Toyota Quits Formula One as Series Returns to Less Lavish Past
Nov. 4 (Bloomberg) -- Toyota Motor Corp. today became thethird carmaker in a year to quit Formula One, removing one ofthe biggest spenders from the racing series as it reverts to aless lavish past, analysts said.
Toyota, pulling out to cut costs estimated at more than$500 million a year amid record losses, is following Honda MotorCo. and Bayerische Motoren Werke AG from the sport owned byLondon-based buyout firm CVC Capital Partners Ltd. BridgestoneCorp. said yesterday it will leave as tire supplier to theseries after 2010.
Formula One’s new lower profile shouldn’t have a directeffect on CVC’s $1 billion revenue, which comes mainly fromtelevision rights and hosting fees, according to Mark Jenkins, aprofessor of business strategy at the U.K.’s CranfieldUniversity who has published research on the sport.
“It’s not a disaster” for the sport, Jenkins said. “It’sreturning to how it was in the 1980s and 1990s with moreselective spending by carmakers.”
Toyota’s withdrawal leaves Ferrari SpA, Daimler AG’sMercedes-Benz and Renault SA as car constructors next season aswell as Proton Holdings Bhd.’s Lotus Cars Ltd, which isreturning after a 15-year absence as one of at least four newsmaller teams. The season starts in March. Lotus’ team will havea budget of as little as 55 million pounds ($90.9 million), teamchief Tony Fernandes said Sept. 25.
Formula One’s present structure is “crumbling,” Mick deHaas, an auto racing sponsorship consultant based in Baarn, theNetherlands who worked in the series since the 1980s, said bytelephone. Team sponsors including Credit Suisse AG quit lastyear, slashing demand for $3,940 for race-day VIP tickets thatinclude unlimited champagne.
Tea Tables
In the 1980s, teams employed fewer staff and sponsors spentless on entertaining clients. Typically, guests were served teaon foldaway tables, said Lynden Swainston, managing director ofLSA Ltd., a London-based travel company, who worked in FormulaOne hospitality since then.
“I can’t see any big manufacturers or sponsors comingin,” De Haas said. “It will be interesting to see how thingsturn out next season.”
The move may save Toyota 50 billion yen ($553 million) ayear, according to Koji Endo, managing director of AdvancedResearch Japan, a Tokyo-based equity research firm.
Toyota’s Core
“Toyota is focusing on its core business,” Endo said.
Toyota, which announces second-quarter results tomorrow, inAugust predicted a net loss of 450 billion yen for the yearending March 31. Company spokeswoman Ririko Takeuchi earlierdeclined to estimate the cost of participating in the racingchampionship.
“Formula is in good enough shape to deal with this,” saidXander Heijnen, a director of CNC Communications in Munich whohas advised carmakers on the series. “Ferrari and Mercedes havebeen there for the longest and they prove it can be doneeffectively.”
Even so, there are doubts about the financial backing ofsome of the new teams, Heijnen said. A new U.S. team, Spain’sCampos Grand Prix, the U.K.’s Manor Grand Prix and Lotus arescheduled to join next season. Sauber, formerly BMW, may getToyota’s berth.
Toyota didn’t win a race since entering its team in 2002,finishing fifth in this year’s constructors’ championship withdrivers Jarno Trulli and Timo Glock.
“They made probably the single largest capital investmentin F-1 ever,” Jenkins said in an e-mail. “It seems the ‘Toyotaway’ did not work in F-1.”
To contact the reporter on this story:Alex Duff in Madrid ataduff4@bloomberg.net.
Last Updated: November 4, 2009 07:28 ESTSource: Bloomberg
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