AC Cars re-starts assembly following supply agreement with Shelbly

[Ozgur_Tan]

UK: AC Cars re-starts assembly
18 Nov 2003
Source: just-auto.com editorial team

AC Cars has recommenced assembly operations at its plant in Frimley, Surrey, following the conclusion of a supply agreement with Shelby Automobiles in Las Vegas.

The long-term agreement calls for the annual delivery of around 50 aluminium body shells mounted on traditional steel chassis for sale in North America through Shelby’s network of more than 20 dealers. The cars will be completed at Shelby’s Las Vegas plant, branded Shelby AC Cobra and will be available to customers from mid-2004.

The development follows the announcement made on 7 October 2003 of a strategic alliance between AC Motor Holdings Ltd and Carroll Shelby International Inc. The Frimley operation, which is now employing about 10 people, was closed down by its then operator Private Corporation Ltd in early October (Private Corporation had operated the plant in August 2002).

AC Cars (UK) Ltd is a subsidiary of AC Motor Holdings Ltd, whose chairman Alan Lubinsky said: “We are delighted to once again bring together the activities of Shelby and AC – two names which are inextricably bound by their joint histories but which, for far too long, have operated as rivals.

“The car which we are partially building in the UK is a faithful recreation of the original Shelby-inspired AC Cobra 427 model of the 1960s which we are certain will become an instant hit with all those North American buyers concerned about originality, genuine style and the attributes of real British hand-crafted bodywork”.

Lubinsky added that AC Cars Manufacturing Ltd, another subsidiary of AC Motor Holdings Ltd, has recently concluded an agreement with the Malta Development Corporation for the commissioning of a dedicated plant in Malta. Due to open early in 2004, this will produce a new range of cars for sale in the USA, UK, Japan, Australia and ultimately in other European countries.

The first product will be a new version of the AC Ace, the car which was originally launched in 1955 and which preceded the famous Cobra model. This car, with a composite body and Shelby-sourced powertrain, is expected to retail in the US at around $40,000 minus engine and transmission. Lubinsky said that other models, including the innovative AC Mamba coupe, would follow in due course, all of which will be sold through the new distribution channels.

[casaleenie]

The car which we are partially building in the UK is a faithful recreation of the original Shelby-inspired AC Cobra 427 model of the 1960s which we are certain will become an instant hit with all those North American buyers concerned about originality, genuine style and the attributes of real British hand-crafted bodywork”.



OH BOY!!, now are these going to be the REAL Cobras?????

This stuff gets more confusing everyday...

[Excaliber]

I think it's very cool!

....so what was all that talk about SPF "owning" AC? THATS the confusing part!

Ernie

[Allan A]

Very interesting, what will this mean for the Kirkhams. I would guess we will see more cars on ebay.

Allan

[Cal Metal]

Press releases are nice. Execution is another matter. If I were the Kirkhams, I wouldn't be losing too much sleep over this.

[Excaliber]

,,you don't suppose the AC plant will in fact be using the Kirkham bodies, you think? I got the impression from the press release AC would be RECIEVING bodies from outside the UK.

At any rate, Kirkham has a solid place in the market.

Ernie

[KobraKarl]

Ernie ,

The release says"Real British hand crafted bodywork" ....maybe they are going to paint them,

KK

[Dan Semko]

The validity of ANY press release by Alan Lubinsky remains questionable, if not self serving. I believe Proctologists use a similar statement as they are snapping on their latex gloves when they say " this isn't going to hurt one bit". It ALL depends on what side of the finger you're on!

[Scott Smith]

Then what's coming out of the much touted AC plant in Malta?

[Dan Semko]

PipeDreams!

[Jamo]

Not that I give a good golly damn...

But Oinie certainly brings up a good point (might be his first ever) regarding SPF Groupies shouting from the highest about control of the "real" AC, including the Frimley plant.

What was in that "pipe" that you guys were smoking?

[Dan Semko]

I believe that it was "Premium South African Jabberwocky"
Having a farming heritage, I'm sure you understand it's "proper" application.

[DKing]

Let's see, what does this do to the market?

Hhmm, okay, Shelby has an alternative source of cars for his aluminum CSX4000's other than Kirkham, so this puts him in to a position to leverage more aggressive pricing from Kirkham. This can be used to increase profitability ( by lower costs) or increase volume (lower market prices for you and me).

Or, Shelby could have a cheaper source than Kirkham, and shop elsewhere. Then Kirkham loses a portion of their volume. This means that Kirkham's fixed costs are spread over fewer cars, resulting in lower profit margin per car. To remedy this, Kirkham will need to sell more cars (or reduce costs) to acheive the same level of profit. Increasing volume comes from a strong marketing campaign, or by lowering market prices. Strong marketing only goes so far. Either way, Kirkham's costs go up, either through increased spending on marketing, or higher fixed costs.

Hhmm, so Shelby negotiates a lower cost from his manufacturers, and Kirkham increases volume to maintain profitability. Both are duking it out for the same market share, trying to increase the market from the currently price-insensitive aluminum Cobra buyer by expanding the market into the realm of the price sensitive buyer that is currently playing in the new or used fiberglass Cobra market (CSX or replica).

