Formula One: Strong Swiss Franc threatens Sauber’s Future

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The supercharged nature of Switzerland’s currency, the Swiss Franc, is having threatening Sauber’s ability to remain on the F1 grid. Given Swiss neutrality to EU legislation (as a non EU member) and a taxation system encouraging corporate domicile, during times of economic turbulence the Swiss Franc is perceived as a safe investment, the impact of which leads to a disproportionately strong currency, which put simply means the value of finance coming into a company such as the Sauber F1 team from sources outside of country has been increasingly diminished.

Speaking in the FIA Team Press Conference at the Russian Grand Prix yesterday Team representative  Beat Zehinder commented:

“A simple figure: in 2007, one dollar was 1.5 Swiss francs. Now we have parity. So what we had income in dollars is now worth 50 per cent less. Switzerland doesn’t make it really easy”

Sources of income for the Sauber F1 Team are seen in FOM prize fund payments, which are understood to be paid in either GBP or US Dollars, driver sponsorship payments which come from Brazil (BRL) and Sweden (SEK), and additional sponsorship income from UK and US partners. It can be assumed that agreements around these revenue streams will have been made in the currency from which the agreement originates, not the currency of recipient (Sauber) The below graphs illustrate the diminishing value of agreements from these sources.

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Source: http://www.xe.com/

Whilst many costs involved with the Sauber F1 Team may be made in Euro’s such as the Ferrari PU supply agreement, fixed costs such as employee salary and facility operational costs, will be made in local currency. This limits the teams ability to mitigate the strength of the Swiss Franc.

The strength of the Swiss Franc is has such an impact on teams finances that Sauber could finish as high as 5th in the World Championship and the net payment to the team in local currency would leave them with the lowest overall team payment.

Formula One Management could move to support Sauber during this challenging economic period through making payments to the team through it’s own Swiss head-office applying an inflationary  and currency adjusted payment. Or through rewarding the Swiss team in the same way Williams, Mclaren, Ferrari, Red Bull, and Mercedes are as teams of historical relevance to the sport. Sauber have been involved in Formula 1 for over 32 years making them the 4th oldest team on the grid.

With the strength of the Swiss Franc unlikely to diminish in the short to medium term the future economic viability of the team without support appears increasingly bleak.

 

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