Total spend for the Mercedes-Benz Grand Prix Limited fell from £324.9m in 2020 to £297.4m last year, despite the calendar being expanded from 17 to 22 races as it became available. The impact of COVID faded.
While many items included in the grand total don’t fall under the cutoff, the £27.4m drop in spend reflects how the team had to adapt to the new era of cost cutting.
It also contributed to an overall increase in profits, from £13m in 2020 to £68.8m in 2021.
The other key element in the rise in profits was an increase in turnover, meaning that F1’s prize money and sponsorship income rose from £355.3m to £383.3m.
Parent company Mercedes-Benz AG did not have to make a financial contribution, reflecting the amount of revenue the team generates.
However, Mercedes continues to provide funding to the independent organization HPP 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 workforce at Mercedes-Benz Grand Prix plummeted in 2021. It went from 1,016 employees in 2019 to 1,063 in 2020, the last year with no cap, when most teams of F1 invested a lot before the restrictions came in.
In 2021, with the cap now applied, it fell back to 1004.
More significant than the overall drop, however, was the drop in the number of people employed in design and engineering, those who fall directly under the cap. Having increased by 34 in 2020, it fell by 75 last year, from 906 to 831.
In contrast, the total number of employed in administration, not restricted by the cap, went 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 fueled by additional staff members from human resources, legal and accounting, many of whom were hired to help the team deal with the extra work created by monitoring and managing the cap.
Wolff said meeting the cap in 2021 had been “painful” but ultimately helped increase the organization’s profitability.
“What happened in F1 is that by putting a spending cap on most of the team’s cost centers, we had to restructure and change our processes, lay off people, unfortunately too, to fit the cost cap. Wolff. he told Autosport.
“Which is particularly painful if you listen to the discussions of teams that haven’t done that.
“As an organization that was spending on engineering to get the best performance, and all of a sudden you need a structure that you need to look at from purchase to production to logistics and then to implementation in the car, and prioritize what you you hit the car, that’s super painful and difficult.
“The advantage is that, as the US [sports] franchises, we have set the spending limit, we have excluded the support areas.
“So the support areas still needed to grow massively to support the organization with the cost cap. But, in short, if you’ve been successful with TV money, sponsorship basically goes right into your margins. And that has happened in the US
“The end result pays for itself, because we can’t spend more than that. We increased costs in the support areas.
“Cost capping has been such a painful exercise in restructuring, but financially it has changed the business model from a slightly profitable company, or just a profitable company, to a 25% EBIT business. [earnings before interest and tax] margin.”
Wolff said the headcount on the company’s administrative side has grown even more in 2022.
Toto Wolff, Team Principal and CEO of Mercedes AMG
Photo by: Simon Galloway/Motorsport Images
“This is getting ahead of 22 accounts, but we’ve got 30 more people in finance, we’ve got eight more people in legal, we’ve got 50 more heads in marketing, communications, sponsorship, all of that, to manage the cost cap.”
Wolff cited an example of how, where once a senior engineer interviewed candidates for the position, it is now done by a human resources specialist, allowing the undercut engineer to focus all of their efforts on their role. major.
“Imagine the hiring process. In the past, an engineer would hire a candidate or interview candidates. You can’t afford it in the first place.” [in terms of their time.]
“But the other thing is we don’t know if we can afford it financially. So they need to re-link with RR. Can we afford it?”
Like other major teams, Mercedes has moved many people from F1 to non-racing projects.
“In applied science, we have the America’s Cup and we have several other projects on performance engineering,” added Wolff.
“We don’t want to be an engineering boutique serving the industry. It’s really about records, wherever you want to be: records on land, sea, air and space, this is an area for us.”