Group Lotus/Proton...heading for disaster?

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Ardius

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During my many readings into all matters of Formula 1, I started to dig more into the Group Lotus/Team Lotus debate. I found this blog post:
http://flataroundtarzan.blogspot.com/2011/01/lots-of-trouble-usually-serious.html

As you may or may not know, recently Group Lotus and Proton have been announcing and securing various deals all across motorsport under the leadership of one Dany Bahar. This includes sponsorship of the Renault F1 team, KV Racing Indycar team, JetAlliance GT2 LM team, ART GP2 and GP3 teams and also the development of the Lotus Evora GT2.
This is also alongside the new range of models already covered in the relevant thread here.
Now, quite clearly, this sounds all pretty ambitious for such a small company like Group Lotus to be doing and particularly for Proton who are not in a great position currently. Not even Ferrari invests this much money at once in so many motorsports as well as launching 5 new car models! Ok, Ferrari spends a lot more money on their F1 team (Ferrari $200 million+ as opposed to Group Lotus' sponsorship of Renault at ~$20 million), but then we are comparing with a company that makes an awful lot just in merchandise alone (wheras Lotus makes very little). So one wonders if all these motorsport programmes are really healthy for such a small company and that they must come at some terrible price.

Well after reading that blog, it appears its even worse than that:
The Midweek Motorsport show on www.radiolemans.com recently received a communication from inside the factory and it makes rather grim reading for anyone with even the slightest regard for the provenance of the Lotus brand. It contained the following revelations:

- Lotus Cars have exhausted their supply of Toyota engines for their road cars so only the supercharged Elise, Exige and Evora can be manufactured.
- 100 members of staff have recently taken voluntary redundancy.
- There is every likelihood that 50-100 more staff will lose their jobs.
- The levels of unallocated (un-sold) stock is rising rapidly with approximately 200 cars now in US port stock
- Sales forecasts have been reduced to the point that about a fifth of the forecast is currently unallocated stock waiting to find buyers
- Dealerships have been served with two year notices of termination
- Lotus have borrowed over $100M to cover existing budget shortfalls with more to come early in 2011
- Lotus paid Renault F1 $14.5m in November.
- The current monthly salary commitment is $6.47M and that was before Nigel Mansell and Jean Alesi were announced as Brand Ambassadors.
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If this is indeed true, we are quite possibly seeing the end of Lotus Cars as we know it.
Just food for thought, and I know that some members here have worked/do work at Lotus and perhaps would be able to comment on this?

I'm pretty worried where this is heading.
 
I'm having a fundamental inability to understand what the first point means. How have Lotus exhausted their supply of Toyota engines if they are still able to build all of the cars that they currently make?
 
I could see Lotus going to the wayside, only to get reborn a few years down the road as a company un-owned by Proton. Proton Cars suck, and Lotus sells medium-priced Elises, Exiges, and under-sold Evoras. To kick start all of the motorsport programs and the 5 new models was just a bad idea.
 
The first point is nothing new. The 2zz has ceased production so whatever supply is left is used for those models. The Elise s has the new 1.6 litre so no problems there meaning the Elise r is the only model unavailable. The problem is whether they have enough engines to supply those models till 2013. Considering backstock stated in the op maybe they will have enough engines. Only 15 new Elise/exiges were sold in Australia last year as well.

I was quite looking forward to the new models. Let's hope that lotus can survive and release them. I fear though corners will be cut somewhere for these models as they seem over ambitious.
 
GT_Prologue5
To kick start all of the motorsport programs and the 5 new models was just a bad idea.
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Exactly. The money needed to produce 5 totally new cars is massive. IMO there is no way they'll stay afloat, they went into too much too fast. I find this sad because I like Lotus cars, hopefully someone other than Proton will pick them up and make them profitable again.
 
Toronado
I'm having a fundamental inability to understand what the first point means. How have Lotus exhausted their supply of Toyota engines if they are still able to build all of the cars that they currently make?
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Some of the other points are rather contorted and aren't entirely accurate, the dealership one in particular. The partnership with Toyota has also been terminated. I don't agree with everything Bahar is up to, but I do believe in his ability to maintain the brand in one for or another.

And wait for Geneva to see a supposedly heavily-facelifted Evora. They're treating the car as a transition between old and new eras, and the redesign will likely reflect that.
 
The partnership with Toyota has been terminated? All 5 of the concept cars used Toyota engines! What are they gonna do now?
 
Toronado
The partnership with Toyota has been terminated? All 5 of the concept cars used Toyota engines! What are they gonna do now?
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Well that was just the concept cars, apparently I remember reading somewhere that Lotus wants to build their own engines for the production models...
http://www.leftlanenews.com/report-lotus-in-fact-developing-internal-range-of-v6-v8-engines.html

But the thing is, as much as Lotus (and Dany Bahar in particular) wants to rebuild the entire Lotus brand using Proton's money is gonna be a burden more for us Malaysians than anything else. Not sure if its true, but a lot of the governments money has been used to fund Proton, including the ridiculous car taxes we have here. :grumpy:
 
It is a worrying time for Lotus and they are taking some fairly big risks which could make or break the company but if they continued on the path they were on they would almost certainly fall by the wayside. The Elise platform is fantastic but not really suitable for going toe to toe with the big manufacturers and as brilliant as the Evora is it still isn't good enough in the right areas to take significant sales away from the other similarly priced sports cars which unfortunately has been proved in the showrooms.

