Honda’s withdrawal from Formula One

Last week, Honda, a Japanese car manufacturer, announced that they are going to withdraw from F1 car race. Last year their team was ranked 8th in the F1 World Championship but they spent ₤147,000,000 (US$230,000,000) for the year which was the highest in the history. Honda’s F1 team, based in the UK, made ₤149,300,000, a 23% rise from the previous year. Within that, around ₤7,000,000 was from the sponsors but last year they boldly removed all the sponsors’ logos from their machine replaced by designs of the Earth to advertise their environmental charitable work. Their biggest cost was for the development and production of about 80 V8 Engines and the second biggest expense was the staff costs of ₤35,300,000. They kept employing specialists in design, production, engineering, etc. and the team has been spending over $300,000,000 so far, which was far too much for any one company to support.

I would like tell you about this famous story about Honda’s participation in F1. The company founder, the late Soichiro Honda was very impressed when he went to watch acrobatic flights when he was a child and wanted to work in the aviation industry in the future. Then he was sent out to an apprenticeship at a car repair company where he started learning about engines. After the WWⅡ, he started his own company, Honda Motor Co, Ltd to develop 2 wheeled vehicles. He then succeeded to make the original model of the “Cub” putting an engine on a bicycle. Hoping to be “World Number 1” one day, he thought about participating in bike races. It only took him 2 years before he entered “The Isle of Man Tourist Trophy Race”, the famous and the world’s oldest motor race in the UK; and became the top winner.

Next, Mr Honda thought about the change of his product lines from motorbikes to cars catching up in the tide of the times. However, Japan’s Ministry of International Trade and Industry at that time was dead against his company moving into the car industry saying 2 to 3 car manufacturers should be enough for the country. So Mr Honda was prepared to fight with the government officials and declared in front of his employees: “At Honda, we have our great skills we have developed in motorbike races. A small motorbike company can make safe cars just as good as others. We have to show it to them. We became big through the races. We will use the same strategy when it comes to cars. We are going to win at the world top car race, which is ‘Formula One’!” He told about his dream. After many twists and turns (they were not making any stock cars), they marked their first victory at the Mexico Grand Prix in 1965. It was the best period of Honda’s F1.

Since then, although they missed some F1 races because of financial reasons, their underlying principle was always that “Honda became big through races” and participated at F1 as an engine supplier. This is still the “Honda spirit” implemented by late Mr Honda’s motto.

In Europe, F1 definitely is a brand name and to promote their business, it is worthwhile for car manufacturers to keep entering every race. It must be getting harder financially even when they consider the benefits the races bring them.

About this withdrawal, Honda’s chief director Mr Fukui said to the media that he and his company tried to prevent further damage by acting quickly to this downturn in the marketplace but now we need more efficient reallocation of our management resources”. The car industry is facing the harshest financial background ever because of the slower growth in new car sales and high Yen after the world-wide financial crisis. Honda already decided to reduce the numbers of the new cars produced by 140,000. In their UK factory, they are closing the factory for 2 months from February next year and downsizing in the UK and other countries.

I wonder what Toyota is going to do about F1.


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