Business World

Saturday 17 August 2019

Sales pressures leave UK carmaker Aston Martin in need of a 007 rescue

Bond-ing experience: A motoring enthusiast examines an Aston Martin Rapide E electric vehicle(EV) during the media day for Shanghai auto show in Shanghai, China. Photo: Reuters
Bond-ing experience: A motoring enthusiast examines an Aston Martin Rapide E electric vehicle(EV) during the media day for Shanghai auto show in Shanghai, China. Photo: Reuters

If only James Bond could come to the rescue of Aston Martin, writes Lisa Jucca. The British maker of 007's legendary sports cars is struggling. With the future of the automotive industry in flux, once-reliable buyers of trophy assets like Volkswagen or Ford motors are no longer in the collecting business. Barring the vanity of a flush billionaire, or over-eager Chinese player, Aston Martin looks destined to continue skidding out on its own.

The company, worth $2.2bn (€2bn), is spinning its wheels. Boss Andy Palmer cut his goal for cars sold to dealers by some 11pc this year, torching a fifth of Aston Martin's stock price.

He also predicted adjusted ebitda margins of just 20pc, worse than a previously planned 24pc.

This puts in question the carmaker's promise when it went public less than a year ago to deliver margins greater than 30pc.

The gloomier outlook comes after a litany of disappointing earnings releases, question marks over the group's accounting practices, and a thwarted attempt to award managers an outsized pay package.

The shares trade almost 60pc below their October initial public offering price.

Aston Martin blamed difficult economic conditions in Europe and Britain for its current woes, which its arch-rival Ferrari has managed to sidestep.

Extricating Aston Martin, which is 34pc owned by Andrea Bonomi's turnaround fund Investindustrial, from the current situation will not be easy.

True, bigger carmakers sit on large cash piles. But they are also facing higher costs from developing new electric and self-driving vehicles, and a potential shift towards transportation as a service that could totally upend their businesses.

Even Daimler, which owns 4pc of Aston Martin and makes some of its engines, already owns upmarket brand Mercedes-Benz.

The British carmaker is too small to offer significant cost savings to a larger peer, and may just add unwelcome complexity.

Even after yesterday's slide, a £2bn (€2.2bn) equity price represents an unusually heavy lift for the odd Chinese or Arab billionaire.

That leaves Aston Martin in a Bond-like dilemma - trying to battle for share against other luxury marques like Ferrari and Lamborghini - and without Bond's fictional Quartermaster, or Q, to fashion an ingenious device to help it escape its precarious predicament.

Reuters

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