Honda president Takeo Fukui on Friday morning announced his company has pulled out of Formula One.
"Honda Motor Co. has come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season for participation," Fukui told a Tokyo news conference. "The difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the subprime problem in the United States, the deepening credit crisis, and the sudden contraction of the world economies.
"Honda must protect its core business activities and secure the long term as widespread uncertainties in the economics around the globe continue to mount.
"We will enter into consultation with associates of Honda Racing F1 and its engine supplier Honda Racing Development regarding the future of the two companies. This will include offering the team for sale."
Fukui said the company had no plans to return to F1 "at this stage."
"We have no plans to supply engines to other teams," he told reporters. "We do not want to be half in and half out of the sport."
Fukui was described by Agence France Presse as emotional. Formula One is hugely popular in Japan, and the BBC's reporter at the news conference called Fukui well-known as a racing fan.
Although many carmaker teams in F1 view their participation as good for sales, Honda has always held the view that racing directly improves its road car design and engineering. Japan's second-largest carmaker to Toyota, Honda, like Toyota, has spent freely in F1 recently.
The Japanese carmaker has offered the team for sale with hopes a buyer can be found by the end of the year, BBC Sport reported. Formula One reporter David Croft said on BBC Radio 5 Live that he understands the team have enough money to operate until March. A report by the Reuters news agency put the time frame closer to a month.
The first race of the 2009 is scheduled for March 29 in Melbourne, Australia. Without Honda, nine F1 teams will field 18 cars; 16 is seen as the number below which F1 cannot continue.
According to the Associated Press, F1 team boss Ross Brawn, who spent the past year hiring technicians and designing a new car in anticipation of a major, hope-holding rules change, informed the more than 700 workers at Honda F1's Brackley, England, headquarters Thursday evening that they would receive three months' severance pay if the team had not sold by January.
Reuters reported the Japanese team's fate was explained to team principals at the Formula One Teams' Association meeting under way in London. The newly created FOTA is finding ways to cut costs of competing in F1 with the expectation of presenting those ideas to the FIA World Motor Sport Council next week. The group issued a statement saying they have agreed upon measures for next season, including substantial cuts in testing and a low-cost engine for 2011.
A recent Financial Times survey put Honda atop team spending at nearly $300 million a year.
Honda's withdrawal is the first F1 shoe to drop in the wake of the global credit crisis. Honda's U.S. sales fell 31.6 percent in November, the New York Times reported. The report dropped company share price by 5 percent. The company had announced it would slow road-car production at plants in Japan, Europe and the United States. Reuters reported the company will have cut production in the United States by 50,000 vehicles this year.
Although Honda sales figures did not take a hit as big as those of top U.S. and Japanese carmakers save Ford, which reported a dropoff of 30.5 percent, a strong yen has hurt Japanese business. Bridgestone, F1's sole tire supplier, revised earnings expectations earlier this year, citing a strong yen and raw materials costs. Toyota's U.S. sales were off 33.9 percent in November; the company has offered 0 percent financing in a bid to find buyers. Panasonic, Toyota F1's major sponsor, recently cut its 2008 net profit projection by 90.3 percent.
Formula One insiders fear Honda's decision to quit might prompt thinking among boardmembers at the sport's other major carmaker participants -- Toyota, BMW, Mercedes and Renault -- to rethink their companies' involvement. News that Red Bull drinks billionaire Dieter Mateschitz last month reacquired the 50 percent of Scuderia Toro Rosso he had sold to Austrian compatriot Gerhard Berger was greeted with anticipation that he will attempt to sell his second team. In May this year, Honda withdrew its backing of Super Aguri, which led to the team ceasing operation.
FIA president Max Mosley announced in summer that F1 costs were not sustainable. Attempts to cut spending led to formation of FOTA and proposals including Mosley's idea to use a single engine. Efforts to cut costs for small teams were approved in October but wouldn't be seen to affect a major player like Honda. By selling the F1 team, Honda emphasizes that Formula One remains prohibitively expensive.
Former F1 driver John Watson complained on BBC 5 Live that a number of Mosley's rules changes, including the allowance next season of a kinetic energy recovery system, have been responsible for driving up costs.
The BBC's Croft reported the independent Williams F1 team faces financial troubles and that Toyota is trimming expenses.
Honda entered F1 in 1963 with American drivers Ronnie Bucknum and Richie Ginther. Ginther supplied the team's first victory, at Mexico in 1965. Briton John Surtees won the 1967 Italian Grand Prix. The team ceased competing after the 1968 season. Honda returned to F1 as an engine supplier in 1983 and continued in that capacity through 1992, Honda-powered teams racking up multiple world championships. Through various entities, the carmaker supplied engines thereafter until buying into a British American Tobacco-owned team in late 2004. Nearly a year later, Honda bought the remainder of the BAR team.
Renamed Honda F1, the team finished fourth among constructors in 2006, eighth in 2007 and ninth in 2008. Englishman Jenson Button delivered the current effort's only grand prix victory, in Hungary in 2006. Brazilian Rubens Barrichello delivered 11 of the team's 14 points this season, aided greatly by a third-place finish at Silverstone in the British Grand Prix. Out of contract, Barrichello was expected to lose his seat to Bruno Senna, the nephew of former world driving champion Ayrton Senna. Under contract Button, whom Honda paid nearly $30 million this year, could be sidelined for the 2009; Toro Rosso is the only team without signed drivers.
For the past two seasons, Honda's F1 cars carried livery with Earth scenes consistent with the company's environmentally friendly road vehicles.
As teams spend the close season arranging funding, tracks already have been hit by the economic downturn. Sponsors of the French Grand Prix backed out, dropping the event from the calendar. The race in Canada was dropped by Formula One Management over financial issues and local and provincial governments have not been able to procure funding to continue the race in Montreal. Officials at the circuit in Hockenheim, Germany, have announced in the past fortnight that they cannot manage the cost of continuing a race there, even one that alternates as host with a German race at the Nurburgring.