Reports yesterday evening from Reuters suggest that Indian commercial vehicle and tractor maker Mahindra and Mahindra may win the race to buy a 50 per cent stake in Aston Martin by the end of the week. This potential deal is causing much amusement in financial circles. What would a tractor maker want with a smaller supercar maker?
There is a lovely circularity about the Mahindra deal, as is being pointed out. Aston Martin’s post-war owner David Brown (who bought the company in 1948) made his money in designing tractors. Ferruccio Lamborghini started in tractor manufacturing in 1948 and started his supercar company in 1963. Ferdinand Porsche also designed a range of tractors in the 1930s, alongside his work developing the People’s Car.
According to the Reuter’s source, the Mahindra deal could see as much as £250m being exchanged for a 50 per cent stake in the company. While Aston banked £72m in profits on around 4200 sales last time around, it is clear that it cannot go on forever tweaking the VH platform and elegantly re-cycling the styling theme established with the 2003 DB9, especially with new pollution, emissions and safety laws on the way.
Such a small turnover and comparatively low profits – and ever-increasing legislative barriers – make it impossible to either take a radically new turn or expand the range into a booming segment such as luxury SUVs. Aston really needs the warm embrace of a global carmaker.
Common sense would dictate that Tata sweeps Aston up and merges it into its Jaguar division. The Aston factory and HQ is next door to JLR’s Gaydon R&D centre. To have two neighbouring British sports car makers making – in small numbers – aluminium platformed, front-engined, high-performance coupes and to be using different architectures and motors is plain stupid.
But Tata hasn’t made a bid. The other reported bid was from Italian investment house Investindustrial, who successfully bought up and sold on Ducati to Audi, tripling its initial investment. Press reports suggested that Investindustrial could have brought Mercedes’s semi-independent AMG division onboard. That would have made sense.
What worries me about the Mahindra bid is that it doesn’t seem to have any technology partners to bring to the operation. Sure it does own South Korean maker Ssangyong, but the maker of the Korando SUV and bizarre Rodius MPV is unlikely to be able to help Aston much. And vice versa.
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Lord spare us from financial 'analysts' and 'bright sparks'!
"An analyst friend first got wind of this deal in September and told me that some bright spark had looked into Aston and figured 4500 annual sales or so was about the global limit for the marque"
- "Aston Martin produced 7,300 cars in 2007, a peak sales year it has not regained since the crisis began."
http://www.ft.com/cms/s/0/d7112174-3ad6-11e2-bb32-00144feabdc0.html#axzz2Dn2N3SU8
The reason Aston Martin is stuffed, is not because as your analyst mate and some bright spark say it can't breach some mythical ceiling of 4,500 units/yr, but rather, unlike the German big premium trio, and Ferrari, Porsche, Bentley and Lamborghini, it has failed to get back to anywhere near its pre-Credit Crunch sales levels.
The whole meme of the post Credit Crunch time, 2008-'12, has been the bifurcation of the car market into the rebounding, apparently hugely successful premium makers, especially the very high-end ones, and the near collapse of the mass-market, middle-ground makers.
So why is Aston Martin, a Ferrari, Bentley, Porsche, Lambo etc. rival, not one of the high-end premium winners?
Its sales in 2012 in the first 9 months, according to the FT article above, are 2,500; that's on course for around 3,400 full year, which is around a 55% decline since 2007.
No other high-end premium maker has seen such a decline, with the possible exception of Maserati; in fact, most of the above listed brands are at least back to pre Credit Crunch levels, if not a lot higher.
The reason AM is in trouble and looking for a sugar daddy, is obviously the now public collapse in sales, by over half, but the reason for that is the lack of real investment since Ford turned the taps off in 2006, and pulled out in early 2007.
Contrary to all the window dressing by Bez and Richards since, and wining and dining of car rag hacks, AM has been running on fumes since at least 2010, and no amount of James Bond PR hype can overcome the real lack of product development, to keep up with the giant 'sausage factory' of new product devlopment churned out relentlessly by the Big 3 Germans particularly, and Ferrari, with the excellent, cutting-edge 458 Italia alone being a near fatal blow to Aston's tired, rooted in the early 2000s product offering.
The bottom line is, without continuous real product development, which needs huge amouts of cash, no brand, not even AM, with all its unmatched PR advantages, can survive over more than a max of five years, before the jig is up - which it is now - royally!
What the UK needs, as James Dyson said this week, is more engineers - European level, professional status 'Ingenieurs', not 'washing machine engineers' - and fewer, far fewer City of London 'analysts' and 'bright' sparks.
ps if you can't get past the FT paywall on the above link, just google " Aston Martin downgrade FT".
Perhaps a comparison with
Perhaps a comparison with Morgan Cars is more relevant and they could continue on in that vein, whilst avoiding the pitfall that Bristol Cars fell into?
Er, no.
Comparisons don't work between AM and Morgan or AM and Bristol, and for as long as no-one can explain Morgan's survival the shadow of extinction will continue to haunt small-scale British manufacturers who rely too heavily on heritage when what punters really want is innovation.
Maybe they could rebrand
Maybe they could rebrand Aston Martin.