Aston Martin’s boss on the secrets to the luxury car brand’s success
With a blueprint to create 1,000 new jobs, introduce a slew of technology-laden models and create a second manufacturing site, luxury sports car maker Aston Martin claims to be accelerating away from its ill-performing balance sheet.
It’s “pretty ballsy”, says its chief executive of 18 months and custodian of the iconic 103-year old marque, Andy Palmer, referring to the company’s “Second Century Plan”.
Aston Martin produces a product that is internationally recognised as James Bond’s ride of choice. It is a small company with a big following. But Palmer has to please his multinational shareholders as well as countless brand enthusiasts.
Just months ago Aston Martin announced 300 redundancies, mainly management roles lost in the pursuit of a flatter executive structure. Aston Martin had just posted losses of £35.9m on turnover of around £454m. Is the boldness displayed by the new management team hubristic or the necessary impetus to roll up its sleeves and fix long-standing problems?
Palmer has already set a number of changes in motion but remains coy about the latest set of accounts, which are not yet due for publication. He says: “What I would say is, ‘look at the results of the past 18 months’.” Palmer says that he inherited a company that didn’t hit any of its budgets and was in continual decline over the last few years.
He says: “Last year’s sales were up 11pc with a portfolio that, essentially, hadn’t changed and was one year older. For the first three [financial] quarters, we’ve hit the declared budget.”
The 52-year-old is an auto industry veteran and was formerly second in command at Nissan’s Japanese headquarters. He wants Aston Martin to adopt a Japanese-style culture of longer-term planning in order to ensure product credibility and profitability.
Under his guidance, Aston Martin will broaden its portfolio to include a third design, a sports utility vehicle (SUV) -type vehicle codenamed “DBX” to complement its V8 and V12-engined sports car ranges.
Output from its existing Gaydon base in Warwickshire is expected to increase from around 4,000 sports cars a year to 7,000 units, in line with arch rival Ferrari’s current production. The Italian maker says it intends to increase its overall output to more than 9,000 units in coming years.
Palmer also wants to revive Aston’s often-forgotten sibling brand, Lagonda. A new factory at St Athan in Glamorgan has also been announced. The fresh recruitment drive will result in 750 jobs being created at that facility and 250 at Gaydon.
There are potential issues with some of these plans. Too many units could demote the Aston Martin cars from “luxury” to “premium”. It appears a subtle alteration, but key in Aston Martin’s market, where image is so important.
But Palmer argues that having two identifiably different future brands will be a trump card, allowing a total potential output of 14,000 across Aston Martin and Lagonda.
“Generally speaking, the industry considers 7,000 cars a year to be the limit of exclusivity,” he says. “It’s that inflection point between trying to earn more money by selling more cars and then not being able to command the price because you’re no longer exclusive.”
So Aston Martin will limit itself to building 7,000 sports cars a year at its plant in Gaydon and then building the DBX and future Lagondas at St Athan. The company is in what the chief executive calls the “stabilisation phase” of restructuring, getting itself in shape in time for new products. “The next period, which starts from this September with the replacement of the DB9 with the DB11, represents the renewal of the sports cars range,” he says. “Then we get into the third phase, which is one of portfolio expansion with the DBX.
“We’re consciously spending a heck of a lot of money on producing the new portfolio. If we go back into history, the company went boom and bust many times. Generally speaking, somebody came into the company with some money to do the next car. Then we’d develop that car and put it into market. Historically it would be quite successful for a little bit but there would be no life cycle management, no second or third or fourth car.
“This company needs a tempo of new products. That tempo is at least one new car every year in each of the segments. So if you start in 2016, we’ve got DB11, then Vantage (smaller sports car), then Vanquish (top of the range). The sports car roll-out is more or less complete by 2018. Then you’ve got DBX (SUV, due by 2020) and so on.
“We need a minimum of seven cars (including derivatives) with a lifecycle of seven years and then copy, repeat, copy, repeat. That brings stability and it brings natural growth.”
Around £500m has been injected into the company to kick-start this process. A further £200m has since been added. Headcount sits at 1,850 but will rise to nearly 3,000 once both facilities are running at capacity. The increase will mainly be in skilled technicians and additional professional engineering talent.
With this level of investment, a strong technical partnership is fundamental. Daimler, owner of Mercedes-Benz and its AMG sports division, has taken a 5pc stake in the Warwickshire business. Mercedes is giving Aston Martin access to its industry-acclaimed electronic and electrical technologies.
The AMG division will supply modern V8 engines which the British manufacturer will tune to its own driving characteristics for the replacement of the smaller Vantage sports models. “It allowed us to concentrate our own internal resources on developing a V12 engine,” says Palmer.