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Analysis: Teams Cut Costs to Keep Wheels Turning

When Eddie Jordan flew to Barcelona for a recent Formula One test, he bought a ticket from a budget airline and joined the queue of ordinary passengers.

When Eddie Jordan flew to Barcelona for a recent Formula One test, he bought a ticket from a budget airline and joined the queue of ordinary passengers.

It is an example that Ferrari president Luca di Montezemolo and McLaren's Ron Dennis are unlikely to be following this season.

Jordan likes the celebrity lifestyle as much as any other Formula One bigshot but times have changed and the Irish entrepreneur is swapping his private jet for less expensive transport.

The anecdote has less to do with Jordan's financial situation, seemingly stabilised after the loss of title sponsors Deutsche Post last year, than with the message that the boss wants to send to his staff.

The man who flew his entire team to the Belgian Grand Prix for one euro each on Ryanair last year has become a fellow traveller in the cheap seats.

Belt-tightening is the order of the day among Formula One's smaller independent teams as recession bites and sponsorship money becomes harder to find.

Jordan has asked all his employees to focus on saving money, trying every week to reduce unnecessary expenditure by doing something just as well for less.

"We've been doing what is prudent to make sure that we're in Formula One for the long term," he said, two weeks before the start of the season in Australia on March 9.

Huge Sums

Formula One is a glamour sport fuelled by money, one where fortunes are spent on making a car go a mere second or two faster and where the wheels stop turning without enormous quantities of cash. The sums involved are daunting.

"There is not a business in the world that has an appetite like Formula One for money," says McLaren boss Ron Dennis, whose team last year were prepared to spend more than ever. "It will eat anything that you wish to throw at it."

Even the smallest team can expect to get through more than $1 million per race weekend on engines alone at present, while the budgets of some of the bigger ones rival those of the world's more deprived nations.

Williams and partners BMW, according to the latest edition of the monthly F1 Racing magazine, are set to spend an estimated $350 million this year without being the most extravagant or even the most successful team.

The magazine's investigation into the sport's finances provide some other eye-popping estimates.

It put the cost of McLaren's new technical centre at considerably above $200 million, Ferrari's engine budget at $175 million, their testing expenditure at $88 million. Even BAR's corporate hospitality came in at $7.2 million.

Some find it all too much.

Arrows and Ferrari-powered Prost have folded and more than half the 10 teams in the Melbourne paddock will be looking leaner than at the same time last year.

Ford-owned Jaguar held their car launch on the internet, turning against the lavish entertainment of previous years, after making more than 70 staff redundant.

Minardi are not yet seeking donations from the public - and took legal action last week against a 'saveminardi.com' website purporting to do just that in their name - but they are struggling as ever.

Some technology sponsors attracted during the booming 1990s have disappeared following the pricking of the dotcom bubble and teams have found replacements thin on the ground, even if new backers are still out there.

The situation has not been helped by wilting television ratings after a season of Ferrari domination with world champion Michael Schumacher winning race after race.

The gulf between the paddock's 'haves' and 'have nots' has grown more noticeable but there is disagreement on how to ensure the sport has a healthy future.

Fighting Funds

Talk of teams contributing to a 'fighting fund' failed to produce anything and attention has now switched to a 'television tax' on the successful teams to ensure that at least 20 cars remain on the depleted starting grid.

Other battles are being fought between the teams, the governing International Automobile Federation (FIA) and manufacturers, who want a far greater share of the revenues and are threatening their own championship from 2008.

The Concorde Agreement between teams and Formula One's rulers expires in 2007, with the lion's share of the money going to the holding company set up by Formula One's commercial supremo Bernie Ecclestone.

Dennis said last week, when McLaren and Williams challenged cost-cutting measures introduced by the FIA, that such a renegotiated agreement giving the teams a greater share of the pot would be enough to prevent further failures.

FIA president Max Mosley would rather introduce long-life engines and components instead of prolonging the current situation whereby even small teams can find themselves paying out $20 million for a season's supply of engines.

Mosley hoped to reduce such bills to $10 million in 2004, $5 million in 2005 and $1.6 in 2006 when engines would have to last for six races. "At $100,000 per race this is still very expensive but is probably manageable," he said.

It may also prove unattainable, given the level of opposition from manufacturers.

"Any initiatives which are intended to artificially constrain cost and remove technical differentiation will be damaging to the very nature of Formula One," Williams and McLaren said in a joint statement last week.

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