Every year, early December generally heralds a time of pomp, glamour and celebration for the Formula One fraternity.

Over back-to-back weekends, the International Automobile Federation (FIA) and Autosport magazine hand out their annual awards - considered the most prestigious in the sport - at gala dinners in Europe.

A sombre mood, however, hung over this year's festivities at Monaco's Sporting Club and London's Grosvenor Hotel.

The Japanese manufacturer's exit comes a few months after its "second" team, Super Aguri, pulled the plug on its F1 operations, also because of financial difficulties.

Independent outfit Williams could be next to quit. The British team, which incurred after-tax losses of £21.4 million (S$47.6 million) and £27.7 million in the past two years, depends primarily on sponsorship to fund its US$160 million-a-year (S$238 million-ayear) operations.

Amid these fears, significant steps to lower costs were proposed by FIA president Max Mosley.

Announced last Friday, the measures include a common engine for teams not backed by car makers, a ban on in-season testing, factory closures six weeks every year and using engines for three instead of the current two races.

These steps would reduce teams' annual costs, which now average a mindblowing US$300 million each, by about 30 per cent. One of the sport's top spenders, Toyota, pumps in close to US$450 million a year.

But questions still remain over whether F1 can weather the economic crisis and continue to be a platform for manufacturers like Ferrari to try new technologies that eventually make it to road cars.

The world's most expensive and technologically advanced sport should survive this painful operation, but not before undergoing a few more amputations.

There are many more unnecessary expenses that can - and should - be reduced. To get an idea of the extravagance involved in the sport, consider these:

A team's spending on engine production and research can reach £180 million a year.

A car's steering wheel alone costs $50,000 and is just one of the 9,000 components that must be manufactured as they cannot be bought off the shelf.

A team spends US$1,000 for a special wheel nut imported from California, and uses 1,000 pieces each season. That's a total bill of US$1 million a year for just one item.

Most teams have a wind tunnel to test the car's aerodynamics and how well it "cuts" through the air.

This state-of-the-art facility costs about US$50,000 to build and is usually operated every day of the year, consuming vast amounts of electricity.

Renault's monthly electricity bill for just its wind tunnel at its base in England is £80,000.

The thing is, despite the millions poured into developing cutting-edge aerodynamic technology, these pieces of futuristic equipment often do not even make it to the race track.

And even if they do, the bulk of fans care only about who's standing on the podium.

As F1 supremo Bernie Ecclestone told The Sunday Times during September's Singapore Grand Prix: "The average fan in the grandstand doesn't care about gearboxes, cylinders and all that. We are in the business of entertainment, not satisfying petrolheads."

Putting a limit on the aerodynamic development of chassis components - something not discussed in detail in the measures announced last Friday - would help slash costs.

Budget caps for each team would be another way.

It would take hard work, but breaking down the overall budget cap into, say, how much can be spent on engines, how much on gearboxes and on other major components would help keep research expenses in check.

But cost-cutting measures are just one facet of change the sport now needs to embrace. Efforts to boost the teams' bottom line must be considered too.

Sponsorship money forms a major part of many teams' income. F1's 310 sponsors poured in US$800 million last year. But many are financial institutions like the Royal Bank of Scotland that have been hit by the credit crunch, so expect this figure to fall.

It is perhaps time for the teams to get a larger slice of the estimated US$1 billion that Mr Ecclestone's Formula One Management receives through the sale of television rights, trackside advertising, race sanctioning fees and corporate hospitality.

According to the industry magazine Formula Money, television rights in recent seasons brought in about US$380 million a year to Formula One Management, trackside advertising contributed another US$164 million, Grand Prix hosting fees US$329 million and corporate hospitality at races US$140 million.

Mr Ecclestone's outfit takes about 50 per cent of the profits from the above, with the rest split among the teams according to how well they do.

A larger portion of the money should be channelled to the teams - the heart and soul of F1, after all - to help them stay afloat.

It remains to be seen if the shrewd Mr Ecclestone, who built F1 into the billion-dollar industry it is today through pioneering the sale of TV rights in the 1970s, will start being more generous.

It would be in his interest to keep teams on the grid, for without them the sport would die.

But should F1 be kept alive?

With such huge sums of money swirling around the sport, many have questioned whether it is just a playground for the rich and famous.

It is not. For manufacturer- backed teams such as Renault, McLaren-Mercedes and Ferrari, F1 is a platform to test out new technologies and safety systems. Research by teams has also benefited non-motoring industries.

The computational fluid dynamics tested in wind tunnels has helped improve aeroplane design, for example. Renault has an alliance with Boeing, and F1 Racing magazine reported that work in this area is projected to lead to a 2 to 3 per cent saving on drag for future aircraft.

Even swimmer Michael Phelps' swimsuit at the Beijing Olympics was developed with the help of this technology, and studies have shown the suit is 4 per cent faster in starts, sprints and turns.

These examples have helped F1 build up a reputation for being at the forefront of change.

But the economic crisis has highlighted how it is now necessary for F1 and Mr Ecclestone to make further concessions if they want to survive.

This article was first published in The Straits Times on Dec 14, 2008.

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