As many will remember, James Bond's Aston Martin DB5 featured revolving number plates, from British to French regulation nomenclature. External to the car's store of other gadgetry, this 'plate spinning' capability allowed for re-invention to suit the changed environment.
It is a useful metaphor in this day and age, since whilst the title of 'Automaker' reflects a prime function of a firm – its origins and most visible offering – companies have over the last century and into the 21st century become far broader in their operational remit.
Value capture for the greatest value creation has been the historical imperative, and unsurprisingly that has meant the conglomeration of those previously separate links of the value chain that offered best reward. From raw materials acquisition all the way through to the after-sales 'experience'.
The fables of Henry Ford's expansion of his employee customer-base - via the $5 per day wages model – went hand in hand with FMC's expansion of autonomy for its materials supply – via the South American siting of 'Fordlandia and 'Belterra'' to access forestry for wood and rubber. Beyond reducing the cost of FMC's input prices, it was seen as a grand schema to essentially colonize S. America (or $.America as some commentators then proclaimed it) to help unify the continent.
Thus in the early part of the 20th century, the automobile was seen as an economic force for global change and good, woven into foreign policy hopes. Yet the latter half of the century such failed attempts in what was a 'de-colonizing' era auto-saw companies re-orientate and re-focus upon the up-stream elements of retail and associated consumer (and thus inter-connected wholesale) financing.
Such actions were of course reflective of the specific economic growth period (ie the stage of capitalism per se), and so as the national context changed so too did economic interaction. Compare Ford to FIAT, the latter of which existed in a very different, pro-socialist environment which held far longer onto the associated downstream activities which fed its factories. (Arguably, right up until this year, and arguably still not fully de-tangled).
By the 1990s the new business mould was set, by which time finance played as greater a part in income capture as vehicle production, with disposals of what were integrated supply-chain vendors such as Delphi and Visteon by GM and Ford, though of course they rightly took full advantage of purchasing supplier shares when times proved prudent, so as to gain greater hold on ensuring supply feed and pricing.
Yet in the main, once through the recessionary early 90s, buoyant capital markets and economies allowed for ever greater vehicle sales to new customers and an ever cheapening cost of capital through which the sales could be obtained. This symbiotic relationship strengthened by the purchase of external finance houses (to gain immediate scale and create cross-tie selling opportunities) and the creation of internal finance companies so as to grow internal capabilities and keep a sharper eye upon the vehicle vs financing inter-relationship: especially important for managing the fine balance between fleet-sales and the managing of used cars' residual values.
In essence car-makers - thanks to Wall Street's own advisory opportunism and stock listing demands - become bankers.
Whilst such actions may fly in the face of the idea of core-competencies, automakers expanded their capabilities to prove that they were as adept in this field as in manufacturing cars and trucks, indeed the activity helped them maintain credit ratings and thus investor interest.
Thus history demonstrates that the larger automakers had become (critically) systemic components of a nation's or region's economy, and in the US's case, the argument for 'bail-outs' was hard to combat, even if the execution created grounds for criticism.
[NB As seen by the Congressional Oversight Report dated 13th January which all too lightly slaps the hand of the Obama administration for the irreparable loss of public funds, by selling the first GM stock tranche at $33 instead of the calculated $45 required to fulfill the public purse. This investment-auto-motives believes was done so as to leave 'much meat on the GM bone' by which the stock market itself could benefit – the 15% rise since IPO listing demonstrating that assumption.
[Interestingly, compare GM to the upcoming Facebook IPO, in which US buyers cannot participate – is the latter seen as too much of a bubble risk to the US index? An interesting academic case study].
Whilst the corporate interaction between vehicle sales and financing is of course nothing new, by 2007 the scale and management task in maintaining this symbiosis, with its tentacle-like extensions – grew to massive proportions.
Here history itself provides a lesson, exemplified by Pierre Alexandre Darraq in 1890s France. His interest in the automobile was purely financial. The income promise generated by (the short-lived achievement of) mass-manufacture, tied to associated 3rd party financing a polar opposite to his contemporaries' engineering focus to create a legacy.
Playing one side of the financing coin, Darraq company share issuances took place in Germany (to Opel), in Britain (with the Darraq Co), in Italy (to the pre-curser of Alfa Romeo) and in Spain; all as part of pan-European strategy devised seemingly by certain French bank. Playing the other side of the coin, consumer finance was offered via those companies and/or the French bank at lower than market rates. (Though sold to the obviously wealthy who did not need credit, the financing was viewed as part of a quid pro quo relationship).
