Honda website
Honda website

MAY 8, 1995

F1's money supply under pressure...

World events barely register with Formula 1 racing teams - unless they cause the cancellation of events - but there are times when the world shakes F1 out of its reverie.

That is happening right now as F1 teams begin to feel the pinch caused by the dramatic slide in the value of the US dollar. The dollar is F1's currency and most of the big sponsorship contracts are negotiated in dollars. At the same time the team tend to pay out a lot of their expenses in the currency of the country in which they are based - in most cases in Britain's pounds sterling. Although the British pound has weakened with the dollar, the teams are still having to pay out more dollars for the goods and services they pay for in sterling. This hits the middle-ranking teams much harder as they are much more reliant on suppliers than are the big teams which do more in-house engineering.

To make matters worse, finding new sponsorships is becoming more difficult - particularly in Japan, which has provided a lot of F1 money in the last 10 years. With the dollar having fallen as much as 16% against the yen, Japanese companies which want to use F1 to promote their products abroad, find themselves unable to compete on the international markets as their prices are too high, which ultimately means that they have less money to invest in sponsorships.