The Mercedes F1 team spent over £240m and posted a loss of £76.9m during its title winning season in 2014, the company’s annual accounts have revealed.
The team enjoyed substantially increased revenues compared to 2013, but the high costs of the hybrid V6 rule changes and bonuses paid as a result of the ongoing success ensured that costs increased at a far higher rate.
In fact the report for Mercedes-Benz Grand Prix Ltd reveals that turnover (essentially sponsors income and prize money) increased from £125.2m in 2013 to £146.9m in 2014 “due to higher sponsorship revenue and increased income from the Commercial Rights Holder flowing from improved track performance in 2013.”
Meanwhile operating costs went from £190.7m to £240.2m “due to significantly higher bonuses payable as a consequence of the record-breaking level of sporting performance and also increased costs arising from regulation change.”
The loss after tax increased from £51.0m to £76.9m, which was “within the pre-defined parameters set by the shareholders.”
The accounts also reveal that on average in 2014 the team employed 765 people, up from 663 in 2013. Wages and salaries rose from £49.7m to £65.2m.
Looking ahead the company acknowledges that it will receive extra funding from Bernie Ecclestone as a result of its sustained success, as the team signed a deal that triggered bonuses based on winning two championships and a string of races. It notes: “The agreement with the Commercial Rights Holder has provisions for significantly increased revenue flows based on sporting performance, some of which will be triggered in 2015 as a result of the team’s performance in 2014.”
Intriguingly the accounts also say that “the company remains committed to cost reduction in F1 and will continue to work with the other competitor teams and stakeholders to achieve this objective in a fair and transparent way.”
It’s worth pointing out that while Mercedes spent more in winning the title the cost per point earned progressed from a high of £1.0m in 2012 to £530,000 in 2013 and then to £355,000 last year, allowing for double points in Abu Dhabi. Mercedes believes that RBR spent £397,000 per point in its championship winning years.
Adam Cooper's F1 Blog 
And just remember the initial reason for the new rule changes folks … yup, to save money and reduce the costs of competing in F1.
And Merc spent $75+million MORE.
If ever there was a record failure to achieve targets, the FIA and F1’s working group hold that title hands down.
Mercedes may have spent more in 2014 compared to 2013, but on the other hand at least some of that increase in spending would have occurred even with static regulations.
Whilst the new engines may require additional technical support, it should also be borne in mind that Mercedes has expanded its customer base;
asides from supplying Williams with engines, Mercedes have also agreed to provide Force India with a transmission and hydraulics systems after Force India split with McLaren.
Part of Mercedes’s expansion in operations, therefore, will be down to the need to provide increased technical support and supplies to their customers.
Furthermore, as noted in those accounts, generous performance related bonuses have also skewed the picture too. Every regular employee within the team was handed a minimum bonus of £10,000, and of course both Rosberg and Hamilton received fairly hefty performance related bonuses, on top of both drivers negotiating markedly higher salaries.
Did Merc give you a figure for Red Bull *Technologies*? 😀
Epic failure.
This kind of thing is exactly why smaller teams, or even teams like McLaren will struggle to compete. The big manufacturers can write £77m debt off as marketing (though I don’t really see a stampede of folks rushing to by C Class Mercs because of their F1 prowess). Independent teams, like Williams, McLaren, Force India and so on have no chance.
So there we have it, Ferrari vs Mercedes (and maybe Renault at some point in years to come).
Why there wasn’t a budget cap on the development of these power units I’ll never know. With such a rule in place there’s a very good chance that Renault would still be powering Red Bull happily and all the power units would be a damn sight closer in performance.
Maybe Merc will have less money to throw at their cars if they’re also caught cheating emissions!
765 employees! No doubt some are required to service the customer engine teams, but the sheer number for a 20 race season (including testing and fly away staff) is staggering. Makes one wonder what the F1 pioneers would say to that. I know, if they had the budget, they too would have spent it.
That also leads to a question: How much did the leading F1 teams of the early era (late 50’s-late 60’s) spend annually, prorated to current dollars?
Not all bad especially if the money is freely available and spent.
How does a company pay out bonuses and then show a loss? Poor management…
Tax write off……..smart management?
Don’t think Merc care if they’re winning. Sizeable losses would (in all likelihood) only become a problem for the parent company if they weren’t. Take a look at RB – as soon as the winning stops the blame game begins. Team management forced to try and find ways of justifying their performance / existence.
Still think a good model for F1 is a form of soft budget capping – similar to that used by some US sports. If your team wants to spend over a certain amount, you must pay heavy compensation to the other teams. i.e. if Merc want to spend £50M over a set budget cap, they must split the same or double amongst the other teams.
WHHAAAATT!!!! That’s my imitation outrage of Ferrari, Mercedes, and possibly Renault and McLaren, at the concept you just proposed.
Should work, but getting buy in? A whole different story.
Very true – shows everything that’s wrong with the sport though, doesn’t it? Get the feeling Red Bull x 2 would probably join your list of outrage, although I sense Renault are looking to perform on something of a budget.
If there was a governing body of any power or backbone though implementing rules wouldn’t be a problem. If Ferrari (et al) decide that the rules don’t suit them, then they would of course be welcome to withdraw and try a different sport – whilst missing out on the benefits of increased interest in a more competitive F1… ah pipe dreams!