In early April I posted an article on the challenges Aston Martin, Ferrari, and McLaren were facing in light of the Coronavirus (Aston Ferrari McLaren Challenges). I then then put together an update in May once each company’s full Q1 results had been released. (Aston, Ferrari & McLaren Challenges Update). In both these articles I included a few top line suggestions on what each of the three companies needed to do to get there business back on track. While it’s easy to toss out a few pretty obvious recommendations from a distance, actually being in charge, dealing with the reality of the situation and assets or liabilities you are inheriting, plus owning the impact of all your decisions, is a completely different situation. Having sat in the hot seat a few times and lived to tell about it, I asked myself what I would do if I was the new Aston Martin CEO.
As a starting point, with an eye of making this as realistic an exercise as possible, I’ve taken into account the reality that Lawrence Stroll is the controlling shareholder. This makes him effectively the ultimate decision maker and taking into account his goals is critical to making a success of it. I have also used Lawrence Stroll’s June 26, 2020 Trading & Funding Update Letter as a starting point on the state of the business. In summary the situation Stroll lays out is:
And then he adds two interesting points:
But in terms of how Stroll really sees the future of the business, it is laid out in the first paragraph of the Update Letter:
“I am as enthusiastic and confident in our multi-year plan to build on the inherent strengths of Aston Martin, its unique Brand defined by beautiful design”
The Aston Martin that Stroll envisions going forward is first and foremost a luxury brand. It needs to become the British “Ferrari”.
What also is very enlightening is two topics that Stroll does not mention:
In the first article I wrote that “Aston Martin feels like it was built on the side of an active volcano that sits on top of an earthquake fault line”, while my long-term view hasn’t changed much, at least the volcano seems to have entered a dormant phase as Aston’s overall the situation certainly looks more stable than it did several months ago. Where the owner of the company wants to take the business is now very clear and what pieces you have to work with have been laid out. Stroll talks repeatedly about Aston Martin as a unique, luxury brand defined by beautiful design which gives a clear starting point.
So, what would I do if I was in charge? With the DBX now out the door with the expectation that it will deliver 50% of unit sales going forward, job one has to be getting the rest of the range back on track. If beautiful design is a critical Aston value, then all the current sports cars need a serious facelift. Aston Martin’s current head of design, Marek Reichman, needs to find something else to do. As a replacement, I would go find Ian Callum and pay him whatever he wants to come in a lead the redesign work. Not only do all the car exterior need to be redesigned, the interiors also need serious work to bring them up to what I would expect from an Aston Martin. A return to “beautiful design” and “elegance” is critical for Aston’s success as this is the niche it can carve out for itself in-between Ferrari which own’s passion and engagement & McLaren representing best in class performance. This expression of “beautiful design” needs to consistently be applied across the Aston Martin experience starting with when you first step foot in a dealership, to all the support materials, to the impression you get both looking at and sitting in the cars. As part of this model lineup overhaul, the current front engine Vantage needs to be replaced finally by a mid-engine V8 built off a carbon fiber tub. The Rapide AMR can also go to an early grave as it is fairly pointless sitting in-between the DBX & DBS. The Rapide is the poster child in terms of being an answer to a question no one asked. I would immediately kill the current internal V6 engine program. Engine development is not something that thin scarce resources should be focused on in the near to mid-term. For engines, I would sign a long-term supply agreement with Mercedes for AMG V8s & V12s for the full range. In the supercar market segments Aston needs to be competitive in, a V8 is the minimum expectation. Post relaunch the core portfolio would be the DBX SUV, mid-engine CF tub V8 Vantage, front engine V12 DBS, and a front engine V8 DB11. This line up should provide good balance while appealing to a much wider range of potential customers. Depending on how sales development for the new mid-engine V8, dropping the front engine DB11 might make sense in a year or two. All production would now be made to order only. The days of overstocked dealership discounting cars heavily to get them off the lot needs to be put and kept firmly in the past. It destroys residual values and negatively impacts the brand.
If becoming the British “Ferrari” is the goal and Stroll does mention that he sees a great benefit of having their own highly competitive Works Formula One team, I would push hard to make it a true “works team” and have the current Racing Point F1 Team fully merged into Aston Martin vs. the current agreement which is basically a 5 year sponsorship agreement at $20 mil. per year. Racing Point as a stand-alone brand has little to no value and certainly isn’t worth investing behind. Fully integrating the team into Aston Martin, which would then allow you to maximize the Aston Martin branding, is critical to unlocking the full benefits of the Formula 1 halo. I don’t believe you can become the British “Ferrari” without taking this step. There is a very good reason why Ferrari, McLaren, and Mercedes all fully own their F1 teams. The F1 halo will be a key element in the success of the new mid-engine V8 Vantage.
Two of the major management blunders of Aston in the last few years were a lack of focus and setting objectives that were neither realistic nor achievable. I would immediately ditch the submarine, Miami apartments, and motorcycle. They are nothing more than an unnecessary distraction and add zero to the goal of building a unique luxury brand. There is a good reason why you have never seen a Ferrari motorcycle or a Ferrari submarine. Probably the poster child for overreaching on objectives is the Valkyrie. When the Valkyrie (designated the AM-RB 001 at launch) was first launched in 2016, first deliveries were targeted for 2018. Currently Aston is hoping to finally deliver the first Valkyries in early 2021. In terms of missing timelines, the Valkyrie has been consistently spectacular, and this just highlights how in over their heads Aston got itself on this project. In roughly the same time period, McLaren has developed and will have delivered the Senna, Speedtail, and Elva. Given just how difficult the Valkyrie project has been, ditching both the Valhalla and the V12 Speedster is only prudent. Resources that these projects would have consumed are much better spent on the base range relaunch. Developing a mid-engine V8 Vantage is far more strategically important long term for Aston than selling 500 Valhallas. As Stroll didn’t mention either the Valhalla or V12 Speedster in the Update Letter, I would expect him to be supportive of the move. Being able to make these sorts of tough, potentially unpopular but strategically sound decisions are what separate a great CEO from an average one.
Last on the list of distractions is the DB5 Goldfinger Continuation. Given that production has started, I would finish the run and then forbid anyone from ever suggesting another project like it. All these continuation runs do is remind the general public that your glory days are long behind you. It also demonstrates a lack of creativity and reeks of a desperate cash grab. I can only imagine what would happen to a young executive in Maranello if he or she suggested producing a few more 250 GTOs.
So where would this all leave Aston Martin going into 2021? The Aston Martin I would envision:
Net net, this will be a much more focused company built around both a competitive F1 race team and a car manufacturer that produces the most elegant, beautiful sports cars & SUV on the market. With a balanced and competitive car portfolio, Aston should return to growth. Once back on sound footing, remaining focused on the core business, and not chasing high profile vanity projects that consume enormous resources, will be critical.
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