2021 Cost Cap Breaches

[Leithen]

The Race is reporting that it is believed that Red Bull and possibly Aston Martin broke the cost cap in 2021.

https://the-race.com/formula-1/red-bull-one-of-two...

That should throw some more fuel on the fire of the season results given there doesn't appear to be any set penalty.

[Leithen]

Given that Ferrari have already questioned Red Bull's ability to afford to continually update this years car, the FIA must find themselves in something of a bind.

One years breach might be something that could be dealt with a slapped wrist, fine etc. But two consecutive breaches by the same team, where championships were won with the car will just make a mockery of the whole cap arrangement.

I would disqualify from the championship retrospectively - any cost overrun will offer an unfair advantage. I'd also impose fines - whatever the cost of overrun, has to then be paid to all the other teams. Go over by $5M, it's going to cost you $45M.

[Leithen]

Dieter Rencken has an interesting article about the inherent difficulty in controlling the cost cap, let alone policing it.

https://racingnews365.com/analysis-is-there-any-su...

With reference to Marko’s comment, the article highlights that in their 2020 accounts Red Bull Racing only had 59 employees. Red Bull Technology had 984. It provides services to both Red Bull and AlphaTauri.

[Leithen]

Evercross said:

Leithen said:

Dieter Rencken has an interesting article about the inherent difficulty in controlling the cost cap, let alone policing it.

https://racingnews365.com/analysis-is-there-any-su...

This is the debate we should be having. The cost cap is unpoliceable, and any notion that one team is doing this or doing that to break it is a laugh.

The bunfight was inevitable, which is why I think it is interesting that someone chooses now to launch the first salvo.

The article is a bit of a cop-out IMHO. Yes, any cost cap will be difficult to audit and consequently to police. However, they all signed up for it, and it will likely only ever be an issue for the top 3-5 teams.

The great advantage the auditors have is to be able to compare the operations, the costs, any pricing from suppliers etc. The design and production of a wing endplate will vary in cost between teams, but not by much.

If there is any leeway given to a team that has come close to a material breach it will be because this is early days in the regime. Down the line and as the cost cap is lowered, there ought to be far fewer opportunities for any such misunderstanding.

I still think that if any team has substantially benefited from spending more than the cap and therefore their competitors, there ought to be a correction to the results where those benefits have been realised.

[Leithen]

AndyDubbya said:

What if Braun had been found to be cheating, the year after they won? How would you penalise them?

They would have shaved a few points off their championship totals?

[Leithen]

ch37 said:

It's funny how everyone zones in on Toto, very DTS in continuing the RB vs Merc narrative.

A quick search and I've found strong comments from:

Mercedes, Ferrari, McLaren and Alfa Romeo.

Given Alpha Tauri and Aston Martin are unlikely to say anything, that's much of the grid covered.

And strong comments mid year from Ferrari, regarding Red Bull's ability to to produce upgrades.

[Leithen]

I always thought it would be Ferrari that would find separating their F1 spend from everything else very hard.

[Leithen]

Muzzer79 said:

jsf said:

M5-911 said:

The risk for F1 to penalize a team or 2 is far too serious, especially if we are talking a big team and potentially striping a driver from the championship.

Then don't all agree to rules that do that.

They all agreed to these rules, implement them.

The debate won't be the punishment. The debate will be the interpretation of the accounting guidelines, determining whether a team is over the budget cap.

The consequences are the meat of the thing. Quantification of any breach. Estimation of any advantage gained. The consequences.

There can be as much debate about the quantification as anyone likes, but it'll be the estimation by rival teams of any advantage gained that counts.

Then it comes down to what the rival teams are prepared to do about it.

Domenicali probably has a bad headache right now.

[Leithen]

Can’t help thinking that the delay is to allow a meeting to take place at Suzuka between all the protagonists.

Carrots, sticks, threats, promises, ultimately settled by money.

On Monday there will remarkable unity between teams.

Or not.

[Leithen]

RacerMike said:

The reality is. This thread will continue on for hundreds of pages like the AD one did. No one will ever agree. To the 90% who just blindly argue along with the majority view, perhaps think around the discussion and consider the broader view.

If you do think about the reality of the cost cap, you ought to quickly understand that its success relies wholly on the confidence of its participants.

If all the teams are happy, this thread will quickly be forgotten. It’s clear however that they are not at the moment.

Perhaps after the clear and transparent publication by the FIA of the audits, all the team principals will pat each other on the back and give each other cigars.

But perhaps that won’t happen, and given that the cost cap defines F1 at the moment, that’s a problem.

