Wednesday, 27 November 2013

Micro Level Trends – Classic Cars (Part 1 of 3) – The 'Californiacation' of Europe's Masterpieces.

The provision of the 'Coupled Ratios' weblog, expected here, has been purposefully deferred.

Firstly to raise the topic here-in, of vital interest to those who have commercial and political influence as the cultural guardians of European history, and secondly to continue to appraise the inferred 'between the lines' details of the global 11's Q3 earnings reports.

[NB the previously increasingly transparent nature of certain reports have seemingly become more opaque. This the apparent corporate reaction to the recent transitory period regards global demand-shift conditions as experienced over the last 3-6 months].

Thus a different weblog is furnished - given its depth, over Parts 1, 2 and 3 - regards the micro-dynamics of the ever more valuable, and so theoretically market-driven, pinnacle of the classic car arena.

Given usual focus on investor interest into the automotive future, the subject matter of classic cars is rarely mentioned by investment-auto-motives; only previously referred to in two ways.

Initially, as a metaphor for the careful re-building of the western banking system - by reconfiguring and re-conditioning the old parts into a new whole (inspired by the 'barn-find' Bugatti Atalanté). And secondly, relative to the adoration vehicles hold within EM countries, which boosts both local old classic car restoration, and generates an impetus to rework vehicles into 'new classics'. Both encompassing the necessary trend for educationally minded, indigenously orientated specialist workshops.

But of course today and into tomorrow the commercial imperative of the classic car arena grows year on year, as the collectors' collective demand rises given the slim but enlarging top-tier percentile of the global uber-wealthy who seek-out those prestigeous, rare, luxury goods that have become artwork “masterpieces”. Either in their own right, or as a catapulted product from the now firmly established world of 'cultural commercialisation'.

A prizing of the very best has always been with mankind, ever since early rulers sought to affirm their status, from the Renaissance onward such commissioned items deployed to create a wider economic effect, through the fabrication of aesthetically similar pieces. As a short edition run or otherwise, which themselves are consumed by those within the upper and middle classes of the domestic 'social trickle-down', and likewise to add to the trading and export economy; an early form of climbing to the senior levels of the value-chain.

Hence from the earliest days rare materials were treasured, all the more after near countless hours of toil morphed said materials into something 'other worldly', by which to entrance the owner's associates and followers. Ironically, over the centuries the adorned and adored non-functional but symbolic (usually jewellery), typically came to be more highly valued than basic but functional items upon which a society turned. (See Thomas More's novel 'Utopia' for a wonderfully rendered reality-check). Yet, from Ancient Egyptian rulers head-wear and neck-wear, through to Russia's Imperial Fabergé Eggs, and far beyond, the ability to have something created for, or latterly collected for, its social symbolism initiated the commission and antique aspects of the prestige goods market.

Over the centuries as worldwide cultures grew, it was typically the 'high-culture' appreciation of Europe's learned 'Grand Tourers' with their Anglo-Germanic rooted preference for Egyptian, Persian, Greek, Roman and Renaissance items. Items which took hold – authentic or otherwise - along with those produced items to cater for such tourists: paintings the most evocative, transportable and 'viewable'. Such near Eastern artefacts, displayed in stately homes, private collections, public view private collections and later national museums.

Far more recently of course the global wealth effect of capitalism has meant that more and more the Chinese, Indian, Russian and South American dynasties are being collected by rich nationals to recapture and represent homeland histories; aswell as boost the ego and grow – or at least hedge - personal net worth.
Over the last century or so the very world of 'high value collectables' has expanded as the culture industry itself has swollen; propagated by the press, radio, television and the internet. Collectables ranging from 17th century heurology to 18th century engraved shotguns to 19th century wallpapers to even include 20th century “star-architect” dwellings. They are often broadly referred generically as “art-works” - partially to ratify their origination but also often to ratify their social worth - and obviously come in many forms. So, across the full spectrum of luxury goods, with obviously original cost and rarity a marked distinction of current and future value.

However, as per conventional 'art' (painting and sculpture), investment-auto-motives must echo Brian Sewell's perspective. Within the painterly realms the achievement of truly good, intellectual and socially meaningful art has unfortunately become swamped by “bad art”, typically derived and thematic art, this as a direct consequence commercialised 'artistry'. Art which although often carrying famous names holds absolutely no artistic merit; the items sold for their branded association rather than an innately powerful soulful insight.

So the terms 'collectable' and 'art' are themselves central terms of an inflationary debased currency within an industry which must itself, for survival and growth, promote 'value' as an end unto itself by itself creating auras of appeal.

An intelligent person might believe that the critical difference between good and bad art will inevitably stand on its own merit, but in an ever blurring age promoted by the cult of personality rather than cult of the work, the quieter closed-quarter yet high-minded taste-makers of old, for all their faults of traditionalism, may well be over-taken by the louder socially-connected yet low-minded taste-agents of today and tomorrow.

Let us hope that in all fields, from cars to carriage clocks, that intelligence prevails regards the innate 'value' and so 'valuation' of an item – as imbued by its original context – rather than giving way to the adoration of falsely created old and new idols.

Automotive Icons -

Fact is that the car was originally adopted only by those who could afford the petrol, steam and electrically powered “contraptions”, given their combined attributes of status and function. But even with 'automotive democratisation' of the masses, the car still represents everything from the greatest socialite prestige, through to a modicum of suburbanite envy. As general trade and industry improved worker income and so bettered people's lives throughout the 20th century so the auto industry expanded, based upon an ever greater tendency to segment by user and product type whilst feeding and delivering both the consumer's life-improvement dream.

Of course, the 'best' remained throughout from beginning to now; either because of engineering integrity or bodywork beauty, ideally the combination of the two to form 'the best of best'. Over nearly 100 years these range from the 1907 Rolls-Royce 40/50 'Silver Ghost' through to today's Bugatti Veyron.

Exactly what determines 'the best' is a question of subject understanding, a necessary start-point for the fortunate car collector who also combines his/her own personal leanings leading to ultimate preference. Though the collector's reality inevitably bounded by some limit of disposable income; even if seemingly limitless to the far less fortunate.

[NB thankfully money is not the arbiter of opportunity to own something iconic. The average car enthusiast may be able to afford a remaining mass produced vehicle which displays as much, and often more design integrity. To this end the Model T, 'Topolino', Deux Chevaux, original Mini, original Cinquecento or Quatrelle have arguably more innate legitimate 'beauty' than far higher priced vehicles].