Lotus has been part of my life for the last 30 years as my dad has a S2 Elite and I've been to more Club Lotus meetings than I've had hot dinners (slight lie!) so I've got a fairly ingrained interest in them. They have reinvented themselves in the past and they need to do it again if they have any chance of growing or even surviving, it's always a worry seeing a car brand you love change but you have to have hope that it will change into something better. I don't think a small British based car manufacturer can complete with the biggest manufacturers in making small affordable sports cars as they will never be able to produce a product of the same quality at the same price so I think it is right for Lotus to move upmarket where price point is a little less critical to the buyer and image, quality and performance are the deciders.

We already knew about the contract termination with the existing dealers which will allow Lotus to set up a new dealer network more suited to the upmarket models they will be selling in a couple of years. The redundancies shouldn't cause too much concern and in fact could be an indication of intelligent management as it is best to manage your workforce during periods of low turnover (current development stage) and then increase it again when production picks up (future production phase) which is harsh for the employees but keep the company from folding. This has happened within my own company recently but we're in a stronger position now than if action hadn't been taken in the slow period.

It's going to be a difficult couple of years for Lotus as they spend a lot of money developing the new cars and marketing the brand especially while sales are slow. Hopefully the bean counters will keep the cash flowing until the new Esprit is released but more importantly I hope that Lotus remains a UK based company with UK produced cars, if they moved abroad then their provenance would truly be lost.
 
Cheers for the answers guys, thats exactly what I wanted to read - some perspective on the matter.

Neal, the problem isn't that Lotus are re-inventing themselves. Its the sheer task they have set themselves. If they were to just bring 1 or 2 new models out and just sponsoring the F1 team (and then bring new models out every few years afterwards + sponsoring all these motorsports gradually) then it would seem a little more realistic.
But what they are doing requires a lot of money and depends on quick success. Combined with the current economic climate it just sounds far too much, far too quickly.
Although I don't like the new design Lotus brand, thats not the issue. The issue is how crazily ambitious it is, needlessly so I think.
 
I did start going off on one a bit and realised I wasn't really responding to the points in the 1st post! :P

I do agree that they seem to be sponsoring too many motorsport teams but if they have the financial commitment from Proton to do this then it gets their name out there to more people and countries than focusing just on F1 which will hopefully result in increased brand awareness and sales in new markets (i.e. America) once the new models come out. Of course if the financial backing dries up or the sales don't materialise then it puts Lotus at risk.

Also as far as I know Lotus are only developing the Esprit at the moment which will put the company under less pressure and allow them to focus on one product. I highly doubt that all the concepts will make it to market in their current form and there's a good possibility some of them won't make it at all. I've not really warmed to the new designs yet either as they seem a bit too conservative and don't really stand out in the crowd, I can see the same design language in each of them but I think they need to be more bold and exciting.
 
Lotus are making a gamble with their racing programs they're starting up now. They are just hoping and praying that they achieve some success from it to bring in some cash, otherwise, they're going under with hundreds of millions of debt with them.
 
I don't understand what they'll be getting out of sponsoring the lower formula teams. I mean they chose well choosing ART (even though I did really like ART's red/white livery) so the teams will have success. But I don't think this will get them that more exposure and certainly won't net them any more money.
 
I see Lotus's support of lower formula divisions as a way of developing young driver talent for their Lotus/Renault F1 team. Although not as high-profile as RedBulls programme, it's certainly a good way of signing emerging talent before other teams with deeper pockets catch onto their potential.
 
It conflicts with the Gravity Management young drivers though, as long as Gravity are in control of the Renault team. Plus Proton backing Malaysian drivers like Fauzy.
The F1 side is a complete mess right now, which is bleeding into GP2 (DAMS, ART and Air Asia).

I'm more worried for the car company side of things, at the end of the day, they can pull out of those sponsorship agreements and by the sounds of things they are getting very good deals ($20 mil title sponsorship of Renault is pretty cheap).
But surely the big spend in all places at once is not going to help and it relies on the roadcars and the brand as a whole being successful. If it is not, the risk is losing the company entirely. They are clearly borrowing a lot of money to do all this.
 
The head of everything is Dany Bahar... I think, if everything gone the other way around, he will be the one to put all the faults on. I've already said this somewhere that Dany Bahar or Group Lotus plan is very-very ambitious that could kill the whole Group Lotus company. I hope Dany Bahar being the smartest realise this...
 
What worries me is that Bahar was Ferrari's branding and merchandising manager or something along those lines. In other words, he was the one who decided that Ferrari needed to sell teddy bears with Cavallino logos on and other god-awful tat.

