Lotus: deal done, action needed

IN THE END, THE SILVER Fox pulled off an astonishing deal. With the bodies of discarded Group Lotus executives littering the Norfolk countryside, with potential investors gnawing their knuckles over the owner's intransigence, with the bailiffs approaching the door, Romano Artioli quickly and efficiently sold 80 percent of his stock in Lotus for a handsome price.

The seeming simplicity of the deal may have had something to do with the size of the carrot being dangled. When a company is experiencing terminal cash-flow difficulties, an offer for 80 percent that amounts to roughly double the value of the whole company three years earlier can hold a person's attention. The agreement guarantees Artioli a seat on the board of New Lotus. At the same time, it commits Lotus to double Elise production and to expand the contract engineering business.

The new owner is effectively Tan Sri Yahaya Ahmad. Yahaya, now 50 years old, is the son of a forestry official from rural Malaysia. He trained at Loughborough University as an automotive engineer, then returned to Malaysia to sell cars. He went from one success to another, and when the Malaysian government wanted to sell state owned Hicom Holdings (one of whose companies makes Protons) last year, Yahaya was its man. He is now one of the biggest players in the rapidly growing Malaysian economy.

Artioli, who bought Lotus from General Motors for about £25 million, obtained £51 million from Proton and Yahaya, who personally contributed 16.25 percent. An additional £13 million to provide working capital puts Lotus in its strongest position for a decade. The talk is of expansion on every front. One element is that the Elise will be made in Malaysia as soon as possible, probably using Proton engines.

Buying a tiny, high-profile British sports car and engineering firm fits well with the global ambitions of Yahaya, Proton and Malaysia. Proton plans to double production to half a million cars a year by the beginning of the next century - and to take the total to 750,000 by 2010. It will need all the help it can get to reach those targets. 'Malaysia is suffering, if that's the right word, from full employment. We have no spare workers,' explains Yahaya.

Even so, Yahaya says Proton will use no more than 20 percent of Lotus's engineering capacity, leaving it tree to continue work for other car manufacturers. The question now is whether those other companies will trust Lotus's confidentiality. They appeared ready to bale out from any dealings when there was the prospect of Daewoo buying Lotus.

These are early days. The priority must be to rebuild the battered confidence of employees, suppliers, dealers, importers and customers. At the same time, the company must plan a long-term strategy with enough investment to realize the grandiose dreams of Yahaya and Artioli. Otherwise, we'll all be summoned back to Norfolk in a few years to meet the latest set of dewy-eyed owners.

Richard Feast
Car Magazine, January 1997