Honda: a one-off or the first of many?

Rubens Barrichello in Honda\'s final Grand Prix at Brazil

Rubens Barrichello in Honda's final Grand Prix at Brazil

Did Honda drop its F1 team because it was performing too poorly to be worth keeping? Or are car manufacturers going to begin cutting their F1 teams, irrespective of how well they’re doing, to save money?

A one-off

This side of the argument insists that although Honda was faced with severe economic pressures, the board wouldn’t have dropped its F1 team had it been more successful. Therefore, Honda’s withdrawal from F1 was just a one-off: the natural culling of an un-competitive outfit.

It’s not difficult to paint a picture of Honda as a struggling team: The Brackley outfit had been on a downward trajectory since 2004, when the team was still called BAR and run by David Richards. Once Nick Fry took over things began to go wrong: starting with the 2005 fuel tank controversy and the team’s poor form, failing to score at all in the first half of the season.

It over-promised in the off-season before 2006 and then under-delivered, except at the Hungaroring, where Jenson Button took a fortunate win thanks to wet weather. The team’s woeful 2007 and 2008 campaigns revealed its true performance level, and when the credit crunch came Honda had no reason not to strike a line through its $400m entry on the balance sheet.

Even if you don’t agree with that pessimistic assessment of Honda’s three years as a full-blooded F1 constructor, its decision to focus development in 2008 to maximise its opportunity with the new 2009 regulations may have added another nail to its coffin. If the RA108’s development had not been sacrificed for the RA109’s, perhaps it could have been a regular points scorer in 2008 and things might have been different.

Either way, although Honda needed to cut costs, it wouldn’t have canned its F1 team if it had been doing better. Therefore, the other manufacturers are unlikely to leave, as four out of the five won races this year and can expect to be in championship contention in 2009.

The first of many

Are more F1 teams going to quit the sport?

Are more F1 teams going to quit the sport?

The counter-argument to that says that car manufacturing is in such grave trouble and F1 costs are so high that it is inevitable more manufacturers will withdraw.

Yes, F1’s major manufacturers re-affirmed their commitment to the sport in the wake of the Honda pull-out. But not all their words came from the CEOs, the Carlos Ghosns and the Norbert Reithofers. They either came from the manufacturers’ motor sports directors such as Norbert Haug, or as unattributed statements. As Max Mosley himself admitted:

The man who runs the competition department wants a big department with the maximum budget and maximum employees. Those on the board want the maximum success from motor sport with the minimum cost. It is really only the man on the board that is concerned with cost.

The people who run the motor sport team won’t make the decision to cut it or keep it. This quote from James Allen reveals the dizzying speed with which an F1 team gets axed in the present economic climate:

It seems that the November sales figures arrived on [Honda CEO Takeo] 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.

And Honda isn’t the only car maker in trouble: Toyota’s US sales fell by 34% in November. BMW’s worldwide sales fell 25% in November. Mercedes’ fell by 27%. Most F1 sponsors are taking a hammering too.

At these times a nine-figure sum on a balance sheet is going to attract attention a long time before an eight-figure one. The fact that Honda has withdrawn from F1 but not British Superbikes, Moto GP and the Indy Racing League proves two things: the motor sport is a justifiable activity for a car manufacturer to be involved in at these times, providing costs are sensible, and that success is not a pre-requisite for their involvement to continue.

Had the FIA imposed greater cost cuts sooner things might have been different. But, although Max Mosley has been pushing for cost cuts for some time, they have not gone nearly far enough. The car manufacturers take some of the blame for not pushing for greater cuts, but the FIA is also accountable.

This season past was supposed to be the first year of legal customer cars, allowing independent teams to compete more cost-effectively in a manner which was commonplace in F1 in the past. But the FIA failed to get the rules sorted, and so the putative Prodrive team (which planned to use ex-McLaren chassis) was put on hold. Then the FIA dallied with the fantasy of budget capping and restricting the amount of time teams could run their wind tunnels for, which came to nothing.

The FIA either couldn’t decide how to cut costs or lacked the will to do it properly. When Mosley found his back against the wall in April he had no trouble finding the backing to keep himself in a job. Might that political capital have been better spent on guaranteeing the long-term survival of Formula 1?

Mosley’s offer of cut-price standard engines may be too little, too late. It may even signify that he has given up on the idea that the manufacturers will remain in the sport and it laying the ground to usher a new era of independent teams into the sport. It is only a matter of time before more teams announce their withdrawal. F1 in 2008 is in the same position the British Touring Car Championship was one decade earlier.

What do you think

I’m not sure which side of this debate I fall on just yet. But the shocking speed with which the axe fell at Honda makes me paranoid that more will follow.

