F Features

Money or Talent? How the F1 Pay Scales Tip

Marussia 2068 HiRes opt

Pay drivers have always been part of Formula One, but with the worldwide economic downturn it seems that pay drivers are proliferating. Or are they?

Red Bull, Ferrari, McLaren, Mercedes, Toro Rosso, Lotus and Sauber all pay their drivers, but Force India, Caterham, Williams and Marussia each have one or two drivers who brought funds or sponsors to the team to secure their rides in 2013. Furthermore, Caterham and Marussia had to drop drivers they had on the payroll last year – Heikki Kovalainen and Timo Glock – for pay drivers this year.

“All the teams are definitely under pressure to protect different revenue streams into their teams,” Marussia’s President and Sporting Director Graeme Lowdon tells PRN Ignition. “But I don’t think it is any different from any other year. The term ‘pay drivers’ itself does not make a lot of sense. A team will structure its income through a lot of different revenue streams, and all the teams, including the world champions, will make a commercial decision on who will drive their car.”

Particular drivers have more or less of a chance of attracting different sponsors, and that is the same at the front of the grid and the back of the grid. This is certainly true in the case of Sauber and Ferrari.

F1 teams usually deal in Euros, British pounds and U.S. dollars. All amounts here have been converted to Canadian dollars at the current exchange rate.

Telmex and Claro, huge mobile phone companies in Central and South America, pay Sauber $26.1 million per year because Mexico’s Sergio Perez drove for the team in 2011 and 2012. Perez has gone to McLaren but the Telmex contract with Sauber runs through 2014. And, Spanish bank Santander pays Fernando Alonso’s $40.1 million salary at Ferrari.

“It is part and parcel of way the sport is currently structured,” Lowdon says. “So you don’t really have that scenario where somebody decides to be a F1 driver one day and just walks up with a barrel of money. That is a bit of an over-simplification.”

Lotus team principal Eric Boullier says there is something wrong with F1’s financial model.

“We definitely need to have more than half of grid being sustainable and profitable to afford to bring talent and chose the driver we want and not being obliged to check the amount of money a driver is bringing to make your business sustainable,” he maintains. “This is where something is wrong. For me the debate is not pay driver or not.

If tomorrow you want a driver and you rate his talent highly, even if he is bringing you money then it is fine. But we should have at least 50% of the grid in F1 today able to choose the driver they want and not depend on the money they bring.”

Marussia 2084 HiRes optAnnual budgets for the teams in F1 range from $54 million to $320 million. All the teams agree that costs should be cut, but they can’t agree by how much to do it and how to do it.

Currently, the teams get 50% of the money made by F1 commercial rights. That includes income from TV rights, race hosting fees and circuit advertising. Is part of the reason teams are resorting to pay drivers because they are not getting enough from the commercial pie? CVC Capital owns the majority of F1’s commercial side, and Bernie Ecclestone runs the show for them.

“It is easy to say I want more money,” Boullier replies, “but we need to have more sponsors, or sponsors bringing more money. The question is why we can’t get them, or why we can’t them fast enough? It is, in my opinion, more a complex issue.”

Racing from karting all the way up to F1 is so expensive that somebody has to pay the bills. In the past, companies such as Elf, Marlboro, BMW, Mercedes and Renault funded drivers.

Sebastian Vettel, Daniel Ricciardo and Jean-Eric Vergne would not be in F1 without Red Bull’s backing – neither would Perez or Esteban Gutierrez without Telmex, or Lewis Hamilton without McLaren and Mercedes. But these are cases of money finding talented drivers. Less gifted drivers and those who are not in the right place at the right time have to search for backing. And they have become so proficient at finding money that their funding has become an integral part of a team’s financial strategy.

“If you look at some of the smaller teams and if it (the pay driver money) is becoming double digit numbers (as in over $10 million), that’s a serious income source and that is why we are seeing this happening,” Mercedes Executive Chairman Toto Wolff says.

Many people in F1 are cocooned from the reality of the worldwide recession.

“Outside of F1we are living in a serious crisis,” Wolff notes, “and you can see that sponsoring and marketing are probably the first things that you are cutting. And we are seeing that. But then if you look at the global picture in terms of F1 it is growing. Television revenues grow even if the (viewership) model changes. The promoter fees grows. So what we are seeing at the moment is just a tough economic environment. This is why we have to rely on other income sources.”

PRN Ignition puts this question to Lowdon: I am a competent driver who has won in GP2. How much money do I need to bring to get a ride with Marussia, or one of the other teams at the less posh end of pit lane? “It is not as clear cut as that,” he responds. “I am not trying to avoid your question. It depends on who you are, what your prospects are. There is invariably a trade-off between the situation the team is in at that present time. Does it need a certain amount of funds? Is there a threshold? We have had drivers approach us with anything from $10 to $20 million. So the variations are huge. It is very seldom that the decisions are made on who has the biggest amount of money. There are way too many factors to consider than just money.”

