Half of the Formula 1 Grid is in Financial Turmoil


6 teams out of 11 don't have the necessary budgets to complete the 20 race 2012 season.

In less than two weeks' time, the first F1 race for the 2012 season will be held on the streets of Melbourne, Australia. Last Sunday the final tests were concluded without any team coming out as a clear favorite to win the championship. That seems to be a good and healthy situation so far. However, the business of F1 is far from being in a healthy state. 6 out of 11 F1 teams that will be airlifting their valuable equipment to Australia are in danger of going out of business, according to Maurice Hamilton, one of the most well-connected F1 correspondents.

Writing in grandprix.com, Hamilton reports that not only the three small teams, HRT, Marussia and Caterham are having difficulties, but also a powerhouse like Williams might not survive the season, not to mention teams like Sauber and Force India. Hamilton writes that a team's minimum annual budget is $120m and those of Ferrari's and Red Bull's are $180 million. He reports that he heard complaints on delayed wages to F1 teams' personnel, delayed payments to suppliers, shortages in spares and bank loans being refused. Big blue chip corporate sponsors are taking advantage of the situation, negotiating reductions in their payments.

According to Hamilton, the implementation of the new 1.6-liter turbo engines from 2014 will be very costly for the teams and he proposes to create a second tier of F1 teams that will retain the current engines. The hard economic reality of the F1 business is evident by the lack of new sponsors in the sport. In the run up to the new season, starting on 18 March, no new big money blue chip corporate sponsorship contracts were signed and announced by any team. Williams were left without a title sponsor and Force India's sponsor, Kingfisher Airlines, has its bank accounts being frozen by the Indian tax authorities for default in tax payment.

The only sponsorship agreement that was announced in last few weeks came the way of Bernie Ecclestone whose company, FOM, signed a new contract with TATA communications. However if things are as bad as Hamilton's portrays them, Ecclestone will have to use his resources in order to bail a few of the teams out, as he has done in the past, and provide race organizers with sizeable grids.

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