Europe's “Best of the Best” -

Nonetheless, undoubtedly within collectors' circles the most prolific of the car types were the purist marques which created whole cars in a true design idiom.

The 'best of the best' typically renowned grand prix cars, or closely related coupes and convertibles flamboyantly 'dressed' by specialist body-stylists, and those of bespoke 'coach-built' limousines (both staid and glamorous), aswell as in another distinct category those early years record breakers and latter concept cars.

The following provides a broad but limited overview of the scene:

Though the car as we know it was first developed as a lightweight singular entity by way of powered tri-cycles and quadri-cycles, early years demand by the wealthy for reliability, distance and speed soon led to a focus on the mechanical whole by producers and so the creation of dedicated high-output chassis, these married to a likewise hand-built body of whichever form (racer, tourer, sedan, limousine) was sought.

A few high-minded creator-producers sought to maintain as much complete vehicle control as possible. But given the commercial pressure to specialise in either mechanics or body, those with such a contrarian perspective were few. Yet today the most prized for not diluting their artistic intent and so individualistic spirit of their machines.

Whole Vehicle Producers include: Bugatti and Voisin with what are considered high-art limited production run cars, with later similar 'complete' efforts from Mercedes, Ferrari (whilst also partially using external styling houses), Porsche and Jaguar.

Rolling Chassis Manufacturers included (amongst others): Rolls-Royce, Bentley, Lagonda, Daimler (GB), Lea-Francis, Alvis, MG, Auto-Union, Mercedes Benz, Horsch, Maybach, FIAT, Alfa Romeo, Lancia, Renault, Peugeot, Delahaye, Delage, Hispano-Suiza, Issota-Fraschini, Talbot (Talbot-Lago)

'Coachbuilders' / 'Carozerria' included (amongst others): Barker, Hooper, Mulliner, Park Ward, Thrup and Maberly, Gurney Nutting, Freestone and Webb, Abbot, Hamshaw, Harrington, Tickford, van den Plas (later Vanden Plas), Corsica, Young, Graber, Franay, Saoutchik, Vanvooran, Letourneur et Marchand, Fagoni et Filaschi, Chapron, Portout, Weinberger, Kellner, Hebmuller, Karmann, Voll und Ruhrbeck, Gangloff, Castagna, Ghia, Bertone, Maggiora, Farina / Pinifarina, Scaglietti, Vignale, Touring, Zagato, Frua, Fissore

Across the Atlantic -

To provide the American comparison, the fewer chassis-makers of premium note were Mercer, Stutz, du Pont, the 'American made' Springfield Rolls-Royce, Pierce-Arrow, Duesenberg, Packard, Cunningham, Lincoln and Cadillac. Whilst equivalent body-builders included Fleetwood, Le Baron, Rollston, Earl and Murphy. However, with a lack of organised indigenous sportscar race meetings between WW1 and WW2, there was less imperative for US made Euro-style powerful lightweight racers.

Instead the US saw the populist rise of more comfortable psuedo-sporty cars like boat-tail Auburns and the rise standard sedan 'stock car' racing – leading to NASCAR. Leaving more purist racers reliant upon European import cars and the rare US-made vehicle like later Cunningham. In fact the late 1950s creation of NART (the North American Racing Team) using Ferrari, though with perhaps the unstated commercial ambition of selling more Ferrari models state-side, such as the soon to arrive 250 SWB California and later special 'NART' related cars.

Thus we see that in actuality, there has always been a close relationship between American and European commercial interests regards product supply to preferred agents and dealers, given the distinct glitterati type purchasers, most prevalent Hollywood film stars.

With the high original price of these exotics creating a ready-made 'import and collect' financial incentive for marque enthusiasts (such as Robert M. Lee), as well as those closely associated with the glamorous first purchasers, who would buy a 'second-hand' and so gain from its exposure.

Changed Technology, Changed Trends -

With the increased adoption of so called monocoque chassis engineering (actually unibody or semi-monocoque in truest sense) - effectively re-unifying mechanics and body, and first productionised on Lancia's 1922 Lambda – slowly over succeeding years, body-building companies either became operationally defunct, with the best admired absorbed into whole car manufacturers or major suppliers.

So the likes of Tickford into Aston Martin (having already absorbed Lagonda cars) and Le Baron into Briggs Pressed Metal then into Chrysler (also having integrating Dodge and Plymouth cars and having used Le Baron to help created its top-line Imperial). However, the process was not always as wholly operationally advantageous as expected as the fiscal backdrop of 1930s America and 1950s Europe sought a major overhaul of product rationalisation, and so the beginnings of the 'common platform' approach.

Few Specialists Survive -

Whilst some quasi-independent coach-builders survived, it was ironically only really in Italy that they were protected by a nationally parental FIAT, which itself had absorbed various up-scale nameplates and used the carrozzeria to maintain their high-end positioning.
Inevitably, the financially stronger craft-companies and the mainstream makers absorbed such niche producers for either specialist vehicle work, as an extended resource function or for asset re-allocation, but primarily from the public viewpoint, associative names used as top-line sub-brands such as Ford previously with Ghia and today with Vignale.

Even so, a reworking of the old carrozzeria model toward stylistic concept work, packaging and engineering development, prototyping and specific core 'module' capabilities in limited series production for whole cars and model variants (typically convertibles) did allow the 'design houses' to prosper through the 1960s, 1980s and 2000s. Indeed allowed new entities to flourish, shifting shape as their major clients sought. The flexible few able to adapt and survive into the late 20th century and just beyond, functioning as both upstream concept formulator and downstream niche builder.

But, as a consequence of the 2007/8 financial crisis VW, Valmet and Webasto acquired different sections of a bankrupted Karmann, FIAT absorbed Bertone in 2009, whilst VW's Audi-Lamborghini division took 90% of ItalDesign in 2010.

The European Fascination -

Unsurprisingly, given “Germany as the birthplace of the car, France its nursery, Britain its school and Italy its finishing school” and Europe's millennia of cultural predominance, the most admired creations during those formative years were inevitably European.

As part of its own upward industrial trajectory, America sought to absorb and replicate all that it could learn, from the earliest runabout cars such as the Rambler and many like it through to supercar efforts such as the 1980s Vector, 1990s Raptor, 2000s SSC and recently defunct Mosler.

