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Honda Motor Co. CEO Takeo Fukui, right, cited troubles in the auto industry as a reason for pulling out of Formula One. ((Itsuo Inouye/Associated Press))

Japanese automaker Honda has pulled out of Formula One racing, citing a slowdown in the global economy.

"We have come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season of participation," Honda CEO Takeo Fukui said at a news conference in Tokyo on Friday morning.

Fukui said the deteriorating world economic conditions led to the decision.

"This difficult decision was made in light of the quickly deteriorating operating environment facing the global auto industry brought on by the subprime [mortgages] problem in the United States, the deepening credit crises and the sudden contraction of the world economies."

He said the company would be willing to sell the team.

"We will enter into consultation with the associates of the Honda racing team and its engine supplier Honda Racing Development regarding the future of the two companies. This will include offering the team for sale."

A pullout by one of the world's biggest car manufacturers will send shock waves through F1, which could start the season with only 18 cars on the grid. Japanese team Super Aguri, which was backed by Honda, pulled out of F1 this year.

Starts down under

The season opens at the Australian Grand Prix on March 29.

On Thursday, Honda Motor Co. announced it is cutting jobs in Britain and Japan because of plunging vehicle demand. It has already reduced its annual production of consumer cars by more than 140,000 worldwide.

Honda is also cutting 760 temporary workers at four plants, including one motorcycle plant, or nearly 18 per cent of its Japan temporary work force of 4,300, this month and next month in response to nose-diving demand in the U.S. and other key markets, said company spokesman Hideto Maehara.

The Honda team, with an operational budget of around $294 US million, finished ninth in the constructors' standings last season with Jenson Button 18th out of 20 drivers with three points. Rubens Barichello, who was dropped by the team going into 2009, was 14th with the remaining points.

Honda, which originally entered F1 as a constructor for a stint

in the 1960s before returning as an engine supplier in the 1980s, bought out BAR Racing in 2005.

FIA president Max Mosley had described F1's combined spending of $1.6 billion in 2008 as "unsustainable," saying the teams were relying too heavily on the goodwill of rich individuals and corporate sponsors.

Mosley has vowed to push through cost-cutting measures by 2010 in a bid to make the sport more feasible.

The governing body has already reached a deal with F1 to cap the cost of engines supplied to smaller teams as part of a plan to save money during the global financial crisis.

Over recent months, the 10 teams have been meeting regularly with F1 boss Bernie Ecclestone to discuss reducing costs, including streamlining engines.

In October, the International Automobile Federation announced that Formula One's  Canadian Grand Prix, which had been set for next June, would be dropped from the schedule.