It would be foolish to judge Caterham based purely on their past achievements. That’s the thought I came away with following a morning spent with the company’s CEO Graham Macdonald.
Macdonald, you remember, took over from Ansar Ali last June. In his previous role (as Chief Financial Officer) he was fighting to keep the purse-strings firmly closed, so the relief of running a business under entrepreneur Tony Fernandes is clearly palpable, even though he’s just returned from an extended 10-day trip to Kuala Lumpur after being called to a group meeting with ‘the boss’.
Since Macdonald took over, the Alpine-Caterham partnership with Renault has been announced, they’ve pulled the plug on the R600 race series for 2013 and announced a new range-topping EUV-compliant Seven based on the trusty Ford Duratec powerplant. They’ve also moved out of Caterham – their spiritual home for the past 54 years – relocating to a temporary facility in West Sussex.
So, a mixture of good and bad news that’s left some of the marque’s most outspoken fans questioning what the future holds.
We’ve been among their most vocal critics, so it’s to Macdonald’s credit that he invited me to an open discussion about what’s really happening and what this means for the future of Caterham Cars and the group as a whole.
In my time with Macdonald and Chief Commercial Officer Dave Ridley, I learned how they’ve synthesised Caterham’s key values into a blueprint for future models and what those models will be. We also discussed the role of Caterham Cars in the group, how the relationship with Renault is going and why we should be excited about the company’s future.
Some of their answers will please you, others may not, but if there’s one message I’d like you to take away, it’s that for the first time in a very long time Caterham has the chance to grow and become more than the sum of its parts.
SD: What’s changed since Tony Fernandes acquired the business in 2011?
During the last four years there was no investment in this business at all. The previous owners, Corven, were desperate to sell the business, so it was all about results to the bottom line, zero investment, sell what you can and get the numbers looking good. The refreshing thing that’s happened now is Tony Fernandes wants to ‘grow’ the business, create a large car company that makes money and will invest in doing so.
So, we’ve gone out and done a deal with Renault – the Alpine-Caterham JV, but we’ll never lose the Seven and that will be the heritage part of the business. Under Corven there was no development of the Seven, I think the last new product we developed under the Seven was in 2008 with the R500 and the 175 for European/export markets.
So when I took over last July, I sat down with my senior team and said “right, we’ve got money to invest, which way are we going to go on the Seven?” We now have a product plan for the next 18 months, with three new products this year that we’re going to announce (over the next few months) which to me are tremendously exciting, driving the Seven business forward. We continue to be passionate about the Seven and Tony Fernandes says that as well, he sits there and says “the Seven will remain as the core of the brand.”
However, we have to grow. We sell 500 Sevens a year, turn over £20 million and make a profit on that, but it’s very, very small. It is what it is, but that’s not why Tony Fernandes invested his money in Caterham.
Caterham’s: New Sportscar
The illustration above was produced by Hingham-based Caterham Technology, under the direction of ex-F1 Technical Director Mike Gascoyne. It is ‘not’ the Alpine-Caterham sports car, but clearly Mike and his team have the resources to develop a product which could grace the catalogues of Aston Martin or Porsche.
In practice, Caterham’s new sports coupé will be priced under £50,000 and feature a range of (supercharged) 4-cylinder engines, with Porsche’s Cayman clearly in its sights.
While the JV intends to share key structural components between the brands, Caterham are already diverging on the engine front. Whereas Renault have specific engines in mind, Caterham need more power and bigger outputs to meet the promise of their brand. So they’re exploring other engine suppliers and have the latitude to do so in other areas too. So don’t expect a Toyoburu clone of Alpine’s preferred solution.
Caterham’s car will look and drive very differently to Alpine’s, and neither company will know what their partner’s car looks like until they’re launched in 2015.
They’re also looking at hybrid powerplants (beyond 2015) and increasing the engineering links between road cars and the F1 programme. This could include KERS, but only where it fits within the price point of their market segments.
SD: So let’s take a closer look at the Alpine-Caterham JV. How is it going and what can we expect?
Renault want to replicate the Alpine brand from the 1960s/70s, while we want to maintain the Caterham DNA in our products. So we’ll get to a point where we are co-engineering and then we will split. And by co-engineering we get a product out there at a reasonable price, which will maintain the Caterham DNA.
Our new sportscar will allow us to apply our knowledge (from F1) in aerodynamics and composite materials. Everything with Caterham is about function, so there won’t be anything used from our F1 programme which doesn’t make the car faster or better to drive. There won’t be any fancy side scoops, or fake cooling ducts for the brakes – if it’s needed it will be there, otherwise it won’t.
We’ve talked this through with our engineers (at CTI) and they understand this. And the guy who’s leading our engineers, less we forget, is Mike Gascoyne, so there will definitely be cues from F1 in the new car.
