is based in Northamptonshire and previously operated as Ilmor, in which guise it contract-built Mercedes F1 and CART/IndyCar engines.
The boss is Andy Cowell, who is ultimately responsible to the board, but has a reporting line to motorsport director Toto Wolff. Directors include Niki Lauda, but, surprisingly, not Wolff.
F1 comprises approximately 75 per cent of turnover (and manpower contingent), with the company supplying four teams, including its own. 'Bare' engines are said to run to about ￡13m per annum per two-car team, so clearly F1 operations are indirectly subsidised to the tune of ￡50m annually by the mothership - given that actual recovery from teams runs to a total of ￡50m per season.
According to sources, the Mercedes 'own' team pays premiums for priority status on development components, but that alone would not make up the shortfall. However, this could not be verified, as such details are not disclosed in terms of exemptions received for inter-group transactions. Thus the exact breakdown of turnover is not available.
The balance of income is derived mainly via R&D for Daimler - predominantly the AMG high-performance division - and work for Mercedes' DTM programme, for which, for example, the four-cylinder engine to suit the category's new-for-2017 Class One regulations was developed in-house.
HPP chief operating officer Andy Cowell: "The directors consider quality, technical excellence, speed and flexibility, combined with cost control, to be the principal success factors towards realising the company's strategies and achieving the company's targets. Performance against these measurables is reviewed regularly."
Want to know how much each grand prix team really spends? DIETER RENCKEN reveals all
Autosport's The True Cost of F1 is now in its third edition, and therefore able to track the sport's commercial trends.
Despite increased spending at the sharp end, the overall picture continues to look bleak - since last year, a team (Caterham) has been lost, while two independents recently confirmed that they had filed official complaints with the EU Commission over the championship's controversial revenue and governance structures.
Another long-standing name - Lotus - relies predominantly on state funding provided by its Venezuelan driver, and stands on the cusp of extinction unless it is saved by Renault, while it is doubtful whether Sauber, Force India and Manor could survive without driver funding.
Indeed, only the continued largesse of Red Bull magnate Dietrich Mateschitz ensures the future of his two teams in the face of serious engine complications.
As McLaren can attest, no title partners or sponsors have come aboard, and existing sponsors are said to be negotiating further downwards off the back of dwindling live attendances and falling TV audiences - the latter having dropped 30 per cent over five years, with no end to the spiral in sight. Even the calendar has taken a knock: this year Germany failed to take up various discounted offers to host its grand prix.
However, it is not all doom and gloom: Honda rejoined the fray - as an engine supplier, again in partnership with McLaren - while next year marks the arrival of the first American team in over 30 years in machine magnate Gene Haas's eponymous operation. Therein, though, lies a stark reality: no start-up can afford F1's costs of entry without billionaire backing.
In any financially driven activity, budget and performance are symbiotic, and thus discrepancies far beyond pure technical and sporting skills or abilities are evident across the grid, with the best-funded teams mainly racing at the sharp end and budget operations generally bringing up the rear. The middle class just survives betwixt and between.
Since the beginning of 2013, Ferrari, Red Bull, McLaren and Williams have received Constructors' Championship Bonus (CCB) payments of varying sizes from commercial rights holder Formula One Management (FOM), with Mercedes receiving an increased windfall from 2016 after winning back-to-back constructors' titles. This structure further widens the gulf between rich and poor, and such payments are identified accordingly. Note: FOM monies are disbursed a year in arrears.
With eight (of 10) teams - including Red Bull Racing, McLaren, Mercedes, Williams and Force India - based in Britain, direct comparisons between UK-domiciled operations are facilitated by Companies House filings.
Such accounts are, though, at least nine months in arrears, and therefore interviews were requested across the board, and mostly granted. Where teams withheld information, educated estimates are applied. Various sources were consulted and cross-referenced, including filings, known variables, informed assumptions and inside information.
