Honda's sudden withdrawal and the deepening global financial crisis has exacerbated the need for both drastic and urgent cost-cutting measures to be implemented in Formula 1.

This week will prove crucial to the sport's immediate future, with FOTA currently presenting its proposals to FIA president Max Mosley in Monaco ahead of the crunch World Motor Sport Council meeting on Friday.

Expert analyst Mark Hughes highlights the issues the FOTA/Mosley talks are likely to focus on, a further impending battle over revenues and analyses where all this leaves the sport for 2009.


As this is written the F1 teams are meeting Max Mosley and presenting him with their favoured cost-cutting measures for next year, believed to include extensive component sharing and a drastic reduction in testing.

They may also be pressing again for a postponement of the introduction of KERS – a move that every team with the exception of BMW was in favour of by the end of this season.

These suggestions carry no weight in themselves but can be adopted by Mosley and put before the next FIA World Motor Sport Council meeting this Friday. Anything on this subject that Mosley puts to the Council is in reality likely to be passed.

However, if the president is unconvinced by the suggested measures, he is likely to put his own fairly radical measures to the Council instead.

He has gone on record saying that F1 teams need to be operating on 20% of their former budgets – though whether he envisages this being achieved by next year is not clear.

To achieve such swingeing cuts in such a short time frame is unrealistic, as a significant proportion of an F1 team’s budget is represented by factory costs which in the short term are fairly inflexible.

Although Honda was believed to be 2008’s biggest spender in F1 at around £200 million, most factory teams operate on something closer to £140-150 million.

Up to a quarter of this is accounted for by factory running costs, although some of these – such as wind tunnel operation – could in theory be quickly trimmed back.

It is widely expected that a move will be made to limit the number of hours teams can run their wind tunnels, but the difficulty with this is that CFD (computational fluid dynamics) programmes are already taking over much of the work previously done by wind tunnels and controlling how much CFD computing power a team has at its disposal would be virtually impossible to monitor and police.

Given how much Mosley has been a champion of the KERS energy recovery system as a defence against any future threat to the sport on environmental grounds, it would seem unlikely he will agree to its postponement.

Teams are not obliged to run it, but those that don’t will likely fall ever further behind competitively as the technology improves, effectively forcing the serious teams to invest very serious money – up to £35 million – in them.

A move towards a standardised KERS, along the same lines as the standardised engine set to debut in 2010, could be made, but that takes away one of the main environmental arguments for introducing the system – that the pace of KERS technology would accelerate because of competitive development between the teams.

It seems likely that Max will insist upon keeping KERS for next year, and look to drastic cost reduction from component sharing, severe testing limits that will potentially mean the end of separate test teams and all the extra equipment and travel they entail, and restrictions on wind tunnel usage.

Further savings will then be feasible for 2010 with the introduction of the much cheaper standard – but not compulsory – Cosworth engine and the compulsory Xtrac/Ricardo transmission.

But cost is only one half of the equation. The other is income.

Mosley has agreed that if the teams accept his measures for cost controls he will open negotiations with the commercial rights holder CVC (represented by Bernie Ecclestone) to improve the teams’ share of the income generated by the sport.

Currently this stands at 50% divvied up between the nine (or 10, if Honda is bought) teams.

Changing this is much easier said than done, given that CVC is heavily leveraged with debt as a venture capital company. Much of its share of F1’s income goes to paying the interest on these debts.

In such circumstances, why ever would CVC agree to reduce its take? Only, perhaps, if it could be convinced that it was essential in order for the category to survive.

Key meetings are due between the teams and Ecclestone next week.

Where does this all leave the sport for ’09?

Much depends upon the accuracy of fears that another team may follow Honda’s departure before the season begins and whether a buyer is found for Honda F1.

Both Toyota and Renault have issued statements saying they are committed for next year, but it’s easy to picture a scenario where a main board backtracks.

It’s difficult to imagine BMW withdrawing when it’s on such an upward curve, next to unthinkable for Mercedes and virtually impossible for Ferrari.

But it goes almost without saying that if any of the more marginally committed car manufacturers are thinking of pulling out, now is the time to do it. The next couple of weeks will therefore be critical.

Should another team withdraw and a buyer not be found for Honda, the prospect of three-car teams becomes a possibility.

A 16-car entry is the threshold at which the commercial rights holder can request teams to field additional cars.

It’s difficult to envisage this would be done on a blanket basis, because it might tip marginal teams over the edge – but three car teams from McLaren, Ferrari and BMW plus one other, say, is not an impossible scenario.

Might that be Jenson Button’s best 2009 hope? Whatever happens, it’s clear that 2009 will be the beginning of a very different F1 era.