Lotus : Havoc in Hethel
Dany Bahar is lucky Lotus is an obscure British car manufacturer – the truth behind the recent goings on at Lotus might otherwise be more well known and be broadcast far more widely. However, the Wall Street Journal took a look at Mr. Bahar’s attempt to create concurrently a new image, new branding and new products for Lotus in the WSJ Magazine on the 25th February, 2011. AROnline readers will, though, already know from my previous articles that all is not as it seems.
The relationship between Lotus and Proton has been off the rails since the death of Proton’s first CEO, Yahaya Ahmad, in a helicopter accident. His plans to unite the two companies and make Lotus Engineering the main design/engineering center for Proton died with him. After his death, the Malaysian car maker was at a loss as to what to do with Lotus and several sub-par Managing Directors attempted to put Lotus on its feet, sometimes while lining their own pockets or burning through capital on value-free programmes.
It wasn’t until Michael Kimberley returned to run Lotus that a reasonable Product Plan was put in place and a Marketing Programme designed to resurrect the Lotus image over time was devised. The only thing missing was money. Proton was reticent about spending money having had its finger burnt in the past. Nevertheless, under Kimberley’s stewardship, the Evora was designed, engineered and developed in under 33 months and the Esprit replacement was engineered concurrently.
A new Elise was started, as was less brutal Exige. For the first time in modern Lotus history a rational, comprehensive Marketing Programme was begun. Motor sport programmes built around the production lineup were outlined. Things were looking up but then Proton changed CEOs as capriciously as the new GM. After all, Proton, like the new GM, is partially Government-owned.
Gone were Kimberley and his crew and in came Dany Bahar, whose success at Ferrari was built on the pre-existing image of the brand, not one he proposed to create. Bahar initiated lavish spending on concept cars (the five proposed production cars), a broad-based motor sport programme (Le Mans, IndyCar, etc.) which eventually added a team for Formula 1, plans for a new test track at the company HQ in Hethel, England, which would be built to race specifications and the hiring of “name” advisers like Bob Lutz. Bahar even went so far as to build a Formula 1-style Track Day car for folks willing to plunk down the money and hire former F1 drivers to act as consultants. Then, on the spur of the moment, Bahar committed Lotus to designing and building an engine for IndyCar (it will actually be engineered by HWA, an off-shoot of AMG, not Lotus, according to my sources) and leased a corporate aircraft painted in the Lotus green and yellow. Forensic Accountants would have been combing through the receipts in any other company,
Bahar told the Wall Street Journal that Lotus founder Colin Chapman would have built heavier, more luxurious cars had he the resources at the time but he is only partly correct. Chapman always looked for the lightest method of construction possible so he said he would have used aluminum instead of steel had that been his only option, but chose fiberglass instead. (Let’s not forget that diminutive Lotus didn’t have the money to build the dies necessary to press steel or aluminum parts, and fiberglass―especially when used for a load-bearing structure―was an exotic material at the time.) He produced the world’s first all-composite unit body car in 1957 (the original Lotus Elite) and stuck with the material and its variants until he died.
Did Chapman want to go upmarket? Yes, disastrously so. Chapman’s attempt to chase Ferrari and Porsche upmarket in the 1970s nearly killed the company with debt. The move alienated the Lotus buyer base and did not seduce any significant number of buyers from Ferrari, Porsche, et al. Sales dropped dramatically. It took decades for Lotus to recover, a recovery that didn’t take hold until the arrival of the Elise in 1996. (The Elise is, by far, the highest selling Lotus model in company history and was designed, engineered, developed and brought to production for the princely sum of $7 million in 1995.)
Now, at a time when the car industry is coming back to Lotus and its ethos of building light vehicles powered by small, high-performance engines that together can beat the competition, Dany Bahar is going after Aston Martin, Ferrari, Lamborghini and Porsche etc. with cars that are just as fat and inefficient as their current offerings.
Bahar was quoted in the article as saying: “We want to be the next Porsche. Not in terms of volume, but in the extent of their range.” That’s quite a statement – especially when you consider the mathematics behind it. Porsche is able to support its model line variation and innovation because of the number of vehicles it sells, not despite it. Lower the volume and the price of its vehicles rises rapidly. Raise it, and the price per unit drops while profits rise.
What does Bahar not understand about that equation? Might he, perhaps, be warning his keepers at Proton that he’ll be coming hat-in-hand for regular additions to the Lotus vehicle development fund? Whatever the case, Bahar was warned by Chapman-era managers who’d seen this train wreck before that his was a recipe for disaster. His answer was to force them out and bring in consultants like Lutz. Now, say my former colleagues, spending is well over budget, projects are slipping and the creditors are starting to ask questions.
Finally, I must argue with Bahar and the article’s author on one more point: Chapman did not care if Lotus was commercially viable. He was on the record as claiming that Team Lotus, the racing team he founded alongside but separate from the car company, was his main concern and he would retire to run it while Group Lotus lived or died on its own. [Chapman expected a larger car maker, possibly Ford, to buy the car making and engineering operations.]
Incidentally, Chapman got the idea for sponsorship in Formula 1 while running cars at the Indy 500 in the 1960s and brought the concept to racing in Europe. He was never one to turn his back on a quick buck and, as John DeLorean discovered, use that to his advantage.