SD: Some outsiders have suggested there are tensions between Renault and Caterham, with Renault calling the shots. What’s the relationship been like in practice?
It was always key that this was a 50:50 JV for the exact reasons you are saying. We knew that anything else would lead to failure. Renault are a big company, they have their processes, but the whole reason Renault chose to deal with Caterham is because they wanted some of our entrepreneurial spirit and our responsiveness, because they know it would take them considerably longer to develop the new Alpine.
So we’ve sat down with Renault, divided the project based on competencies, with CTI leading some work-streams and Renault leading others. There’s occasional friction, because everyone thinks they know better, but its been set out quite clearly and that’s the way it’s working.
And the spirit from Renault is very much in the way of a partnership. We have fortnightly meetings which alternate between being in the UK and being in Paris – and they want to come and breathe in Caterham’s DNA to get beneath our skin and understand what makes us tick. That’s all part of the partnership.
SD: Last year you sat down with a clean sheet of paper to define the Caterham DNA. Most of us know what that ‘was’ (in the Seven), but what did you choose as the key attributes that will make it into future products?
The Caterham DNA is about being lightweight where possible, fun to drive and accessible. So what I don’t want is a lumbering 2-tonne sports car, instead I want a nimble, agile car, with a good power/weight ratio but at the same time we need to appeal to a broader market. Tony is also very keen that this appeals to the masses.
SD: One of things that the custodians of the brand have come to value in the Seven is its ‘weekend special’ appeal, a blast of fresh air after a busy week whether on-road or at the track, but I realise that’s probably not how you see the wider brand moving forwards. So, just to be clear on that, it’s the principles of agility, driver connectedness and fun, without being hung up on a specific material (like aluminium), size or format of vehicle. Does that sound about right?
Yes. We have to diversify, let’s be realistic about it. If we take just the Caterham principles of ‘performance through light weight’ you’ll end up with a Seven. We have to become more accessible than that and open the brand to a wider market.
I’m sure people will be concerned, however a fundamental principal is that we keep as much of the Seven’s DNA as we can whilst making future cars more accessible. For example, I want a young lady who’s in a relatively senior position to want to get into our car every day and drive it, because it’s got a bit of kudos, prestige and a bit of power, but is easy to handle. At the same time, I want to be able to get in (as a driving enthusiast) and take it on track. It will be very difficult to achieve, but that is where we’re focused.
As you know, we now have a team of more than 100 engineers up in Hingham, some of which have come from Lotus – from the original Elise program, and these guys know exactly what we need to achieve.
“The Caterham DNA is lightweight, fun-to-drive and accessible,” says Macdonald. “But we need to diversify beyond being purely hardcore.”
We keep saying accessibility, but you’ve only got to look at Tony’s other businesses to understand where that aspect of our DNA is now coming from – that’s what Air Asia is all about. He wants to be able to share the Caterham experience with everybody. We do open testing with our F1 team and Tony wants more people to enjoy the brand we’re building.
SD: How do you balance that accessibility with becoming too ubiquitous? How do you stop your new sports car becoming just another MX-5?
I’d love it if we sold the MX-5 volumes but what we’re trying to do is retain the purity of the existing brand, while designing a product which more people can experience. Our volume targets are nowhere near a BMW or Mazda model, we’re building a niche product, not a soft sportscar but it will not be as hard-core as a Seven.
SD: What will the new sportscar feel like to drive?
I want people to be able to get into it without contorting their body, feel comfortable, have modern day comforts and feel special once you’re in there, because it will feel light, agile and be exquisitely engineered.
SD: Tony Fernandes has singled out Porsche as his inspiration, they sell huge volumes, but you’ll still get in a Boxster or a 911 and it retains that purity of response which we’ve known and loved for decades..
And that’s ‘exactly’ what we’d like to try and take to our new products. You can jump in and drive a 911 every day, but when you open it up it still feels like a pure sportscar. And that is what we’re striving for.
SD: Which business within the Caterham group owns the brand?
This is a topic which was reiterated in our meeting with Tony on Saturday night – the car business is the retail front of this business. CTI is the engineering backbone, Composites in Germany are the materials experts, Caterham F1 is the means for us to promote the brand but Tony expects the car business to generate the bulk of the income and for the business as a whole to reach the stage (in the future) where it can stand on its own feet and operate without the need for significant investment.
Caterham has two UK showrooms at the moment; a temporary unit in Crawley plus one in the Midlands, but recognise they’ll need proper OEM dealers to compete against other mainstream car makers.
They’ve already identified where they’d like them to be, but are debating whether to go with franchise or owned dealers – Tony Fernandes would like to own them and this is likely to be part of their initial strategy.
They are looking at a new dealership for the Seven (not far away from Caterham’s birthplace), which will become the new home for Caterham’s heritage models and they’re also looking at a chain of dealers for new products, which will feature Sevens on display.
