Wednesday, Dec 17, 2008

(Adds background, details, quotes.)

By Oliver Klaus

Of ZAWYA DOW JONES

DUBAI (Zawya Dow Jones)--Motorsport's top governing body is increasingly concerned that more teams will exit Formula One because of the sports $1.6 billion bill and fewer sponsors, according to a senior official from the body.

"I won't be shocked to see more teams in certain parts of the motor sport pulling away," the Fdration Internationale de l'Automobile's vice president Mohammad Bin Sulayem said in a news conference in Dubai Wednesday.

"If a sponsor pulls out, the team pulls out. End of story," he added.

Early this month Japanese auto giant Honda Motor Co. Ltd. (7267.TO) announced it was quitting Formula One racing as it cuts costs globally amid falling sales of its cars.

Asked about the future of the Honda F1 team, which is now on the market, Bin Sulayem said "there is a chance" for it to be bought from investors, coming "maybe from the Middle East, maybe from Europe."

Sulayem said that sponsors for Formula One were also under pressure and called for further cost reductions in the sport to help teams survive.

"Look at the sponsors of Formula One such as banks. Banks now are bleeding," he said. Banks are amongst the sport's biggest backers after tobacco advertising was prohibited.

Britain's second-largest financial institution, the Royal Bank of Scotland Group PLC (RBS.LN) sponsors the AT&T Williams F1 team, while Dutch banking group ING Groep N.V. (ING) is a sponsor of the ING Renault F1 team. Both banks have been hit heavily by the financial crisis and received cash injections from their respective governments.

Sulayem said cost cuts of up to 25% in 2010 after the agreed 30% cut in the coming F1 championship season would be needed to sustain the sport. In the 2008 season, the 11 Formula One teams spent a combined $1.6 billion.

BUDGET CUTS

The FIA, under the presidency of Max Mosley, at a meeting in Monaco last week agreed to cut the budgets of Formula One teams by at least 30% "to safeguard the future of the FIA Formula One World Championship" after Honda pulled out from the competition.

Measures introduced to meet this target include reducing engine costs, in-season testing and staff numbers. Formula One teams have agreed to use lower-cost, longer-lasting engines from 2009.

Bin Sulayem said cost savings would also have to come from expensive engines and costly aerodynamics tests in wind tunnels. Shorter races from 2010 may also be an option, he added.

However, more measures are set to be introduced from 2010 to cut budgets by "another 22-25%," Bin Sulayem, who was recently elected FIA vice president and the first Arab ever to gain a place on the World Motor Sport Council, said.

"In 14 months there will be a cut of over 55%. This, I believe, will save Formula One," Bin Sulayem, winner of 14 FIA Middle East Rally Championship titles and more than 60 international rallies, said.

Other motorsport disciplines have also been affected by worsening economic conditions. On Tuesday, Japan's Fuji Heavy Industries, the maker of Subaru cars, announced that it would withdraw from the world rally championship due to deteriorating economic conditions.

The crisis in Formula One and other motorsports comes at a time of slowing global car sales and the U.S. government's ongoing effort to work out arrangements for bailing out the Big Three Detroit carmakers, Ford Motor Co. (F), General Motors Corp. (GM) and Chrysler LLC.

-By Oliver Klaus, Dow Jones Newswires, +9714 364 4962 Oliver.Klaus@dowjones.com

Copyright (c) 2007 Dow Jones & Company, Inc.

(END) Dow Jones Newswires

17-12-08 1346GMT