RE: The Lotus Five Year Plan - One Year In

RE: The Lotus Five Year Plan - One Year In

Friday 24th June 2011

The Lotus Five Year Plan - One Year In

Bahar's team keep it 'pedal to the metal' in spite of critics


Nigel Mansell in the Lotus 81 - a big draw for media at this week's test track opening
Nigel Mansell in the Lotus 81 - a big draw for media at this week's test track opening
Lotus big-wigs went on a media offensive this week, with CEO Dany Bahar, chief technical officer Wolf Zimmermann and operational advisor Karl-Heinz Kalbfell corralling journalists into a sweltering marquee following the opening of the new company test track and offering some frank insights into 'where Lotus is at'.

Bahar is prepared to confront cynicism
Bahar is prepared to confront cynicism
The first few minutes were a little uncomfortable as Bahar began his presentation with what sounded like a plea for the media to get on board with the company's five year plan. Sources suggest the controversial Lotus chief doesn't understand the cynicism (especially from 'enthusiasts' here within the UK) about a programme designed to bring jobs and wealth to the country and to turn around one of our most historic (remaining) marques. Nevertheless he gamely confronted the issue, and didn't try to sweep it under the carpet.

"We're 17 months into our five year plan, and obviously we realise there have been negative and cynical comments in the media and elsewhere, but it isn't stopping us from delivering our ambitious - or as some would say over ambitious - plan," he said.

Acknowledging the fact that a £3m track refurbishment is a small step along the road, Bahar reckons it is proof that things are getting done. Look at the building work going on around the site too, he said, while confirming all the targets for the first year have been met.

The builders are busy at Hethel
The builders are busy at Hethel
Bahar also invoked the names of the Lotus Advisory Council - containing industry luminaries Burkhard Goschel, Frank Tuch, Bob Lutz and Tom Purves - and talked up the credibility they bring to the project. "People like this wouldn't be taking part if this plan wasn't credible," he claimed. "If we the management team fail, well, we can look for another job. But with their reputations these people have even more to lose than us."

Proton's MD Dato' Sri Syed Zainal attended the briefing and added a few words confirming the commitment to the project from the Malaysian end. "As a shareholder in a company we've owned for 14 years, we know there's a lot of capability to unlock - the value of this company is in its future," he stated.

Keeping the faith

Speaking to Dany Bahar after his presentation, we asked him about his own self belief. Did he ever have any doubts about the size and scope of the programme?

"Yes of course I have doubts every day," he told us. "It's a plan, but it's also a gamble. It's not easy to raise £400 million investment for a company that's been losing money for 15 years," he added wryly, but he says he draws confidence from where the money has been sourced. The detailed auditing from state-owned Proton has been far tougher at every stage than it would have been if the money had come from investment banks, Bahar maintains.

Council's 'remuneration' is Evora loan
Council's 'remuneration' is Evora loan
The CEO also reiterated the value of the Lotus Advisory Council, which meets four times a year as a group, although members make significant individual contributions beyond that - in exchange for little more than an Evora loan car and travel expenses. Former BMW R&D guru Burkhard Goschel was responsible for a complete rethink on the transmission, says Bahar, who reckons the Council's combined experience is priceless. "We're a young team, but between them these guys have probably a hundred and fifty years of experience, including with turnarounds that have been successes and failures. We brought them in because we didn't want to miss anything."

PH spoke later to Council member Tom Purves about his role, and he demurred from the suggestion that his reputation rested on the Lotus Plan's success or failure, but he did agree the relationships are fuelled by goodwill and enthusiasm.

"No I don't think our reputations are tied to this. From our point of view, Lotus is just far too important a brand to see go to the wall, and to be part of trying to make this work is a pleasure," he told us.

A moveable feast

Esprit will get modular V8 and...
Esprit will get modular V8 and...
The Lotus Plan itself has evolved slightly since its high profile launch at the Paris show last Autumn. Most significantly the plan to use a Toyota/Lexus V8 has been dropped following market research, from which Lotus was surprised to learn that customers didn't think a Toyota powered car could justify a £100k+ price tag.

