Bahar blows credibility, loses Lotus?

Chris Sawyer

Jarno Trulli at Monaco

Jarno Trulli at Monaco

Well, having just read the entire Judgment in the ‘Group Lotus vs. Team Lotus’ case (my name for it), I can only say that Sir Walter Scott’s saying, ‘Oh what a tangled web we weave when first we practice to deceive,’ pretty much describes the history of Lotus (Group and Team) and the current situation. This whole thing is a tangled mess and about to get much messier.

The High Court has, in a nutshell, reaffirmed rights that have existed since at least 1968 and certainly since a legal agreement between Group Lotus and Team Lotus written in 1985 on the cusp of the sale of Group Lotus to General Motors. The High Court Judge, Mr. Justice Peter Smith, held that Team Lotus and Group Lotus are essentially separate entities. Team Lotus was given the right to use the ACBC monogram with or without the words ‘Team Lotus’. Group Lotus could continue to use the names ‘Group Lotus’ and ‘Lotus’ and the roundel with the ACBC monogram.

The Judge also found that the agreement acknowledged ‘that both businesses originated from the work of the late Colin Chapman but have been run as separate businesses since at least 1968.’ Further, if the 1985 agreement was terminated, ‘Group Lotus could enter into racing for the first time under the Lotus name.’ However, Group Lotus could not use the name ‘Lotus’ alone or the word ‘Team’. The latter was left to Team Lotus and only Team Lotus. Mr. Justice Smith observed that the 1985 agreement ‘contemplated what we have now, two teams racing under the Lotus name simultaneously in the same series. These restrictions were to be made permanent and survive the termination of the 1985 agreement.’ There’s a lot more to the Judgment, but this pretty much sums up the major bone of contention.

What now, then? Well, as I said in an earlier article, Tony Fernandes fights the long war and this is but the first victory. The purchase of Caterham Cars by Team Lotus is not an end unto itself. Had he lost the right to use the Team Lotus name, Fernandes could very easily have transferred his attentions to the Caterham brand and proceeded to build his automotive empire around that name. That’s because Fernandes was reasonably confident he held the upper hand – if he lost, Fernandes could agree to purchase the rights to produce the current Elise and Exige models, giving Group Lotus a needed shot of funding in a still unsteady world economy. An entry-level vehicle not in keeping with Lotus’ ambitions would be sold off in return for money that could be used to service the £270 million debt Group Lotus recently incurred with Asian banks. Fernandes and Caterham Cars could then move into a slot in the global sports car market Group Lotus is currently keen to vacate. However, if Fernandes won, the Team Lotus name could be swapped for the Elise/Exige manufacturing rights and the promise of no further legal action.

It’s important to remember that, from the very beginning of this soap opera, I have steadfastly asserted Dany Bahar’s plans smacked of readying Group Lotus for sale. What I didn’t know at the time, but have since learned, is that the previous management team at Proton entered into the licensing agreement with Tony Fernandes and his 1 Malaysia Racing Team for much the same reason. Apparently, the intention was that Fernandes, who had backing from the former Prime Minister of Malaysia Dr. Mahathir Mohamed, would take control of Group Lotus over time and separate its losses from Proton’s financial ledgers without Proton losing face.

Proton would then have been able do one of two things: 1) Borrow money at a more reasonable interest rate to fund its own Future Product Programmes, or 2) make itself more attractive to a potential suitor like the VW Group. However, although there was talk that Fernandes could also obtain control of Proton in this exchange, it’s now thought that the political knots were too tightly tied to have allowed this to happen. It’s one thing to sell Proton off to a major automaker, quite another to hive it off to the CEO of a cut-rate airline.

Bahar, for his part, happened along just as the management team at Proton changed and his idea of taking Lotus into Ferrari and Porsche territory (including profits) fell on receptive ears. However, the Bahar plan had a failsafe: the move upmarket could be used to prop up the balance sheet, garnering a greater return for Proton – and Bahar – when Lotus was sold. Thus began the five-car assault seen at the Geneva Motor Show and plans to attack everything from the F1 World Championship to Le Mans and the Indianapolis 500. Bahar was definitely trying to sell hamburger by enticing buyers with the sizzle of steak and the greatest sizzle, in his mind, was Formula One but Tony Fernandes had beaten him to it.

Unfortunately for Fernandes, his management team never understood that his relationship with Group Lotus hinged upon a licensing agreement which gave Hethel full control over the approval of new clothing and merchandise for his F1 team. By dragging its feet, Group Lotus could delay product approval long enough to prevent Fernandes from selling it in a timely manner. Sensing this, Fernandes pushed ahead and gave Group Lotus all the reason it needed to legally end its agreement with him. Perhaps he will be more cautious and methodical in the future.

