Chris Sawyer, Executive Editor of US-based website Cars In Context and a seasoned Lotus observer, takes a close look at PROTON Holdings Berhad’s latest plans for the future of Group Lotus plc.
What is happening inside Group Lotus plc? The company showed five new concepts at the recent Paris Motor Show, all headed for production between 2012 and 2015, on top of announcing a major, multi-fronted Motor Racing assault.
Work is progressing to turn the Lotus Test Track into an FIA-standard Race Circuit with 12 garages capable of holding 24 cars. Not only will the upgraded track be used to test the new family of Lotus road cars and the proposed racecars – everything from GT4 to Le Mans prototypes and Formula 1 – but there is also talk that the facility could host Race Meetings for some of the lower series. The local Planning Authority might have something to say about that though…
Even more amazing is Group Lotus CEO Dany Bahar’s assertion that the diminutive British automaker will get £700 million (approximately $1.2 billion) in funding for all of these projects as part of an investment programme by owner PROTON Holdings Berhad (Proton) and global investors designed to catapult Lotus into competition with Ferrari, Porsche, etc. Investment bankers from Goldman Sachs and others were at the Paris Motor Show to see the new car launch and evaluate Lotus’s future prospects at Proton’s invitation.
Though Proton may view its ownership of the Hethel-based sportscar maker as an unprofitable experience, Group Lotus veterans see the same 13-year period as one of promises made but not kept. The high spirits that accompanied the late Proton CEO Yahaya Ahmad’s signature on the papers transferring majority ownership to the Malaysian car maker seemingly died in the helicopter crash that took his life not long after. Since then, except for a few bright moments, Lotus has been adrift.
Despite all of the cheerful pronouncements from what Jeremy Clarkson once described as “the hill country of Norfolk,” the numbers don’t add up. Take, for instance, the racing plans. When Cadillac raced at Le Mans from 2000-2003, it did so for most of those years with an off-the-shelf Riley & Scott chassis with unique bodywork – only in the last year (2002-2003) did it order a bespoke chassis from the same supplier.
Had Audi not decided to begin its Le Mans assault at the same time, the low-budget (~$100 million total) programme might have borne fruit. However, Audi was out for blood and spent upwards of a reported $165 million per year on its race programme. Cadillac couldn’t match the German OEM’s performance or investment.
Fast forward to the 2011-2012 timeframe and, unless Audi, Peugeot and others decide to abdicate their claims on the Le Mans crown, costs will only continue to rise. Group Lotus does have some of the most imaginative Engineers around but the company has neither the sheer resources nor the requisite infrastructure in terms of men and equipment to take on the major OEMs and their Racing Teams.
Group Lotus’ only advantage is to join the festivities at the time when new rules put everyone on the same footing. However, the old saying “Racing takes money. How fast do you want to go?” certainly applies here -especially when Lotus also plans to race one of the cars introduced at Paris in the GT2 series and the Evora in GT4.
Group Lotus also lacks the manpower to lend its engineering expertise to ART Grand Prix’s GP2 and GP3 efforts at the same time. This may be where the rumoured tie-in with Dallara bears fruit, particularly given Lotus’ continued participation in the Indy Racing League with KV Racing Technology – the IRL will continue to use Dallara-built chassis under the new Technical Regulations which have been adopted for 2012 and beyond.
The association with ART Grand Prix also explains the warfare between Tony Fernandes’ Lotus Racing F1 team (1 Malaysia Racing Team (UK) Limited) and Group Lotus. Fernandes’ purchase of the rights to the Team Lotus name – the validity of which will probably be upheld by the UK’s High Court barring any behind-the-scenes deal-making – meant that plans to launch a Group Lotus-supported F1 effort through ART Grand Prix were put on hold. Without a company-owned F1 effort, the value of Group Lotus is much less than it could be and money is at the centre of all that is happening in Hethel.
