F1 teams could go out of business, Motorsport UK boss warns

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In the round-up: Motorsport UK chairman David Richards warns the disruption to the start of the 2020 F1 season could put teams out of business.

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Anthony is also concerned about how the long hiatus will affect some F1 teams:

I have a feeling we might lose a team before Liberty acts to support those that are struggling. There are potential owners waiting in the wings so hopefully teams can be saved.

I can’t see car sales doing well for a while, so I wouldn’t be surprised if Renault call it a day even if finances aren’t dire, F1 doesn’t seem a priority for current management. Uncertain times ahead for sure.
Anthony (@Antznz)

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On this day in F1

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Keith Collantine
Lifelong motor sport fan Keith set up RaceFans in 2005 - when it was originally called F1 Fanatic. Having previously worked as a motoring...

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30 comments on “F1 teams could go out of business, Motorsport UK boss warns”

  1. pastaman (@)
    26th March 2020, 0:08

    Aren’t F1 teams saving money through all of this by not traveling to races, not working at the factory, and not manufacturing parts? Someone please tell me why I’m wrong.

    1. @pastaman, You’re not wrong, you’re just not looking at the full picture, F1 teams have to spend money in order to make money, they have made the cars, contracted the drivers, and staff, borrowed big from the bank, have to pay rent for factory and major equipment etc. etc. They need an income from F1 just to break even in most cases, without that income they will be in debt for all that expenditure, probably in the region of 50 – 60 million, saving a few million on travel expenses and parts just won’t cut it.

      1. pastaman (@)
        26th March 2020, 1:46

        Thanks for the answer, but what is the “income from F1”? Genuinely asking.

        1. pastaman (@)
          26th March 2020, 1:51

          I wonder because I thought the “income” was from sponsorships, being classified for more than 2 years, finishing positions from previous seasons, heritage bonuses, etc. and not a race by race thing. How does shutting down for a few months affect any of these incomes?

          1. Previous seasons income will be used to pay of debt, there will be no payment next year to borrow against.

          2. THe income for this year is made up of several “up front” payments starting in March/April based on the one hand on results from the past + the heritgage bonusess etc, but on the other hand, they are a % of expected revenue for THIS year @pastaman. The last payment(s) are then adjusted to reflect how the season revenue really played out.

            So first of all, that first payment was probably postponed (to may?), since Liberty is currently working hard to come up with a halfway sensible estimate of what the revenue might actually be – meaning that teams who based loan repayments and supplier payments planning on the basis of receiving money about now, have to negotiate about delaying those payments.

            And the bigger issue is off course that when the expected revenue for this year drops by who knows how much – probably at least some 200-300 million less, not unlikely to be more – hard to say exactly, but it could well be between 30-50% of the revenue. That would mean the teams also get far less when the payments do start to get in – if you were counting on 50 million from F1, and now you get only 25-35 million, that can break a team.

          3. @pastaman Also sponsorship deals is based on X number of race, events, merchandise deals, commercial appearance, etc. With the situation right now that basically preventing the teams to fulfill their obligations, I wouldn’t be surprised if a lot of sponsors try to negotiate less pay for this season too. The sponsors economy is also affected by the pandemic too.

    2. Have to contractually pay quite a few people and there is continued development and testing going on with no prize money, tv, spectators, merchandise etc to support it. So it’s quite an (additional) expense even if they are not spending money for travel, fuel, and tires.

    3. Teams are likely saving a little money now, but not that much (most of their costs for the cancelled/postponed races won’t be refundable, because they happened after WHO declared a pandemic – that invalidates most insurances. Also, any sponsor that is race-by-race rather than season-by-season won’t be paying, and most staff are salaried).

      They will lose a little money at the back end of this season if the season is intensified by rescheduling some of the postponed races, especially if there’s a second wave of virus in that time.

      They will lose a lot of money in the first half of 2021. The Chinese and Monaco races are key ones for sponsor pursuits, there is still some extra racing planned, Liberty’s reduced income for 2020 will start filtering to the teams (income from Liberty comes the calendar year in arrears from when Liberty accrues it), effects on the wider supply network will result in reduced credit supply (which many teams lean upon) and the development for 2022 teams can’t do now will increase. The big teams will be working on 2022 from the moment the factories re-open, so everyone else who wishes to remain competitive over the entire span of the next few years must do the same.

      For that matter, no team has signed an equivalent of Concorde for 2021 except Renault (neither is it a given that Renault will remain so signed if the upcoming recession is deep enough), therefore it’s possible teams may have the expense of enforced engine supplier swapovers too.

  2. I doubt that F1 Teams will be any different to the thousands of businesses and sporting clubs that are being brought to their knees by this pandemic.

    In time, things will recover but I’d expect the various governments around the world to be supporting their mainstream business activities as a priority over something like a F1 team or a Football team first.