Knowing that the Team Lotus name was dormant and wishing to pay Proton and Group Lotus back for what he perceived as a slap in the face, Fernandes bought the rights to the Team Lotus name from David Hunt and dared Bahar and company to sue him. They did. Fernandes won. Proton and, more to the point, Dany Bahar have egg on their respective faces. Fernandes is in control.

The Elise/Exige swap is just the first move in this chess game and there’s a precedent in the move of the Seven from Lotus to Caterham. Inevitably the deal will be spun as a move to heal the wounds and to close the door on Lotus’ down-market past as it moves toward a bright new future. Great emphasis will be placed on the fact that the Toyota engine currently used in the car is going out of production and that the cost of finding a replacement, mounting it in the car and certifying it would take precious resources from the company as it prepares for the future. Proving its magnanimity, Group Lotus will include use of the Elise and Exige names. This will relieve it of a sticky problem with the next-generation car: a much higher price. Don’t be surprised if the Elise concept isn’t rejigged and renamed ‘Elan’.

Fernandes will accept the gift graciously as the addition of the Elise and Exige will triple Caterham’s road car offerings overnight. This will bolster his efforts to expand Caterham sales, especially in the Asia-Pacific market. Rebranding the Air Asia GP2 effort with the Caterham name will strengthen the tie, as will greater support for grassroots motor sport series. However, this is by no means the end of his efforts.

Fernandes has announced his intent to bring the brands together under the Caterham Team Lotus umbrella and ‘launch a range of new Team Lotus brands into the global marketplace’. Expect the Team Lotus branded Seven to be followed by further iterations – especially Elise and Exige when that deal is completed – as well as a line of affordable lifestyle products for buyers and poseurs alike. Fernandes’ plans for Caterham Team Lotus should not, though, be interpreted as a sign that he has taken his eyes off Group Lotus.

Stung by the attack on his credibility and honesty, sources say Fernandes has as his ultimate goal the complete takeover of Group Lotus. Should that happen, he may well follow the path of Ron Dennis and McLaren and eschew involvement with a major OEM to go it alone. Once again Toyota, which saw Lotus sold out from under it in the 1980s, and Honda, which passed on buying it in the 1990s, will have to sit on the sidelines and watch. However, one of those Japanese OEMs may agree to supply engines and transmissions which will be suitably modified for use in Lotus and Caterham vehicles.

What about Dany Bahar? Well, the word is that patience is wearing thin within the executive ranks of Proton. Major league loans have been taken out, grandiose plans put in place, yet there is little to show for the effort. Budgets have been broken, new programmes announced almost on a whim and millions spent on a losing legal effort.

However, what may ultimately prove to be of more significance is that Bahar testified in court that he had a two-minute telephone conversation with Max Mosley regarding the Team Lotus situation – a conversation which Mr. Justice Smith described as ‘fairly inconsequential in respect of the dispute’ – only to have it transpire that the supposed conversation never took place! The Judge said: “…the only relevant telephone conversation had a two-second duration and Mr. Mosley recalled somebody ringing him but not getting through. I am satisfied no conversation took place as alleged by Mr. Bahar.’

My sources suggest that it is only a matter of time before Bahar gets his comeuppance and his spanking at the hands of Max Mosley can’t have helped his credibility. Look for Bahar to part company with Group Lotus before the first quarter of 2012 is complete.

Posted in: Essays, Lotus
Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

12 Comments on "Bahar blows credibility, loses Lotus?"

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  1. Glyn Stacey says:

    A great article… I still can’t understand how Proton were taken in. The main thing is that Lotus is safe in the long term, although it’s in for a very bumpy ride.

  2. Jemma says:

    I don’t think Group Lotus is safe at all – this sort of litigation costs money, a lot of money… That’s something which small companies generally don’t have to waste and, even if they think they do, circumstances can change…

    There is a quote from Aaron Sorkin’s book about the 2008 credit crash, regarding one of the companies having to agree a swingeing Government buyout: “which is better gentlemen – 100% of nothing, or 20% of something”.

    Group Lotus has a lot of stairs to climb – they need new engines, new designs and are aiming at new competition – it’s a big ask even without all the legal complications. I hate to say it but I can see this being the start of the end of Group Lotus as it is.

    Oh, and I thought Mr. Mosley was the one getting spanked…

  3. Jordan says:

    A great article… However, one point is unclear: you suggest that Fernandes might trade the Team Lotus rights to Group Lotus in exchange for the manufacturing rights to the Elise and Exige, but then later mention that Fernandes plans to launch new Team Lotus products, of which the Elise may be one. How will Fernandes launch a Team Lotus edition Elise if he has traded away the Team Lotus rights?