Of 2,000 respondents, we're told only a third were existing Lotus customers - which perhaps explains the nature of the feedback - but either way the research means Lotus is now on the way to getting its own 'in-house' modular engine, initially in 4.8 litre V8 guise in the new Esprit. The Elan has been delayed because it looked too much like an in-house Esprit rival, and it could now reappear as an Evora replacement in 2017 (thus putting it safely outside the remit of the £400m/5 year planned investment), while there's still thinking to be done on the future of the Elise, according to Zimmerman: "The current car is very track focused with its wide sill structure, and we're still thinking about where the next one should go."

...share up to 50% of parts with Eterne
...share up to 50% of parts with Eterne
Part of the Elise equation could be a 2.0 or 2.4 litre in-line four based on the new modular V8, if the cost can be amortised. But in whatever shape the new Elise is realised, Bahar continues to affirm his commitment to those core Lotus enthusiasts at the sub-£30k end of the sports car market.

The rest of the model plan, while appearing grandiose from an external perspective, is actually predicated on what Bahar describes as conservative planning: "We are not a Ferrari or an Aston, and that's why we need such a wide product range so we don't miss any opportunities. If we had the confidence to say we could sell 3000 or more Esprits, then we wouldn't need these extra models to succeed. But because we are conservative, and say we'll have only 1500 Esprit sales, this gives us the opportunity to do the front engined GT and a four door.

"Our current volume is around 1200-1800 per car, and the basic assumption for the five year plan is that we can repeat this volume but with more products to reach a target of 5-6 thousand cars a year." Development cost for each will average around £150m (more for the Esprit donor, less for its family spin-offs), he says, so revenue from early Esprit sales will evidently be critical to maintain the plan's progress.

Former AMG man Wolf Zimmermann
Former AMG man Wolf Zimmermann
With only £400m to play with, the key to success is 'commonality' across the model platforms, and Zimmermann was at pains to stress the lengths Lotus is going to in this area: "On the one hand it's a pain in the arse doing so many cars at once," he quipped, "it means we're doing 15 hour days - even more. But of course there are many advantages."

"The Elite, Esprit and Eterne are players in a different league to what we're doing today. The new platform and chassis strategy is based around 50 percent commonality of parts, including engine, steering, suspension, brakes and electrical systems," he says, and is confident the newcomers will be worthy contenders in a formidable premium sector.

"The Elite GT will be one of our nicest cars in future, offering usable rear seats in a wheelbase package of 2700mm, a front mounted V8 and 7 speed DCT rear transaxle. The Eterne four door will be Elite up to the central H point, but the rest of the car will new. It will be 400mm longer than the Elite, and launched in 2015."

According to Zimmermann efficiencies are not brought about simply through component sharing, but through the work practices at Lotus. "This is not the normal road car development process," says the former M-B AMG man. "It's more like racing car development. Two people can meet in the morning, make a decision in 30 minutes, and when the memo goes out the next morning everyone is working in the right direction. In a normal car company, these decisions take months."

Wise council?
While the trials of simultaneously engineering a quiver of new models would put any small automotive player under extreme pressure, how does Council member Purves react to the assertion that - given sufficient funds - developing the product may be the easy part?

Kalbfell - marketing becomes more vital
Kalbfell - marketing becomes more vital
"Everything I've seen of planning they've done appears founded on realistic market assumptions about wealth and population growth, and future propensity to purchase. You've already got Ferrari and Lamborghini who produce cars of the nature we're talking about. Ferrari has become quite ambitious in terms of scale, and Porsche has gone mainstream. So there's quite a gap developing for knowledgeable people looking for enthusiasm and excitement."

"In my view the bigger challenge is to build a dealer network that can deliver," he says. "That's about hearts, minds and attitudes, and it's not just something you can pour money into."

