Investors encourage Proton to sell Lotus

[Iconic Ride]

At the moment it would appear that the "exact market value" is in a state of highly variable flux, due to Group's uncertain eventual owner, and the unknown intentions of what a new owner (if that is really what is to happen) might have in mind for "disposition" of its new asset. Proton, for better or worse, seemed to have provided an economic backstop of continuity and sense of stability for Lotus for a fair amount of time. That stability seems to have evaporated swiftly with their departure. If Dany and the boys in Hethel can make a convincing case for "the new era" to DRB-Hicom, then all will be well. If not, well then.......

Lopez is, naturally, a "wild card" in the unfolding drama. Is he "puppetmaster," or "traveling diplomat?"

[TBD]

Don't forget that Lotus Engineering is the real backbone to the Lotus Group. They do substantial work for many of the big carmakers and have cetainly helpes Proton in the past.

Now it looks like DRB-Hicom will probably look for production contracts with VW or Mercedes. I'm sure VW would be interested, they want to become the biggest carmaker.

I would guess for a financial investor looking to create Lotus market value by following DB's plan and then selling the company to one of the big groups.

[simonb]

Nice relevant article quoted in the playground

http://cbt.com.my/120120/conversations-with-tengku-mahalel-on-lotus

Before we get into conniptions about Lotus and Proton, a quick look into history may help us understand the current situation. The English company was bought by Tan Sri Yahya Ahmad and he died in a tragic helicopter crash before he could see his plan to fruition.

It could well be that he had a grand vision for F1-winning company started by the brilliant race engineer, Colin Chapman, and owned by the Chapman family, said one of his confidantes, who wishes to remain un-named.

Lotus, a small English automotive-focussed research, development and engineering company, was bought by the late Tan Sri Yahya Ahmad when he was the controlling shareholder and MD of Proton.

The issues about Lotus, including its huge and continuing losses, have re-surfaced over the past year when Proton backed a RM700 million turn-around plan that some critics have criticised as improbable.

Tengku Tan Sri Mahaleel Tengku Ariff, who joined Proton in 1996 as VP of Strategy and Operations, and who, after Yahya's death, was promoted to CEO of Proton and Group CEO of Proton holdings in April 1997, shared with www.cbt.com.my his views. Mahaleel is credited with focussing on Lotus even before he joined Proton.

“Before Tan Sri Yahya died in 1996, he had bought Lotus. It was part of our plan to grow Proton into becoming a car-maker,” said Tengku Mahaleel …..one of the key players in Proton at that time. “This was in 1996 and the era of the Industrial Master Plan. The Prime Minister had asked us at Proton: when are you going to design your own car?

“The government wanted a national car by 2000 and we couldn’t do it without the knowhow in 17 areas of engineering science, like chassis engineering, and engine design.

"The reason we bought Lotus was for its engineering design and knowhow,” Mahaleel emphasized.

“We bought it not as a sports car company and we didn’t care whether it was making profits.

“When Lotus was acquired, we gained access to computer simulations on engine design and all the other key engineering areas to build our own national car. The savings that we gained from using Lotus engineering technology to build the Waja in 2000, the Gen2, the Savvy and the Satria in 2003, was worth more than we paid for Lotus.

“In my time at Proton till I left in September 2005, we had no R&D grants from the government. From 2008 – 2011, Proton received R&D grants from the government worth RM750 million.

Year R&D grants (RM million)

2008 193.7

2009 80.6

2010 143.7

2011 297.7

“I estimate that Proton’s actual R&D expenditure in 2011 was RM40 million to RM50 million.” Tengku Mahaleel said

“Because we wanted the knowhow to build cars, we also bought Michigan Automotive Research, a US-based company with the facility to test up to 20,000 bhp locomotive engines. We placed this under Lotus.

“As for reports that many Lotus engineers left after it was acquired by Proton, it must be clarified that those who left were engineers employed on a GM-engine project,” Tengku Mahaleel said.

The issue of Lotus was one of the hot topics that the media focused on when Datuk Seri Mohd Khamil Jamil held his first press conference regarding DRB-Hicom’s purchase of the 43 per cent stake in Proton. Lotus is the hot-button issue because it's been accruing losses since the day it was bought till now. The situation became even more sensitive when Proton announced that it had taken a RM700 million loan to finance a turn-around plan proposed by Lotus CEO, Dany Bahar, Ferrari's former brand manager.

