How Mercedes has adapted to budget limits

With the introduction of a budget cap of $146.2 million (approximately €150 million at current exchange rates) in 2021, exclusive of certain expenses, spending on the Mercedes-Benz Grand Prix Limited will be £324.9 million in 2020 (3 700 million euros). In 2020 it was £297.4 million (€339 million), down more than €30 million despite having played 22 competitions in 17 competitions last year. These cost reductions resulted in significant gains in revenue to £13m (€15m) in 2020 and £68.8m (€78m) in 2021. This also ranges from £355.3m (€405 million) to £383.3 million (€437 million). Therefore, the parent company, Mercedes-Benz AG, did not have to participate in the budget. However, the star brand continues to fund the high-performance powertrain branch that designs and manufactures F1 power units. Another iconic figure showing the impact of the budget cap is that the number of team staff plummeted from 1,016 in 2019 to 1,063 in 2020, the last year without a cap, to 1,004. It was the design and engineering departments that suffered this decline, and most other sectors did not count towards the cap. The number of employees decreased from 906 to 831. The administrative sector, on the other hand, now has 173 compared to 157 before. A few new recruits specifically helped ensure compliance with this budget cap. Team Leader Toto Wolff says meeting budget caps was “painful” but made the business more profitable. “What happened with F1 was that by setting spending caps on most cost sources for our team, we had to reorganize ourselves, change our procedures and, unfortunately, lay off our staff within the limits.” Wolff told Motorsport.com. “It’s especially painful to hear about a team that didn’t do that.” Mercedes AMG F1 Director Toto Wolff said: “It is very painful and difficult to prioritize what to load in a car from the moment you buy a part to an organization that is suddenly obsessed with engineering to get the best performance possible. ” “But from a financial standpoint, budget caps have changed our business model and transformed our company from a profitable business to a business with a profit margin before interest and taxes of 25%.” According to Wolff, the administrative department has grown even more this year. “We anticipate accounts in 2022, but 30 more from the financial side, 8 more from the legal side, and 50 more from the marketing, communications and sponsorship departments, all to manage budget caps.” Wolff gives further examples. You are no longer an experienced engineer interviewing potential hires. “Imagine the hiring process,” continues the Austrian. “In the past, engineers were recruiting candidates or interviewing candidates. First, we can’t afford it. [quant à l’utilisation de son temps de travail]. But secondly, we don’t know if we can financially afford it. So he has to get in touch with HR who needs to get in touch with the finance and ask if we can afford it, saying he needs another staff that costs £45,000 per year.” Mercedes, like Ferrari and Red Bull, has moved some staff to Non-F1-related projects. “There are America’s Cup in applied science and various other projects in performance engineering. We don’t want to be an engineering boutique serving the industry. What really matters is the record. Wherever it is on land, at sea, in the air, or in space, this is the realm for us,” concludes Wolff. Also read:
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