But the early to mid 20th century dynamics of the US meant that it would focus upon mass-production, standardisation and so parts-bin reconfiguration to create notional 'sports cars', such as the first Corvette. Instead relying upon transplant efforts – that of inserting a powerful American engine into a lightweight European body (eg Shelby et al) – to create purist sportscars.

[NB 20th century global economic development – ie the desire to spawn large consumer societies so as to propagate capitalism and so a virtuous investment cycle - meant that Japan replicating the American mass-model, so the Koreans like Japanese, and most recently Chinese learning from all.

So, as a result of Europe having been at the forefront of vehicle creation, during the crafts meets industry period of late 19th century and early 20th century – yet utilising both methods thereafter - means that it was in comparison to the US and elsewhere, always been the 'home' of the more exotic, arguably more mechanically 'intelligent' and so more alluring specialist vehicle.

Hence the “European Fascination” and attached high valuations of its products.

American Purchasing Power -

Whilst this has been the case for the last 50 years or so, the fact is that the 20th century was the “American Century”, across heavy and light industry, thereafter upstream consumer related activities such as marketing and advertising, followed by information technology and then web related enterprise – all paralleled by an ever deeper, broader and expanding financial sector.

This enabled originally by a potent mix of finance shifted from Eastern Europe, industry and initial technology drawn or replicated from the best of Europe, an aspirant, immigrant population from across the poorer regions of Europe, and a new class of entrepreneurs and industrialists and largely a politically united national mindset, itself assisted by the troubles of Europe.

This made for the golden age of prosperity, the greatest proportionate rewards of course going to those industrialists who were able to put capital and labour to work, or able to extract the money earned by workers through leisure-time entertainment; the most prolific obviously being the Hollywood film system.

[NB to paraphrase a saying that existed amongst the Polish and Italian immigrants of the time...“the Protestants grab your 'balls' during the week at the factory, the Jews in the picture-house on Saturday and the Catholics at church on Sunday”].

Beyond the social angst of some workers, the fact is that the immense wealth made by those in more fortunate positions (through being born lucky or via deployed intelligence) allowed them to commission bespoke European-made cars, or import at a heavily discounted used purchase price such cars from failing aristocrats.

But moreover, the enormous success and wealth accumulation brought about by that 'American Century' has allowed that process of 'European purchase' to continue to this day, with the impact of the 2007/8 western financial crisis lessened given a propensity toward global-span investment portfolios.

Thus, American purchasing power, whilst a smaller part of the global whole, has grown given its central role within the global whole.

Cultural artifacts have always been representative a person's social stature. Just as Grecian and Roman sculptures and architectural items were adored by the North European aristocrats in the 17th and 18th centuries, so in the late 20th century and early 21st century, the 'high-art' created at the apex of the European era – when art met industry through “industrial art” - is now collected by those with the financial means.

An automotive collection consisting of such creations, as a select group or as part of a broader vehicle set, is deemed to provide kudos and so status.

An Important Aside -

At this point, although likewise entranced by such beautiful artifacts, investment-auto-motives must obviously reiterate the fact that a person's innate worth derives from his/her innate 'being', not financial net worth. Truly good intention, higher-self behaviour, manners and modesty are 'richer' values than pure wealth; with the best outcomes from a combination of both.

To deploy an automotive example, the Toyoda family's expensive, but long serving, comfortable but austere Toyota Century, with cloth not leather seats, said much more about their responsible dynastic position than a 1920s 'Doozy Flivver' ever did about its driver.  

The Next Weblog -

To gain an insight into the price of such high culture, the following Part 2 depicts:

A. the background to the classic car set
B. the importance of related social gatherings
C. the collector's basic purchase process
D. the monetary value spent on acquiring “the best of the best”
E. the formation of improved price tracking and indices
F. the fact that the 'market' has little true consistency
G. the basic list of important museums and collections
I. the increasing rise of the replica
J. the blurring of real and 'hyper-real'
K. the broadened 'market' (original vs 'homage')
L. the commercial future of 'Californiacation'.

Sunday, 10 November 2013

Company Focus – Morgan Motor Company – Headless Entity vs Strategic Imperative: the Need for Mutuality.

As the major auto-manufacturers continue to provide their Q3 earnings figures, with recent individual stock movements reflecting bearish, mediocre and surprise sentiments; many companies (excluding the best operating or market-placed) as investment-auto-motives believed, over-bought, and so rightly set for correction.

When all eleven reports from the global players have been released, investment-auto-motives will attend to the usual depiction of 'Coupled Ratios' analysis.

Before then an observation of a firm at the very opposite end of the spectrum: unique, privately owned and with what could be described as a monopolistic small corner of car history, so well worth a view.

The Morgan Motor Company, with the recent reported dismissal of the firm's perceived operating- head and figure-head, Charles Morgan.

So, the darkest of days or a positive new chapter?

Outline -

Having seemingly learned much from his father Peter, from when he took the reins onward, he hardly ran the firm as a commercial 'play-thing', recognising the enormous responsibility of maintaining the family and commercial legacy. It was under his guidance that a very new era began at the turn of the century, with what were then seen as radical product steps providing the company with what appeared a more even keel through the first decade of the 2000s. That seemingly successful decade did however allow him to perhaps play-up to the role of the archetypal 'Morgan Man', purveying the 'joie de vivre' associated with marque and lifestyle. He was the external persona, ever vivacious and well-mannered at the car-race meetings such as esteemed Le Mans and vehicle jaunts such as the American coast to coast adventure.

Yet equally, from an external viewpoint – perhaps especially that of any non-family co-shareholders within the Morgan Technologies Board, the firm's policy formers - he seems to have been viewed as having become overtly over-comfortable with a commercial entity that to date existed under his familial and personal domain.

Reasons for the dismissal include:
- acting as Chairman without being elected as such.
- non-agreed support of the associated Oak Racing team.
- announcing that a new 3-wheeler would be forthcoming.
- taking non-agreed fees for television appearances.

So a board level view that whilst Morgan Motor Company remains private and independent, its leaders must equally accord to strictures of corporate governance.

This then highly plausible.

Yet there may be another viewpoint within. Perhaps any less brand imbued stakeholders without the weight of Morgan history upon their shoulders see a medium term financial windfall from a strategic exit of their stakes.