The turn-around plan is for Lotus, which is famed for minimalism and light-weight, to build six new models that will bring the Hethel-based company face head-on into Ferrari supercar territory. This looks like a backward step at a time when the world is looking for fuel efficiency and lightweight cars.

While Datuk Seri Khamil Jamil conducted himself professionally when he replied that DRB-Hicom needed to do the due diligence and needed to meet and hear the Proton and Lotus managers before any decision could be made, it was quite clear that he had an opinion on the situation.

"I wonder why there's no one from Proton, or a Proton employee, that's in charge of Lotus," he said. Dany Bahar is employed by Lotus.

[Gus82]

I would guess for a financial investor looking to create Lotus market value by following DB's plan and then selling the company to one of the big groups.

The problem is that even if Lotus becomes consistently profitable I don't see any of the established manufacturers having a place in their line up for it. VW for instance shares technology in their premium models amongst a number of brands, but doesn't need another, Fiat with Ferrari and Maserati is similar.

Manufacturers who don't have another upmarket brand to twin with Lotus are likely to be less interested as there would be few synergies to make it worthwhile for them, hence why Ford sold Aston Martin despite it not losing (much) money.

The only way I could see another car manufacturer becoming involved for the foreseeable future is if it is as a significant but minority shareholder reducing risk and responsibility, as part of a joint branding partnership. Take Ford as an example.

You could have Ford Engined F1 and Indycar projects, a Ford Fiesta Lotus rally car and Ford engined versions of the cheaper Lotus models. It would make the most out of all the work going into boosting the value of the Lotus branding.

Edited January 21, 2012 by Gus82

[Iconic Ride]

"While Datuk Seri Khamil Jamil conducted himself professionally when he replied that DRB-Hicom needed to do the due diligence and needed to meet and hear the Proton and Lotus managers before any decision could be made, it was quite clear that he had an opinion on the situation."

This does not give me a warm and fuzzy feeling about the outcome of this latest iteration of the franchise.

It's "White Knight" time, mates.

[TBD]

...

“When Lotus was acquired, we gained access to computer simulations on engine design and all the other key engineering areas to build our own national car. The savings that we gained from using Lotus engineering technology to build the Waja in 2000, the Gen2, the Savvy and the Satria in 2003, was worth more than we paid for Lotus.

....

this gets me thinking about a potential Lotus buyer from the worlds second largest economy. The exact same interest in buying Lotus would suit to the chinese carmakers. They have the money, but so-far are gravely lacking the engineering and technology skills for entering the intenational market. They've shown their commitment by buying Volvo and looking at Saab. Clearly Saab would have been a bumm deal, no own engineering left and they didn't even own their own brand anymore.

Lotus Engineering would be a good investment, experience in designing engines, hybrid technology and unsurpassed experience in building light cars. Surely F1 would be a prestige thing for a chinese investor and the Lotus cars would be a fancy to the chinese market. Anyone know if DB is already having chinese lessons?

In the end, we're all guessing. But I'm actually less worried now than before under Proton control.

[gtornes78]

Lotus Engineering has had a strong customer base in China for at least the last ten years, so should DRB-Hicom wish to unload Lotus their should be plenty of suitors in China that know Lotus well already.

[Iconic Ride]

As long as it's not the Japanese. Driving a Rotus would reduce the cachet factor a bit.

[basalte]

"Seeded in muddy waters, the lotus roses above the mud .....Chinese poets use lotus flowers to inspire people to continue striving through difficulties and show their best part (!?) to the outside world no matter how bad the circumstances might be ....The sacred lotus is an extremely important spiritual symbol in Eastern religion. It represents purity, divine wisdom and the individual`s progress from the lowest to the highest state of consciousness...."

From "The Legend of the Lotus" .

I think that might just strike a chord with these Chinese chaps....

[Gus82]

Apparently Mr Bahar is seeking investors to help him buy Lotus....

http://www.bloomberg.com/news/2012-01-29/lotus-ceo-bahar-seeks-backers-for-carmaker-buyout-times-says.html

[hedgerley]

Made the front page of today's Sunday Times as well. It reckons Genii is about to complete several months due diligence and sees them as competition to Bahar's efforts to secure backing. Seems to me he should go with Genii and stick around. I thought he and Lopez were good buddies?

[Nelly]

I really have no idea now where this is going or what to think of it, other than Bahar must have known what was coming having just re-signed....surely?

