The decision by BMW comes at a time when automakers worldwide are reporting lower sales amid the global economic slowdown. Consumers are reluctant to spend on big-ticket items, forcing companies to trim costs.
Georg Stuerzer, an automotive analyst with UniCredit in Munich who follows BMW, told the Associated Press that he estimated the company was spending approximately $282 million (euro200 million) a year on its Formula One involvement.
Draeger said it was not yet clear if the decision would result in job losses in Munich and Hinwil, Switzerland. The operation employs about 700 workers.
"Since we only made this decision yesterday, we cannot provide any more precise information," he said. "We will develop and assess various scenarios and do our best to find a solution for the employees in Hinwil and the staff members involved in the Formula One project in Munich."
BMW's withdrawal will prompt speculation about the future of drivers Robert Kubica and Nick Heidfeld. Kubica will be in strong demand for next season and will likely remain involved in F1.
The future for Heidfeld is less certain, though his long stint in the sport could make him an attractive option for the new entrant teams, who will be looking for an experienced driver next season.
BMW achieved eight Formula One victories from 1982 to 1985 as an engine supplier to Brabham. In 1983, Brabham won the drivers' championship with Nelson Piquet. The last win with the famed turbo engine followed with Benetton in 1986.
After quitting the series in 1987, BMW returned to F1 as engine supplier to the Williams team in 2000 and scored 10 victories until 2005, when it took over the Sauber team.
In its debut season in 2006, BMW Sauber wound up fifth in the constructors' championship. In 2007, the German-Swiss team came in second after McLaren-Mercedes' exclusion from the points standings.
The 2008 season saw the team in the hunt for the world championship until the end of the season, winding up third. Kubica had the only GP victory in Canada.
So far, the BMW Sauber F1 Team has taken one pole position (Kubica in Bahrain in 2008) and 16 podium finishes. It is eighth in the constructors' standings this season.