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Aston holds firm amid virus crisis

Size, alacrity work in Aston Martin's favour amid COVID-19 fallout but uncertainty remains

17 Mar 2020

BRITISH premium marque Aston Martin is confident it has the flexibility to ride out the COVID-19 pandemic and global economic repercussions despite heavy financial losses, pointing to a largely intact production supply line, unprecedented demand for the all-new DBX SUV and a compelling future-model program.

 

According to Aston Martin Lagonda Asia-Pacific president Patrik Nilsson, the company’s comparatively small size means it has the speed and agility to tailor production and/or make changes as required in turbulent times better than much larger corporations.

 

However, he admitted that there is much uncertainty as the world is navigating through completely unchartered territory and governments are taking extreme action.

 

Among them, UK prime minister Boris Johnson is considering measures that would require British manufacturers, including car-makers, to switch production to medical equipment.

 

“It’s totally fluid,” Mr Nilsson told GoAuto at a press event in Melbourne last Thursday, the day before the Australian Formula One Grand Prix was cancelled.

 

“Nobody really knows in that sense. We have sold more cars in January and February than in the previous January/February (period), but that’s based on last year’s performance and deliveries coming in.

 

“Traffic is slightly lower in the showrooms. We’ll see what the impact that has. We’re monitoring this, of course, constantly. The main priorities, of course, are keeping our staff and customers safe.”

 

His comments also came just a day before Aston Martin Lagonda announced that Canadian billionaire Lawrence Stroll had increased his stake in the company from 16.7 per cent to 25 per cent, following a dramatic nosedive in the company’s share price, driven in part by the fallout from coronavirus.

 

The total capital raised is now £536 million ($A1.07 billion) – up from the previously announced £262m ($A525m) – along with a short-term investment of £75.5m ($A151.64m).

 

Despite the ongoing financial difficulties, Mr Nilsson said Aston Martin was sheltered from the worst of the production delays that have hit many other manufacturers around the world caused by factory shutdowns in China and other places as a result of COVID-19, with enough parts supply in stock to see the company out for the foreseeable future.

 

“(Production) is not affected,” he said. “When (the COVID-19 crisis) started, we looked at our suppliers list, and we don’t have tier-one suppliers in China. We do have tier-two and tier-three suppliers, but we geared our business towards having quite a significant stock of parts, so we’re fine when it comes to production for now.

 

“We don’t know for how long the coronavirus is happening, but what it looks like also is production will start coming back, it will just be adjustments around production in different supply countries (as needed).”

 

Though it appears that China may have the pandemic under control with dramatically fewer cases of infection over the past few weeks, the situation is worsening elsewhere, with Europe now dubbed the epicentre of the virus.

 

Mr Nilsson said production and sales volume projections were difficult in such circumstances, but that the company has the ability to implement changes relatively quickly as required.

 

“Quantifying it is the hard part,” he said. “We constantly do at least a three-month rolling forecast, so we’re just adapting to the situation currently. Our plans would then change, of course, every time we do this kind of forecast. We would do that in a normal year as well.

 

“And we are a small, independently owned company, which means we have flexibility. So we can change production when we need it, we can change between models when we need it … so it’s business as usual in the planning sense.”

 

Mr Nilsson added that being a British brand actually helps with adapting to adverse situations such as COVID-19, given the challenging economic turmoil and widespread social and political unrest surrounding Brexit for the best part of the last decade.

 

“Being a UK company, we are prepared for a lot of things,” he said. “We had to be prepared for everything happening around us. Monitoring the economy, monitoring all the macros in the economy, is what we do.

 

“The great thing is, normally we can offset economic development that might not be so positive in one country with another. That’s what we do.”

 

That said, Mr Nilsson conceded the cancellation of big-publicity events such as the Geneva motor show and pushing back of the New York show to later this year is taking its toll.

 

“The direct impact it has on the business is travel restrictions, and a more cautious approach to travel, based on this,” he explained. “We see events not happening. The Geneva motor show is a perfect example of how that affects the business … it’s a shame that Geneva didn’t happen, because it’s a big platform for us.

 

“Events like this (visiting key global dealerships to meet the press and customers) takes a little bit the place of what Geneva would have done for us … so there’s been a lot of effects (from COVID-19), but I can’t tell you what that means yet.” 

 

Despite Aston Martin Lagonda announcing a loss of £104m ($A209m) in 2019 amid rising debt and slowing revenue, Mr Nilsson believes the company has already implemented the foundations necessary to survive.

 

These include fresh models such as more SUVs beyond the promising DBX, the coming mid-engined Vanquish, DB12 grand tourer and relaunch of the Lagonda nameplate as a pure-EV brand with an electrified sedan and SUV – although Lagonda’s return has been delayed until 2025, some three years later than originally scheduled.

 

“Any storms that come to us, we will weather,” Mr Nilsson said. “So, I’m not concerned. I know the order book for the DBX. I know what’s coming down the pipeline. Economic factors, we should of course think about them and react to them correctly and make the right decisions around that. But I have total confidence that we’ve done that.

 

“I don’t want to sound flippant about it. I think about it but I’m not concerned. (Postponing projects like Lagonda and putting the Rapide E electric sports sedan on ice) is a description of how being a nimble and smaller company makes it slightly easier for us to change direction than the big ones.

 

“If you look at other, massive manufacturers, they are taking extreme losses when something moves a little bit, because they just cannot change direction, to be reactive enough to react to it. They just can’t. I think that’s one of our biggest strengths we have.

 

“I don’t want to portray that it’s business as usual, because we are facing big challenges with the economy and the coronavirus. But what we do want to show is the drive forward, the exciting stuff that is coming up, the way the brand is changing.

 

“We might have been criticised before for being a little bit conservative, and I think we can afford ourselves not to be so conservative. 

 

“It’s a very exciting future, and that’s what we want people to take away from all this.”


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