Thus the dualistic interplay is age old, especially where a holding company is formed, an understandable part of its own business model, such 'plate spinning' very much part of the necessary work for successful commercial 'take-off'.
As the early pioneering decades gave way to those which saw efficiently honed production, the very nature of an expanding global automotive market also demanded geographical expansion of company abilities. Later, the effective commoditization of the car - generated by the wash of financing - meant that corporations had construct themselves as scale-driven competitors, and so effectively become 'lead-share market-makers', a pattern seen since the 1930s in the USA everytime an economic downturn consequentially expelled the smaller firms.
However, cars and trucks of course became central to the national economic model in all mid-stage industrialised countries. And as GDP slowly increased so did the public's comfort and level of expectation, hence old automakers joined by new. All having to create empires which could handle a myriad of requirements; across procurement, logistics, manufacturing, marketing, design, development, retailing etc etc.
Such 'plate-spinning' became ever more complex, and the ability to manage a specific portion and/or portions of the internal value-chain became the lever(s) of competitive advantage. From lean manufacture to life-cycle planning to R&D strategy to brand development to product personality and feature content to retail spaces to today's reach of 'concierge service' (this trikling-down from luxury and into the premium sector).
As a natural consequence, the number of plates that must be spun by an individual company - or indeed competitor peer set - depends greatly upon the expectation of the customer, competitor action, and of course a corporate desire to engage into and exceed both client and foe mindsets. All in order to raise its ability to massage the client perception, attitude, reaction and of course ultimately, the company's top line. The ultimate goal to create price inelasticity as a central tenent of the business model.
Obviously, this most prevalent for those within the luxury product realm, themselves now increasingly the 'centre of gravity' for western-world production and export.
Unlike their 'commoditized' opposites in price-sensitive sectors, premium and luxury brands are to a great extent the 'lifestyle purveyors and intermediaries' which form part of a wealthy client's 'reality'.
As part of such a 'reality manipulation' remit, they must offer 'Life Extensions' (to co-opt the parlance of the film Vanilla Sky). To offer something previously never experienced, or to do so with greater aplomb.
Yet, what can you give the man or woman with everything?
Vanilla Sky's main character David Aames is the man with everything: a publishing empire, a Park Avenue apartment, a classic Ford Mustang (though he literally dreams of a Ferrari 25OGTO), and an 'FB' girlfriend with model looks. No man could seemingly want more. But what David really wants is love and reliability, attachment and security.
In today's socially-frenetic hyper-consumerist culture where constant change rules as the norm, those central humanistic desires appear to be spiralling-away in ever decreasing circles within the human experience. The humanistic desire replaced by brand-connections in the retail and virtual realms.
This is only a part of the PESTEL environment in which any B2C company (automotive especially) must participate and offer, with varying levels of the psychological and esoteric.
Once upon a time something like an 4th hand used Toyota provided these innate satisfiers to a newly licensed 16/17 year-old teenager. Yet that, and far beyond, is something that even the likes of Bentley, Rolls-Royce & Maybach must proffer to the ever so world-weary forty-something adults that are 'cash-rich and time-poor'.
Such ability to engineer delight often depends on the size of the vehicle programme budget, its boundaries dictating the level of innovative freedom allowed; with ideally such innovation derived from pre-phase R&D efforts.
When not part of a bigger corporation with funds to throw at innovation, it may be harder still. Thus for the likes of Aston Martin and its smaller peers to orchestrate such innovation, there is greater reliance upon internal imagination. A need for dedicated and innovative personnel who can add product/brand psychological value, both during concept gestation, and through wholly idiosyncratic 'created experiences' once the car is in the client's hands with the brand melding into their hearts.
AML an others of course already recognise the theory of this , with the efforts to create a world of 'Aston Martin' that goes beyond the sector norm of track-days and VIP events, via the brand pillar of amateur race-team support and up-scale merchandise. To do so, it has embraced the realms of 'art' to both create lifestyle links and brand-associations. However, presently it seems directed at the 'petit-bourgeois' yet monied provincial buyers - that no doubt represent much of the client-base - who likes to see an 'arty' picture of his/her car on their lounge or dining room wall. But in such a world, customers must be psychologically led, if anything, to balance the obvious (and income necessary) typical mind-set chasing. AML and others need more than replicating the metal assuage of the 1980s Testarossa on the boy's bedroom wall.
