F1 cost cap set at 40 mln pounds

Formula One faced the risk of becoming a two-tier championship on Thursday after its governing body said teams accepting a strict cost cap would have more technical freedom in 2010 than those with unlimited budgets.

Three new teams will also be allowed to enter, potentially expanding the starting grid to 26 cars -- six more than at present.

The International Automobile Federation (FIA) said the optional cap would be set at 40 million pounds ($59.35 million), 10 million more than first proposed but still barely a quarter of what some teams have been spending.

Marketing and hospitality costs, drivers' salaries (with at least three currently estimated to be earning $20 million or more a year) and any fines and penalties imposed by the governing body will be exempt, however.

So too will any dividends paid from profits relating to participation in the championship and any expenditure that the team could prove had no influence on performance.

Engine costs, already set at five million euros ($6.66 million) for an independent team in 2010, will be excluded next year to encourage manufacturer teams to take up the option.

"At 40 million pounds, we believe that 70 percent of the grid can generate a profit," the FIA said in a question and answer sheet accompanying a statement.

"This transforms the business case for owning a Formula One team, for both manufacturers and private investors."

GLOBAL RECESSION

The FIA hoped all teams would accept the cap ultimately and said interest had been "extraordinarily high".

Those with it would be allowed to use movable front and rear wings, have engines free of any rev limits and more powerful KERS energy recovery systems.

Formula One is dominated by manufacturers who are suffering in the global recession from slumping car sales. Japan's Honda has already pulled out and there are fears about others.

Teams want to cut costs but, despite outward unity, have different views on how best to go about it.

"We would like to see all the teams operating to one set of regulations and under a budget cap in 2010 and that is the position we will be advocating with (the teams' association) FOTA when we meet next week," said team owner Frank Williams.

McLaren's Martin Whitmarsh said the best solution was one which "may or may not include a budget cap, but which ideally would not encompass a two-tier regulatory framework".

The cap will be policed by an independent costs commission, consisting of a chairman and two commissioners appointed by the FIA. The FIA was confident it would be effective.

"No team would wish to be exposed as cheating, so we expect a healthy amount of self-policing," it said.

The governing body set a May 29 deadline for teams wishing to enter next year's championship and said they must state whether they wished to compete with the cost cap. A list of those accepted will be published on June 12.

New teams entering as constructors and with a cap will get money from the commercial rights holder, the FIA added.

"This includes an annual payment of $10 million to each team plus free transportation of two chassis and freight up to 10,000 kg in weight (not including the two chassis) as well as 20 air tickets (economy class) for each round trip for events held outside Europe."

That found favour with Aston Martin and Prodrive chairman David Richards, one of those interested in entering in 2010.

"We remain encouraged by the new rules which have the potential for a team to be commercially viable and competitive on a far more realistic budget," he said.

Refuelling during races will also be banned next year to save the cost of flying equipment around the world and give a greater incentive to improving fuel economy.