CAR yesterday sat down with Dany Bahar, the chief executive officer of Lotus Cars, to discuss the company’s financial situation. He talked about the recent takeover of parent company Proton by DRB-Hicom and what it means for Lotus, the financial performance of Hethel and the latest on plans to launch the new Esprit supercar and all the other new Lotuses in the pipeline. Read on for CAR Magazine’s full interview with Dany Bahar, split over the next three pages.
CAR: It must have been a crazy couple of months for Lotus…
Dany Bahar: ‘It was actually more crazy at the beginning than it is now, but it’s okay.’
Was the Proton sale to DRB-Hicom a surprise to you?
‘Yes. There were speculations from the beginning that Lotus was going to be sold one day, that it was too expensive, that it was too unrealistic, too nonsense, blah, blah, blah. But then Proton got sold, that was a bit of a surprise, especially when Proton was starting to do well, and their future product line-up is really exciting, so the next five to six years for Proton has a very bright future.’
But last year’s results weren’t very good…
‘That was actually because of us, but the results of Proton on its own, they’re a profitable company since many years, and with the current product they have – and I must admit that’s not the best they’ve got… but they’re launching a new car today, that’s the first car of a new generation, and that’s a very exciting car and there are many products coming – the global small car is coming – ones that we’ve seen in Geneva motor show two years ago with Giugiaro, so they have a few good products coming out, so they can only get better. So I was surprised that now things are starting to work out, that it got sold. That was a surprise.’
How did you find out? Was it an email, a phone call?
‘It’s not a thing that happens just like that, there’s a lead up, and I was involved in the information they share from the start. All the subsidiaries received the message from the mother company. When exactly it happened and how it happened is out of my knowledge.’
Have you been over to see the management at DRB-Hicom?
‘Yes, just once. The second time they were here, just a few weeks ago. They stayed for a week or two.’
What were their impressions of Hethel?
‘I think they need to first understand what they have bought. It’s something that’s outside what they normally do in their day-to-day business. They need to understand what animal they bought in terms of Proton, which is a very large company with 11,000 employees and subsidiaries, and one bit of that is Lotus, so you need to give them time to go through every single company to see what they’re doing.’
How did they respond to your four-car model plan?
‘They still need to understand whether the plan which we started two years ago is something they want to support, or modify it… all we can do is to show what we have done in the last two years and that’s it, that’s all we can do. It’s not up to me to discuss shareholder matters.’
We understand that Lotus is for sale. Is that true?
‘I don’t know if Lotus is for sale, nobody told this to me officially. All I think is that the new shareholders want to keep their options open, therefore they have done a thorough review of our business, and now the results of that review will form the basis for them to take a decision. There are many options.’
>> Click ‘Next’ below for more of CAR Magazine’s interview with Dany Bahar, CEO of Lotus Cars
CAR: And what of the rumours that DRB-Hicom will put Lotus into administration?
‘That is nonsense. That would be silly from any buyer to buy a company, spend a lot of money and then put it into administration. And there are certain moral and ethical obligations that I’m very sure our Malaysian shareholders – the current ones and the previous ones – will respect for sure.’
Did the senior management of DRB-Hicom drive a Lotus around your test track?
Was that their first time in a Lotus?
‘Yes, their first time. My feedback is that they got very excited when they saw the stuff that we have done in just two years. The place here transformed completely, the products we have done so far, the work we have done so far is amazing. The pace we have gone is absolutely crazy.’
Is the due diligence [when DRB-Hicom has time to assess its new assets before committing to the future] period ongoing?
‘No, I think that is over.’
So when will you know about the future of Lotus?
‘Well, the future of Lotus doesn’t look as bad as the media speculates. We had some issues in this takeover period, during 90 days where the funds were a bit, I’ll say, restricted, because we would only receive funds for the ordinary course of business, and that is simply selling cars. But since we are in a turnaround plan we are heavily dependent on bank loans and equity injections from our shareholders, which was the plan from the beginning, so that brought us into difficulties. But we have resumed the development programmes already, we started two or three weeks ago.’