Compare this with FIAT's seeming arms-length efforts to strike at the heart of the London art establishment, with a Tate Britain gallery showing an 'old-new built 126' showing the 1970s vs 2000s vehicle time-warp (with inference of panel match build quality), and an original 1960s 500 held by a seeming giant child's hand with inference of the new 500 being a life-toy for the fully grown adult today.
And in turn, see FIAT's work with Ferrari via Ferrari Heritage (car reconstruction), Ferrari's client 'Race Stable' (for special edition models, and Ferrari World for the tourists of the Middle-East.
Today, more than ever, from London's Berkeley Square to Beijing's Regent area, luxury product companies are faced with a slow but strong rebound in the West within which loyalist and new clients will want to see new marque dimensions and personifications – both as distinct to the company and as a personal 'rub-off''.
In the Near and Far East, the seeming continuous stream of new GCC and Asian clients, once past the novelty of acquisition and 'arrived' ownership may also expect a level of marque (and to them by default associative cultural) immersion.
This luxury realm learning of course should trickle-down in time to lower sectors, brands and products.
Recently the global component supply chains were fractured and are re-set via ongoing M&A, internal company efficiencies are being strictly maintained for FCF & working capital purposes, necessarily buoyant balance sheets are kept for investor interest, and within that 're-set' context board members and their non-execs must be prepared to reach ever further-out. Into new exploratory and uncomfortable areas, to spin yet more additional plates set-up within the value chain and across the retail realm.
This new era has only just begun, and the doors of consumer and corporate perception are being expanded.
Lastly, Dr Piech and Porsche AG (as was) was derided for becoming “a Hedge Fund with a car company attached”. It was only its commitment to both itself and customers that allowed it to become so. Though much to the chagrin and envy of its competitors who were given a clear lesson in how a high margin auto-business evolved over decades could give high FCF from which to create a synergistic financial powerhouse. Businesses that could be both autonomous yet mutual rewarding, and all furthermore, all to the German national good. (Ferdinand Piech may well privately think “I'm a legend”, and considered arrogant for doing so, but ultimately he is right.
Moreover, today and situated to the east, South Korea's Hyundai Motor marches forward, with conglomerate interests in its own brokerage house to trade its way into the future via close contact with the capital markets; a model Chinese exporters will no doubt mimic with even greater strength in times to come.
Thus, just as James Bond kept his plates spinning relative to the environment, so must the auto-industry.
As 'Vanilla Sky' asserts in its opening* and closing sequences...“Open Your Eyes”.
*Post Script:
the opening sequence also depicts the TV showing Audrey Hepburn's 'Sabrina', like most of her films demonstrating character self-development, a Directorial short-hand for Vanilla Sky's plot-line.
Though perhaps such a viewpoint is relevant to the US auto-industry today, it might gain greater impetus from 'Billion Dollar Brain', since all investors, companies and governments must think extremely deeply as the sector is re-moulded.
Showing posts with label Aston Martin. Show all posts
Showing posts with label Aston Martin. Show all posts
Thursday, 20 January 2011
Tuesday, 7 December 2010
Company Focus – Aston Martin Lagonda – Stretching its Wings with Cygnet.
The emergence of the premium city car came about with the Daimler's brave introduction of the innovative A-class in 1997. It was quickly nick-named 'The Earl of Sandwich' amongst the UK auto-industry given its high price position and innovative twin-layered floor.
Developed from the smaller 1993 'Vision A' concept, which size-wise sat equidistant between production A-class and >Smart ForTwo, so spawning 2 original concepts for the German corporation. A company which at the time had enough liquidity and credibility to take over Chrysler so as to seek platform synergies, accordant cost savings and operational stretch across a broader consumer market. History shows how this corporate ambition flailed, but the A class, along with its less numerous but technically visionary Audi A2, set the scene for establishing the genre as a credible sector.
Premium small cars had been undertaken before, as seen in the 1960s with the effectively coach-trimmed Mini offerings from Hooper Coachworks for Peter Sellers, Wood & Pickett for George Harrison of The Beatles), and the Downton variant, all of course based on the original primary premium small car, the performance orientated Mini Cooper & Cooper S. FIAT of course had Abarth & Giannini variants of the 500 (Cinquecento)and Renault the 8 Gordini.
The French in particular applied up-market fashion-label marketing ties for limited run editions - as seen with the Peugeot 205 Lacoste and others, this effectively copied in the late 1990s by Rover Group for the limited edition Paul Smith 'designer' Mini.
