Although the incoming $145 million (£107.8m) annual budget cap applies to all teams, Mercedes and Ferrari are most affected. Red Bull Racing has traditionally operated on lower budgets than its two primary rivals: It currently operates above the cap but will be able to largely off-set any reductions within the larger Red Bull family, while McLaren and Renault need make only relatively minor adjustments.
As for the rest, they’re operating well within the cap, which provides for a number of exclusions over and above straight performance spending. Marketing, hospitality and administration costs, plus – currently – driver and top three executive salaries are all excluded. Thus overall team spending could exceed $145m despite compliance with the Financial Regulations, which provides for severe penalties for breaches.
As outlined above, Red Bull has various options, including co-operating with sister team AlphaTauri and taking on projects via its Red Bull Technologies (mainly automotive activities) and Red Bull Advanced Technologies (other) divisions. Mercedes has a relationship with Racing Point – a pink facsimile of last year’s Silver Arrows won last weekend’s Sakhir Grand Prix – and recently diversified into applied sciences.
For the record, such activities are not new: McLaren has operated its Advanced Technologies for almost three decades, while Williams Advanced Engineering was formed in 2010, and both operations arguably carried their parent companies through some challenging F1 seasons. Crucially, both companies had been able to redeploy staff internally – keeping skills ‘in house’ – rather than lose them to other industries.
The ‘odd’ team out, though, is Ferrari. Without similarly close team alliances, no applied technologies division and cut loose by its New York Stock Exchange listing from former parent company Fiat Chrysler Automobiles, which is currently in the process of completing a merger with PSA (Peugeot/Citroen/Opel), Ferrari is in danger of losing out, particularly as Italian labour laws make retrenchments a laborious and expensive process.
To this end the FIA granted all teams a six-month ‘soft-landing’ window, but even that could be insufficient for Ferrari after the Italian government outlawed retrenchments until March 2021 as part of its Covid-19 support packages. One option is to diversify into WEC and IndyCar, but campaigns in both categories are unlikely to absorb sufficient surplus personnel by being mainly specification series focussing largely on engines.
As the budget cap applies directly to chassis and race operations departments and not engine divisions, the ‘wrong’ engineers would be deployed. In addition, the most talented engineers are often loathe to leave the cutting-edge environment that is F1 design and development, and thus may leave F1 totally and head elsewhere. That would have the unfortunate effect of removing them entirely from the F1 talent pool.
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The obvious solution, then, is to form an alliance with a customer team, not unlike that entered into between Mercedes and Racing Point, or the relationship between Red Bull and AlphaTauri. Coming changes to parts classifications from the current binary choice of listed (to which teams own the designs) and non-listed (open) parts to no fewer than five categories in 2022 further encourages cooperation between teams.
The new parts classifications will be: Listed (as above), Standard (single supplier via tender), Prescribed Design (free supply to set specification) Transferable (shared between teams), and Open Source (self-explanatory).
Thus, the question facing Ferrari is not whether it should enter into a formal alliance, but with which team. Step forward Haas: not only is the US-owned team a current powertrain and non-listed parts customer, but also uses Ferrari’s wind tunnel for development as permitted by the aerodynamic testing regulations (ATR). In fact, the team has no manufacturing facilities of its own, relying on Dallara to deliver services and parts not provided by Ferrari.
Joining the dots is simple – the regulations provide a natural break point. With 2020’s cars being largely carried over for next year and F1’s ‘new era’ regulations delayed a year due to Covid-19, Dallara continues developing the current Haas – a car it had a large hand in producing – with Ferrari penning its replacement in parallel. Where other teams have the same engineers on two cars, Haas will have two design teams.
RaceFans initially learned of the plans when an insider suggested that the Haas contract with Dallara would be extended for a single year only – for 2021 – suggesting the team would be moving on thereafter. A Ferrari insider subsequently confirmed the establishment of a “Ferrari customer technical services division” was a possibility, stressing that it would obviously comply with all F1 regulations: technical, sporting and financial.
Although the FIA would not comment officially, the governing body is believed to have inspected Ferrari’s plans and given its green light to the project, subject to certain provisos such as totally separate premises and systems in order to prevent casual ‘coffee machine discussions’ during which secrets may be whispered, with staff effectively being Haas employees albeit paid by Ferrari in order to maintain employee benefits and company perks.
Another stipulation is that Ferrari staff seconded to the project be placed on Haas’ performance bonus structure, and not Ferrari’s. The FIA will monitor car design in terms of (revised) ‘photocopier’ regulations to ensure that no surfaces are in any way similar. There will no doubt be suspicions about illegal co-operation due to geographic proximity between Ferrari and its satellite, but forget not that Mercedes and Racing Point bases are but 10 miles apart.
Following a protest from Mercedes in November 2015 over the then-Ferrari/Haas relationship ahead of the latter team’s official arrival in F1 in 2016, the regulations were amended to prevent any suspect parts sharing and back-and-forth transfers of personnel between teams.
The stewards made clear that it was illegal for teams to share information gained during aerodynamic testing; that they cannot share staff or swap staff without acceptable periods of gardening leave; cannot acquire aerodynamic surfaces from external sources unless testing was conducted under a team’s own ATR quota; and must have ‘firewalls’ in place to prevent ‘leakage’ of wind tunnel and other data.