A new addition this year is a 'Bang-for-Buck' (B4B) table, whereby team budgets, excluding engine divisions, are divided by championship points scored as at the Brazilian Grand Prix to provide an efficiency index. Less is more, as they say.
Currencies have been converted from Euro (Ferrari/Toro Rosso), Swiss Francs (Sauber) and US Dollars (FOM) to Sterling for ease of comparison. Rates used: ￡1 = �1.35/SFr1.50/$1.50
MERCEDES
Brackley, Britain (German owned)
Full co-operation/input
Mercedes F1's activities are split into two separate units: Mercedes Grand Prix (MGP) (race operation), and High Performance Powertrains (HPP) (self-explanatory - see separate section), which operates autonomously and supplies MGP and others. The former is held 60/30/10 by Daimler, team boss/director Toto Wolff and non-executive chairman Niki Lauda, while the latter is a 100 per cent Daimler subsidiary.
While headcount - and saliently salaries per employee - increased after last year's championship success, sponsor income and FOM revenues followed suit, with Daimler's contribution, effectively viewed as global product advertising expense by the car maker, remaining stable at ￡60m. However, this continuing shortfall remains a worry, potentially causing the board to reconsider its engagement over time should results go south.
Combined, Mercedes constitutes F1's largest global spend - with commensurate headcounts - yet MGP is undoubtedly the most effective B4B operation, delivering the constructors' title at ￡350k per point, and for around ￡60m direct cost. The operation is financed by a combination of Daimler funding, sponsorship, customer activities - notably Force India and other engine customers - and burgeoning FOM revenues.
Having scored consecutive double titles, MGP - already a member of F1's Strategy Group - is now a full CCB operation, therefore qualifying for additional premium payments estimated at ￡25m/annum from 2016. Will these be used to reduce Daimler's contribution or increase already dominant performance levels?
Motorsport director Toto Wolff: "If you see it from Daimler's perspective, it's not bad: a global advertising equivalent value of �3billion in return for its contribution."
RED BULL
Milton Keynes, Britain (Austrian owned)
Full co-operation/input
Red Bull's UK-based operation draws on two interlinked companies: Red Bull Technology (RBT), which produces cars for Racing Bull Racing (RBR), the race team management entity. RBT also provides gearboxes, hydraulics and other permitted technologies to Scuderia Toro Rosso, as well as various services to other group companies, so RBR's purified budget is ￡200m, on which a modest profit is expected.
RBR, however, drops to fourth in the overall classification this season, precipitating an estimated reduction of ￡10m (for 2016) in FOM revenues. This is, though, partially offset by lower driver retainers after Sebastian Vettel's move to Ferrari and commensurately reduced performance bonuses, while a number of contractors have been appointed to staff positions - inflating payroll, but decreasing overall outsourcing costs.
The racing team's objective remains to reduce dependence on its parent company - ultimately achieving revenue-neutrality - while continuing to generate global brand exposure for the core product through successful campaigns. However, the evident downscaling of Adrian Newey's activities, the uncertain engine situation and reducing FOM revenues will prove challenging.
Team principal Christian Horner: "We've enjoyed a stable sponsor platform, and through tight cost controls have been able to post the only profit amongst British teams in 2014 despite our drop-off in performance."
WILLIAMS
Wantage, Britain (Frankfurt Stock Exchange Listed)
Full co-operation/input
Williams Grand Prix Engineering (WGPE) moved back to the sharp end after totally reinventing itself - in the process snaring Mercedes power - and it certainly paid off on the scoreboard and balance sheet over the past two seasons. WGPE has a unique business model, being F1's only listed team.
The founder Sir Frank Williams retains 52 per cent of stock, US investor Brad Hollinger has 10 per cent and newly knighted co-founder Sir Patrick Head nine per cent, while Toto Wolff (Mercedes) controls 4.9 per cent. Employee funds control 2.5 per cent, with the balance (21.6) being publicly traded on Frankfurt's Stock Exchange.