    1. William Jones
      26th March 2020, 1:33

      I believe the suggestion was that Liberty Media help out, not governments.

      1. Can’t see that happening – they’ll have a huge struggle just to keep themselves afloat which is why most organisations will be looking to public funds to save jobs etc.

  3. I like that quote from Robert, f1 cars don’t snap in slow motion.

  4. Cristiano Ferreira
    26th March 2020, 2:14

    I think the best thing Liberty could do to try and lessen the damage done by the Covid-19 is to share the prize money in equal parts between all teams regardless of their position in the stands. Its strange but i think its the best thing to do regarding this virus situation.

  5. The only team who had all costs covered without being supported by the corporate owners was Merc. But I would think that even they are now having to find costs savings with out any real income. The smaller teams that I think are in trouble are Haas and Williams, but for different reasons.
    Carl Haas is already on record to being doubtful about continuing because of poor performance. This financial burden on top of that may be a deciding factor. Williams is already on a very thin budget this could push them over the edge…but I hope not.
    On a recent video Mark Priestley put forward a theory about why McLaren went ahead with its engine deal with Merc despite the massive redesign and all of the risks associated with it. He speculated that Renault may be opting out of F1 totally and McLaren really had no option but to push on with the Merc deal. But as I said he was only speculating.

    1. Actually Ferrari even had a small profit @johnrkh.

      But as you mention, Haas will be in a bad position. He has his NASCAR operations, his company might well face a decline in demand as companies worldwide could ramp down investment into new equipment and he also has to fund the F1 team.
      Williams was in a tight spot already, that is not going to get any better. Let’s hope they weren’t counting on anything and manage to hold on. I really think Alfa Romeo (Sauber) will be in a really tough situation as well. They aren’t that well funded and without perspective for this year, it might be the end of them. Let’s hope Honda wants to reap some rewards from their investment before they pull the plug.

      As you mention Renault seem to be on the edge between going on and quitting since they have failed to get their operation anywhere. With the 2020 cars kept on for 2021, I can see them going on through that year to either get at least some results, or at minimum allow a buyer to take over.

      No easy times.

    2. @johnrkh, IIRC back when RBR was winning championships they spent about $440+ million and prizemoney etc was about 450 million, and they were the only team making money without valuing promotional worth.

    3. The only team who had all costs covered without being supported by the corporate owners was Merc.

      Even Mercedes gets an $80M allowance from Daimler and still ends up with a loss according to Deiter’s research.

      1. @coldfly I may have jumped the gun I was going off this article.

      2. @coldfly Never have any luck posting links. The article I’m referring to was titled ‘Wolff wants to make it a “no brainer” for Mercedes to stay in F1’

        1. this one! thanks.
          Reading it, it seems an aspiration rather than a reality.
          I hope all teams can have realistic plans to be truly profitable (i.e. ‘sponsorship’ from owners only based on ‘decal value’). A global sport like F1 should be able to provide that opportunity to teams.

  6. David Richards still looks like a ruffian. :)

  7. Sky TV are still paying Liberty for F1, and I’m paying Sky for my subscription. The money – or much of it – is still there. Liberty must make stage payments to the teams.

    1. Won’t some people drop their subscriptions in the interim? Just saying. And there is the possibility Liberty could defer or avoid some payments I would think, if races are pushed back or canceled.

      Other than Netflix I have seen no new money coming in the last few years. Too bad spending restrictions didn’t come in 2020 instead of 2021. I bet even the big teams are lamenting that right now.

      1. @rsp123 Brian Spending caps are useless to teams that won’t reach them. In fact, it’s fortunate this year’s not capped, because this would have been £35 million (and counting) taken off all the teams’ caps, with no opportunity to foresee at the time the peak of that expense was generated (January/early February). We could have been looking at enforced layoffs just to go under the limit.

  8. Rescheduling the Canadian GP wouldn’t be easy, so quite likely, it’s either the original slot or no Canadian GP this year both due to Montreal’s distance to Europe and the climatic reasons involved. The only suitable alternative would be August, and that’d only work without the Dutch nor the Spanish GP being there.

  9. F1 is still sitting on my $99 for F1TV Pro. With so many races cancelled, I wonder what they are doing. Refunding? I know they won’t do that. So They basically got free money without delivering a product. Maybe they can use that money to help out Teams in need. Not sure how many people subscribe to the service, but I’m sure it can help pay some salaries of workers or Pay a few Bills for the Teams.

    1. @us-brian they have generally been pretty good about refunds when the streaming service had disruptions or quality issues. I imagine they will wait to see how many races actually take place this year before taking any action.

    2. Unfortunately, that’s pretty much every sports league right now.

      Today was to be Day1 of MLB, and no refunds for anything have gone out it seems. Same with NBA, NHL which were in season…then there’s MLS.

  10. Thank you for the birthday shout-out, Keith!

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