Perhaps for them the firm was and is too similar to its own Plus Four model, seemingly wafting along under Charles' overt guidance, rather than being transformed into more powerful Plus Eight version, and pushed hard to release innate potential.

History -

Far more detailed accounts are available elsewhere, but in summary:

The 104 year precedence of Morgan Motors is legendary amongst car lovers, and whilst the AC brand may indeed be slightly older and have its own milestones, it unlike Morgan, has not had the unbroken existence. From 1909 to this day Morgan has remained – whether 'stalling', ticking-over' or 'revving' – resolutely at Malvern Link in Worcestershire.

Founded by the entrepreneurial 'HFS' Morgan, having opened a sales and service garage and recognising the value of the broad auto value-chain, the original raison d'etre behind vehicle production was to help better mobilise the burgeoning new lower middle class, the clerks, factory foremen and increasingly better educated young men and women. Given that many were seeking to change from bicycles and motorcycles into cars HFS saw the potential for an affordable 3-Wheeler vehicle, tried and tested through motor-sport and which subsequently evolved into a range of cycle-cars with various 'comfort' and 'sporting' attributes.

Increasing aspiration and the availability of higher purchase saw the popularity of the cycle-car diminish, whilst at the same time sports-cars were growing in favour amongst the upper middle classes, mimicking the aristocracy and racing elite with time trials and hill climbs etc. So HFS created a small roadster named the 4-4 in 1936.

Post war demand for both lower cost utility vehicles and more exuberant personal cars allowed Morgan to build both the 3 Wheeler in a sparse guise and the 4-4, the former discontinued in 1952 with fallen demand.

Thereafter came a slow succession of ever modified evolutionary sports-cars maintaining the original 1930s cosmetic and spirit, with IL4 engines for the +4, the 4/4 and V8 power for the +8 and later more step-change advanced Aero 8

[NB Between 1964-7 there had been an aesthetically contemporary +4+ coupe model, but was 'lost' between two markets, unable to match the best of prestige competition and viewed as overtly modern by the traditionalists].

But as is evident, since the introduction of the Aero 8, the company has become more ambitious; by the way it unabashedly showcases itself, the way it seeks to grow its 'brand equity', done so by reviving HFS' own appreciation for permeating and expanding the automotive value chain via the creation of newer associated enterprises.

As such a new division named Morgan Technologies was created in 2010, acting as an umbrella for Aero Racing Ltd (dedicated to Performance aspects) and Morgan 3 Wheeler Ltd (dedicated to espousing this model)

As a privately held company Morgan is not obliged to externally communicate the outcomes of boardroom dealings around which its articles of association are drawn, nor obliged to utilise the non-executive influence that a publicly listed company should deploy for “good governance”.

As such, given the fondness in which broader public and business circles hold the firm, any fundamental change within the seemingly very staid company inevitably comes as a surprise.

An External Eye -

In 1991 Peter Morgan allowed the BBC's television cameras into their domain as part of the Troubleshooter series. The fact that son Charles had been an ITN cameraman may have been an influence.

As is by now well understood, the info-tainment ambition was to have the revered ex ICI and 'consulting guru' Sir John Harvey Jones to visit the factory so as to cast a shrewd eye over general operations. Then to recommend strategic and tactical alterations designed to streamline the firm into a more efficient entity notionally capable of greater success.

Harvey-Jones was warmly welcomed and the family absorbed his critique of the very apparent parts inventory and production line inefficiencies within the firm. Specifically those of the bye-gone methods which partially served to underpin the hand-crafted mystique of the vehicles, and so the yesteryear character of the marque. Yet also because of the organic yesteryear approach, the methods and culture – itself reflecting the company owners own historically conservative approach – meant that by equivalent modern standards, the cost of the man hours involved per car build dramatically reduced profitability margins. It seems that even during the 1950s heyday of the 'time and motion man', when Britain was becoming dedicated to necessary efficiency, Morgan remained untouched.

It was the inevitable 'catch 22' of a heritage firm whose customers relished the products and the seemingly relaxed culture, aswell as the years long anticipation for delivery. But whose customers were typically of an upper age bracket and who only really appeared during the improving steps of the economic cycle.

Morgan's Managerial Chronology -

To the outside world the company appears the very essence of a heirloom entity. Founded by 'HFS' Morgan in 1910 and run under his direction until passing in 1959. Thence his son Peter took the helm until 2001 or so leaving a few years before his passing. Charles Morgan entered the business full time in 1999, but perhaps because of a lack of imbued auto-sector and company experience brought in Alan Garnett between 2003 and 2006. This 'co-piloting' role expanded with Steve Morris, Tim Whitworth and Matthew Parkin becoming involved in 2006; Parkin leaving in 2010.

Thus until recently MD Morgan acted as seeming final decision maker and figure-head, but it now seems that a board level / shareholder recommendation sought his removal; the MD's role given to Morris.

Business Model -

If two words were to sum-up the firm's historic commercial attitude they would be 'cautiousness' and 'flexibility'. These intrinsic traits have underpinned the long survival rate: spanning 114 years, 2 world wars, two depressions (1929 and 2008), multiple recessions and the fashion vagueries of the niche car market, which themselves have created real “here today, gone tomorrow” volatility amongst sub-tier niche suppliers.

Given the long outlook, the massive contraction of UK plc's engineering base and the general sector dynamics, the firm's very survival has depended upon pragmatism, a pragmatism born from HFS and Peter Morgan's observations of the pitfalls of high finance and overly unrealistic business plans that have existed within the niche vehicle industry.

This conservatism shown by the unstated up-side of the Harvey Jones critique: that the firm was able to gain deposits years in advance of deliveries, thus a portion of the working capital was essentially free of cost, the very opposite of most businesses, and a manner that no doubt suited the firm well.

The availability of this no cost capital has shrunken as delivery schedules have shortened to meet new customer expectation, the contracted time scale presumably compensated by the rise in orders and so still useful cash cushion.

As to a basic interpretation of overall costs:

Bill of Materials (BOM):
The construction materials used are relatively low cost given the premium product pricing: aluminium sheet (hand-formed and angle-bonded), section and sheet ash (hand-cut to shape and jig constructed) and steel section (welded), and leather / cloth (via sewing machine)

The stability of the workforce, who themselves recognise the personal value of steady employment in the region, especially regards manual labour, plus the innate willing flexibility of the staff means that labour rates are contained. Many of the families that have worked at Morgan have lived its history and seemingly recognise the need for wage restraint, themselves understanding that lower cost labour is available from the locally unemployed and newer immigrant workers.

