Formula One is on the verge of a serious financial crisis after the collapse of the Marussia and Caterham teams, according to former team boss Eddie Jordan.
Caterham have set up a supporters fund after falling into administration last month, in an effort to be able to participate in the final race of the season in Abu Dhabi.
But it is the end of the road for Marussia, after the Banbury based team closed its doors and made its 200 staff redundant on Friday.
Jordan knows exactly what it feels like to run a small team on a limited budget, having run his own team from 1991 to 2004. He also knows what it is like running out of money and ultimately selling up. So it’s no wonder the Irishman has strong views on the current state of affairs in the sport.
“Caterham (previously Lotus), Marussia (previously Virgin) and HRT were promised that the sport would have a budget cap of 50m Euros and the governing body, the FIA failed to impose this”, said Jordan.
“Teams have to use Ecclestone’s freight but the costs of this are high. There used to be a £10m payment from the commercial rights holder to teams to support the freight costs but Ecclestone withdrew that two years ago.
“There is the gross disparity of $300m being skimmed off the top of the money allocated to pay the teams as a cash payment for the top five teams, Red Bull, Ferrari, McLaren, Williams and Mercedes.”
The latter issue is one of large unrest. Autosport this week reported that some teams receive one-off payments for signing up with Ecclestone. Red Bull receive $35 million, Mercedes $12 million and Williams $10 million. The lack of balance in these payments as well as the bonus received by each team based on their finishing position in the constructor’s championship is astounding.
While F1 looks towards cleaner, more environmentally friendly solutions for the sport (such as the hybrid turbo-charged engines), these are invariably leading to the small teams’ downfall.
Price-wise, they are being smothered. The Hybrid power system required for 2014 regulations have seen a $10 million average increase, while the gearbox and hydraulics combined total an extra $5 million. But that’s just the tip of the iceberg.
For mid-field teams, fuel, tyres and electronics add up to $3.7 million and this is before taking employee salaries into account. $20 million for those, plus a range of IT, track facilities, travel, windtunnel/CFD, factory maintenance, HR and freight leads to a staggering $120 million spent.
To put Caterham and Marussia’s plight into perspective, they operate on a $60 million and $70 million budget respectively so are spending much less than their mid-field rivals. 2014 is Marussia’s most successful year since their inception in 2010, yet this was still not enough to save them.
If you look at the overall budget of the richest team on the grid Mercedes and that of Caterham and Marussia, it pales in comparison. Mercedes is a factory team and is backed to the hilt by Daimler, the parent company. To give you an idea of just how much of a difference there is between the top teams and the minnows; Mercedes Grand Prix’s budget is $335 million (including engines). That is two and a half times the budget of Caterham and Marussia out together.
According to Eddie Jordan, there is one person at the top of the sport who must shoulder at least a portion of the blame for the sports’ financial problems.
“Who’s accountable? It’s Bernie Ecclestone’s job to make sure promises are adhered to, and these costs are not coming down next year even though the manufacturers originally said they would”
Ecclestone admitted as much on the eve of this weekend’s Brazilian Grand Prix in Interlagos, without seeming too convinced on a plausible solution.
Ecclestone said: “There is too much money being distributed badly – probably my fault.”
He added: “Like lots of agreements people make, they seemed a good idea at the time. I know what’s wrong, but don’t know how to fix it.”
With other teams on the grid in increasingly precarious financial positions (Sauber the most at risk), Ecclestone must clunk some heads together to avoid a total meltdown in the sport. We’ve already lost Marussia, and Caterham are desperate. F1 cannot afford to lose any more.