2021 Mercedes financial numbers reflect "painful" F1 cost cap – Motorsport.com

The overall spending of Mercedes-Benz Grand Prix Limited fell from £324.9m in 2020 to £297.4m last year, despite the calendar being extended from 17 to 22 races as the impact of COVID faded.
While many elements included in the overall total do not come under the cap, the drop in spending of £27.4m reflects how the team had to adjust to the new era of cutting costs.
It also contributed to an overall increase in profits, from £13m in 2020 to £68.8m in 2021.
The other key element in the profit hike was an increase in turnover, meaning sponsorship and F1 prize money income, went from £355.3m to £383.3m.
Parent company Mercedes-Benz AG did not have to make a financial contribution, reflecting just how much income the team is generating.
Mercedes does however still provide finance to the separate HPP organisation from which the F1 team in turn buys its power units.
In another indication of how the cost cap has had an impact, the overall headcount at Mercedes-Benz Grand Prix tumbled in 2021. It rose from 1016 staff in 2019 to 1063 in 2020, the last year without a cap – when most F1 teams invested heavily before the restrictions came in.
In 2021, with the cap now applied, it fell back again to 1004.
However, more significant than the overall fall was the drop in the number of people employed in design and engineering – those who fall directly under the cap. Having risen by 34 in 2020, it was slashed by 75 last year, from 906 to 831.
In contrast, the total of those employed in administration, not restricted by the cap, rose from 157 to 173 in 2021.
Mechanics work on the George Russell Mercedes W13 in the garage
Photo by: Steve Etherington / Motorsport Images
That was boosted by extra human resources, legal and accounts staff members, many of whom were hired to help the team deal with the extra work created by monitoring and administering the cap.
Wolff said that meeting the cap in 2021 had been “painful”, but that ultimately it helped to increase the profitability of the organisation.
“What has happened in F1 is that by setting a spending limit on the largest part of the cost centres in the team, we had to restructure and change our processes, make people redundant, unfortunately also, to fit into the cost cap,” Wolff told Motorsport.com.
“Which is particularly painful if you hear the discussions of teams not having done that.
“As an organisation that was spending on engineering, in order to achieve the best performance, and suddenly needing a structure that needs to analyse from the moment of purchase throughout the production, the logistics and then deployment on the car, and setting priorities of what you give to the car, that’s super painful and difficult.
“The advantage is that, like the US [sports] franchises, we’ve set the spending limit, we’ve excluded support areas.
“So the support areas still needed to grow vastly in order to support the organisation with the cost cap. But the bottom line, if you’ve been successful on track with the TV money, sponsorship is basically going directly into your margins. And that has happened in the US.
“The bottom line pays for itself, because we can’t spend more than that. We grow costs in the support areas.
“The cost cap has been restructuring-wise such a painful exercise, but financially it has changed the business model from to a lightly profitable company, or just profitable company, into a business with a 25% EBIT [earnings before interest and tax] margin.”
Wolff said the headcount for the administration side of the company has grown even further in 2022.
Toto Wolff, Team Principal and CEO, Mercedes AMG
Photo by: Simon Galloway / Motorsport Images
“This is pre-empting 22 accounts, but we have 30 people more in finance, we have eight people more in legal, we have 50 heads more in marketing, communication, sponsorship, all of that, to administer the cost cap.”
Wolff cited one example of how while previously a senior engineer would interview job candidates, now that is done by an HR specialist, allowing the engineer – who comes under the cap – to focus all his efforts on his main role.
“Imagine the hiring process. An engineer in the past would hire a candidate or would interview candidates. First of all, you can’t afford it [in terms of his time.]
“But the other thing is, we don’t know if we can afford it financially. So he needs to link back with HR, and HR needs to link back with finance, and say we need another head that’s costing us £45,000 a year. Can we afford it?”
Like other top teams, Mercedes has shifted many F1 people into non-racing projects.
