Add Lightness and Quality: Inside Lotus' Turnaround Plans

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Lotus is steadily becoming the carmaker we all once thought it was. Forget its brief -- and, as it turned out, fantastical -- flirtation with luxury sports cars and front-engine AWD hybrid sedans and coupes. According to CEO Jean-Marc Gales, it's once again all about simple, ultra-lightweight cars with transcendent handling.

Gales was hired by Lotus' Malaysian owner, DRB-HICOM, after the ouster of Dany Bahar, the CEO who wanted to shift Lotus toward a Porsche-like range. Gales is a lifelong Lotus fan -- he even collected the brochures when a boy -- and a self-confessed uber-gearhead. He trained as an engineer, but he's had senior posts in other disciplines for a number of carmakers, including as global head of sales for Mercedes-Benz.

He draws two solid lines in the sand very early in our interview. First: "Any car we launch in the next two years will be lighter and faster than its predecessor." This applies to new versions of the Elise, Exige, and Evora. And second: "I want to sell 3,000 cars a year."

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What will these revised cars be like? "Very advanced but having nothing superfluous," he says. "They might lose some of the ride comfort they have now but will gain massively on handling. I sleep very well at night knowing the engineers who sign off the handling." There will be obvious sales-boosting variants, including an Evora convertible and additional track-biased derivatives -- though an SUV is also a possibility.

<blockquote align="Center"><p>Any car we launch in the next two years will be lighter and faster than its predecessor.

Should Lotus build its own engine? "There is absolutely no need. Why spend hundreds of millions of dollars on that? I can buy one and tune and calibrate it. We can tune this V-6 [from Toyota] with our supercharger and management for fantastic noise and response."

What about the aluminum structure under all Lotus cars? "The Evora tub meets regulations until 2020, and we will likely stay with aluminum beyond that. It's similar weight and strength to carbon fiber but one-third of the cost." He claims the Lotus tub is just seven pounds heavier than the Alfa 4C's carbon-fiber structure.

For some years a battle has raged over what Lotus is all about. This is for the moment a settlement. Lotus has lost money every year for the past two decades. Bahar stated emphatically that Lotus could never survive on its ultra-lightweight range, simply because the global market was insufficient for the company to break even. That's why he planned to invest heavily in mainstream, if more expensive, cars, to sell 5,000 a year. Gales says the exact opposite, that the market for lightweight cars is just fine provided you run the company well. That means pushing up sales, pushing down costs, and not making repeated mistakes.

"I was surprised by the lack of process when I came here," says the Luxembourg-born Gales, whose first language is French but who is fluent in English, German, and Italian. "I spent a lot of my time in German companies. [Having a well-structured organization] helps your discipline."

<blockquote align="Center"><p>Gales says that the market for lightweight cars is just fine provided you run the company well.

Already sales are up. Partly that's because there are now new dealers in the obvious European and Asian cities -- Paris, Berlin, Monaco, Abu Dhabi — where Lotus was bewilderingly absent before. Other housekeeping measures have been taken. "We didn't even have a customer database." Lotus' global sales went up by more than 50 percent to 1,565 in the nine months to the end of 2014 (202 of which were in the U.S.) compared with the same period a year before. The running rate is now about 2,000 a year, before the revised cars arrive.

"And we will increase revenue because [on] these higher-performing cars the prices will go up."

So he's selling more cars for more money. But he has also cut costs. Many production jobs have been eliminated, and total head count has dropped from 1,215 to 930 even though output has risen.

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"We will launch on time, too," he says. "The Elise S Cup [a non-Federalized car] is the first Lotus ever that isn't late. The Evora 400 is also finished already. Early! This never happens here." And late launches knock a huge hole in cash flow. "Lotus didn't even have a program management team before. Can you believe it?"

Gales arrived in Lotus' Norfolk, East of England, HQ in May 2014 when the place was almost mortally wounded. The company had lost £170 million ($260 million) in fiscal year 2013. The Malaysian management moved in the following year and cut the loss to £72 million ($110 million). Gales says losses are falling more, such that by the end of fiscal year 2015 the company will break even.

<blockquote align="Center"><p>Gales says losses are falling more, such that by the end of fiscal year 2015 the company will break even.

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Much of this loss was due to investment in the new kinds of Lotus: the Esprit supercar, a V-8 engine. In fiscal year 2013 the R&D spending was greater than the total revenue. I put it to Gales what seems obvious, that it might have been worth salvaging those projects. Was there anything usable? "Nothing," he shrugs. He says the much-vaunted V-8 had never properly run. "Don't invest £200 million ($305 million) in a new car when you haven't exploited the current one."

There's a large, half-built factory building at Lotus that the company began erecting for assembly of that all-new range announced in 2010. These days it's redundant, and Lotus people refer to it as "the skeleton." It's a poignant memorial to a former era, its steel girders and half-fixed roof rusting and rotting in the English rain. Lotus has no need for it now, as the existing production lines can do 3,500 Elises, Exiges, and Evoras per year.

Gales has many measures in mind to simplify production. He has put in place a "lightweight laboratory" in the engineering center. It contains, arrayed across a big hall, every part from each of the company's three model lines. Each employee, including the people who assemble the cars, has been through the lab, looked at every part, and made suggestions as to how it can be made lighter, simpler, cheaper, or better -- and often a combination of the four. The results have been spectacular. The Evora 400 will take 20 percent fewer hours to build and cost 10 percent less in its bill of materials, and it will be lighter and higher in quality.

Lightness, of course, is a traditional Lotus virtue. Quality less so.

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