Aston Martin investment talks with Stroll, Geely
Monday 13th January 2020
Aston Martin investment talks gather pace
Racing Point F1 team owner could sink £200m into brand as Geely mulls possible Lotus tie-up
In what's described as a "final effort" according to Automotive News, Aston is seeking investment from Lawrence Stroll - the Canadian owner of Racing Point Formula 1 team. This comes in addition to talks reportedly taking place with Geely, as Aston attempts to recover after its stock plummeted in value and a profit warning was issued last week.
It's rumoured that Stroll is willing to put up £200m as part of a capital increase by Aston Martin, primarily to fund production of the imminent DBX and reduce the company's debt burden. The company has already taken out a £120m loan, of course, and qualified for a subsequent £80m when it hit 1,400 orders for the SUV - although those sums come accompanied by interest rates of 12 and 15 respectively.
As for the Geely role, the Chinese firm sees potential in a tech-sharing agreement between Aston and Lotus. Apparently "preliminary discussions" have taken place, though Geely has thus far refused to comment. Additional reports are also suggesting that Contemporary Amprex Technology, a Chinese battery maker, might be interested, though there's been no word from them yet either. Of those owners with a significant stake already - Investindustrial and Adeem control more than 60 per cent - it's believed that the former will participate in a capital increase.
There has been a statement from Aston, which is unsurprisingly non-committal: "We remain in discussion with potential strategic investors in relation to building longer term relationships which may or may not involve an equity investment". Doesn't really say much, does it?
So, there's still much to be decided as far as this saga goes. That said, the matter is only growing more urgent, with reports that the firm's total outstanding debt might already extend beyond a billion pounds. With projects like the Rapide-E being cancelled, plus those like the Lagonda and mid-engined hypercars looking very far off, it seems action is required sooner rather than later.
Discussion
Feels a little like Aston have done Lotus under Bahar. Some quite big plans with lots of new models but questionable financials to actually achieve them.
Although the DBX does exist. Followed one into Calais. Which could be what makes the difference between pie in the sky and good business model.
Although the DBX does exist. Followed one into Calais. Which could be what makes the difference between pie in the sky and good business model.
Although I doubt it made much financial difference, those AM hyper cars seem a bit of a distraction. The future looks positive with a good range of cars and the new SUV though. I could see a tie up with Lotus working well for both companies, especially as Geely own Volvo.
£1bn of debt though potentially....
£1bn of debt though potentially....
AM's problem is that in 2018 its management team created an ambitious vision for the future in order to support a high price at the IPO in October of that year but the IPO didn't bring in any cash at all to the business - it all went to the existing shareholders (with some going in fees and management bonuses). AM's management were then in a very exposed position - they had committed to an ambitious growth strategy but had very limited funds available to deliver it. They might have succeeded if everything had gone well for them but they appear to have been caught out by a slow-down in certain markets (and probably by other less-visible things like cost-overuns, poor sales mix and other normal business factors. AM has survived (so far) by securing some very expensive debt but it appears that it is not enough and banks probably won't lend them any more, hence the the need for a dialogue with potential new investors such as Stroll and Geely. To bring in the cash they need to fund the tuned-down-but-still-ambitious growth plans they will have to issue and sell more shares which will dilute the value of the existing shares owned by current shareholders. It will be interesting to see how much new equity they can attract and what the equity value will be when the dust settles.
2 points for me.
1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
2) If you are so much in debt, and going cap in hand to find new investors, and taking out loans at 12% & 15%, why the hell are you spending Millions. Probably tens of millions on the Halo Valkyrie? Surely get the core product right and increase sales? Once making a profit, then splash out on a Halo model only a few people will get to see. Fewer get to own. And fewer still to ever get driven.
I'm sure the DBX will be a sales winner for them. But every car they've brought out recently, has been met with mixed reviews. Not brilliant enough to tempt those out of Porsche and Ferrari's. And always slower and heavier than their rivals.
Just a shame Mercedes didn't just but them lock stock and barrel. At least their management team could have run it properly.
1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
2) If you are so much in debt, and going cap in hand to find new investors, and taking out loans at 12% & 15%, why the hell are you spending Millions. Probably tens of millions on the Halo Valkyrie? Surely get the core product right and increase sales? Once making a profit, then splash out on a Halo model only a few people will get to see. Fewer get to own. And fewer still to ever get driven.
I'm sure the DBX will be a sales winner for them. But every car they've brought out recently, has been met with mixed reviews. Not brilliant enough to tempt those out of Porsche and Ferrari's. And always slower and heavier than their rivals.