Having moved away from driver-related funding, Williams has two revenue streams: sponsors and FOM revenues, with the arrival of Unilever and BT contributing to a 50/50 split that is both unique and a lesson to other teams, while Williams Advanced Engineering - a separate business unit - benefits from technical spins-offs and provides a commercial cushion.
Chief executive officer Mike O'Driscoll: "The team's been very lucky - all the work we put in last year is paying off, and obviously that has knock-on effects on commercial discussions as we reach the mid-point of our five-year plan."
FERRARI
Maranello, Italy
Zero co-operation/input
Ferrari is unique in producing an entire car within one industrial complex. It does so by sharing facilities with the road car operation, which supports Gestione Sportiva in lieu of advertising.
This complicates issues, for internal policies make accurate revenue/profit splits impossible - with October's IPO on the New York Stock Exchange serving both to obfuscate matters and divulge previously withheld information.
2015 marks the first year under a totally revised management structure - from president Sergio Marchionne, who committed increased budgets, down - but the new arrivals, particularly team boss Maurizio Arrivabene and quadruple champion Vettel, have largely rejuvenated the team, with the Scuderia now confirmed runner-up in the championship.
This will provide increased FOM revenues, of which Ferrari is already, at ￡110m, the primary beneficiary, further bolstering the war chest of the second-biggest spender in the sport. Add in that Vettel is (allegedly) cheaper than predecessor Fernando Alonso, and Ferrari clearly has more disposable income for the future.
Engines are supplied to two customers teams (three from 2016), enabling costs to be defrayed - these are reported separately to provide a purified base.
Ferrari press office: "Please understand that in view of our IPO we have to be very careful about any financial disclosures. Thus we are unable to help."
McLAREN
Woking, Britain
Input provided
How the mighty have fallen. Once regular contenders for victory and titles, McLaren's cars now battle to make it past Q1. True, this is primarily down to Honda's dire engine performance and reliability, but there's no denying internal issues play their parts. FOM's payouts and partners are, though, unforgiving, and woeful performance has caused McLaren's revenues to plummet as well as sponsors to depart - increasingly so in both instances.
The parent company has restructured itself as McLaren Technology Group, which provides salvation as profits from other activities plugged a ￡30m gap, while Honda has joined as both engine supplier and commercial partner - allegedly contributing ￡35m annually, plus engines - without which matters would look bleaker. Sources indicate that McLaren will approach Honda to address a projected ￡25m shortfall.
However, the continued absence of a title sponsor remains a worry, as does McLaren's serial lack of championship success - which impacts all revenue streams - with combined driver salaries being arguably the highest on the grid, even if Honda makes substantial contributions here, too. While McLaren is not yet endangered, how much longer can this situation persist?
Chief operating officer Jonathan Neale: "We're fortunate in having a technology group in which we can at least shelter for some of these difficult times. But it's not something we can sustain indefinitely."
SCUDERIA TORO ROSSO
Faenza, Italy (Austrian owned)
Full co-operation/input
Scuderia Toro Rosso (STR) exists as a finishing school for Red Bull's cadre of development drivers, and came of age with the successive elevations of Vettel, Daniel Ricciardo and Daniil Kvyat to RBR - which bodes well for current drivers Max Verstappen and Carlos Sainz Jr, both of whom are tipped to continue in 2016.
The team continues to expand its Faenza base, while recruitment of staff to service its Bicester (UK) windtunnel remains ongoing.
STR operates on a break-even basis, being funded by an expanding portfolio of external sponsors, with the balance of budget underwritten by Red Bull. STR receives substantial support from RBT, particularly now it runs identical rear-end technology to RBR.
Like sister RBR, engine unreliability has cost STR dearly, with no formally announced solution yet in place for 2016.
Team principal Franz Tost: "We continue to support all cost-saving initiatives that will enable us to further develop our young drivers."
