The carmakers have confirmed in statements that Mercedes-Benz will increase its stake in Aston Martin over the next three years from 2.6% to as much as 20%.
In exchange for the new shares, Aston Martin will get access to Mercedes-Benz technologies and components including next generation hybrid and electric powertrains.
Aston Martin, the favorite ride of fictional British secret service agent James Bond, was in rough shape even before the coronavirus pandemic slammed the auto industry.
The company battled weak demand for some of its models and a global auto slowdown before Formula 1 billionaire Lawrence Stroll drove to its rescue in January.
The Canadian billionaire led a group that paid £182 million ($236 million) for 16.7% of the company. Aston Martin then raised an additional £318 million ($412 million) through the issue of new shares.
In May, the company replaced CEO Andy Palmer with Tobias Moers, who had been with Mercedes-AMG since 1994.
Investors remain unconvinced about the turnaround effort. Shares in the firm have collapsed since they were listed in October 2018, a stinging indictment of a carmaker that once sought a valuation on a par with Ferrari.
Aston Martin said on Tuesday that it suffered an operating loss of £229 million ($297 million) in the first nine months of the year. The stock has lost two-thirds of its value so far in 2020.
Moers said that the partnership with Mercedes-Benz will be crucial going forward.
The German brand's technology "will be fundamental to ensure our future products remain competitive and will allow us to invest efficiently," he said in a statement.
For Mercedes-Benz, which is owned by Daimler, the deal is a chance to burnish its luxury credentials at a modest price. It said the tech transfer is worth £286 million ($371 million).
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