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Lotus Green Lights the Federal Elise
(Reprinted with permission from the September 2001
issue of LOTUS reMARQUE, the monthly
newsletter of Lotus, Ltd. See www.lotuscarclub.org.)
Four years after first supporting the idea of a federal Elise in principle, Lotus has given its formal approval to funding the model. The popular small car, which debuted six years ago and has been sought by American Lotus enthusiasts and the companys U.S. dealership network for nearly as long, is projected to become available in late July 2003 and go on sale as a 2004 model. However, Lotus Cars USA, the companys U.S. distribution arm, is hoping to beat that timetable by at least a couple of months so that it can take advantage of as much of that years good-weather selling season as possible. LCUs plans call for sales of 2,000 federal Elises annually at a list price of $38,500.
The new model will use essentially the same body style as the current, so-called
Series Two Elise (referred to as Monza or Elise
2000 at the factory), although it may have to be modified a little to
accommodate the federally required side impact protection. The S2s styling
has not been as well received as the initial Elises design, but it is
being built to a much higher standard of fit and finish than the hand-laid
process used to produce the original. Consideration was given to creating
the federal model by mating the S2 body to the Elise-based chassis that is
currently being used by Lotus to produce the VX220/Speedster for GMs
Vauxhall and Opel subsidiaries. However, the thinking now has turned against
using a common platform.
The federal Elises powertrain will use a high-revving four-cylinder
engine that will produce 150-200 horsepower. The choice of engine has been
made, and Lotus has already begun doing development work on it. But, because
a firm deal has not yet been signed, alternatives from GM and Rover remain
slight possibilities.
The uprated engine will power a car that is approximately 150 pounds heavier than the current Elise. The added weight will come largely from the addition of air conditioning, a radio, an air bag, side impact protection and a larger radiator. A stripped-down variant remains a possibility, depending on certification requirements, but it is expected to account for no more than 10 percent of the total sales volume. According to a source, the added weight will not significantly affect the character of the car, and its performance will be equal to or better than that of the Elise being sold now.
Arnie Johnson, the chief executive officer of Lotus Cars USA, had hoped to
be able to announce the approval of the federal Elise project at Lotus, Ltd.s
21st Annual Lotus Owners Gathering in late August. Instead, he freely shared
with meet attendees his frustration with the companys slow decisionmaking
process, as well as his hope for a positive resolution at a Lotus board meeting
that was scheduled for September 5. A day before the meeting, however, a company
spokesman feigned ignorance that it was pending. And, after the meeting had
taken place, the spokesman continued to insist that the idea of an Elise-type
model for the U.S. market was still being studied and that a firm decision
had not yet been made.
In fact, the £8 million project was approved at that meeting, with Tengku
Tan Sri Mahaleel, the boss of Lotus owner Proton, present and giving it his
blessing. However, an official announcement has been withheld because there
is some concern that it could adversely impact current Elise sales. This is
because the federal Elise will be developed as a world car, with the U.K.
and Europe slated to begin getting it a couple of months after it goes on
sale in the United States.
Following ten months of manufacturing delays and ramping up, Lotus is now
producing 60 Elises per week and maintaining a consistent, decent order backlog
of three months. But that is nothing like the year-plus backlogs that existed
after the model first became an unexpectedly hot seller. As a result, there
is significant sentiment within the companys management for holding
off on an official announcement as long as possible, which was done with the
S2 car. The opposing view is that, rather than selling against a year-long
drumbeat of bad Lotus news production delays, the suspension and subsequent
cancellation of the M250 mid-range model, the sharp decline in Lotus Engineerings
business, the layoff of hundreds, the shuffling of the companys leadership,
and sporadic rumors that the company is for sale getting out significant,
positive word of Lotuss future plans can only bolster the confidence
of potential buyers and current car sales.
In 1997, Lotuss acting CEO, Mohamed Zainal, who was the initial executive
assigned to Hethel by Proton after it purchased the company in late 1996,
told his U.S. dealers that a federal Elise would be available within 18 months.
