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Honda Drops Formula One, Blames Auto Industry Slowdown

Los Angeles Times, December 05, 2008

By Greg Johnson

Even as U.S. automobile industry leaders were going hat in hand to Congress, Japan's second-largest automobile manufacturer rocked the motor sports world by dropping its decades-long association with Formula One racing.

Japanese media reported that Honda had been spending about $500 million annually on its Formula One program.

Takeo Fukui, president and chief executive of Honda Motor Co. Ltd., on Friday blamed 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's abrupt abandonment of Formula One has sports marketing industry observers wondering what's next in a motor sports arena where even NASCAR is being pummeled by the global financial crisis that has caused automobile and truck sales to plummet.

"I think it spells big trouble," said William Chipps, senior editor of the Chicago-based IEG Sponsorship Report newsletter. "Auto companies are the lifeblood of motor sports, and their financial troubles will have a profound impact on nearly every motor sports property, both in the U.S. and internationally."

"Honda pulling out of Formula One could portend larger problems at NASCAR as the Big Three put more focus on surviving and less on marketing," Chipps said.

The abrupt departure prompted the Paris-based Federation Internationale de l'Automobile -- the motor  sports world's governing body -- to reiterate its concern that "the cost of competing in the World Championship is unsustainable.... In the FIA's view, the global economic downturn has only exacerbated an already critical situation."

The 2009 Formula One season opens March 29 with the Australian Grand Prix. If the Honda racing squad can't find new investors, the circuit would have just eight teams remaining in competition. Teams such as Ferrari and McLaren Mercedes spend $200 million annually on their technologically advanced race cars.

American Honda Motor Co. in Torrance on Friday said in a statement that the Formula One decision should have no impact on its U.S.-based motor sports operations, including the racing operations at its Honda Performance Development subsidiary in Santa Clarita, which has 125 employees:

It is unfortunate that current global economic challenges have necessitated the cessation of Honda’s participation in Formula One racing. However, Honda’s U.S.-based motor sports activities are expected to continue in 2009.

Racing has played an essential role in Honda’s history as a company, and the competition that racing provides has always been a cornerstone of Honda’s corporate values. We race to learn, and we race to win. We plan to continue both of those traditions in 2009 and beyond.

Honda plans to sell its Brackley, England-based Honda Racing F1 Team.

Nick Fry, president of the Honda Racing F1 Team, said in a statement that "we do understand that this decision was one which they felt they had to take in light of the global economic situation." Fry said that the team, which has been preparing a new car for the 2009 season, has a "steely determination" to race "if a new owner can be found."

Honda has had a long but bumpy relationship with Formula One racing. Company founder Soichiro Honda created the first team in 1964. The company subsequently abandoned F1 racing, but began to supply engines to teams during the 1980s and formed its most recent Formula One venture in 2005.