While Ferrari’s listing (tracking stock: RACE) makes it difficult to form a separate company within the Ferrari N.V. corporate structure, its public company status provides another impediment for underhanded dealings: imagine shareholder reaction should the customer division get ‘done’ for cheating, particularly under the financial regulations.
As a pointer: when Ferrari’s fuel flow settlement with the FIA emerged at the end of February the share price immediately reacted negatively, although the full effect was difficult to quantify as the matter was announced just as Covid-19 bubbled under. As a matter of interest, the stock fell by $50, from $180 to $130, before gradually rebounding and is currently trading at an all-time high of $215.
While Ferrari has not officially confirmed the establishment of the customer division, consider the wording of last week’s press release announcing that head of Scuderia Ferrari’s chassis engineering department Simone Resta would be heading up Haas’ technical effort from next year.
Ferrari team principal and managing director of the Scuderia Mattia Binotto spoke of Resta “relinquishing his position as head of the department” in order to “strengthen the technical operation at the Haas F1 Team.” Ferrari’s website refers to Resta’s “move to Haas”, which suggests a resignation when in fact the move is a secondment. Semantics in the best Ferrari tradition.
Equally, the press release alluded to “our long-term relationship with Haas, dating back to when it first came into Formula 1, [which] should be the basis for both parties to benefit from any possible synergy, consistent with what is defined in the FIA regulations.”
While Haas, which also sounded Renault out – albeit cursorily so – over an alliance from 2022, maintains that its decision to recruit Mick Schumacher for next year is unrelated to the project, Binotto made specific reference to the German’s signing, stating, “[Haas] has just strengthened an already very close relationship with the Scuderia by taking on Ferrari Driver Academy driver Mick Schumacher.” Go figure…
Significantly, Haas did not comment about Ferrari’s press release, let alone welcome Resta to its ranks – as could be expected in the case of new recruitment. This provided slam-dunk pointers that the Italian is not joining the US team on a formal basis but will undertake contract work on behalf of Ferrari specifically for Haas.
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Yet Ferrari’s press release read “Resta moves to Haas”, and the official Formula 1 website wrote of Resta’s “recruitment”!
Resta – and any other employees who may follow him to Haas – will not, though, be able to return to full-time Ferrari duties overnight at the end of any contract period, with the FIA expected to impose periods of gardening leave commensurate with their levels of insider knowledge. Six months is the current norm for senior employees moving to other teams – less for more junior individuals – and these guidelines are expected to apply.
Questions will, of course, be asked about any gardening leave prior to joining the project, but given that Ferrari has not yet commenced advanced design of its 2022 car – it is still at the concept stage as regulations are likely to change over the next few months – no such impositions will apply to employees who transfer during the formative stages. That should, though, change as design work advances.
The FIA recently appointed a full-time F1 inspector who will no doubt undertake strict random inspections to ensure that all statutory provisions are adhered to, particularly with regard to the budget cap, which kicks in next year and thus applies to any work undertaken by Dallara and Ferrari specifically for Haas.
Also subject to the FIA microscope will be compliance with the ATRs and CFD equivalents. Such audits will be regularly undertaken at all teams, albeit with a particular focus on team alliances as these are where grey areas are most likely to exist – witness Racing Point’s infamous ‘photocopy engineering’ case, which resulted in a further tightening of the regulations. Ironically Ferrari was amongst those teams who pushed hardest for change.
All this begs the question: what about Sauber, or Alfa Romeo as the team is known? Although the Swiss outfit’s co-operation with Ferrari – being confined to powertrain and allied electronics and hydraulics – is not at the same level as that of Haas, the deal was forged when (the late) Sergio Marchionne was president and CEO of Ferrari and FCA, hence the Serpent branding and Alfa Romeo’s hiring of Antonio Giovinazzi.
However, the deal expires at the end of 2021. Whether it is renewed depends upon the future direction of Alfa Romeo under FCA/PSA – on track to become the world’s fourth-largest auto company, to be known as Stellantis – but either way Sauber will need to consider its options: Continue as self-sufficient independent or enter into a similar alliance with Ferrari, or, failing that, Renault, which is also seeking a partner.
The final decision about Alfa Romeo’s post-2021 future, and therefore the fate of Sauber, rests with John Elkann, the chairman of Italian industrial conglomerate Exor, which is a major shareholder in Ferrari and FCA and soon of Stellantis. Should Alfa Romeo remain in F1 then a Haas-type project is a distinct possibility; if not, Sauber may well cut a deal with PSA’s mortal enemy, Renault (Alpine from 2021). Watch this space.
When I first broached the topic with Ferrari I asked whether such a project was in the offing, and, if not, why not, for it makes enormous sense given the evolution of the regulations and Ferrari’s need to tick a list of boxes. While no direct answer was forthcoming, the responses were such that it was clearly worth digging further. Then came last week’s Resta announcement.
Whether team alliances are desirable is debatable; the fact is, though, that F1’s cost-cutting drive has made them inevitable. Sure, Ferrari’s customer technology department – or whatever the company may choose to dub Resta’s domain – will operate differently to the Red Bull, and Mercedes models by effectively slotting between the two, but the primary point is that it complies fully with all FIA regulations, as do those models.
The closing question then is: when will Renault follow suit, and with whom? Sauber Renault, or Williams Renault? Last-named does have a rather evocative ring to it…
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