Rubens Barrichello of Brazil. (Wolfgang Rattay/Reuters)

Honda withdraws from Formula One racing

By Mark McDonald and Brad Spurgeon

Published: December 5, 2008

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HONG KONG: Honda announced on Friday that it would withdraw from Formula One, a startling pullout that has its origins in the dismal state of the auto industry and that is likely to have huge repercussions on the high-profile global racing circuit.

A glum Takeo Fukui, the chief executive officer of Honda, made the announcement at a news conference in Tokyo.

He called the company's withdrawal from the series "a difficult decision" caused by the worldwide economic gloom and "the quickly deteriorating operating environment facing the global auto industry."

"I offer my sincere apologies," he said, "to everyone involved."

The governing body for Formula One racing said in a statement Friday that the sport's finances were in "an already critical situation."

Honda has struggled badly this year, battered by weaker sales and a stronger yen. November sales, for example, were off 32 percent from a year earlier.

"Honda must protect its core business activities and secure the long term," Fukui said. "A recovery is expected to take some time."

While he cited economic reasons for departing from Formula One, the Honda team could have used the sporting equivalent of a bailout. Honda finished in ninth place out of the 10 teams that finished the season. A co-sponsored team, Super Aguri-Honda, withdrew after just four races of the 2008 season, citing a lack of funding.

The Honda team's drivers also fared poorly: Rubens Barrichello of Brazil finished 14th in the standings and Jenson Button of Britain was 18th.

With the Honda racing team now up for sale, one of the principal worries among frenzied Formula One bloggers around the world was the future of the Toyota Formula One team - and perhaps the future of the circuit itself.

Toyota, the world's largest automaker, has had its own financial troubles this year, and its November sales were down 34 percent from a year earlier.

But a Toyota spokesman was quoted earlier in the week as saying the company had no intention of putting its Formula One team on the block. The company said it would introduce its new racing car on Jan. 15 over the Internet instead of its usual glamorous unveilings.

Also, last week, LG Electronics announced a multiple-year technological partnership and marketing sponsorship program with the overall race series.

But car companies are cutting costs, laying off workers, closing factories and, in the United States, pleading for bailouts. Those woes clearly extend to racing sponsorships. Audi, the German carmaker, announced this week that it would withdraw from the popular Le Mans sports car series in Europe. And on Friday, it said it would withdraw from the American version of the same series.

Formula One bills itself as the world's richest sport. Its race teams subsist on sponsorships, television rights money, advertising contracts and sales to the so-called Paddock Club, which caters to the wealthy during the 17 to 19 annual races, each known as a Grand Prix. The sport features some of the world's heftiest brands in some of the glossiest sectors - telecommunications, drinks, computers, banking and automobiles.

For their sponsorships, the companies get global television exposure for their logos - even if those trademarks are flashing by at 220 miles an hour - along with big promotional dividends. The Formula One race in Brazil last year was the world's second-most-watched sports event with 78 million viewers, trailing only the 2007 Super Bowl with an audience of 97 million.

The 11 teams on the Formula One circuit spent a reported $1.6 billion during the 2008 season, which ended on Nov. 2. Max Mosley, the president of the International Automobile Federation, which governs Formula One and other racing series, has called that spending figure "unsustainable."

A statement Friday from the federation reiterated that view, even repeating the word "unsustainable" and adding that "the global economic downturn has only exacerbated an already critical situation."

Even successful, winning teams on the circuit lose money, and the budget for the Honda operation was said to be between $217 million and $300 million this season. The team employed more than 700 people at its headquarters in Brackley, England.

The Honda withdrawal came as a surprise to the team, Formula One sources said.

Until recent years, Formula One was a Eurocentric sport. And while TV revenues from Europe still dominate, half the races are now outside Europe, including events in Australia, Brazil, Bahrain, Malaysia, China, Turkey and Singapore. A race in India is planned for the 2011 season.

Honda entered the series racing in the early 1960s, not long after it first started making cars. The team's first Formula One race was the 1964 German Grand Prix - in the backyard of BMW and Mercedes, no less - and the first victory came the following year in Mexico.