They’ve decided to retain a ‘club feel’ for the Seven, recognising the importance of a ‘mecca’ or ‘hub’ where owners can congregate and build a relationship with the brand.
Renault will market the Alpine brand in the UK through selected Renaultsport dealers, but Caterham and Alpine will not be marketed together or sold in the same outlets.
We’re very privileged in this respect. Whereas we were a small company of 100 staff based in a sleepy town in Surrey, we’ve now added 100 staff in CTI, 20 in composites and 250 in F1, so there’s now 500 staff dotted around, growing daily that we are driving forwards. We’re using the F1 programme to leverage our brand and some of the top engineers in the world want to come and work with us in Caterham Cars. Sometimes I have to pinch myself to believe how much resources we now have compared to three years ago.
You only need to look at the organisational changes which happened last year, where Riad (Asmat) moved from running the F1 team to now operating as Group CEO, and his focus is now mainly on the car business.
SD: Last week Caterham revealed a bike (at the Malaysian GP) and I heard Tony mention a motorbike as well. Where does that fit?
Tony has sponsored a rider in MotoGP during the last few years and off the back of that has asked why we’re not doing a motorbike. That’s the way he thinks, so he’s asked CTI to deliver him a plan, just as Caterham Composites have created a road bike. These are ‘special projects’ that test our engineers and showcase their abilities, but for the time being it’s about building the brand.
If Tony wants to produce either and a business case can be found, then Composites will design the body, CTI will do the engineering on it and Caterham Cars will retail the products – although we might do a deal with a wholesaler to sell it into bike stores.
SD: If I were to ask what people should be excited about, what would your answer be?
We are a small British company that has always punched well above our weight on PR and branding, and we now have the funding and the drive behind us to enable us to grow into a global brand that is recognised for the excellence of our products.
Look what JLR (Jaguar Land Rover) has achieved from where they started from. We may never reach that scale, but in 10 years time I’d like Caterham to be seen as another British success story, growing from a small 500-unit car maker, selling a 50-year old design, into a world-wide branded and profitable car maker. If I can leave in 10 years time and feel I’ve achieved that, then I’ll be a very happy man – that’s what’s driving me every day.
There will always be the stalwarts who hate the idea of change, but I’d like to think there are others who are interested in how this is going to develop, and want to turn another chapter in the Caterham story.
I think customers should be excited about the investment, not just for our new products, but in terms of our existing models. Our hands have been tied for 5 or 6 years. I’ve been running our export markets and it’s an expensive process to homologate a car. The last EU homologated car we launched was in 2008 which is a long time ago, so those export markets which are key to us have been devoid of new product for five or six years. We’ve changed that, we’ve got new cars launching and a plan to continually do so. Our new plan will extend the life of the Seven and secure its place at the heart of our brand. That’s what excites me the most.
We can’t divulge anything about these new Seven-based products at the moment, but they’re fantastic – I’m so excited by them. If we sit here in a year’s time and you see what Seven products we’ve brought to market, I’m sure you’ll be very pleased by what we’ve delivered.
Beyond the new Caterham Sports Coupé
When you visit the markets in Malaysia, Indonesia and East Asia the cars on the street are small SUVs, crossovers and city cars. In Russia 30.6 per cent of sales are for SUVs, so clearly this is a market trend which no self-respecting car business can ignore.
Ultimately, Fernandes sees the JV with Renault as opening other doors within the Nissan/Renault alliance (although Caterham are not tied to this alliance at the moment), and Macdonald clearly sees Caterham building different products beyond the core track and sports car genre.
Whether those products are branded as Caterham is quite another matter. Perhaps they’ll develop a new sub brand, but clearly Fernandes investment in Caterham goes beyond window dressing – he wants an engineering led car company which can capture the booming demand in emerging markets.
Macdonald recognises how this might look, but counters by saying “Tony Fernandes continues to invest millions into this business, and he wants to see a return. If that means we need to diversify, then so bet it, as long as we preserve the fundamental virtues of our brand. If you look at Nissan, Porsche, Lamborghini and what Bentley are about to do – you’ll realise that very few car makers can sustain a profitable business based on a single (core) niche.”
Caterham are at the beginning of this new journey, and they’ve clearly spent a great deal of time charting the best course. They’re very conscious of the brand’s heritage, their responsibility to existing owners and to their new owner, Tony Fernandes.
Their new sports car will not be a Lotus, nor resemble the failed 21. The team’s inspiration may come from Porsche, but they’re grounded enough to realise they’re unlikely to steal many sales away from the Cayman. But it will be special, with the quality of a mass produced road car and the performance of.. a Caterham.
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Images courtesy of Caterham Cars, Caterham CTI and Caterham F1.