So I’m leaning towards the ‘first of many’ side of the debate. And, like many of you, my suspicion falls on Honda’s Japanese rivals Toyota as the next most likely domino to topple.

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32 comments on Honda: a one-off or the first of many?

  1. I’m shocked! Really! What’s all this nonsense of you guys talking about a more “modest” cheapest F1?

    The reason of F1 is excellence. And excellent doesn’t come in cheap and modest packages. You sound like Mad Max trying to put cosworth engines on all cars. Nonsense! There are already cheapest and modest series wich provide very good racing, why would you want F1 to become that?

    Face it, one of the reasons we love F1 is because it’s so unreachable for us mere mortals. We can’t even get close to the pilots and that’s some of what’s special to it.

    Crisis or no crisis, F1 will survive one way or another, and if RB and TR go out with Honda, so be it. If Renault follows, no matter. Others will come eventually. Don’t become so paranoid about it, we all know that japanese can be swift and brutal in their desitions.

    Seriously, a modest F1? Come on! We want cars made of unobtanium with diamond brakes and space age bodyworks (okok, exagirating a bit there)

  2. Keith

    Had the FIA imposed greater cost cuts sooner things might have been different.

    Not for Honda it wouldn’t. Keith your not wrong in your appraisal of Honda’s F1 operation post 2004. From the moment they sacked David Richards it’s been a joke, a joke that they had only just begun to rectify before all of this and now they’ve chucked it in. It’s not surprising really, maybe they’re just using the financial climate as an excuse to save face. I even find myself agreeing with Jacques Villeneuve’s comments (which for me doesn’t happen often) about what he perceives to be a political rather than financial move.

    Every year I think Toyota could leave and it’s not because of the crunchy credit, sales figures or even Honda. It’s because their F1 operation has been such a monumental waste of money. The real question is how long are they willing to throw that much money down the toilet? They’re always gonna have that kind of money to waste it’s just a question of when will they get bored of wasting it.

    BMW won’t quit:

    It is with regret that we learnt of Honda’s decision. It has no bearing on BMW’s involvement in Formula One. Our F1 involvement is an integral part of the company strategy. There is no better platform than Formula One for demonstrating our brand values. BMW, moreover, makes targeted use of the Formula One project as a technology accelerator for series production… With the BMW Sauber F1 Team, we have from the start focused on high efficiency and have achieved our successes with a compact and powerful team… The cost-benefit ratio is commensurately positive…

    I doubt Renault will either. Even though I’m under the impression their financial resources are considerably less than the other top teams they have very good results which means their operation should be cost effective ergo not worth quitting.

    Red Bull I’m not so sure about, mainly because I don’t know much about the state of Mateschitz’s inveastments and assets, but the Pitpass article someone linked points out that they’ve been investing a lot of money in their teams so I would be surprised if they made those investments to then quit.

    I get the feeling that Williams could be one major sponsor loss away from folding but that’s just a guess, I get the feeling they’ve been like that for a while.

    In short I don’t think we’ll see many or any more teams quitting. Honda’s pulling out could well be a good thing for several reasons not least in the hope that someone who actually cares about running a race team well will take over at Brackley.

    I think the point about customer cars was a good one and that people should be mor open to the fact that standardized engines is only one possible cost cutting solution (and not a very good one in my opinion). Free-ing the regulations to allow for cheaper more innovative performance gains would be far more significant.

  3. I believe that both observations are correct, because situations vary by individual teams/companies.

    I haven’t read any figures, but I don’t doubt that Ferrari aren’t exactly selling a lot of cars right now, either.

    Honda exited F1 because it was a very easy way to lower the budget. It is the same reason that General Motors are considering removing more than half its nameplates from existence, for a person in charge it is a very simple and obvious decision. Honda did not remove itself from IRL because they probably make money by leasing the engines to teams, and they did not remove themselves from motorcycle racing because motorcycles do not have the ridiculous high costs of development, not that a Moto GP effort is cheap by any means.

    I am very surprised that Toyota have not made a similar announcement yet; it would not be a bad or wrong thing, to me, it’s just saddening.

    Max might prove to be a little bit smarter than some of us want to give him credit for: if manufacturers can’t afford to be in F1, then what we’ll have are privateers left in F1 in 2010 or so, driving in his identicars, and it’s really nobody’s fault. Though the rules allow for other manufacturers to make engines that meet the spec, there will be no takers, because the same rule existed in the Cosworth-only ChampCar.

