Aston Martin Lagonda Holdings plc, and Lucid Group Inc. have a lot to boast about when it comes to their plan to merge.
Aston Martin Chairman Lawrence Stroll said Monday that he should be knighted “for what I have done.” This was hours after Aston Martin announced it would spend about $232,000,000 in order to get electric vehicle parts from Lucid. Aston Martin’s minimum purchase of Lucid parts was $225 million. This is not far from the £408 millions ($519million) cash balance that the UK company had at the end of the last quarter. The deal was described by Lucid’s Chief Executive Officer Peter Rawlinson as a validation.
Rawlinson praised his counterpart’s Formula 1 team for a successful year, saying “Aston Martin has shown an uncanny talent to select the right partners on both the road and the track.” “Thank you, sir, for choosing us.”
This alliance, which was struck shortly before electric truck maker Lordstown Motors Corp. declared bankruptcy, is only the latest example of the difficulty in making the transition from combustion to batteries. The engineers at Lucid in Silicon Valley and the petrol heads of Aston Martin in Gaydon in England have both had a tough time.
Stroll has stabilized Aston Martin to some degree. The Canadian, who made his fortune as a fashion designer, admitted he had no idea what he would be doing when he gave the company a lifeline at the beginning of 2020. The targets it has set for five years in the future for £2.5 billion in revenue and £800 millions in adjusted earnings fall far short of what Ferrari NV currently brings in.
Aston Martin and Lucid’s new partnership is a necessity. The company will continue to run on a tight budget for the next five years, with only £1.8 billion in capital expenditures. Lucid will be paid for in part by newly issued shares. The company is transferring a 3.7% share. Rawlinson knew that Lucid was in for a tough road before it began production of the Air. He was the chief engineer at Tesla Inc. who designed the Model S. His plan, years before the company merged to become public with a special-purpose acquisition company, was to add revenue to the carmaking business by supplying technology to other manufacturers.
Lucid underestimated the difficulty of manufacturing Air, and only produced 7,180 cars last year. This was a fraction from its original goal for 20,000 vehicles. It’s expected to produce 10,000 sedans this year and analysts expect free cash flow to roughly match last year’s outflow of $3.3 billion.
While Lordstown’s last hope of being saved failed — iPhone maker Foxconn Technology Group withdrew from a production partnership, Aston Martin shares a white knight who is Saudi Arabia’s sovereign fund.
Five months after saying Aston Martin had plenty of cash, Stroll announced in July of last year that it was raising money by selling a stake to the Saudi government-controlled Public Investment Fund. The PIF owns 18% of Aston Martin.
Last month, the fund increased its stake in Lucid by more than 60%. It did this by launching a 3 billion share offering.
Stroll played down the role of PIF in Aston Martin’s and Lucid’s coming together. He said that although the fund suggested the two companies should talk, they had already been discussing for the past 2 1/2 years.
Stroll stated that his Aston Martin turnaround required an industrial solution. In the best of circumstances, an industrial solution could take from five to seven to ten years. I’m happy to report that we have turned around this place industrially in just three years.”
Rawlinson, who will build on Lucid’s first tech-sharing win to date, will soon make a similar argument.
Rawlinson stated that the Aston Martin agreement will lead to “wider adoption and applications of technology in the future.”
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