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Force India: $150m the right level for a cost cap

Force India COO Otmar Szafnauer believes a $150 million cost cap is entirely possible in Formula One and could be successfully policed by the FIA.

Both the FIA and Formula One's new owners Liberty Media are keen to reduce the cost of competing in the sport and a cap on spending is being considered as a possible solution. The idea is nothing new in Formula One, but a previous attempt to introduce a £40 million cap failed after it was rejected by the teams in favour for a self-imposed resource restriction agreement — which also ultimately failed.

Team budgets vary massively in F1, with top teams spending over $300 million a year and midfield teams such as Force India spending in the region of $120 million. In order to give the biggest teams a chance to scale back their operations, a cost cap is unlikely to be introduced before 2021 but Szafnauer believes a $150 million cap is a good target to aim for.

"We have to be pragmatic," he said. "Say the cost cap comes in a couple of years and there are people spending $250 million and have 1,000 employees — which is not farfetched — and then suddenly you say next year 100 million less, you might have to get rid of 300-500 employees and that's a difficult thing to do. We've got to be pragmatic.

"But I personally think that if we say $150 million, that's a lot of money to go racing and that's probably an order of magnitude more than other car racing series. We should be able to do a fantastic job for the fans by only spending $150 million, so I think that's a realistic figure — not to mention that half the teams don't spend that much already. Although there is a cost cap, half of us would be way under and would have to do nothing. It's just half of those teams that would have to come down to that figure, probably four out of ten spend over that."

One of the most compelling arguments against a cost-cap in F1 is that teams linked with large car manufacturers would simply move their F1 development to a different area of the company that is not regulated by the FIA. But Szafnauer believes F1 has the potential to self-regulate a budget cap by relying on whistleblowers.

"That's always the question that comes up, that if we cost cap are people going to go around it? I think there should be methods and mechanisms to prevent that, for example governments and taxes — there's a huge incentive not to pay your tax because that means you keep more money, but the governments have mechanisms to test and check and prod. I'm sure there's a lot of people getting away with it that we don't know about, but every once in a while there is a huge fine.

"If that punishment is big enough when you get caught, then I think you can police it. And to me the biggest deterrent in our sport is when people leave one team for another with the knowledge of what's going on and then saying 'you know what these guys are doing? They are circumventing the 150 million cap by this'. So whistleblowing is probably the biggest deterrent."

Current world champions Mercedes are among the teams that would have to make the biggest cut backs in order to comply with a budget cap and team boss Toto Wolff said it is crucial that it is done in a fair way.

"I think we are all living in the same financial reality and we have seen teams growing dramatically over the years and we are all very sensible that we want to somehow contain it," he said. "It needs to be done in a way that it is good for the sport, that it respects the structures that have been created, so it needs a glide path, and it needs to be fair. That is very important.

"We all have different set-ups and the way we are organised is in different ways. Ferrari is a fully integrated team within the larger road car company. We are a separate entity in the UK. You look at all the teams; it's very different. You need a governance that functions and you need a strict set of rules and then it just needs to cover everybody. The discussions that have been happening, at a very early stage, I think there is no big disagreement."


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