Andy Palmer on Aston Martin's investment deal and future
3 February 2020 - autocar
Aston Martin's chief executive on why today's deal puts the firm in a "great position"
Aston Martin chief executive Andy Palmer talks exclusively to Autocar following the announcement that billionaire Lawrence Stroll is investing in the firm this morning.
When did you conclude negotiations?
"I'm getting too old for all-nighters, but let's just say it was a late night! It has been time-consuming, but as I sit here now the company is better funded than it has ever been in the past, with a good product cadence in plan as per the second century plan and with a commitment to build our own V6 hybrid in the UK. That is compelling."
We understand you had rival bidders to consider, so why choose Lawrence Stroll?
"Lawrence and his consortium are a group of pretty big names and it is a great sign of confidence in Aston Martin and our plan that they have invested in us. They have huge experience in luxury brands, and as much as anything that gives the company - and me personally - a group of mentors to work with.
"On a more personal level, Lawrence shares a lot of my beliefs and passions. He was clear that the mid-engined plans had to progress, he has a passion for F1, and F1's ability to sell cars for you, he can see the value of the hybrid V6 and more. And he loves cars; he's an investor who wants to engage. There would be nothing worse than a disengaged investor."
Is his investment enough to do what you want?
"To this plan, yes. It allows us to once and for all start doing the right things, chief among them controlling supply and demand in a way that Ferrari has demonstrated can be so effective. In the past we have had a balance sheet that has required us to push wholesales to pay our bills. Now we can reset, reduce our stock and start operating properly."
Shouldn't you have done that before?
"We had to pay our bills, most notably the one to build a new factory. We made that decision in 2016 when the going was good and were committed to it. You can't build a new factory and a new SUV that's true to your values by cutting corners. The costs were fixed in a bullish market that turned to crap."
How bad was last year?
"Very. Our retail sales were up 12%, our marketshare was up in a lot of markets, but the slice of the pie was less and the profitability of what we sold not good enough. The list goes on. It was a bad year."
Don't you have to take the responsibility for that?
"Yes. I'm chief executive. I'm responsible for that and for where we are. Clearly there were factors I couldn't control, which affected almost every luxury car maker, but it is absolutely my responsibility to get us through this."
What would have happened without this investment?
"We would have had to take on more debt at nosebleed levels. $100m at 15% interest is pretty alarming and inevitably would have created problems down the road. It's not where anyone wants to go, because it is toxic debt, but I'm not going to say that we would have faced doomsday - just issues to overcome down the road. Thankfully we have a solution that I sit here now and reflect on as being enormously positive for now and the long term."
Why push on with the mid-engine programme?
"Well, I'm a car guy, so that helps, but in business terms the profit margins on those cars are attractive, the market is still growing and open, and there is very little cross-shopping among buyers that would harm our other vehicle sales. Tie those facts into our involvement and belief in F1, plus the arrival as Valkyrie as our halo car, and it makes sense."
You've stated Valkyrie will arrive this year. How hard has that project been?
"We are building and running cars and it will be delivered to customers this year. That's the facts, but if you're asking if it has been easy then the answer is no. I'm not blaming anybody for that, because we are trying to make a car of the decade, if you will, a last naturally-aspirated, F1-derived car for the road. That's difficult, and if you want to know how difficult then look at how Mercedes are getting on with its own Project One. We are a bit late with the project but no more than a bit late, and it will be phenomenal. What a halo to have for our mid-engined programme."
Will the split with Red Bull Technologies affect Valhalla?
"Valhalla was always in-house and will continue to be, as will development of our V6 hybrid engine."
Could Racing Point, or Aston Martin Racing personnel, work on road car projects?
"Today, who knows? But it is possible."
Could you work with Red Bull Advanced Technologies again in the future?
"I'm not discounting anything."
How disappointing is it to delay your electric car plans, including the relaunch of Lagonda?
"You know I'm a great advocate of electric cars, going back to Leaf and the Nissan NV range, my favourite project of all. So I am wedded to the idea of electrification going forward. But we have had to cut our cloth accordingly - for me the V6 hybrid is the priority, and to be making that engine in the UK is something to be proud of.
"You also have to remember that none of our competitors, bar Porsche, will have an electric car on sale before 2025. So we are on a pretty similar timeline to them, and at the vanguard of the luxury market still. The money we have is going on making the mid-engined programme as good as it can be. The rest will follow."
Are you concerned at switching from links with a winning F1 team to a mid-grid team?
"It gives us a challenge and, if you talk to Mr Stroll, then you'll quickly learn he isn't in the paddock to just turn up. He is investing in the team to win, and we wouldn't want to be involved with a team that didn't have a chance of at least podiums."
How do you see your own future at Aston Martin now?
"I hope that people remember I've had four good years at Aston Martin and one bad one. I know people have short memories and that I am responsible for the lot, but I believe I have the support of Lawrence Stroll, his investors and all of our shareholders.
"This is a tough industry, but I've been in it 40 years and I hope people recognise that I'm good at innovating new vehicles, bringing those innovations to market and then marketing them with success. 2019 was a shite year for the industry. My job now is to navigate that, and with this investment I believe we have what we need to do that."