At the United States Grand Prix Saturday press conference, Red Bull team boss Christian Horner and McLaren CEO Zak Brown clashed over Red Bull’s 2021 cost cap breach and McLaren’s letter to the FIA. Here is the transcript!
Q: We last spoke to you in Singapore, about the budget cap. What is the latest on that please?
Christian HORNER: The latest on that is that we are in a process with the FIA. We’re hoping to get closure on that. And at that point in time, then all the facts will be laid on the table and we’ll be able to talk very openly about the cap, and why we feel that our relevant costs are fully in-line. We’re in the process, we’re working with the FIA . They’re diligently trying to do their job and hopefully, in the near future, will have a resolution.
Q: Can you give us your thoughts on that process that’s taking place?
CH: Well, it’s a new process. I mean, what you have to remember, with these regulations, is that they were introduced, obviously, at a level where the $175 million, it was then reduced by $30 million during the pandemic, it’s a complicated set of regulations. It’s 52 pages. And of course we’ve been through that process and 2021 was the first ever year of a set of very complicated financial regulations, which of course, have a varying… interpretations to them from different accounting specialists. So obviously, the findings of the FIA have been made public recently. And we’re now in a voluntary process with the FIA, going through that process with them. And I hope you will be able to conclude it in the near future. But that’s where we currently are.
Q: Zak, coming to you now. Can we get your thoughts on the budget cap and some reaction to what Christian has just said?
Zak BROWN: Well, I think the budget cap is very important for the future of the sport. I think everybody recognises that and that’s why it was put in place. It is complicated, it is new, I think none of us know any details. So, I think we need to wait for the FIA and Red Bull to finish up the process that they’re in. And I think just even like on the Super Licence, it was a shame not to get Colton Herta into the sport. I think he too would have been an excellent addition to the grid. And I think with this being a new process, what we need to do is come out of the backside of this, and learn from it and see what we need to do – as we need to do with other regulations – modify them from time-to-time. I think we all have opinions but we need to kind of see it through and then – as the teams, the FIA and Formula 1 do – sit around a table and say this probably isn’t perfect. I don’t think anyone thought it would be perfect. And then go: ‘What should we do to modify it moving forward?’ But fundamentally, the cost cap is a very important part of Formula 1’s future.
Q: Zak, you say ‘we all have opinions’. Last week, you wrote a letter outlining your thoughts on any budget cap breaches. Why did you feel the need to write that letter?
ZB: Because all the teams have opinions, and some speak about it vocally, others don’t necessarily always bring forward some specific views. So, I thought it was important from a transparency standpoint, we all sit around the table, there’s a lot of times we discuss things openly and then there’s a lot of back-channelling, and I thought I would just lay it out there – not knowing the facts of the case. So, it was more of a response of ‘if these types of things have happened’. It’s not for McLaren to decide they have or haven’t, but to put forward now that we understand the ramifications if you go over, what some of those benefits can be and how we should address them. So, it’s the same conversation, I think, we would have had when we came up with the cap, we just never really spoke about what would be some of the potential consequences and, like all the teams do, suggest to the FIA some solutions for them to take onboard – but ultimately for them to decide.
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QUESTIONS FROM THE FLOOR
Q: (Scott Mitchell-Malm – The Race) Christian, please, you talked about being in the process. I just wondered, when it comes to the differences in interpretations, were there any opportunities prior to this for anything to be flagged up to you? You know, points in the process before this, where there’s dialogue between the FIA, anything like that that could have prevented this being something that happens in advance, basically? If there are differences in interpretations, could you’ve got the answer sooner?
CH: Well, I think that, as Zak said, it’s a process, it’s a new process. We made an interim submission in 2021. There was no feedback or suggestion that we were doing anything that was contrary to any regulations. And then, of course, the submission was made in March. Again, we didn’t hear anything from that submission in March until the latter part of September. So, it’s a significant period of time that there was… and, of course, there’s also duty within the regulations for the FIA to guide, to have effective compliance.
Q: (David Croft – Sky Sports F1) Question to Christian. Tricky one this: we’re all conduits to the fans who want to understand what is happening with the cost cap, and there’s been lots of views put on social media and discussions by the fans. But as far as I see it, Red Bull are the only team that have been accused of overspending. However that overspend has happened, however innocently that might have happened – and I’m not accusing Red Bull of cheating here – a figure of $1.8million has been quoted and the team haven’t denied this. So, however much, however innocent, that overspend has been, you’ve still benefited – am I right? – from an extra $1.8 million that could have gone into car development that you shouldn’t have had under a cost cap. So, do you concede that you have benefitted by an overspend, and that may in some way have contributed to some of the success that you’ve achieved in 2021, and 2022 so far?
