The British luxury carmaker is heard looking for options to raise funds for expanding its range of luxury sedans, hybrid models and crossover SUVs where it urges to compete with its immediate rivals who have created a name for themselves, while Aston Martin ailed to match their sales figures in the past few years. In fact, the auto maker has been long held back by its ageing models, which caused it to miss out on the global luxury car boom that saw the value of the global market almost double in five years. Let’s dig further to find out what turnaround program the luxury brand is taking at recent times to regain its dominance in the luxury auto market. Here’s the total story.
Change in management kindles the turnaround strategy
Chief Executive, Andy Palmer, suggested soon after taking the reigns of the company last year that he would take all initiatives to rejuvenate the company to compete with immediate contender in the industry, the Tata-owned Jaguar Land Rover (TTM, Financial) in certain markets.
He is strategizing to turn the loss-making marque into a profit making concern and has reportedly extended its turnaround strategy by three years to 2020. Palmer has already hinted at grander plans for the four door Taraf sedan launched in the Middle East in limited volumes this year under the revived Lagonda brand.
Also at a lavish party last week, Palmer unveiled the DB10 concept car that will feature in the next Bond film, “Spectre”, and may offer design clues about future production models. He stated during the party in London – “It will come as no surprise when I say that the year ahead is going to be busy across the board…”
What is the turnaround program?
It is not surprising that Aston recorded a net loss of 16.7 million pounds last year, as weak credit ratings inflated its financing costs to 26.9 million pounds last year. The company is already paying out 10.25% annually on the latest $165 million bond issued in March, whose CCC+ rating from Standard & Poor’s was closer to default than investment grade.
Such impending issues has forced the management to rethink on their strategies and thus the British high-end marque is presently working on plans to issue new shares or bonds and extend its recovery strategy by three years to 2020.
According to reliable sources, this turnaround marks the expansion from the current model range. The car maker is examining debt-or-equity raising options to finance a bigger plan, and further cash is expected to be freed up by more efficient working capital management such as vehicle and parts inventory. The fund-raising would generate 100-150 million pounds ($156-$234 million) with any new shares offered to current investors.
Aston has begun updating the existing models under the 500 million pound investment strategy drawn in 2012, when Italy’s Invest industrial that along with Kuwait’s Investment Dar presently controls about 93% stake in the company paid 150 million pounds for a 37.5% stake. That plan would see a replacement for the 120,000 pound DB9 in late 2016 and a return to profitability the following year.
A further 5% is held by Daimler (DDAIY), underpinning a partnership struck last year for the German firm to supply Mercedes engines and the similar technology to Aston Martin, thus aiding in revival of its ageing models.
Last word
As per analysts, success or failure may hang on “"how much Aston can draw on the partnership with Daimler and leverage its research and development”. In fact, if Aston Martin is able to revive its lost charm, it will create a crowd growing in the super-premium auto market. Let’s stay tuned and keep an eye on how this turnaround program of Aston takes final shape.