FORCE INDIA
Silverstone, Britain (Indian owned)
Full co-operation/input
Force India's commercial portfolio consists of a balanced mix of shareholder loans, group company support, driver-linked contributions and FOM revenues. None of these components have fluctuated much since last year, so the team's performance hike - one slot up in a confirmed fifth place in the championship - is clearly down to stability and improved use of modest facilities, and an aggressive outsourcing policy.
A technical partnership with Mercedes GP, in which the team uses a full 'rear end' supplied by the reigning champion squad, has paid off handsomely in terms of speed and reliability, as has a switch to Toyota's windtunnel, reckoned by most to be the best in the business.
A further boost is that both drivers have been confirmed for next year. Any wonder the team is targeting a future third-place constructors' finish.
Deputy team principal Robert Fernley: "The biggest thing is the transition from our windtunnel to Toyota's exclusively, and we continue trying to maintain an optimum balance between production and outsourcing of major items."
LOTUS
Witney, Britain (Luxembourg owned)
Full co-operation/input
Beleaguered Lotus needs to secure a big-daddy investor PDQ, with Renault the most likely - if not certain - suitor. The team floats uncomfortably in that middle ground between majors and independents, carrying large-team overheads on modest income streams, yet without CCB safety nets.
Having previously downsized, there is little fat left to cut, and hence a string of energy-consuming and reputation-battering debtor actions that debilitated this once-proud operation.
Following eighth in the 2014 classification, mainly due to Renault's underperformance, both sponsor income and FOM revenue have taken knocks, depleting already thin budgets.
Mercedes power has redressed the performance deficit, but commercially the team is way off where it deserves to be and relies on Pastor Maldonado's PDVSA contribution, so remains vulnerable.
Chief executive officer Matthew Carter: "From a huge loss in 2013 we recorded a modest loss in 2014, and with our improved performance are targeting sixth place overall and improved fortunes going forward."
MANOR
Banbury, Britain
Full co-operation/input
Having exited administration, Manor regrouped after attracting the support of Stephen Fitzpatrick, an energy entrepreneur. Key to the team's survival are its FOM revenues - secured via a top-10 placing in 2014 - which guarantee ￡30m per annum for the next two years, with drivers and a variety of sponsors contributing to the budget required to run 2014 cars powered by year-old Ferrari powertrains.
Next season should provide an upswing if plans reach fruition: Mercedes units will power Manor's new cars, while restructuring will bring new senior faces aboard. Still, it will be tough going...
President Graeme Lowdon: "This has been a pretty difficult season, but that's secondary to the fact that the team continues and that's the most important thing."
SAUBER
Hinwil, Switzerland
Full co-operation/input
Sauber swims mid-stream. Unlike its peers, however, it is disadvantaged by invoicing in US$ but trading in buoyant Swiss Francs. This disparity, compounded by FOM's inequitable revenue structure and its lack of points in 2014, lies at the root of its current travails.
However, two well funded (and capable) drivers have led an upsurge in results, and the future is rosier, if not yet bright.
Sauber's state-of-art facilities are its salvation, being rented out to supplement budgets. The balance of funding is made up of a mix of team sponsorship, driver contributions and FOM monies.
Team principal Monisha Kaltenborn: "We have consolidated our partnerships and strengthened our third-party business, but in this environment it remains a permanent challenge."
MERCEDES GETS MOST BANG FOR ITS BUCK
Points as of 2015 Brazilian GP. Budget does not include engines
In addition to dominating both championships, as expected, Mercedes wins Autosport's inaugural bang-for-buck Efficiency Index hands-down with a per-point spend of ￡0.35m/point, while Williams excelled itself to place second despite having only the fifth-largest budget.
Third, as expected, is Ferrari, with Force India doing a superb job on limited resource to place fourth. Fifth is Red Bull Racing after another fraught year.
Not only is McLaren's on-track performance disappointing, but it brings up the rear of the scorers with a per-point spend almost 20 times that of the champion team, while point-less Manor has the worst ratio.
