Economic woes have FIA, race teams eyeing common goal: to cut costs

"R.U. NUTS?"

That was the message crew chief Lugs Harvey scrawled on a pit board and showed to his driver, Stroker Ace, in the hilarious book "Stand On It: A Novel By Stroker Ace," written by Bill Neely and Bob Ottum.

Ace was racing their Sprint Car at Terre Haute and was thrashing the thing around at full bore and within an inch of its life as he charged through the field after the car had refused to start.

It takes money to go racing, whether you occasionally compete at an amateur level at a local track or if you are one of the biggest pro teams in the world. In the novel, Ace and Lugs got a healthy sponsorship for their NASCAR team from Clyde Torkle's "Rain Tree Farms -- The World's Finest Fastest Fried Chicken."

But if you told Lugs that the big Formula One teams spend $300 million to $400 million or more per year to field two cars in 19 races, you know what he'd say?

"R.U. NUTS?"

Max Mosley, president of F1's governing body, the FIA, has long campaigned for cost-cutting, and the recent worldwide economic crisis has brought his message home.

"It has become apparent, long before the present economic difficulties, that F1 was unsustainable," Mosley said in an interview with the BBC.

"You can't run a business where the outgoings are two to three times the income. Not for very long. It depends at the moment on millionaires -- or billionaires, we don't have millionaires any more -- subsidizing them, people like Vijay Mallya of Kingfisher [Force India] or Dietrich Mateschitz of Red Bull. Without them, those teams wouldn't be there.

"We've already got two gaps; we're likely to lose two or three more of the independent teams. F1 cannot continue like that; that's been obvious for some time.

"At the moment we've got 20 cars. If we lost two teams we'd have 16; three teams, 14. It then would cease to be a credible grid."

The rules in F1's franchise system limit the field to 24 cars and 12 teams. Right now there are 10 teams and 20 cars. The two gaps Mosley refers to are the two open slots. Earlier this year the Super Aguri team dropped out because it didn't have the finances to continue.

Mosley predicts that the big manufacturer teams are going to face difficult times as well.

"Some of the manufacturers may be in difficulty now as well," he told the BBC, "because if you look at their share prices, their profitability, their sales, the days when they could just toss out 100, 200, 300 million euro a year, which is what F1 costs those big companies, I think they're finished. I really think it's a serious situation."

Of course, all the teams want to save money. But historically the case has been that they can't agree on how to do it because none of them is willing to give up the tiniest competitive edge it perceives it may have.

One of Mosley's main tactics in dealing with the recalcitrant teams could be described as a variation of bait-and-switch.

He baits them by threatening a drastic set of rule changes that gets them so upset that when he offers a compromise the teams jump at it and accept things they never would have in the first place.

On Oct. 10, the Friday of the Chinese Grand Prix weekend, Mosley shocked the teams by announcing that new rules would make the teams use standard engines and gearboxes starting in 2010.

The announcement was strategically timed to come out shortly before an official FIA press conference that included privateer team owners Vijay Malay of Force India and Gerhard Berger of Toro Rosso. Naturally, they both endorsed Mosley's plan.

"The global economic environment is certainly a cause of major concern," said billionaire business tycoon Malay. "In my 25 years as chairman of the [United Brewery] Group I've never seen such a position, where there is lack of confidence, where economic growth is being questioned, where there is a liquidity crisis, share prices have fallen off the cliff and trading conditions are certainly very, very difficult.

"In this context any initiative to reduce the costs of F1 is most welcome. We have the FIA, the regulator, which writes the rules. We have the Formula One Teams' Association that has recently formed, which I believe is also appreciative of the need to immediately reduce costs, so I think the FOTA and the FIA can talk to find out a solution but a solution is a must."

We fully appreciate that there is a need to address the issues of cost and technology, and environment, etc. But at the same time, when you put on the list that manufacturers are in F1 to differentiate their products and their capabilities, that has to be taken into consideration, too.

-- McLaren's Ron Dennis

Berger owns 50 percent of Toro Rosso, while Red Bull's Dietrich Mateschitz owns the other half.

"I couldn't agree more with Vijay," Berger said. "I, as an independent team, am very happy to see things moving, and that slowly everybody starts to realize that we are getting into a very, very difficult situation As we all know how much long lead time decisions like this can have, it is very important to react quickly."

Patrick Head, the director of engineering and co-owner of the privateer Williams team, says budgets must be reduced.

"I would have to say that as a non-manufacturer team, we are certainly in favor of anything that reduces budgets," he told ESPN.com. "Quite a lot of the other teams are in the same position. Whether actually going for a standardized engine is the way to achieve that is a matter of debate.

"But I don't think that there is any question that current budget levels are unsustainable for all but a few teams."

BMW, Honda, Ferrari, Renault, Mercedes-Benz and Toyota were not pleased at the standardized engine proposal. They were upset enough already when the FIA said it wanted to make sure all the individually designed and built engines had equal power outputs.