I'm not entirely sure managing an entire company is within his comfortable remit.
 
Bahar seems like the motoring equivalent of Kotick (head of Activision).
 
homeforsummer
What worries me is that Bahar was Ferrari's branding and merchandising manager or something along those lines. In other words, he was the one who decided that Ferrari needed to sell teddy bears with Cavallino logos on and other god-awful tat.

I'm not entirely sure managing an entire company is within his comfortable remit.
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I don't buy the teddy bears but it think i've bought almost everything else ferrari sell that doesn't cost a fortune!
 
It's virtually all incredibly tacky IMO and it's largely Bahar's fault, so I'm just not sure he should be the person to lead Lotus, especially since Lotus have always done without the massive pomp and fanfare that Ferrari have always had.

Their USP is engineering and indeed Lotus Engineering as a concern have come out with some of the most innovative automotive technology in the last decade or so - variable platform architecture, lightweight range-extending engines for EVs, engines that can run on any fuel from propane through petrol and diesel to chip fat oil...

The Elise might not be making Lotus much money any more but what Lotus really needs, rather than a massive range of new models, is another "killer app" like the Elise to cement their engineering and sports car credentials. Sod making a range of sports cars, make one sports car and make it bloody fantastic. Give it the Omnivore engine, give it the variable platform architecture... Then expand the range...
 
Duffers917K
Bahar seems like the motoring equivalent of Kotick (head of Activision).
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He is a brand manager, and a very successful one at that. His last two positions were at Red Bull and Ferrari. Although he "isn't a car guy," having these credentials alone make me believe that he can do great things for the brand. But only if money permits...
 
exigeracer
He is a brand manager, and a very successful one at that. His last two positions were at Red Bull and Ferrari. Although he "isn't a car guy," having these credentials alone make me believe that he can do great things for the brand. But only if money permits...
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Here's the rub. Brand, not product.

And at the end of the day, you win or lose on product, not branding.
 
Toronado
And when Bahar was at Ferrari, he didn't have to worry about product.
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To be honest, if he'd just let the engineers do their thing and then worry about how to sell it, it'd probably be a better business model.

As it is, I have a sneaking suspicion that he's asked the designers and engineers to come up with a Boxster rival, a Cayman rival, a 911 rival, a 911 Turbo rival, an Aston Martin DB9 rival... etc. So now the designers and engineers have got to worry about how to make all the damn things.

Funnily enough, the only model that seems to make immediate sense is the city car that they revealed in Paris alongside all the other cars. Even if it's not produced as a Lotus, you can bet there's some clever thinking inside that a bigger manufacturer would love to snap up and sell themselves, a little like Gordon Murray is doing with the T25.

And getting a big car manufacturer to buy your stuff and worry about the marketing themselves is a damn good way to make money.
 
homeforsummer
And at the end of the day, you win or lose on product, not branding.
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The products that Lotus is making are not able to sustain a business or in any way permit growth. You cannot ignore their absolute lack of any profit whatsoever in the last decade. Their image is unable to attract any money from any significant market segment, and they hardly have anything to deliver to them in any case. Making small, enthusiast-oriented sportscars isn't globally viable under their current distribution model, nor is it of any interest from large investors.
 
exigeracer
The products that Lotus is making are not able to sustain a business or in any way permit growth. You cannot ignore their absolute lack of any profit whatsoever in the last decade. Their image is unable to attract any money from any significant market segment, and they hardly have anything to deliver to them in any case. Making small, enthusiast-oriented sportscars isn't globally viable under their current distribution model, nor is it of any interest from large investors.
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I wasn't implying they had to continue "as they were", just that the actual product they sell is more important than their branding and a car company wins or loses on whether what they're selling is something that people want to buy or not.

I've no problem with the large lineup they showed at Paris, but I do worry about how it was shown. Telling people that you'll be making all those cars before the engineering work for even one of them has been carried out is a big risk and smacks of trying to build a brand with no product to back it up.

Let's presume the first one they release is a bit sub-par (I hope it isn't, but nothing is perfect).

What happens then is that a) the venture is damaged after only one car has been released and it'll put people off all the subsequent cars, and b) Lotus will have to spend more time and effort correcting the first car's problems rather than developing the next model to be released, pushing the whole schedule back which becomes a financial issue. I rather worry that Bahar's plan involves Lotus making money off the first release in order to fund the latter ones - which means the first car has to be absolutely spot-on.

Let's not forget that the Evora is a bloody good car, but it's not really selling.

So product, not brand. They need to make something that everybody wants to own and do it well. Then they can faff about expanding the range.
 
All very true, and I agree for the most part. Let's also keep in mind that the development of each car individually that was shown at Paris won't take nearly as long as any Lotus in the last 20 years. Everything since the M100 was an entirely new platform that was being developed, whereas these new cars are going to be using an existing, flexible and very capable chassis system (VVA) that was recently debuted under the Evora.
 

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