BMW's Journey in Formula One


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BMW AG said it will leave Formula One motor racing at the end of the 2009 season, another sign of auto makers' growing difficulty in justifying the sport's high costs at a time when global auto sales are slumping.
Although a marginal sport in the U.S., Formula One has established itself as the pinnacle of international motor racing and attracts huge TV audiences in Europe, the Middle East and Asia. That has made it a big business, with sponsorship and television deals totaling billions of dollars.
BMW's Journey in Formula On

But the loss of a team with BMW's cachet could raise doubts about other major car makers' commitment to the sport, adding to woes that include declining attendance, internal power struggles and a poor environmental image. The news overshadowed Wednesday's announcement that seven-time Formula One world champion Michael Schumacher will make a comeback for the Ferrari team as a stand-in for injured driver Felipe Massa.
BMW's withdrawal follows that of Honda Motor Co. last year, and could increase pressure on other manufacturers, including Daimler AG's Mercedes-Benz unit, Toyota Motor Corp. and Renault SA, to reduce or end their involvement in Formula One.
"After Honda and BMW, the danger exists that others will pull out too," said Niki Lauda, an Austria racing legend and three-time Formula One world champion. "You need several competing manufacturers to create the marketing buzz. If one more manufacturer quits, the sport will really hit the brakes," he said.
Falling sales, poor racing results, and the mismatch between Formula One's gas-guzzling extravagance and BMW's quest for a greener image all played a role in the German auto maker's decision, company officials said.
BMW Chief Executive Norbert Reithofer said his company would use the money it spent on Formula One to promote the "sustainability and environmental compatibility" of its road cars.
The auto maker doesn't disclose its Formula One spending, but its two-car team has a budget of around $335 million this season, according to Formula Money, an annual study of the sport's finances.
BMW's global car sales are down by about 25% this year, forcing it to slash costs. In addition, the company's Formula One team has failed to live up to expectations that it could be a top contender this year.
While the recession batters auto sales, the cost of winning on the race track has soared, with top teams spending more than $400 million a year on technology and star drivers. Formula One's high-tech, single-seater cars zip around twisty tracks at speeds of up to 220 miles per hour.
The sport has also been rocked by rancor between its parent body, the Fédération Internationale de l'Automobile, and the competing teams over spending limits proposed by the FIA. A majority of teams threatened to leave and set up a rival race circuit before a compromise last month.
In addition, the recession and high ticket prices have led to empty grandstands at some races this year, while bad publicity over the private lives and political opinions of the sport's top administrators have hurt its image.
In April, Daimler's worker representatives called on the company to end its involvement in Formula One, where it is a major shareholder in the McLaren-Mercedes team. Like BMW, Daimler is hurting from weak car sales, including in the troubled U.S. market, and is trying to cut billions of euros of annual costs.
Daimler CEO Dieter Zetsche said Wednesday the company has no plans to follow BMW and leave Formula One, but that it has already trimmed its spending on the sport by 30% from last year.
A senior Toyota executive said the company has no intention of quitting. But the cost pressure that prompted Honda and BMW to quit also led Toyota to stop hosting Formula One races at the Fuji Speedway circuit, which Toyota owns.
A spokesman for Renault, whose Formula One team has struggled since winning back-to-back championships in 2005 and 2006, declined to comment on its team's future.
Managers at Renault have privately expressed doubt about whether the sport serves much purpose for a maker of small, inexpensive cars. When racing results are poor, the question mark grows, say people familiar with the company's thinking.
The commitment of the sport's most famous team, Ferrari, is less in doubt, since racing prowess has historically been essential to its image and road-car business.