Things aren’t looking good for Aston Martin (the manufacturer) after having tripled their losses in the first half of 2022. While there has been some relief thanks to cash injections from investors, it doesn’t seem like it’s enough with some experts asserting that a takeover is the only way out of this mess.
Let’s look at the figures.
In the first half of 2022, Aston Martin lost a pre-tax £285.4 million (~$500.1 million AUD). In the same period last year, the company’s losses were £90.7 million (~$157.7 million AUD). Yikes.
Chairman Lawrence Stroll has explained some of the reasons as to why this has happened, chief of them being that the company has been handicapped by a chip shortage.
“We ended June with more than 350 DBX707s that we had planned to deliver in Q2, still awaiting final parts, consuming tens of millions in cash and temporarily limiting our ability to meet the strong demand we have,” said Stroll.
He continued with an optimistic outlook for the future, “We have now started to deliver these vehicles in July and expect further improvements in the supply chain as we move through (the second half), supporting the delivery of our full-year targets.”
Last month, Aston Martin initiated a capital raising plan that would see it raise £653 million (~$1.14 billion AUD) through an investment of £78 million (~$136.7 million AUD) from Saudi Arabia’s Public Investment Fund and a rights issue of £575 million (~$1 billion AUD).
After the new rights issue, the Public Investment Fund owns 16.7% whilst Stroll’s Yew Tree Consortium holds 18.3%. Mercedes-Benz holds just under 10%.
Experts don’t believe this is enough to save the company. Professor David Bailey of Birmingham Business School told Forbes that a takeover would make more sense.
“The latest effort by Aston Martin to raise cash buys some time but doesn’t change the fundamental challenges facing the firm. It is difficult to see how it can survive as an independent player in a rapidly evolving industry with high costs of developing new EVs (electric vehicles),” said Bailey.
A counteroffer was made by Chinese conglomerate, Zhejiang Geely Holding Group, but this was rejected. This is something that Bailey considers to have been a mistake, “Turning down the recent investment offer by Geely seemed a particularly bad call – it would have raised more cash and opened up access to platform sharing with Lotus, also owned by Geely. A takeover seems increasingly likely.”
Automotive analyst, Charles Tennant, agrees with Bailey,
“Unless sales can be revved up soon, I’m afraid yet more cash – or even a takeover perhaps by the Chinese behemoth Geely – is going to be required sooner or later. With a share price that has tanked 66% so far this year it is clear that the City (investors) has the jitters about future prospects, even though Stroll claims Aston Martin is in a strong position with robust demand.”
So how many cars are Aston Martin selling? In 2021, first-half sales were 2,901. In 2022, that number has shrunk to 2,676. The company does expect to sell over 6,660 cars in 2022 but it doesn’t look likely considering their supply chain issues.
Tennant explains that all this money is going to disappear as Aston Martin will have to pay their debts totalling £1.27 billion (~$2.2 billion AUD), “a figure that has worryingly risen by 40% so far this year.”
Are Aston Martin in trouble or should we put trust in supervillain-like Lawrence Stroll?
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