Guenther Steiner, Autodromo Hermanos Rodriguez, 2019

Big penalties needed to enforce cost cap – Steiner

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In the round-up: Haas team principal Guenther Steiner says penalties for breaking the budget cap need to be high to discourage teams to stick to the spending limits when they are introduced for the 2021 F1 season.

What they say

I’m very confident because how does the IRS do it? I always go back to that one. And then if the penalties are big enough that if you get caught, that you don’t do it. If you do it with the IRS, you know where you go – I mean, we cannot do that one but the penalties need to be sporting and financially this big that people don’t do it.

Quotes: Dieter Rencken

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Comment of the day

Does Cyril Abiteboul have good reason to be confident about Renault’s preparations for the coming rules change in 2021?

I suspect he’s kidding himself is he thinks that the big three aren’t as advanced for 2021 as they are.

It’s concerning though that they’ve devoted a lot of resources to 2021 – that can’t possibly be good for 2020 and I’d have thought they’d want a very positive year this year to have any chance of retaining Daniel Ricciardo. Either that or they have him so integrally involved in the 2021 project he’ll have no choice but to see it through.

I’m excited at the prospect of a changing of the guard in 2021, but don’t want this season to be ruined by teams shifting their efforts too early and allowing 1 team to dominate in the hope they’ll gain an advantage in 2021.
DB-C90 (@dbradock)

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27 comments on “Big penalties needed to enforce cost cap – Steiner”

  1. Seems Steiner always has time for a soundbite. Is he the least busy team principal in the paddock?

    He must wait for Ferrari and Dallara to design most of the car. Then he can assign the remaining vital design tasks to his small staff – where to place the team logo, a sponsor logo (if there is one), create a new incomprehensible Pirelli setup that takes 20 races to unravel and prep for the next soundbite op.

    Seems fair that if the big teams must cut spending to meet the budget cap, that teams like Haas must increase their spending to meet the cap. Why isn’t there a mandated spending floor?

    Under spending hurts F1 just as much as over-spending – probably more. As the pinnacle of motorsport, do we really want thrifty teams winning races? That’s not good for the extravagant show. ;-)

    1. Not sure if it could be sarcasm, but some teams just don’t have the money to afford hitting the budget cap.

      1. @esploratore: Yes, sarcasm. And more. If these cheapskate teams have trouble raising a few hundred million a year, they’ve picked the wrong series. F1 doesn’t need backmarker teams with more excuses than performance.

        More sarcasm, but with an edge of truth – my fear with budget caps is the decline of F1 into a mediocre spec-series with a few bespoke parts. Money is not the problem. The world is filled with far too much of it. It’s getting people to spend massive amounts of it wisely on worthwhile things like shaving a tenth off a lap.

        1. I often wonder why people who are against shared parts (allowed under the rules now for years – just like the power units have always been) have nothing to say about the tires being spec parts delivered by a single supplier with mixed success. One could easily make the case that the point of contact between the car and the racing surface is the most elemental aspect of race car operation, and yet spec parts are just fine there. It sounds to me as if the case you are really making ere is that you want to see F1 be a competition between three or maybe five teams and that those teams must be controlled and funded by multinational mega-corporations. The gap between the lower racing series and what you propose is way too big for any up and coming team to bridge, and that means that the the “feeder” series become meaningless. Open-wheel F1-type racing should be structured so that TEAMS as well as driver can make that step up to the Big Time. I’m not in favor of megacorporations controlling everything in the world, and I am definitely not in favor of them defining and controlling F1 racing because they are the only entities with the megaresources to enter and play the game. You can tell me that “that’s how the real world works” but I think that we should aspire to and set our goals to achieve something better and more sporting than that. Designing regulations and financial structures that lead to the elimination of teams with only $175 million to spend seems like a bad goal to work toward.

          1. @gwbridge, as Dieter commented in his article late last year though, the possibility of a team being able to step up from a junior series into F1 seems to be actually reducing in tandem with the rise of single spec racing series.

            In the 1980s and 1990s, you had a wide range of chassis manufacturers that meant you had a wider talent pool of potential designers to draw upon and a relatively broad range of suppliers whom you could draw upon. Some teams could step up to F1 because they had been manufacturers in junior series, such as Formula 2, Formula 3 or Formula 3000, and had the internal manufacturing capacity that could then be turned to F1 – examples of such companies include March, AGS, Reynard, Lola, Dome, Footwork, Coloni, Onyx and Toleman.

            Now, though, the number of independent chassis manufacturers has shrunk dramatically – as he pointed out, the number of independent chassis manufacturers has declined to Dallara, Mygale, Tatuus, Dome and Crawford. Out of those, Dallara is the most dominant – Mygale and Crawford mostly just serve regional racing series these days – and, even then, it’s very hard to find junior open wheel series where manufacturers actively compete against each other (not just in Europe, but around the world – the US and Japan have also seen the rise of spec racing series).

