DECEMBER 4, 2008

The future of Honda Racing F1

Honda has given its Formula 1 team three months to find a new owner - or else the team will shut down. An announcement is expected from Japan in the course of the next few hours. The good news is that the team is already out there looking for backing and hopes to find sponsorship to keep the team alive. Honda engines will not be available but Ferrari has additional capacity to produce engines following the decision by Force India to switch to Mercedes-Benz. Ross Brawn's connections in Italy will obviously help, so long as there is money to pay for them. That will not be an easy thing to achieve given the current financial climate, but if a buyer can be found - and the team has a lot of assets - this would solve the problem. It is anticipated that the team management will be looking in the Middle East where there is still money to be found, despite some restructuring that has been brought on by the global financial crisis.

One name that may reappear in the weeks ahead is that of Martin Leach, the car industry executive who was at the centre of the Super Aguri takeover bid earlier this year. He and Honda's Nick Fry worked together for years at the Ford Motor Company and are friends and it may be that an attempt will be made to revive that deal. The Honda team is a much better investment than was Super Aguri and the planned backer, the Dubai International Capital (DIC), has money to invest. DIC decided against buying Super Aguri because of the many doubts but the idea of being involved in F1 was obviously appealing. DIC has said this week that it is shifting its focus away from Western firms to concentrate on the emerging markets in Asia, but as F1 is growing in Asia, this might fight the bill. DIC has investments in a number of companies that might benefit for F1 exposure and Honda Racing F1 is understood to have some sponsorship from Brazil's Petrobras (which is making a drive into the Japanese market next year) and was rumoured to be close to a big Middle Eastern deal a couple of months ago. DIC has a $12bn fund for investments and exists to buy comnpanies that will help to consolidate Dubaiā„¢s economic, social and industrial development. Among the investments it has made are the Tussauds Group, Doncasters, a maker of precision parts for military machinery, Travelodge, the German packaging firm Mauser, the UAE-based luxury goods retailer Rivoli, plus small shareholdings in Daimler, HSBC, Sony and the EADS aerospace company.

For Honda the withdrawal from F1 is a bitter blow to ambitions but with US sales falling cataclysmically in the last few weeks - a drop of 32% in comparison to a year ago - and Honda's share price under pressure in the stock markets in America and Japan, the company seems to have little choice. It has already decided to freeze its plan to increase production capacity in Turkey and will delay plant construction in India by at least one year, in addition to introducing plans to idle factories in the months ahead.

Honda first entered F1 back in 1964 and won its first race at the end of 1965 but then had little success and withdrew at the end of 1968. In the early 1980s the company came under the control of Nobuhiko Kawamoto, who had been a member of the F1 team, and he pushed for a Formula 2 engine project which began in 1978. This resulted in the Ralt-Honda team dominating F2 in 1982, 1983 and 1984. Kawamoto began preparations for a return to F1 with a turbo engine, used initially by the small Spirit team. A deal was then struck with Williams and the the Williams-Honda combination won its first race at Dallas in 1984. By 1986 Williams-Honda was dominant and Nelson Piquet won the World Championship in 1987. A switch to McLaren in 1988 produced the most successful F1 car ever with Ayrton Senna and Alain Prost winning 15 of the 16 races that year. McLaren-Hondas went on to win the next three titles in 1989, 1990 and 1991. In May 1990 Kawamoto become president and chief executive of Honda but at the end of 1992 he pulled the company out of the sport. His ultimate aim remained to have a winning Honda car and engine combination but spent the 1990s expanding Honda's activities in the United States. It was not until 1998 that he gave the company the go-ahead to go back to F1 with a complete team. The initial effort, headed by Harvey Postlethwaite, was cancelled before it really began after Kawamoto was ousted in a power struggle in Tokyo, but the new chief executive Hiroyuki Yoshino agreed a deal to supply engines to British American Racing in 2000. Success was slow but by the end of 2004 the team began to look promising and Honda bought a shareholding and at the end of 2005 purchased the shares that had belonged to British American Tobacco and turned the organisation into Honda Racing F1. In the middle of 2006 Jenson Button gave Honda its first win in F1 since the 1960s in Hungary. Sadly, the 2007 season was ruined when the Japanese tried to run the technical operation themselves. The 2007 car was a big disappointment and Ross Brawn was recruited too late to have much influence on the 2008 car, which was not much better than its predecessor.