Indeed, Honda’s exit seemed like a huge blow to the sport at the end of last year. But it was only the beginning. Swiss bank Credit Suisse pulled its sponsorship of the BMW team. ING - the title sponsor of Renault as well as three of the races - followed by slashing millions from its F1 sponsorship.
All the teams have been hit. But none of the teams has been hit as badly as Williams, which has lost sponsorship from Bauger, Lenovo and Brazilian oil company Petrobras.
To make matters worse, its biggest backer is beleaguered bank RBS, which recently forecast an annual loss of £28 billion (about $42 billion) - the biggest in UK corporate history. And with just six weeks to go until the season’s first race in Melbourne, there’s little time to add new sponsors to the car’s livery.
It doesn’t help that the many of the F1 sponsors are from financial services - a sector that, despite its volatility, still brings in $100 million to F1 teams -and have taken a hit themselves.
It’s anyone’s guess just how bad the financial crisis will get and its impact on global brands supporting the sport. That’s perhaps the big problem for the F1, which can only be described as a luxury investment. The question now isn’t whether the sport will be impacted by the financial crisis, but rather how much damage will be done.
A major issue is Formula One’s high profile; large companies (especially those bailed out by public money) can’t be seen to be making staff cutbacks on the one hand, and pouring money into a luxury sport with the other.
The good news is that many of the big sponsors are tied into long-term deals, which should offer some insulation to teams - that’s assuming these companies stay in business.
The majority of sponsors also appear to be reviewing their options, rather than reviewing their deals. Formula One should use this as an opportunity to take steps so that big brands can justify their involvement with the sport.
How well it pulls through this crisis remains to be seen. But let’s not forget Formula One racing has been here before, albeit not on this scale, and survived. It was during the economic recession in the 90s that sponsorship became a legitimate part of the sport’s marketing mix.
Some years on, the talk of bans on tobacco advertising suggested that there would be less money to go around. But, in 2007, millions in new sponsorships were signed after the tobacco ban saw a wave of new brands - led by banking giants Santander and ING - enter the sport.
Since the tobacco days, there has been no real dominance by a single sector. And, given its international audiences and reach, F1 sponsorship has become an effective part of corporate marketing strategy for global brands.
Interestingly, the downturn could drive Asian brands - the likes of India’s Tata (one of the few carmakers globally to boast balance sheets healthy enough to sponsor Ferrari) as well as Chinese brands such as Haier - to realise their global ambitions through exposure in Formula One.
Even so, in this current climate, there are going to be fewer deals on the table, and Formula One racing must take the opportunity to ensure its own survival.
One thing’s certain, Formula One racing, which over the years has become less economically sustainable, no longer has the right to exist in a world of its own. It will have to continue to cut costs and be both prudent and realistic going forward. Ironically, the economic downturn could prove to be healthy for the sport.