            How many junior teams now have the ability to design and build their own cars? None, essentially – they’re reliant on third parties and are operators of a car built to a specification developed by others. When you look at it, it’s notable that there seems to be a breakdown in technical staff moving from junior series into F1 – it’s as if there is a divide between those below, who work with cars built to standard specs, and F1, which mainly operates in a bit of an isolated bubble.

            Even if they had the budget, how many teams in junior series actually have the technical expertise now needed to move up?

          2. Well, well, well ! @ANON dons the rose-tinted specs and suspects that there may have better times in the past. What is the world coming to ?

          3. @hohum, it is with caveats though – it was one thing to have the manufacturing capacity, but another thing to know how to then use it properly to make the move up to F1.

            It’s true that those teams could move up into F1, but some of those teams weren’t even especially competitive in junior series, let alone F1 – being badly underfunded and operationally overstretched meant they were doomed to failure in F1.

            Only one of the companies that I listed there is still around in F1 – Toleman, where successive takeovers resulted in it becoming Renault today. Quite a few of the others were rather ramshackle affairs (AGS, Coloni and Onyx come to mind there) and, whilst technically they could move up to F1, the rest of their operations were hopelessly overstretched and weren’t really fit to move up into F1.

            In some senses, there has been something of a shift in skill sets – in junior series, the larger teams there may not have the in-house capabilities to build a team that a team of the 1990s might have had, but on the other hand I would strongly suspect that outfits like Prema, ART or DAMS are significantly better in terms of commercial ability and operational skills than a number of those teams were in the 1980s and 1990s.

  2. Ironic choice of example by Steiner, given Gene Haas’s run-in with the IRS ;-)

    1. Voice of experience speaking.

    2. In a way it’s a bit of an odd comment because I just can’t imagine Liberty Media going down this path if the best funded teams were going to flout the rules because it was cheaper to pay some paltry fine and live with the accolades.
      According to the Formula 1 website, there are three types of penalty: 1) What is called a “procedural breach”, which is not filing the expected documentation for auditing on time, or having errors in it; 2) A “minor overspending breach”, which seems to be exceeding the budget cap by less than 5%, but it also appears a minor overspending breach can be more than 5%; and 3) is an overspending breach that is definitely in excess of 5%.
      The penalty for a procedural breach is financial. The penalty for a minor overspending breach “could be a combination of a reprimand, deduction of constructors and/or drivers points, a ban for a certain number of races, limitations on testing – both CFD and on-track – and/or a reduction of their cost cap.”
      If we assume that Guenther is wondering what Liberty might do if a team were to basically disregard the budget cap. Doing that will be considered worthy of a “… material sporting penalty, which is the most serious as it can involve all of the above plus exclusion from the World Championship.”
      I don’t see there being any major flouting of the rules, especially amongst the best funded teams.

  3. COTD ….
    Is this just an exercise on the part of C.A. to bolster the moral and standing of the team given that senior management at Renault / Nissan are likely planning a review of the program.?
    Clever ploy and I hope he can pull it off.
    With C. Ghosn taking up residence in a new “safe” haven, can we expect to see some action at R-N HQ. ? You bet.
    This is shaping up to be quit entertaining.

  4. Yeah I really see Max with Honda and RBR for a good stretch to see their partnership through with a fair and concerted effort, as in something like another 5 years. It just feels like they’re on the cusp of something really good. Of course there is the possibility, as has been reported, that powers above F1 at Honda may not want much more time there, but my goodness what a shame if they did leave soon and I can’t really envision them wasting all this progress with a premature exit when it’s all going in the right direction. And the way they speak of Max…

    1. I can’t really envision (Honda) wasting all this progress with a premature exit

      Wise words, probably shared by a few in 2008 ;)

      1. Lol well for comparisons sake their last run was for 9 seasons, the last three of which were as a Constructor, not just an engine supplier, so they had much higher expenses, and then the global recession hit. They didn’t have a ‘Max’ nor were they about to enter a completely new F1 chapter of cost caps. Hopefully, as I say, they’ve got another 5 seasons ahead. They’ve just finally won some hybrid era races this season. Fingers crossed because of course all of F1 will take a big hit if they lose one of only four Pu suppliers. Max will land on his feet, but still it would be great for all if Honda stays for a time yet.

        1. @robbie, if the company was in a difficult enough scenario or felt that Formula 1 wasn’t serving their interests well enough, then it could happen.

          After all, when they chose to pull out in 1992, they had Senna to work with, had taken 69 victories and their engines had been in the WCC winning car for six years back to back. They were getting considerable publicity, and their association with Senna had opened up the South American, and particularly Brazilian, market to them, but they took the decision that those returns were not enough to justify the continued outlay at a time when their efforts in the North American market were encountering difficulties and the global economy was stuttering.

          Equally, Max will not be a stranger to the impact of Honda cutting planned F1 projects – he just has to ask his own father, Jos, about Honda’s aborted plans to enter F1 in the late 1990s, as Jos was the test driver for the RA099 that had been developed, but a change in leadership within Honda, compounded by Postlethwaite’s death, saw that project cancelled at a fairly late stage to cut costs.

