Group Lotus
Debate between Richard Bacon and Simon Wright
Mr Bacon
I agree that the so-called STEM subjects—science, technology, engineering and maths—are vital to firms such as Lotus, and I am keen to see those developed through the proposal for a school specialising in them.
It is important to note that although Lotus’s contribution to the history of technology and innovation is already imperishable, it has not stopped. In this Olympic year, it is worth pointing out that Chris Boardman won the 4,000 metre pursuit gold medal at the Barcelona Olympics riding a revolutionary lightweight and aerodynamic carbon composite monocoque bicycle developed by Lotus. He also rode the Lotus “superbike” to smash the world 5,000 metre pursuit record by more than 8 seconds.
Tesla Motors, which my hon. Friend the Member for Great Yarmouth mentioned, is a business based in California whose investors included, among others, the owners of Google. It asked Lotus to develop a fully electric car, and the Tesla roadster was built in Norfolk and then exported to California with extraordinary success.
Simon Wright (Norwich South) (LD)
I congratulate the hon. Gentleman on securing this debate on a subject that is so important for Norfolk’s economy. Whenever I have visited Lotus, I have been impressed to learn about its advances in low-carbon vehicle technologies. The UK car industry is a world leader in this area. Does he agree that if Lotus were to leave Norfolk and the UK, it would risk losing access to skills and expertise and jeopardising its ability further to develop its reputation in low-carbon technologies?
Mr Bacon
The hon. Gentleman is absolutely right. I have talked about Lotus’s heritage, which is of stunning historical importance, but it is the future we are concerned about. Lotus has demonstrated, with things such as the Tesla project, the tremendous contribution it can make to the future and its expertise in hybrid and electric vehicles.
Proton, the Malaysian car manufacturer that has owned Lotus since 1996 and invested considerably in it, was founded in the early 1980s under the stewardship of the then Malaysian Prime Minister, Tun Mahathir, who, it is fair to say, is something of a visionary who has probably done more than anyone else to create the Malaysia we know today—a modern country with a powerful economy and global connections. The Malaysian Government held a large stake in Proton for many years, but made it clear that they no longer wished to retain this stake. In early January, Tun Mahathir gave his public blessing to the sale of the stake to DRB-HICOM, a major industrial conglomerate with a wide variety of interests.
On 16 January, HICOM announced that it had bought the Malaysian Government’s stake in Proton and thus become the ultimate owners of Group Lotus. Incidentally, on the same date, Group Lotus announced the opening of a major brand store in London’s Regent Street. Only three days earlier, on 13 January 2012, a UK-registered company, Lotus Youngman UK Automotive Company Limited, company number 7909455, was incorporated at Companies House—that was just three days before HICOM bought Proton—with the chief executive officer of Group Lotus, Dany Bahar, as one of its directors. Curiously, that was not announced to the Malaysian stock exchange until several months later, on Thursday 12 April.
That is of particular concern because, as has been reported in the newspapers, the CEO of Group Lotus, Dany Bahar, has a financial incentive in his contract to sell the company, and because Group Lotus no longer owns the right to use the name “Lotus” on cars sold in China. That right is now owned by a small Taiwanese company, which licenses it to China Youngman, a potential buyer of Group Lotus that is already importing Lotus cars into China. That is an odd thing for any car company to do, particularly one whose brand and the heritage are so important. The brand is a central part of the company’s value, and it is hard to imagine selling it to others so that it could not use its own brand name in a territory without let or hindrance, but that appears to be what has happened.
By coincidence, my right hon. Friend the Prime Minister was in Malaysia recently, and he spoke to the head of Proton, Dato’ Sri Syed Zainal. Unfortunately, it appears that only hours after our Prime Minister had spoken to the head of Proton to emphasise the importance of British jobs at Group Lotus, Dato’ Sri Syed was in China seeking a buyer for Group Lotus. That has naturally caused immense worry and concern for the 1,200 employees at Group Lotus. It is also unnecessary, because there are well-capitalised potential buyers for Group Lotus with a credible plan to keep the business and the jobs in the UK.
When I raised the issue with the Prime Minister last week at Question Time, he emphasised the importance of Lotus, saying that he had raised the issue with the Malaysian Prime Minister and that the Government were monitoring the situation closely. My fear is that, even if an agreement is reached, any guarantees that might be provided about British jobs will later turn out to be worthless. The Kraft Foods takeover of Cadbury comes to mind in this respect.
One way of accomplishing a transfer to a Chinese owner against the wishes of many of the interested parties would be to reach an agreement in principle to sell Group Lotus but to present it as a joint venture rather than a sale, then to wait until after the Malaysian elections—Lotus is rightly valued by many in Malaysia as a jewel in Proton’s crown and the issue could become politically divisive—and have a Chinese buyer such as China Youngman acquire 100% of the business after the Malaysian elections were safely out of the way, transferring manufacturing to a new Chinese owner later. One could even have a private side agreement to that effect.
People in Norfolk, most notably the loyal and hard-working Lotus employees, want to ensure that that does not happen. I have asked HICOM to consider carefully its responsibilities to local employees and I hope that it will do so. However, I remain extremely concerned. The fact that KPMG has been appointed with a mandate to sell Group Lotus to the Chinese is not an encouraging sign. Nor is the fact that the Malaysian banks want their money back from Proton. I fear that Proton will say that it has decided to keep Lotus, while negotiating with the banks for as long as possible to write off or reduce debt, then either hand what is left of Group Lotus to the Chinese or liquidate it. The question for Proton in such circumstances would be: is it planning to pay the suppliers? That is relevant because there are tens of millions of pounds of accounts receivable outstanding, and many further jobs in the supply chain beyond those at Group Lotus itself are affected.