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How do you manage a car firm that goes to the wall every time a new model is launched? Carefully, says the man in charge, Terry Playle
by Steve Cropley

Lotus will be okay. It is on course for a stable future. That’s the clear message you take from an interview with Terry Playle, Lotus’s boss for the past 10 months. But it will take more than this year’s austerity and hard work to get things truly right — and the economic slow-down isn’t helping. There’s hard thinkng to be done about the model line-up, and the once-thriving engineering consultancy needs to be rebuilt. But in the long run, Playle believes Lotus can have a sus-tainable future, eventually building the 10,000 cars a year ill-fatedly planned for last year, and selling three distinct models.

That’s the abridged version of Terry Playle’s plan for Lotus. He can go into much more detail. But to feel confident about delivering any verdict, the chair-man and chief executive says he did months of research into what went wrong so rapidly last year, and (just as important) what has repeatedly gone wrong at Lotus in the past.

Playle, it turns out, is just about the perfect man for the job of reviving Lotus: a proven company doctor with long-time Hethel connections. His links go back to 1966, when his family firm was a supplier of electrics for the Elan. Ten years later, during which time he moved into compa-ny doctoring, Playle helped dispose of Colin Chapman’s ill-fated boat business. He bobbed up again in 1997 — having run "various plcs" in the intervening years — as an architect of Project Daffodil, a restructuring programme for Lotus pro-duced for (but discarded by) his prede-cessor at Hethel, Chris Knight.

And now Playle’s back again, an imposing and jovial man of 69, six-and-a-half feet tall with a shock of white hair, an action-man lifestyle behind him ("I gave up polo when I turned 64") and a willingness to stay connected at Hethel for years to come.

"This company," he says crisply, "has been at the brink of bankruptcy four times in 16 years. Each time, the cause has been the cost of getting a new model into production, and each time we’ve passed into the hands of a new owner. There’s a kind of consistency in that, wouldn’t you say? Four new models, four times to the brink, four new owners and it seems to happen about every four years."

PlayIe smiles as he speaks, but he’s not trying to be funny. Far from it. He is tak-ing the shortest possible route to acknowledging that Lotus managements have made repeated mistakes in the past, and showing that he now knows what it takes to craft a sustainable future for the volatile Hethel sports car maker. Such is Terry Playle’s reassuring tone — his manner could be that of a high-powered surgeon instead of a fixer of companies — that only later does it occur to me how close Lotus must have come to the brink.

"When I came here," says Playle, "I found a remarkable core of people who were operating the company almost despite its management. They simply knew what was right for Lows. The atti-tude seemed to be that boards of direc-tors may come and go, but the company had to keep operating. One old Lotus hand told me I was the 56th director he'd seen in the place. Quite a lot of them wanted to know — genuinely, not aggres-sively — what made me think I could do things differently from all the rest."

The problem was the one most pundits had already perceived: Lotus was seriously over-committed, things started to go wrong and the job of righting the ship took engineers away from the consultancy activities, which earned the money. From 1997, when Lotus’s owner, Proton appointed Chris Knight, the company had earned three succes-sive tidy annual profits: £8 million, £10 million and £12 million. Elise produc-tion, originally planned for 350 cars a year, had been scaled up to 700 units.

But according to Playle, continuing strong demand induced the manage-ment to "really go for it", increasing Elise production to 3000 cars and matching that with another 3000 Fuse-based GM cars (Vauxhall VX22Os and Opel Speedsters). "It was a tremendous risk," he says. "Just scaling up from 700 to 3000 Elises would have been a gamble, but to double that again, using a new £9 million factory which hadn’t been proven and then taking a decision to source all body-work from a new supplier in France, well, it was the kind of risk no management was entitled to take."

Teething problems soon set in. Production of the old Elise was stopped before it had been proved that the new one would go down a production line. Engineers had to be transferred from customer consultancy projects to sort things out. The Vauxhall/Opel car wasn’t
hitting the consistency of build GM want-ed: that required the transfer of even more engineers. Engineering customers started to lose faith. Dealers were screaming for cars. GM wanted its mod-els built better. The company’s opera-tions went into a spiral dive.

And all the while, over in Coventry, a team of engineers and designers was at work on the prototype of Lotus’s Porsche Boxster-chaser, the M250, which was costing an arm and a leg. Even before he got the CEO’s job, Playle realised the car would not offer the flexibility of manu-facture Lotus would need in future. "We were telling our consultancy customers that they needed high commonality of parts, including platforms," says Playle, "but we weren’t doing it ourselves." Playle killed the M250 with his own hand last January after a pre-Christmas trip with Chris Knight to Proton to deliver the bad news. The Malaysians took it well, says Playle, and were very supportive.

A couple of months ago, Lotus announced a loss of~43 million for the 2000-2001 financial year. That included the money spent developing the M250, together with revenue lost because the VX220 was six months late and the new Elise nine months overdue. With the M250 dead and Coventry sold, and new cars flowing from Hethel in record num-bers, Playle says the company is finding its feet fast. Production glitches have been ironed out, and consultancy engin-eers have been returning to their outside customers. Business needs to build, but it is at least "going the right way".

Under Playle’s recovery plan, Lotus is split into two: Lotus Engineering and Lotus Cars. This is not entirely new as a concept at Hethel, but apparently the financial separation of the two divisions is. In the past, Paul robbed Peter more often than you could count. The new Lotus Cars is itself split into manufactur-ing and commercial divisions. Playle is fond of saying that Lotus never sold cars in the past. It let the dealers do that, holding to an echo of the old Chapman dictum that road cars were built to finance the racing.

Now, however, Lotus will sell cars. It will support dealers, says Playle (a com-ment which has been getting him out of jail at "lively" dealer meetings since he said it the first time). Motor sport activi-ties will have a marketing edge to them. Much more will be done — by an active and properly funded Lotus marketing department — to build the image.

And the model range? At present the company makes 6000-odd cars a year, evenly split between Lotus and Opel/Vauxhall. The GM deal was done for three years, a little over two of which remain. It is by no means certain, says Playle, that Lotus would want to repeat it. But the company is resourced to make 10,000 cars a year, and that sounds like a good target to shoot for in the long run, he believes. But he insists on not being held to that. "I never allow systems to get in my way," he says.



Playle sees three Lotus models. "We’ll always build the Elise," he says, "and vari-ants of it. There will be a middle model, call it M250B, which will be different from the car we killed, and which will use Elise chassis principles. But it might have steel front and rear structures, say, instead of the Elise’s aluminium and composite structures." He has no firm idea about the third model, saying only that it will also be an Elise-theory car in its means of construction. "We want to challenge the fundamentals," he says. "We may come up with something nobody is expecting."

Challenging the fundamentals - the now traditional boom-to-bust oscillation in Lotus’s progress — will be Playle’s major preoccupation for some time to come. But "within months" he plans to appoint a younger chief executive and settle into the role of chairman, concen-trating on the big picture. Playle’s eye is already on a likely man for the new job. "I wish he could be involved now," he says with feeling. "However, this is not just a hobby for me. I intend to stay involved." Those who believe what Lotus needs, above all, is a bit of continuity will be pleased to hear that.


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