Max Mosley has warned that other manufacturers may follow Honda in quitting Formula One if costs are not reduced dramatically in the next two years.
The FIA president wants budgets to be slashed to just £30-40 million, between ten and 20 per cent of current levels by 2010, and fears more manufacturers may follow Honda out of F1 unless his target is reached.
"I had been expecting one of the major manufacturers to stop for some time, even before the current situation the costs were completely out of control," said Mosley when asked by autosport.com for his reaction to the Honda announcement.
"Now it is difficult to imagine how any manufacturer could stay in unless we make substantial reductions in costs."
Mosley believes there is little that can be done to bring costs down too much for next year, but reckons the sport can be put on a proper footing for 2010 - when plans to offer a cheap standard engine are in place.
He believes cost-cutting proposals put forward by FOTA are not yet good enough, but thinks that the situation can be sorted.
"The moment where we can make really massive reductions is from 2010, but we have to get through 2009 first.
"We need to have a radical revision of the whole thing - we have got to get the costs down not by 10 or 20 per cent, but down to 10 or 20 per cent of what they are now.
"I would expect a team to be able to run in the 30-40 million pound bracket. If we can do that, then a combination of what they get from television and central rights, and what they can get from sponsors, should make the teams viable without huge subsidies either from the car industry or billionaires. But without that, I don't really see where the money is coming from.
"We've got a complete programme we would like to put through, but we have to get the teams to agree to most of it. If we do that then the costs will come down to the point where the whole thing will be viable. If we don't do that, then I am not optimistic."
Mosley added that if his proposals are implemented, and budgets are slashed, then more traditional racing teams would be attracted back to Formula One and the sport would not be reliant on car manufacturers to fill its grid.
He plans to meet with the Formula One teams in the next few days to discuss future cost-saving plans.