After that 90-day period, did you get money from DRB-Hicom?
‘No, our shareholder is Proton, was Proton and will always be Proton – hopefully – and we get money from them. The projects we’re working on have resumed again, it’s not as bad as people say. We are very advanced with the Fuji project – the Esprit programme. The physical engine is already in a mule car, running around our test track.’
Have you had to move the launch back for Esprit?
‘Yes, definitely, if you lose your development activities for three months, you have to ramp up your supplier base again, so for sure there’ll be a delay.’
So for that 90-day period when money was tough, did you have problems with your suppliers?
‘Yes, absolutely, because if there is no money we cannot pay the suppliers, because the work has been done already and we haven’t received money since mid-November. You can imagine it – all the work since November has continued, and we had some difficulties to pay some suppliers, but I think we are catching up now as we speak. Every week we are getting better and I am sure we will resolve this issue very soon. The fact that we have resumed production, that we have resumed development, shows that we start now to come back.’
Is Lotus assured a constant supply of funds to get through this development period until the Esprit launch?
‘Yes, that has been the case for 15 years. We have been a loss-making company. It shows that with the current product, or with an affordable product – as good as it is – it’s just not enough to sustain this operation, we’re not a small operation. You have to move up the ladder to offer products that make a margin. Secondly, find the right buyer who is ready to spend £60-70k, and consequently offer the right quality to justify the price, and the combination of all of this did not happen so far. We are starting now to get the quality we want, to get the designs we want, slowly, slowly, slowly… and we now have an order bank of more than 1100 cars. I don’t know when was the last time we have an order bank like this. Especially the more expensive models are a major part of this – just talking about the current products.’
What were Lotus’s sales last year?
‘We finished at around 2575 or 2600, something like that.’
What were your financial results?
‘We made a £25 million loss, as projected. Our business plan projects a four-year loss – nearly making a profit in year four – then profitable from year five – that would be 2015. But now since we’ve postponed the first project, we have postponed a little bit the profitability.’
I’ve heard there’s some question over Lotus now getting the £10m Government grant for a new production line…
‘It’s not up to them, it’s up to us! The government is actually very, very helpful and they are really pushing us to get this money, but there are certain conditions that we need to fulfil, and because we are in a takeover situation, those conditions cannot be fulfilled, so we need to wait. We need to go through the formal process.’
When the Proton takeover was announced and rumours started to circulate, we were told that you were ‘on leave’ which helped fuel the rumours that you were no longer CEO of Lotus. Can you explain where you were?
‘I was in the Middle East and Far East on a business trip, but I’m here as you can see!’
How long were you on the trip?
Can you tell us any more about it?
‘Yes, I visited many countries: China, Lebanon, UAE…’
And what was the purpose of the trip?
‘Visiting our distributors, meeting up with future dealers…’
So the process of overhauling your dealer network is still ongoing? Is it near completion?
‘No, we are far away from completion. We are more like 40%. I have just visited a new dealer in China – Cheng-Du – it’s a superb facility, very stylish, all just for us, so the commitment is really there. And we have very big discussions with big Middle Eastern automotive groups, and I am very confident they will start working with us. Rumours are one thing, but the other thing is the strength of the brand and the product line-up – I’m not talking about the future line-up, just the current line-up – and I don’t think that they would commit to us if they didn’t think they could generate a revenue or a viable business. Lebanon is crazy. They opened the first dealership – very central location, very fashionable, just one brand, superb architecture – two weeks ago and they’ve sold 25 cars already. It’s not the US, it’s Lebanon! It’s crazy, it’s fantastic! So I think the combination of the new products – we’ve shown the Evora GTE, and the Evora IPS, and also the Exige – really works. We just have to continue to deliver that.’
So you sold out of all the Evora GTEs straight away…
‘Yes, the first year is completely gone, even if we could sell more we could not deliver them. That was 120 units for China, but we have an order bank of around 250 units, so we’ll produce them after the Chinese production.’