“In applied science, we have America’s Cup, and we have various other projects on performance engineering,” Wolff added.
“We don’t want to be an engineering boutique that offers service to the industry. It’s really about records, wherever wants to be – records on land, sea, air and space, this is an area for us.”
Verstappen told de Vries to call Marko after Monza F1 cameo
Latifi explains “funny” wrong turn mistake in Suzuka F1 practice
Ricciardo: I won’t be on F1 grid in 2023
AlphaTauri: Italian GP debut key to choosing de Vries
Hamilton’s first experience of turning silver into gold
Binotto “pessimistic” over F1 budget cap results delay, wants FIA clarity
Ferrari Formula 1 boss Mattia Binotto wants clarity from the FIA over the reasons for delaying the 2021 budget cap results, but admits he feels “pessimistic.”
DTM Hockenheim: Auer beats van der Linde in crash-filled race
Mercedes driver Lucas Auer moved within two points of DTM championship leader Sheldon van der Linde with victory in the penultimate race of the season at Hockenheim, which was overshadowed by a violent multi-car pile-up and a Porsche engine catching fire.
Vettel explains “Arigato Suzuka” radio message in Japanese GP qualifying
Sebastian Vettel says his ‘Arigato Suzuka’ radio tribute was spontaneous after matching his best Formula 1 grid position of the year in Japanese Grand Prix qualifying.
Hockenheim DTM race red-flagged after scary crashes
The opening DTM race of the Hockenheim DTM finale has been red-flagged following a spate of high-speed crashes on the restart, including a fireball moment for Dennis Olsen’s Porsche.
Why Red Bull freedom and an Alpine switch can define Gasly’s F1 career
After seemingly being stuck in limbo at AlphaTauri – too good to let go, but not a realistic prospect for a Red Bull return – Pierre Gasly has finally shaken off the shackles to join Alpine. A fresh start at the French team should do Gasly the world of good, but he must adapt quickly. Oh, and work with a team-mate with whom he’s had a fractious relationship…
The relaxed home life that helps F1’s Kevin Magnussen to deliver
The unrelenting grasp of the tax man prompts most racing drivers to move to the likes of Monaco, Switzerland or Dubai. But, as Oleg Karpov found out, Kevin Magnussen is quite happy where he is, thank you very much – at home, with his family, in Denmark
How Perez has shown what many F1 drivers need from the 2022 season run-in
OPINION: Sergio Perez’s Singapore triumph arrested a big decline in his Formula 1 performances against Max Verstappen at Red Bull since his Monaco win. He now needs to maintain his form to the season’s end, while others are also seeking a change in fortunes.
How the FIA should punish any breaches of the F1 cost cap
OPINION: On Wednesday, the FIA will issue F1 teams with compliance certificates if they stuck to the 2021 budget cap. But amid rumours of overspending, the governing body must set a critical precedent. It needs to carefully pick between revisiting the bitterness of Abu Dhabi, a contradictory punishment and ensuring parity for the rest of the ground-effect era
Singapore Grand Prix Driver Ratings 2022
A testing return to the Singapore Grand Prix in tricky conditions created plenty of hazards and mistakes for the Formula 1 drivers to fall into. That partly explains a number of low scores, including from a handful of high profile runners, allowing others to take a starring role under the floodlights
The two key contributors to Leclerc’s defeat to Perez in Singapore
In a marathon Formula 1 Singapore Grand Prix, Sergio Perez’s victory was only assured hours after the race due to a stewards investigation. Throughout the contest the Red Bull driver impressively held off Ferrari’s Charles Leclerc in changing conditions to see the Mexican pull out enough of an advantage to negate his post-race penalty
Why is Oscar Piastri F1’s most sought-after rookie?
The Australian rising star is fast, consistent, confident, adaptable and has shown excellent racecraft, but there’s already a taint to his reputation. That hasn’t stopped him becoming the hottest property in this year’s F1 driver market and why McLaren moved fast to snap up the 21-year-old
The unintended benefit that F1’s new engine rules era will deliver
Formula 1’s incoming engine rules shake-up has multiple targets. But it may also solve what has been a bone of contention since the hybrids arrived in 2014. The new plan will allow the series to pump up the volume


Leave a Comment

Your email address will not be published.

You may also like