MAY 17, 1999
Chaos at Honda
THE Honda Motor Company seems to have gotten itself into a tangle over its involvement in F1 racing. The company had committed itself to entering Grand Prix racing next year with its own team - called Honda Racing Developments - but British American Racing arrived with a bid for the factory engines which is believed to be in the region of $50m a year for three years. In addition to the $150m on offer Honda would save around $500m in the same period by not having to invest in its own program. A deal was struck for BAR to have "factory" engines.
Those expecting an announcement at Monaco were disappointed and it was very clear that there were intense negotiations taking place over how Honda is going to unravel the commitments it made to F1 boss Bernie Ecclestone and to the FIA. Although there were no high profile Honda men at Monaco the company's longtime European fixer Masaru Unno seemed to be very busy, shuttling between Ecclestone and Hirotoshi Honda. At the same time the FIA's Max Mosley was in Tokyo.
In order to avoid public embarrassment Honda is probably going to have to agree to pay considerable compensation to the F1 bosses. This is likely to include the transfer of HRD's ownership to Ecclestone. He could then sell the team to the highest bidder. In addition we would expect that Honda will pay a considerable sum in compensation to both Ecclestone and the FIA.
The Honda board was split over whether Formula 1 was a good idea even before the decision to go with BAR. Half the board of directors is arguing that F1 is not a top priority for the company at the moment and that money would be better spent on new technology. Even those who have good connections within Honda say that no-one knows what will happen because Honda is committed to two different projects. At Monaco we heard that a face-saving plan was being discussed in which Dome would take over HRD and run with Mugen engines. Dome has long had F1 ambitions and there appears to be money available to run the operation. The problem with that deal is that many of the staff of HRD are so fed up with Honda that they are not going to stay if this happens and so the team will fall apart. There is no shortage of jobs at the moment and very few of the HRD people are on long-term contracts.
Such a deal would obviously have a knock-on effect on the Jordan team, although in theory the operation has a Mugen deal for the 2000 and 2001 seasons. As with all F1 contracts however there are probably clauses which could be used to sink that deal if necessary.
The management problems in Japan are a distinct danger to the company as it is vulnerable to takeover bids at the moment. There is no doubt that Ford and even DaimlerChrysler have been looking closely at doing a deal to buy Honda and a gridlocked board of directors might be enough to convince the Honda Family to sell its 40% shareholding if the right bid were to arrive.