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LOTUS - The Company - Past, Future, Business, and Cars
A fascinating and entertaining article on Lotus, its business, its past, its future, and of course, its cars.
Can't wait to see the next-gen Lotus cars that SHOULD debut in March (Geneva Auto Show).
Quote:
Jean-Marc Gales, the newly recruited CEO of Group Lotus Plc., arrived in Norfolk, England last May with a simple but daunting mission: to restore the once mighty British automaker as a supercar superpower.
For the past few decades Lotus has been seriously stalled while its main rivals–Ferrari, Porsche, McLaren–have shot past them in auto racing, production vehicles, engineering services and profit. The past two years alone Lotus has seen nearly $400 million in losses. Since 1998, Lotus has had only four profitable years.
The 52-year-old Gales began his career leading Volkswagen fleet sales, followed by a stint managing Mercedes global marketing before he claimed the presidency of Peugeot in 2009. An acute technocrat steeped in the hard business of selling large numbers of vehicles, at midcareer Gales has a surprising sense for the entrepreneurial. And apparently a fearless heart.
Walking the Lotus facility last May, Gales performed combat triage, asking his engineers for products to execute and market within a year. His goal: to unveil the next generation of Lotus vehicles at the Geneva auto show in March of 2015.
With the engineers revving, Gales shook the financials. “It required painful decisions,” he admits. “It does not take 1,250 employees to produce 1,296 cars–an unsustainable condition.” He let go of 25% of the workforce.
Gales then put on his salesman’s hat. “The dealer network was extremely spotty. We had no dealer in Paris, no dealer in London, no dealer in Cannes or Milan, Abu Dhabi–no dealers where there are people with the money to buy our cars.”
He signed up 25 new dealers and by year’s end will have another 50. Voting with their own money, dealers have agreed to buy vehicles and spare parts for cash, and self-fund build-out of their dealerships, boosting Lotus’ cash flow. “The dealers are so confident that they are carrying the investment themselves,” Gales explains. “Dealer network expansion is essential for driving volume above 3000 cars a year. The average Lotus dealer, and it is prudent to stick with an average here, sells 20 new Lotus cars and around $80,000 in spare parts a year.”
Why are dealers willing to put up cash for a brand few people beyond sports car enthusiasts recognize or understand? A brand that has swayed from one financial disaster to another most of its existence? The power of mythology, the promise of new products, a changing regulatory landscape that demands more efficient vehicles, and a no-nonsense CEO.
Mythology begins with Anthony Colin Bruce Chapman (his four initials are incorporated into the Lotus badge), who founded the company in 1952 in a London horse barn. By 1963 Lotus had soundly beaten Ferrari, Porsche, Cooper and BRM to secure its first of six Formula One World Drivers and seven Constructors championships. Lotus also introduced rear-engine design to the Indy 500, eventually winning in 1965, forever changing American motor sports. Always the entrepreneur, in 1968 Chapman brought cigarette sponsorship to Grand Prix racing, which helped make him a millionaire and changed the face of all motor sports forever. The team’s last major success came in 1978, with Mario Andretti at the wheel of a Lotus Grand Prix racer that perfected the concept of “ground effects,” the car an inverted wing that literally sucked itself onto the track, allowing it to corner at shockingly high speeds. Andretti and Lotus claimed World Championships that year.
Away from the track, Lotus developed giant slayers, innovative but quirky sports cars built on the principles of Colin Chapman: Simplify, then make it lighter. Always diminutive, and with rare exception powered by engines first from Ford, then GM and now Toyota, Lotus cars were all about brain wave steering and handling.
Despite some renown in the late 1970s–James Bond’s amphibious Esprit in The Spy Who Loved Me–by 1982 the company was selling only a few hundred cars a year and was propped up by an IP agreement with Toyota made not long before Chapman’s death at age 54. In spite of new-found income generated by providing big car companies with engineering services, much as current Formula One teams McLaren and Williams are starting to do, without the founding entrepreneur guiding the company, Lotus faded fast.
After seven years of ownership GM sold its stake in 1993. In do-or-die fashion, Lotus developed Elise, the first production car built of bonded aluminum. Sheets and spars of aluminum are pressed, twisted and extruded into precise shapes, then chemically “glued” or “bonded” together. A form of industrial origami, the process results in strong, lightweight cars.
Elise was a lightning bolt 20 years ago, so stunning that Ford engaged Lotus to develop the vertical horizontal (VH) architecture that underpins all Aston Martins. But until now Lotus lacked the resources to mutate its own car, the mid-engine Evora, into a range of products.
Prior to Gales there was another bold attempt to revive the company, but it quickly failed. In 2010 Lotus’ Malaysian parent company, Proton, appointed former Red Bull and Ferrari executive Dany Bahar as CEO. Bahar recruited a Mercedes-AMG powertrain engineer, and designers from Ferrari. A flashy marketing executive accustomed to Red Bull’s outsize marketing budgets, Bahar had a plan long on bravado and Central European sensibilities, but short of achievable goals. Bahar correctly identified that matters had to change, but his tenure ended in 2012 with acrimony and a flurry of legal battles. Soon after Proton was absorbed by its Malaysian rival, DRB-HICOM. “The financial situation was dire for several years,” Gales admits, “with losses of $255 million in 2012-13 and $108 million in 2013-14. We had to take action to quickly turn this situation around. It was part of my brief from the owners, DRB-HICOM and Proton as well as to become operationally cash flow positive in 2015 and profitable in 2016.”