It will be interesting to see where Haas F1, with its unique model of outsourcing where permitted, slots in next year.
In addition to detailing the index, the analysis provides a vital pointer: the total spent by all 10 teams during the 2015 season amounts to ￡1.395bn, or an average of ￡140m each.
Only four teams are above the median - Constructors' Championship Bonus teams all crucially enjoying premium payments - while the rest survive on FOM's scraps. Is it any wonder F1's revenue structure is heading for the EU Commission?
Equally, of the teams' ￡1.4bn spend, just ￡588m (42 per cent) was derived from FOM, with the balance generated by commercial sources. Yet, F1's commercial rights holder pockets around ￡300m from all its streams, or more than even the championship-winning team spent on its entire campaign.
F1's MONEY (POWER)TRAIN
Formula 1 currently has four engine suppliers, but there are effectively only two providers of customer units - Mercedes and Ferrari - with the other two concentrating, whether by design or circumstance, on dedicated operations: Renault supplies both Red Bull teams, and Honda partners only McLaren.
Each supplier operates to its own business model, with Mercedes-Benz High Performance Powertrains being a 100 per cent subsidiary of Daimler AG, and additionally undertaking research projects on behalf of various group companies, while Ferrari's F1 engine operation operates side-by-side with both the Scuderia and the road car engine division.
Renault Sport F1 in Viry-Chatillon is, after last year's corporate restructure, a sub-division within the mother company's Renault Sport division - and operates mainly on a sub-contractor basis with suppliers. Honda operates its F1 programme as an R&D project, funded in co-operation with Honda Motor Company's marketing division, with project management jointly in the hands of R&D, Marketing and McLaren.
All four engine suppliers operate under disparate national and corporate financial reporting conventions, while their operational models are also vastly different - with their levels of outsourcing varying commensurately. The same applies to engine pricing: Ferrari adjusts internally, Mercedes has fixed (subsidised) prices, whether for supply to its own team or customers, while Renault's marketing division absorbs the difference between cost and price.
Different, too, are their levels of customer activity. Mercedes supplies three teams - Williams, Force India and Lotus - in addition to its own outfit. Ferrari supplies its own team and Sauber with current-spec engines, while Manor currently laps up its 2014-spec hardware - but switches to Mercedes next year. Renault supports just the two Red Bull squad, although doubtless it wishes it had a larger customer base to defray costs.
By contrast, Honda, which supplies 'free' engines to McLaren as part of the partnership agreement, granted the team right of refusal over supplying rival teams. There also appear to be no prospective suppliers on the horizon, which could cause complications should Renault exit F1 any time soon, as has often been threatened.
As a result, the FIA recently called for expressions of interest to supply a 'dumbed-down' standard-specification engine, which will further muddy matters by either forcing down prices or attracting existing Mercedes and Ferrari customers. Is it any wonder that Ferrari recently invoked its veto against engine cost caps; and is it also any wonder that Mercedes motorsport boss Toto Wolff said the proposal "does my head in"? It appears to have been halted for now by the F1 Commission.
All these factors make direct comparisons between engine suppliers fundamentally impossible. However, in order to provide an insight into the economics of F1 engine supply, the financial statements filed by Mercedes HPP in terms of British law have been analysed, and reported in a similar format to that used for teams.
CASE STUDY: MERCEDES HIGH PERFORMANCE POWERTRAINS
Brixworth, Britain (German owned)
HPP, as the company is known within Mercedes, is based in Northamptonshire and previously operated as Ilmor, in which guise it contract-built Mercedes F1 and CART/IndyCar engines.
The boss is Andy Cowell, who is ultimately responsible to the board, but has a reporting line to motorsport director Toto Wolff. Directors include Niki Lauda, but, surprisingly, not Wolff.