Capital Expenditure:
The fact that seemingly all of the build process is by hand means use of tried and tested methods; which in turn means use of old machinery and tooling. Much of what could be termed capital equipment is many, many decades old, from 1920s scroll rollers, to 'English Wheels' to wooden ply forming jigs from the 1950s. In a very astute money-saving manner, it indicates that the phrase 'CapEx' has been rarely uttered, presumably primarily over the years for maintenance of the site's facilities. So when undertaken regards a new project, a very real analysis of its contribution.

The adoption of bought-in components such as the super-formed (heated and mould blown) aluminium fenders for the Aero8 is one such investment, recognising the cost and quality advantage involved in a complex single sheet panel.

Beyond the previously mentioned low value antiquated tooling, and the use of near zero-cost practical solutions (eg home-made wooden axle stands for the chassis dress), the major asset of the company is the factory site itself. Bought by HFS' father given its adjacent standing next to the old family home.

For what is general external commentary, it would have been acutely impertinent to have researched the value of the site – either from company accounts submissions or from a local property investigation. But it seems probable that over the last century or so that the site was either bought freehold, or that any previously outstanding loan has been paid. So that HFS, Peter and Charles wisely chose the freedom provided by total ownership over any supposed advantage from drawing equity from the property. This then a major strategic pillar in providing a steady basis for the firm, so reducing overheads, securing management and staff employ, and providing for a virtuous circle of stability.

Family Fortunes -

Much of the conservatism arises from the company's familial origins and the desire for commercial steadiness and longevity, but also importantly because of the innate responsibility undoubtedly felt for the livelihoods of its 190 or so employees, many themselves the sons and daughters or other relation to former employees. The rural location of Malvern Link meant that as agriculture became mechanised at the beginning of the 20th century, so other forms of work were sought, the light industry basis and stability of the firm providing the income for successive generations.

Thus, as with many of Germany's steady and successful Mittalstand companies, the Worcestershire firm has ostensibly always undertaken a CSR stance, one vital to its well being.

Production Volumes:

These as garnered from web research are recorded as approximately
1990: 400
2000: 500
2009: 850
2011 1000


As a private concern understandably little is communicated externally given internal confidentiality and the desire to avoid loosing competitive intelligence.

However, it was stated in 2011 that the annual turnover was approximately £35 million, which based on the approximate 1000 units gave an averaged per unit top-line revenue of £35,000, the details of BOM, labour, S&M and overhead costs obviously not given.

Whilst publicly Morgan says that it has a profit margin of 12%, so beating most of the volume premium and sports-car makers, investment-auto-motives would expect a margin closer to 15-18%, which if verified would demonstrate the business acumen within the firm.

Vehicle Range -
Today the model range consists of 3 distinct groups, with 4th 'cross-breed'.

1. 'Classic' evolutionary cars based upon the now renowned ash-wood frame, (historically evolved)
2. 'Aero' revolutionary cars based upon then all new alloy frame architecture (2001 onward)
3. '3-Wheeler' “retro-lutionary” car, using a steel tubular spaceframe (2011 onward)

4. the Aero series spawned Aero Plus 8, which uses 'Classic +8' external styling cues.

[NB to the uninitiated the model series names of the 'Classic' roadster range are today confusing given its engine-orientated origins: the +4 four seater (as would seem befitting), a +4 two seater and the 4/4 two seater].

Product Strategy -

Under his tenure Charles Morgan has aptly demonstrated 'future-forward' and retrospective “visioneering” so previously desperately required; achieved with the Aero8, the Three Wheeler, the Aero+8 and the latterly showcased Eva GT.

The +4 and +8 models were previously and unsurprisingly designated as the 'Classic' series with periodic limited run variants, maintaining steel ladder chassis, wooden body tub and aluminium skin panels. UK base variant prices range between £33,075 to £85,200 (inc UK VAT)

The Aero Eight was designed to highlight Morgan's ability to leap into the future with an all-aluminium frame and skin panels, and now includes '8', AeroMax coupe and SuperSports coupe T-top variants. UK base variant prices range between £99,950 to £126,900 (inc UK VAT)

The 3-Wheeler was designed to provide a more affordable vehicle so as to re-crystallise the marque's origins with the cycle-car 'Runabout', and to open the door to a new motorcycle orientated market – having witnessed the massive growth of expensive 'leisure bikes' previously - and to lower the brand entry price point for new buyer groups. UK base variant prices range between £25,950 to £29,162

The Eva GT concept show at Pebble Beach in 2010 uses the basic bones of the Aero SuperSports coupe to create a cosmetically new vehicle. One which draws influence from its forebears and broader retro-culture yet also from modern supercar forms. Its general styling, crease lines - and when applied two-tone paintwork - echo the dramatic very aero-influenced custom built luxury coach-built coupes of the 1930s, such as Bugatti, Delahaye, Hispano Suiza, Delage, Talbat Lago et al; a similar face to the Bugatti Veyron aswell as arguably mimicking the rear of the Bristol Fighter and Noble supercars. Use of overlaps and cut-aways to create an organic retro-futuristic form, critically without running boards, instead obverse cut-aways at sill level. Thus able to raise the innate perceived value of the Morgan marque itself, via direct historical association and indirect association with a 1930s heyday and with a 21st century juxtaposition.

Importantly for Morgan the Eva GT's prime raison d'etre appears to be that of a 'product bridge' between the roadster inspired Classic and track inspired Aero; with apparently improved usability and functionality and no doubt to be priced as the “best of both worlds” car; hence the GT moniker.

Spin-Off Products -

Beyond the car range other product types have been explored. Perhaps most visible in recent times has been the scale sized 3 Wheeler Pedal Car for toddlers, made on a commission basis; so broadening the merchandise offering to personal private customers.

Also Morgan has custom adapted a standard golf buggy to produce what presently seems a one off Morgan Golf Cart by grafting on the front and tail sections of a standard car; this no doubt to explore additional income stream avenues from the leisure sector, from Chinese golf courses to American country clubs.

[NB This buggy is a far better adaptation than the heinous mock “Rolls-Royce” grilled carts that were popular on the US west coast in the late 1970s, given its modesty and friendly organic face].

