As Aston Martin Triples Loss Survival Might Require A Takeover

As troubled luxury sports car maker Aston Martin tripled losses in the first half, a cash injection was seen as inadequate and a takeover might be required for survival. Aston Martin lost a pre-tax £285.4 million ($347 million) in the first half of 2022, compared with a loss of £90.7 million ($111 million) in the same period last year. Aston Martin shares were erratic in European trading Monday, opening down nearly 3%, then rallying to a 2.8 % gain. Chairman Lawrence Stroll, commenting on the financial results last month, said the company was handicapped by a shortage of chips, which left 350 of its pricey DBX SUVs unfinished and stranded in limbo.“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,” Stroll said.“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,” Stroll said. Aston Martin said last month it planned to raise £653 million ($744 million) through an investment of £78 million ($93 million) from Saudi Arabia’s Public Investment Fund and a rights issue of £575 million ($681 million). After the rights issue, the Saudis own 16.7% of Aston Martin, Stroll’s Yew Tree Consortium 18.3% and Mercedes-Benz just under 10%. A counter-offer from Chinese conglomerate Zhejiang Geely Holding Group was rejected. Analysts aren’t convinced the capital raising plan was sufficient. Professor David Bailey of Birmingham Business School thinks a takeover is making 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),” Bailey said.“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 (British sports car maker) Lotus, also owned by Geely. A takeover seems increasingly likely,” Bailey said. Other commentators say more cash is needed.“The scale and direction of the losses suggest a bigger cash injection is required. Without serious investment in a revamp to catch up with rivals like Ferrari, the losses will keep mounting,” said Reuters’ Breaking Views column. British-based automotive analyst Charles Tennant agrees more drastic action might be required including a takeover.“Unless sales can be revved up soon, I’m afraid yet more cash – or even a take-over perhaps by the Chinese behemoth Geely – is going to be required sooner than later.

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