And obviously, those original, inspiring auto-centric monikers have been of course been revived, since the re-introduction of Mini by BMW, the 'Cooper character' utilised as the 'centre of gravity' when devising the reborn range. Abarth and Gordini more recently used to give provenance to the Italian and French makers' higher priced variants. So far the FIAT 500 Abarth Ferrari edition, and one-off Rolls-Royce trimmed Mini reflect the ultimate yet.
Thus it could be said that where possible in the 2000s, most small car makers have adopted the idea of “Putting on the (Mini) Ritz'...and in doing so, as the song says 'Trying very hard to look like (Gary) Cooper.”
Harrods of Knightsbridge, here in London, currently showcases the latest premium city car offering, with Aston Martin Lagonda's much awaited and debated 'Cygnet'. Never have the Aston 'wings' adorned anything so brand-radical, such a small and up-right car sourced from a mainstream producer, re-worked heavily cosmetically and partially mechanically.
It is a landmark vehicle for the company, which although today stands bigger and stronger than almost ever thanks to Ford's previous governance – especially when compared to its its Lionel Martin 'origination' or David Brown / Victor Gauntlett 'stewardship' days – faces very different business challenges. Back into the private ownership hands of UK and Middle-Eastern investors, today the company must leverage its past experience which brought both increased professionalism, improved commercial acumen, scale growth and so production economies, advantageous infrastructure facilities, a worldwide dealer-base etc.
In short Ford help massively to provide the 'spring-board' for the firm to develop into a very different entity – stronger and more ambitious – and having to be so to convincingly compete against those 'parentally protected' such as: VW's Bentley, FIAT's Ferrari/Maserati, Daimler's Mercedes/AMG and assisted McLaren, BMW's M-series and even Rolls-Royce with its expected Ghost Sports-Coupe.
This independent AML however, like all premium auto-makers, did suffer heavily from the consumer impact of the financial collapse. So beyond pairing back to the bone operationally, this headwind event along with important others - such as the critical incoming CAFE-type emissions regulations - has made the management at its Gaydon HQ think differently about exactly how to create a tenable and ideally prosperous future.
It unsurprisingly sees that through expanding the business both in terms of breadth by re-introducing the Lagonda marque at some point, and expanding the Aston Martin product-line and so reach into new premium markets. That has meant the introduction of the 'Rapide' 4-door coupe and recent preview of 'Cygnet'. These more nominally mainstream cars thus respectively give additional 'breadth' and 'depth' through sub-sector entry, and thus herald new stakes in the ground as claims for new territory.
However, even before the event of the 2008 financial collapse and even on the back of record global unit sales, AML will have recognised that its independence and self-reliance would only be possible with external assistance from one or more major manufacturers. Hence, to try and obtain the reduced procurement costs available to their counterparts, to provide accessible technology streams ideally across the 5 prime vehicle engineering areas so that AML could better devise its own R&D strategy, and so to offer the possibility of adapting and utilising off-the-shelf systems, whole platforms or indeed whole vehicles. The ambition being that these out-sourced R&D and tooling items have already absorbed in part or fully through a 3rd party's own in-house project amortisation.
As CEO Ulrich Bez and the company's owners saw the 2007/8 demolition of both private wealth and effectively closed bank funding access the decision to act strategically and quickly on what were probably already seen as plotted strategic possibilities was taken: to both maintain backing of 'Rapide' with in house resources, and leverage Toyota and its (as yet to be applauded) iQ model to provide for Cygnet.
Thus Cygnet has been a leap of faith on many levels.
However, although large by UK independent manufacturer standards, AML is in structural capacity terms a minnow when compared to VW, Daimler or BMW, so fortunately without the obligation to fill factory production space. Indeed it was always known that 'Rapide' would be assembled elsewhere, as stated in the previous Arabic post, originally ideally in Kuwait given Investment DAR's national development interests, but almost always set for the likes of Steyr (as seen), Huliez, Pininfarina or similar to ensure project delivery timing and product quality.
The ability to process manage 'Rapide' outsourcing in a professional manner (as oppose to the ad-hoc method with earlier 1960s-80s projects) plus the experience of former interaction with Ford's PAG should have step by step generated a level of ease within AML regards running what are effectively joint-venture vehicle programmes.