(Sorry - originally put resigned without the hyphen, sure someone would have picked up on that!)

Edited January 29, 2012 by Nelly9000

[Stirling_Villeneuve]

I hope so... the alternative is he has a big pay off in his contract should Lotus be sold and his services no longer required. Either way it's not good news.

[Iconic Ride]

"Paging Tony F." "Tony F. to the auction hall. Bidding begins in five minutes."

[Gus82]

Well at least it looks like there are a number of buyers with or without Tony F. The worst case scenario would always be a situation where there was only one offer on the table from someone who couldn't afford to run the business properly. If there is interest in more than one party after due diligence is carried out we can be sure that the development work and future plans (or a version of them at least) is workable!

I wonder what would happen if Genii lost out regarding the Lotus F1 team, and also if the Ethos range extender is likely to see the light of day if Proton aren't Lotus' owner? I could see Proton scraping a lot of their advanced R & D projects in preference to using bought in technology from their production partners as it would make sense financially.

[NedaSay]

So Tony F. had a plan that was simple! Create a team ex nihilo! Obtain Group/ownership support! some time down the road buy Group! Dany B. had a plan that was simple! Get offered the CEO job by shareholders ! Come up with a wowing line of products! Find partners (Genii??) and buy out the company somewhere down the road! Gerard L. had a simple plan! Sign a branding agreement with Group to name his F1 cars! Make Dany B a director of said F1 Team! Auditing Group to see if company would be viable! Make a firm offer to buy group at a later date!

So Dany B appointment disrupted Tony F. plan! And now DRB Hicom's move appears to have dirsupted Dany B. and Gerard L. plans a bit ! Wait weren't DB and GL supposed to work together!?

Well the more bidders the merrier. However I doubt that Tony F would bid since he now has Caterham, enough techs and engineers ( some coming from Lotus) and Leafied estate to develop the company in a big way!

Ok where can I find 500 M GBP no question asked ASAP! Uh China, the Emirates or Columbia?! Russia! No that'd be a bit farfetched and dangerous!

Edited January 30, 2012 by NedaSay

[Kimbers]

Middle East.

[simonb]

Tie up with McLaren would be nice

[Gus82]

Tie up with McLaren would be nice

How about Aston Martin? It would need a major change to the product plan though. Perhaps Lotus could do mid engined cars and Aston the front engined ones, but with shared engines, electrics, platform components etc.

I still think Lotus can do it on their own though and this is the best scenario, as long as they are owned by someone with decent funding and a long term view...

[Kimbers]

Agree Angus.

But the money has to come from somewhere in the first place, to be independant

[Stirling_Villeneuve]

Independent? Why did I suddenly get a cold shiver and think.... TVR!

[Kimbers]

And thats the issue. Lots of people talking about Lotus standing alone. I can't see that as viable especially knowing they need another £400 or so million to complete their long term plans....unless they get a rich benefactor on board like Man City did

[Iconic Ride]

Well, GM has risen from their deathbed in a big way lately (numero uno globally again, according to some statistical measures), and has an historical tie to the marque.

But I ain't holdin' my breath.........

[Stirling_Villeneuve]

....unless they get a rich benefactor on board like Man City did

...or like Caterham did?

[rudolphwolven]

Unfortunately (in my personal opinion) DB will become a true obstacle for Lotus in the coming exceptionally difficult period...........

the post of Joe Gustafson 08-16-2011 was a razorsharp analysis:

............"The only thing you haven’t heard from Lotus is what the cars will look and drive like. The last time we heard that was last year, and those were merely concepts. Lotus is acting more like an internet startup than a car manufacturer.

Danny “I don’t like cars” Bahar continues to show that he hasn’t the slightest clue on how to run Lotus. In fact, he has never had experience making cars at all. his last job was at Ferrari expanding their brand through merchandising. That might have worked with Ferrari to shill out the brand with clothes and pop star recomendations, but only because Ferrari had the lore and history to make that happen. Not to mention that that lore and history was made by the drive to make the best racing cars possible. Road cars for Enzo Ferrari were only a way to make money to go racing, not a hollow “branding” exercise to make money for more Grey Goose and Saville Row suits. Maybe Bahar should go work for Goldman Sachs instead one of the most hallowed brands in automotive history, he can bring Swiss Beatz with him."............

http://www.dashboard...-to-mediocrity/

Edited January 30, 2012 by Ruud