TOKYO -- Toyota Motor Corp. pulled out of Formal One racing today, as it battles a second straight year of red ink and races to cut more than $9 billion in costs this year.

Toyota follows Japanese rival Honda Motor Co. in quitting the sport. Honda announced at the end of last year that it would no longer race, projecting it could save nearly $1 billion.

Toyota didn't say how much it expected to save by dropping out, though outsiders have estimated its annual F1 budget at around $300 million. But it said in a statement it had to withdraw “reflecting on the current severe economic realities.”

Toyota will pull out at the end of the 2009 season, it said.

The world's largest automaker is forecasting a $7.85 billion operating loss in the fiscal year ending March 31, 2010. And it is targeting $9.4 billion in cost cuts during that period. It is scheduled to report second-quarter results tomorrow.

“This was a difficult but ultimately unavoidable decision,” President Akio Toyoda told a news conference in Tokyo today. “Since last year as the economic climate worsened we have been struggling with the question of whether to continue in F1.

“We stressed our commitment to F1 last year, and we have done our best over the past season, but it was no longer viable to continue,” said Toyoda, himself an avid racing fan.

‘Deepest apologies'

“We are pulling out of Formula One completely. I offer my deepest apologies to Toyota's many fans for not being able to achieve the results we had targeted.”

Toyota raced in eight seasons since entering Formula One in 2002, but it exits without a single win. The team's cars finished second in two of the last four races of this year.

Toyota said it drew upon its racing experience in developing such production vehicles as the LF-A super sports car, which debuted at last month's Tokyo Motor Show.

Only three manufacturers remain in Formula One: Ferrari, Mercedes and Renault.

Toyota's pullout comes 11 days before a much-anticipated meeting at which the team's budget was to be discussed.

Japanese departures

The departure continues the drain of Japanese companies from motorsports, which has seen Subaru-maker Fuji Heavy Industries Ltd. and Suzuki Motor Corp. withdraw from the world rallying championship.

Japanese tiremaker Bridgestone Corp. announced on Monday it would not renew its supply contract with Formula One after the 2010 season.

In July, Japan's Fuji International Speedway circuit, owned by Toyota, surrendered hosting rights for the Japanese Grand Prix in 2010 and beyond to reduce costs amid the global economic downturn.

Toyota signed an agreement earlier this year committing to F1 until at least 2012, so its pullout could also have legal ramifications.

Toyota did not comment on any possible attempt to sell the F1 team. But Toyota said in its statement that it hopes “to do its best to find a solution for those parties who will be affected by any inconvenience this decision may cause.”

Possible impediments to sale

Toyota's F1 operations are based within a larger site owned by the company, which could make it much harder to sell as an independent entity.

The Cologne, Germany, facility is likely too large for a purchaser who would want to downsize and cut staffing levels, as happened when Honda's F1 team was passed on via a management buyout to Ross Brawn. It also is not clear whether an engine-supply arrangement would be made available to any buyer, although this would seem unlikely.

If the team does not continue, there could be legal action against Toyota from the FIA or Bernie Ecclestone, since the team had made a three-year commitment when it signed the Concorde Agreement in July. BMW chose not to do so, having decided to pull out. But that meant the Sauber team purchaser Qadbak had to start as a fresh entity and has been waiting on the reserve list for one of the other 13 teams to drop out.

Toyota could scale down the motorsports side of the Cologne operation and operate a sports car, rally or touring-car program. It last competed at Le Mans in 1999.

AutoWeek motorsports correspondent Adam Cooper and Reuters contributed to this report

PRESS RELEASE: Toyota statement on Formula One

“Toyota Motor Corp., which had viewed its participation in F1 as contributing to the prosperity of automotive culture, remained dedicated to competing at the pinnacle of motor sports, even in the face of the abrupt economic changes that started last year. However, when considering TMC’s motor sports activities next year and beyond from a comprehensive midterm viewpoint reflecting the current severe economic realities, TMC decided to withdraw from F1.

“TMC leaves F1 having compiled 13 podium and 87 point finishes over eight challenging seasons since 2002 with Panasonic Toyota Racing, a full-constructor team. It views its time in F1--in which teams put forth their best efforts to fiercely compete at racing’s highest level--as an irreplaceable experience that provided an opportunity to develop both human resources and its R&D operations. TMC expresses its deepest appreciation to its F1 fans and others for their warm support.

“TMC also wants to express its heartfelt gratitude to all Panasonic Toyota Racing drivers to date and to all Toyota Motorsport GmbH employees who have helped make the team’s achievements possible. TMC intends to do its best to find a solution for those parties who will be affected by any inconvenience this decision may cause.

“Drawing on its experience in F1 and other motor sports, TMC intends to move forward in developing exciting production vehicles, such as the Lexus ‘LFA’ supercar and compact rear-wheel-drive sports cars. In motor sports, it will not only race in various categories, but will also actively contribute to further development of motor sports by supporting grassroots races and planning events in which it is easy for people to participate.”