Wednesday, December 1, 2010

Proton, Lotus Gamble Big

IndyCar is celebrating a third manufacturer for 2012 in the form of Lotus – as both an engine and presumably, and aerokit manufacturer.  This, from a manufacturer whose road cars have always featured engines from a more mainstream manufacturer such as the current Toyota.
But this is not the strangest bit.  As many have noticed, Lotus now seems hell-bent on producing entries into virtually every top flight motorsport series on the planet.  And even this involves twists.
At the beginning of this year, the Lotus brand had one outlet in motorsport.  Lotus Racing campaigned two cars in 2010 under the Lotus Racing banner.  Now they are in danger of losing that banner to…Lotus?!?!  How can this be?
If we go back to the beginning, it starts out calmly.  The luminary Colin Chapman founds Lotus.  For business reasons, Team Lotus – the racing arm - is created as a separate legal entity.  This shields the carmaker Lotus from any liability issues from Team Lotus.  But upon Chapman’s death in 1986, the ownership of Team Lotus, and its purpose begins to unravel.
GM bought Group Lotus (consisting of Lotus Cars and Lotus Engineering) in 1986.  In 1991 Team Lotus was sold to a group of former employees.  Both companies would continue to change hands with Group Lotus ending up in the hands of Malaysian automaker Proton, while AirAsia CEO Tony Fernandes ultimately would secure the rights to the name Team Lotus.
The two Malaysian organizations appeared set to work with each other with Fernandes securing the permission of Group Lotus to create a Formula 1 team using the Lotus name.  Thus, Lotus Racing competed in the 2010 Formula 1 season and finished the season ahead of the two other new teams.
Upon securing the rights to the name, Fernandes announced that Team Lotus was officially back.  However, Group Lotus seemed to shoot down that idea and made claims that they would take measures to protect their trademarks - leaving Lotus Racing officials perplexed, while rumors surfaced of Group Lotus buying into the more established Renault Formula 1 team.
It would appear that the change in heart comes from a reported $1.2B investment in Group Lotus from parent company Proton.  Proton appears to be taking advantage of the Lotus brand by producing Lotus inspired editions of their own cars.
So, on the one hand we have Group Lotus which, albeit with ownership changes, continued on in the traditions of the company - producing cars and selling engineering services.  On the other hand we have Mr. Fernandes who may have merely bought the rights to a name (Team Lotus had long lied dormant), but in doing so, has won the ardent support of Formula 1 fans who view him as the man who brought Lotus back to Formula 1.
The two sides appear willing to fight.  It doesn’t seem clear - either procedurally or geographically - where the legal proceedings will go.  However, it’s sad to think to think that Colin Chapman probably never would’ve wanted the two Lotus’ to be independent and working at cross purposes.
From a business perspective, things could be equally interesting.  Proton is betting on being able to woo the Porsche aficionado.  Can they succeed?  Well, according to Group Lotus Advisory Council member Bob Lutz, “Of course they have a chance. If you do nothing, then it's certain death. If you make a massive investment, then it's maybe death.“ 
Nice choice.  Well, I guess if it all comes to naught, I guess Tony Fernandes could buy up the pieces.

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