Aston Martin to downgrade?

It is hardly surprising that Moody's Investors Service has things under review as Aston runs through cash reserves. Moody's analyst Falk Frey: "The review was prompted by a significant deterioration in Aston Martin's liquidity profile as per end September 2012, caused by a much weaker cash generation and operating performance in the third quarter."

Aston has been on the brink of failure before. Its founders of 1914, Lionel Martin and Robert Bamford set up in 1922, yet were forced to wind it up in 1925. It was only Aston’s racing that sustained it under AC Bertelli and then RG Sutherland, until 1948 when it was taken over by David Brown. He had just bought Lagonda, which made available a twin overhead cam 2.5litre engine designed by WO Bentley.

Once again racing was a key and the Claud Hill-designed, essentially pre-war 2litre, driven by St John Horsfall won its class in the 1946 Belgian Grand Prix. A new car with independent front suspension and open bodywork with separate wings was built quickly for Horsfall and Leslie Johnson to win the Spa 24 hours’ race. Encouraged, the new owner embarked on a programme of racing and a range of great sports and GT cars.

In 1972 the David Brown Group sold Aston Martin to Company Developments Ltd., a Birmingham-based consortium, under accountant William Willson MBE, but following another bankruptcy the receiver sold Aston in 1975 to American Peter Sprague and George Minden for £1.05 million. They returned it to a trading profit in 1977, and William Towns styled a Lagonda saloon with advanced and extremely complicated electronic systems, which turned out to be a mistake. The firm was hit by the economic slowdown of the 1980s, sales collapsing to three cars a week and chairman Alan Curtis nearly closed it. In the nick of time he attended a Stirling Moss benefit day at Brands Hatch sponsored by Pace Petroleum, and met its proprietor Victor Gauntlett.
Curtis had plans to buy MG, and a prototype Aston-MG was built, but MG Rover would not relinquish the title.

Victor Gauntlett bought a 12.5 per cent stake in Aston Martin for £500,000. Tim Hearley of CH Industrials did he same, and Pace and CHI became joint owners in 1981. Robust, patriotic Gauntlett was executive chairman and effectively head of sales. Pace Petroleum sponsored racing and the Nimrod Group C car, owned by Aston Martin Owners’ Club president Viscount Downe, came third in the Manufacturers Championship in 1982 and 1983, finishing seventh at Le Mans. Once again, however, annual sales collapsed to an all time low of 30.

Gauntlett had to sell out to the Kuwait Investment Office in September 1983. Then, as Aston Martin needed cash, he also agreed to sell his share to American importer and Greek shipping tycoon Peter Livanos, who invested via his joint venture company ALL Inc, with Nick and John Papanicalou. Gauntlett remained chairman with 55 per cent owned by ALL, with Tickford a 50/50 venture between ALL and CHI. This ended when ALL exercised options to buy a larger share. CHI's residual shares were exchanged for CHI's complete ownership of Tickford.

In 1984 Titan, the Papanicolaou’s shipping company was in trouble, so Livanos's father George bought their shares in ALL, leaving Gauntlett once again a shareholder in Aston with 25 per cent. The company was valued at £2 million the year it built its 10,000th car.

The irrepressible Gauntlett bought a stake in Zagato, resurrecting its collaboration with Aston Martin while negotiating a return to the James Bond films. Producer Cubby Broccoli had recast Bond with actor Timothy Dalton, intending to bring Bond back closer to the original of Sean Connery. The great Gauntlett narrowly turned down the role of a KGB colonel in the film.

Sales prospered until a pressing need for investment in new models. It was time for another of the chance meetings of minds that punctuated Aston Martin history. In May 1987, Gauntlett and Prince Michael of Kent were guests of Contessa Maggi, wife of the founder of the Mille Miglia, revived as a classic event. Walter Hayes, vice-President of Ford of Europe was also a guest and although still smarting over Ford’s aborted negotiations to take over Brian Angliss’s AC Cars, Hayes knew the potential in a premium brand.

Ford took a shareholding in September 1987. After producing 5,000 cars in 20 years, the economy was improving, sales of limited edition Vantage, and £86,000 Volante Zagato coupes rose, the venerable V8 ceased and the Virage was introduced. Gauntlett remained chairman for two years while Hayes took stock, contriving an engineering rationale for a new, smaller Aston Martin. Ford took full control, Gauntlett handing over the chairmanship in 1991.

Ford put Aston into the Premier Automotive Group, opened a new factory in 1994 at Banbury Road in Bloxham. There was investment in manufacturing, production quickly increased to a record 700 in 1995; the 2,000th DB7 came in 1998 and in 2002 the 6,000th. Aston Martin now made more cars in a year than it had made in all its history. The DB7 was enhanced by the V12 Vantage in 1999, and in 2001 the V12 Vanquish.

In 2003 Aston Martin moved to Gaydon and in 2004, set up a 12,500 sq m (135,000 sq ft) AMEP engine production plant within Ford Germany at Niehl, Cologne. This could produce 5000 engines a year but under pressure from America, Ford divested itself of the Premier Automotive Group, selling first Aston Martin, then Jaguar, Land Rover and Volvo. UBS AG was appointed in August 2006 to sell Aston Martin by auction and on 12 March 2007 a consortium led by Prodrive chairman David Richards and co-owned by Investment Dar and businessman John Sinders, purchased it for £475m ($848m). Prodrive had no financial involvement and Ford kept a stake, valued at £40 million ($70 million).

Now there have been bids from Investindustrial and Mahindra & Mahindra Ltd. Investindustrial, a European private-equity fund based in London, offered just under £250 million, Indian Mahindra then making a higher bid. The winner would get 50 percent of voting rights and a 40 percent equity stake. Investindustrial plans to use technology and car parts from AMG Mercedes-Benz. Aston Martin still gets engines from Ford but lost access to other resources after Ford sold it.