F1 comprises approximately 75 per cent of turnover (and manpower contingent), with the company supplying four teams, including its own. 'Bare' engines are said to run to about ￡13m per annum per two-car team, so clearly F1 operations are indirectly subsidised to the tune of ￡50m annually by the mothership - given that actual recovery from teams runs to a total of ￡50m per season.
According to sources, the Mercedes 'own' team pays premiums for priority status on development components, but that alone would not make up the shortfall. However, this could not be verified, as such details are not disclosed in terms of exemptions received for inter-group transactions. Thus the exact breakdown of turnover is not available.
The balance of income is derived mainly via R&D for Daimler - predominantly the AMG high-performance division - and work for Mercedes' DTM programme, for which, for example, the four-cylinder engine to suit the category's new-for-2017 Class One regulations was developed in-house.
HPP chief operating officer Andy Cowell: "The directors consider quality, technical excellence, speed and flexibility, combined with cost control, to be the principal success factors towards realising the company's strategies and achieving the company's targets. Performance against these measurables is reviewed regularly."
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From the time the 2015 Formula 1 season finished on Sunday, and teams completed the Pirelli tyre test, the start of '16 pre-season testing was just 11 weeks away. With time now short, some teams brought 2016 developments to Abu Dhabi for track testing in first practice on the Friday of the grand prix weekend. The aim is to gather valuable data to help with their programmes over the winter.
MERCEDES
Two significant developments were clear at Mercedes: a revised suspension system and a new rear wing aero trick.
SUSPENSION
The suspension change affects the front inboard set up. This was apparently first tested on Hamilton's car as part of the S-duct setup in Brazil. It appears the car now has a single hydraulic heave damper supporting the front suspension, rather than the two separate coil sprung and hydraulic elements run previously on the W06.
It's a popular misconception that since front-and-rear interconnected suspension (FRIC) was banned last year, hydraulic suspension elements had no place in F1 either. The reality is that teams retained the hydraulic systems, but merely disconnected the front-to-rear link.
Lessons learned from how a hydraulic element can be of benefit were found to be equally useful even without the link. Therefore teams have continued to evolve ever-more complex hydraulic setups, to control both heave and roll motions. With this the race engineer can have better control of all the suspension modes.
All season Mercedes has had a simple coil-sprung device, known as the 'front coil heave unit', fitted between the pushrod rockers. This unit is visible through the aperture in the top of the chassis. Less well known was a separate hydraulic element, known internally as the 'front gas heave unit', mounted below it.
This second unit is the one that provides the Mercedes with such excellent suspension control, noticeable from the onboard shots when the car barely pitches under braking, but still moves quite freely over kerbs and in roll.
So with a hydraulic system already in place, the Brazil/Abu Dhabi set-up is more a simplification of the system. The hydraulic unit now sits higher in the tub's open hatch, with the coil unit deleted.
The car will still require a sprung mechanism to support its weight, but this can be achieved with torsion bars, or more likely a separate unit in the sidepod.
A benefit of hydraulic units over simple springs is that they can be positioned in such a way as to clear up space inside the footwell, so a remote heave spring in the sidepod is a possibility on the Merc.
With this new suspension layout and the S-duct panel, we can surmise that the 2016 car will have a very different shape at the front of the monocoque, and that the volume freed up by the new inboard suspension will be given over to the S-duct routing.
REAR WING TWEAK
Also on the Mercedes this weekend was a detail on the rear wing, where a serrated strip was attached to the rear face of the flap.
We have already seen serrated details on the Mercedes under the front wing. This design is what's known as a 'trip strip', common in aviation, to keep airflow attached to curved surfaces.
On the rear wing the strip was applied part way up the underside of the flap. This is an area where the airflow is in transition from smooth to turbulent.
The strip would appear to induce more turbulence, but in a controlled manner, as each serration creates tiny vortices. This should help make the airflow more predictable, and aid particularly in reattaching the airflow when DRS closes the wing flap.
