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Rediff.com  » Sports » Formula One cost cap set at 40 million pounds

Formula One cost cap set at 40 million pounds

May 01, 2009 12:34 IST

Formula One teams will be granted more technical freedom if they compete with a budget cap of 40 million pounds ($59.35 million) next year, the sport's governing body said on Thursday.

Three new teams will be allowed to enter, expanding the starting grid to a maximum of 26 cars or six more than at present, the International Automobile Federation (FIA) added in a statement.

The FIA had originally proposed a cap of 30 million pounds, a fraction of what some teams with budgets in excess of $200 million have been used to spending every year.

Marketing and hospitality costs, drivers' salaries (with at least three currently estimated to be earning $20 million or more a year) and any fines and penalties imposed by the governing body will be exempt, however.

So too will any dividends paid from profits relating to participation in the championship and any expenditure that the team could prove had no influence on performance.

Engine costs, already set at five million euros ($6.66 million) for an independent team in 2010, will be excluded next year to encourage manufacturer teams to take up the option.

"At 40 million pounds, we believe that 70 percent of the grid can generate a profit," the FIA said in a separate question and answer sheet.

"This transforms the business case for owning a Formula One team, for both manufacturers and private investors. The desired net result is to have a very healthy commercial environment for present and new owners."

GLOBAL RECESSION

Formula One is dominated by manufacturers who are suffering in the global recession from slumping car sales. Japan's Honda has already pulled out and there are fears about others.

All want to cut costs but some team bosses have cast doubt on how quickly they can slim down their operations to meet any cap conditions, while also raising concern about job losses likely to run into the thousands.

The FIA hoped all teams would accept the cap ultimately.

"So far, interest has been extraordinarily high from both existing teams and potential new entrants," it added.

The cap will be policed by a new independent costs commission, consisting of a chairman and two commissioners appointed by the FIA for a three-year period. The FIA is confident it would be effective.

"No team would wish to be exposed as cheating, so we expect a healthy amount of self-policing," it said.

Those teams accepting the cost cap would be allowed to use movable front and rear wings and have engines free of any rev limits, while the rest would remain subject to restrictions.

The governing body also set a May 29 deadline for teams wishing to enter next year's championship and said they must state whether they wished to compete with the cost cap. A list of those accepted will be published on June 12.

New teams entering as constructors and with a cap will get money from the commercial rights holder, the FIA added.

"This includes an annual payment of $10 million to each team plus free transportation of two chassis and freight up to 10,000 kg in weight [not including the two chassis] as well as 20 air tickets [economy class] for each round trip for events held outside Europe."

As previously announced, refuelling during races will be banned next year to save the cost of flying equipment around the world and give a greater incentive to improving fuel economy.

Source:
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