Günther Steiner, the Italian-American boss of Formula 1 team Haas, is surprised when asked whether he has decided to seriously improve his car for the first time only at the end of July because of the budget limit, more than four months after the unfortunate start of the season. “No,” he says firmly. “Sometimes we do something different, but not to be different. There was simply no rational reason to do it sooner.’
Steiner means: his team does not have enough money to intervene earlier. If only he had the stress of being under the so-called budget cap to stay, he says with a laugh. ‘I always say that’s not the cap our problem is, but the cash. I have a certain amount that I can spend. When that runs out, I can no longer pay people.’ His driver Mick Schumacher is currently giving him a problem. The German has already destroyed two cars in serious crashes, as a result of which the team has lost at least two million euros more than budgeted and hardly has any spare parts.
Exactly for teams like the American Haas, which has been one of the smallest racing stables for years, the budget ceiling was created in 2021 after years of negotiations between the ten teams. The measure should bring financial peace, so that poor teams like Haas are not in a permanent survival mode. At the same time, it should reduce the differences between the teams and make the sport more future-proof.
This year the limit is converted to about 135 million euros. Everything related to the performance on the asphalt must be paid for. This varies from the development of the car and the production of (spare) parts to the salaries of the factory staff and the costs of getting the cars on the track. There are exceptions for, among other things, the salaries of drivers and the three highest-paid team members. Also costs for, for example, marketing or hotels are exempt.
No more spending unbridled money
After four months, it is noticeable that the ins and outs of the top teams Red Bull, Ferrari and Mercedes in particular have changed drastically: until 2020 they worked with three times higher budgets of around 400 million euros. This way they can no longer spend unbridled money on improving their cars. Especially this season, in which the car rules have been completely turned upside down, they are experiencing the consequences of this.
For example, Mercedes immediately knew that the new creation did not work as hoped. Normally, the team would invest many millions in new parts in a short period of time to remove the errors from the design as quickly as possible. The team does not have that luxury this year. Updates are coming slowly, so that the race stable in Canada on Sunday, at the ninth race of the year, is still struggling with a bouncing Mercedes.
Haas team principal Steiner saw his drivers score points in just two races in the two previous seasons. This season, it immediately hit the first two GPs, with a fifth and ninth place. According to him, it shows that the cost cap is a success. “We’re actually in the best position,” he says. ‘We already had a smaller budget, so we were under that anyway cap† We have always tried to work as efficiently as possible. So we’re not that big monster that has to give in now. Instead, we have remained a small mouse and now other mice have joined. But the cats are gone.’
Submit financial reports
Steiner explains that the FIA motorsport federation keeps an eye on the teams with a magnifying glass. Financial reports are regularly submitted to FIA experts and every part of the car is earmarked.
Steiner: ‘They all have their own number. That way the FIA knows exactly when we have a new part, how it was made and what it cost. We have to share everything. So, for example, you can’t hire a parent company to buy the stuff for you. Then they will immediately ask for the origin. It’s a very complex system.’ According to Steiner, abuse of that system is virtually impossible due to the many control mechanisms. “You’ll get caught anyway. It’s just a question of when.’
If the budget ceiling is exceeded, in the worst case, there is a risk of expulsion from the championship and in the mildest case, fines. Several racing stables have indicated in recent weeks that they are going over the limit with their expenses this season. The main reason is the sudden high inflation and more expensive energy due to the war in Ukraine.
For example, according to Red Bull team principal Christian Horner, freight costs have increased four times in a short time. The Briton predicted in Monaco at the end of last month that at least seven teams will not be able to compete in the last four races if they want to keep costs down. He spoke of force majeure and called on the FIA to increase the limit. The team boss of Max Verstappen received support from his colleagues at Ferrari and Mercedes, among others.
On the edge of the budget ceiling
It is no coincidence that these are also the teams that, like Red Bull, operate on the edge of the budget ceiling. Haas team principal Steiner is skeptical. “If you already know that you will be out of money for the last four races before the end, you start saving on things. That’s how I would do it,” he says of Horner’s words.
“Our business is racing and if you don’t make it to the last four races, you destroy your business. Then you won’t get any money for next year,” says Steiner, referring to the distribution of the hundreds of millions in prize money after the season. “It will be good for the small teams, by the way. What they don’t get, we get. So I’d be happy with it.’
When asked, Steiner immediately mentions the area in which the most can be cut back: the further development of the car. It is precisely in that area that the top teams do not want to save, because those ‘updates’ are crucial in the title fight. It therefore makes the discussion about a possible adjustment of the budget ceiling a full self-interest.
Sensitivities
It is something that Steiner sees through like no other. The born Italian knows Formula 1 from scratch. He started there in 2001 and has been the boss of Haas since 2016. There he grew en passant into one of the best-known characters in the popular Netflix series Drive to Survive, because of its outspoken and striking character. He does not shy away from harsh statements about his drivers, for example, and therefore also not about the sensitivities surrounding the budget ceiling.
Steiner is sure that with the possible raising of the ceiling, Formula 1 will be back to square one in no time, he says. “Then we go to 150 million euros and before we know it we are back at 200, and we didn’t want that anymore,” he says. ‘Look at the sport: when has it ever been more successful? There is no more weak team. Everyone has already scored points. That last happened a long time ago. Plus: the thought behind the cap is in line with today’s world, in which sustainability plays an important role. We have to achieve more with fewer resources, so we no longer make stuff and then throw it away.’
Verstappen sees nothing in ‘completely wrong’ salary ceiling
In the protracted negotiations about the budget ceiling in Formula 1, the salaries of the drivers were not affected. For now, at least, it turns out. In recent weeks, it has sounded from the F1 wings that there is being careful talk to put a limit to those top phonoraria.
It is unclear what exactly this should look like and when it should be set up. In any case, the class looks at American sports competitions, where teams are allowed to spend a set amount on salaries. That should prevent super teams. In the case of Formula 1, racing stables should choose more sharply between how much budget is put into the development of a car and how much into a driver.
Although the plans are not concrete, it is already leading to discussions about what exactly the value of a driver is. That is responsible for about 14 percent of the performance, British statisticians have already calculated based on all races between 1979 and 2014. The rest is due to his car. On the other hand, the driver is the banner of his team and he becomes the world champion, not his car.
Max Verstappen is in any case one of the most outspoken opponents of a salary ceiling. The reigning world champion is one of the big earners in Formula 1. At the beginning of this year, he extended his contract with Red Bull until 2028 for an annual salary reportedly between 40 and 50 million euros. He would immediately consume a third of his team’s total spending (135 million) if his salary were included in the current budget cap.
A week ago in Azerbaijan, Verstappen called the idea of a salary ceiling ‘completely wrong’. According to him, Formula 1 is becoming increasingly popular, from which the teams and sport themselves fully benefit financially. “So why should there be restrictions on the drivers who run the show and put their lives on the line?”
He further believes that a salary cap is disadvantageous for novice drivers, as sponsors are less likely to invest in them if they know they are unlikely to ever be fully repaid.
Mercedes team boss Toto Wolff, who has seven-time champion Lewis Hamilton on his payroll for 40 million a year, was in favor of limiting driver rewards. According to him, due to the strict budget cap, it is ultimately untenable to continue to pay drivers mega amounts. “Even if the drivers will have a different opinion about this. But in the US this was introduced 15 years ago and those are the most successful competitions in the world. So it works quite well there.’
According to Wolff, Formula 1 should take the time to develop its own ‘sustainable’ form. “Because this is not for the short term.” The good news for Verstappen is that he will still be in good shape until at least 2028; Wolff believes that the contracts that are currently running may be ‘just’ served.