December 5, 2008

Honda Leaves Formula One Racing



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 which could have serious repercussions on the high-profile 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 weakening sales and a strengthening yen. November sales, for example, were off 32 percent from a year ago.

“Honda must protect its core business activities and secure the long term,” Mr. 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 ended in ninth place out of the 10 teams that finished the season. A co-sponsored team, Super Aguri-Honda, withdrew after just four races this year, 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 team — and perhaps the future of the circuit itself.

Toyota, the world’s largest automaker, has its own financial troubles this year, and its November sales were down 34 percent from last year.

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

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 car manufacturer, announced this week it would withdraw from the popular Le Mans sports car series in Europe.

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 season’s 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 — telecoms, liquor, 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, 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 close to $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 television 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— and its first victory came the following year in Mexico.

The Honda driver Jo Schlesser was killed at the French Grand Prix in 1968, leading the team to shut down its team and withdraw from Grand Prix racing at the end of that year. It returned to Formula One in 1983 but as an engine supplier, notably to the highly successful McLaren and Williams teams.

By the time it left again in 1992 it had won 69 more races and several world championships, dominating the series. It returned again in 2000 as an engine provider to the British American Racing team, and it bought the team outright in 2006, when it began to race under the Honda name again.

At the time, a share of Honda stock on the Tokyo exchange was priced at 3,980 yen. The stock closed Friday at 1,653 yen, down 8.3 percent on the day.

Source: NY Times

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