Breaking News: Bridgestone quits F1!

In a shocking announcement, Bridgestone will not renew its contract to supply the Formula 1 series as its tire provider. Currently Bridgestone is the sole supplier of F1 as Michelin bowed out in 2007.

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The story can be found at Bloomberg:

Nov. 2 (Bloomberg) — Bridgestone Corp., the world’s largest tiremaker, will stop supplying tires for the Formula One racing championship series as it aims to cut costs and streamline research and development efforts.

The company won’t renew its current contract, set to expire at the end of the 2010 season, the Tokyo-based company said in a statement today. The company is the sole supplier of tires to F- 1 racing teams.

Bridgestone spent as much as $100 million a year on Formula One-related costs, according to the company. Honda Motor Co., Japan’s second-largest carmaker, and Bayerische Motoren Werke AG have also announced their withdrawal from the championship in the past year as the global recession cuts automobile sales.

The tiremaker said it will redirect its resources toward development of new technologies and strategic products.

Bridgestone forecasts net income will drop 42 percent to 6 billion yen ($67 million) in the year ending in December.

I don’t want to get reactionary but this is a big blow to F1 as Bridgestone has been a supplier for many years and the series is reliant on its technology, R&D and products. It seems Honda, BMW and now Bridgestone are finding commercial boss Bernie Ecclestone’s series too expensive to stomach and perhaps this will also give former FIA president Max Mosley even more to crow about when discussing cost-cutting measures in F1.

Currently Bridgestone USA is trading at 32.81 USD while the Japanese arm is trading at 1,475 JPY and that is at 21:30 hours. It will be interesting to see what, if any, impact this announcement will have on the markets today but currently the Japanese stock is down almost 4%.

The next question on most fans minds will be, “what about Michelin?”. Will they come back to F1? Well…according to their press release back in late 2007 when they announced their departure from the sport they said:

“Michelin has continually made its belief known that Formula One should, as motorsport’s cutting-edge discipline, be an arena where the most advanced technologies can do battle in the interest of motoring. In this respect, the changes in the Formula One rules to bring in a single-tyre supplier go completely against these principles. It is one more step towards standardizing a sport which should be practiced at the highest level of competition”

It seems they are not very keen on a single-source series and relish competition as a way to highlight their brand. I understand the thinking behind that statement as I agreed with them and was miffed by the regulation changes the FIA made regarding the tire technology and a single-source. While many may have been in anguish over the tire war in F1, I felt is was healthy for competition and was not popular with the anti-tire war folks. Including all the unfortunate people at the US Grand Prix in 2005.

Is there any easy way to define why the FIA decided to use a sole-source for tires in F1 starting in 2008? There were many anecdotal tales of controlling the speed and grip of F1 cars but in the end, this may have been a serious blow to the series. Will F1 show up in 2011 without tires? Of course not but it remains to be seen if Michelin have changed their mind on the sole-source idea or if there will be another manufacturer with the technology and capital to support a series as global and large as F1. Michelin has a history of being in and out of the sport so time will tell.

Goodyear also left F1 after it started to falter in the tire war and left the series in 1998 much to the dismay and surprise of many of the teams they supplied in F1. The thought of them coming back makes little sense but perhaps another company will see a need for the brand equity and reach F1 can give them. Maybe a struggling economy is in need as a clearly defined leader in tire technology. Then again at $100 million a year, maybe not.

Tokyo (November 2, 2009) – Bridgestone Corporation (Bridgestone) today announced that it will not enter into a new tire supply contract with the FIA Formula One World Championship (F1) series; the current contract is set to expire at the end of the 2010 season.

In addressing the impact of the continuing evolution of the business environment on its decision, the company focused on the need to redirect its resources towards the further intensive development of those innovative technologies and strategic products which support the company’s goals and further enhance the company’s reputation as a technology leader.

Over the years, the company has benefited directly from its involvement in Formula One racing. The lessons learned through Bridgestone’s successful participation have translated into innovations that can be applied to the design and manufacture of tires. In addition, its collaboration with F1 has contributed to increased brand awareness and the recognition of Bridgestone as a leader in the global tire industry. Having achieved these goals, Bridgestone is now poised to take its technological and brand building efforts to the next level.

Bridgestone is committed to supporting F1 and the series’ teams through the completion of the 2010 season. The company also expressed its sincere appreciation and gratitude to the management of Formula One, the F1 teams and support staff, and the F1 fans around the world for their enthusiasm and support for Bridgestone over the last 13 years.

Could it be possible that Bridgestone has discovered that a single-supplier series is not beneficial to a company when seeking to sell products? Perhaps Michelin had it right all this time? No one knows if they make a good tire because that’s the only tire. I think of NASCAR and Goodyear. To be honest, they take all the marketing space on cars and suits but when their tire sucks, they take the hit as well. So the upside is frequency of logo branding but no one takes their product that seriously as there is no competition to force them to prove superiority. Or…they just could be feeling the economic crunch like everyone else and decided to circle the wagons…probably more likely than my crackpot theory of re-discovering marketing 101.

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