  4. Ross A says:

    @Jemma
    Well said, Jemma. Both companies, as they stand, are in vulnerable positions right now, although I do feel Team Lotus will still have the edge on whatever will happen. Interesting times ahead for Lotus and, er, Lotus…

  5. @Jordan
    A good point – I imagine that the deal which Chris Sawyer envisages would not only cover the transfer of the Team Lotus trademarks to Group Lotus in exchange for the IPRs to the Elise/Exige designs and names but also include a Licensing Agreement allowing Caterham Cars to use Caterham Team Lotus badging on the Seven, Elise and Exige…

  6. Chris Sawyer says:

    Clive has it exactly right. My apologies for not catching that shortcoming in the story.

    The fact is, we are a long way from being done with this saga. The costs incurred by Group Lotus and Proton thus far, including the funds wasted on this litigation, are adding up on the wrong side of the ledger for one D. Bahar. That said, I should point out that not everything he did was wrong or wrong-headed. He was right to dramatically rethink quality control at Group and to force some thinking that looked beyond the historic boundaries in which Lotus has operated.

    Others would have done so, but the money from Proton was never forthcoming. That’s why, as I stated at the very beginning, the death of Yahaya Ahmad was tragic for both Proton and Lotus. When he died, the plans and funding died with him.

    One other thing, I hope all caught the potential for putting the two brands together. Caterham would still appeal to the entry-level driver, perhaps even more so than today, as well as to the driver looking for bare-boned sports car excitement. Lotus, on the other hand, would appeal to the driver who desires sports car purity, but with a few more modern creature comforts and conveniences – though not as many as in, say, a Porsche or Ferrari.

    My understanding is that Fernandes sees the potential for a sports car maker with an F1 pedigree that operates in the space Ferrari, Porsche, McLaren and others have vacated. Lotuses will not be so expensive as to be dream machines, but not so spartan as to appeal to a small slice of humanity. Properly planned, it could work.

    Oh, and as for this being the long road to oblivion, Lotus has been near death so many times it’s hard to say if it has the nine lives of a cat – or more. During my brief time working with the folks in Hethel, as well as the more than 20 years I have known some of the greats in the company’s history (many unsung), I have come to understand what drives Lotus forward. Chapman’s motto, “In adversity we thrive,” is no less true today than it was in 1948. There are many truly talented people at Lotus and many fresh ideas.

    Lotus truly is a company that can be classified as a “giant killer.” The trick is harnessing that talent, mating it to new levels of ability and discipline and not strangling everyone with bureaucratic lunacy of the type that arrived with GM’s ownership.

    Unfortunately, either the company’s larcenous side (Chapman was no saint, but neither as great a sinner as portrayed) comes to the fore or the leadership gets entangled in the ego that comes with running a sports car company. There’s a strong future for Lotus, but one that always will be filled with struggle.

  7. Chris says:

    @Chris Sawyer
    What a load of tosh some of this post is. You claim Bahar and Lotus are resistant to working with Fernandes, then assert with some authority that they WILL be doing a deal re: the Elise/Exige for Team Lotus.

    Furthermore, Fernandes didn’t dare Lotus to sue him over the Team Lotus name – if you had bothered to read the Judgment before posting this nonsense, you would’ve seen that he dared them to sue him over his blatant breach of the merchandise agreement. Lotus did sue him and won convincingly.

    These ‘sources’ you claim seem to be nothing more than the speculation Joe Saward mumbles about on his blog.

    A poor show…

  8. Chris Bentham says:

    @Chris
    A good point, well made. I have to say that, if a deal is done with “Team Lotus” going one way and the rights to the Elise etc. going the other, the thought of a “Team Lotus” Caterham special is, quite frankly, ridiculous.

  9. @Chris Bentham
    Actually, Caterham Cars Limited has already announced that the company will build a limited run of 25 Team Lotus Special Edition Sevens which will feature a £3000 upgrade package and a bespoke colour scheme that mirrors the green and yellow colours of Team Lotus in F1. See this earlier story on AROnline

  10. Chris Bentham says:

    @Clive Goldthorp
    Yes, every man and his dog already knows this – the article implies that Caterham Team Lotus versions will be a part of the regular model line up AFTER the mooted swop of “Team Lotus” for the IPRs to the Elise/Exige models.

    My comments were specifically about that. I hope this helps, Clive.

  11. @Chris Bentham
    Thank you for clarifying the point you were making in Post#8 above.

    However, there would appear to be no legal reason why the Licensing Agreement referred to in my Post#5 above might not be included in a Compromise Agreement between Group Lotus and Team Lotus…

    Mind you, given Dany Bahar’s latest comments, the chances of the parties entering into such a Compromise Agreement are probably pretty slim at the moment. See: Group Lotus ‘more committed than ever’ Pablo Elizalde, Autosport, 2 June 2011. That situation might, though, conceivably change should Mr. Bahar cease to be Group Lotus’ CEO…

  12. Liam Cawley says:

    Brilliant, thanks. A spanking by Mosley too..

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