| Formula One -
December 6th, 2008
Formula One, which bills itself as the world’s richest sport and races in some exotic locales, was stung Friday by the withdrawal of the Honda Motor Company, the open-wheel circuit’s biggest-spending owner, which is reeling from the worldwide financial crisis.
“Honda must protect its core business activities and secure the long term as widespread uncertainties in the economies around the globe continue to mount,” said Takeo Fukui, the chief executive of Honda, Japan’s No. 2 automaker, at a news conference in Tokyo. He added, “I offer my sincere apologies to everyone involved.”
Sustaining its two-car race team of Jenson Button and Rubens Barrichello cost Honda an estimated $217 million in 2008. The price proved too steep amid weak auto sales and a rising yen. Honda’s November sales in the United States fell 32 percent. The team is looking for a new owner before the 2009 season begins in March in Melbourne, Australia.
At Formula One — whose 11 teams spent $1.6 billion during the 2008 season — the recession is pushing the organization to a desperate financial brink. Even before Honda’s decision to get out, the circuit’s governing body, the International Automobile Federation, called its spending figure “unsustainable.”
Honda has been in and out of Formula One since the 1960s. Most recently it provided engines to the British American Racing team in 2000, and then bought the team outright in 2006, when it began to race under the Honda name.
The car company’s departure from Formula One is a dramatic example of the financial impact the economic downturn is having in sports. There have been layoffs at the N.B.A. league office, the suspension of testing for the 2009 season at Nascar tracks, General Motors’ premature severing of its ties to Tiger Woods, and Major League Baseball’s freezing employment and budgets.
After Honda’s announcement about Formula One, the federation said “the global economic downturn has only exacerbated an already critical situation.”
“No one knows how serious the world crisis is,” Max Mosley, president of Formula One’s governing body, was quoted as saying on Bloomberg.com. “It’s not just the racing teams. It affects fans’ abilities to attend racing and sponsors’ paying fees.”
With Honda gone, Formula One bloggers speculated about the future of the Toyota team and others on the circuit. Toyota, the world’s largest automaker, saw its November sales plunge 34 percent from last year. But Toyota is staying in Formula One for now. A company spokesman said it would introduce its new racing car on Jan. 15 over the Internet.
The problems for Formula One, and to a lesser extent Nascar, are spiking as the Big Three Detroit automakers are pleading for a financial bailout from the United States government.
Executives of G.M., Ford and Chrysler testified to Senate and House committees this week, asking to receive $34 billion in loans, and they received a bit of support from Brian France, Nascar’s chairman. In letters sent Tuesday to House and Senate members, he wrote that the “domestic automobile manufacturers play a very important part of the heritage of Nascar, but more importantly, it is vital for all of America.”
On Friday, as Nascar prepared for its end-of-season celebration in Manhattan, two of its racing teams, Petty Enterprises and Gillett Everham Motorsports, were the subject of reports about merger talks, but neither side would comment.
In June, a 60 percent stake in Petty Enterprises was sold to Boston Ventures, a private equity firm. Last month, Chip Ganassi Racing and Dale Earnhardt Inc. agreed to merge into a four-car team led by Martin Truex Jr. and Juan Pablo Montoya.
SI.com reported that about 500 jobs had been lost to cutbacks at Nascar.
“Perhaps the reason for these mergers is teams hope that one plus one will equal three in terms of providing a better overall opportunity for sponsors,” said David Carter, a sports industry analyst at the University of Southern California. “This is a buyer’s market for sponsors, but the problem is buyers are having a hard time justifying the spending.”
Andrew Giangola, a spokesman for Nascar, said the racing organization had not laid off any employees at its central office, but that within teams, a 3 to 5 percent reduction was expected.
“We’re not immune to the downturn by any means,” Giangola said. “That said, our average attendance at Sprint Cup events was nearly 120,000 this season,” which he said was a decrease of nearly 10 percent.
“As far as next season, we hope to have full car counts, and a fully funded field, but it remains to be seen how that shakes out,” he said. “A few years ago, we had 52 to 53 cars trying to qualify each week, but that’s dropped down.”
He said that Honda’s decision to leave Formula One did not have a direct effect on Nascar, whose racecars are dominated by cars made by Ford and Chevrolet, a G.M. brand.
Both companies, with billions of dollars in losses, plummeting sales and cash running out, have said they will remain with Nascar for the immediate future.
Honda’s involvement in the Indy Racing League, the United States-based open-wheel circuit, is expected to continue, according to a statement from the American Honda Motor Company. Honda is the sole provider of engines for the circuit.
Mark McDonald reported from Hong Kong and Brad Spurgeon from Paris |
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