Lotus Works into a New Position

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LOTUS by TCC Team (9/15/2002)

Is there room for a street-legal go-kart on the American highway? That could determine the fate of the long-struggling sports car company.

Founded in 1948 by the eccentric British race car driver, Colin Chapman, Lotus has built a reputation for innovative engineering – manifested in a series of unusual cars for road and track. The latest is the Elise, a pint-sized two-seater that’s little more than a high-powered go-kart.

An earlier version of the mid-engine sports car has been on sale in Europe since 2001, but it wouldn’t meet U.S. safety and emissions regulations, leaving American dealers with nothing else to sell but the extremely low-volume, $90,000 Esprit. That was a critical omission, admits Clive Dopson, the engineer who oversaw development of the new Elise.

“The U.S. market is extremely important to Lotus because 50 percent of all sports cars are sold in North America,” says Lotus Managing Director Dopson, and so, he says, the automaker has spent the past couple years working on a U.S. version.

Toyota’s halo

The new edition of the Elise has won a waiver for U.S. bumper regulations. So the most significant change is its emissions-compliant engine, a 190-horsepower in-line four lifted from Toyota’s MR2 Spyder. Modified by Lotus, it delivers tire-spinning acceleration, with 0-60 times of 4.9 seconds.

Equally significant is the fact that the new powerplant lets Lotus bask in Toyota’s halo, no small matter for a British brand never before known for its reliability. “It’s a Toyota engine, so you know it’s not going to break,” says Duke Hale, the CEO of Atlanta-based Lotus Holdings.

With an all-new plant in the U.K., Lotus has capacity to produce 5000 cars a year — a figure that includes both the Elise and the Speedster, a spin-off marketed through General Motors’ European Opel brand. At a starting price of $39,985, Lotus planners believe there’s a sizable market in the U.S. for a car like the Elise.

“Hats off to them for trying,” says analyst George Peterson, of California’s AutoPacific Inc. The Elise is a “real enthusiast play,” he says, though he questions whether the car is “too tightly defined? It may be tough to find 2500 people who want a car like that each year.”

Despite such concerns, initial interest seems to be strong. Lotus Holdings is signing up dealers — it now has 39 outlets in 29 major markets and intends to add as many as ten more showrooms in the coming year.

Pushing the innovation envelope

Even with that distribution network under development, Lotus claims its American dealers have already taken orders for nearly the first year of imports. And Hale insists he’s confident, “We could sustain that easily for two to three years.”

Beyond that, he hints, there will be “innovative ways” to tweak the design of the Elise to renew market demand. And several additional products are in the works. That includes the Exige, a replacement for the aging Esprit. Currently, plans call for the new sports car to be sold only in Europe, but Hale confides it “certainly is poised for the U.S.,” as well.

Over the long-term, the bullish CEO insists “I wouldn’t be surprised to see Lotus selling better than 10,000 vehicles a year in the U.S. That’s my ambition by 2009 or 2010.”

That would certainly help solidify the situation at a company almost constantly in turmoil since its founding 56 years ago.

Like many small European sports car companies, Lotus’ roots are in racing. Chapman had a string of victories to his personal credit, but he was also able to field a team made up of some of the world’s most famous drivers, including Emerson Fittipaldi, Mario Andretti, Stirling Moss, Nigel Mansell, and Ayrton Senna.

Lotus race carChapman’s success had a lot to do with breaking the rules. His strategy depended on more than just increasing horsepower. He was an advocate of lightweight bodies and was one of the first to make effective use of aerodynamics.

That creative approach to automotive design earned Lotus a profitable engineering consultancy. It still counts some of the world’s largest automakers, including Toyota and GM, among its clients.

A decade of turmoil

Indeed, GM was so impressed it acquired Lotus’ engineering and carmaking operations in 1985 (though not the Formula One racing subsidiary). The marriage was not made in heaven, it turned out, and GM sold off the company in 1993, ushering in a decade of turmoil and frequent changes in ownership.

Since 2002, the British company has been a wholly owned subsidiary of Proton, an Indonesian-based automaker that dreams of becoming a serious global contender. Proton has pumped in much-needed cash, but is now looking for a return on its investment.

“The fact that we’re still here is something of an anomaly,” Dopson says with a grin, but one that reveals the uncertainty that has faced Lotus over the years.

Lotus is a small company with relatively big aspirations. Whether it can succeed will depend on the reception its little Elise receives when it rolls into U.S. showrooms this year.

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