          You can see why some have similar concerns over Honda, as although there have been reassuring words, on the other hand the wider Honda company has been under a bit of financial pressure over the past couple of years. They took a significant financial hit in 2018 and early 2019 as they have been trying to restructure their European division, especially as they have brought forward their plans to shift their entire European division to either purely electric of plug in hybrid car models from 2022, rather than 2025 – that three year acceleration in that programme will require significant investment from the company.

          Added to that, their sales and profits in the latter part of 2019 were a bit weaker than anticipated and their current projections for the 2019-2020 financial year suggest a drop of a bit over 10% in profits (their forecast was cut from 770bn yen to 690bn yen). With the company under pressure to increase the amount of cost cutting to maintain profitability, whilst also engaging in a major restructuring and accelerating the development of new models in their European arm, it is perhaps understandable that some might be concerned that those focussing on cost cutting might axe the F1 engine division.

          1. @anon Hey we won’t know til we know, right? I think nothing is relatable to 92 when they had had a great run and it became time, or otherwise with a leadership change. As I said in my first post of course there is always the possibility of them pulling out when and how they see fit, but to me it just doesn’t feel like that is imminent with them currently, in spite of whatever economic points there are at the moment to cause suspicion otherwise. I suspect it will now be quite a number of months before we hear anything more about their future, as for sure they are in through 2021.

  5. Coincidently, the superpower I’d most like to have is teleporting as well, and in the form of jumping like in a 2008 movie called Jumper.

    1. @jerejj Ha, ha, yeah me too. Loved that movie.

      There is a TV show called Impulse about that superpower too.

  6. Pity there are no team penalties for running clown drivers…

    What nonsense will be coming in 2020 from the Harse pair?

  7. Cost Cap in current form is destined to fail.

    If anyone believes Ferrari and Mercedes will not “hide” half of their spendings, by internally allocating them to other departments or daughter companies – you can’t be more naive!

    1. @dallein I don’t believe you are right and I’ll take at least the attempt at making something unsustainable into something sustainable any day, over more of what they have been doing for decades. I’d be really surprised if a team were to blatantly hide ‘half’ their spending after agreeing with Liberty to the new way, but at least if they did there will now be penalties in place that didn’t exist before, there will be financial spot checks, and so there is now a risk of not just penalties but public accusations of cheating for the type of overspending that had only been looked at with a shrug until now.

    2. There is going to be creative accounting. F1 is all about finding loop holes and working out how much the rules can be bent before you get into trouble. One such loophole could be doing research for road cars that is transferable to F1. That doesn’t mean the cost cap is a waste of time.

      The recent articles put Ferrari’s budget at $435m, compared to Williams at $125m. The cost cap will start at $175m. I realise there are complications regarding what is and isn’t included in the cap, and how prize money will change, but let’s take these numbers at face value for the sake of argument. Ferrari spend $175m under the cap. They find loopholes to spend a further $75m in ways that aren’t covered by the cap. Williams are unaffected by the cap, but they are now racing against a team with twice their budget ($250m), instead of a team with 3.5 times their budget. It won’t mean they are immediately winning races, but it should help them avoid being lapped every race.

      Once the cap is in place they can review how it is going, close loophole that they see being exploited and increase or decrease it as appropriate.

    3. @dallein It’s not that simple. Besides, Ian Tommins explains why even if your scenaria pans out, it’s still very much better than what the chasm in budgets we have now.

      The only thing I worry is that the smaller teams will simply go with half the budget. Since that would be enough to stay within 107% rule. Which will negate most of the whole point of the cap.

      Although there should still be more teams able to get a budget close to the $175 million cap (+expenses) rather than almost 500 million spent by the top teams now.

  8. I have no time for Steiner the thug, but he is right about the need for a huge deterent.

    Something like a fine equal to the amount of over-budget-cap abuse, which will then be distributed equally amongst the other teams – effectively a double whammy penalty, AND also have their budget cap reduced for the following season by the offending amount.

    Perhaps also the inclusion of one excluded expense in future budget caps for that team, per offence … starting with the highest paid driver fee, then the other driver, then the excluded executives from highest to lowest.

  9. Just make the penalty 10 times the amount of the overspend. All other breaches 5% of the team’s budget.

    However it will all be in the past, all penalties will be applied upon auditing last year’s figures. There will then be a reluctance to penalise for events of the past as in the Aussie football case.

    1. Especially given that any retrospective penalty big enough to attract more than a shrug from the audience will likely be parsed in a similar way to the doping scandals cycling had in the 1990s and early 2000s, regardless of the facts of the case.

      This is because it is impossible to know if a breach has happened in sufficiently timely fashion. “Sufficiently timely” would have to be “before the final race’s results are known to people,” and you can’t punish someone for a financial breach before the relevant financial period ends.

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