July 24, 2019 / 9:55 AM / a month ago

Breakingviews - If only James Bond could rescue Aston Martin

James Bond actor Pierce Brosnan poses for photographers with the new Bond car, an Aston Martin V12 Vanquish, at Pinewood Studios in London, January 11, 2002.

MILAN (Reuters Breakingviews) - If only James Bond could come to the rescue of 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 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% this year, combusting a fifth of Aston’s stock price. He also predicted adjusted EBITDA margins of just 20%, worse than a previously planned 24%. This puts in question the carmaker’s promise when it went public less than a year ago to deliver margins greater than 30%.

The gloomier outlook comes after a litany of disappointing earnings releases, question marks over the group’s accounting practices and a thwarted attempt to award managers an outsized pay package. The shares trade almost 60% below their October initial public offering price. Aston blamed difficult economic conditions in Europe and Britain for its current woes, which somehow its arch-rival Ferrari has managed to sidestep.

Extricating Aston, which is 34% owned by Andrea Bonomi’s turnaround fund Investindustrial, from the 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% of Aston and makes 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 equity price represents an unusually heavy lift for the odd Chinese or Arab billionaire.

That leaves Aston trying to battle for share against other luxury marques like Ferrari and Lamborghini – and without Bond’s fictional Quartermaster, or Q, to fashion a magic button to get it out of its predicament. 

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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