HomeNewsFinance & MoneyMotorsportGlobal

Formula 1 bosses take pay cut and furlough staff as teams discuss further cost cap

Chase Carey, CEO and executive chairman of Formula One Management (Photo by Mark Thompson/Getty Images)

Formula One Management, the body that runs Formula 1, has furloughed some of its staff while senior executives have agreed to take a reduction in their salaries.

Around half of F1’s employees will benefit from the UK government scheme that pays up to 80 per cent of wages to a maximum of £2,500 ($3,086/€3,493) a month, but senior figures will not avail themselves of the scheme.

FOM’s leading executives will take a minimum 20-per-cent pay cut, with chief executive Chase Carey reported to be giving up a much larger proportion of his salary.

The motorsport has already had to cancel the first 8 Grands Prix of this season which could lead to a large shortfall in hosting, sponsorship and broadcast fees. F1 filings indicate the sport’s broadcast contracts “include a provision to reduce the fee payable to Formula 1 if there are fewer than 15 events”.

Similarly, the filings state: “fees under the relevant advertising and sponsorship contract are likely to be reduced” and corporate hospitality tickets are required to be refunded if a race is not held.

FOM pays teams prize money out of its income which means they are also likely to be heavily affected by the crisis. FOM has held talks with teams to work out how to help them during the lockdown with one option to advance payments and deduct them from future earnings.

Earlier this week, McLaren chief executive Zak Brown warned that the Covid-19 lockdown left F1 in a very fragile state in an interview with BBC Sport. He suggested as many as four teams could go bust if the crisis wasn’t handled correctly.

Brown called on the other teams in the series to agree to a further cost cap to ease the financial burden caused by the cessation of races.

From the 2021 season, F1 will introduce a cost cap governing team expenditure in the motorsport as part of the new Concorde Agreement negotiated between FOM and the teams. The $175m (€156.5m) cap covers all expenditure which relates directly to a F1 team car’s performance and is designed to promote closer racing and greater economic sustainability. The cap has a fixed conversion rate in both pounds and euros from the time it was introduced in the regulations.

Teams agreed to reduce the 2021 cap to $150m at a crisis meeting on Monday but some are now calling to reduce it even further to $125m.

Two of the leading teams, Ferrari and Red Bull are reported to not be willing to go below the $150m figure while Mercedes would be open to the idea if it can be convinced that it wasn’t being used to undermine the larger teams.

The larger teams also supply parts for the smaller teams and one concern raised in the meeting was that the cost of developing these parts was included in the cap. They argued this would put the smaller teams at an advantage as they don’t have to shoulder these expenses.

F1 has already delayed introducing new car regulations that are designed to encourage closer racing from 2021 to 2022 to ease the financial burden on teams.

Read this: Covid-19 drives F1 to a crossroads