Marketing -

It has become apparent that over the last few years that Morgan has indeed sought to raise its profile and attractiveness as the economic consequences of the financial crisis were doused and renewed hope emerged, especially so in the US, Britain and the slowed but strong EM regions.

Well recognising its past and potential customers anyone who spends time in central London, such international business people, upbeat bankers and financiers and the wealthy dilettante of Chinese, Indian, Arabic and Latin American origin, cannot have failed to notice the periodic showcasing of new Morgan Motors alongside the 'heritage-richness' invoked by older gleaming though often happily ragged Plus 4's and Plus 8's that appear on the streets between spring and autumn. That show-casing has taken place in various forms, perhaps most notably via the 'Best of Britannia' initiative, exactly a year ago, the company, its vehicles and associated merchandise depicted amongst likewise 'hand-made' products ranging from bicycles to shoes to couture, and exhibited last year via a Barings Bank sponsored 'trade export' window situated opposite Charing Cross Station in The Strand.

Beyond central London, in the broader UK and elsewhere, beyond local dealer marketing activities it has perhaps been youtube and similar video websites which have conveyed the Morgan message. Achieved via the plethora of auto-dedicated video production efforts from the professionally known to to the youthful start-up who seek to build their own name by getting under the skin of auto-culture; though their innate knowledge may be more enthusiast than industry expert. Hence there are various factory visits to view on the web so as to see the very inner workings at Malvern Link, and coverage of classic and contemporary vehicle events ranging from the likes of Pebble Beach's concours d'elegance to the less prestigious but more hands on local amateur car show.

Racing Fever -

Motor racing has been intrinsic to the firm's vehicles from its beginnings, mostly as a supplier to privateers, latterly expanding to run an in-house team in the Le Mans Prototype 2 series and sponsoring its single-make Challenge Series for head to head track racing, and single-make Speed Championship for against the clock 'sprint' and 'hill climb' runs.

However, investment-auto-motives suspects that it may be the associated costs that the company must endure to sponsor all of these initiatives that may have contributed to the recent rift between the board and Charles Morgan.

Charles Morgan obviously enjoys the motorsport aspect, having been a period participant since his Rover powered +8 days. And it is undoubted that there exists a positive feed-back loop between +4, +8 and Aero8 racing, both in vehicle research-work and building the brand and client relationships. The main benefit being that the cars raced - classed as 'GTs' – are lightly modified road cars, so closely resemble those standard production cars that leave the factory gates.

However, as has been the case with other overtly ambitious niche firms, the entry into LMP2 racing is typically costly and whilst bringing glamour and some technical learning, the very fact that the cars do not resemble the GT race cars nor production cars means that the bottom-line commercial benefits from LMP2 racing are highly debatable.

Thus any involvement must be cost-effective. And in this regard investment-auto-motives is unsure of the basis for involvement beyond co-branding. Ordinarily Morgan would notionally provide a number of aluminium chassis to partner Oak Racing for race adaption. However, Oak uses its own carbon-fibre based monocoque (from Pescarolo) which includes: open cockpit and aerofoiled race body, cockpit technology installation etc and uses Nissan for power-train partners. Thus the Morgan technical contribution appears minimal, except maybe suspension and wheels.

Thus there appears no real Morgan brand story around LMP2 besides affiliation. Without substantial technical affiliation, it may be the case that the affiliation is effectively paid for, ie as little more than a branded sponsor for the car to wear its nose-badge.

Basic logic infers that the EvaGT concept would be developed into a GTE type race car so able to insert itself in a race class between the GT class and LMP2, but this is no doubt a costly exercise. Even if of theoretical strategic fit.

This is the cause of the rift between Charles and the board of directors.

Having undertaken a snapshot view, investment-auto-motives must side with the latter, recognising the contribution that GT type racing involvement brings, and indeed possible GTE, but doubting the present goodwill and commercial benefits of LMP2. Morgan should have more slowly climbed-up the race class ladder, rather than 'stretch and backfill'.

Commercial Expansion -

Given the specialist nature of the cars themselves, the select used vehicle arena and specialist repair and maintenance necessary, it is understood that Morgan Motors has long offered Finance and Insurance services to its customers.

So as to both express and nurture the firm's innately unique culture, it was recognised that a 'brand experience' be developed.

This meant improvement of client and public relationship management, though not in the formulated CRM methods of big business. But it did involve learning from elsewhere, and thus a Visitor Centre and Museum were duly created, in addition to the Factory Tours that had always been an informal part of the external-facing persona.

An in-house lifestyle magazine titled 'MOG' was introduced, then in web-based format – though not available when checked on 05/11/2013, which suggests probable changes by management.

[NB the marque is affectionately named 'Moggie' - akin to the yesteryear Morris Minor]

As previously mentioned, two sub-divisions have been formed to expand enterprise.

'Aero Racing' operates a three pronged strategy:
A. Lifestyle – a conduit for Morgan's sponsorship of its Morgan Challenge Cup and Speed Championship, Track Days and Morgan Club Events
B. Performance Parts – sales of performance parts for privateers and road users
C. Vintage – photos and film from the firm's archives

'3-Wheeler Drive':
Using presently 2 black and yellow vehicles numbered #1 and #2, this was set-up as a driving instruction school to new, prospective 3-Wheeler owners, and provides 'brand experiences' for those who who are either enthusiasts or as gift recipients.

Environmental Credibility -

From a vehicle emissions standpoint there are only perhaps EVs and Hybrids running in electric model that are able to beat the low emissions values of Morgans, enabled not by sophisticated powertrain technologies, but simply from the lightweight nature of the cars.

Moreover, from a production emissions perspective, as a niche manufacturer the absence of the heavy industrial equipment used by major manufacturers which itself requires substantial energy inputs, with instead a reliance upon dedicated low volume hand-crafting using certain renewable materials, means that the manufacture may be regarded 'green'. (Indeed nigh-on a template for the 'i-stream' ideology which underpins the business model for the T25/27 eco city-car concept)

Furthermore, the fact that older Morgan cars maintain their value means that the majority have typically been renovated as opposed to scrapped.

These aspects combined provide a fortunate serendipity by which this old fashioned firm's methods are consistent with ever broadening global eco-consciousness.

This positive halo further enhanced with the creation of the 2009 'LIFE Car', a fuel-cell powered one-off based on the Aero8, with technical and financial contribution from one defence company, academia, an eco-car start-up firm and government.

