The grids for the Brazilian and United States Grands Prix were notable for the absence of the Caterham and Marussia teams.
The two surviving outfits from the influx of new blood in 2010 both went into administration before Marussia folded completely with the loss of 200 jobs last Friday.
Meanwhile, Caterham’s future existence in the sport is looking increasingly precarious as it seeks £2.35 million via crowdfunding to make it to the final race of the season in Abu Dhabi.
Formula 1 has a history of eating up and spitting out teams – over the course of its 64-year history 121 different marques have been and gone, Ferrari the sole survivors from the opening championship in 1950.
F1 is an expensive business – even more so in the volatile financial markets of recent years – so attaining any sort of longevity in the sport is no mean feat.
The sport is also a financial minefield, with a myriad of different payments, budgets and a somewhat secretive nature among the many teams.
Dieter Rencken is an accredited F1 business journalist, who annually dissects F1’s team spends in the weekly British magazine Autosport.
He said: “Bernie Ecclestone (right) likes to keep it secretive. He sends faxes with the letterhead Mister E and makes a point it’s pronounced mystery. There’s always been an air of mystery and there’s been some very, very serious attempts to keep the lid on exposure.
“CVC Commercial Partners [F1’s major shareholders] don’t want people to know what they’ve made, lost or turned over. They just want that for their investors.”
Of those entered in the 2014 World Championship, Ferrari are top of the pile in budgetary terms with a spend of about $420m compared to the lowest spenders Caterham, who boast a relatively paltry sum, well comparatively at least, of $95m.
That Caterham and Marussia should be struggling so much this year is baffling in some respects in the knowledge that the commercial rights holder group, effectively owned by Jersey-based Delta Topco, is expected to have an operating profit of about $1.8 billion at the end of this season.
So how is that influx of money, which comes a variety of sources ranging from television rights to payouts from the individual grands prix, distributed? It’s via a ludicrously complex process.
Of that $1.8 billion pot of cash, 63 per cent goes to the teams through a variety of streams. The top 10 teams get a payout of $40m – hence Caterham and Marussia’s constant battle to avoid 11th spot for which a relatively paltry $10m is on offer.
In addition to that $40m for each of the top 10, there are further scaled payouts based on performance ranging from Red Bull getting $75m for winning the constructors’ championship in top spot to about $15m for Caterham sneaking 10th place. There is then a further bonus of $150m shared out among the top three in the contructors’ championship, plus historical payouts to a trio of teams with a rich history in the sport: Williams, Mercedes and Ferrari.
For Mercedes and Williams, that equates to $30m, for Ferrari, it is believed to be in the region of $90m and that is merely for making it to the start line for the first race of the season, such is Ferrari’s influence in the sport.
In addition, there is further income from sponsors and F1 business title Formula Money estimates for 2014, the average team budget is $236.6m, a hike of 29 per cent from $182.9m in 2010, much of that down to the cost of the new hybrid engines this season.
The budget each team has obviously varies massively and also the manner in which they choose to spend it also differs. But working on the average, according to Formula Money’s figures, $63 million is spent on research and development: $25m of that on wind tunnel testing, $15m on track testing and the remainder on Research and Development. According to Rencken, trying to make the figures exact on R&D for the big manufacturers is very complex.
“Take Mercedes across the whole company (including road cars) for example who in Stuttgart have a budget of about $5 billion for R&D. How much of that is spent directly on F1 and how much on other projects that have got nothing to do with it? That’s the big question.”
Mercedes is complex in that it has two strands to its F1 operation: the racing team and High Performance Powertrains, the engine-building side of F1, which has a spend of about £140m this season but something like half of that cost is met by supplying engines to other teams on the grid such as McLaren, Force India and Williams.
Another big spend is on production, estimated this season on a typical team at $57m: a third of that on manufacturing, $28m on a custom engine supply (admittedly not applicable to every single team) and the remainder on other key components such as gearboxes, tyres and electronics.
A marginally bigger spend is on salaries. Again that can vary massively but the average is about $65m, $20m of which is on drivers, $40m on team members and $5m on directors.
In the case of drivers, that can vary monstrously. For example, Fernando Alonso is thought to be F1’s highest earner on $40m this season, while Kevin Magnussen is believed to be on a salary in the region of a few hundred thousand. Then there is the matter of pay drivers, Marcus Ericsson is thought to have sealed his hop from Caterham to Sauber next year on the promise of $15m in sponsor backing.
And the final big section of spending for any team – on average $55m – is on operations: $20m on transport, travel and accommodation for the 19 grands prix on the calendar, $15m on entertaining, $7m on freight, $5m on IT, $3m on factories and utilities, $3m on professional services and $2m on fuel.
The question is whether the level of spend can be sustainable with teams currently falling by the wayside and others warning they could follow suit.
According to Formula Money editor Christian Sylt: “How big a crisis is this? I don’t see the situation as particularly significant. F1 has survived far worse in recent history with the pull-outs of Toyota, BMW and Renault.”
Lotus boss Gerard Lopez argues, though, that things need to change in the manner in which money in the sport is spent.
“The distribution model of revenues is completely wrong,” he said. “The ones that have more, get more and as a result want more and want to spend more and so on, and the ones that have less, get less. When you’ve got teams that get $160-170 for showing up something is entirely wrong.”
The cost cap originally suggested in 2010 quickly fell by the wayside and teams look set to continue to spend and spend big to stay at the front or simply survive in the sport.
