The future, by Andy Palmer
Phew – the new Vantage isn’t a dud. Now for the next phase of Aston CEO Andy Palmer’s masterplan: become the British Ferrari
‘PORSCHE, FERRARI, move aside: Aston Martin is back!’ That was the final flourish with which Andy Palmer, Aston Martin CEO, presented the new Vantage to the world. Though its V8 engine is at the opposite end of the car, the second-generation Vantage (see page 102) is clearly a serious rival for Porsche’s 911. But it’s the company that sold 33 times fewer cars than Porsche last year, the pinnacle of performance car makers, that Palmer is truly targeting.
From Formula 1 to a financial float, from luxury brand aspiration to developing mid-engined supercars, Aston Martin is taking the fight to Ferrari head-on. It’s an incredibly ambitious strategy founded on last year’s groundbreaking financial results, new levels of strategic planning and an inherent belief in the potential of the 105-year-old company.
‘Ferrari is the only benchmark,’ says Palmer when we meet. Not in the type of cars, he caveats, though there will be convergence there: 2019 will herald the mid-engined Valkyrie, the hybridised V12 hypercar co-designed with Red Bull engineer Adrian Newey, gunning to be the fastest car ever. Take that, LaFerrari.
No, Aston’s 54-year-old CEO is referring to how he wants to position the company, before it’s floated in an initial public offering (IPO). Aston’s majority shareholders are investment groups from Kuwait and Italy (with a slither owned by tech partner Daimler), and they will want a big payday when they sell their stakes.
‘They’ve asked me to study various options,’ explains Palmer, when I ask him what dictates the correct timeframe for going public. ‘The longer you hold on, your quarters of success become years of success and the comparison to Ferrari and its IPO becomes ever more powerful. On the other hand, the longer you wait, the more you risk a bull market becoming a bear market, or unexpected events happening in the world.
‘Ferrari established the principle that a car company can be a luxury company,’ continues Palmer, citing the fact that its company worth (called ‘enterprise value’ in financial circles) is around 18 times its projected EBITDA (earnings before income tax, depreciation and amortisation – a measure of its annual income). ‘Every other car company is two or three times,’ says Palmer. ‘In my view, there really is only one other company that could replicate that – us.’
Given Aston Martin was heavily indebted and lost £72m in 2014, the year Palmer took over, the company has come a long way: DB11 sales drove record revenue of £876m in 2017. Equally it has a long way to go yet: Ferrari raked in €3.4bn (£2.98bn) in revenue.
Aston’s 5117 retail sales lagged Ferrari’s by more than 3000 units too. This year the Brits should close the gap, with a full 12 months of DB11 V8, plus the Volante roadster and new Vantage coming on4
stream. If 7200 cars in 2007 was a record year (when, pointedly, earnings were less than half 2017’s total), what’s the production limit on Aston Martin’s secondcentury plan?
‘I would say 14,000,’ the former head of Nissan product development responds. ‘ Gaydon is land-locked: it can’t expand any more. On a properly efficient system we can produce 7000 cars at Gaydon and we’ll hit that in the second half of this year. Then you’ve got St Athan [the Welsh factory that will assemble the DBX crossover from 2019]. It’s being kitted out for 5000 cars initially, but the line is sized so it could be further upgraded to 7000 cars. That’s 12,000-14,000.
‘But exactly where the peak is no one really knows. It’s not 250,000 like Porsche or 40,000-50,000 like Maserati, but could it be 20,000? I don’t know. The temptation is always to push. The reality is build the capacity, then run that capacity at maximum.’
The mid-engined supercar will help keep Gaydon at full steam, by arriving as the DB11 and Vantage age. Why else do that car? ‘Let’s set aside that we’re all petrolheads and would like to develop a mid-engined Aston,’ is Palmer’s gratifying answer, before he outlines the business case. ‘It’s also about the average transaction prices of the company: we peak at Vanquish, broadly £200,000. If you want to look like Ferrari or Rolls-Royce, you need to have an offer that’s £250,000, £300,000, £350,000. Going into other segments allows us to do that.’
Like the Valkyrie, the mid-engined cars are being developed in partnership with Red Bull Advanced Technologies; Aston will relocate 130 staff to the F1 campus, and establish a design centre there. The collaboration’s biggest goal is to reduce mass: ‘Adrian Newey is a man possessed on weight, and weight is the evil of the car,’ says Palmer. And will the engine come from another partner with F1 links, Mercedes-AMG?
‘We’re not simply tied into buying other people’s engines,’ the CEO says. ‘The V12 we did ourselves…’ And must it be electrified to reach the 800bhp threshold Ferrari will surely achieve? ‘It will use a hybrid KERS system; by the middle of the 2020s we’ll offer a hybrid in every model line, but not plug-ins. That’s one of the technological choices we’ve made. We will continue to develop V-configuration engines, and we will do an EV, but we won’t do downsizing to inline-four engines, diesel or hydrogen.’
Aston’s mission to revive Lagonda as a pure-electric brand epitomises the company’s relentless advancement under Palmer. ‘There’s a duopoly in Rolls-Royce and Bentley, but both are very conventional and the intention of Lagonda is to disrupt. So we’ve got a car that’s broadly the overall length of a Ghost but with the interior space of a Phantom. We wanted to show a car which doesn’t need to have the Parthenon grille. And we’re saying this brand will only be EV – which is exactly the space Tesla sits in.’
Rolls-Royce reacted somewhat peevishly when the Financial Times relayed a similar Parthenon comment from Aston design chief Marek Reichman: I suspect the straight-talking Palmer would only have chuckled at the resulting furore. Well, here’s a grenade for Elon Musk too…
‘It’s about to get much harder for Tesla because everyone’s coming with an electric car now. The car industry is often called a dinosaur but we are phenomenally good at making [volume manufacturing] work. The likes of Tesla need to get their act together quickly or die. How many months is the Model 3 behind schedule and struggling with build quality?’ Ouch.
But the ultimate disruption is targeted at Ferrari. Aston is the headline sponsor of this year’s Red Bull Formula 1 racer, but the CEO admits it’s about marketing rather than technology transfer. For now. ‘[F1 chief] Ross Brawn has published his [2021 engine] draft specification, and it’s now in consultation. Ferrari and Merc hate it and we like it. To some extent Renault and Honda sit on the edges. If it’s going to have heat recovery we won’t be doing the engine. If it isn’t, there’s a good chance we will be doing an engine.’
Ferrari chief Sergio Marchionne has threatened to pull Ferrari – an ever-present – out of the series, if the company’s know-how in exhaust and brake energy recovery becomes redundant. Which leads to a fascinating notion: could Ferrari bow out of F1, leaving space for its aspiring luxury brand rival? You can bet this calculation is all part of Palmer’s masterplan.
Making a Midlands Maranello? You’d better believe it.