Honda has shaken the motorsport world with a shock decision to withdraw from Formula One and sell its team. Around 800 employees here in England are expected to lose their jobs by the end of January, local media reported.

“We, Honda Motor, have come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season of participation,” president and CEO Takeo Fukui said in a statement.

“This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the sub-prime problem in the United States, the deepening credit crisis and the sudden contraction of the world economies.

“Honda must protect its core business activities and secure the long term as widespread uncertainties in the economies around the globe continue to mount.  A recovery is expected to take some time.”

“Not only sales of our automobiles, but also sales of motorcycles and power products nosedived at an accelerated speed in North America and around the world in October and November,” Fukui told Agence France-Presse (AFP) at a press conference in Tokyo today (5 December).

“This was absolutely beyond our imagination. We had absolutely no idea what was coming,” he said.

“If this situation continues for another year, the auto industry will be in a serious mess. We cannot do business with optimism alone. The situation can get worse,” Fukui said, adding that a rising yen has also battered Honda.

He told AFP: “We are reviewing all areas of our business. I have nothing today ready for an official announcement.

“We must ride out the crisis, find a way out, and survive. Not only that, we have to prepare ourselves for the new era so that we will have new products and technology ready to go,” he added.

Honda will renew focus on hybrid vehicles [a new Insight five-door hatchback is soon to go on sale], clean and small diesel engines, and cheap and fuel-efficient vehicles for emerging markets, AFP said.

“All of these are very urgent. I think we will be judged by where we will be five years from now,” Fukui said

Honda’s statement added: “Under these circumstances, Honda has taken swift and flexible measures to counter this sudden and expansive weakening of the marketplace in all business areas. However, in recognition of the need to optimise the allocation of management resources, including investment regarding the future, we have decided to withdraw from Formula One participation.

“We will enter into consultation with the associates of Honda Racing F1 Team and its engine supplier Honda Racing Development regarding the future of the two companies.  This will include offering the team for sale.”

A Honda Racing official told Sky News this morning that “two or three global players” had already expressed interest in buying the team. He added that staff were determined to have a Honda F1 car on the grid at the Melbourne Grand Prix early in 2009.

Honda, which began as a motorcycle maker before getting into cars in the 1960s, has participated in motorsport for decades, beginning with motorcycles, and entered Grand Prix racing in the 1960s.

In its “third era” of Formula One, from the 2000 season, it worked initially with the BAR team, jointly developing racing cars. From the 2006 season, it switched to running a 100% Honda-owned team.

“Surmounting many challenges, the Honda Team achieved a Grand Prix victory in 2006, enabling Honda to receive overwhelming support from Honda fans around the world that were looking forward to greater success,” the statement said.

“It, therefore, has been an extremely difficult decision for us to come to this conclusion without having been able to fully meet the expectations of our fans.”

Britain’s Times newspaper said the move dealt a huge symbolic blow to the company’s image and could plunge the sport into crisis. The paper noted that Fukui himself is a passionate fan of motor racing and he was visibly shaken as he made the announcement in Japan.

Analysts have said the pull-out could do significant damage to the company’s entire business model, according to the paper.

The decision leaves team drivers Jenson Button and Rubens Barrichello without cars for next season and means about 800 staff at the team’s headquarters in Brackley, Northamptonshire, near the famous Silverstone race track, face unemployment at the end of January. A Honda official has said that the staff would be paid for at least three months.

The F1 team has been costing GBP200m per year [Sky News said GBP300m] but Honda has always maintained that the money is worth it as motor sport participation at the highest level attracts the best engineers to the company, The Times said.

Honda investors told The Times that the company’s decision may have been based on the rising complaints from shareholders, who believe that the money lavished on F1 could be better deployed. Unlike rival Toyota, the team is self-funded rather than with help from sponsors.

The paper said the Honda team had finished second to bottom in the constructors’ championship this season and had scored no wins for several seasons.