  4. Lady Snowcat said on 7th December 2008, 20:49

    Whilst I do think Ross’s record in the past speaks for itself I do wonder if he isn’t a victim of naiivety in respect of his actions since he joined Honda…. under his guidance and to get Honda up to the top teams (he believes) they embarked on expenditure which other teams struggled to match (indeed Honda are believed to have spent more in 2008 than any other team)…. and made Honda a laughing stock in 2008….

    I assume the eminent Mr Brawn felt he had sufficient support from the head guys at Honda to completely ignore 2008 to ensure 2009 would be excellent… but in business it is always your last results that are considered …. not next year’s pipe dream….

    Perhaps the extreme forward focus and “catch-up” spending spree made the F1 team team expendable…. especially when there were no guarantees….. we can all recall the Honda F1 management’s optimism each year since BAR’s second place in 2004, accompanying a steady slide down the team table…..

    I thoroughly accept that no-one saw the financial meltdown of 2008 coming but even so…. effectively betting “the farm” was always going to be a high risk strategy….

    I only hope that we get to see if the reputed $300 mill was well spent….

  5. Robert McKay said on 7th December 2008, 21:51

    I’m shocked! Really! What’s all this nonsense of you guys talking about a more “modest” cheapest F1?

    The reason of F1 is excellence. And excellent doesn’t come in cheap and modest packages. You sound like Mad Max trying to put cosworth engines on all cars. Nonsense! There are already cheapest and modest series wich provide very good racing, why would you want F1 to become that?

    Face it, one of the reasons we love F1 is because it’s so unreachable for us mere mortals. We can’t even get close to the pilots and that’s some of what’s special to it.

    Crisis or no crisis, F1 will survive one way or another, and if RB and TR go out with Honda, so be it. If Renault follows, no matter. Others will come eventually. Don’t become so paranoid about it, we all know that japanese can be swift and brutal in their desitions.

    Seriously, a modest F1? Come on! We want cars made of unobtanium with diamond brakes and space age bodyworks (okok, exagirating a bit there)

    Couldn’t disagree more.

    Formula 1 once made it’s name with a grid full of Cosworth engines.

    And to you, me and even GP2 a budget of £30 million is still a ridiculous, astronomical, unreachable figure, and yet considerably more affordable than current budgets.

  6. Terry Fabulous said on 7th December 2008, 21:54

    I wonder what the Australian GP organiser are thinking right now? Surely there aren’t too many punters forking out $500 for what could be a heavily truncated grid.

    Sigh, my Jenson Button Honda Mouse pad at work looks a little sad today :(

  7. Lady Snowcat said on 7th December 2008, 21:58

    Errr….

    Well I am just considering a trip down under…

    A lack of Honda to laugh at will hardly spoil it for me…

    I can’t say I gave them much thought this year except to feel sorry for them…

  8. i think next year i’ll wear my 06 honda shirt during the opening f1 round… back then they had well designed gear and sponsors… and actually fought for race positions…

  9. Honda was a one off of the big names. Everyone else will be fine. They have good sponsors, or wealthy owners.
    Honda leaving is a shame for the sport, but it wont affect me being @ the 1st race

  10. theRoswellite said on 8th December 2008, 7:26

    From Bucknum to Barrichello, from Ginther to Button, thanks HONDA, you’ve always been a quality organization.
    Come back soon.

  11. While I would be suprised if the any other team quits before the start of the season, I think in a few years time the team list will be different to what it is now.

    Some teams will be sold and renamed, and if Max gets his way with cost cutting, customer cars etc then we may even get more than 10 teams in F1.

  12. Why is budget capping a fantasy?

    I appreciate that a budget cap wouldn’t be straightforward because of cross subsidies within organisations and investment costs incurred in one year but the results used in another year.

    But, it isn’t beyond modern accounting practices to come up with something workable.

    Or is it?

  13. Keith Collantine (@keithcollantine) said on 8th December 2008, 21:32

    I say budget capping is fantasy because:

    1. I don’t believe they could enforce it.
    2. Even if they could, I don’t believe they could convince all the teams that it was being enforced.

  14. beneboy said on 8th December 2008, 21:47

    Re: Budget Cap.

    If Ferrari do some R&D at their factory are they doing it for F1 or their road cars ?
    The same is true for all teams with connections to production car manufacturers.

    Unless the FIA had people monitoring both the factories & the accounts then it is impossible for them to be able to tell who is really spending what, if the teams want to hide it then the accountants will find a way, that’s what they’re paid for.

    I doubt the FIA has the people who are able to effectively police a budget cap. We’d just end up with endless court cases over alleged spending.

  15. I agree a budget cap wouldn’t be the simplest thing to administer. But given we’re looking at a bad set of choices I reckon it’s worth a try.

    It would need thinking through very well, but surely it offers a better outcome than everyone driving with the same engine.

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