Selwa, of Lotus Cars, USA

Selwa, distributor of Lotus Cars, USA

How to save do company by buying it and then selling it back to new owners.

It's a miracle that Lotus Group has survived. Over the past four years, company directors in the United Kingdom have had the life expectancy of a second lieutenant in combat. Reportedly, more than 30 directors came and went in the last four years along with several luckless managing directors, and the company teetered on the brink of bankruptcy more than once. Exhibiting a ruthless management style that would have pleased Machiavelli, Lotus' unpredictable owner, Romano Artioli (who founded and subsequently shuttered the modern Bugatti company), deftly engineered a leveraged buy-out to take over Lotus from GM, then flirted with several suitors, including Korea's Daewoo, and finally sold 80 percent of his Lotus holdings to Protons a wealthy Malaysian carmaker, for nearly $84 million.

Along the way, Lotus Cars U.S.A. anchoring the company' s largest export markets bobbed like a cork in a bathtub, not knowing whether it would share the fate of its luckless parent. Fortunately for Lotus Group, it had the right guy at the wheel in America. Outspoken and energetic, 44-year old Jim Selwa is the kind of person that enthusiasts think should be running a company like Lotus. A car junkie and racing freak, he's owned a Testarossa and a 911 Turbo. As owner and chairman of Marketing Network Inc., a provider of marketing, advertising and promotional services, Selwa worked with the U.S. units of Lamborghini, Rolls-Royce and Volvo. After he sold that business in late 1995, Lotus' Rod Mansfield (a capable man whom Artioli later unceremoniously fired) took Selwa on as a consultant for the troubled U.S. operation and then made him president in Dec. 22, l995.

"Lotus just built cars and shipped them over," Selwa says. "When I came, we had 126 Esprits, a lifetime supply. I had 32 in the warehouse. The rest were at dealers."

He did the unthinkable. He shipped 16 cars back to England. "I said, 'if you want me to launch this V8, we've got to clear up the dealer situation and get rid of these cars.'"

Selwa's sales blitz helped Lotus move 145 S4S's last year. He sold 76 new V8s and delivered 42. "I was only supposed to get 50 V8s for the whole year." he says. "We sold 67 in 60 days."

But he's more than a high-pressure salesman. "Our real customer is the dealer" Selwa says, "but we want to make sure our owners are being taken care of. In the past, people here at Lotus Cars U.S.A.] were paid by the cars they sold. So they put on dealers; they had 80 stores at one time, and wholesaled as many cars as they could."

In screening each dealer Selwa set tough new sales goals based on individual market sales for Lotus and rival makes. "On the East Coast," he says, "our dealers were on top of one another; nobody could make a dime. Customers would keep calling until they could buy the car for $50 over list. Changing that wasn't anything Einstein had to invent," he insists.

And Selwa focused on low performers. "I was amazed. People would have two year-old Esprits sitting on the showroom floor. They'd argue it was a traffic builder; it was worth the $150 per month financing," Selwa explains. He said he told them to step up and sell cars or he'd replace them with a dealer who would.

As Selwa was changing things in Atlanta while trying to ignore the brinkmanship that characterized Artioli' s on-again, off-again negotiations with various would-be Lotus Group owners ---an opportunity opened up. Apax, an earlier suitor in the United Kingdom, didn't want Lotus U.S.A., so cash-hungry Artioli sold it, parts and all, to Jim Selwa in June 1996. Taking a page from Artioli's book, he quickly streamlined personnel ("anybody who wanted to do things the old way, I didn't need," he says) Preferring to concentrate on the newer models, Selwa sold $200,000 worth of pre-l991 Lotus parts to longtime distributor, Dave Bean Engineering, in San Andreas, Calif.

That left Selwa with a one-car lineup to sell, one that didn't impress him. "In every review," he says, "the Esprit was always last vs. the competition. I sat down with the people at the factory and said 'l can't do this, coming off of a life working with Lamborghini and Rolls-Royce. The Esprit is not competitive. If you want to launch this V8, you have to make it competitive.'"

Having worked with high-end exotic dealers and their customers, Selwa said his own research showed that the Esprit was considered quirky, with quality problems. And the car, equipped with a turbo four, competed with cars that had larger engines, better gearboxes and better sound systems. The Esprit wasn't a Ferrari or a Porsche," Selwa explains. "But we always got compared to them."

How did a guy who'd never run a car company convince the Brits to make changes? "I told them I know the guy who'll buy this car," says Selwa. "And his first impression is key. He wants it to sound good, to smell good, to be right on the inside. None of our stuff ever fit right The airbag cover didn't always fit in the hole; not one vent was the same on the car. I thought: 'These are all things we can fix. Let's go talk to Mr. Vent over there and see what we can do.'"

