Plans to build two future Lotus models including the next Esprit will come under scrutiny when Lotus and Proton executives meet in Hethel this Wednesday.
The Lotus Evora was supposed to be the first of three new models to be designed and built at Hethel under a five-year plan. But that plan may now be revised as Lotus deals with serious credit issues, potential supplier insolvencies, and damaging exchange rates.
Group Lotus CEO Mike Kimberley explains: We have two new models to come in our five-year plan that need to be funded. We can't find anyone to fund them. The banks don't want to know. The financial institutions don't want to know. The government could support that kind of thing. Look what the Germans are doing, they are putting more than Euro2000 on every car that is replaced if its nine years old. They reckon they will sell an extra 600,000 to 800,000 cars that way this year. That's the sort of thing our government could do. It depends on our shareholders. But the whole world is suffering from this recession.
The credit availability issues come at what should be bright days for Lotus despite the global economic downturn. Since returning to Lotus, Mike Kimberley has turned the companys finances around. Three years ago Lotus lost £5 million now Lotus posts a profit of £2 million. The launch of the Evora is just on the horizon and Lotus is expanding into new markets including Saudi Arabia and possibly China. Lotus Engineering also worked on 340 projects for 140 clients last year and there are plans to open a new technology center in India this year.
Speaking about supplier issues, Kimberley remarks: The biggest threat we have is supplier companies going into administration - both suppliers to Lotus Cars and Lotus Engineering. We have the exhaust system being manufactured by a company in the north. They were doing excellent work. But because a number of their big clients cut back on production, they got down to a level when they were losing money and went into administration. That could have meant a problem for us in finding another supplier. An exhaust system part has to be good for 10 years life and 100,000 kilometres in Europe and America in durability, so you have to go through all those tests again if you start with another supplier. In this case, we were lucky that the company was bought by a bigger UK business and is continuing. Those are the sort of things that significantly affect us.
And on escalating material costs due to exchange rates Kimberley comments: The other threat is the weakness of the pound sterling. It helps our engineering business but damaging on the car side. Our engines and transmissions come from Japan - you've seen how the value of the pound has fallen against the Yen. That pushes our material costs up. We buy a lot in Europe. Because the pound has sunk so low against the Euro, the cost of those parts have gone up.
Yep I remember it got driven into a barrier and lost, didn't it?
I mean, that's like pornography in reverse, dressing her up, and it still makes me all too happy in the pants..