Broad Skills Workshop -

Given the largely self-reliant attitude engendered by H.F.S, the factory has sought to be as self-contained as was possible. This led to a plethora of craft skills being developed across steel fabrication, carpentry, leather-working and body panel forming.

At the present time Morgan's very anti-thesis, the Ford Motor Company has engaged with a DIY innovation outfit named 'TechShop', which essentially offers the equipment for enthusiastic innovators to start creating, so as to infuse Ford with ideas and strategic possibilities.

With far fewer financial resources, but with old and modern tooling and master crafts-people in situ, plus a massive pool of willing youngsters abound, as well as a flexible local UK and foreign supplier-base Morgan should be seen as an ever present 'TechShop'.

The manner in which it has evolved, leapt forward and indeed re-communicates the green credentials of its methods and products demonstrates the fact.

Into the 21st Century -
Thus we see that Morgan Motors has formulated a business template that simultaneously looks both backwards through history for inspiration, but also forwards through technology and brand / product positioning. Importantly recognising the need to both bolster the brand's inherent equity and grow its recognition and repute across the globe, especially regards new EM markets that will provide a new revenue stream balance versus the traditional UK, European and American markets.

This has only been achieved thanks to the multiple efforts of Morgan, Garnett, Morris, Whitwirth and Parkin, their immediate support staff and all at the factory.

Yet, now it seems that with a new company template formed, along with successful products, a new shareholder watershed may have arisen, unfortunately manifesting itself through board level power-struggles.

It seems likely the case that the non-family stakeholders (shareholders or not) may be seeking a strategic sale exit for the company, understandably to the chagrin of Charles Morgan who has been with the firm full time since 1985.

Undoubtedly having seen the cross share-holds and total acquisitions by major auto-firms of what were struggling concerns (ie AML previously, Rolls Royce, Bentley, Lamborghini), Charles Morgan might well be amenable to the partial acquired subordinate interests a of major VM, but understandably unlikely to wish to relinquish a 50%+ or indeed total control.

Other shareholders, from a more remote position, may wish to see this as the ideal divestment outcome.

Divestment Exit Routes -

Perhaps the most obvious route for what may be termed 'activist' (ie maximum profit-seeking') shareholders would be a Trade Sale to a volume manufacturer

1. TATA Motors
Given aluminium structure development of Aero8 so as to merge into the more advanced capabilities of Jaguar Cars (of JLR). Serendipitously, Morgan used the moniker F-Type 80 years before Jaguar. This would then obviously build TATA's stable of British marques.

2. BMW
Given the 4.8L V8 engine supply into Aero8 and +8 and similar aluminium structure interests (see Z9, M-series cars and now elements of the i3 and i8), plus mutual cycle-car/motorcycle aspects there seems to be a basis for strong synergies. Like above, such a deal would develop BMW's stable of British icons beyond Rolls-Royce and Mini and could be deployed alongside its engine supply interest in Weisman Cars, “Germany's Morgan”. Latterly the Z-series cars could be restyled as Morgans.

3. Mazda – Ford
Given that the Japanese company (itself partially owned by Ford) is today perhaps best known for its iconic MX5/Miata model, which re-invented the modern sparse sportscar with its Mk1, and the fact that Morgan utilises Mazda transmissions for Classic and 3-Wheeler ranges, it seems possible that as part of its own and indeed Japan's re-emergence, and the Japanese love of british heritage, it could hold possible appeal to commercially inter-link the MX5 and Morgan product and technology bloodlines. (This seen with the SuperDry 3-Wheeler). Moreover, the Ford supply of 4 cylinder engines for the Classic range indicates a possible interest if it seeks to rebuild an adjunct division; was was the previous case with PAG.

4. Daimler
Given the Stuttgart corporation's interest in synergising its AMG division with Aston Martin Lagonda, expecting a cross-shareholding to incentivise; it would seem likely that Daimler would seek to build its marque stable in an orderly manner. Morgan's small packaged sports cars and basic but highly flexible platform engineering methods could be used to expand the AMG performance brand to include 2 seater track-biased roadster and coupe models.

5. Volkswagen Group
Given VW's desire to own the best marques (Bugatti, Bentley, Lamborghini, Porsche, Ducati etc) there may be commercial interest from Wolfsburg given the Bugatti-esque overtones displayed in Eva GT. Creating a mix and match technology strategy that could interweave Bugatti, Bentley and Morgan along with the more mainstream enabling systems technologies made available via Porsche, Audi, VW.


6. Caparo Group
Another supplier (for brake callipers and systems) to Morgan is Caparo AP Braking, a sub-division of the steel orientated Caparo Group, which also includes Vehicle Technologies which created the Caparo T1 road legal track car. Caparo Group is seen to be eager to climb the technology ladder and so value chain, so as to partially extract itself from low value steel. Thus Morgan could be viewed as either a potential acquisition or offer its current shareholders a cross-shareholding so diversifying their respective interests.


To a Private Equity firm, itself acting as the refining intermediary before a latter trade sale.

Setting Out Its Stall -

The manner in which Morgan has both modernised and entrenched into its roots indicates that over the last decade or so its shareholders have sought to create not only a tenable company - as was always the desire of HFS and Peter – but more, so as to better integrate Morgan's product range and base technology with that of the automotive giants, themselves seeking high-value marques which espouse both high technology content, a proven provenance (such as Le Mans racing) and that all important asset, strong emotional ties.

It seems apparent to investment-auto-motives that Morgan has indeed sought to intentionally spread its wings widely across the VM spectrum so as to both create a broad basket of supplier relationships, but also to possibly attract a latter-day broad set of highly competitive well financed potential buyers or stakeholders.

Conclusion -

Presently it seems that internal works may be afoot which, though not stated, may seek to begin a process of commercial rationalisation and streamlining which evolves Morgan into what could be a very different entity, one far more interwoven with the giants of the automotive world.

As with other British niche vehicle manufacturers, and indeed the not so niche (eg Aston Martin now enchanting Daimler having previously benefited from Ford), Morgan's past initiatives have demonstrated the inevitable reliance upon technically capable 'business partners'. Most notably the Aero Eight with BMW power-train technology and Hydro designed aluminium structure.

Relationships which in actuality have been little more than that of a notionally gracious system supplier assisting a production minnow, though obviously the former gaining associative kudos and cache, and the latter high quality 'mix and match' technology.

