No James Bond to rescue Aston Martin, carmaker struggles as demand falls

Source:Global Times Published: 2019/7/28 17:34:32

If only James Bond could rescue Aston Martin. The British maker of 007's legendary sports car is struggling. With the future of the automotive industry in flux, once-reliable buyers of trophy assets like Volkswagen or Ford Motor are no longer in the collecting business. 

Barring the vanity of a flush billionaire, or an overeager Chinese player, Aston looks destined to continue skidding out on its own. 

The company, worth $2.2 billion, is spinning its wheels. Boss Andy Palmer cut his goal for cars sold to dealers by some 11 percent this year, combusting a fifth of Aston's stock price. He also predicted adjusted EBITDA margins of just 20 percent, worse than a previously planned 24 percent. This puts in question the carmaker's promise when it went public less than a year ago to deliver margins greater than 30 percent.

The gloomier outlook comes after a litany of disappointing earnings releases, question marks surrounding the group's accounting practices and a thwarted attempt to award managers an oversized pay package. The shares trade almost 60 percent below their October initial public offering price. 

Aston blamed difficult economic conditions in Europe and the UK for its current woes, conditions which its arch-rival Ferrari has somehow managed to sidestep.

Extricating Aston, which is 34-percent owned by Andrea Bonomi's turnaround fund Investindustrial, from its current situation won't be easy. 

True, bigger carmakers sit on large cash piles, but they're also facing higher costs from developing new electric and self-driving vehicles, and a potential shift towards transportation as a service that could totally upend their businesses.

Even Daimler, which owns 4 percent of Aston and produces some of its engines, already owns upmarket brand Mercedes-Benz. 

The British carmaker is too small to offer significant cost savings to a larger peer, and may just add unwelcome complexity. 

Even after Wednesday's slide, a 2 billion pound ($2.5 billion) equity price represents an unusually heavy lift for the odd Chinese or Arab billionaire. That leaves Aston trying to battle for shares against other luxury marques like Ferrari and Lamborghini - and without Bond's fictional Quartermaster, or Q, to fashion a magic button to escape its predicament. 

The author is Lisa Jucca, a Reuters Breakingviews columnist. The article was first published on Reuters Breakingviews. bizopinion@globaltimes.com.cn

Posted in: INSIDER'S EYE

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