In some respects this sort of airflow aid is similar to a 'monkey seat', not adding downforce directly but helping the air to flow as it should.
It has been suggested the strip will create a dirtier wake for following cars. While there will be more turbulence, this is at a low level and is unlikely to be felt by a following car.
McLAREN
Still working hard to understand the direction for its 2016 car, McLaren brought yet more updates to the recalcitrant MP4-30 for Abu Dhabi.
Again the work is centred on getting more rake angle put into the car's set-up. This time the rear suspension has been modified to make it all work. The team also ran a modified steering wheel, seen earlier this year.
Part of the car's early design was to retain the rear suspension fairing from 2014, but this compromised the car's rear wishbone layout since the legs needed to sit over the top of the diffuser - necessitating an unusual position for the lower wishbone, which (uniquely) sits behind the driveshaft.
Wanting a more conventional positioning of the wishbone for aerodynamic benefit is costly. The gearbox has to be redesigned to create a mounting point strong enough to accept the loads.
It appears this is the route McLaren has taken. The lower wishbone mounts at the same place at the back of the rear crash structure, but the forward leg now reaches forwards to the gearbox, creating a very wide "V" shaped arm.
With this experience, no doubt McLaren will have a more conventional rear suspension set-up for 2016.
LOTUS
Still without certainty for its future, which has hindered development work over the second half of the season, Lotus made an unexpected development step by bringing a new nose to Abu Dhabi.
Most similar to Mercedes, Lotus has a streamlined and narrow nose, towards the limit of how short it can be.
The new nose follows a similar path, but the tip is a thumb-like design, rather than rounded. The belly of the nose at first appears to be bulbous, but it is more likely to be the front wing pylons extending rearwards into a pair of vanes, ideas commonly adopted by 'Team Enstone' in 2009, '10 and again with last year's twin-tusk design.
Although the overall dimensions of the nose are similar to the previous E23 set-up, it is in fact a totally new structure, requiring crash tests in order to be used on track.
This is a significant investment and does perhaps suggest the team's future is now a little more certain.
FORCE INDIA
Since the team is operating with a selection of three basic front-wing designs, some observers mistakenly concluded it had brought a new wing to Abu Dhabi.
However, one of the wings was set-up with small pods on the endplate. These were not aerodynamic parts, but covers for laser rideheight sensors.
Several teams have used these sensor pods in recent years. The idea is that the wing's attitude to the track can be mapped, since the gap to the ground is a critical part of making front wings work.
| |
From the time the 2015 Formula 1 season finished on Sunday, and teams completed the Pirelli tyre test, the start of '16 pre-season testing was just 11 weeks away. With time now short, some teams brought 2016 developments to Abu Dhabi for track testing in first practice on the Friday of the grand prix weekend. The aim is to gather valuable data to help with their programmes over the winter.
MERCEDES
Two significant developments were clear at Mercedes: a revised suspension system and a new rear wing aero trick.
SUSPENSION
The suspension change affects the front inboard set up. This was apparently first tested on Hamilton's car as part of the S-duct setup in Brazil. It appears the car now has a single hydraulic heave damper supporting the front suspension, rather than the two separate coil sprung and hydraulic elements run previously on the W06.
It's a popular misconception that since front-and-rear interconnected suspension (FRIC) was banned last year, hydraulic suspension elements had no place in F1 either. The reality is that teams retained the hydraulic systems, but merely disconnected the front-to-rear link.
Lessons learned from how a hydraulic element can be of benefit were found to be equally useful even without the link. Therefore teams have continued to evolve ever-more complex hydraulic setups, to control both heave and roll motions. With this the race engineer can have better control of all the suspension modes.
All season Mercedes has had a simple coil-sprung device, known as the 'front coil heave unit', fitted between the pushrod rockers. This unit is visible through the aperture in the top of the chassis. Less well known was a separate hydraulic element, known internally as the 'front gas heave unit', mounted below it.
