Toto Wolff outlines ‘painful’ Mercedes approach to staying within budget cap

Michelle Foster

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Toto Wolff says confirmation Red Bull breached last year’s budget cap has added to his pain over his decision to make staff redundant, slashing Mercedes’ workforce to fit into the cap.

Last season Formula 1 introduced a $145 million budget cap, many of the big teams forced to retrench staff in order to bring down their spending.

Mercedes’ went from £324.9 million in 2020 to £297.4 million last year.

But while that number is more than the cap, there is still a lot of the Formula 1 teams’ spending that is exempt from the cap such as driver and team boss salaries as well as power units to name just two.

On Monday the FIA confirmed that one team, Red Bull, breached the cap last season with motorsport’s governing body declaring it a ‘Minor Overspend Breach’.

That means it was less than 5 per cent of the cap, less than $7.25 million.

But according to Ferrari team boss Mattia Binotto, even $4m would open the door for a team to employ “70 people in a technical department who can come up with and produce solutions that could be worth up to half a second a lap”.

Wolff says that another team overspent while Mercedes said goodbye to staff makes the entire situation “particularly painful”.

“What has happened in F1 is that by setting a spending limit on the largest part of the cost centres in the team, we had to restructure and change our processes, make people redundant, unfortunately also, to fit into the cost cap,” the Mercedes motorsport boss told Motorsport.com.

“Which is particularly painful if you hear the discussions of teams not having done that.

“As an organisation that was spending on engineering, in order to achieve the best performance, and suddenly needing a structure that needs to analyse from the moment of purchase throughout the production, the logistics and then deployment on the car, and setting priorities of what you give to the car, that’s super painful and difficult.

“The advantage is that, like the US [sports] franchises, we’ve set the spending limit, we’ve excluded support areas.

“So the support areas still needed to grow vastly in order to support the organisation with the cost cap. But the bottom line, if you’ve been successful on track with the TV money, sponsorship is basically going directly into your margins. And that has happened in the US.

“The bottom line pays for itself, because we can’t spend more than that. We grow costs in the support areas.

“The cost cap has been restructuring-wise such a painful exercise, but financially it has changed the business model from to a lightly profitable company, or just profitable company, into a business with a 25% EBIT [earnings before interest and tax] margin.”

Red Bull have expressed their “surprise and disappointment” at the FIA’s findings, adamant their “2021 submission was below the cost cap limit”.

But will Formula 1 keep its promise to bite?

Prior to the FIA releasing their findings, old quotes from F1 managing director Ross Brawn surfaced in which he spoke of “teeth” in the budget cap punishments.

He continued: “If you fraudulently breach the financial regulations, you will be losing your championship. So it has serious consequences if teams breach these regulations.”

He’s right, it is. That team has gained an advantage, one that lasts at least two years if not three so now the FIA has to find a way to negate those gains.

The penalties for minor overspends, the category Red Bull’s infringement falls into, are less severe than material overspend but do include deduction of Constructors’ or Drivers’ Championship points as well as “limitations on ability to conduct aerodynamic or other testing; and/or reduction of the Cost Cap”.

But unfortunately the list also includes “public reprimand”.

While that would be damaging to a team’s name, when that team is Red Bull they can largely shrug that off with that number ‘1’ that’s sitting on Max Verstappen’s car.

So the big question is will Formula 1 keep its promise, will the punishment bite or will it be a slap on the wrist?

Read more: F1 cost cap: What punishments are Red Bull facing after minor breach?

Mercedes Toto Wolff

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