Thus, from a market perspective, given he apparent buoyancy of the premium small car sector (and the CAFE need to off-set AML's large car V12 & V8 emissions) it was inevitable that a small car project exploration would take place. And given the realistically restricted options available, any project solution would involve adoption of a major car maker's A or B-segment vehicle. The Germans would not (understandably) be willing to share proprietary technology with what is seen as a high-threat competitor, so it was no surprise to investment-auto-motives that Toyota – already a supplier of power-train to UK sport-scar builders and with its own UK manufacturing presence and good political relations – provided the (iQ) platform as the basis for Cygnet. Indeed, from a commercial angle, almost a given 'on a plate' since the top-spec, fully-loaded Japanese iQ models – typically unavailable anywhere outside Japan – could be used as a base.
However, it has caused much debate, both by those shoppers and tourists in Harrods, within the auto-industry and amongst the public-facing car press.
Of the former, a very quick, informal survey of those those that eyed the IQ showed unsurprisingly men frowning and women smiling. In the latter it has divided 'for' and 'against' opinions respectively between the editor of Autocar magazine and a contributor to Marketing Week magazine.
The differential being that there is a major chasm between 'brand extension' as with Ferrari's use of caps, shirts etc (ie merchandise) and 'product-line extension' as reflected by a new vehicle product launch (ie as part of core range). The argument is that these two very different actions have different affects on the core personality, credibility and so reputation of a brand. Much of course depends upon the execution of the newly introduced product, in essence “how true is it to brand DNA amd general perception” and indeed “how much DNA-stretch do the products of a particular brand actually have ?” Get it right and the result flies off the shelf...get it wrong and it could convey the practice of cynical cold marketing.
From a generalist perspective regards the Cygnet case, investment-auto-motives agrees with the concerns of the marketeer. For most 'autophiles' who respect the lineage and GT/racing character of Aston Martin it is indeed a stretch far too far. The product execution of heavy 'design cue' adaption of an iQ is not credible. Akin to a shapeless, wannabe gym-bunny decked from head to foot in sports-logo sponsored lycra...but inevitably destined to sit infront of the TV.
This was precisely why investment-auto-motives wrote a column pointing out that Cygnet should be branded Lagonda, so as to sit alongside its future (possibly Daimler sourced) Lagonda badged SUV big brother. In essence to create the rational basis and segment stretch for a new domain of
vehicles, Lagonda as an affiliated but distinctly separate brand to A-M that had the innate new-brand flexibility that enabled credible adaption of others' products; that was the central raison d'etre.
[NB investment-auto-motives believes the down-sizing west presently lives through an era pertaining to the 'paradoxical premium'. This was previously noted in the TV advertising for Mini 4 (ie Countryman), and conveys to the consumer (and allows him/her in turn) to demonstrate a level of 'constructed irony' regards the premium good. It follows in the pastiche tradition, and is brilliantly demonstrated by a product and display toward the rear of Harrods.
Here the Theo Fennel brand has produced fine silver crafted 'coats and caps' for the classic everyday items of the English breakfast table, ie HP sauce bottle, Heinz ketchup bottle, Marmite jar, Coleman Mustard jar and other similar condiment items. These silver casings are blatantly superfluous to function, yet 'work' as they combine innate grandioseness with the balance of contextual humour. In short a psychologically and sociologically balanced premium offering for a mundane activity.
Such examples should be 'digested' to help inspire similar efforts within the automotive realm. A light-hearted attitudinal direction may have seen Cygnet 'play' further on its origins, in a similar vein to the 1998 New Beetle's inclusion of the abstract flower and vase alluding to original Beetle].
However, here is the rub for marque purists with regards to Aston Martin.
Having previously set-out the strategic imperative, it seems that a very real operational, short-term cash-flow rational has been the basis for the A-M badged Cygnet. Cygnet is very probably helping to underpin that all important corporate agenda right now: accessible and low cost working capital.
Gaydon has undoubtedly given the issue much thought, and reached its conclusion that beyond the fact that the global A-M global dealer-base needs new product beyond Rapide which accords to the times and broadens the client-base. Yet more important for the AML HQ is the fact that short-term pressures to generate income is very probably nigh on critical.
This period is all too telling, since having seen the peaks and troughs of the company's past, Dr Bez and colleagues undoubtedly wish to stabalise the sales/income curve. So as to overcome the all-too typical wide-swing cyclicity typically seen by independent premium sportscar makers. Gaining improved control of the demand-side of the business model as well as the supply-side is the ideal of all companies, but perhaps none so much as the likes of AML with so exposure to events such as recessions, oil crisis, 'down-shifting' sociological trends etc. (This is something both Morgan and Ferrari at either end of that spectrum in size and product offering have done).