Setting aside the fact that the cars shown in Paris are at odds with Lotus’ long-held brand and engineering ethos, they are all focused on an upmarket buyer for whom a major Motor Racing brand profile is a plus. Le Mans and, to an extent, the Indy 500 fit the bill, but Formula One is the centrepiece of any strategy. Without it, the Lotus name can’t be held in the same esteem as Ferrari’s.
CEO Bahar is right to believe that Lotus’s past F1 history has been tarnished by years of non-participation and – more importantly – outright brand neglect. Had Lotus not let the venerated Esprit languish in the marketplace for more than 20 years without a thorough re-think and cadenced model changes or let impotent CEOs and corporate in-fighting keep the Elise as its main vehicle for too many years, this would not be a problem. Plenty of companies have played off past success in Motor Racing. However, they had a fresh and full lineup to keep the public interested in the future as well as the past. Lotus has had only the past on which to live for too many years.
Mounting a credible effort in F1 takes cubic money. Money Group Lotus hasn’t got, even with the new investment. By working with ART Grand Prix, the company had the opportunity to enter the World Championship without having to bear the entire cost. Unfortunately, Fernandes beat Bahar to the punch – originally with the pre-Bahar Group Lotus’ blessing – and reaped the benefits. An independent-minded man, Fernandes is not about to let someone else set the agenda for him, even if he holds Team Lotus and the Chapman family in high esteem. In short, he is not about to let Group Lotus call the marketing and PR shots.
The nascent IPR dispute may have taken some of the shine off the unveiling of the new Lotus range in Paris but what about the cars themselves? The Elan is a variation of the Evora and so relatively easy to get into production quickly and cost-effectively. Gestation of the new Elise has begun, shaving its development bill, and even the new Esprit (the car was not to carry this name under the Kimberley regime) is production-ready.
That leaves the Elite and Eterne – both are based on the Variable Vehicle Architecture (VVA) launched with the Evora, but in front-engined form. They will require a different build sequence and procedure to that adopted for the mid-engined cars. All of the new Lotuses will use aluminum and composite body panels (stamping or superforming of the aluminum will be required), get unique electronic accessories (no more buying off the shelf) and sumptuous interiors. That will not be cheap and nor will the cost of upgrading the build facilities at Hethel to reach the quality levels which buyers of cars costing an estimated £34,000 to £120,000 expect.
Dany Bahar’s plan may be no more than another of Proton’s misguided attempts to invest in Lotus but, if not, the conclusion must be that Proton is either looking for a partner to help finance and run Lotus or readying the company for a sale. Fiercely proud and independent (the Malaysian Government turned down offers from Ford, VW and others to buy Proton outright), the Malaysian automaker will not easily admit defeat.
Unfortunately, there are only a few OEMs which might wish to invest in Proton’s plans for Group Lotus and most of them are Chinese. Dr. Mahathir Mohamad, the former Prime Minister of Malaysia, the creator of Proton and an adviser to Tony Fernandes, would never let that happen.
One solution might be for Fernandes to take a stake in Group Lotus. This would let Proton wind down its involvement and eventually pave the way for the company’s sale to a non-Malaysian concern after Fernandes had taken full control. He might even persuade outside investors (like the United Arab Emirates) to invest in the company and keep it independent.
However, there is another, more intriguing possibility. Dr. Mohamad could negotiate a board position for Fernandes at Proton, with the understanding that he will take control of the company over time. Like the pure Lotus scenario, that would allow Proton either to be sold or create a situation in foreign investors could buy into the company.
That option might, at first sight, seem unlikely but such a move would let the Malaysian Government save face as Proton’s eventual sale or the dilution of control would not happen while the company was under the Government’s protection. Lotus would be a part of this sale and could, if necessary, be spun-off to raise capital. This may seem like an unusual outcome, but it’s not outside of the realms of possibility – Fernandes has strong ties with the global financial community and they are the same people who were at the Paris Motor Show to evaluate Lotus.
Group Lotus’ future therefore remains unclear but, then again, that’s been the case for at least the last 13 years – it’s a never-ending saga…
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