Questions have been raised during the past 24 hours over the handling of Lotus’ future by new owners DRB-HICOM and in particular the role played by Lotus current CEO Dany Bahar in securing the jobs of its Hethel employees.
We spoke with Lotus this afternoon and you can read their responses below. There are still a number of questions outstanding, which we will update in this article when we hear back from them tomorrow. [Click Here to read the latest update]
Just 6 months ago a grant of £10.4m was made from the UK Regional Growth Fund to assist in the development of Lotus’ new models, with CEO Dany Bahar promising to create up to 1,200 new jobs for the region. Bahar said to BBC News at the time, “It was always our intention from the beginning to create jobs in the region, especially in the automotive manufacturing industry in the UK, which was an issue.” Business Secretary Vince Cable, said during his tour of Hethel’s facilities last July, “We do need companies like Lotus. The British car industry was written off years ago and is now really reviving.”
Whilst the future plans of DRB-HICOM remain in doubt, the promised regional growth funding for Lotus has now been put on hold. Ministers remain committed to keeping Lotus in Norfolk, and keen to support Lotus provided it creates new jobs for the region.
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Meanwhile DRB-HICOM has been eager to distance itself from the highly publicised issues at Group Lotus, whilst Bahar is keen to ingratiate himself with any new buyers and secure their support for his future plans.
One such buyer is the current Lotus F1 Team owners Genii Capital, who confirmed over the weekend that it was considering making an offer for Group Lotus and told the BBC that it respected the “historic link” between Lotus and Norfolk.
Some of the challenges facing Lotus are perfectly normal in the greater scheme of things, Lotus (and Bahar’s plans for the car maker) are heavily dependent on the leveraged support of banks and shareholders and with DRB-HICOM’s acquisition of Proton, these were always likely to be disrupted.
Naturally, whilst DRB-HICOM undertook their post-acquisition due diligence, the financing was stopped and since the operation of its business depended on outside capital, Lotus were unable to meet some of their bills during the intervening months.
At no time has a “quick sale to a Chinese buyer and a production move to China” been mentioned or discussed, which means that these rumours can be put to bed.
Without wishing to get stuck on semantics, whilst the above response may indeed be true from Lotus’ perspective, the information coming out from Malaysia casts a somewhat different light on the situation.
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Coinciding with last week’s media storm, news then emerged that Group Lotus boss Dany Bahar had together with another Lotus director, Azman Bin Abdullah, registered the company, Lotus Youngman UK Automotive Company Limited at Companies House on January 13th 2012.
This was just three days before the sale of Proton was announced, prompting speculation that it was little more than a shell company, set up as a vehicle to facilitate the purchase of Lotus assets in an eventual sale.
China Youngman Automobile Group, who build and sell cars in China using a Lotus developed platform, were involved in a failed $446 million offer last year to buy the ailing Swedish car maker, Saab. Youngman sells passenger cars in China for the domestic market, including the L3 and L5 models, which are engineered with the assistance of Lotus Engineering and based on Proton running gear.
Youngman is not Lotus’ importer in China – Lotus has an “engineering services agreement” with Youngman (i.e. they are an engineering client and some of their vehicles use the licensed wording “Engineered By Lotus” on them.
Norfolk MP, Richard Bacon, has called for an emergency debate in the House of Commons to review what is being done to safeguard jobs at Hethel. He said in an interview with Eastern Daily Press, “The government’s policies are designed to encourage more jobs not fewer, and last year the government promised more than £10m of its regional growth fund to Lotus. I want to hear what ministers are thinking about that and what they are planning to do.”
Bacon went on to say, “Lotus Youngman was incorporated in January 2012, so this raises serious questions as to why the Malaysian stock exchange wasn’t informed until last Thursday.”
British Prime Minister, David Cameron, told the House of Commons today (18/4) that he had raised the issue of Group Lotus with the Malaysian Prime Minister and its new owners. He also said that “..he is monitoring the situation closely”.
The formation of this company was to facilitate a proposed joint venture between Lotus and Youngman for the development of certain automotive products. The discussions have been ongoing for more than 18 months. The name of the joint venture company was agreed between the parties and the company was incorporated to protect that name. Youngman has existing commercial relationships with both Proton and Lotus and the formation of the company relates solely to the joint venture and nothing more. If the proposed joint venture does not proceed, the company will become dormant.
If this is indeed the case, then this may be yet another ‘storm in a teacup’, but one wonders why Lotus allowed such perceptions to form, given the scrutiny its business has been under these past few weeks.
The key issue at this juncture is one of trust. The ‘drip-drip’ of information, together with Bahar’s continued dismissal of any concerns is not the most prudent way for Lotus to regain its credibility.
One of the questions which remains outstanding is why the Malaysian stock exchange was only notified about Lotus Youngman UK Automotive Company Limited last week.
It’s a genuine concern and should be straightforward enough for Lotus to answer. We’ll let you know what they say.
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Updated 18/04/2012: Following a conversation this afternoon with Thomas Hofmann, Lotus’ Director of Group Communications, he confirmed the following:
In response to the question: Why was the Malaysian Stock Exchange only notified of Lotus Youngman UK Automotive Company Limited last week?
Thomas Hofmann: The decision to form the company was made before the DRB announcement, but because of the mayhem around the announcement, formal notification was overlooked.
We then asked: “So, what you are saying is that there was no regulatory trigger (in terms of notifying the Malaysian Stock Exchange) nor did it result from any housekeeping (either connected with the E&Y/Rothschild due diligence or otherwise) that recommended such a detail be publicised?”
Thomas Hofmann: Yes, that’s exactly it.
Lotus have been keen to defuse any misunderstanding caused by their relationship with China Youngman, and generous with their time in providing further information on the points that we raised.
Our understanding is that whilst none of this precludes a future deal, for the time being discussions about the ownership of Group Lotus, should DRB-HICOM choose to sell, remain open and therefore no decision has been made which would adversely impact Lotus employees in Hethel.