The ultimate paradox for the brand purist is that – depending on its production numbers and 'exclusivity' – the parody Cygnet will sell well. There is always a market for limited number, exclusive club fashion goods, no matter what their logical or pseudo logical rationale. And that income will be welcomed by Ulrich Bez, Dave Richards, John Sinders and the Kuwait based EFAD Group / Investment DAR.
Whilst those high net worth ladies who have earned their own wealth take a male attitude toward the car, and would only ever buy a Vantage or better, the Cygnet is the perfect 'designer' Christmas present for those cosseted daughters, wives and girlfriends of wealthy men. Importantly, it is only available to Aston Martin customers, thereby generating a level of demand amongst a section of people who want to have themselves recognised as the preferred clients of AML.
Moreover, it will probably act as as the 'City run-about' for wealthy families who have a car 'tied' to their London, Paris or Milan apartments sat within basement car-parks. Or indeed as the 'Marina run-about' in the guise of a pseudo modern-day successor to the canopy-topped, wicker-seated FIAT 600 Jolly. But for most users inhabiting the suburban fringes, it simply allow them to say “my other car is an....Aston Martin”. Cygnet then, being AML client only, acts as lifestyle mirror for times when driving the 'real' Aston is inconvenient.
Indeed, very probably the Arabic owners of AML and Harrods will individually take one or two so as to help prop up the company and their associated holdings – and if one were in their position of company stewardship and wealth, one would have to ask “well why not?”.
Yet, let's hope that they also ask for the Lagonda-bronze body colour and an after-fit Lagonda badge. Why just start a fashion trend, when you personally have the capability to start a new company?
Those lucky few will just need to find a very large, car-sized, box that says “Eid Mubarak” and “Merry Christmas”.
Developed from the smaller 1993 'Vision A' concept, which size-wise sat equidistant between production A-class and >Smart ForTwo, so spawning 2 original concepts for the German corporation. A company which at the time had enough liquidity and credibility to take over Chrysler so as to seek platform synergies, accordant cost savings and operational stretch across a broader consumer market. History shows how this corporate ambition flailed, but the A class, along with its less numerous but technically visionary Audi A2, set the scene for establishing the genre as a credible sector.
Premium small cars had been undertaken before, as seen in the 1960s with the effectively coach-trimmed Mini offerings from Hooper Coachworks for Peter Sellers, Wood & Pickett for George Harrison of The Beatles), and the Downton variant, all of course based on the original primary premium small car, the performance orientated Mini Cooper & Cooper S. FIAT of course had Abarth & Giannini variants of the 500 (Cinquecento)and Renault the 8 Gordini.
The French in particular applied up-market fashion-label marketing ties for limited run editions - as seen with the Peugeot 205 Lacoste and others, this effectively copied in the late 1990s by Rover Group for the limited edition Paul Smith 'designer' Mini.
And obviously, those original, inspiring auto-centric monikers have been of course been revived, since the re-introduction of Mini by BMW, the 'Cooper character' utilised as the 'centre of gravity' when devising the reborn range. Abarth and Gordini more recently used to give provenance to the Italian and French makers' higher priced variants. So far the FIAT 500 Abarth Ferrari edition, and one-off Rolls-Royce trimmed Mini reflect the ultimate yet.
Thus it could be said that where possible in the 2000s, most small car makers have adopted the idea of “Putting on the (Mini) Ritz'...and in doing so, as the song says 'Trying very hard to look like (Gary) Cooper.”
Harrods of Knightsbridge, here in London, currently showcases the latest premium city car offering, with Aston Martin Lagonda's much awaited and debated 'Cygnet'. Never have the Aston 'wings' adorned anything so brand-radical, such a small and up-right car sourced from a mainstream producer, re-worked heavily cosmetically and partially mechanically.
It is a landmark vehicle for the company, which although today stands bigger and stronger than almost ever thanks to Ford's previous governance – especially when compared to its its Lionel Martin 'origination' or David Brown / Victor Gauntlett 'stewardship' days – faces very different business challenges. Back into the private ownership hands of UK and Middle-Eastern investors, today the company must leverage its past experience which brought both increased professionalism, improved commercial acumen, scale growth and so production economies, advantageous infrastructure facilities, a worldwide dealer-base etc.
In short Ford help massively to provide the 'spring-board' for the firm to develop into a very different entity – stronger and more ambitious – and having to be so to convincingly compete against those 'parentally protected' such as: VW's Bentley, FIAT's Ferrari/Maserati, Daimler's Mercedes/AMG and assisted McLaren, BMW's M-series and even Rolls-Royce with its expected Ghost Sports-Coupe.
