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post #1 of 12 (permalink) Old 12-05-2008, 03:16 PM Thread Starter
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Analysis: Sayonara Honda, who else is at risk?

DECEMBER 5, 2008
Analysis: Sayonara Honda, who else is at risk?
Source: F1 News - Grandprix.com


The Honda Motor Company has confirmed that it is pulling out of Formula 1 racing. The company's chief executive Takeo Fukui told the media in Japan that the move was necessary because of difficult business conditions and added that there are no plans to supply engines in F1 either. The team in England is evaluating the possibilities for the future and the management, led by chief executive officer Nick Fry and team principal Ross Brawn, are "deeply committed to securing the team's future" and are engaged in looking for a new team owner, given that the team has high expectations for 2009.

Fukui explained that the difficult decision came "in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the sub-prime problem in the United States, the deepening credit crisis and the sudden contraction of the world economies".

"Honda must protect its core business activities and secure the long term as widespread uncertainties in the economies around the globe continue to mount," he said. "A recovery is expected to take some time. Under these circumstances, Honda has taken swift and flexible measures to counter this sudden and expansive weakening of the marketplace in all business areas. However, in recognition of the need to optimize the allocation of management resources, including investment regarding the future, we have decided to withdraw from F1."

Extracting the team from F1 is not going to be the work of a moment as Honda must have given certain commitments to the Formula One group as part of the commercial agreements that govern the sport - even if there is no Concorde Agreement as such at the moment. This commitment will probably be until the end of 2012. This does not preclude selling the team (as Ford did when Jaguar Racing was transformed into Red Bull Racing).

The sale of the team is not the problem. It will probably be just a nominal sum of money, the key point will be to find someone who is willing to pay the $200m that will be needed to pay for the 2009 season. Engines can be bought from Ferrari.

The biggest question in the sport is not about Honda, however, as everyone is watching to see whether or not this will result in other automobile manufacturers heading for the door. They are all facing the same financial troubles at the moment and Honda was actually considered to be among the strongest in terms of its commitment to Formula 1.

A look at the other companies involved reveal the scale of the current crisis in the automobile world.

Toyota, the world's most powerful car company, has reserves of $40bn in cash but it recently reported a drop in US sales of 34% in November as consumers simply stopped buying cars. The company has started to discount by offering 0% financing for 12 models and $5,000 off its Tundra pickup and Sequoia SUVs, but despite this Toyota was forced to report a $330m loss in the US in the third quarter. The fourth quarter will be worse. Ironically, Toyota opened a new $850m plant at Woodstock in Canada yesterday, to assemble the RAV4, a compact sports utility vehicle, but has delayed a new Prius plant in Mississippi. The firm will also stop production at all of its US facilities for two days this month to reduce the number of cars being built. This will provide workers with a longer Christmas break. Despite this Toyota says it still has about 73 days' worth of unsold cars and more trucks.

BMW took a major hit in the United States as well last month with its sales tumbling 26.7%, with the 11-month annual sales down by around 6.8%. That will probably reduce further in December. The good news for the German firm is that Mini sales were up by 31% and Rolls Royce is also doing well, its sales rising by 29%. BMW has cut one of the two shifts from its Leipzig factory and is laying off 5,000 temporary workers. The company has also cut back on research spending and delayed several projects.

Mercedes-Benz has suffered similar disasters in the United States with sales down 30% but overall 11-month sales only 1.2% under last year. The company has flexible working rules which mean that workers can work less but get paid the same on the understanding that when there is more demand they will work more.

Renault is fortunate in that it is not yet in the US market and has been a major beneficiary of a recently-announced French government package worth $32.8bn to help boost the national economy. The company is still saying that production cuts are necessary because of falling sales. Renault has no plans to announce any more job cuts, although it is already committed to cutting 6,000 jobs across Europe and is shutting many of its sites for several weeks in December.

American sales are also important to Ferrari, but the exclusive nature of the cars means that demand for new models is not as badly hit as might be expected.

Overall US vehicle sales dropped 37% in November and the industry says that December will be worse with estimates of drops of between 35% and 40%. The total US vehicle sales for the year are expected to fall 20% as a result of the crisis.
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post #2 of 12 (permalink) Old 12-05-2008, 07:37 PM
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I would think that if Benz and Bimmer don't get races back in their prime markets [US, Canada, 2 in Germany, France] they would be likely to consider pulling out. At this point in time if they aren't getting serious cross marketing advantage there is really no point in their participation.

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post #3 of 12 (permalink) Old 12-06-2008, 12:16 AM Thread Starter
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I would think that if Benz and Bimmer don't get races back in their prime markets [US, Canada, 2 in Germany, France] they would be likely to consider pulling out. At this point in time if they aren't getting serious cross marketing advantage there is really no point in their participation.
F-1 has to be represented on the North American Continent.

Bernie / Ali Baba needs to leave the building, and the 40 thieves (F-1 group) be satisfied with a smaller loot.

Most of the F-1 tours profits should go to the teams, or the teams may select to start their own tour.
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post #4 of 12 (permalink) Old 12-06-2008, 09:04 AM
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F-1 has to be represented on the North American Continent.
Not sure this is true. How many Mercedes or BMW owners actually know that these companies compete in F1, or made their buying decsion as a result of their presence in F1? Looking at who drives Benzes and Bimmers these days, absence of a NA GP probably won't cause a blip on the sales trend charts. Sadly, those of us (NA F1 fans) who have the F1 needle stuck in our arms value their involvement in F1 but we're a very small minority.

