Honda pull out of F1..Toyota next?

Honda announced this morning that it is withdrawing from Formula 1.

Honda announced this morning that it is withdrawing from Formula 1. It is putting its team up for sale and will continue to fund the team for three months, but if no buyer is found by March then the team will be closed down.

There is a sense of shock in Japan about this. Apparently there have been rumours out there during the last week that Toyota was building up to make an announcement of this kind, but not Honda. All eyes are now on Toyota to see what their next move will be.

Honda president Fukui made the announcement in the early hours of this morning. My sources suggest that this was quite a sudden decision, despite rumours that all was not well at Honda. This is all about trade, or lack of it.

It seems that the November sales figures arrived on Fukui's desk on Thursday and were far worse than expected. Against that backdrop Fukui took the decision. Interestingly Honda had held a press conference on Thursday to announce a new car and he made no mention of F1 then. When quizzed about this after the withdrawl announcement on Friday morning Fukui said that it had been a sudden decision.

Fukui is a big supporter of F1 and has attended many races, taking a direct personal involvement in the team and with the drivers. This is a massive blow to Honda's self esteem as racing is a fundamental part of the DNA of the company and the F1 programme is the proving ground of its most talented engineers, who then move on to road car operations.

The entire team was addressed by team principal Ross Brawn at 6pm Thursday evening and he explained the situation to the workforce. Also on Thursday there was a FOTA meeting in London and the other teams were informed.

Honda has its car factories in Japan working part time shifts, owing to the collapse in the automobile sales market and clearly the management feel that they can no longer justify spending up to £150 million a year on F1, even if cost cutting measures are in the pipeline. Too much time has been wasted in agreeing a package of cost saving measures - as the FIA and also the Williams management have been warning for months. They are entitled now to say "I told you so", but will take no pleasure from doing so.

The news is still a major shock, because Honda has until recently been one of the most profitable of the car makers currently engaged in F1. If they can make this decision, so can the others. This is a major moment for the sport and I imagine Bernie Ecclestone and Max Mosley will be ringing around frantically, ensuring that the remaining teams are solid.

Mosley will now swing into action. He will want to make sure that radical steps are taken immediately to strip costs out of the sport shore up the health of sport and I expect him to use Honda's withdrawal as a trigger for making some big changes in the next week or so, certainly with a world council meeting on December 12th poised to approve whatever he feels is appropriate.

Honda has a track record of sudden withdrawals, pulling out of Williams in 1987 to switch to McLaren and then withdrawing from F1 altogether in 1992.

The Financial Times newspaper recently wrote that the team was the highest spending of the F1 outfits and had got through £147 million in 2007, about £40 million more than McLaren. They added 100 new staff - taking the total to 667 - and were investing heavily in the Ross Brawn plan for the future.

The news will be a savage blow to Jenson Button, who had recently renewed his contract with the team shortly before the Japanese Grand Prix. With all the top seats filled and on the back of an indifferent season, Button will be feeling nervous about his prospects for 2009. Button gave the team its best moment in F1, winning the Hungarian GP in 2006.

The ray of hope for Jenson is that if other teams with draw and the remaining teams are forced to run three cars, he might be able to land a third McLaren seat or something at one of the other teams. Peter Sauber has always been a Button fan, so BMW Sauber is also a possibility. But that's a long way off at the moment.

It is only hearsay at this stage, but one detail you might be interested in is that I understand that the package being put up for sale does not involve the potential new owner running Honda engines but instead involves Ferrari engines, a deal which one imagines Ross Brawn would have put together. The problem is that next season engines have to last three races, as opposed to two this yeara dn Honda doesn't have enough three race engines to last the season. It's further complicated by the fact that the car will have been designed around the Honda KERS system and in the next three months the engineers will have to optimise the design around a Ferrari with a Magneti Marelli KERS system.

Who might buy? Well remember that Honda was in discussion with Dubai International Capital over the sale of Super Aguri earlier this year. That negotiation lasted months before DIC suddenly withdrew, so the lines of communication are open there. The Abu Dhabi sovereign wealth fund is another possibility.