FERRARI'S threat to pull out of Formula One at the end of the year unless the governing body backs down on a planned budget cap sets the stage for what will be heated talks at the top of the sport over the coming weeks. While the step appears dramatic, it is part of a war of wills between International Automobile Federation (FIA) president Max Mosley and the Formula One Teams Association (FOTA) led by Ferrari president Luca di Montezemolo. Tuesday's development sets out the battle lines before a likely meeting between the two men ahead of next week's Monaco Grand Prix. What is the problem? The FIA have proposed an optional 40 million pound ($60.69 million) budget cap for 2010 to encourage new teams to enter and safeguard the sport against the risk of more manufacturers pulling out after Honda's departure in December. Those teams accepting the cost cap will get greater technical freedom than those remaining with unlimited budgets, potentially creating a two-tier series. Driver salaries, engines and marketing costs will be exempt from any cap, effectively making the overall budget closer to 60 million pounds for a small team like Force India – not very different to what they have now. Montezemolo, whose team are estimated to have an annual budget in excess of $250 million and receive a greater share of the sport's revenues than others in recognition of their special status, says the two-tier system could be fundamentally unfair and even biased. While everyone wants to cut costs, and most are in favor of some sort of a cap, Ferrari are unhappy with how a cap will be policed and oppose any two-tier championship. Some manufacturers are also uneasy about having outside accountants, as proposed, going through their books. There is an added political and legal dimension with manufacturers such as Toyota faced with having to make mass redundancies if they are to comply with such a cap. Who will blink first? Mosley, who has portrayed the situation as a power battle he intends to win, says Formula One is fighting for survival and costs must be reduced urgently. The FIA has shown no signs of wishing to compromise. However the FIA did back down on plans to award this year's championship to the winner of most races after the teams flexed their muscles. FOTA have stressed their unity and common purpose since they became a body last year and that has held so far, despite sporting disagreements. However there is also a feeling that Ferrari, with an increasing number of stores worldwide selling F1 branded merchandise, needs Formula One as much as the sport needs them and a deal will have to be thrashed out. Formula One supremo Bernie Ecclestone, who had talks with most teams at the weekend, hinted at one possible solution when he told the Times newspaper on Tuesday that any concerns about policing the cap could be overcome by allowing each company or team's own auditors to check expenditure. “Ferrari are not stupid, they don't want to leave Formula One and we don't want to lose them, so we'll get to grips with it,” Ecclestone added Will other teams follow? Red Bull, one of whose teams is powered by Ferrari, and Toyota have already said they will not enter unless the rules are changed. Williams, Force India and Brawn GP are likely to enter purely because, unlike the manufacturers, they have nothing else to fall back on. Formula One is their sole focus. The budget cap is only attractive to new teams if they have a chance of competing on level terms. Most of those who have expressed an interest in entering would struggle to raise even the 40 million and would be at an immediate disadvantage if the cap were raised. What if Ferrari do quit? The sport would suffer a severe blow with the loss of its most glamorous and successful team and the only one to have competed in every championship since the first in 1950. Italians would be in mourning. Other manufacturers would doubtless follow and Formula One would become a battle between independent teams. Talk of a rival series might be revived.
