Aston Martin Investors Like CEO Change, Worry About Tardy Electric Pace

Aston Martin’s losses more than doubled in the first quarter, but investors seem confident the long-term future is rosy, with a bit of help from a well-seasoned new CEO.

It will have to raise its game to keep up with the move to electric cars though.

Aston Martin has gone bankrupt 7 times since its inception in 1913 but has never undergone that humiliation since it became the wheels of choice for mythical movie secret agent James Bond.

Financial circumstances turned decidedly shaky again for the luxury sports and now upmarket SUV maker since it floated in 2018. But Canadian billionaire Lawrence Stroll stepped in to bolster the finances in 2020, while a deal with Mercedes, which now owns almost 12% of Aston Martin rising to 20% in 2023, will provide the latest high-tech engines and electric vehicle technology.

Aston Martin has now hired its 3^rd CEO in as many years. Tobias Moers became CEO replacing Andy Palmer, and after months of rumors has now been replaced by former Ferrari leader Amedeo Felisa. Late last year Moers was reportedly about to be replaced by former Ford Europe chairman Steven Armstrong, but Moers hung on in there until news of Felisa’s appointment, who was Ferrari CEO from 2008 to 2016. That shouldn’t be a surprise given Stroll has long been an admirer of Ferrari’s highly successful game plan, although Felisa is 76.

Meanwhile, Aston Martin lost a pre-tax £111.6 million ($143 million) in 2022’s 1^st quarter, more than double the £42.2 million loss in the same period last year.

Reuters’ Breaking Views said Felisa is taking control at an important moment.

“Under Moers, the group cut costs and launched new brands such as the DBX707,” Breaking Views said.

Aston Martin has said its DBX707 is the most powerful SUV in the world and will be priced at $232,000 before tax, about $46,400 more than the standard DBX. The DBX707 is powered by a 4.0-liter Mercedes-Benz derived twin-turbo V-8, producing 707 hp. Later this year Ferrari will launch its first SUV, the V12 Purosangue, another competitor for the Lamborghini Urus. VW’s Audi owns Lamborghini.

“But Aston Martin is still saddled with over £1 billion ($1.23 billion) of net debt and is still burning up cash. The good news is that as new models roll out, free cash flow may only be minus £79 million this year, and turn positive in 2023, according to Refinitiv forecasts,” Breaking Views analyst Neil Unmack said.

By 2025, Aston Martin plans to sell 10,000 vehicles year, up nearly 40% from 2021. That is close to Ferrari’s annual output. Last year Aston Martin sold more than 30,000 DBXs, and orders in the first quarter rose about 60%. It delivered 14, $3.3 million Valkyries in the quarter and has a target to deliver 90 of them in 2022.

Investment researcher Jefferies, despite the worsening losses, described news of a replacement CEO as bringing better headlines and hopes of management stability.

“Whilst not good, first-quarter numbers look better than expected overall with guidance confirmed. New CFO Doug Lafferty and CEO Amedeo Felisa will hopefully help stabilize management across the company,” Jefferies analyst Philippe Houchois said in a report.

Houchois liked the 8-point improvement in gross margin as pricing improved.

But Breaking Views said Aston Martin’s slow embrace of electric vehicles is a problem.

“The snag is that Aston Martin is way behind rivals in developing electric cars, with its first pure battery ride not due until 2025. As the sector shifts away from fossil fuels, Aston Martin will need some driving worthy of the British super-spy,” Unmack said.

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