'McLaren and Aston Martin can thrive by giving up their independence'

Road Cars

They have already given up their British ownership, and now it makes sense for McLaren and Aston Martin to relinquish their independence for profit and greater success, writes Andrew Frankel

McLaren Artura outside the technology centre in Woking

Development costs for McLaren's new Artura could have been shared if the firm was part of a conglomerate

McLaren

Author

Andrew Frankel

I read with a certain sense of relief that Aston Martin will be raising some £653 million over the next few months through a deal involving money contributed by the Saudi Public Investment Fund (PIF), and existing shareholders Mercedes-Benz and Lawrence Stroll’s Yew Tree Investment Group. The money means the company, which prior to this deal was mired in a near £1 billion debt, will keep the wolves from the door for a while yet. Maybe even permanently.

But every time a new round of funding is announced for either Aston Martin or McLaren, I find myself wondering again whether these companies best interests may not lie in being majority owned by some vast automotive concern.

And it saddens me to say this because in my heart there’s a part of me that would like these companies to be not just British, but British-owned too. But the truth is that ship has long since departed the dock. Aston Martin is a public company whose largest shareholders are PIF (essentially the Saudi state, Canadian Lawrence Stroll and Mercedes-Benz whose share will rise to 20 per cent next year). The McLaren Group remains privately owned, the majority share by the Bahrain royal family.

First Aston Martin DBX drives off the production line

Independence gave Aston Martin full control over DBX development — at a hefty price

Aston Martin

So why stay, for want of a better word, ‘independent’? I asked this question to former Aston Martin CEO Andy Palmer while he was still in the job, the man who floated Aston Martin on the Stock Exchange. It was a matter very close to his heart. “Look at the DBX,” he said, referring to his just launched SUV. “That’s a brand new car on a brand new platform developed exclusively for and by us, and built in a brand new factory. Do you think we could have done that if we’d been owned by a car company?” It’s an interesting question but the answer is, no, probably not. The DBX would have had to have been derived from some pre-existing platform already in use elsewhere within the group. And there’s a good chance that would have made it less attractive, because there are certain hard points of these platforms that are either too difficult or costly to change, and it may even have looked less like an Aston Martin.

From the archive

Palmer wasn’t finished. He preferred the speed of response of the small company where no decision needed to be referred back up the chain of command and he liked not being part of a stable where what you make is determined as much by the other cars with which you share stable space as what you really think is right for the company.

And I understand all of that. But so too do I understand that for every ‘independent’ McLaren and Aston Martin, so too is there a Rolls-Royce or a Bentley, also blue-blooded British car companies, but wholly owned by massive automotive manufacturers. And the truth is that while McLaren and Aston Martin are both famously troubled companies, despite the undoubted excellence of much of what they make, Rolls and Bentley struggles ended the moment they were snapped up by, respectively, BMW and Volkswagen. And, yes, I know BMW owns only the right to call a car a Rolls-Royce but we won’t let that delay us here. For these two companies, both of which have been to the very edge of the abyss and back, seem to post record sales after record sales. Is this a coincidence? I think not.

Because a BMW or a Volkswagen brings so much more than money to the table. It brings massive economies of scale, it brings technological know-how of a kind a small independent could scarcely imagine, it brings brains by the thousand, and it brings purchasing clout. I recall once being told that before it was bought by VW, someone at Bentley rang up Bosch and asked if it would provide a fuel injection system for the big old V8. When asked what sort of volumes were required the Bentley engineer said around 1000 units per year. At which point the person on the other end of the line started laughing. When the same engineer called back a few months later and asked the same question, but with the company now owned by possibly Bosch’s largest single customer, it was met by an altogether more serious response and, in time, the requisite Motronic hardware. Being part of a massive corporation also means your fleet emissions are absorbed into those of the group.

Porsche Cayenne and Macan GTS

Sharing platforms for the Macan (left) and Cayenne with other VW Group companies has made Porsche wildly profitable

Porsche

But it’s not all upside. Palmer was right: if you’re on the team you have no choice but to play the game. Do you think Porsche would have put a flat four in the Cayman and Boxster were it not owned by Volkswagen? Me neither. And independence doesn’t mean deals can’t be done: the Porsche Cayenne was the result of a joint venture between the then still-independent Porsche and the VW Group: Porsche got the gig to develop a new SUV platform which could be used by VW and Audi, the Cayenne came as part of the deal and transformed Porsche’s business forever.

Ownership by a car brand can go wrong too, fatally in the case of BMW-owned Rover and GM-owned Saab. You can also outgrow these relationships. So much has Porsche thrived since it was taken over, that despite accounting for only around 3.3 per cent of total Volkswagen Group volume each year, it delivers about 25 per cent of its profit. So now Porsche is thinking it wants to smell fresh air again and will launch its IPO later this year, with a likely valuation of between $80-90 billion, money VW needs to finance the electrification of its ranges. Ferrari removed itself from Fiat ownership in 2015 (although it remains a major shareholder), went public and has never looked back.

But there is a time and place: Ferrari and Porsche are both hugely successful and massively profitable, which is not something you can say about McLaren or Aston Martin right now. Admire both companies as I do for continuing to go it alone (Mercedes’ soon to be 20% stake in Aston notwithstanding), I can’t help think that the short to medium term interests of both would be better served under a benevolent automotive proprietor.

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