Earlier this week I got together with Margareta Pagano, Business Editor of The Independent newspaper, and compared notes on the state of play at Norfolk’s favourite car maker.
The question, which remains far from certain, is whether the patient (i.e. Lotus) would survive the surgery by its new owner, DRB-Hicom, who have turned the company inside out in their search for what they regard as unnecessary of indulgent spending, initiated by former CEO, Dany Bahar.
Maggie’s article – Lotus eaters take a gamble, published in today’s Independent newspaper, will no doubt receive the same frosty response from DRB as her previous one – where she suggested Bahar was being used as a scapegoat by DRB to cover the mistakes made by ex-Proton CEO, Dato’ Syed.
Since new chief operating officer, Aslam Farikullah, was brought in at the beginning of this month, communication has been mostly a one-way affair and extremely limited – Lotus’ communication team here in the UK are no longer allowed to speak to the press, with all releases being firstly reviewed by DRB in Malaysia.
Following the dismissal of CEO Dany Bahar, DRB have been keen to rebuild the reputation of Group Lotus – not with customers or suppliers, but with the six lenders who fuelled Bahar’s New Era investment plan and are demanding recompense after the main covenants of their syndicated loan were breached last July.
The opening of the new flagship Lotus Original store in London this week was the catalyst for our conversation – I had already noted that Wiebke Baeuer, Head of Lotus’ Merchandising business was, like Dany, no longer with the company – she joined luxury watch and jewellery maker Chopard at the end of last month having originally worked with Bahar in setting up Ferrari’s retail product business.
This prompted a closer look at the other executives brought in by Bahar to transform the sports car maker, including Gino Rosato (Director of Corporate Operations), Claudio Berro (Director of Lotus Racing), Wolf Zimmerman (Chief Technical Officer), Maurizio Parlato (Director of Sales & Marketing) and Donato Coco (Design Chief). While Berro and Coco remain active (and visible to outsiders), Bahar’s other lieutenants are believed to have turned their focus elsewhere.
In a move aimed at quelling speculation that DRB is not committed to the carmaker, Khamil Jamil, DRB-Hicom’s group managing director said at the launch: “Group Lotus has some of the most technically gifted and talented members of the automotive industry and we are determined that they will be given the opportunity to flourish under the new management. DRB-Hicom has invested new funds and it is our job to make sure that investment is used in a way that can drive the company forward.
‘Under new management’ is code for “..once we’ve cleared out every last vestige of Dany Bahar’s people..”, which includes the three Lotus executives suspended a fortnight ago, Mike Bell (Head of Finance), Kerry Dugan (Head of HR) and Sarah Price (Head of Legal) – who have now had their employment contracts terminated. From what we can gather, Dominique Houde (Director of Corporate Finance), the man responsible for capital investment decisions, is still at the company.
However, as Maggie says in today’s article:
“Even so, the store opening was clouded by news earlier in the week that Lotus will not be exhibiting at the Paris Motor Show this September, that 57 contractors – including Mr Bahar’s close associate Gino Rosato, director of corporate operations – have had their work terminated at the Hethel-based factory, and that DRB-Hicom is reviewing marketing plans.
Some sources claim DRB wants to strip out the intellectual property from Lotus Engineering – the consultancy arm of the group that works for other car-makers such as Tesla and Mercedes – taking it back to Malaysia.
A DRB spokesman denied this, repeating again that it is committed to Lotus and has already pumped £100m into the company since taking over. The new owners also said contractors have been given notice because they want key staff to be employed – not on contract – because of the confidential nature of so much of the engineering work being carried out.”
Last week DRB Hicom’s Chairman, Dato’ Syed Mohamed Syed Murtaza together with Dato’ Sri Mohd Khamil Jamil, Group Managing Director presented a revised business plan to the members of their syndicated loan facility. Of the original £270 million, some £207 million was drawn down by Bahar and his team before the supply was stopped last July. The loan was provided on the basis of a back-to-back guarantee by Proton – which DRB has now adopted the liability of.
We understand that new chief operating officer, Aslam Farikullah, is due to present a new business plan once terms have been agreed for the loan with its syndicate lenders. But whether that plan involves developing or disposing of Lotus is yet to be confirmed.
This guarantee and the risk that it places on DRB Hicom is the real reason why Bahar was shown the door earlier this month. With more than $10bn of debt being carried on DRB’s balance sheet, concern is growing in Malaysia that DRB, whose corporate bonds represent 10% of the total market, could be exposed to the recessionary downturn of China’s cooling economy.
DRB see big potential in the Far East and the Middle East markets for the new £50,000 Exige S and Evora variants (GTE & GTC), but the likelihood of this plan succeeding depends on negotiating more agreeable terms for the original syndicated loan.
And while the Regent Street store opening could be seen as a positive step in this direction, it had more to do with the politics back in Malaysia rather than an endorsement of at least ‘part’ of Bahar’s original 5-year plan.
Read the full article in The Independent.
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