How about a backers for an independent British sportscar marque? Kuwait’s national Investment Dar, which paid $925m for a 51 percent stake in Aston Martin two and a half years ago, has secured a claims freeze from creditors, reports The Guardian. This, nearly seven months after the fund got into trouble and offered its Aston stake up for biding, and our Aston-buyer-rumor-meter is still registering a fat goose egg. $393m of Dar’s stake was financed with a Shariah-compliant loan, and the Dar has been forced to publicly ask its creditors to chill. The finance guys will come to some kind of musawamah, but it’s Aston I’m worried about. McLaren is making a less indulgently heritage-dependent bid to be come the British sportscar firm, while Aston is… languishing on the market, firing workers, being turned down by celebs, rebadging Toyotas and generally cheapening the brand. Where do you go from there?
Where every other troubled car company goes to… China. Shanghai can buy Aston with money it finds between the couch cushions.
I just know somehow Jeremy Clarkson will blame this on the Americans :-)
The world needs fewer car companies.
F-e-w-e-r, rhymes with brewer, or sewer…
Ford’s doing really well right now.
Maybe they could buy AM. Efficiencies of scale, shared R&D, it’ll be great!
Oh, wait…
Can I lease it with option to buy?
Twotone
The day of the stand-alone specialty auto maker is over. Ferrari, Maserati, Porsche, Rolls-Royce, Bentley and Bugatti are all part of much, much larger automotive enterprises. The engineering, design and business talent required to run any automotive company is staggering. Building a handful of units, no matter what the price, doesn’t support such an endeavor.
The problem with Shariah compliant financing is that Islam prohibits the paying of interest.
Christian and Jewish prohibitions on usury only apply within those faith communities. According to Jewish law, Jews can pay interest to non-Jews. Likewise, Christian sanctions on usury allow Christians to pay interest to non-Christians. Furthermore, anti-semitic policies kept Jews from owning farmland or joining guilds, so moneylending was one of the few professions Jews could enter in Europe. Some historians feel that Europe’s dominance over the past 500 years was in part due to the availability of venture capital. It may also explain the lack of economic development in the Muslim world.
Investement Dar is going to have trouble refinancing. The way Shariah compliant loans work is that on paper the borrower is borrowing the full value of the loan. So with a $100K mortgage that might have $300K worth of premium and interest payments, the loan is structured as a $300K loan and treated as a simple no interest loan. Any Shariah compliant refi would mean that at least on paper the loan would be for $393 million plus whatever interest would accrue over the life of the loan. In today’s credit markets, finding someone to loan $400 million for a car company that is currently struggling financially is going to be hard enough. Finding someone willing to put double that amount at risk is going to be impossible.
It may also explain the lack of economic development in the Muslim world.
Well, apart from the absolute mountain sized piles of money they sit on from all that oil. IIRC, in 2008 the IMF estimated private CASH (not assets) in the “Middle East” to be ~US$1.5 trillion.
Maybe all those Sheiks should just pay up out of their pocket change.
I would really hate to see Aston Martin go away, they are really beautiful cars. A friend has a black on black Vantage, its the only car i like better than my Jag XK8. My fear is that A-M may be bought by the likes of BMW or VW, who have in my opinion, ruined Rolls & Bentley. The Rolls is a Hummer in a tux and the Bentley is a bling-mobile for the likes of Paris Hilton.
@ Ronnie –
Good post…and I’d also add that one major factor hindering development in the Muslim world is the radically inequal distribution of wealth. Hard to build a strong economy when half your population lives in abject poverty, and the top 1% live like feudal barons.
John Horner: Building a handful of units, no matter what the price, doesn’t support such an endeavor.
Good point. The Aston-Martin name is built upon a storied heritage…but alas, it’s profits, not heritage that pays the bills.
I hate to see any company fail, but one wonders if there is any future for these cottage-industry automakers. It’s a shame that more of these didn’t reinvent themselves as research-and-development vendors for larger makers, much as Lotus did (does?).