This independent AML however, like all premium auto-makers, did suffer heavily from the consumer impact of the financial collapse. So beyond pairing back to the bone operationally, this headwind event along with important others - such as the critical incoming CAFE-type emissions regulations - has made the management at its Gaydon HQ think differently about exactly how to create a tenable and ideally prosperous future.
It unsurprisingly sees that through expanding the business both in terms of breadth by re-introducing the Lagonda marque at some point, and expanding the Aston Martin product-line and so reach into new premium markets. That has meant the introduction of the 'Rapide' 4-door coupe and recent preview of 'Cygnet'. These more nominally mainstream cars thus respectively give additional 'breadth' and 'depth' through sub-sector entry, and thus herald new stakes in the ground as claims for new territory.
However, even before the event of the 2008 financial collapse and even on the back of record global unit sales, AML will have recognised that its independence and self-reliance would only be possible with external assistance from one or more major manufacturers. Hence, to try and obtain the reduced procurement costs available to their counterparts, to provide accessible technology streams ideally across the 5 prime vehicle engineering areas so that AML could better devise its own R&D strategy, and so to offer the possibility of adapting and utilising off-the-shelf systems, whole platforms or indeed whole vehicles. The ambition being that these out-sourced R&D and tooling items have already absorbed in part or fully through a 3rd party's own in-house project amortisation.
As CEO Ulrich Bez and the company's owners saw the 2007/8 demolition of both private wealth and effectively closed bank funding access the decision to act strategically and quickly on what were probably already seen as plotted strategic possibilities was taken: to both maintain backing of 'Rapide' with in house resources, and leverage Toyota and its (as yet to be applauded) iQ model to provide for Cygnet.
Thus Cygnet has been a leap of faith on many levels.
However, although large by UK independent manufacturer standards, AML is in structural capacity terms a minnow when compared to VW, Daimler or BMW, so fortunately without the obligation to fill factory production space. Indeed it was always known that 'Rapide' would be assembled elsewhere, as stated in the previous Arabic post, originally ideally in Kuwait given Investment DAR's national development interests, but almost always set for the likes of Steyr (as seen), Huliez, Pininfarina or similar to ensure project delivery timing and product quality.
The ability to process manage 'Rapide' outsourcing in a professional manner (as oppose to the ad-hoc method with earlier 1960s-80s projects) plus the experience of former interaction with Ford's PAG should have step by step generated a level of ease within AML regards running what are effectively joint-venture vehicle programmes.
Thus, from a market perspective, given he apparent buoyancy of the premium small car sector (and the CAFE need to off-set AML's large car V12 & V8 emissions) it was inevitable that a small car project exploration would take place. And given the realistically restricted options available, any project solution would involve adoption of a major car maker's A or B-segment vehicle. The Germans would not (understandably) be willing to share proprietary technology with what is seen as a high-threat competitor, so it was no surprise to investment-auto-motives that Toyota – already a supplier of power-train to UK sport-scar builders and with its own UK manufacturing presence and good political relations – provided the (iQ) platform as the basis for Cygnet. Indeed, from a commercial angle, almost a given 'on a plate' since the top-spec, fully-loaded Japanese iQ models – typically unavailable anywhere outside Japan – could be used as a base.
However, it has caused much debate, both by those shoppers and tourists in Harrods, within the auto-industry and amongst the public-facing car press.
Of the former, a very quick, informal survey of those those that eyed the IQ showed unsurprisingly men frowning and women smiling. In the latter it has divided 'for' and 'against' opinions respectively between the editor of Autocar magazine and a contributor to Marketing Week magazine.
The differential being that there is a major chasm between 'brand extension' as with Ferrari's use of caps, shirts etc (ie merchandise) and 'product-line extension' as reflected by a new vehicle product launch (ie as part of core range). The argument is that these two very different actions have different affects on the core personality, credibility and so reputation of a brand. Much of course depends upon the execution of the newly introduced product, in essence “how true is it to brand DNA amd general perception” and indeed “how much DNA-stretch do the products of a particular brand actually have ?” Get it right and the result flies off the shelf...get it wrong and it could convey the practice of cynical cold marketing.
From a generalist perspective regards the Cygnet case, investment-auto-motives agrees with the concerns of the marketeer. For most 'autophiles' who respect the lineage and GT/racing character of Aston Martin it is indeed a stretch far too far. The product execution of heavy 'design cue' adaption of an iQ is not credible. Akin to a shapeless, wannabe gym-bunny decked from head to foot in sports-logo sponsored lycra...but inevitably destined to sit infront of the TV.