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Most of the F-1 tours profits should go to the teams, or the teams may select to start their own tour.
+1 Let's hope the current direction of F1 supports an implosion and the result is what you are forecasting.

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post #5 of 12 (permalink) Old 12-06-2008, 10:20 PM Thread Starter
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Q and A with Luca di Montezemolo

Check the last paragraph

Dec, 7th - 01:19

Q and A with Luca di Montezemolo

It is a very delicate time in Formula One with Honda’s announcement to retire from the Championship hitting home to most of the grid, the economics of the situation proving to be more dire than originally thought, The announcement came just a few hours after the FOTA had unanimously decided further significant cost cuts in the series starting in the upcoming season, making their reasons a little bit harder to fully fathom.

Ferrari President Luca di Montezemolo gave an exclusive interview to the official Ferrari website about these very relevant issues...

President Montezemolo, what is your reaction to Honda's announcement to retire from Formula 1?

I'm really sorry to hear this and I am close to the men of the team in this very difficult moment. Unfortunately these things can happen in difficult times like these. Over the years we've seen coming and going several constructors in Formula 1.

The FOTA's executive committee met in London. What decisions have been taken there?

First of all I want to say that I was very satisfied with the meeting's extremely cooperative climate. We unanimously took some very important decisions with short-term and mid-term impact, for the years 2009 and 2010, while we also set out a proposal for a new engine starting in 2011. We gave a further input as far as cost reduction is concerned to help especially the smaller teams over the upcoming season. It's a huge effort from all of us, which is important for two reasons: firstly because it wasn't planned, considering what has been planned a few weeks ago, and secondly, because it happens in a very delicate overall economical situation.

Do you think that things are going in the right direction?

I think that we've given an unanimous reply to the requests FIA has made several times; therefore we've shown that we have a great capacity to react and to suggest solutions, backed by all of us protagonists in Formula 1, from the big car manufacturers to the independent teams. The aim is to reach unanimous decisions, which satisfy all our requests, while we don't touch Formula 1 as a sporty and technological competition amongst teams.

What are the next steps?

In the short run we'll organize a meeting with Max Mosley to present him the details of our proposals and to discuss with him how to improve the show our sport offers. Furthermore we also agreed that it's necessary to meet with Bernie Ecclestone to talk about the distribution as far as the earnings are concerned.
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post #6 of 12 (permalink) Old 12-08-2008, 10:16 PM
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Not sure this is true. How many Mercedes or BMW owners actually know that these companies compete in F1, or made their buying decsion as a result of their presence in F1? Looking at who drives Benzes and Bimmers these days, absence of a NA GP probably won't cause a blip on the sales trend charts. Sadly, those of us (NA F1 fans) who have the F1 needle stuck in our arms value their involvement in F1 but we're a very small minority.
The parties that Benz threw the first few years in the early 2000-2003 were VERY nice. They catered to dealers, fans, owners.

I think the key is the impression of technical excellence that comes from F1 and most of the folks in this country still have a pretty good bead on different sporting events, even if they don't follow them to the edge like some of us do.

Of course, depending on how deep this particular little recession goes it might be a moot point.

I just read that Mercedes just rented an additional 20 acres in Long Beach to hold cars that have arrived for West Coast dealers that the dealers cannot/will not accept.

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post #7 of 12 (permalink) Old 12-09-2008, 01:24 AM Thread Starter
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A friend has a chandler business in the Long Beach harbor area, and you can see the many cars stored around the North side of the bridge.
My buddy took me a few times to a bar for sailors right on a dark harbor pier, complete with bargain basement hookers, and a lot of rough looking characters. Good food though, but I had a had time believing, I was actually in the US.

BTW, the Long Beach harbor has an independent Harbor Police.
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post #8 of 12 (permalink) Old 12-09-2008, 04:43 AM
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The parties that Benz threw the first few years in the early 2000-2003 were VERY nice. They catered to dealers, fans, owners.

I think the key is the impression of technical excellence that comes from F1 and most of the folks in this country still have a pretty good bead on different sporting events, even if they don't follow them to the edge like some of us do.

Of course, depending on how deep this particular little recession goes it might be a moot point.

I just read that Mercedes just rented an additional 20 acres in Long Beach to hold cars that have arrived for West Coast dealers that the dealers cannot/will not accept.


With all of those cars stacked up at the port with more on the way, maybe the Buy 1, Get 1 Free will be in August/Septemebr 2009.........
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post #9 of 12 (permalink) Old 12-09-2008, 09:14 AM
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The day Bernie leaves the F1 show will be a very happy day for everyone that loves Formula1.
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post #10 of 12 (permalink) Old 12-09-2008, 03:29 PM Thread Starter
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[QUOTE=EvoGuy;3198261]The day Bernie leaves the F1 show will be a very happy day for everyone that loves Formula1.


Beside being a greedy, Napoleon complex afflicted gnome, and that's not mentioning his bad side, he deserves credit for bringing F-1 into the big league.
Anyone who has watched the races 40+ years ago will understand.
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