Business IdeasBMW quits Formula One at end of season after a decade
Bayerische Motoren Werke AG will quit Formula One in November, becoming the second carmaker in less than a year to withdraw from the auto racing series amid slumping sales.
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Formula One is becoming less important as BMW “places stronger focus on sustainability initiatives,” Chief Executive Officer Norbert Reithofer told a press conference in Munich today. The biggest luxury-car maker follows Honda Motor Co, which left in December. In June, teams agreed to scrap an energy-saving device to cut costs.
Munich-based BMW, which spends about $200 million on Formula One to market its brand, reported a 13 per cent drop in car sales in June, the slowest decline since October. The carmaker supplied engines to the Williams team for six years before buying its own team in 2005. In June, Formula One teams said they agreed in 2010 to scrap a device that diverts energy from braking into a power boost button because it’s too expensive. The Kinetic Energy Recovery Systems, or KERS, was introduced by ruling body Federation Internationale de l’Automobile to make the series more environmentally friendly.
The BMW team, which has about 700 staff in Munich and Hinwil, Switzerland, is withdrawing after months of friction between competitors and the FIA over rules. In June, BMW joined rivals including Ferrari SpA and Renault SA in threatening to set up their own series. Georg Stuerzer, an automotive analyst with UniCredit in Munich, estimated that BMW spends ¤200 million a year on Formula One and saving that money could add ¤1.50 to BMW’s share price by improving cash flow and earnings.
“As long as it doesn’t lead to a loss in pricing power, it’s a reasonable decision,” Stuerzer said. “If it doesn’t help brand image, then it’s too expensive.”
The BMW team finished third in last year’s constructors’ championship with 135 points behind Ferrari and McLaren. It managed eight points after 10 of 17 races this year as drivers Nick Heidfeld and Robert Kubica struggled to match championship pacesetters Brawn and Red Bull.