This was precisely why investment-auto-motives wrote a column pointing out that Cygnet should be branded Lagonda, so as to sit alongside its future (possibly Daimler sourced) Lagonda badged SUV big brother. In essence to create the rational basis and segment stretch for a new domain of
vehicles, Lagonda as an affiliated but distinctly separate brand to A-M that had the innate new-brand flexibility that enabled credible adaption of others' products; that was the central raison d'etre.
[NB investment-auto-motives believes the down-sizing west presently lives through an era pertaining to the 'paradoxical premium'. This was previously noted in the TV advertising for Mini 4 (ie Countryman), and conveys to the consumer (and allows him/her in turn) to demonstrate a level of 'constructed irony' regards the premium good. It follows in the pastiche tradition, and is brilliantly demonstrated by a product and display toward the rear of Harrods.
Here the Theo Fennel brand has produced fine silver crafted 'coats and caps' for the classic everyday items of the English breakfast table, ie HP sauce bottle, Heinz ketchup bottle, Marmite jar, Coleman Mustard jar and other similar condiment items. These silver casings are blatantly superfluous to function, yet 'work' as they combine innate grandioseness with the balance of contextual humour. In short a psychologically and sociologically balanced premium offering for a mundane activity.
Such examples should be 'digested' to help inspire similar efforts within the automotive realm. A light-hearted attitudinal direction may have seen Cygnet 'play' further on its origins, in a similar vein to the 1998 New Beetle's inclusion of the abstract flower and vase alluding to original Beetle].
However, here is the rub for marque purists with regards to Aston Martin.
Having previously set-out the strategic imperative, it seems that a very real operational, short-term cash-flow rational has been the basis for the A-M badged Cygnet. Cygnet is very probably helping to underpin that all important corporate agenda right now: accessible and low cost working capital.
Gaydon has undoubtedly given the issue much thought, and reached its conclusion that beyond the fact that the global A-M global dealer-base needs new product beyond Rapide which accords to the times and broadens the client-base. Yet more important for the AML HQ is the fact that short-term pressures to generate income is very probably nigh on critical.
This period is all too telling, since having seen the peaks and troughs of the company's past, Dr Bez and colleagues undoubtedly wish to stabalise the sales/income curve. So as to overcome the all-too typical wide-swing cyclicity typically seen by independent premium sportscar makers. Gaining improved control of the demand-side of the business model as well as the supply-side is the ideal of all companies, but perhaps none so much as the likes of AML with so exposure to events such as recessions, oil crisis, 'down-shifting' sociological trends etc. (This is something both Morgan and Ferrari at either end of that spectrum in size and product offering have done).
The ultimate paradox for the brand purist is that – depending on its production numbers and 'exclusivity' – the parody Cygnet will sell well. There is always a market for limited number, exclusive club fashion goods, no matter what their logical or pseudo logical rationale. And that income will be welcomed by Ulrich Bez, Dave Richards, John Sinders and the Kuwait based EFAD Group / Investment DAR.
Whilst those high net worth ladies who have earned their own wealth take a male attitude toward the car, and would only ever buy a Vantage or better, the Cygnet is the perfect 'designer' Christmas present for those cosseted daughters, wives and girlfriends of wealthy men. Importantly, it is only available to Aston Martin customers, thereby generating a level of demand amongst a section of people who want to have themselves recognised as the preferred clients of AML.
Moreover, it will probably act as as the 'City run-about' for wealthy families who have a car 'tied' to their London, Paris or Milan apartments sat within basement car-parks. Or indeed as the 'Marina run-about' in the guise of a pseudo modern-day successor to the canopy-topped, wicker-seated FIAT 600 Jolly. But for most users inhabiting the suburban fringes, it simply allow them to say “my other car is an....Aston Martin”. Cygnet then, being AML client only, acts as lifestyle mirror for times when driving the 'real' Aston is inconvenient.
Indeed, very probably the Arabic owners of AML and Harrods will individually take one or two so as to help prop up the company and their associated holdings – and if one were in their position of company stewardship and wealth, one would have to ask “well why not?”.
Yet, let's hope that they also ask for the Lagonda-bronze body colour and an after-fit Lagonda badge. Why just start a fashion trend, when you personally have the capability to start a new company?
Those lucky few will just need to find a very large, car-sized, box that says “Eid Mubarak” and “Merry Christmas”.
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