[Leithen]

Well.

Mercedes appear to have been remarkably quiet over the weekend on the subject.

Stefano has a big headache.

[Leithen]

Until the FIA and/or Red Bull offer transparent details and reasoning for RB being considered to be in breach of the financial regulations, it is impossible for the fans, but more importantly the other teams to know or judge the severity of the breach.

Will such transparency occur? I wouldn't bet on it.

I genuinely wonder whether the cost cap is dead in the water. It's the elephant in the room. Do all the team owners privately accept this? Given the franchise values, do they care? Whilst they might publicly say one thing and commit to the financial regs as agreed, will there be a quiet deal done where Mercedes, Ferrari, Red Bull, et all can do whatever they like and certificates of compliance will be issued regardless?

[Leithen]

Chamon_Lee said:

I’ll just leave this here.
Looks like he took a gamble that everyone would be a cheat

He’s talking about the 2022 cost cap and the impact of inflation etc. There was a lot of noise at Monaco from all the top teams about the cost impacts of operating this year.

[Leithen]

jm doc said:

SO?

He's talking about cost caps and penalties. He admits that even a "slight violation" (his words and kindly even defines an amount) can make a difference.

Please forward to the FIA.

So, I was providing the context to the quote. No need for CAPS and back in your box.

[Leithen]

Chamon_Lee said:

Your context is correct but it certainly points us in a clear direction of his mindset rather than people assuming it’s a simple oversight. It’s a purposeful circumvention of the rules.

There are, unsurprisingly, many layers to this fiasco. On a number of points, the teams will be in agreement - for example the effect of rising inflation, fuel costs, etc.

I think it very unlikely that RB will be found to have fraudulently tried to circumvent the cost cap. No one appears to be claiming that. Instead they have, and will, argue that their structure of cost allocation is correct and the FIA is wrong. How far they are prepared to argue this will shed a lot of light on the inner tensions between the teams. The further they take legal challenges, the more shaky the whole cost cap edifice will become.

The cost cap only works if it has the confidence of all the teams. It is very difficult to see how Domenicali and bin Sulayem are going to finesse that.

[Leithen]

Jasandjules said:

Leithen said:

There are, unsurprisingly, many layers to this fiasco. On a number of points, the teams will be in agreement - for example the effect of rising inflation, fuel costs, etc.
.

But do you know what the other 9 times can agree on? They ALL managed to come in under the Cap.

We have no idea where they are with the 2022 Cap, and if this year is anything to go by, won't know until September 2023. What we do know is that several teams have made noises mid-year about the global financial inflation situation and how it will impact them. Ultimately this probably only affects the three or four teams that are operating near the cap.

[Leithen]

jsf said:

They caught the cheats and found them guilty, that means they found it possible to police.

Now it moves to the next stage of justice, the sentencing. This is the stage where people will decide if we have a whitewash or an appropriate punishment.

Indeed. If the breach is clear cut and of a scale to have changed the outcome of championships they need to have the guts to correct that.

Should RB threaten to walk after 2025, call their bluff. The sport will still have Ferrari, Mercedes, Alpine, Audi, and opportunities for other manufacturers to take part in a clearly level field, which is effectively policed.

[Leithen]

I'd quite like Mercedes to go all Lotus 94T and have championship stickers down the side of the car.

[Leithen]

Muzzer79 said:

GCH said:

Muzzer79 said:

cc3 said:

Just pull out of GP’s until FIA do the right thing

They can't - breach of contract

So is cheating

Contract law doesn't work on an eye for an eye basis - Someone else breaching their contract with a party doesn't give you licence to break yours with the same party.

If the teams pulled out of any races they'd be sued and would lose said lawsuit.

The teams involved may well employ the finest legal minds to argue that they are unable to compete fairly if any breach punishment is too lenient.

[Leithen]

deadslow said:

CharlesElliott said:

If you have a budget it is non-sensical to say that you went over the budget because of spending on x or y. That is just retrospective allocation. If you have 100m to spend and you spend 105m, then you overspent by 5m. It is meaningless what you spent on each line item, it is only the total that matters. You cannot overspend on salaries, or catering or anything else, you just overspend.

yes, but if you fully intended to comply with the budget/included/excluded categories spending limit, but retrospectively the FIA disagrees over the categorisation of some of those expenses, then you have a different problem, which might be more common in the first year(s) of such a regime.

Two problems with that;

1/. According to Brown, they had a trial year to figure that out before the year in question.

2/. All the other teams managed to figure it out and budgeted/performed accordingly.