And now the FIA was saying engines will be completely standard, built either by a third party or by the manufacturers themselves to a rigid set of specifications.

"We fully appreciate that there is a need to address the issues of cost and technology, and environment, etc.," McLaren Mercedes boss Ron Dennis said. "But at the same time, when you put on the list that manufacturers are in F1 to differentiate their products and their capabilities, that has to be taken into consideration, too."

Mosley and the FIA appeared serious, however. The FIA released a 27-page document describing in detail the "invitation to tender for sole supply contract" for engines and gearboxes.

During the weekend of the Chinese Grand Prix, members of the newly formed FOTA held two long meetings to discuss a unified set of cost-cutting proposals to present to Mosley in a meeting in Geneva on Tuesday.

"There is a very, very firm commitment from the teams that finds a good solution that addresses all of the problems for all the teams in F1," Dennis said in China. "But that is going to require lots of compromise and moving towards the central ground."

The subsequent meeting with the FIA in Geneva was a success.

"Today's meeting in Geneva has produced significant cost savings for
2009 and 2010. FOTA are working urgently on further proposals for 2010 and thereafter," a joint FOTA and FIA statement said.

No details of what was agreed upon were released, but as reported earlier by ESPN.com, four key points have been reached:

• Manufacturers must be willing to supply 25 engines per year to independent teams at the cost of 10 million euros ($13.5 million).

• Engine life will be extended from two to three races.

• The FIA and FOTA will meet again after the season-ending Brazilian Grand Prix to discuss further cost cuts, including new testing limits and the use of a standard kinetic energy recovery system (KERS).

• Further meetings will be held to work out to reduce chassis development costs and to solve the controversy over whether customer cars should be legal in the future.

So far there has been no mention or hint that standardized engines will be required. That is not to say it won't happen, but then again, perhaps Mosley's bait-and-switch tactics worked. He has long campaigned for affordable engines to be made available to the private teams, but the manufacturers have balked at that.

On the other points, one team estimated that it costs $5,000 per mile to go testing. It's speculated that the total testing mileage a team can log during the season will be reduced from the current limit of 18,600 miles to 12,470 miles.

Critics, however, say that the teams will merely take the money saved and spend it anyway on bench testing machines such as seven-post chassis rigs and the latest computers.

Some of the top teams have already spent $20 million to $50 million developing the new KERS that will be allowed in 2009. A standard system would save money all around but that initial investment would be lost.

Just how much does a team need to spend on developing a chassis?

"F1 at the moment is incredibly competitive," said Force India's chief technical officer Mike Gascoyne. "We [are] regularly qualifying under two seconds away from the front of the grid. Those are lap times that would have been very competitive two or three years ago, and we do that on $120 million.

"Why are teams spending $500 million when you can blatantly have a competitive series with cars that we produce which three or four years ago would have been middle-to-top ranked cars? We can do it on $120 million; why can't everybody else?"

The big teams have two or even three wind tunnels running 24 hours a day. There have been calls to limit wind-tunnel usage, but again, the teams would just funnel the money into computational fluid dynamics (CFD) systems.

Software for the latest and most sophisticated computers has been developed to use CFD to simulate wind-tunnel testing. Thus, for example, a proposed new front wing can be tested by putting a computer model of the wing into the wind-tunnel simulation -- before the wing itself is actually built.

Mosley sent a letter to FOTA saying that the FIA envisages common parts for numerous areas of the chassis.

"For example," he wrote, "standard suspension and wheels (i.e.
standard 'corners'), a standard underbody and other parts which are currently the subject of major expenditure but add nothing to the spectacle or to the public interest of F1.

"Other measures, such as a minimum height for the centre of gravity, restrictions on the use of certain materials or the homologation of certain major components (e.g. the 'tub') for a period of time, may also be appropriate."

Critics fear that F1 will lose its appeal if it becomes a spec-car series.

Others, like Renault team boss Flavio Briatore, agree with Mosley, saying that the average fan could care less about what sort of suspension or gearbox a car has, and such components contribute nothing to what F1 should be -- an entertaining show.

In the past the teams have rarely been able to all agree on anything, but so far all the teams are sticking together in FOTA, which was formed in September.

"This is the first time there is this kind of cohesion in F1 despite the interests being necessarily different between the various teams,"
Ferrari team principal Stefano Domenicali said.

"So I think this is a positive thing that goes in a direction that wasn't predicted by some, because I remember when we signed the association in Monza, some people were betting that the association would dismantle after two days. We are keeping together, this is positive."

The initial consensus between the FIA and FOTA has been described as a historic landmark. Indeed, after decades of disagreement, the teams and the FIA seem to be working towards a common goal.

All the teams sticking together? The teams and the FIA agreeing? F1 cutting cost substantially?

In the past, had somebody suggested all this would happen simultaneously, you may well have replied: "R.U. NUTS?"

But it looks like it is becoming reality.

Dan Knutson covers Formula One for National Speed Sport News and ESPN.com.