Drivers are paying anything from $2.7 million to $50 million this season, but the going rate is $10.7 million. But these are not guys with stacks of money and negligible talent. The current crop of pay drivers all won races in GP2, Renault World Series or Formula 3. This is a new breed of pay drivers. They need to be skilled at raising money and at driving. The teams will accept nothing less – the days of signing worthless drivers worth a lot of money are over.

Six of the Best
Pay drivers sometimes repaid with race results and glory. But more often in the past they had little or nothing to show for the masses of money they poured into their distinctly inglorious and brief times in F1.

Three of the best F1 pay drivers of all time were Juan Manuel Fangio, Michael Schumacher and Niki Lauda who between them racked up 15 world titles and 140 championship race victories.

After a successful career in Argentina, Fangio headed to Europe in 1948 thanks to the backing of the Argentine government and the Argentine Automobile Club. Schumacher was part of Mercedes’ junior driving program. And, when he got a chance make his F1 debut with Jordan at the 1991 Belgian Grand Prix, Mercedes paid Jordan $150,000 USD.

Benetton snatched Schumacher away, but Mercedes continued to “pay” for the final five races of the season in 1992 as well by finding a new sponsor for Benetton.

Lauda, meanwhile, brought his own money to the table by taking out a bank loan worth 100,000 British pounds ($1.37 million today) to pay for his 1972 F1 season with March. He took out an additional 80,000 British pound ($1 million today) loan for the 1973 season with BRM. Lauda was on the verge of bankruptcy when he ran in third place in Monaco. Thereafter, BRM said he would not have to pay and would become a salaried driver instead.

The list of the pay drivers in the “far more money than talent” category who did not achieve fame and fortune is a long one. Three of the best at being the worst ever pay drivers were: Jean-Denis Deletraz, Esteban Tuero and Yuji Ide.

Deletraz had been lapped 19 times before he retired in his F1 debut in the 1994 Australian Grand Prix with Larrousse. He only “raced” ink F1 twice more with the highlight being classed 15th and seven laps behind in the 1995 European Grand Prix.

Money rather than skill so fast-tracked Tuero’s career that he was in F3000 by age 18 and F1 by age 19 with Minardi. Way out of his depth, he only finished four of the 16 races in 1998.

Ide was slow, got in the way of other drivers, caused Christijan Albers to have a massive shunt, and had his Super License yanked by the FIA after he took part in just four races in 2006 with Super Aguri.

Others to consider are: Taki Inoue, who called himself the worst ever driver in F1; privateer Al Pease who was disqualified for being too slow in the 1969 Canadian Grand Prix; Marco Apicella, whose entire F1 career lasted 800 meters before he crashed out of the 1993 Italian Grand Prix; and Paul Belmondo, who only managed to qualify for seven of the 27 races he entered.

Who Pays What?
Who pays what for the privilege and prestige of racing an F1 car? Obviously, the teams and drivers aren’t going to publicly reveal any money amounts, so PRN Ignition talked to individuals who do the contract wheeling-and-dealing behind the scenes, and obtained additional information from other sources in the paddock, including team personnel, sponsors and even the drivers’ wives and fathers. While the figures below are fairly accurate, it must be remembered that none of them are official.

Marussia $20 Million
Marussia 2112 HiRes optJules Bianchi has paid a mere $2.7 million for the season. But then Marussia had already banked the $2.7 million Luiz Razia paid as a first installment of the $20 million he had promised the team from a consortium of Brazilian companies. When the next installment failed to appear, Marussia ditched Razia. The Ferrari’s Driver Academy pays for Bianchi, but is looking for a sponsor to defray that cost.

Grahame Chilton, the multi-millionaire chairman of insurance firm Aon Benfield and vice chairman of Aon Corporation, has funded his son Max in his climb to F1. However, the $23.4 million that Marussia gets does not come directly from the senior Chilton, but rather from a consortium of sponsors he has brought to the team.

Caterham 10.7 Million
8669455346 ca91658729  optGuido van der Garde and Charles Pic each bring $10.7 million. Van der Garde’s money comes from the clothing company McGregor. It is owned by his fiancée’s father who has also put together a consortium including Beelen.nl, a recycling and demolition company, to fund van der Garde’s racing career.

Pic’s father owns one of the largest trucking companies in France, and has bankrolled son Charles. French oil company Total also contributes for Pic’s share.

Caterham gets further income from its two reserve drivers Alexander Rossi and Ma Qing Hua, who are each paying $1 million to take part in Friday morning practice sessions.

Williams $50 Million
PDVSA, the Venezuelan state-owned oil and natural gas company, contributes $50 million per year to the team (and that fee goes up 10% annually) because Venezuela’s Pastor Maldonado is a Williams’ driver.

Two Finnish-based companies – Wihuri, an international industry and trade conglomerate, and Kemppi, a manufacturer of electric welding machines and related products – pay a total of $2.7 million for Finnish driver Valtteri Bottas.

Force India $10.7 Million
The team pays a salary to Paul di Resta but welcomes the $10.7 million brought by Adrian Sutil who has put together a group of 10 personal sponsors and partners. His main contributors are Medion, which sells computers, and soft drink producer Capri-Sun.

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