In 1998, Lotuss board of directors first committed in principle to the
idea of producing such a car. The following year, the board approved Arnie
Johnsons business plan for the model. In numerous trips to the factory
since then, Johnson continued to press his case. But, with the Elise continuing
to sell well elsewhere with nice profit margins, other projects were always
given higher priority. Even when Johnson framed his argument for a federal
car with then-CEO Chris Knight in stark monetary terms that each years
delay meant another $10 million left on the table that Lotus would not be
able to get back he was not able to carry the day.
Several factors combined to produce a favorable decision at this time, and
the demise of the M250 played no small role. Previous plans called for the
M250 initially in convertible form to succeed the federal Esprit
and become the centerpiece of Lotus Cars USAs future, regardless of
whether the Elise ever got to the States. Without the M250, and with its replacement
three years away at the very least, LCU was faced with the unhappy prospect
of having no product to sell once the Esprit had run its course.
According to the same company spokesman who denied that the federal Elise
had been approved, Lotuss commitment to the Esprit remains open-ended.
In fact, the company has only enough parts including the lifetime buy-in
of many items that are no longer being made to produce 225 more Esprits.
LCU has been selling approximately 150 Esprits annually in recent years, and,
in the present soft economy, it expects to sell only about 125 of them in
2001. Even so, with a few Esprits still being sold annually in the U.K. and
Europe, that rate of U.S. sales means that the models quarter-century-long
run will come to an end by about mid-2003. By then, the car will also be living
on the last federal waiver that it can reasonably expect to get; its current
waiver runs out in September 2002, and another years extension should
be obtainable without difficulty, but it would be unlikely to get a bye on
the tougher federal regulations that 2004 model-year cars will have to meet.
Without product, Lotus Cars USA would not likely have been able to maintain
its 35-dealer network, much less upgrade it, and building a new network from
scratch to handle the M250s eventual replacement could well have cost
more than federalizing the Elise in the first place. The timely arrival of
the Elise will moot that potential problem.
The approval of the federal Elise project also means significant work for
an engineering staff that sorely needs it. The major development efforts on
the S2 Elise and the VX220/Speedster were concluded last year. When work on
the M250 was suspended last January, its 100-person project team which
was slated to grow to 250 had the model reached the full-blown development
phase was reassigned to other projects. And the near-empty pipeline
of new business for Lotus Engineering, which was a major factor in the workforce
cutbacks last spring, has not yet significantly refilled. As a result, in
a historic turnabout for the company, Lotus Cars is currently helping to support
Lotus Engineerings underutilized staff. The federal Elise project will
not be a panacea, but, with the M250s replacement still not out of the
starting gate, it should significantly help.
Finally, the production capacity to build the federal Elise will be available
at the time that it is needed. Roughly half of Lotuss current output
consists of the VX220/Speedster, but that model is slated for only a three-year
run. Lotus poured substantial funds into expanding its carbuilding facilities
in the expectation that the M250 would come on stream in 2002 and sales of
the current Elise would remain strong, but the former is defunct and the latter
is no longer a given.
Mahaleel endorsed the federal Elise project only after satisfying himself
that enough study of its marketing and its costs had been done. But, after
what happened with the M250, such projects as the federal Elise are now subject
to more rigorous review on the basis of meeting milestones, time lines and
budgets. As a result, the federal Elise has not been given an entirely free
pass. It will be scrutinized again at the end of the concept development stage
early next year. Between now and then, work will proceed on the engine, test
mules, prototypes and crash protection and testing.
At the same time, in keeping with Hethels desire to hold off on an official
announcement, LCU is planning a so-called soft launch of the federal
Elise. It has ordered three Euro Elises, which are being built this month,
and plans to mount a display at the Greater Los Angeles Auto Show in early
January, where consumer feedback will be collected. A new Esprit will be on
hand, too and, to help get it to the finish line, a 25th Anniversary
Edition is planned for the 2002 model year.
Mark Winston