Overall spending on the Mercedes-Benz Grand Prix Limited fell from £324.9m in 2020 to £297.4m last year, although the schedule was expanded from 17 to 22 races as the ‘impact of the COVID faded.
While many items included in the overall total do not fall under the cap, the £27.4m drop in spending reflects how the team has 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 of the profit increase was increased turnover, meaning F1’s sponsorship and prize money rose from £355.3m to £383.3m.
Parent company Mercedes-Benz AG did not have to make any financial contribution, reflecting the amount of revenue the team is generating.
However, Mercedes still provides funding to the separate HPP organization from which the F1 team in turn buys its power units.
In another indication of how the cost cap has had an impact, Mercedes-Benz’s global Grand Prix workforce fell in 2021. It went from 1,016 workers in 2019 to 1,063 in 2020, the last year without a cap, when most F1 teams invested. long before the restrictions came.
In 2021, with the cap now in place, it dropped again to 1004.
However, more significant than the overall drop was the drop in the number of people employed in design and engineering, those directly below the cap. After increasing by 34 in 2020, it decreased by 75 last year, from 906 to 831.
On the other hand, the total number of people employed in the administration, not restricted by the limit, went from 157 to 173 in 2021.
Mechanics work on the George Russell Mercedes W13 in the garage
Photo by: Steve Etherington / Motorsport Images
This was driven by additional human resources, legal and accounting staff, many of whom were hired to help the team cope with the additional work created by cap monitoring and administration.
Wolff said meeting the cap in 2021 had been “painful” but ultimately helped boost the organization’s profitability.
“What has happened in F1 is that by putting a spending cap on most of the team’s cost centres, we’ve had to restructure and change our processes, make people redundant, unfortunately also to fit within the cost cap,” Wolff. he told Autosport.
“Which is especially painful if you listen to the discussions of teams that haven’t.
“As an organization that was spending on engineering, in order to achieve the best performance, and suddenly needed a structure that needed to be analyzed from the moment of purchase throughout production, logistics and then deployment to the car, and setting priorities of what you give to the car, this is super painful and difficult.
“The advantage is that, like the US [sports] franchises, we have set the spending limit, we have excluded the support areas.
“So the support areas still had to grow a lot to support the organization with the cost cap. But the bottom line, if you’ve been successful with the TV money, the sponsorship basically goes straight to your margins. And this has happened in the US.
“The result pays for itself, because we can’t spend more than that. We increase costs in the support areas.
“The cost cap has been such a painful exercise since the restructuring, but financially it has changed the business model to a slightly profitable company, or just a profitable company, to a business with a 25% EBIT [earnings before interest and tax] margin”.
Wolff said the workforce for the company’s administration has grown even more in 2022.
Toto Wolff, team principal and CEO of Mercedes AMG
Photo by: Simon Galloway / Motorsport Images
“That’s anticipating 22 accounts, but we have 30 more people in finance, we have eight more people in legal, we have 50 more heads in marketing, communications, sponsorship, all of that, to manage the cost cap.”
Wolff cited an example of how, while a senior engineer used to interview job candidates, now an HR specialist does, allowing the engineer, who is under the cap, to focus all of his efforts on his main role.
“Imagine the hiring process. An engineer in the past would hire a candidate or interview candidates. First of all, you can’t afford it. [in terms of their time.]
“But the other thing is we don’t know if we can afford it financially. So they have to liaise with HR, and HR has to liaise 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 moved many people from F1 to non-competitive projects.
“In applied science, we have the America’s Cup and we have other projects on performance engineering,” Wolff added.
“We don’t want to be an engineering shop that serves the industry. It’s really about discs, wherever they want to be: discs on land, sea, air and space, that’s an area for us.”