Toyota (TM) Pull Out Of Formula One: The Death Of Car Racing's Profits

The three major car racing circuits–Formula One, NASCAR, and Indy Car–have built a multi-billion business. Formula 1 revenue, which includes sponsorships and broadcast fees, is estimated to be $3.9 billion, which is more per event than either the NFL or The Premier League of soccer clubs.

Toyota (NYSE:TM) has elected to pull out of Formula 1 because of cost considerations. The world’s largest car company has lost money for more than a year.

Reuters estimates that Toyota has spent $300 million per year on its Formula One campaign. Honda (NYSE:HMC) pulled its cars from the circuit earlier this year.

The Toyota retreat can be added to news that the Obama Administration has pressured Chevy and Dodge to pull out of the NASCAR racing series to save $250 million a year. The two companies have been pillars of NASCAR and there are no other auto firms with large enough budgets to replace them.

Revenue at the International Speedway Corp which operates a large number of race tracks that host major car races fell to $179 million in the third quarter compared to the same period a year ago when the company had sales of $213. Operating income dropped from $61 million to $16 million. The company said its outlook for the balance of the year is poor.

The car industry’s global problems will almost certainly mean major cutbacks in professional auto racing. It remains to be seen whether any of the big car companies recommit to the sport in 2010 or 2001. One of more of the circuits could disappear if that does not happen.

Douglas A. McIntyre