Was DRB-Hicom's "Due Diligence" The Beginning And The End For Dany Bahar And Lotus?

Lotus CEO Dany Bahar’s 14 day suspension is set to expire on Monday. We have no idea what will happen next. He may get the boot, taking his ambitious five-year product plan with him. Or he may not. Putting the pieces together since Lotus was taken over by DRB-Hicom has painted an interesting picture, while still leaving the future of Lotus up in the air.

In the end, it turned out that Bahar received his suspension for some spending practices that Lotus and independent auditors found questionable, including renovations to his rented home totaling $54,152, and over $1.5 million in private aircraft fees. According to the Daily Mail, the paper that broke the story, Bahar received compensation worth $1.85 million on top of those perks, while Lotus had an operating loss of $1.5 million in 2011, along with debts of $309 million.

Despite fears of parent company DRB-Hicom (owner of Proton, which in turn owns Lotus) offloading the Lotus brand to the Chinese (a common fear for enthusiasts), it looks like Lotus might be safe under Malaysian stewardship for the near future. DRB-Hicom initiated an independent audit of the company back in March, following compliance failure for a 2010 loan worth nearly $418 million, which was being guaranteed by Proton. A report in the Malaysian press detailed the issue

In March, Proton, in its third quarter results, noted that its subsidiary was in a technical breach of certain post drawdown covenants on its existing long-term loan. It has requested for an extension of time to fulfil the covenants and has submitted an appeal to the lenders.

For now, the loan amounting to RM1.01bil had been re-classified as a short-term loan as at Dec 31, until the receipt of approval for the extension of time.”

Early March was also the start of Lotus suspending development of the new Esprit, while also putting a hold on Bahar’s five-year plan. Officially, only day to day operations could be carried out under Malaysian takeover laws while DRB-Hicom conducted its due diligence of Lotus, which may have ended up being the audit discussed in the above reports by the Malaysian press. That period was supposed to have wrapped up by the end of March, but in mid-April, Bahar seemed to have no idea regarding the future direction of the company, aside from DRB-Hicom’s indications that they’d hang on to Lotus. But by May, Bahar was in the doghouse just when he claimed that a decision on his plan would be made, and Proton’s managing director and CFO resigned, and the company issued another denial that it had planned to sell Lotus.

The July issue of EVO magazine claims that only 43 new Lotus cars were registered in the UK at the time of publication, with eight cars registered in April, 2012. In 2011, 37 Lotus cars were registered in that month alone. Despite this, Lotus is claiming that the poor sales are a result of a re-jigging of their dealer network, and that they have orders for 1,168 cars in total [Bahar claimed 1162 in an April web interview with EVO].

The tragedy here seems to be that Lotus is on the up-swing in terms of product. The Evora S, Exige S V6 and Elise S have been well-received by the press, and Bahar’s future plans for a new Esprit and an expanded model range looked like they’d be the kind of cars that could expand the appeal of Lotus cars beyond the narrow hard-core enthusiast customer base. If the allegations are true, then Bahar may have become a victim of the kind of hubris and irresponsible behavior that has been the downfall of countless individuals. Let’s see what Monday holds.