By DCB Editorial, July 6, 2022
Are Aston Martin in trouble? It may not be grammatically correct but that very question is one of the most searched for terms when people Google Aston Martin. So we attempt to answer the grammatically incorrect Google search-driven question. Are Aston Martin in trouble? Yes, Aston Martin is currently in trouble. Being in trouble is nothing new for the venerable luxury supercar maker. Throughout the course of its 109-year existence, Aston Martin has gone bankrupt several times. An eighth bankruptcy loomed over two years ago until the world’s poorest billionaire, Lawrence Stroll, stepped in to bail out the company. Along with other investors Stroll pumped in over $300M USD to secure the company’s future. It wasn’t near enough.
Is Aston Martin Still Owned By Ford?
Ford no longer owns Aston Martin, they did own a 75-percent stake in the company between 1987-2007 making them the outright owners at the time. Under Ford, Aston Martin modernized and re-located from its coachbuilt origins in Newport Pagnell, England to Warwickshire, England with a new state-of-the-art manufacturing facility. Ford did a solid job of rejuvenating Aston Martin, in many ways the DB9 was their legacy.
But Aston became a loss-making entity and Ford could no longer justify the investment thus it was sold off to a consortium of private equity firms. This is the point at which Aston Martin’s current troubles begin, it’s a 15-year accumulation of building a debt pile.
Aston Martin And Vulture Capitalism
Private equity firms/investment exists to make a profit. Such firms work best in the tech/digital industry which is fast pace and profitable by nature. A typical private equity business exit plan is around 5 years. Private equity investment and manufacturing is an odd mix, a typical car has a product life cycle of 5-8 years. The initial pre-development phase takes an additional 2-3 years. The Aston Martin DB9 had a 12-year product lifecycle which is considered to be ancient in the car manufacturing world.
So how does private equity make money? Debt. Ruthless private equity firms will load debt onto their assets, pocket the money (debt) and let the corporate balance sheet take the profit and loss burden. This way of operating leads to a lack of investment and eventual collapse. And when Aston Martin doesn’t meet annual sales targets more debt has to be leveraged to keep the whole operation afloat.
Lawrence Stroll, The World’s Poorest Billionaire
After 13 years of private equity occupation, Aston Martin is $1.8BN in debt. Nevertheless, the company floats on the stock exchange in 2018, valued at £5.3BN. But like most newly floated companies the share price is over-valued. Inevitably the share price plunges, today Aston Martin is worth around £1.3BN USD and is now seen as a risky business. That risk combined with previous debt means banks will no longer loan money to Aston Martin.
It’s 2020 and Aston Martin is in serious trouble. Lawrence Stroll, the world’s poorest billionaire businessman, along with co-investors, pumps in $300M USD becoming the outright owner. It will never be enough, Aston Martin continues to post losses. The much-vaunted DBX SUV is not yet the cash cow savior the company was expecting.
Is Aston Martin Owned by Mercedes Benz?
Mercedes aquires 5 percent shareholding of Aston Martin in 2013 and increased it to 20 percent when Lawrence Stroll jumped on board. Mercedes currently supplies Aston Martin with powertrain, software technologies, and components, including next-generation hybrid and electric drive systems. Despite the restructuring of management Aston Martin continues to make a loss.
As of June 2022, Autocar reports Aston Martin is looking for fresh investment to “balance the books”. This means Aston Martin is verging on bankruptcy, banks will no longer provide loans due to imminent risk. According to reports, Stroll looks to Saudi Arabia for funding via the Kingdom’s Public Investment Fund, a sovereign wealth fund worth $620BN USD.
Will Aston Martin Survive?
Modern corporations are data-driven, everything is digitally costed, and streams of data are analyzed from production to marketing to sales. But debt is debt, and no amount of data crunching can predict lower than expected sales. All Aston Martin has left is its brand and heritage, to that end, it is a business for the passionate investor. Brand and heritage are not computable data sets.
With a mountain of debt, loan repayments, stalling sales, and years of under-investment under private equity ownership it is very much business as usual for Aston Martin. Aston Martin teetering on the verge of bankruptcy is nothing new, the company is the ultimate loss-making escape artist.
Aston Martin will declare bankruptcy within 2 years, and when it does Mercedes will swoop in and buy the assets for next to nothing.