Just a shame Mercedes didn't just but them lock stock and barrel. At least their management team could have run it properly.
[quote=wab172uk]2 points for me.
1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
I would say that China is a key market for Mercedes so the engine deal is unlikely to be a problem for them. They wold not want to trigger any kind of Chinese retaliation in the event of such a deal. Just a thought.
1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
I would say that China is a key market for Mercedes so the engine deal is unlikely to be a problem for them. They wold not want to trigger any kind of Chinese retaliation in the event of such a deal. Just a thought.
wab172uk said:
2 points for me.
1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
Given that Geely own something like 10% of Daimler and Geely and Mercedes have announced they’re working together on electric cars for China I’d guess it won’t be much of an issue. 1) Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very. So they then could pull out, or not renew their engine / gearbox deal. Then where does that leave Aston?
wab172uk said:
Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very.
3 points before answering your question:1. Geely owns 10% of Daimler.
2. BAIC (Mercedes' major partner in China) owns another 5% of Daimler.
3. Geely and Mercedes literally just announced their latest joint venture in China to develop and build electric vehicles under one joint owned company.
As far as I can see Mercedes (Daimler) is happier to do all sort of business with the Chinese than any other nationalities. Some people might think that's a mistake they are making. But, mind you Mercedes has been doing joint venture style of business with Chinese auto manufacturers in China since 1987. one of their current joint ventures in China with BAIC started in 1998 and still going strong, hence the 5% share sold to BAIC recently.
loveice said:
wab172uk said:
Just how happy will Mercedes be supplying their engines when the Chinese are heavily invested? I'm guessing not very.
3 points before answering your question:1. Geely owns 10% of Daimler.
2. BAIC (Mercedes' major partner in China) owns another 5% of Daimler.
3. Geely and Mercedes literally just announced their latest joint venture in China to develop and build electric vehicles under one joint owned company.
As far as I can see Mercedes (Daimler) is happier to do all sort of business with the Chinese than any other nationalities. Some people might think that's a mistake they are making. But, mind you Mercedes has been doing joint venture style of business with Chinese auto manufacturers in China since 1987. one of their current joint ventures in China with BAIC started in 1998 and still going strong, hence the 5% share sold to BAIC recently.
gazzathehutt said:
AM's problem is that in 2018 its management team created an ambitious vision for the future in order to support a high price at the IPO in October of that year but the IPO didn't bring in any cash at all to the business - it all went to the existing shareholders (with some going in fees and management bonuses).
did the ipo come after some restructuring where cash was taken out and AM saddled with loans?i didn't follow the AM ipo but thought some financial engineering took place.
As a brand, I'm a big fan of Aston Martin but..... Their lamp seems to have shone relatively briefly (in the big scheme of things) with the DB9 being an absolute gem of a design, along with the V8 /V12 Vantage of that era. Even the Vanquish at the time was enough of a brawny halo model in the range..
However, in relatively simplistic terms, they seem to have sat on their hands pretty much stretching the DB9 design way beyond its sell-by date, and then joined the SUV market way after it had already been saturated by every other premium brand.
And I have to hold my hands up and say, I think the new Vantage has missed the mark, being technically inferior to the comparable Merc AMG GT but missing the AM elegance to make up for it.
The DB11 is mostly very decent but in the current market i'm sure that alone isn't going to keep the accountants away from the Prozac.
PS - Regarding 'bashing' AM. I'm completely against giving a brand a kick for no reason but with AM I genuinely think they've made some very poor decisions in recent years and much of their struggle is self-inflicted.
However, in relatively simplistic terms, they seem to have sat on their hands pretty much stretching the DB9 design way beyond its sell-by date, and then joined the SUV market way after it had already been saturated by every other premium brand.
And I have to hold my hands up and say, I think the new Vantage has missed the mark, being technically inferior to the comparable Merc AMG GT but missing the AM elegance to make up for it.
The DB11 is mostly very decent but in the current market i'm sure that alone isn't going to keep the accountants away from the Prozac.
PS - Regarding 'bashing' AM. I'm completely against giving a brand a kick for no reason but with AM I genuinely think they've made some very poor decisions in recent years and much of their struggle is self-inflicted.