This view is echoed by Kalbfell: "When I arrived somebody told me Lotus was always a technology focused company. Now the major task is marketing, and getting on the shopping lists of many more customers - so expect a lot of sales, marketing and point of sales activity. Lotus faces the painful process of connecting the business to future needs."

Bahar himself is aware that the right product line-up is only half the story, and while corporate communications currently still revolve around the cars, the process of firing up a sleepy dealer network has begun in earnest behind the scenes with a dealer conference at Hethel held earlier in the week.

"We've offered our dealers the chance to grow with us. They don't have to invest much now, but if they want to be part of the Esprit success - with its much bigger margins - of course some investment will be required," says Bahar.

"Some will not be able to grow with us and some will, but today out of our 160 dealers only a handful report they are breaking even, so it's really a question of whether they want to make money with Lotus. Here in the UK there are 14 or 15 dealers, and there'll probably be a similar number in five years but with a very different set-up."

China - sales are already startling
China - sales are already startling
Expanding global markets will also form part of the recipe. "The Asian market is fastest growing for sure. Japan is very strong, and even the recent tragedy hasn't impacted - although we keep waiting for an effect," he says. "We have just introduced a new China distributor who sold 120 cars in the three weeks before he even started working properly."

Encouraging stuff for a man who, in spite of the colourful commentary his plans have generated, is the first to acknowledge: "We have to win this on the sales floor".

Author
Discussion

nouze

Original Poster:

853 posts

176 months

Thursday 23rd June 2011
quotequote all
good luck to them, innit

mrdemon

21,146 posts

264 months

Thursday 23rd June 2011
quotequote all
they canned the best car,

shame about the Elan.

mikEsprit

827 posts

185 months

Thursday 23rd June 2011
quotequote all
mrdemon said:
they canned the best car,

shame about the Elan.
The Elan really did look like the Esprit, though.

And with its projected performance numbers being only a tick less than the Esprit, it would have eaten Esprit sales constantly.

slipstream 1985

12,125 posts

178 months

Thursday 23rd June 2011
quotequote all
the elan was aimed too high, it should be a front engined rear wheel drive soft top/coupe to compete with the audi tt bmw z4 market.
elise shoud be kept in the mx5 mr2 type market.
exige should be stand alone.
evora should be porsche caymen market.
esprit should be bottom 911 to top 911 market. (in performance anyway)

The Pits

4,289 posts

239 months

Thursday 23rd June 2011
quotequote all
I agree the Elan was one of the most exciting prospects.

They were aiming to make it lighter than the Evora, 400+bhp and was going for around £70k.

The Esprit at £160+k is showing how totally removed from reality the current management are.

I'd say McLaren will struggle as it is at that level and they have some serious, contemporary F1 credentials.

As has always been the case with Lotus the Esprit will need to be twice as good as its (very, very good) competitors to stand a chance and overcome the prejudice towards them. I just can't see how it's going to be any better than the 458, MP412C etc.

I'd be the first to be happy to be proved wrong but the top priority for the new management if they are in any way serious is to find new engines for the Elise/Exige and they should have done this before the ZZGE engine was outlawed by euro regs. They simply can't survive with only a 1.6 Elise and the Evora.

But no, what do they focus on instead? £150 Bermuda shorts.

Wow all of a sudden theyr'e a super sexy euro luxury lifestyle brand. Meanwhile the Elise has never been heavier or slower.




Fire99

9,844 posts

228 months

Thursday 23rd June 2011
quotequote all
The Pits said:
The Esprit at £160+k
Now i'm no marketing guru but when you say the words Lotus Esprit, i'm sure a price bracket of the Porsche 911 and Aston Martin V8 Vantage wouldn't be far off the mark.

Base model around £60k up to £90-100k perhaps..

£160k labels it with the same issues as the new Noble. It can have amazing ability but if the badge doesn't work, it won't sell in any volume.