This second unit is the one that provides the Mercedes with such excellent suspension control, noticeable from the onboard shots when the car barely pitches under braking, but still moves quite freely over kerbs and in roll.
So with a hydraulic system already in place, the Brazil/Abu Dhabi set-up is more a simplification of the system. The hydraulic unit now sits higher in the tub's open hatch, with the coil unit deleted.
The car will still require a sprung mechanism to support its weight, but this can be achieved with torsion bars, or more likely a separate unit in the sidepod.
A benefit of hydraulic units over simple springs is that they can be positioned in such a way as to clear up space inside the footwell, so a remote heave spring in the sidepod is a possibility on the Merc.
With this new suspension layout and the S-duct panel, we can surmise that the 2016 car will have a very different shape at the front of the monocoque, and that the volume freed up by the new inboard suspension will be given over to the S-duct routing.
REAR WING TWEAK
Also on the Mercedes this weekend was a detail on the rear wing, where a serrated strip was attached to the rear face of the flap.
We have already seen serrated details on the Mercedes under the front wing. This design is what's known as a 'trip strip', common in aviation, to keep airflow attached to curved surfaces.
On the rear wing the strip was applied part way up the underside of the flap. This is an area where the airflow is in transition from smooth to turbulent.
The strip would appear to induce more turbulence, but in a controlled manner, as each serration creates tiny vortices. This should help make the airflow more predictable, and aid particularly in reattaching the airflow when DRS closes the wing flap.
In some respects this sort of airflow aid is similar to a 'monkey seat', not adding downforce directly but helping the air to flow as it should.
It has been suggested the strip will create a dirtier wake for following cars. While there will be more turbulence, this is at a low level and is unlikely to be felt by a following car.
McLAREN
Still working hard to understand the direction for its 2016 car, McLaren brought yet more updates to the recalcitrant MP4-30 for Abu Dhabi.
Again the work is centred on getting more rake angle put into the car's set-up. This time the rear suspension has been modified to make it all work. The team also ran a modified steering wheel, seen earlier this year.
Part of the car's early design was to retain the rear suspension fairing from 2014, but this compromised the car's rear wishbone layout since the legs needed to sit over the top of the diffuser - necessitating an unusual position for the lower wishbone, which (uniquely) sits behind the driveshaft.
Wanting a more conventional positioning of the wishbone for aerodynamic benefit is costly. The gearbox has to be redesigned to create a mounting point strong enough to accept the loads.
It appears this is the route McLaren has taken. The lower wishbone mounts at the same place at the back of the rear crash structure, but the forward leg now reaches forwards to the gearbox, creating a very wide "V" shaped arm.
With this experience, no doubt McLaren will have a more conventional rear suspension set-up for 2016.
LOTUS
Still without certainty for its future, which has hindered development work over the second half of the season, Lotus made an unexpected development step by bringing a new nose to Abu Dhabi.
Most similar to Mercedes, Lotus has a streamlined and narrow nose, towards the limit of how short it can be.
The new nose follows a similar path, but the tip is a thumb-like design, rather than rounded. The belly of the nose at first appears to be bulbous, but it is more likely to be the front wing pylons extending rearwards into a pair of vanes, ideas commonly adopted by 'Team Enstone' in 2009, '10 and again with last year's twin-tusk design.
Although the overall dimensions of the nose are similar to the previous E23 set-up, it is in fact a totally new structure, requiring crash tests in order to be used on track.
This is a significant investment and does perhaps suggest the team's future is now a little more certain.
FORCE INDIA
Since the team is operating with a selection of three basic front-wing designs, some observers mistakenly concluded it had brought a new wing to Abu Dhabi.
However, one of the wings was set-up with small pods on the endplate. These were not aerodynamic parts, but covers for laser rideheight sensors.
Several teams have used these sensor pods in recent years. The idea is that the wing's attitude to the track can be mapped, since the gap to the ground is a critical part of making front wings work.