CH: No. Look, absolutely not. I mean, what you got to look at is what are the relevant costs? And what are the relevant costs within the cap and what’s outside of the cap? And that’s where the interpretation comes from. And our view is that our relevant costs are within the cap. Now, obviously, we are in discussion with the FIA about what those costs are, and what are mitigating potential circumstances, you know, etcetera. So, we had zero benefit from a development perspective or an operational perspective, either for 2021 or for 2022 from the way that we operated it within the cap. Our submission was significantly below the cap. We expected certain things to be potentially challenged or clarified, as is the process in a brand new set of regulations, but based on external, professional accounting third parties, the interpretation of those rules, of a 52-page document to police this, were very clear from our side. So, we absolutely and categorically don’t feel that we’ve had any advantage either in 2021, or 2022, or ’23 or ’24 or some team’s even talked about ’26, is totally fictitious.
Q: (Phil Duncan – PA) Christian, just on Zak’s letter. He said that the overspend breach constitutes cheating. So I just wanted to get your reaction to that and obviously, the accusation of cheating.
CH: Well, obviously, Zak’s letter – which wasn’t copied to us, obviously – we’ve had sight of that letter, and it’s tremendously disappointing. For a fellow competitor to be accusing you of cheating, to accuse you of fraudulent activity, is shocking. It’s absolutely shocking that another competitor, without the facts, without any knowledge of the details, can be making that kind of accusation. And that goes… you know, we’ve been on trial because of public accusations since Singapore. And the rhetoric of cheats, the rhetoric of… that we’ve had this enormous benefit, that the numbers have been put out in the media that are miles out of reality, and the damage that does to the brand, to our partners, to our drivers, to our workforce, in an age where mental health is prevalent, we’re seeing significant issues now, within our workforce. We’re getting kids that are being bullied in playgrounds that are employee’s children. That is not right, through fictitious allegations from other teams. And you cannot go around just making that kind of allegation without any fact, or substance. So, we absolutely are appalled at the behaviour of some of our competitors.
Q: Zak, would you like to comment?
ZB: No, well, I guess yes, because I will comment. Look, my letter set out that I think if someone – a team – spends more than the cap, they’re going to get an advantage. And the cap is a rule, no different than the technical rules in the sport. We’re not taking a view whether they did or didn’t. My letter was: if someone has, then here are the things that we think should be addressed. No different than if a ride height is incorrect, or a flexi wing, or whatever the case may be. So I didn’t mention any teams. It was a general response. Now that we are into the cost cap era, if someone breaches that, here’s what we think some of the ramifications are. I have no idea what the number is, I know none of the details. If we had more money to spend, that would put us in a better light and performance, more people, more upgrades, whatever the case may be. So, we feel it’s a performance benefit if someone has spent more than the allocated cost cap, that is up to the FIA to determine whether they have or haven’t.
Q: (Andrew Benson – BBC) For Christian. You talk about the process, Christian. What exactly is that process? Have the FIA offered you a breach agreement? Are you negotiating over that breach agreement? Are you deciding whether to accept it? What is going on?
CH: The process, as per the regulations, is that we’ve been invited to enter into an ABA, which is for a minor breach, and a procedural breach, that you have the opportunity to discuss with the FIA and present your case, your position on this. And we’re in that process and have been for the last… pretty much, what, 10 days or so? Going backwards and forwards with the FIA. And I hoped for it to be resolved before this weekend. I’m hopeful that it can be resolved during this weekend. But should that not happen, the next process is it goes to the cost cap administration panel and then beyond that there’s the International Court of Appeal. So, it could draw it out for another six, nine months, which is not our intention. We want closure on 2021. I think that we’ve had some healthy and productive discussions with the FIA, and I’m hopeful of being able to reach a conclusion in the near future.
Q: (Adam Cooper – Motorsport.com) Another one for Christian. Has this issue been impacted by amendments that came along after you submitted in March? For example, there’s a suggestion that in June there was a change to the way unused spare parts are allocated to heritage departments and so on. So, have the goalposts moved on you?
CH: Yes, in a simple answer to that question. We feel that, again, at such an immature set of regulations, there’s going to be clarifications and tidying up, and I think, certainly how unused inventory was treated was, in our view, a change to the regulation. Then perhaps… Certainly we applied a very strict ruling in the way that we treated our new stock. And I think that a clarification came out in June that changed the application of that. That had a seven-digit effect on our submission. But, of course, retrospectively, we were not allowed to change your submission. What you have to remember is that the submission can constitute about 75,000 line items. So, there’s an enormous amount of data that has to be inputted into these submissions and I think it’s only natural that, in a first year we have a set of very complicated regulations, to be able to get its arms around everything, is almost impossible. Almost impossible. And interpretations have been made, maybe by other teams have been slightly different, and then a change like that has a huge swing in your application of how you’ve completed your form which, had we been able to resubmit at that point in time, we would have treated very, very differently. So, you know, there’s probably several teams that have been affected in that manner.
