Aston Martin: Another New CEO

Aston Martin Lagonda (AML) just announced that current Bentley Motors (Bentley is a wholly owned subsidiary of Volkswagen Group) Chairman and Chief Executive Officer Adrian Hallmark will take over as CEO by October 1st.  Hallmark will be Aston Martin’s 4th CEO since Lawrence Stroll took over as Executive Chairman in 2020.  Stroll will now have had the same number of CEO’s as Trump had Chiefs of Staff during his presidency and one more than the number of Formula 1 Teams Daniel Riccardo has driven for in the same period.   

The search process has played out generally as expected.  It likely started back late last year  when it was clear that AML’s 2023 full year results would be quite ugly (see: Turtle Flambe).  The announcement of the new CEO was released after the recent debt refinancing was concluded and he will start in the back half of the year.  The candidate came from the most likely (Group 2) of the three groups I identified back in January’s blog on the search (Time for a New CEO Again?).  

  1. 1. Former Automotive CEOs/MDs looking for a new job.
  2. 2. Senior Executives who might just be interested in one last payday.
  3. 3. Current top talent at major automotive companies just below the CEO level.

Hallmark falls squarely into the 2nd group as he is 61 and this will likely be one last big payday.  I have heard from several sources that the compensation package is quite substantial. 

The question is why (money aside) would Hallmark want to do this?  To start with, it’s a quite high profile and prestigious CEO role.  Second, Hallmark was at Bentley for just over 6 years and has executed a successful turnaround.  During his tenure, he took Bentley from a €288 million operating loss in 2018 to a € 708 operating profit in 2022 and vehicle sales increased from 10,494 to 15,174 over the same period.  However, 2023 wasn’t so kind with vehicle sales declining 10.6% to 13,560 and operating profit dropping 17% to €589 million.  In fact, Bentley was the only brand in the Volkswagen empire that suffered a decline in vehicle sales in 2023 and the outlook for 2024 was “cautiously optimistic”.  In a recent CNN interview, Hallmark was quoted as saying, “although our customers can still afford our cars, there was a level of emotional sensitivity that slowed down demand”. Apparently, Ferrari customers are not “emotionally sensitive” (Ferrari’s Record 2023 Results).

While almost all senior executives will survive one bad year, two bad years is another story.  As many recruiters will tell you, it’s always better to jump ship before you get pushed.  If you can jump, and get paid handsomely to do so, it’s a major personal win. 

Hallmark’s track record at Bentley indicates he should be able to get Aston Martin back on track.  Whether he’s allowed to do so is another question.  If Stroll allows him to be the CEO, then AML has a chance but it’s going to take 3-5 years despite Stroll’s mid 2023 proclamation that the  Turnaround is Complete.  If Hallmark is CEO in name only, then my guess is he is out in 12-18 months. 

And thus ends our 3 part trilogy on AMLs latest search for its next CEO……at least for now.  Parts 1 & 2 are below.

Note: I do not, and have never, owned any AML shares.

Part 2

On Feb 6th, Bloomberg published the following: Aston Martin is Hunting for its Fourth CEO in Four Years .  The Bloomberg article confirms what I was hearing in early January, which is captured in the article below.  For Bloomberg to have published the article, they would have confirmed it with multiple different sources.  Since I posted the original piece, I have heard that several candidates have been approached.  Given the history, the job is a tough sell to say the least, about on par with being named Chief Minister by Henry VIII.   While the title might be CEO, any qualified candidate has to realize that there is zero chance Stroll will actually let them operate as a CEO.  Given that the current CEO, Amadeo Felisa, has only been in the role of a bit over a year and a half, he has hardly been given the time (and very likely not the autonomy) to turnaround the business.  The last time Aston Martin (AML) had any stability in the C-Suite, Andy Palmer was the CEO. 

The timing on this development is also quite interesting as Aston Martin will be reporting their full year 2023 results in 3 weeks.  The delays on the DB12 and the management turmoil in Aston Martin’s largest region, the Americas, where AML is also on their 4th leader in 4 years, does not bode well for 2023’s final numbers.  At a minimum I expect there will have been another rather large “temporary suspension of the demand-led operating model” in Q4 2023. One of the largest Aston Martin dealers in the US has a notice on their website stating: “we have a much larger inventory on site and in transit” vs. the 18 new Astons they have listed on the website.  The fact that what was a confidential CEO search has become quite public now would seem to indicate that Stroll is planning to toss the current CEO under the bus for what are likely to be disappointing results.  How this impacts the latest “fulsome refinancing exercise” AML is about to kick off will also be interesting.

Things are certainly never dull in Gaydon.

Part 1

I wasn’t planning on writing another article on Aston Martin Lagonda (AML) until they released their full 2023 results in February.  However, according to a couple of well informed contacts, it is rumored that Lawrence Stroll might just be looking for a new CEO for Aston Martin Lagonda…….again.  As Stroll’s index finger only points outwards, I guess this should not be a major surprise after all the issues with the DB12 start up and having to call down the 2023 Guidance back in November of last year.

Last time we went around on this merry go round was in early 2022.  It started out in early January with an Autocar article on the then Aston Martin CEO, Tobias Moers’ future at Aston Martin being in doubt.  At the time Stroll denied he was looking to replace Moers in a statement to the Financial Times Aston Martin chair denies he is looking for a new chief executive.  Stroll’s denial back then rang pretty hallow when shortly after the FT article came out,  Bloomberg Aston Martin Approaches Ford Executive identified the individual Stroll had approached about replacing Moers and indicated several discussions had already taken place.  Certainly, in this case, where there was smoke, there was fire, and by early May 2022, Moers was out and former Ferrari CEO, Amedeo Felisa, had replaced him. 

