Honda said on Friday that it was pulling out of Formula One due to the global financial crisis, raising further concerns over the notoriously expensive sport's future.
Honda Motor president Takeo Fukui made the announcement at an emotional press conference, repeatedly apologising to fans, staff, drivers and F1 authorities.
"Honda Motor Co. has come to the conclusion that we will withdraw from all Formula One activities, making 2008 the last season for participation," Fukui said.
"This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the subprime problem in the United States, the deepening credit crisis and the sudden contraction of the world economies," he added.
Honda has been involved with F1 since 1964 and has clocked up three wins, including Jenson Button's in Hungary in 2006.
The team finished ninth in the constructors championship this season with 14 points. Veteran driver Rubens Barrichello achieved the team's best result with a third-place finish at Silverstone.
Honda Motor also supplied engines and other technical support to Formula One team Super Aguri, which called it quits due to financial problems in May.
Formula One events are also feeling the pinch with this year's Australian Grand Prix going 27 million dollars into the red and France axing its race over money worries.
Shanghai organisers recently cast doubt on the future of the Chinese Grand Prix but then retracted their remarks.
Max Mosley, the head of motorsport's world governing body, the FIA, has urged teams to come up with cost-cutting proposals in the face of the global financial downturn, which has hit automakers hard.
"It had become apparent, long before the present economic difficulties, that Formula One was unsustainable," Mosley said in October.
Honda, Japan's second largest automaker, is reducing production and cutting hundreds of job cuts in response to slumping car sales.
Japanese manufacturers have expanded rapidly in recent years to meet brisk demand for their smaller, fuel-efficient cars, but they have not been immune to the financial crisis, even if they are in better shape than their US rivals.