Formula One’s financial crisis

In the aftermath of Caterham and Marussia dropping into administration, Formula One was on the cusp of meltdown in the United States.

It’s been widely known for months, if not years, that the cost of Formula One was killing the smaller teams.

The heavily skewed financial rewards look after the top teams, whilst the smaller teams receive very little. They have even been banished from the F1 Working Group which discusses the future of the sport.

It is hardly surprising that they may feel unwanted and yet Formula One was a sport cannot survive without them.

In Austin, Texas, Force India, Sauber and Lotus threatened a boycott in protest at how revenues are divided within Formula One.

No-one other than themselves will know quite how serious they were. But the thought of six cars withdrawing from the grid, plus the four cars from Marussia and Caterham that were already missing would have made the paddock and grid look a lonely place.

Throw in the little matter of Formula One desperate to not be embarrassed once more in what is deemed their best future market place and something had to be done.

But it wasn’t done by Formula One supremo Bernie Ecclestone, it instead came from Donald Mackenzie.

Who? You might ask?

Well Donald Mackenzie is chairman of CVC Capital Partners, Formula 1?s controlling shareholder.

CVC have never publicly interfered with the running of Formula One before and these reports via The Times newspaper are unprecedented.

With Formula One at risk of fielding a grid of just 14 cars, Mackenzie got on the telephone to Lotus owner Gerard Lopez.

Lopez himself hasn’t been the most vocal of men in the paddock, but in Austin he spoke very well to the media and became someone of a figure head for the smaller teams plight.

According to The Times ?It is thought that CVC may be willing to find as much as £100 million for the three struggling teams to prevent the sport splitting in two.?

£100 million of course is a sizeable amount, split between Lotus, Force India and Sauber it’s an additional £33million plus for each team, which could be the difference between the teams running or following the likes of Marussia and Caterham into administration.

And where can CVC magic up £100million from?

Well CVC and other shareholders took an estimated profit of £795 million in 2013 out of the sport and that’s after £500million was handed out to the top teams as prize money.

There is plenty of money to go around in Formula One, the problem is it’s not distributed around to those that matter, the teams.

Lopez told the Guardian as quoted by Sky Sports: ?I know CVC and Bernie [Ecclestone] have been looking at this. It?s going to be a base payment [over and above the money paid for positions in the championship] given to the smaller teams, which is essentially going to make it possible for a normal budget to work.

?To be honest, it?s really not a complicated thing to do. It just requires a bit of goodwill. The overall amount we?re discussing, once you start dividing it by the number of teams, is not that massive.

?There is a way to build a proposal in the next couple of days. I really think there is a way to solve this in the coming days, probably even to get to a proposal before Brazil. In which case I don?t see the point in doing anything drastic that would damage the sport.?