Looking back, the current rumored situation certainly is par for the course for Stroll since he took over as Executive Chairman at AML.  Poor Tobias Moers was left twisting in the wind for months and his first CEO, Andy Palmer, found out he had been fired when a reporter from the Financial Times called him up and ask for a comment. 

 

AML is really in no better shape today than it was when Felisa took over 2 years ago.  Looking at a few key numbers through the last available reporting period vs. same period 2 years ago:

 

 

 

Q1-Q3 2021

Q1-Q3 2023

Cars Wholesale

4,250

4,398

Revenue

£ 736 mil.

£1,040 mil.

EBITDA

£72 mil.

£131 mil.

Loss before Tax

-£198 mil.

-£260 mil.

Free Cash Flow

-£39 mil.

-£297 mil.

Net Debt

£808 mil.

£750 mil.

Cash on Hand

£495 mil.

£544 mil.

 

AML is selling a few more cars at a higher ASP (average selling price) than they were a couple of years back and losing a lot more money doing so.  The rise in revenue & ASP has more to do with the Valkyrie than anything else, and for this AML should thank the long-departed Andy Palmer.  Net debt is down slightly and cash on hand is up a bit which does look good on paper.  However, this doesn’t take into account the £964 mil. of capital that been raised in the last 2 years that’s almost all gone. However, to be fair to Felisa, blaming him for AMLs current issues is akin to blaming Lieutenant-General Arthur Percival for the fall of Singapore. While Felisa might be the CEO, he does report to an Executive Chairman, making him more of a COO than a CEO.

Potential Successors

Last time Stroll went down this path, he had a ready-made solution sitting right in his Boardroom in Amedeo Felisa.  Felisa had been the CEO of Ferrari from 2008-2016 so he was a highly credible option who already was involved with Aston Martin.  Today no such option exists on AML’s Board of Directors.  The last person who could have been considered, Antony Sheriff (former Managing Director of McLaren Automotive), left the Aston Martin BoD last April to become Chairman of the Supervisory Board at Rimac Group and at Bugatti-Rimac.  Stroll therefore has been forced to look outside the AML organization.  At this point, it’s a very tough role to fill, given both the history and what the future may hold (see: The Grinch). 

 

Stroll’s pool of CEO candidates fall into what I believe are three groups.  The first group is former Automotive CEOs/MDs looking for a new job (example: recent SSO Award Winner Thierry Bollore). The first group is less appealing to Stroll as all would come with baggage but would certainly be less expensive to hire than either of the other two groups.  The second group is recently retired Senior Executives who might just be interested in one last payday (example: recently retired Rolls Royce CEO Torsten Müller-Ötvös). This second group, from which Felisa came from, is an easier sell as one last big payday and a nice severance after a couple of years could be appealing.  The third and final group is current top talent at major automotive companies just below the CEO level.  That last group, of which Moers could be considered to have been a member of when he was hired, is going to be a very hard sell for Stroll given both AML’s history of revolving CEOs and its current financial situation.  These types of executives tend to plan a long game and are looking for both stability and a high chance of success.  To put it in F1 driver terms, Romain Grosjean would be in the first group, Fernando Alonso in the second, and Lando Norris in the third.

Implications

While I don’t think anyone at Aston Martin shed a tear as the door was closing behind Moers, if Felisa is out after about two years, it has potentially serious leadership implications for key areas of Aston Martin’s operations. While not many senior executives followed Moers from Mercedes AMG to Aston Martin, Felisa has surrounded himself with former Ferrari colleagues.  In fact, Aston Martin now has former Ferrari executives controlling all the key operating positions including sales, marketing, technology, procurement, and manufacturing.   At a glance, the Aston Martin executive organization chart today (AML Leadership Team) looks like it is more likely to belong to a Modena area organization than one based in Gaydon.  If all these former Ferrari executives followed Felisa out the door, it could have serious implications on Aston Martin’s operations.  At a very minimum, it’s going to cost Stroll quite a bit to get them to stay as a large amount of management turmoil is the last thing Stroll needs as AML embarks on the 1st half 2024 “fulsome refinancing exercise”.

Summary

When I first heard that Stroll might be back in the market for a CEO again, I wasn’t the least bit surprised.  However, sacking Felisa now does seem like a high risk move given the impending “fulsome refinancing exercise” they are about to kick off.  My guess is it gets pushed to the 2nd half of the year after the fresh cash is in the bank.  However, this doesn’t prevent Stroll from having a successor already lined up and available to start as soon as it’s convenient.  I doubt Felisa will be sad to go, the last two years can not have been much fun.  The only question is does his team then follow him out the door.

Note: I do not, and have never, owned any AML shares.

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March  2024

 

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One Thought on Aston Martin: Another New CEO
    John.
    24 Mar 2024
     9:49am

    Job No.1., day No.1. Sack Marek Reichman.

    If you don’t then you’re already lining yourself up for failure.

    Four CEOs and the fundamental problem that Aston has, that Reichman designs don’t sell, remains. Aston’s best sales were with Ian Callum designs. They had a refined elegance to them that fitted with Aston Martin. Now it’s a mess of design details that don’t fit together. Like the many schizophrenic personalities of Reichman simply don’t meet at any time. Or that’s the best explanation I can think of, if there is any design talent there.

    However you look at it, Reichman has had far too many attempts at making an Aston Martin. Only now with the latest refreshes are people saying it’s “ok”. It’s simply not good enough for Aston when people should be going “wow” or “it’s beautiful”. A beautiful car will get people through the showroom doors regards of other faults or deficiencies the car has.

    Hallmark, to save Aston Martin, sack Marek Reichman.

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