In case you haven’t notice, the world is going through a tough period. For Formula One, this means many of the manufacturer backed teams are in trouble as retail car sales plummet.
Honda is already out. Renault just received a total of 4 billion from the French government to stay in business. BMW and Mercedes rely on sales in the United States to fund their operations. Toyota is declaring its first loss as a company in practically forever. Ferrari…well, it is doing okay. Still, the prospect of a severe change in landscape for Formula One is not just a possibility, it is turning into a probability.
It costs a lot of money to be in Formula One. That goes without saying. Ron Dennis of McLaren was recently quoted saying the top teams in the sport will spend between $200 and $300 million dollars on just the development of their engines and gearboxes. This doesn’t include suspension, chassis or aerodynamic work. As a matter of perspective, the entire budget of a NASCAR team couldn’t fund the development of a gearbox on a top Formula One team. That is simply staggering.
So, how do the teams pay for it? Well, the privateer teams simply don’t. They lose the race before the first day of the weekend. Instead, they try to finish in the points. The more points that can get, the more money the sanctioning body pays them. This allows them to continue racing. Lose out on the points and money and you are soon out of the sport. At best, you end up with a team like Williams that was once a leader in Formula One and now considers it a good year if it can stagger into the middle of the rankings.
For manufacturers, the sales of cars fund the racing teams. That being said, it takes a ton of sales to make up a $300 million or higher budget. The manufactures supplement their investment by gaining sponsorship from third parties. ING, for instance, was sponsoring Renault and will continue to do so through 2009 before stopping. As a primary sponsor, the banking company pays anywhere between $65 and $120 million to the team. That leaves a lot of cost for Renault to handle on its own.
Sales for car makers are not just down. They have plummeted. The figures are staggering and no manufacturer could have planned for this mess. With the stark economic realities in mind, the idea of spending a few hundred million dollars on a Formula One team seems like a lark. Although the races garner huge television audiences, cutting costs is currently far more important than exposure. This could lead to the exodus of manufacturers from Formula One.
Who could go? The obvious two are Toyota and Renault. Renault was just bailed out by the French government. Toyota has spent billions in Formula One for almost no positive results. Unless things turn around economically, it is hard to see these two teams hanging around. After them, BMW and Mercedes will be leaving if sales in the United States stay depressed. 2009 looks like a brutal year in America, so this could be it for both manufacturers.
And what are we left with? Ferrari is solid. McLaren is a solid team, but will be in trouble if they lose Mercedes. The rest of the field? It will be privateers for as far as the eyes can see down the grid. Even if you love Ferrari, it will be painful to watch them finish 1-2 in every race of the season.