GKP

15,099 posts

240 months

Friday 24th June 2011
quotequote all
Esprit will be £120k and the Elan hasn't been canned, just delayed while it gets a mild rework.

Hitch78

6,100 posts

193 months

Friday 24th June 2011
quotequote all
...six years of rework?

loomx

327 posts

224 months

Friday 24th June 2011
quotequote all
Two worrying things about this artical... 1. The ammount of times they say "based on assumptions" assuming things is never good. and 2. The lack of comments on focuing on build quality of the product.

When your aiming in the price bracket they are aiming for, the car will need to be flawless in terms of build quality to succeed.

chickensoup

469 posts

254 months

Friday 24th June 2011
quotequote all
Good idea to postpone the Elan. Evora is a good car and should be worked on rather than swept away.

Give it a year or so, and with facelift, decent gearchange and maybe a bit more oomph it will be a tad more interesting.

They may as well get QA correct on an existing line

The Pits

4,289 posts

239 months

Friday 24th June 2011
quotequote all
GKP said:
Esprit will be £120k and the Elan hasn't been canned, just delayed while it gets a mild rework.
Latest details (announced this week) from an interview with Bahar in Evo say 'The company is also aiming at a £168,500 pricetag.'

Given that the entire five year plan will all be based on the 'success' of the Esprit, I'd say they have no chance.

I have no problem with Bahar's aspiration, Chapman himself boldly had a go at Ferrari with the Esprit Turbo and had the nerve to charge more than the 308 for the early cars too.

However he didn't base the whole future of the company on this audacious move. Pre NSX supercars were pretty rubbish so it was a lot easier then to compete. I also see no reason why Lotus shouldn't compete with Ferrari, it remains a fantastic brand, but it will take time to get there and you need to build up to it with a consistent run of astoningly good cars. Noble have tried to do it in one go and it doesn't work. There's no short cut to ferrari's position.

I'm not at all fond of naysayers and don't like to be negative especially about Lotus but Bahar and his cronies have lost all grip on reality.

As already mentioned if they were at all serious they would have found some new engines for the Elise/Exige some time ago. That's what the company urgently needs. Everything else is just window dressing. Which appears to be a Bahar speciality.

Hitch78

6,100 posts

193 months

Friday 24th June 2011
quotequote all
loomx said:
Two worrying things about this artical... 1. The ammount of times they say "based on assumptions" assuming things is never good. and 2. The lack of comments on focuing on build quality of the product.

When your aiming in the price bracket they are aiming for, the car will need to be flawless in terms of build quality to succeed.
But in business you build a case and secure your funding based on assumptions an awful lot of the time. It is not the use of assumptions that is the risk, it is the quality of the assumption. When they talk about using an assumption they are not saying that they gave it some thought or had a hunch; an assumption will be backed by rigourous methodology that will be audited and tested by whoever is funding this.

I see nothing to suggest that these cars, if made, will not be constructed to a high standard. The chap used to work at Ferrari and they know a thing or two about product quality. He has also surrounded himself with some notable names who will also recognise the need for quality - they just have to do something about it now.

GKP

15,099 posts

240 months

Friday 24th June 2011
quotequote all
The Pits said:
Latest details (announced this week) from an interview with Bahar in Evo say 'The company is also aiming at a £168,500 pricetag.'
That pricetag will be attached to the lightweight 'S' and subsequent even lighter 'Superleggera' type versions of the car.

HeMightBeBanned

617 posts

177 months

Friday 24th June 2011
quotequote all
Hitch78 said:
The chap used to work at Ferrari and they know a thing or two about product quality.
What, like constantly cracking manifolds or engines that require £15k rebuilds after 20,000 miles or stty electrics or (most recently) cars that spontaneously combust?

Take off the rose tinted specs. A Ferrari is still an Italian car when you peel away the gloss.

