Corona: Will F1-Teams go bankrupt?

In the past week, McLaren has sent some of its employees on short-time work. Now Williams is taking this step too. Are teams going bankrupt?

McLaren boss Zak Brown is clear in his words: “Formula 1 is in a very fragile state. I could imagine four teams disappearing if this is not handled properly.”

The last time four teams went bankrupt was before the 1993 season: Brabham, March, Fondmetal and Andrea Moda.

Fact is: The corona crisis is also spreading in Formula 1. All races are canceled until mid-June. But Liberty Media needs revenue to distribute the income under the teams.

According to information from F1-Insider.com, it is actually the income of the current season that is distributed to the individual teams in ten installments based on the world championship key from the previous year. The amount results from an estimate of the expected income. If the amounts are above or below the forecast, the rates will be adjusted accordingly at the end of the year.

The problem: Formula 1 has hardly any income at the moment. And to what extent this is going to change if races take place in front of empty stands is unclear.

Background: In 2019 around 30 percent of all Formula 1 revenue came from the tracks, 38 percent from TV rights, 15 percent from sponsors. The problem: Contracts can be renegotiated if fewer than 15 races are held or the GP is closed to spectators. There are currently only 14 dates and no one knows whether the races can actually take place.

McLaren was the first team to respond, sending many of its employees on short-time work. Team principal Andreas Seidl and drivers Carlos Sainz and Lando Norris accepted pay cuts.

Now Williams follows. Some employees were sent home until the end of May. The executive board and drivers have to forego 20 percent of their salary. With Nicholas Latifi, the newcomer, this is of course a matter of form. The Canadian brings a lot of money, the only way he got the place in the first place.

For Williams the situation is more serious than for McLaren. First, the company is listed on the stock exchange. Second, the traditional racing team has been a financial and sporting problem child of Formula 1 for years.

Many team bosses fear that the corona crisis could lead some Formula 1 teams to exit Formula 1. Günther Steiner (Haas), Zak Brown (McLaren), Franz Tost (Alpha Tauri) and Frédéric Vasseur (Alfa Romeo) have already expressed concerns about this.