Greater interaction with the auto-giants is perhaps inevitable, but as shown the Morgans have always managed to achieve successful commercial relationships without depending too heavily upon any single one supplier, indeed their mantra has been to de-risk by involving many. So exactly how this process will continue will be most interesting to see.

But inevitably with the EM expansion of the car market and a growing number of current and potential wealthy client groups means that the legendary names of automotive history may have become renewed 'manna' for the auto-majors, so their interest always more than purely philanthropic. The more historically meaningful and characterful, the more the potential attraction.

Presently the removal of Charles Morgan, by hook, by crook or however, indicates that the remaining directors may wish to 'sweat the assets' of the firm; largely its brand equity and inherent global goodwill.

But equally, things may not be as they seem.

The news of his apparent dismissal could be a ruse to attract and gauge the commercial interest of outside parties and simultaneously jivvy-up UK government to better assist SME and so Morgan in the process, given its role as cornerstone of British light industry

Indeed, why should Morgan not successfully replicate itself across the UK within the remaining similar small-scale Victorian and Edwardian red-brick sites elsewhere, using such places as flexible expansion and indeed contraction capacity as required and in turn training a new generation of apprentices and engineers.

Only time will tell.

If ultimately in years to come such an expanded Morgan Motor Company's destination is as a listed entity on the stock-market, it would indeed be ironic, since as understood, it was the family income gained from the bond and stock markets in the first half of the 20th century which itself was used to fund the firm through its own periods of hardship.

Whatever the eventual outcome however, Morgan without its figurehead and the all important lineage which imbues the firm with far more than the sum of its parts, might well externally undermine the company to the detriment of all.

Morgan is more than a niche car company, it is a representation, even if idealised, of the way things ought to be, of how capitalism, paternal values and enormous goodwill can be combined in a successful formulae. Indeed, the UK's broad fortunes across many of its SME would do well to apply “the Morgan Method” of business.

Cooler heads should prevail, so as to further build-upon a century of toil, and not all too easily erode what is for many a slice of how the world should be.

Post Script -

Harvey-Jones's Case Studies -

In addition, and of possible value so as to provide a more rounded picture of late 1980s, early 1990s UK manufacturing, and critically serving as a juxtaposition to M.M.C., it may be useful to momentarily view the fortunes of its then counterparts.

Apricot Computers:
Liquidated in 1999 (late in outsourcing integrated manufacture)

Churchill China:
Listed on the LSE's AIM in 1994 (family retained partial share-hold)

Copella Apple Juice:
Sold to Tropicana, then to PepsiCo

Norton Motorcycles:
Became defunct, a DTI fraud investigation followed, debt and rights sold to various American PE firms, 2008 brought new leadership and revival, and 2011 government export loan

Shropshire Health Authority:
Morphed into latter-day 'Primary Care Trust'

South Yorkshire Police:
Ongoing, though heavily criticised for dishonesty in a high profile case.

Velden Engineering:
Ongoing, expanded interests in specialist engineering, design and development and property.

Thus as seen, a mixed bag of outcomes. The much respected Harvey-Jones did indeed pertinently highlight the challenges for each organisation but to believe there may have been catch-all solutions to what were a diverse set of companies was to be naïve. Each firm had a its own specifics in terms of sector dynamics, core capabilities, managerial appreciation and balance sheet strength.

Apricot Computers were effectively far too small scale and too introverted to ride the major sector specific changes that were under-way, especially so between the research-work in in the US and its use of low cost mass production across Asia.

Churchill China sought recapitalisation via the notional venture listing within the London Stock Exchange, and saw a collapse of confidence in 200, but positively restructured, ever since experiencing positive market cap climb to a new record presently.

Copella Apple Juice appears to have ridden the early 1990s popularism for health oriented foodstuffs, and looks to have been effectively created for major player integration; serving its founders well, today one of the pro-health sub-companies of PepsiCo.

Norton Motorcycles had seen various attempts at resurrection since its mid 1970s demise, in retrospect seen as the creation of shell-type holding enterprises leveraging the highly emotive Norton name for what was possibly unethical ends. Seemingly properly resurrected in 2008 and able to deploy effective web-communication the brand appears externally to be stable, able to deploy its Cafe Racer appeal alongside other revivalist efforts (eg Ace Cafe and Goodwood Revival)

Shropshire Health Authority:
This public entity became integrated within the national Primary Care Trust system as what seems the inevitable partial privatisation of the NHS as greater population demands outweigh publicly available income.

South Yorkshire Police:
Remains effectively intact, and though heavily criticised for specific cases of mis-dealings and thus the shattering of public trust, very probably does so given its developed structure relative to the regionally specific challenges such as social deprivation, racial diversity, urban vs rural affairs.

Velden Engineering:
This company seems an unlikely success story as what was once seen as an out-dated hangover of an industrial past, based in Bolton and established in 1973 in the midst of the UK economic woes. Starting as a basic fabrication shop, it managed to survive the 1970s and beyond during the UK's prolonged domestic industrial contraction – seeing foreign firms introduce mass manufacture. Doing so by investing in modern technology, achieving quality standards equal to those of large industry, maintaining labour flexibility, positioning itself as a specialist to large clientèle to provide good margins, and finally able to acquire strategic and value adding small UK engineering interests.

It can be seen that the outcomes of Harvey Jones' case studies might surprise.

Whilst the Police and NHS public organisations have inevitably developed within the microcosm of their politicised and national budget worlds, in this select group the private enterprises demonstrated that the arguable economic split between supposed backward 'old industry' and future-facing 'new industry' was not as prevalent as would seem.

Of course for the failure of Apricot came the success story of Cambridge's ARM Holdings. Churchill China demonstrated its growth capabilities by expanding its range across china-porcelen, general ceramics, glass and wood, along with an innate heritage appeal using the suffix '1795' in its web identity. Norton did indeed suffer versus its Japanese and German competitors, but other micro problems and macro trade internationalisation issues were undoubtedly afoot far beyond the innate capabilities of British engineering.

But perhaps it has been Velden Engineering along with Morgan Motors that stand rightly proud for adapting both technologically and commercially as was necessary to suit the much changed climate.

Both today seemingly in good operational health.

To reverse the established saying...”an old dog can indeed learn new tricks”, and must do to survive and prosper in an ever growing global pack.