Beefmeister

16,482 posts

229 months

Friday 24th June 2011
quotequote all
Kalbfell:



Ray Winstone:


Lawrence5

1,253 posts

234 months

Friday 24th June 2011
quotequote all
<<Lotus chief doesn't understand the cynicism (especially from 'enthusiasts' here within the UK)>>
The power of accurate observation is commonly called cynicism by those who haven't got it
George Bernard Shaw

Maybe we have heard this all before – not just Lotus but other manufacturers? Maybe you can’t out-Porsche Porsche or out-Ferrari Ferrari..... you are Lotus - so think differently !

3000 Esprits would be 10 times what they sold in the year 2000..... the Evora may not have been the right car to go £50k+ market but you have to take it as limited appetite from the marketplace. Not sure you can spend your way into the big league

Working backwards to make it profitable on the customers you already have is a better strategy – hope the rumoured v6 Exige makes you realise that. That management structure is huge and doubtless expensive.... easier/cheaper to control costs than create new customers.

Banks will be suspicious cynics too but revenues and sales now will prove you can do it – nothing wrong with thinking big but you have to earn respect. Keep the plans fluid and jump on opportunity – no point spending £30m on F1 if you haven’t got the products to put the halo on....

We would all love to be proved wrong – but don’t be surprised by cynicism wink

Volker

86 posts

222 months

Friday 24th June 2011
quotequote all
ask myself why Mr. Zimmermann and Mr. Winstone are both wearing Audi cuff links..? smile

Leithen

10,799 posts

266 months

Friday 24th June 2011
quotequote all
The more personal the criticism of Bahar, the more I hope he succeeds.

Cynicism is cheap.

The Pits

4,289 posts

239 months

Friday 24th June 2011
quotequote all
Their only chance is the far East. I get the impression they've all but given up on the UK market.

I can see the Lotus brand appealing in China, the Lotus flower is a big deal over there as a symbol and might help give it an 'eastern' feel to the exponentially increasing market. If they can sell lots of Esprits around the world it won't matter that not many buy them in the UK. But we'll have lost Lotus as I know it for good by then.

I still can't shake the feeling that the world just doesn't need another £170k 'supercar' right now. McLaren threw the kitchen sink at the MP4-12C no doubt steered by the same marketing research bs that Lotus are looking at based on global wealth projections. And all the reviews say it's still not as good as the 458. Now personally I'd have an MP412C in a heart beat over a 458 but would I spend that sort of money on a Lotus? After having had 4 Lotus cars I consider myself a very loyal customer so if I'm having my doubts, what chance far greater number of people who are usually aligned with the likes of Ferrari and Porsche? I just can't see how the Esprit it's going to be better than its competitors and if it's not better it really won't sell. It's certainly not going to be faster, the current targets are for more weight and less power than either the 458 or MP412C. It'll need to be a lot better looking by 2013 too. I don't think it's set anyone's pants on fire yet.

The Elan however I could see being faster, lighter and better to drive and much more exciting to look at than a 911. The Elite, if a convertible as planned and for not much over £100k would appeal too.

Personally I'd have preferred the Lexus engines. Lotus have no heritage as an engine builder. Building their own V8 for the Esprit was a sales disaster. Building their own engines did nothing for TVR either. The lexus V8 and for £168k it would have to be the LFA V10 are brilliant massively resourced and developed engines. What's not to like? The ISF V8 only weighed 240kgs, Lotus own V8 was super compact and light and weighed 220 all-in, just to put it into perspective. But 2000 people on the internet said otherwise. The same people that said Lotus needed a V8 Esprit and then bought a 911 anyway.


Rawwr

22,722 posts

233 months

Friday 24th June 2011
quotequote all
The Pits said:
would I spend that sort of money on a Lotus? After having had 4 Lotus cars I consider myself a very loyal customer so if I'm having my doubts
I don't believe New Lotus will have any relation to Old Lotus apart from the badge. This is the necessary total breakaway from what they've done in the past.

Owned a Lotus in the past? Yes? That's super but they're going to be relics if the Bahar direction works.