[Team] Honda's selling ... but who's buying? [HUGE MERGE]

[Rockmunky]

Works for me...

[Asa]

How about the Dubai company that wanted to buy a F1 team? I guess at the moment the only money you can find is in the Middle East. They are still pumping oil from the ground.

[juicy sushi]

cannot accomodate something more sensible? i think this move is completely sensible. in accounting it's called "sunk cost", and in the current climate it makes total sense. sad for f1, very sad for the staff in brackley, but it's completely sensible for honda...

[mountainstar]

No surprise. For the 400 million you can do a lot of ground level marketing and motorsport such as touring cars and sports cars that are more bang for the buck and probably do more to sell cars. Basically for all that spend they were not getting any benefits for it.

I've heard strong rumors from people in the know that the irl program in the USA is going bye bye as well.

[perfectly_frank]

Does anyone see a potential angle for the Andretti family to buy the Honda programme? Marco does intend to race in F1 & Michael is very friendly with Honda . . .

-file under wild theories-

[neilap]

What a blow...

I have little reason to get up early to watch the races anymore.
Oh well, Honda has to do what is best for the business.

How is it that a week ago Honda was talking up their chances for next season, Honda was testing new drivers? JB was talking about winning as opposed to just getting podiums... Then out of nowhere this...
There was no speak of doom and gloom, there was no yelling for cost cutting. Honda was not, ala Renault, moaning about the financial dilemma that F1 is in. In fact Ross Brawn suggested that Honda had a huge budget and that other teams may not be able to sustain development in the manner Honda can. All these were stated in the post season, now we hear that Honda is pulling out... again.
I'm more than disappointed.
If Honda ever decides to grace us with their presence in F1 again, the better 'come proper' and not waste our time and their money.

[EERO]

I don't know whether to post he words "It's started" or "it's over".

It has "started" because the given the state of the world's economy, there is no way that these Multi-National corporations can continue to justify the expense of F1 when they are hemorrhaging jobs and capital. Honda has had limited success for all the the expense. Whither goes Honda, so goes TOYOTA. TOYOTA have had even less success-and with honda gone, I hve little doubt that they will be chasing Honda out the exit.

STR's fate has us all wondering which end is up. Mateschitz is involved with something that includes the Ferrari engines and Vettel, but I doubt we'll see two Red Bull Teams next year-once the momentum begins, they won't look like the only pessimists for pulling one of the teams.

It's "over" because the days of huge budgets and factory teams will come to an end. The F1 circus will come to more closely resemble the 1970's, with many small constructors... and Ferrari...and Bernie will realize that the financial fan base of F1 which is centered in Europe and which has recently been forsaken will not forgive him-the collapse will be nearly total.

The King is Dead, long Live the King!

A new leaner F1, familiar to those of us with a long memory will re-assert itself.

[gregw]

I'm confident the roots of this decision are in the perilous state of the auto industry and not the poor performance of Honda F1.

Some thoughts:

- the doomsday scenario is a triple whammy where: auto makers can't make enough profit to sustain their own vehicle financing models; can't reinsure against customer default; and lower net demand. If this were to happen in 2009/10 then all bets are off.

- worldwide about 85% of vehicles are purchased with credit finance. In countries like the US and UK, it's closer to 95%. In a world of restricted finance, this model won't work.

- auto makers provide finance and leasing direct e.g. Ford, BMW and Daimler or via third parties like GMAC, General Electric in the case of GM.

- those financing directly like BMW face massive write-downs on depreciation and customer defaults. In BMW's case this will amount to more than EUR 1bn in 2008. This eats in to the cash position. Those with cash will survive. Those without will struggle.

- recent accounting changes require companies to value assets at the current fair value rather than at the end of the term. In the case of auto loans this means any losses must be declared now, not in 24 or 36 months.

- as profits fall - and despite a fall in demand - makers will struggle to provide customer finance and maintain adequate liquidity.

- vehicle financing is under written by the use of credit default swaps, the market for which has all but dried up. No one wants to re-insure any debt, let alone car loans.

- the shocking UK statistic that there will be no new net lending in the housing market is a very bad sign. Car loans are secured against individuals and depreciating assets. Who is going to finance car loans when they won't finance prime debt like UK mortgages.

- there is a great risk that the recession will be prolonged. Once the global banking crisis is resolved, consumers will still be burdened by significant household debt in key markets like the US, reducing demand.

A couple of issues that could be specific to Honda F1.

- Honda benefited from a monetary policy scheme in Japan. It pumped massive amounts of cash in to Japanese banks, which in turn was lent to Japanese companies at exceptionally low rates. There is a very real prospect 'quantitative easing' bankrolled Honda's F1 programme.

- in the last 52 weeks sterling has fallen 40.68% against the Yen. I don't know much about Honda F1's operations, but any costs in Yen or USD would have gone up significantly since last year's budget round. At GBP 16-20mio an engine, add 40% to the cost of each one, and you can imagine all to easily how much the budget would need to rise. I don't know if Honda F1 is hedging currency.

The central issue is that the business model employed by almost all auto companies is no longer viable. Honda is taking swift action to ensure it will survive and prosper in the future. It won't be the last auto maker to trim the marketing budget.

