Sat, Dec 06, 2008 - Page 20 News List

Honda pulls out of F1 over cash crisis

‘WAKE-UP CALL’Amid slumping car sales, the automaker said it was no longer able to bankroll the Formula One team and its US$294 million budget


British Formula One driver Jenson Button of Honda steers his car during the second practice session at the Formula One Valencia Street Circuit in Valencia, Spain, on Aug. 22. Honda is pulling out of Formula One, blaming the world economic crisis for plans to sell its team.


The global economic slowdown has taken an early toll on Formula One, with Honda quitting the high-cost sport to focus more on making and selling cars at the expense of racing them.

Honda CEO Takeo Fukui told a packed news conference yesterday that the Japanese automaker was unable to continue backing a team in the high-cost F1 competition and wanted to put it up for sale.

“The automobile industry is experiencing very difficult times,” Fukui said. “Demand started to dry up in November and we can’t see the light at the end of the tunnel.”

The withdrawal of one of the world’s biggest car manufacturers will send shock waves through F1, which is already under mounting pressure to put the brakes on spiraling costs and could start the season with only 18 cars on the grid.

“This is a wake-up call,” F1 boss Bernie Ecclestone told Sky News television.

“If you and I wanted to run a Formula One team, we wouldn’t need to have to spend what they are spending at the moment — probably £200 million [US$293.3 million] a year to do it,” he said. “The trouble is the teams are basically run by technicians who should probably be at home playing with their PlayStations rather than spending fortunes to win races.”

Japanese team Super Aguri, which was backed by Honda, pulled out of F1 earlier in the 2008 season.

The 2009 season opens on March 29 at the Australian Grand Prix.

The latest move reflects the huge difficulties faced by auto makers around the world, including the Big Three — General Motors, Ford and Chrysler — in the US, where desperate automakers are seeking a US$34 billion bailout to stay afloat.

On Thursday, Honda Motor Co announced it would be cutting jobs in Britain and Japan because of plunging vehicle demand. It has already reduced its annual production of consumer cars by more than 140,000 worldwide.

Honda is also cutting 760 temporary workers at four plants, including one motorcycle plant, or nearly 18 percent of its Japan temporary work force of 4,300, this month and next month in response to nose-diving demand in the US and other key markets, company spokesman Hideto Maehara said.

Speculation of the announcement started late on Thursday in England, where the F1 team is based. Yesterday, Japanese politicians expressed regret over the decision.

“It really shows that the auto industry, which has been leading the Japanese economy, is facing severe economic conditions,” Japanese Economy, Trade and Industry Minster Toshihiro Nikai said.

The Honda team, with an operational budget of around US$294 million, finished next-to-last in ninth place in the F1 constructors’ standings last season. Honda, which originally entered F1 as a constructor for a stint in the 1960s before returning as an engine supplier in the 1980s, bought out BAR Racing in 2005.

Its move yesterday underscored deeper problems in the popular but expensive sport.

FIA president Max Mosley had already described F1’s combined US$1.6 billion spending this year as “unsustainable,” saying the teams were relying too heavily on the goodwill of rich individuals and corporate sponsors. Mosley has vowed to push through cost-cutting measures by 2010 to make the sport more affordable for teams, highlighting Honda’s announcement as extra motivation for change.

“The announcement of Honda’s intended withdrawal from Formula One has confirmed the FIA’s long-standing concern that the cost of competing in the World Championship is unsustainable,” the FIA said in statement yesterday.

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