So, if Shelby isn't gaining the market share he's after (with the subsequent profit), he can price his aluminum car closer to the price of a Kirkham to shift some potential Kirkham buyers over to Shelby. Kirkham, faced with this attack, might not want to lose these buyers and may lower price to keep them, AND/OR, may decide that some of those potential SPF or ERA customers look pretty tasty, and retarget their pricing to capture some of this market.

Of course, people that already own Cobras and want to sell them face a new market where their used Cobras no longer command the resale value they once had because you can get a new one at a lower price than before.

All of this is good news for the consumer, who is in the market for a Cobra, be it CSX or replica. However, if you own one already, aside from an original which will hold it's value as such for a purist collector, this is likely to have a negative impact on the resale value of your Cobra. This statement is true for any CSX4000 or replica alike.

The big question is this: Is Shelby seeking to increase profit by expanding his market and increasing volume (lowering market prices), or is he seeking to increase profitability by achieving lower costs?

If I were the Kirkhams, I'd be breaking out my Game Theory textbook and start formulating alternate war strategies based upon what I think Shelby is up to. I'd also be looking at the loss of Shelby's business and what impact that would have on my production, costs, and profitability.

Oh, and let's spare the air of the whiney-butt Shelby-bashing (I can hear it coming). This is capitalism in action. Nothing wrong with being aggressive in your market.

[DaxSC]

Hmmm

Personally, I don't think the Kirkhams are going to have a problem. If, and I mean IF the bodies are going to be handmade in the UK, where labour rates have got to be nearly 10 times that of Poland; the finance costs of the new Frimley plant, plus additional tooling investment, I cannot see how the can compete anywhere near the per unit cost of the Polish product.

We shall see.

[ToyCollector]

I agree with DaxSC on this. I do not worry that the Kirkhams have a small gross margin at all. In the past, anything from the AC plant has not been cheap at all from what I have seen, and with the Shelby name now tied to it, why play a price war game? I think the AC plant follows in the footsteps of so many other British automaking facilities. They made really cool stuff honoring traditions at a loss just for the craft of it, but ran a lousy business.

Hence why Land Rover, Rolls, Bentley, Jaguar, Mini, Aston-Martin are now owned by foreign companies. I think what may be happening is that this is actually a way to counter the market perception that Shelby's aluminum car really has a good amount of Kirkham in it. By going back to AC, it ads some marketing clout to differentiating the product. My prediction: Shelby either goes up market some more with this AC sourced car and drops Kirkham as a body supplier, or keeps both at two price points with the AC one as the premium offering.

[REAL 1]

Very interesting. However, like some said I'll wait to see cars coming in before I believe it.

Jim price as I understand owns the tooling and jigs. He closed the plant in Frimely the minute he thought Lubinsky was cozying up to CS based on his previous deal with AC.

How does AC build the frames and bodies without the bucks, tooling or jigs unless they are making new ones.

How do 10 guys produce 50 bodies and chasis by hand in a year and produce a quality product at a competitive price? Something is not adding up here.

What does "partially building in the UK" mean? I wouldn't be surprised if they end up shipping Kirkham bodies and Chasis through the mysterious Malta plant for an "AC" stamping then to SAI.

Oh yeah. I also find it suspicious that a similar press release discussing this new developement hasn't been made by SAI. Why? Hmmm.

I also agree with Cal that Kirkham makes a quality product second to none. I don't see where an AC supplied body and chasis will affect the value of the current aluminum CSXs unless they are offered at the same price and availability off of the original jigs, bucks and tooling. That would be impossible to do IMHO for many reasons Jim Price being the first of many.

Any AC supplied body and chasis will be considerably more expensive to produce and buy than a KMP counterpart simply because of the manufacturing abilities and process. I don't believe an AC supplied body and chasis could be offered for sale in anywhere near the range of the current CSX aluminum rollers.

[Cal Metal]

The only issue that DKing didn't discuss was the one with respect to quality. I would give odds that very few people can match the Kirkhams in that category, and that is what the high end consumer will ultimately seek out.

[ToyCollector]

Evan, having read the past stories of Mr. Lubinsky, and this is a stretch from most of us to fathom...if he was in the driver's seat and having a good wager that Jim Price was going to shut it down, could he have copied the molds/bucks/jigs ahead of time? Or maybe some craftsman at the plant had stashed some away over the years. Other than that angle, I agree they would have a tough road ahead of them. My interpretation of partially built in the press release was they would ship the AC produced parts to Shelby in Vegas for final assembly of other sub-components. Basically they ship to Vegas their content that replaces what Kirkham usually supplied. Just a guess.

[DKing]

I think it comes down to what percentage of Kirkham's business is in building cars for Shelby, right? If Shelby switches, this would be a big contractual loss to Kirkham. The question would be if Kirkham wanted to spread their fixed costs over the same amount of cars. This may not be a market shaker, but it will have some impact on their business, as well as other Cobra manufacturers.

[ToyCollector]

I could easily envision the Kirkham's building other cars as well to cover fixed costs if they wanted to. Would love to see a GT-40 on their agenda, an aluminum Porsche 550 Spyder. They could expand their wares quite readily if they so desire. Loss of Shelby as a customer is a speedbump I am sure they have thought about before, as well as others doing aluminum cars.