Giving cheer to sports car purists, Gales is adamant that Lotus will remain a rare analog holdout in a world of computer-controlled supercars that defy the laws of physics. Like Elise before it, the Evora engages the driver in an intimate conversation between car and road. Like every Lotus, it’s a “momentum” car, meaning once speed is built up, don’t waste it by slowing down too much for corners. Behind the wheel, any cyclist or skier will quickly understand Evora’s supple yet tenacious handling.
Gales is focused on fully reviving the road car business first, then turning to the company’s long-time engineering consultancy. “Traditionally, Lotus Engineering has always been the larger part of the Lotus business,” Gales says, “but more recently we have been more selective with the amount and type of work that we have undertaken. The consultancy business now represents 10% of total turnover. We do not exclude that it will grow again, but the priority for the next few years is on Lotus cars, which is the best advertisement for our consultancy division. Clients are coming to us for what our cars are globally renowned for, vehicle dynamics, lightweight engineering and efficiency.”
Though Gales is coy about the vehicles he’ll announce in Geneva, it’s reasonable to expect a dramatically revamped Evora that’s lighter and significantly more powerful. Gales claims that Lotus has also reduced build costs by 10%. When pressed about the dull engine sound of the current 2014 Evora–one only hears the slight whirring of the supercharger that sits atop the Toyota V6–Gales responded, emphatically: very soon Evora will howl with the best sports cars.
And the Evora that will likely bow at Geneva will come to America. “We are fully committed to the North American market and will produce a 2016 model year Evora that will be fully compliant for the USA. The North American market is vitally important for us and we are expanding our dealer network and will grow our sales volumes in the future.”
To boost sales volumes, the new Evora–which won’t be released in the U.S. until late 2015–may become the basis of a new coupe-like CUV, though when pressed on the topic Gales grew entirely silent. More radical still, there could be a mid-front-engine, rear-drive four-door sedan, though any such car will be years away.
With multiple flavors of Evora, a CUV and a smattering of track-only hyper-Lotuses to market to members of private racing clubs like Thermal in Palm Springs, Gales is confident he can lift Lotus’ global sales to 10,000 by 2018. Considering Lotus barely sold 1000 cars in 2013, and fewer than 2000 cars in 2014, it’s a bold prediction. Lotus will not match Ferrari or Porsche for annual or per-unit profit, but the company is sustainable at 3000 cars per year. “A break even point depends upon many variables, says Gales, “but we definitely have the intention of being profitable by producing and selling over 3000 cars per year in 2016.”
When asked why a former president of Peugeot would move to often-gloomy Norfolk to run an advanced engineering firm that also crafts exotically simple sports cars, Gales is clear: “For the challenge,” he says. “I see a huge amount of potential for the company, and I know we can realize this potential. Also, I have always loved Lotus, ever since I was a child and my father took me to the Lotus dealer in Luxembourg. I still have the brochures from that visit.”
What hasn't Killed me, has made me more tolerant of RS!
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I used to live in Norwich, Norfolk, a couple of miles from the Lotus factory. I grew up in England and very patriotic when it came to my love of all things Lotus. My favourite racing car has always been the Lotus 49, and until the Elise was released, my favourite road/racing car was the 7. Once the Elise was released this became my new fav car and has been pretty much ever since.
When I was in high school in the late 90s in England, we did a week of work experience. I noticed that there was a spot for work experience at the Lotus factory!! I managed to get the week there and it was one of the best weeks of motoring nirvana I've experienced.
I spent a couple of days in the engine testing area, testing the 3.5L V8 for the Lotus Esprit. Even though this was the late 90s a lot of the data collection was done with pen and paper.
The next day I was with a couple of guys who were stripping out brand new cars to be used in crash tests. We gutted the interiors of the cars and did a bit of work to get them ready to be tested.
The last two days were by far the best. I was assigned to work with a test driver who was changing suspension settings on the new Elise. We'd make a change, and then go out on the test track, me in the passenger seat of course :P He was a great driver and we had a lot of fun. He told me about one driver though, who could take the chicane faster than all the rest and drive every turn completely sideways. This was test driver Matthew Becker.
On Friday I got a chance to ride with Becker for half a dozen laps around the track. He was the guy who signed off on the final setup for the Elise. Needless to say his driving was fantastic. Several full laps of the circle pad sideways and into a few laps of mostly sideways fun. At the end he tidied things up a bit and did a fast lap to show what the car could do when you were a little more focused.
Matthew Becker is the son of Roger Becker, who was the stunt driver in the Esprit for the bond movie. He took over from his dad's role at Lotus when he retired.
It was one of the best weeks of my life, for sure. And a few years ago I was lucky enough to drive an Elise at autocross. It felt like I expected, light, nimble, precise, lots of feedback and instant response. A lot like a motorbike in several ways. The one thing I will say that let me down a little was that the steering was REALLY heavy on this particular car. I've driven cars with no power steering before, and I've driven cars with power steering that had been disconnected. And this was easily the heaviest steering I've ever felt. It caught me out in a couple of places on the autox run, especially in the slalom where I struggled to keep up the speed of the inputs.
Here's me driving the Elise, and struggling to get out afterwards (I'm 6'2" and overweight, that's my excuse for not being able to get out :P) The nervous laugh when I hit the cone was because the owner specifically mentioned "do not hit any cones!" haha:
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