McLaren's Financial Situation

[manuelf]

Interessting Video from Robert Mitchell (founder/owner of Apex) about McLaren's situation.

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[slicknick]

They are already laying people off these weeks, just wanted to inform everyone (to which extent, though, this I don't know)

 

[J.E]

Only a matter of short time until they come up with an SUV.

Since they are a small independent company, they will have to outsource this job, so "who" is going to be the McLaren badged SUV?

 

[Centurion]

Encouraging Mclaren to pursue exclusivity like Ferrari is a moot point because:

1. Ferrari is closer to a luxury brand like Hermes than it is to a car manufacturer.

2. Ferrari's exclusivity is a perception. They are selling more cars and are introducing more models like ever before.

Unfortunately exclusively is rarely profitable in the automotive industry. If the opposite were true then Rolls Royce, Bentley and Lamborghini would be thriving as independent manufacturers.

 

[Deleted member 1071]

Only a matter of short time until they come up with an SUV....

One of several dedicated BEV platform providers (VAG, M-B, (maybe BMW) Rivian, Rimac, Bosch/Benteler, etc...), I reckon.

 

[tristatez28lt1]

Encouraging Mclaren to pursue exclusivity like Ferrari is...

Not going to post too much confidential info but Ferrari remains the untouched auto industry unicorn:

Here the public information: annual report 2019
https://corporate.ferrari.com/sites/ferrari15ipo/files/fnv_2019_annual_report_red_book_0.pdf

 

[J.E]

One of several dedicated BEV platform providers (VAG, M-B,...

I think a "coupé" SUV would be more fitting for McLaren. I wonder how a Porsche Cayenne Coupé would look like with McLaren style.

 

[Centurion]

Not going to post too much confidential info but...

Yupp. Not many manufacturers can charge €15 for a pack of three pencils in yellow, white and red or €20,000 for a stripe on paint on a car.

Although Mclarens depreciate steeper the netcost over buying a flagship Ferrari could be the same. In order to be granted the privilege to factory order a Pista or TDF you will have to ladder up by buying 3-4 other Ferraris which you will likely lose some money on.

If I fancy a 600LT, I can walk into a Mclaren dealer and order one or buy a used one without paying over list price.

 

[Matski]

Mclaren doesn't, or at least, shouldn't trade on prestige. Mclaren could boost sales by offering a focused drivers car at real world costs. Keep it pure, and even if it was sub £50k it would not tarnish their reputation, be compromised or even be seen as a cash grab... a Mclaren SUV at £150k would be all of those things.

 

[Centurion]

Mclaren doesn't, or at least, shouldn't trade on prestige...

For cashflow and financial independence an SUV is a must. There is also room for McLaren to go downmarket and compete against Porsche instead of shadow boxing with Ferrari.

 

[Cashmere]

The beginning of the end?

McLaren puts iconic Woking HQ up for sale for £200m

Sports car maker McLaren has put its iconic headquarters near Woking in Surrey up for sale in a bid to shore up its balance sheet.

www.cityam.com

 

[Centurion]

Prospective buyers could be big residential property developers or businesses like Amazon that need land more warehouses.

It's a great HQ with excellent access to the M25 motorways. However the HQ will only be an attractive purchase if it includes ownership of the land. Lots of clauses will be necessary to ensure that the owner isn't stuck with Mclaren as a perpetual tenant even if they struggle to make lease payments.

Overall Mclaren are in a challenging phase. This is underscored by the recently launched R-Pack for the 620R which includes a roof scoop, louder exhaust and plenty of carbon fiber.

It's obvious that 600LT and 600R allocations haven't sold out. The pandemic has been salt on the wounds as finance companies probably calculate horiffic residual values for Mclarens.

 

[mini_cooper4]

Expected... still sad though.
Who will be willing to take the risk of aquiring them?

 

[dalab]

I don't understand, so where are they going to work and produce? I would have hoped to mortgage it maybe but sell it .... is this like goodbye?

They sell it conditional on being tenants of the same property is what occurs to me .....

 

[Centurion]

I don't understand, so where are they going to work and produce? I would have hoped to mortgage it maybe but sell it .... is this like goodbye?

They sell it conditional on being tenants of the same property is what occurs to me .....

They are selling it with the condition that they will lease it from the new owners. Sometimes businesses sell assets and lease them back as a way to free cash.

Mclaren will still remain the tenant of the HQ after the sale.

 

[dalab]

They are selling it with the condition that they will lease it from the new owners. Sometimes businesses sell assets and lease them back as a way to free cash.

Mclaren will still remain the tenant of the HQ after the sale.

Thanks, I am right then, it must be hard, but it is harder to have to go bankrupt due to lack of funds

 

[J.E]

Who could save McLaren? I don't know.

"Hey Mercedes"...

 

[Cashmere]

Who could save McLaren? I don't know.

"Hey Mercedes"...

Doubt it.

 

[dalab]

According to this chart, I understand that basically this is how the automotive business is managed, the problems begin when the debt exceeds the value of the company, I think that is not the case in any of these, but i'm not entirely sure.

What I do not understand is why the need or obligation to generate so much debt in some of these companies, if we know that they generate profits of tens of billions annually (and they are precisely the ones that have the most debt)

In the case of Daimler, Toyota, VW, BMW, the value of the assets are similar to the debt value and the brand value exceeds the same and it is what the company is actually "worth" debt free

Example of what I read in the balance sheets:
BMW debt 126 B - assets 126 B (+ -) brand market value 60 B (+ -)
BMW AG value: 186 B (To my humble understanding)

I'm not sure that's the way it is, I can be wrong

 

[Matski]

I'm not sure that's the way it is, I can be wrong

I'm not an expert, but as an example, at the end of FY2019 BMW had €228bn in Assets, and €168bn in debt. The difference is the equity in the company. It's worth remembering that debt comprises many things, and isn't all what you'd consider borrowing, stuff like pension liabilities and customer deposits (€11Bn...) held are included. BMW's biggest single area I believe is in Bonds, which accounts for €53Bn of their debt - I would imagine issuing bonds in place of straight loans or share issues has it's advantages, one of which is that it reduces tax liability, unlike saving profits for large scale investment, which can attract a lot of tax.

I'm not sure how you'd arrive at brand market value from those figures alone, but calculating the value of a company isn't that straight forward.