#27 - The Wrong White Knight

I think even Ian Fleming would have struggled to construct a more convoluted cliff hanger; The protagonist enters at the 11th hour saving the floundering company from almost certain demise, gobbling up a bunch of equity at all-time lows and injecting themselves onto the board in the process……and they say not all super heroes’ wear capes. Well that is exactly what a consortium led by Canadian billionaire Lawrence Stroll has done for besieged Aston Martin. The consortium, which plans to invest £182mm in return for a 16.7% equity stake and making Stroll executive chairman on the board is part of a £500mm planned capital raise for Aston of which the additional £318mm will be found via an underwritten rights issues.

It’s scintillating stuff and a deal struck on the eve of our Brexit departure highlights that the UK is very much open for business again to global investors. That said, while it’s easy to think that the bandaid Stroll has brought to the party is enough to save the company, I’m afraid it’s going to take a lot more than just £500mm and an F1 team to save the crown jewel of Gaydon.

In my eyes, the problem is systemically down to the fact that Aston Martin is an analogue competitor in an increasingly digital race that is becoming exponentially harder for them to win. Aston has always prided themselves on the handcrafted/coachwork nature of the cars they build and throughout the majority of the 20th Century that worked moderately well for them. But by the 80s, the Germans and Japanese had ushered in a new era of efficiency in production, design and performance. You bought a Porsche 911 not only because it was fast and looked good but because the build quality was exceptional and the car was competitively priced. Even James Bond made the switch to a BMW Z3……a Z3 Pierce!!

And that in my opinion is where the beginning of the end for Aston really started. While the rest of their competitors were moving with the times to be at the forefront of technological innovation, Aston Martin sat idle; blissfully content, full of self-belief for their hand built cars and unwilling to move with the herd……..until it was too late.    

It was only in 2012 when Italian PE fund Investindustrial bought into the business that the backward and archaic mind-set which had hung over Aston since its conception (and through its plethora of previous owners) changed. Following a £150mm capital injection they set about modernising the manufacturer. Deals were struck with Daimler to secure Mercedes AMG power units for their next generation models, they appointed former Nissan big wig Andy Palmer as CEO and built a state of the art new facility in St Athan which would not only act as the home for Aston’s first ever SUV but also the reintroduction of the “Lagonda” brand as their luxury EV offering. All sounds very promising….so much so that at the end of 2018 they were able to float the business publically.

However, if my economics teacher taught me anything it was that hopes and dreams don’t pay the bills, cash flows do. So while a flurry of impressive investor presentations and PowerPoints can convince people to give you money, if you can’t follow through with tangible financial results, mission failed. And that is where we find Aston right now.

The new Vantage model, although a vast modernisation over the previous generation car, has disappointed with underwhelming sales figures in a horrendously competitive market, the DBX is a decade too late and the company is sitting on a pile of debt that in my opinion, is unserviceable and too highly geared to the success of an SUV which as I mentioned earlier, is akin to coming to market with their first smart phone and trying to take on Apple.

So now Aston has another involved party who is a hugely successful businessman in his own right and very passionate about the industry. The problem however remains that Aston Martin still lack any real competitive edge in the modern day auto market. Their current model offering is inferior and not priced competitively enough while their most obvious glimmer of a green shoot for the future, the high end luxury EV market, has just been put on hold for at least 5 years to focus on cost cutting measures.

To me the entry of the Stroll consortium signals the final nail in the coffin for the once brilliant Aston Martin. Delaying entry into the EV market (especially given the already substantial expenditure) is a mistake of biblical proportions for the company. Instead, an Aston Martin branded F1 car will prop up the bottom of the grid for a couple of seasons while the heir to the Stroll empire enjoys the jet set life….meanwhile a British institution is sunk.

I’m honestly gutted for Aston as I truly believed that they were so close to turning it around but sometimes fate has other plans….

Happy Motoring,

Greg