Up Close At Lotus Headquarters

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The moment that Malaysian carmaker DRB-Hicom took control of Lotus in April, rumors were born that Lotus’s fifth owner was looking for a sixth. Since then, DRB execs and British politicians have cooled the speculation with sobering comments that no changes are happening—”for now.” But their reassurances did nothing to address questions about Lotus: How far along is the Esprit? Why is the Elise dead in the U.S.? And with only the Elise, Exige, and Evora on the market, how is it that Lotus keeps the lights on and 1200 people employed? We went to Lotus’s headquarters in Hethel, situated on a former Royal Air Force site on England’s eastern seaboard, looking for answers.

When Dany Bahar arrived at Lotus as CEO, he split the company into two distinct divisions: Lotus Cars and Lotus Engineering. This isn’t just a change in where people sit, or how PowerPoint slides are laid out—it’s a major change to Lotus’s business model. Prior to Bahar, there was just one group of Lotus engineers. To make sure that Lotus’s road cars received first-class development, the company would need a big engineering staff—bigger, ...
... probably, than the small annual-sales numbers could otherwise justify. So pre-Bahar execs would take on consulting projects for the oversized engineering department to work on, bringing in more cash and keeping them busy when not developing Lotus road cars.

Now, however, the Lotus Cars division has its own engineers to develop Lotus-branded sports cars, and Lotus Engineering is the consulting firm. Although some of the advanced research from Lotus Engineering will trickle into Lotus vehicles, 95 percent of Lotus Engineering’s work is done for outside clients. Lotus says that in part this split was made to make sure consulting clients didn’t feel like they were getting a “B-Squad” of engineers, with the top people assigned to Lotus’s own vehicles. That’s possible. But we think it also makes it easier to sell off one or the other if they’re packaged individually.

Lotus Engineering is a big operation. Two-hundred-fifty engineers sit in what’s essentially a single room in Hethel, in what was once an RAF building. There are another 95 in Michigan, and 95 between Kuala Lumpur and Shanghai. Altogether, the division brought in more than $70 million in revenue in 2011. It still didn’t turn a profit, though.

Mark James, the director of Lotus Engineering, is energetic. He’s been with the company since 1985, but looks like he was born in the 1970s. Looking at Lotus’s aging portfolio of cars, you might think everyone at the company also is frozen in time. James isn’t. (His division also doesn’t work on the road cars.) He tells us that Lotus Engineering does virtually any work customers request, from designing variable valve-lift systems to chassis tuning, but that the best is the high-value work. For Lotus, that’s coming up with the basic idea for vehicles, whether that’s packaging, powertrain, layout, or engine selection, as well as developing concept cars.

Developing concept cars? This raises an eyebrow—Lotus showed six concept cars at last year’s Paris auto show, and most of the media read it as a publicity stunt. “It showed a range of what Lotus is capable of doing as a company,” James explains. Lotus is in the process of designing an entire range of mainstream products for China Youngman Automobile, and the just-debuted Youngman SUV is a dead ringer for Lotus’s APX concept from 2006. We ask if the far-fetched line of vehicles we saw in Paris was just a catalog from which new companies in the developing world could order up products. “No,” James says. Even if that wasn’t Lotus’s intention—and we still think it could have been—the lineup of fiberglass concepts serves that purpose to a T.

Lotus has done development work for more cars than most people realize. The Infiniti Emerg-E is based on the Evora, and Lotus developed its range-extended-electric powertrain, too. Porsche licenses the design for its VarioCam Plus variable valve-lift system from Lotus. Officially, all James would say is that his company contributed to the development of Aston Martin’s Vanquish. But Lotus actually designed the Vanquish’s entire architecture, and back in 2004 wasn’t so coy: Literature from Lotus Engineering explains that Lotus based the Vanquish’s underpinnings on the same aluminum tub it used for the Elise. Although Aston took over engineering of its platforms after the Vanquish, the VH architecture it uses to this day is derived from Lotus’s work.

As we reported last year, the Elise is dead for the U.S. market mostly because its exemption from meeting the latest airbag requirements has ended. The company may have dug the Elise’s grave with the Evora; after the latter car was introduced with airbags that do comply with U.S. standards, the National Highway Traffic Safety Administration told Lotus that it wasn’t taking excuses for the Elise any longer.

This leaves the Evora as the sole Lotus offering in this market. Derivatives such as the GTE and a convertible that we expect is in the pipeline will keep at least a few customers interested. But the Esprit is still far off. We weren’t able to take photographs while driving around inside Lotus’s rather large compound, but can report that a huge factory is under construction. Worryingly, though, construction didn’t seem very far along, and even in the middle of a weekday afternoon, there wasn’t a construction worker to be seen. Lotus probably can’t afford to go without a significant cash flow from U.S. sales until it gets the Esprit actually into production.

The shrinking of Lotus’s U.S.-market portfolio is indicative of our concerns about the company in general. When Lotus delivers, the products are pretty fantastic. But right now, for all the press conferences, special-edition Evoras, and sextet of concept cars, there’s little substance to back it up. Lotus Engineering seems to be successful, but isn’t bringing in enough cash to pay for development of an Esprit or next-gen Elise, either. Whether or not DRB-Hicom decides to sell Lotus, some stability will be good for the firm—and for attracting investors. On our way out of Lotus’s parking lot, two employees were raising flags: the Union Jack and the Malaysian flag. That Malaysian execs were coming for a visit the following day is, to us, a good sign.

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