Q: (Rebecca Clancy – The Times) A question to Zak and to Jost, to follow up on Adam’s question, please. This clarification that came out in June seems to have quite heavily affected Red Bull from what we understand. Did it actually affect you as a team? Were you able to do resubmissions? Were you aware of the clarifications? Can you just talk a bit about that, what happened in June?
Jost CAPITO: No, it didn’t affect us, because we were in line with the regulation after the submission.
ZB: I can only speak to our process with the FIA, which we found to be very collaborative, lots of clarifications, we asked lots of questions, we were right near the limit, which is, you know, one of the reasons why, in this year we’ve all dealt with the inflation issue. But you adapt your response. I’ve been managing budgets my entire life in business. So it’s nothing that’s foreign to me. And no, we found the process to be quite thorough, quite detailed, and very manageable.
Q: (Louis Dekker – NOS) For all three of you, we’ve been waiting for clarification for about two weeks now. Is this already the moment that you can conclude that this as a disgrace for the sport or is it too early to say that? And should we remember what Christian said that we hope for a fast solution – for instance, this weekend – but what happens if it takes another five or six, seven months?
CH: I think it’s in the interest of everybody, in the interest of the sport, in the interest of Formula 1 to get this situation resolved as quickly as possible. And I think there are many lessons that can be learned from it.
ZB: I agree with Christian.
JC: I agree with Christian as well. And I think that has to be… In addition, it has to be clarified in a proper way. That’s more important than being one or two days early or later.
Q: (Ben Hunt – The Sun) A couple of questions. Christian, can you tell us what the proposed penalty is that the FIA have given to you? Zak, a question about your letter. It seems a bit pre-emptive from my point of view. There could be a suggestion that you didn’t trust the FIA to be diligent and strict in their punishment. And generally, to all three: are you satisfied with the way that the FIA are handling this investigation? It seems pretty murky, you know, these deals, we’ve seen it before. They promised, you know, openness and clarity, and just being open with everyone. Yet it seems a very closed book, it just doesn’t send the right message to me. I just wondered if we could get your feelings on it?
CH: I can’t tell you that obviously. It’s a confidential discussion between ourselves and the FIA. What I will say is that once, hopefully, this situation is concluded there will be complete transparency and I will talk you through the reasoning behind our submission and the position that we had, as to why we felt that each of the line items that have been challenged we believe there’s a contrary position. So yes, and it should be transparent. The whole thing should be transparent. There’s going to be no private, you know, secret deal. I think it would all be absolutely above board. This is very different to a previous situation.
Q: Zak, please, first of all the letter?
ZB: Yeah, no, I think we have a lot of trust in the FIA. All we were doing was volunteering our opinion for them to take into consideration. I think it has been a transparent process so far, in that, you know, certificates were going to be issued, then it was delayed, but they communicated it was going to be delayed, they’ve communicated who’s received, who hasn’t, who had procedural. And I don’t think it’s right, that it’s, you know… It shouldn’t be a public hearing. And I’ve got a lot of confidence that it will be transparent at the end. So I think we need to let the process play out. And only then can you really take a view on what you think of the process. But I think so far it’s gone according to how they laid out what the process would be.
Q: Jost, the process?
JC: I think for us, we can say that we had a very open, very thorough and very constructive discussion with the FIA through the whole submission process, and thereafter, and before, through all of the season. As Christian mentioned before, it’s not that you just hand the paper in and that’s it. So it was lots of discussion. And this was very constructive with us. I believe that the FIA has handled it the same way with every other team as well. I think now it’s the right way to first sort the things out and not go public every single day with something new. I think it has to be thoroughly handled. And I believe the FIA will do that with every team. And then when the time is right, and when they are ready, for sure they will be transparent and go public with what the situation is.
Q: (Dieter Rencken – Racing News 365) Jost, based on what you’ve just said, you were in fact found in procedural breach of the cost gap regulations. As a team owned by an American investment company, did this have any impact on the investors’ standing? How did they react to it, because, again, that procedural breach is in fact, a breach.