CABC said:
gazzathehutt said:
AM's problem is that in 2018 its management team created an ambitious vision for the future in order to support a high price at the IPO in October of that year but the IPO didn't bring in any cash at all to the business - it all went to the existing shareholders (with some going in fees and management bonuses).
did the ipo come after some restructuring where cash was taken out and AM saddled with loans?i didn't follow the AM ipo but thought some financial engineering took place.
No wonder they are in trouble. It's very sad.
Fire99 said:
As a brand, I'm a big fan of Aston Martin but..... Their lamp seems to have shone relatively briefly (in the big scheme of things) with the DB9 being an absolute gem of a design, along with the V8 /V12 Vantage of that era. Even the Vanquish at the time was enough of a brawny halo model in the range..
However, in relatively simplistic terms, they seem to have sat on their hands pretty much stretching the DB9 design way beyond its sell-by date, and then joined the SUV market way after it had already been saturated by every other premium brand.
And I have to hold my hands up and say, I think the new Vantage has missed the mark, being technically inferior to the comparable Merc AMG GT but missing the AM elegance to make up for it.
The DB11 is mostly very decent but in the current market i'm sure that alone isn't going to keep the accountants away from the Prozac.
PS - Regarding 'bashing' AM. I'm completely against giving a brand a kick for no reason but with AM I genuinely think they've made some very poor decisions in recent years and much of their struggle is self-inflicted.
However, in relatively simplistic terms, they seem to have sat on their hands pretty much stretching the DB9 design way beyond its sell-by date, and then joined the SUV market way after it had already been saturated by every other premium brand.
And I have to hold my hands up and say, I think the new Vantage has missed the mark, being technically inferior to the comparable Merc AMG GT but missing the AM elegance to make up for it.
The DB11 is mostly very decent but in the current market i'm sure that alone isn't going to keep the accountants away from the Prozac.
PS - Regarding 'bashing' AM. I'm completely against giving a brand a kick for no reason but with AM I genuinely think they've made some very poor decisions in recent years and much of their struggle is self-inflicted.
Your summary is a fair resume of what happened.
When measuring quarterly sales from the time of each model launch, the original Vantage and the DB9 far outsold their replacements.
After 2003, when the concept of the Vantage was first unveiled, orders poured in and dealers even stopped taking any further orders. Some customers had to wait several years for their car.
Being the 'lowest price' Aston Martin, the new Vantage should be the strong seller. Although some design aspects of the new Vantage have been criticised, the market now is perhaps more competitive, than it was in 2003 onwards era. Quite a few new players now in Aston Martin's market.
GTEYE said:
I haven't really followed it but reading that suggests that the financial engineering comprised of asset stripping the new cash out of AM.
No wonder they are in trouble. It's very sad.
No wonder they are in trouble. It's very sad.
Not asset stripping. Before the IPO the hype was clear for PHers to see, with a result of the IPO share price £19 and Company value was an inflated level. The previous owners sold only a small part of their holdings, so they have also felt the pain since IPO.
Overspending on the development of (perhaps) too many future models, has caused borrowing to steadily increase and net cash available to reduce. Hopefully the DBX will help turn things around, but repaying and/or servicing a £1billion debt is the financial problem.
If the worst happens, without the debt, someone will come to the rescue. That has been happening numerous times since formation in 1913.
Edited by Jon39 on Monday 13th January 17:11
So many experts on here 😂😂 you do know that for most non PH people. IE the world out there away from your keyboards.
People, love AM, Ferrari, Porsche etc and they are still aspirational and feel good toys that we unnecessarily lust after.
Why, because we can and do enjoy the simple pleasure of having one. Strange to most of you experts I know. You really are a sad bunch
People, love AM, Ferrari, Porsche etc and they are still aspirational and feel good toys that we unnecessarily lust after.
Why, because we can and do enjoy the simple pleasure of having one. Strange to most of you experts I know. You really are a sad bunch
YKnot said:
So many experts on here ???? you do know that for most non PH people. IE the world out there away from your keyboards.
People, love AM, Ferrari, Porsche etc and they are still aspirational and feel good toys that we unnecessarily lust after.
Why, because we can and do enjoy the simple pleasure of having one. Strange to most of you experts I know. You really are a sad bunch
People, love AM, Ferrari, Porsche etc and they are still aspirational and feel good toys that we unnecessarily lust after.
Why, because we can and do enjoy the simple pleasure of having one. Strange to most of you experts I know. You really are a sad bunch
Is it possible to be passionate (have owned my AM for eight years, no PCP discounts then), but also express an opinion about unfortunate financial facts ?
Edited by Jon39 on Monday 13th January 17:17
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