Selwa battled with Artioli over the changes. "We went at it pretty hard, I'd say: 'Don't ship me any cars for a month.' He'd say: 'This is what you're gonna get.' I wouldn't take them, and he wouldn't straighten them out. But I just would not back down. I'd say 'If you're not going to make this right, I'm leaving.'

"Think about it" Selwa says with a chuckle. "He's cash-strapped, wondering how he'll meet his payroll, and this clown from the U.S. comes in and wants him to make the product better. Finally, he said he'd do it."

That was because Artloli needed Selwa and Lotus Cars U.S.A., especially when the Malaysian-owned Proton came knocking to buy Lotus Group last October.

The U.S. distributorship, Proton insisted, had to be part of the deal. Selwa had worked hard to turn his company around, and he was reluctant to sell it back. But he was concerned that the Proton deal would fall through if he didn't. Selwa sold the U.S. unit back to the parent for "fair market value." Best of all, from his point of view, he was asked to stay on.

Selwa won't sell Proton cars at Lotus dealers in America, but he'd like to sell Proton-built Lotus Elises there someday. Proton plans to build 2500 Elises per year in Malaysia. "That's the only way we'll eventually get it here," Selwa says. "Lotus is sold out [of Elises] for a year and a half." The current Elise was never U.S. certified; Selwa might bring in 20 as race cars for a special series. Down the road, with sufficient funds, a Malaysian-built Elise could be certified and sold at a competitive price.

For now, Selwa knows he has to reintroduce Lotus. "For years, they touted Colin Chapman; they talked about prestige, racing heritage, light weight, cornering power, 'the fewest parts effectively deployed.' That all works if you're an engineer, but nothing there is a guiding principle for a company that deals with customers."

He has rewritten the company's U.S. objectives to be more customer focused.

"That's how you start to move the needle. Since 1983, we've sold 2856 cars here. I've got names and VINs so we can talk with every Lotus owner. That's what Rolls-Royce does."

Selwa has also deliberately kept the Esprit' s price from escalating- at $79,325 base, the V8 is only $4,670 more than the previous turbo S4S.

How big can Lotus get here? "Five years from now, with the right dealers, we can sell 200 to 250 Esprits a year, and maybe the same number of Elises."

He sees the Lotus dealer of the future as a boutique selling a range of exotic cars. He's had discussions with Bitter about a competitor for the BMW 7-Series based on the Lotus-tuned Opel Carlton. He has thought about Caterham; he'd consider bringing in TVRs. He'd like to distribute Lamborghinis. "Their facility in Jacksonville is just like this one," he notes. "Every one of their dealers is one of ours; why not dump their cars on our doorstep?"

Jim Selwa could have walked away when he sold Lotus U.S.A. to the Malaysians. But he didn't. He's still a car guy on a mission. "When they write the history of Lotus," he says, "I want to be in there as somebody who made things better. Lotus is here to stay." "


On a different note:

Subject: Salwa and Lotus
Date: Thu, 13 Feb 1997 11:22:23 -0500 (EST)

In a message dated 97-02-12 16:39:57 EST, you write:

<< Haven't heard any comments on the list about the great review that both
the new Esprit V8 as well as LCU president Jim Selwa got in the latest
issue of Autoweek. Anybody care to contribute? >>

In the article Selwa sais : "For years, they touted Colin Chapman; they
talked about prestige, racing heritage, light weight, cornering, the fewest
parts effectively deployed. That all works great if you are an engineer, but
nothing there is a guiding principle for a company that deals with costomers."

Well, I submit that most Lotus costomers are engineers (at least at
heart). It is their engineering that makes them great, and it is what
distinguishes Lotus from the others. I have owned several Rolls Royces and
have always thought that the advertsing was poor. Now I find that the guy who
was responsible for it is in charge of Lotus USA and wants to make the
company more like Rolls Royce and Lamborghini. - That is not what I want...
as a Lotus costomer.

All I hear people talk about is how great the V-8 sounds. I don't give a
damn how it sounds, and for that matter I don't think that it sounds nearley
as impressive as my demolition derby car. What I am looking for in a car, and
in a company is a Lotus. A true Lotus. The V-8 seems to be one, and I am
glad that Salwa has helped keep the company alive. But I would hate to see
the company shift from it's principles.

My thoughts:

I think Selwa was good at compromising between business (bean counting) and enthusiasm (Lotus cars). The problem was the level to which he was willing to compromise the vision. I prefer to err on the side of enthusiasm. Colin Clarkson talked about satisfying the "hair and nails" buyers. I care only that the buyers break their nails opening the door or get their hair fluffed to the extent they do not buy the car. If they buy the car, it is financially a success and Lotus will build more. If they do not like the car, it will not be built and I will not get the enthusiasts' car. I hope a visionary comes along, like Chapman, who can make the right choices and build the right cars. The Elise is such a car.