Disclaimer. My days are spent managing a hedge fund. I like to think I'm one of the more astute ones, but in any case our reputation isn't to great right now. Your more than welcome to take what I've said with a pinch of salt

[gregw]

It probably deserves a separate thread, but I can't help thinking, Honda F1's demise will strengthen Max Mosley's position within the sport, and all that implies.

[Kiwi3]

I also wonder who is next. One of the main reasons Toyota joined was to compete against Honda wasn't it? Also there is not much point for Red Bull in running two teams...

16 car F1 won't look good at all...hopefully this will all shake out and we can return to 1990 spec F1 with racing teams instead of manufacturers competing, but with F1 somehow still maintaining relevance to the wider picture by playing a role in environmental technology R&D.

[Kiwi3]

well grandprix.com are pointing out that Nick Fry is mates with Martin Leach, who was fronting the Dubai thing, and the Middle East is perhaps the area that is hurting the least from the financial crisis and are looking for investment bargains + means to promote tourism.

[gregw]

Originally Posted by perfectly_frank

Does anyone see a potential angle for the Andretti family to buy the Honda programme? Marco does intend to race in F1 & Michael is very friendly with Honda . . .
-file under wild theories-

Would you give Marco a Super License Even BCE would need a large cheque to do that!

[gregw]

Originally Posted by Kiwi3

well grandprix.com are pointing out that Nick Fry is mates with Martin Leach, who was fronting the Dubai thing, and the Middle East is perhaps the area that is hurting the least from the financial crisis and are looking for investment bargains + means to promote tourism.

Up to a point. If oil prices to continue to slide in the face of reduced demand, Middle Eastern investors will be more cautious as the future becomes increasingly hard to predict.

[mountainstar]

They recalculated the numbers the other day in the USA. Last year almost 16 million new cars sold. This year it looks like right around 10 million. You are going to see the whole car industry get totally rearranged because of this.

Don't be surprised if Toyota bails next.

[Canada ALMS fan]

http://translate.google.com/translat...hl=en&ie=UTF-8

It's official!

[Skam85]

Schumacher/Brawn partnership rekindled in Schumacher F1 perhaps... with a Ferrari engine deal

[climb]

naaahh, I'd say the Dubai thingy is the most viable deal imo

[spectator22]

Listen in folks: G-L-O-B-A-L R-E-C-E-S-S-I-O-N. No buyer, no sponsors, no nothing. F1 is going to have to deal with the REAL WORLD out there for the first time in a long time. Will countries being ripped off $millions to host F1 GPs be entitled to a discount if the field falls below 20? Toyota next?

[Stefvh]

No need to translate, the news is at world.honda.com

[Andrew Kitson]

Cosworth to build the standard engine:
http://www.grandprix.com/ns/ns21023.html

[Dutton]

A race is a race until it drops below 12. IIRC, in that situation the teams are obliged to run 3 cars. I suspect the teams would be persuaded (read get given money) to run three if it dropped to 16, but that is just my hunch.

With Honda gone, I really wouldn't be surprised at all if Toyota exit stage left before the start of the season. If not then, then before 2010. Without Honda competing, well, it makes it a significantly easier call to make. Teams like FI are always on the brink of extinction. Red Bull and Torro Rosso could easily merge (or else TR simply die off).

I cannot see why any company/seriously-minted-person would be interested in buying these teams at the present time, with the possible exception of nationalised companies from countries where the governments don't have to worry about future elections. Even in those cases, I find it altogether more likely that those companies/governments are going to have more important things on their minds than funding/running an F1 team (recessions cause problems with or without elections).

We are currently looking at 18 cars for 2009. There is no doubt 16 is absolutely possible (arguably probable). Less than 16? I wouldn't be betting on it, but it is certainly not out of the question.

This kind of situation is always the dangerous side of heavy manufacturer/corporate domination of team ownership. It is great when times are good, but it can cause drastic issues when the times go bad (note the use of the word WHEN, not IF).

[Greenback]

What about David Richard's Prodrive and Aston Martin?

[Andrew Kitson]

The Cosworth announcement from the FIA might help a buyer?
http://www.grandprix.com/ns/ns21023.html

[Dutton]

He was only ever going to get involved when being a customer-car driven Mclaren B-team was on the table. As soon as the customer bit fell apart, he wasn't interested. He also let himself believe Max's claims of viable budgets of US$50M, and what not. It was also at a time when things were much rosier economically. I would say the chances of Prodrive getting involved would be 0.1%. I am giving the 0.1% on the basis I am not actually capable of seeing into the future, thus it is still technically sort of possible, but, really, it is just not going to happen.

As for the engine announcement, I now see they are going to let teams keep their own designs provided they "accept parity" with the standard engine. So it is take the spec unit as produced by the spec producer, build your own to identical specifications, or keep your own design but "accept parity". It looks like this thing is actually going ahead. Will the engine deal thing help with a new buyer? I don't think so. It could be enough to prevent a team leaving, but I doubt it would entice new entries - it isn't like it makes F1 suddenly cheap (particularly where success is concerned).

[Stefvh]

Especially with that Cosworth engine only beginning in 2010.