Honda Quits F1 Racing

There’s no debating that the global recession is hitting every aspect of the economy hard. Auto manufacturers seem to be having an especially tough time and this has understandably led to Honda Motor Co.‘s decision to withdraw from Formula One racing.

After sales in the U.S. started plummeting with the economic recession, Honda Motor Co. has had to make some tough calls. The U.S. was the company’s most profitable market. But their sales plummeted a striking 32% during the month of November alone – the worst drop the company has seen since 1981. Weak consumer sentiment and economic slowdown are the main reasons for the fall, neither of which have a quick-fix solution. Instead, Honda has had to take a long hard look at how the company is run and has chosen to re-focus its efforts in the industry. With regards to making cars, this means cutting down on luxury car development and speeding up the development of diesel engines, hybrid cars and compact cars. Honda’s F1 operations were carefully considered and eventually it was decided that they were unsustainable and expensive. The decision to leave F1 and the subsequent laying-off of assembly workers and reductions in production costs has slashed at least 20 billion yen (US$216 million) off the company’s productions costs. The engineers that were involved in those facets of the industry have been reassigned.

President Takeo Fukui said: “This difficult decision has been made in the light of the quickly deteriorating operating environment facing the global auto industry. Honda must protect its core business activities.”

Further, the company has decided not to supply engines to other teams and their Brackley, England-based team is up for sale. If the team is not bought, it will be the second team to leave the sport. The last team to quit was Honda-backed Super Aguri which folded earlier this year due to lack of funding. That will leave only nine teams to compete in the sport, and it seems this could be the start of a rather scary trend. According to Max Mosley, president of the F1 ruling body of the FIA, teams spend as much as $1.6 billion on the Formula One racing series each year. That amount is clearly unsustainable and, with the current economic conditions and current scandals that have unraveled in the sport, may ultimately see the disappearance of the sport altogether. However at this point other teams seem determined to continue.

Honda is not leaving off motor sport altogether. The company hopes to continue racing in the MotoGp motorcycle series as well as the IndyCar series.

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