UPDATE 1-Motor racing-Honda to pull out of Formula One

(Adds details, byline, quotes)

By Alan Baldwin

LONDON, Dec 4 (Reuters) - Honda are pulling out of Formula One and will close their team down if no buyer is found by the end of the year, a senior source at a rival team told Reuters on Thursday.

"They have a month to find a buyer, otherwise they are closing the team," the source quoted Honda team bosses Ross Brawn and Nick Fry as telling a meeting of the Formula One Teams' Association (FOTA).

"It's very, very sad for Formula One to see a team with the heritage of Honda leaving the sport," added the source, adding it was no real surprise given the team "were running up costs to a level that were self-evidently unsustainable".

Another source said the staff were told they would be on three months' notice from January if no buyer was found. The season starts in Australia on March 29.

There was no official confirmation from the British-based team, whose staff were told in a meeting at the factory on Thursday evening.

However, a spokeswoman said there would be a statement from Honda Motor Corporation on Friday.

The departure of Japan's number two carmaker, with their sales and profits battered by the global financial crisis, has huge implications for the sport.

TIGHT TIME-FRAME

It would also leave Britain's Jenson Button without an immediate drive for 2009 -- although some teams have yet to confirm their lineups.

Brazilian Bruno Senna, the 25-year-old nephew of the late triple world champion Ayrton, had also been tipped to take the place of his veteran compatriot Rubens Barrichello at Honda next season.

Honda's exit will leave the $1 billion sport, dominated by carmakers, facing a depleted grid of just 18 cars if no buyer with deep pockets can be found in the extremely tight time frame available.

Formula One sources also fear that other major manufacturers, with their factory production suspended and thousands of staff laid off, could follow Honda's example.

Honda, along with Toyota, have been the big spenders in Formula One in recent years.