New CEO keeps Lotus focused on the basics

Overhauling Lotus
CEO Terry Playle's plan for fixing Lotus includes


  • Allocating engineers properly and maintaining staffing levels for consulting work and manufacturing operations

  • Cutting costs at the engineering unit

  • Re-engineering the M250 sports car to meet global standards, using a platform common to other Lotus cars

  • HETHEL, England - Lotus is one of Britain's most famous automotive brands, but as a small producer it often has been on the brink of disaster.

    After posting a pre-tax loss of $60.1 million for the year ending in April, it seemed founder Colin Chapman's dream once again had become a nightmare.

    Lotus' failure: trying to do too much at once. Lotus engineers had to fix problems on the Opel Speedster and Vauxhall VX220 assembly line as well as develop designs of the Lotus Elise replacement and an all-new M250 sports car.

    Lotus had built a factory to boost production sharply, from 700 cars per year to 6,000. But workers had to learn new manufacturing techniques. At the same time, there were cash-flow problems as the original Elise ended its product cycle and Exige sales stalled.

    "It was a complete disaster," said Terry Playle, who in April was promoted from the board of directors to CEO to rescue Lotus.

    "Over 16 years the company has gone bust four times and had four new owners," Playle said. "The new owner always coincides with the launch of a new model. But rather than analyze why it went bust, Lotus always just got a new owner."

    Seeking balance

    In an interview at Lotus headquarters in Hethel, England, Playle outlined Lotus' ambitions as it finds a balance between creating cars and working for others as an engineering consultancy.

    The 69-year-old Playle certainly doesn't need the work. He has been an ally of Lotus for 30 years while running various British venture capital concerns. Though best known for his business acumen, Playle also was the project manager for the aviation industry's "black box" flight recorder.

    Putting Lotus back together is a tough job, and Playle is openly looking for a CEO to handle operations so he can concentrate on strategy.

    Playle envisions Lotus reborn as a niche automaker nimble enough to go where the large players can't. He also views the Lotus engineering consulting arm as a strategic advantage for the group.

    A Lotus-developed engine will power one-tenth of all new cars made in Europe next year, he says. That engineering includes Porsche's VarioCam technology. Lotus outsourced the technology to a third-party supplier that builds the parts for Porsche.

    Avoiding distractions

    Playle said Lotus must effectively allocate its engineers. Too often in the past, Lotus would pull engineers from its consulting arm to trouble-shoot manufacturing startup problems for Lotus cars, hampering design work for outside clients.

    "When you do that, you are no longer focusing on new orders and clients," Playle said.

    The original Elise startup pulled half the consulting engineers off their regular jobs, he said. "We ran out of money and had to sell the company to Proton," Playle said.

    Malaysian automaker Proton owns 80 percent of Group Lotus, as the company is known. Playle downplays any suggestion that Proton might compromise the Lotus engineering consulting operation by borrowing the best bits for itself.

    Other automakers have threatened to hire other consultants if Proton tries to become a global automotive player. But Playle is working hard to maintain the secrecy barriers between the Lotus consulting arm and Proton operations.

    "Lotus has never been caught out where something leaked from one area to another," Playle said. "Proton could acquire Lotus technology without owning us. Anyone can lock us up with enough engineering work."

    Playle is focused on reviving Lotus. The engineering arm cut costs in October by selling its Coventry prototype works to HPL Prototypes Ltd. The Coventry operations were replaced by newer machines in Hethel.

    After splitting the engineering and manufacturing sides to prevent large manpower shifts, Playle focused on the softer side of Lotus. For all of its cars, heritage and engineering dynamics, Lotus never had a marketing, sales or public relations department.

    "Lotus has never sold a car - people buy them," he said. "If you are building 1,000 cars a year, so far it holds up. But if we are selling 5,000 or 10,000 cars, we have to see where our cars fit."

    Lotus finally is assessing risk, Playle said. "We have more discipline," he added.

    For example, despite making an impact and generating 1,000 orders by unveiling the Lotus M250 prototype two years ago at the British auto show, Playle killed the car.

    He saw the M250 as having a serious weakness: It required a dedicated platform but had no other derivatives. The M250 was designed for the British market, with little consideration for the broader European market and none for the United States.

    Lacking flexibility

    "We didn't have the flexibility in the engineering and manufacturing model, and that's the key to the future," Playle said. "Yes, we had 1,000 orders, and we could have gotten two years of production from that. But we're nowhere after that, and with one model out of that chassis, it didn't fit the bill."

    Playle ordered his engineers to start over on a new M250, using a platform that will be the backbone for other Lotus offerings. The new car also will be used for Lotus' rebirth in the United States, after several failed attempts with the Esprit. This time, Playle pledges that Lotus will not show the car until it is ready for sale.

    Playle recognizes that re-entering the U.S. market may mean creating a car with some compromises. But he doesn't want purity of form to doom Lotus.

    Said Playle: "What I don't want to happen is for Lotus to be a perfect, pure sports car, but 'Rest in Peace.'"

    You can reach Mark Rechtin at mrechtin@crain.com

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