Ronnie Schreiber:
The problem with Shariah compliant financing is that Islam prohibits the paying of interest.
Isn’t it really just a question of semantics? A lender isn’t allowed to charge interest under Shariah law, yet the it’s okay for the lender to purchase a property outright and resell it to the borrower at a fixed higher price. Sounds like interest to me.
Personally, I think the world of finance, Shariah or ortherwise, is just one Gi-normous shell game.
FreedMike :
@ Ronnie –
Good post…and I’d also add that one major factor hindering development in the Muslim world is the radically inequal distribution of wealth. Hard to build a strong economy when half your population lives in abject poverty, and the top 1% live like feudal barons.
I think that the abject poverty is partly due to the brain-drain. Due to their gender, half the population isn’t allowed to go to school beyond the 8th grade or so. Those who stay in school may not be much better off. And many simply leave to seek freedom and liberty elsewhere.
Maybe the ones who leave are the smart ones. Or at least they may be the highly motivated ones. Smart people can think about moving mountains and can even draw up the project plans, but truly motivated people can actually move them.
But I digress…
@Zoom Zoom:
Good points. A lot of it also the lack of socioeconomic mobility – people are born into a certain class, and that’s what defines them. Why get an education if all you’re going to be is a ditch digger, which is the same job your father before you did?
And why should girls get educated if all they’re going to do is punch out kids and cook meals, just like their moms did before them?
If these societies weren’t so stratified, the problem of uneducated women wouldn’t be so prevalent, IMHO.
Acquisition (who?!) or extinction. I don’t know how they lasted this long. Oh yes, fools, money, etc.
What the heck is the Muslim world? Show me the cultural similarities between Senegal, Indonesia, Saudi, Afghanistan or Lebanon (I could go on), and I’ll buy you a falafel.
“unequal distribution of wealth” ? I think Michael Moore has a movie about that. “born into a certain class” describes India, or even South America.
Keeping the thread focused on Kuwait would be more accurate.
What the heck is the Muslim world? Show me the cultural similarities between Senegal, Indonesia, Saudi, Afghanistan or Lebanon (I could go on), and I’ll buy you a falafel.
Let’s see. Don’t eat pork. Pray 5 times a day in a Mosque. Treat non-Muslims as second class citizens. Certainly seem to be some cultural similarities.
The fact is that Muslims see themselves as part of one large ummah, nation.
“unequal distribution of wealth” ? I think Michael Moore has a movie about that.
Mikey knows all about unequal distribution of wealth. He lives in a lakefront home on Torch Lake, arguably the most desirable location for vacation homes in Michigan. He also owns an apartment on Park Avenue in Manhattan.
Mikey likes to make it seem like he’s a common working class guy, but he never lived in Flint (he lived in a nice middle class suburb) and he’s never worked a real job in his life. Mikey would collapse if he had to work an 8 hour shift in a factory.
When Mikey sells his homes and uses the proceeds to help the homeless or he doesn’t charge admission to his movies, I’ll see him as anything other than a huge (and getting bigger everyday) hypocrite. Hell, entire families in Haiti could live for a week on what Mikey stuff in his face for lunch.
When Mikey sells his homes and uses the proceeds to help the homeless or he doesn’t charge admission to his movies, I’ll see him as anything other than a huge (and getting bigger everyday) hypocrite.
Damnation to those successful people!
(Yawn).
Let’s see. Don’t eat pork. Pray 5 times a day in a Mosque. Treat non-Muslims as second class citizens. Certainly seem to be some cultural similarities.
The fact is that Muslims see themselves as part of one large ummah, nation.
Wow. They’re just one homogeneous block. I’m so glad you cleared that up for me.
My Talmud is rather rusty. Perhaps you are familiar with a parable that has to do with splinters in someone else’s eye and removing the plank over your own?
+1 To AlexD for having seen enough to know that no group really thinks or lives a monolithic existence.