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.
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