Lotus Originals, the luxury clothing and accessories brand for Group Lotus, celebrated the opening of its flagship store at 52 Regent Street in the old Café Royal this week with all the razzmatazz you would expect of the iconic sports-car maker that starred in so many James Bond movies.
Vince Cable, the business secretary, himself a petrolhead, was there as the guest of honour with top executives from DRB-Hicom, the Malaysian giant industrial conglomerate that now owns Lotus, Richard Bacon, MP for the Norfolk constituency where the car-maker is based, the Malaysian High Commissioner and a dozen Malaysian journalists and TV cameramen flown over especially for the event.
Noticeable for their absence, though, was the British press and the leggy blondes usual in sports-car circles; this launch was for show back home in Malaysia where ownership of the late Colin Chapman's Lotus car-maker is a trophy brand.
DRB's high command included Khamil Jamil, DRB-Hicom's group managing director and the new chief operating officer, Aslam Farikullah, brought into Lotus following the suspension of Dany Bahar, the flamboyant former chief executive who was dismissed over alleged "misconduct" of funds.
In a move aimed at quelling speculation that DRB is not committed to the carmaker, Mr Jamil said at the launch: "Group Lotus has some of the most technically gifted and talented members of the automotive industry and we are determined that they will be given the opportunity to flourish under the new management. DRB-Hicom has invested new funds and it is our job to make sure that investment is used in a way that can drive the company forward."
He added: "Malaysia will be a second home for Lotus."
Even so, the store opening was clouded by news earlier in the week that Lotus will not be exhibiting at the Paris Motor Show this September, that 57 contractors – including Mr Bahar's close associate Gino Rosato, director of corporate operations – have had their work terminated at the Hethel-based factory, and that DRB-Hicom is reviewing marketing plans.
Another three senior executives – the head of legal, human resources and finance – who worked with Mr Bahar have also been suspended by DRB following an intensive audit of the factory by the new owner which took over Proton – the Lotus parent company – in January. It is still not known whether Mr Bahar, who is understood to have left the country, is going to take legal action against DRB on the grounds that all his expenditure – said to include helicopter flights, expensive homes and an extravagant lifestyle – was sanctioned by Proton.
However, DRB's decision to review marketing, and cut back on contractors, has raised fresh doubts in the car industry about its long-term plans for Lotus and the future of its 1,300 employees.
Some sources claim DRB wants to strip out the intellectual property from Lotus Engineering – the consultancy arm of the group that works for other car-makers such as Tesla and Mercedes – taking it back to Malaysia.
A DRB spokesman denied this, repeating again that it is committed to Lotus and has already pumped £100m into the company since taking over. The new owners also said contractors have been given notice because they want key staff to be employed – not on contract – because of the confidential nature of so much of the engineering work being carried out.
An offer to buy Lotus for £1 had also been turned down. But there was no comment on reports in the German press yesterday that Volkswagen has expressed an interest in buying a stake in Proton, and might even consider acquiring the national carmaker in the long-term.
Shares in DRB-Hicom shot up 2.7% to 2.70 Malaysian ringgit (RM) on the Kuala Lumpur exchange – their highest since March.
For now, Lotus is concentrating on producing the award-winning Evora – a car which even the hard-to-please Jeremy Clarkson once said was as good as a Porsche – while the 170mph V6 Exige S is due to go into production next week.
DRB has yet to present its new strategy to turn around the lossmaking sports-car maker but has definitely decided to kill off Mr Bahar's five models in five years, a plan that many in the industry thought was both ambitious and misguided.
One insider said: "Lotus is a niche sports car for the enthusiast rather than for the poseur. DRB sees big potential in the Far East and the Middle East, particularly for the new, £50,000 Exige S model. But it will take time."
The new chief operating officer, Mr Farikullah, who trained as an engineer in the UK, is due to present the business plan once Proton has agreed to terms with its syndicate lenders.
DRB said that Proton executives have submitted a plan to the six banks –which include CIMB Bank Bhd, Malayan Banking Bhd, Overseas-Chinese Banking Corp Ltd, Export-Import Bank of Malaysia Bhd, Affin Bank Bhd and Eon Bank – and hope the rest of the money agreed with Lotus 18 months ago will soon be released.
The loan was for £270m – £207m of which has been drawn down by the former management – and the banks are due to release the balance when new terms are agreed, the company added. The syndicate lent the money to Lotus on the basis of a back-to-back guarantee with Proton, which is said to have cash of around $400m (£255.2m).
Indeed, it is this guarantee which worries some insiders who are concerned that Lotus could have a domino effect on DRB because of its debts: "That is why Lotus is such a big problem for them. They have to get it right," said one source.
Steve Davis, the car expert and author of the SkiddMark blog, said: "With the sale to DRB going slowly, the bankers were getting nervous and with Proton acting as a guarantor for Lotus, the consequence of banks withdrawing their facilities became the most significant risk faced by DRB from its acquisition. With Proton requesting an extension to Lotus' covenants, those same bankers went from nervous to downright fearful."
DRB also knocked down industry rumours that it had not paid the $1.1bn for a majority stake in Proton, which it bought from the state-backed Khazanah earlier this year. These rumours were also denied by the conglomerate which is run by one of Malaysia's wealthiest men, Tan Sri Syed Mokhtar Al-Bukhary.
The national carmaker Proton was created by former Prime Minister Dr Mahathir Mohamad, considered the father of modern Malaysia, and bought Lotus in 1996.
Dr Mahathir gave his blessing to the DRB takeover and is close to Tan Sri Syed Mokhtar.
In the Malaysian press, there have been warnings about the extent of debts held by DRB, whose interests range from making, assembling and distributing cars and defence vehicles, which are said to total $10bn.
In May, DRB reported group revenue up at RM6.88bn (£1.39bn) on pre-tax profits of RM1.52bn compared to RM701.52m the year before.
The increase in pre-tax profit is attributed to negative goodwill of RM971.52m from the acquisition of Proton. DRB claim its gearing is only 0.8 per cent of total valuation.
The Malaysian Insider webside recently reported that Tony Pua of the Democratic Action Party, one of the country's leading opposition MPs, had warned Parliament in Kuala Lumpur last month that a recession brought on by China's cooling economy and the eurozone crisis may cause problems for several of the country's debt-laden companies, including Mr Al-Bukhary's empire because of its borrowings.
Mr Pua said: "Syed Mokhtar's group of companies has a combined debt of RM34.3bn or more than 10 per cent of all local corporate bonds as of 2011 with only RM7.8bn cash as of May 2012."
The Oxford-educated Mr Pua, said: "Syed Mokhtar now controls power, water, port, rail and toll businesses as well as national carmaker Proton with billions in government-guaranteed debt. Despite the expansiveness of his empire and debt load, the Prime Minister's Department wants to privatise Penang Port to him."
A DRB spokesman dismissed these reports, saying that the company was in a strong financial position with gearing of only 0.8 per cent against its valuation.Reuse content