Honda has pulled out of Formula One racing, the Japanese automaker saying Friday it needs to focus on its core business amid the slowdown in the global economy.

Honda CEO Takeo Fukui told a packed news conference the company was unable to continue backing an F1 team because of the tougher economic times. He said Honda was open to selling the team.

"The automobile industry is experiencing very difficult times," Fukui said. "Demand started to dry up in November and we can't see the light at the end of the tunnel."

The withdrawal of 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 earlier in the 2008 season.

The 2009 season opens March 29 at the Australian Grand Prix.

The latest move reflects the huge difficulties faced by auto makers around the world, including the Big Three — General Motors, Ford and Chrysler — in the United States, where desperate automakers are seeking a $34 billion bailout to stay afloat.

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 percent 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, company spokesman Hideto Maehara said.

"It's understandable if you look at the current situation around the auto industry," said auto analyst Koji Endo at Credit Suisse. "Ford, GM, and Chrysler are all facing extremely tough times. I would not be surprised if Japanese auto manufacturers start losing money in 2009, which would be the first time since World War II. Given this situation, it may be a good idea for them to pull out of auto racing."

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Speculation of the announcement started late Thursday in England, where the F1 team is based. On Friday, Japanese politicians expressed regret over the decision.

"It really shows that the auto industry, which has been leading the Japanese economy, is facing severe economic conditions," added Economy, Trade and Industry Minster Toshihiro Nikai.

The Honda team, with an operational budget of around $294 million, finished next-to-last in ninth place in the F1 constructors' standings last season. 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.

Its move Friday underscored deeper problems in the popular but expensive sport.

FIA president Max Mosley had described F1's combined $1.6 billion spending 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 to make the sport more affordable for teams.

The auto racing world governing body has already reached a deal with F1 to cap the cost of engines supplied to smaller teams.

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

Honda's announcement also prompted fears other major manufacturers could follow suit.

Toyota Motor Corp., Honda's main rival in Japan, has also announced staff cutbacks, but has denied rumors it might quit F1. The Toyota F1 team finished 5th in the season standings.