The situation in F1 is confusing… again
‘Not at all! [Laughs] It becomes confusing because of you guys!’
Can you simplify it for us, then?
‘Yes, it’s very simple. We have a very good relationship with our F1 partner [Genii Capital] and I have a very good relationship with [Genii boss] Gerard Lopez. Our working teams work very closely together in different areas. After the first year of getting to know each other, this year is a real pleasure and hopefully they continue to deliver the results they started to do this year. There really is no big issue. We have changed our agreements as you know, but that’s a formal thing, and in reality the content is the same – it’s even got better for both parties, so I think a lot of this is made up by the press.’
So is it right to say that it used to cost you money to run the F1 team, but now it no longer costs you money?
‘Yes, we had some agreements before that we were contributing to their budgets…’
It’s been reported that Genii terminated the deal. Is that true?
‘That’s wrong, and it’s not the way that Mr Lopez actually put it to the journalists, I was told. If you take everything out of context, you can put your own story in there. We have a crystal clear understanding of our deal, and it’s a good partnership, and I hope it will continue for the next ten years.’
What kind of money did you used to put into the F1 team?
‘That’s not something for the public.’
But it’s zero now, and it was something before?
[Laughs] ‘Yes, that’s very close. I like that!’
We know the Esprit is delayed to 2014. Does that knock the other cars back?
‘Well, after we showed the five cars at Paris we decided to invest in our own engine project instead of going for the Lotus Elan. We had a programme we wanted to do with Proton – it’s a global small car actually, a Proton car – and we work alongside them with the development and once they bring that car out, we’ll decide if it’s something for us. So we end up with Esprit, the four-door Eterne and the Elite, and one day we’ll replace the Elise, because it’s already 15 years old. So the only discussion now is if we stick to that four-car programme but, as I said, I believe we are so far advanced with the Esprit project that it would be a shame for everybody and a lot of sunken investment if somebody would stop that and I strongly believe that the Esprit will make it. But, after that, we will have to see. From the beginning, we were only able to actually choose this route because there was a commonality strategy, but even if we choose to modify the plan, I still believe we need a multiple product line-up, rather than just one, in order to share the costs and distribute the responsibility.’
Do you think the Lotus PR response to the Sniff Petrol release [where Bahar was depicted as the Iraqi information minister insisting that there were no problems as Iraq burned behind him – an image Lotus itself used as ‘self-irony’ in the release]?
‘You have to ask the PR people.’
But what do you think?
‘I think every professional should carry out his job – I’m not a press person – so I’ll leave it up to our professionals to decide what is good and what is bad. They have chosen to do something more controversial, to make a statement.’
But you’re okay with that?
‘I’m okay with that. I’m sure there are pros and cons. I think it’s us. We’re not a mainstream company. We don’t pretend to be corporate, we don’t pretend to be a big car manufacturer. We do our things the way we believe is right, we want to be something special. This company has always been something special – it went through difficult times, busy, busy times. Just this morning I walked to the factory to look at one of our development cars and two of the long-serving production employees said “I’m glad to see you, I’m glad you’re here”. They said, “don’t worry, boss, it’s business as usual, we’ve seen this before already so many times. It’s normal for us.” This company has gone through many things: bankruptcies, jail, fraud, death. I think that gives you a special position. If you like us, you love us, if you don’t like us, you hate us. I don’t want to say we’re a polarising company, but it’s just something a bit more special.’
Do you think it’s best to stay with Proton, or is there a benefit in going your separate ways?
‘Without Proton we wouldn’t be here. The shareholders have supported us since day one, and made possible bank loans, and have supported us going into F1. We owe a lot to Proton and the shareholders. I see no reason why we should not be with them.’
Okay, that’s it… [starts to wrap up, talk turns casual]
‘You know, there is a little surprise coming at Goodwood. Two things actually…’
Go on then, what is it?
[Laughs] ‘It’s a surprise!’
The Evora GTE and…
‘Wait and see!’