Andy Palmer is on a tight schedule.
The 53-year-old chief executive of the luxury car company Aston Martin Lagonda has set himself a deadline of 2020 to get the company back in financial shape and fit for sale, either to another motor manufacturer or via an offering of shares on a stock exchange, and the clock is ticking.
Mr Palmer, who was in the UAE last week for the Formula One race on Yas Island, was appointed to the Aston Martin job in 2014 with the mission of reviving the legendary British brand, the car of choice for James Bond, which had fallen on hard times in the face of revved-up global competition in the sports car business.
After two years at the helm, he says, Aston has reached “the end of the beginning. We’ve been through the restructuring, now we’re on a two-year phase of rebuilding our core business in luxury sports cars. Then comes two years of portfolio expansion. So far, we’re on track.”
That all sounds quite straightforward, but nothing is simple in the car business and it might be argued the easy part is behind him. Now comes the tricky task of building, and selling, a whole new portfolio of cars, some of them a radical departure from the company’s 103-year-old tradition.
Mr Palmer’s career has been spent exclusively in the motor business, from an engineering apprenticeship in the British Midlands, once home to a thriving car industry, to two decades with Japanese car maker Nissan, rising to the post of chief planning officer, based in Japan.
“I went to Japan for three years and stayed more than 10,” he says.
In 2014, Aston’s future looked uncertain. It had been through several unsettling changes of ownership, first as part of the Ford group and then under a fluctuating array of private equity investors. A controlling group of Kuwaiti and Italian shareholders – who had stumped up generously to fund losses and development programmes – headhunted Mr Palmer for the task of finally getting Aston back in gear.
“I think we’ve done pretty well with cars that are essentially a decade old. The operating performance is improving,” he says.
The financial figures – Aston declared a net loss of £128 million for 2015 (then about Dh697m) – tell the story of a company in flux. The deficit was exacerbated by one-off restructurings, including the loss of 300 jobs at its main manufacturing plant in England, as well as big finance costs and high capital expenditure on a new manufacturing facility in Wales, and new model developments, which are key to Mr Palmer’s strategy.
From the time James Bond first climbed into a DB5 in the 1964 film Goldfinger, Aston Martin has been regarded as a great British icon. But times and tastes change and the luxury fast car business, subject to the fickle tastes of the super-rich, is more susceptible than most.
Mr Palmer’s challenge is to widen the portfolio to cater to other segments of the luxury market – the booming sports utility vehicle segment and the top-end luxury saloon business – while retaining the Bond-fuelled appeal of the sports car range.
The competition is fierce. Premium motor manufacturers like Porsche, Maserati and Bentley are prominent in the SUV space. Even Rolls-Royce, at the top of the luxury tree, is launching an SUV. Rolls, Bentley, Mercedes and others dominate the luxury saloon market. Meanwhile, Ferrari, Lamborghini and Porsche lead in sports cars.
So far, Aston has responded with the new DB11, its flagship big sports car in the Bond tradition to replace the top-seller DB9. The DB10 was only produced in a limited edition for the Bond movie Spectre. Mr Palmer says 4,000 of these super vehicles have already been ordered and 1,000 will be delivered by the end of the year, 100 to the Middle East.
In 2017 and 2018 there will be new versions of the Vantage and Vanquish models, before the unveiling in 2019 of the SUV, called the DBX. The early years of the 2020s will see a new sports car, and new Lagonda models to take on Rolls-Royce and Bentley in their core markets.
“If you draw a map of the kind of cars high net worth individuals buy, it is in those categories, and we hope to cover it essentially with seven new cars,” says Mr Palmer.
Some critics have attacked these plans, as well as small-scale projects to brand power boats and property developments with the Aston badge, which they see as a departure from the Bond tradition, but Mr Palmer is having none of that.
“We have a small and profitable division that focuses on brand expansion, all in areas that fit within the customers’ lifestyle under the ‘utterly beautiful’ motif. If I thought it was diluting the brand, I would not do it. Nobody criticises Ferrari for their merchandising or their amusement parks,” he says.
Given Mr Palmer’s big shareholders in the Middle East, a sales push in this region might be expected, amid signs the oil price is stabilising. The UK, Europe and America are the biggest markets for Astons but the UAE is catching up. Dubai remains the top regional market, although Aston is expanding in the capital with a new showroom opening in the upmarket Etihad Towers next year.
There is good regional potential, he believes, with Aston holding something like 10 per cent of the regional sports car market compared with 15 per cent globally.
The other push is into electric cars. Mr Palmer has pledged to become the first luxury car maker to produce an all-electric powered vehicle by 2018, with an electric version of the Rapide GT sports car.
All those plans carry a heavy price tag. Aston’s existing investors have stumped up $700m in the past few years to fund them and Mr Palmer insists that will be enough to see the company through his six-year programme. But what happens then?
“Private equity investors want out at some stage, so the job is to create as much value as possible for a sale or an initial public offering. Luxury car companies command some big premiums,” he says. Analysts see a return to profitability in 2018.
One important factor is the presence of Daimler as a 5 per cent shareholder, cementing its technology partnership with Aston. Industry experts believe the German manufacturer does not want to buy Aston, but it does not want anybody else to buy it either. So a possible bid by another luxury car manufacturer with deep pockets – say Rolls-Royce or Bentley, both owned by rich German groups – would set off an auction process for Aston, a prospect Mr Palmer does not comment on but which would obviously be to his advantage.
If Mr Palmer can sell Aston at a luxury-brand premium and get the shareholders a good return on their sizeable investment, he will regard his job as done, regardless of what the purists think of his strategy.
“We love James Bond. But it cannot all be about Bond,” he says.
fkane@thenational.ae
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