They say that in life only two things are certain: death and income taxes. The only certainty brought by the arrival of the pandemic is that its long-term impact is uncertain.

Formula 1’s conviction that it exists in a bubble was rudely blown apart by the pathogen, exposing every failing and weakness in cruel fashion. From its gung-ho attitude in travelling to Melbourne despite advisories to the contrary to petty squabbling during recent teleconferences over DAS steering designs and rear brake ducts while the world around it is in crisis, F1 has occasionally acted rather strangely during the current crisis.

It would not be an exaggeration to state this 70-year old sport could collapse should the current lockdowns of all but essential services continue throughout the year. For F1 is by nature a travelling sport, and most certainly not an essential activity.

F1’s survival hinges on the ability of its teams to weather the devastation wreaked by Covid-19, for they are the primary components in the sport’s supplier chain. F1’s commercial model is effectively a manufacturing operation: The commercial rights holder buys in ten raw products (the teams), then adds value by processing these ingredients into a sellable product (the show), which F1 wholesales to race promoters and broadcasters.

These in turn retail the “show” to customers (fans) through outlets (circuits and broadcasts), with each link being absolutely vital to the survival of F1. Just as shoe manufacturers cannot survive without reliable flows of hides at the start of their chains and satisfied customers at the end, so F1’s future is wholly dependent upon it having sufficient suppliers (teams) and enthusiastic fans. Lose a link, and the chain is destroyed.

In the real world, the loss of a single supplier could bring the entire process to an immediate halt, and while there may be alternatives when times are good, choices invariably diminish during downturns. So it is with F1: the loss of a team or two for whatever reason is bearable during boom periods – they can be sold outright or in administration – but where to find a buyer or alternative in present circumstances?

Thus, it is critical that F1 preserves all ten teams, for the chances of new teams coming into a sport that is in regulatory and commercial disarray are highly unlikely and close to zero. Consider: after a five-hour teleconference on Tuesday a dozen of the sport’s top managers could not even agree when to hold the follow up call despite the urgent need to sort crucial issues such as budget cap levels and the regulation changes.

(For the record, the next call is due on Friday, but only after objections about working over Easter were swept aside.)

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The fundamental issue facing F1 is that all 10 teams operate to different business models, although these can be broadly distilled into five distinct categories:

Car manufacturer-owned teams who produce their entire car (Mercedes, Ferrari, Renault)

‘Sisters’ who share technologies through common ownership (Red Bull, AlphaTauri), using Honda engines

Teams that produce cars in-house, buying in engines only (McLaren, Williams)

Teams that produce cars in-house, buying in complete power trains (Sauber, racing as Alfa Romeo)

Satellite teams, who source permitted technologies from other teams (Haas, Racing Point)

Now consider that annual budgets vary from $125m (Williams) through to $435m (Ferrari, without power units) and manpower levels vary from 250 (Haas) to 1000 (Mercedes, with its power unit division adding 500), and that team ownership varies from car and drinks companies (as above) through entrepreneurs (Haas) and investors (Sauber) to a public company (Williams), and the sheer diversity of F1 becomes clear.

Simply put, there can be no “one-size fits all” quick-fix solution, yet that is precisely what F1 urgently requires and is attempting to achieve through endless teleconferences. The imperative is to provide immediate relief to cash-strapped teams, yet the talk is mainly of reducing budget caps in 2021, which, while having merit, will hardly help struggling outfits through the looming crisis …

Equally, corporate teams and major sponsors may not (yet?) be experiencing direct liquidity issues, but their boards may consider their respective F1 spends to be extravagances given the extent of the global crisis and its impact on their bottom lines, and thus may decide that exit is the best option.

There is a precedent: In 2008/9, as the then-global economic crisis bit, so a raft of motor manufacturers and corporates exited stage left. Honda was first to leave, followed in quick succession by BMW, Toyota and Renault, although last-named remained as engine supplier – a choice the company later admitted was not ideal. Honda, though, later returned as engine supplier, but is committed only to Red Bull to end-2021.

During a recent interview with RaceFans, McLaren Racing boss Zak Brown expressed his concerns that four – and possibly five – teams could be sidelined by the crisis, in turn plunging F1 into a crisis of unprecedented proportions.

“There are currently 10 teams, so 20 cars on the grid. After the 2008/9 financial crisis we were down to 18 cars, which I think is about the limit. Any more, and I think the sport faces substantial problems,” he said.

In 2019 constructors’ championship order, which teams are most at risk? We ranked them using the following scale:

1: Highly likely to stay

2: Likely to stay

3: 50/50 either way

4: Endangered

5: Critical

For detailed background on their financial situations ahead of the 2020 F1 season, read our exclusive team budget analyses here:

Mercedes

The parent company’s share price has taken a battering of late due to a variety of factors, with Covid-19 compounding a drop of 50%. While team executives warmly coo about below-the-line values of F1, fact is that incoming Daimler chairman and head of Mercedes Ola Källenius issued three profit warnings since assuming office last June, and announced headcount reductions of 10,000, equal to 300 per day for a year.

Against that background one wonders how he feels about Mercedes F1 Team arguing in favour of $150m budget caps – others are pushing for $125m – in order to save 300 jobs total. Equally, after winning six consecutive double titles and having motorsport boss Toto Wolff, whose contract expires this year, publicly committed to the team “for the short term”, the Daimler board must again be considering its options.

