car industry

The scale of the problems facing Lotus Cars was laid bare yesterday with information showing that its new Malaysian owner is facing legal action from a number of suppliers over non-payment of debts – said to total £23m – and has asked the Inland Revenue to delay tax payments to conserve critical cash flow.

DRB-Hicom, the owner of the Norfolk sports car maker, was not available for comment, but sources close to the company said many of the outstanding issues – including payments to suppliers – facing Lotus relate to the previous management.

They added that in some cases DRB-Hicom is challenging some of the arrangements with suppliers over previous contracts where there are concerns about quality control. But they also repeated that DRB remains fully committed to Hethel, its workforce and turning Lotus around into a self-reliant and global brand.

A final plan to make Lotus self-sufficient should be ready soon after due diligence work being carried out by Ernst & Young and Rothschild.

However, the enormity of the clean-up operation facing Aslam Farikullah, new Lotus chief operating officer, is clear. According to internal financial results for August seen by i, the company owes suppliers up to £23m at 90 days overdue, and another £7m between 30 and 90 days.

One person close to the group said: "One petition has already been lodged with the company, and several others are outstanding. But the danger is that someone may sue for winding-up." Losses, after exceptional items, interest and tax, for the last five months to August are shown to be running at £23.6m.

The document states: "Cash flow: Critical. Overhead base is massively too high for current business, payroll bill for business is too high. Salaries top-end loaded."

DRB brought the British-trained engineer Mr Farikullah to turn Lotus, which includes the highly successful engineering business, back to health. The Government has been supportive of the new owners with Vince Cable, the Business Secretary, attending the launch of the Lotus shop in Regent Street. Lotus was due to receive a £10m regional grant.

DRB-Hicom acquired Lotus after its takeover earlier this year of Proton. But after an investigation, it sacked chief executive Dany Bahar for alleged gross misconduct.