JC: The procedural breach we had had nothing to do with Williams Racing. So as you know, there are all kinds of companies that are linked to the owner of the team that have to submit an audit. They have companies all over the world. So one third audit company said a couple of days before that they will not finish that in time. That was contrary to what they said before. So it had absolutely nothing to do with Williams Racing. And it was completely beyond our control. So with that, it has no impact on the investors.
Q: (Luke Smith – Autosport) Christian, you said you want closure through this whole situation? We’re already what, nine of 10 months into this season now as well, how important is it, through all of this, that we don’t have the same situation in another 12 months’ time that is clear from the FIA that your submission for next year will be fully understood?
CH: I think it’s enormously important. I mean, we can’t be waiting and being in October, November to find out, you know, the outcome of a previous year’s championship and I think the FIA going to put the resource in to deal with that, because I think, what you have to remember is this set of regulations was placed upon the FIA to police and I think it’s probably taken them by surprise during the last 18 months, just the scale, particularly with the scale of some of the teams and the complexity of it, to have to have to deal with it. And I think they’ve done obviously the best they can with the resources that they have, but, you know, obviously, the process, we’re assured will be a lot quicker next year or for this year. And of course, you know, there are significant challenges within 2022 that when you look at the amount of crash damage some of the teams are having, some of the update levels that are going on, you know, there are precedents that will be set from 2021 will have to apply and with a consistency in 2022.
Q: (Sam Hall – GP Fans) Christian, how concerned are you that given these clarifications, your submission for this year could be ruled to be in breach as well. And to all three, the 5% limit on the budget cap, this minor infraction, is it right that there’s such a big window for error before the more serious punishments are considered?
CH: Look, I mean, this year is a challenge with the energy costs and everything else associated with it. If I look at the facts, Max Verstappen has had the least amount of accident damage of any driver on the grid? Sergio Pérez is certainly at the lower end. If I look at the amount of developments compared to some of our rivals we are significantly below that. If I look at the quantity of parts that we’re bringing, if I look at where we are in the freight, we’re probably the sixth or seventh team that brings in terms of freight volumes to a Grand Prix. So, having been through this process, one can never say that you’re fully confident. But you know, I cannot believe when we look at the statutory accounts of others, and so on, that we are in any way out of kilter with the rest of the field.
Q: And Christian, the 5% window?
CH: The 5% window. Again, I think it’s part of the regulations that potentially need to be looked at, because the ranging suite of penalties, again, are totally subjective. And I think this is what’s contributed to a concerted campaign for there to be a draconian penalty on Red Bull for what… At the end of the day, you know, we’re talking probably… What is in contention with the FIA is a couple of hundred thousand dollars. So, and as I say, I will explain later why we have a differing opinion within that submission of, you know, what, what our position was versus another. But what has been just tremendously disappointing through this whole process is that the leakage that happened is that then suddenly we are tried and subjected to what, three weeks of effective abuse. And then to be seeing… I mean, Zak’s got a very convenient memory of the letter that he wrote, accusing us of cheating and being fraudulent. You know, it’s just not right. It’s just not right. And this has to stop.
Q: Zack, the 5% window?
ZB: Yeah, I think in hindsight, the 5% is way too high. It’s something all the teams discussed and agreed upon. So I think that’s something coming out of this that we need to look at, because five 5% is, you know, a very substantial amount of money in percentage basis to things like car development, or people to hire, or wherever you may choose to spend the money. So I think that definitely needs to be reviewed.
JC: Yeah, I’ve got the same opinion. It has to be clarified. And the 5% is quite a lot of money. But when you look at the past before the cost cap, and compare Williams to the top teams, they were outspending, five to 10 times, not 5%. So now with 5%, the gap is much smaller than it was five to 10 times before. But nevertheless, it has to be sorted still, as we want long-term the same kind of competitiveness. And when I hear comments that now everybody has the same cost cap and has the same budget, that everything is on the same playing level, well, if teams outspend another team by five to 10 times for a couple of years, they’re starting from a completely different level. Then the cost cap makes it very difficult for a team that didn’t have the resources before to catch up, because we can’t outspend the teams who outspent us the years before, even if we would be in the position to have the money. But nevertheless, it has to be cleared. And you don’t have in the technical regulations, either the 5%. But I agree that it’s the first time of these regulations, and they had a massive impact on many teams. So for the first year to have a kind of a threshold of 5% it must have made sense. But it has to be more strict and clearer in the future, as the FIA and the teams also get experience with the cost cap regulations. And it’s complicated regulations, and they have to be complicated. We do not see that they can be simplified from the 50-plus pages to a five-page regulation. So it needs a lot of work and where I see when we work in the F1 Commission, the team’s work very well together to find the solutions with the FIA, and with FOM.