Score: 4 (remaining as engine supplier only: 3)

Ferrari

The brand’s share price (RACE) has held up well, having dipped only 30% on account of being rated a luxury rather than an automotive company, but continued participation depends upon two factors: F1 revenues, estimated at $200m last year, and sponsor income. Given that Liberty is unable to forecast 2020 income, in any event likely to be down 50% in the best-case scenario, there is cause for concern.

Add in that sponsors are likely to tighten belts, and for the first time in 70 years Ferrari needs to seriously consider its F1 future, particularly if up to five teams drop out, in turn reducing the credibility of its primary marketing platform. Ferrari could afford to race on regardless, but for what purpose if its major competitors drop out and revenues plummet? Thus it needs to consider the common good, not merely itself.

Score: 2

Red Bull

The team’s benefactor, namely the eponymous drinks company owned by Dietrich Mateschitz, has taken major hits with lockdown restrictions placed on its major markets – hotel, restaurant and catering outlets (HORECAs) – and the Austrian must be considering whether owning two teams makes sense (see AlphaTauri), particularly if delaying the new era regulations impacts on the planned synergies for his teams.

Equally, if Honda exits – it was first to do so in 2008, remember – then both teams face a major dilemma.

Score: 2 (if Honda leaves: 4)

McLaren

The continued participation of F1’s second-oldest team is far from secure: owned by a Middle Eastern fund and private investors, the holding company recently raised $350m in a shareholder cash call. Having moved from being a race team to an automotive and technology conglomerate, McLaren’s primary focus is no longer F1.

Indeed, its markets could be better served by IndyCar and WEC, both of which can be contested for fractions of F1 budgets. Brown is pushing hard for budget caps reductions, and unless these realise the shareholders could pull the plug on F1.

Score: 3

Renault

The French company walked the last time despite having won the 2005-06 titles, so it has form. Add in a plunging share price (+50%), considerable boardroom upheaval in the wake of former CEO Carlos Ghosn’s arrest, and poor on-track performances relative to aspirations, and the question that will surely be asked by new CEO Luca de Meo, due to take the helm in July, is: “Why should we continue in F1 regardless of Covid-19?|”

Should Renault remain, then a change of top team management seems certain, with the word in the paddock indicating a return by Frederic Vasseur, currently boss of Sauber. (see below)

Score: 4

AlphaTauri

Not much to add to the Red Bull narrative (above) save to question why Mateschitz would consider it necessary to maintain two teams, given that the main team provides the primary marketing platform for the brand, while AlphaTauri publicises his upmarket clothing brand and is unlikely to break even on that basis.

Score: 4 (if Honda exits: 5)

Racing Point

The team was acquired by a Lawrence Stroll-led consortium in 2018 and will form part of Aston Martin’s marketing thrust from 2021 after Stroll and Co acquired control of “Britain’s Ferrari” brand, a transaction that was completed last month despite (due to?) the ravages of Covid-19 on the share price.

Thus, Racing Point’s future seems bright green, subject to affordability and a continued supply of Mercedes power trains and related technologies. Stroll will, though, need to keep his co-investors onboard and that may prove challenging if F1’s revenues dip substantially.

Score: 3

Alfa Romeo (Sauber)

The Swiss team was acquired by Swedish investors in lieu of loans, and the plan is to ramp up performance, then sell the team as a successful going concern. Considerable progress has been made under Vasseur, but the owners will surely consider their options if unsustainable budget caps are retained and Vasseur leaves, particularly as the Alfa Romeo branding deal expires at end-2021 and is unlikely to be renewed.

Score: 4

Haas

Team owner Gene Haas is committed to F1 until the end of this year, and will continue only if he believes his team “Has a chance of winning”, as he told RaceFans during pre-season testing. Last year the team placed ninth, and thus considerable improvement is required to maintain his appetite. F1 has established his eponymous machine tool brand globally, but the team has also been involved in numerous political skirmishes.

The team’s operation consists mainly of filing cabinets – being supply, design and manufacturing contracts with Ferrari and Dallara – while the team base in Banbury could readily be repurposed. Of all teams Haas could shut shop soonest, with minimal losses – which have arguably been covered by global brand exposure.

Score: 5

Williams

F1’s third-oldest team is also its most critical patient, having been reduced to survival mode by a series of poor performances and questionable decisions driven mainly by its listed status, which requires it to prioritise profit ahead of long-term investment.

The company recorded another loss last year and was forced to sell a majority stake in its advanced technology division, so a prolonged Covid-19-induced hiatus could bring this proud operation to its knees unless F1 moves extremely fast to at least provide Williams with a fighting chance. In comparative terms, it is in intensive care and not yet on a ventilator, but the prognosis is not good.

Score: 5

Overall

Our analysis indicates we should be concerned about the futures of as many as half-a-dozen F1 teams. Reducing budget caps is a step in the right direction but, more than anything, F1 needs to find ways of saving money immediately, not at the end of 2021; of extending a hand to needy teams.

Building ventilators and respirators is a wonderful initiative. But much more needs to be done internally, using the same spirited co-operation.

The future of F1 currently rests in the hands of a dozen people – FIA, F1 and ten team bosses – and unless they all pull together in the right direction they collectively deserve the full blame if this 70-year-old institution so beloved by millions of fans across the globe collapses into a worthless heap.

That is another certainty.

RacingLines