An F1 mess developing in Malaysia

We are hearing that the Lotus-ART announcement last night is not merely about GP2 and GP3 and seems to be a precursor to a battle over the rights to use the Lotus name in Formula 1. From what we are hearing, Group Lotus, which is owned by the Malaysian government-controlled Proton car company, has embarked on three legal actions to stop Tony Fernandes from using the Lotus name next year. The Group applied for various trademarks relating to Lotus Racing earlier this year. The group is also believed to have withdrawn permission to allow Fernandes to use the Lotus name and is claiming that David Hunt, the owner of Team Lotus Ventures Ltd, had no right to sell the rights and logos to the Team Lotus name. The apparent aim of all this is to grab the Lotus name and to enter F1 with a Lotus-branded team, run by ART.

The bad news is that all of this is not on very solid legal ground. The Lotus company dates back to 1952 when Colin Chapman established the first Lotus company, called Lotus Engineering. Team Lotus, which ran cars in competition, became a separate entity two years later, while Lotus Engineering developed into Group Lotus in 1958, when the company began to build production road cars.

After Colin Chapman’s death in 1982 the Lotus companies were re-organized and Group Lotus was re-financed with capital from British Car Auctions, Toyota and various other parties. In January 1986 General Motors bought out most of the Group shareholders and, by the end of the year, had acquired a 91% stake in the road car business. This firm would later be sold on to Italian businessman Romano Artioli before Perusahaan Otomobil Nasional Bhd (Proton) bought control in 1996.

While all this was going on Team Lotus was a separate entity, controlled by the Chapman Family. In 1975 the racing operations were transferred to a firm called Team Lotus International Ltd and a trademark application was made in 1988 for a “Team Lotus”, including the celebrated CABC logo. At the end of 1990 two former Lotus employees, Peter Wright and Peter Collins, took control of the F1 team, with a company called Team Lotus Limited, with the rights to the name and logo being assigned to this new organisation. Four years later this latter operation went into administration and a firm called Paintglossy Limited (later renamed Team Lotus Ventures Limited) bought the rights to the name and logo from the administrator. The “Team Lotus” trademark process was completed in January 1995, specifically in relation to Formula 1 racing.

Group Lotus challenged this decision in the courts in 1998 – after the Proton takeover – and lost. Thus Group Lotus has no real legal claim on Team Lotus, based on the decisions made up to now. There is no reason to suppose that a new legal action will be any more successful than previous ones. It seems that Tony Fernandes has now acquired the rights and logos from Team Lotus Ventures Ltd and so, in theory, has the right to call his organisation Team Lotus. The Chapman Family seems to be in agreement with this situation – which is a point of some importance.

Fernandes is very well-connected in Malaysia. For the last nine years he has run Air Asia, which was established in 1993 by the Malaysian government’s DRB-Hicom. This fell quickly into debt and in 2001 the then Prime Minister Dr Mahathir Mohamad sold it to Fernandes for one ringgit. He then pulled off an amazing revival.

Proton is a loss-making state-owned automobile company. Its ownership of Lotus has made little difference. The Proton board decided in September 2009 to hire Dany Bahar as the firm’s new chief executive. He was employed at Ferrari at the time and brought in a number of Ferrari people as he set about revamping the firm, trying to turn it into a Malaysian version of Ferrari (albeit based in England). All of this probably explains why there have been conflicting reports in recent days regarding the Lotus engine supply next year. Team Lotus is believed to have a deal with Renault, but Group Lotus and ART seem to be keen to use the old Toyota F1 base and equipment. The price tag on this is about $30 million a year and the deal is for two years. Toyota provides Lotus with road car engines and so Bahar is obviously trying to stitch together the various elements of the deal to Ferrari-fy Lotus. There is currently no F1 entry for Lotus ART, which will require further investment.

The bottom line of all this is that there is probably going to be a power struggle in Malaysia to see whether Proton’s masters support Bahar or Fernandes. It is a case of my politician is stronger than your politician. Bahar is guy with ideas, but Fernandes has had solid and impressive results in the past and he seems to hold most of the cards with regard to the Team Lotus name. He also has an F1 entry, which is more than can be said for Bahar (at least as far as we know).

51 thoughts on “An F1 mess developing in Malaysia

  1. So, let me get this straight;

    The “Lotus-Toyota F1” stories relate to Group Lotus/Proton and the Lotus-ART tie up entering GP3, GP2 and possible F1 in the future.

    The “Lotus-Renault” stories relate to Fernandes/Lotus Racing and their new GP2 entry Team Air Asia. Juat to mix things up further I’ll through the Lotus Racing livered IRL car driven by Sato (not sure what the team name is) as another spin-off/sponsership deal in Tony Fernandes portfolio.

    Coincidently, or not, these are both Malaysian owned and backed. Meanwhile the Team Lotus brand has been bought and sold, originally out of Group Lotus, with the brand owned by David Hunt and now sold on to Tony Fernandes which he is free to use, with the Chapman family blessing purely out of respect for the nostalgic element and not because the Chapman still hold a stake in the brand.

    Humm…

    What about Classic Team Lotus, who run and maintain the historic race cars. Who owns and operates this branch?

  2. Now it all makes sense. I’ve got a friend of mine in Tokyo (and in Toyota!) who told me this morning that Lotus and Toyota had made a deal. It sounded very odd to me, because we all know that this Lotus Racing was going to make a deal with Renault… and probably this Friday they will anounce it.

    So, after this enlightned post of yours, we can see that this is much more complex that we thought. And what we see around here are not one, but two currents. Like you said: my politician is better than yours… what a big mess!

  3. Sounds like a huge mess. I think they’d be crazy to back anyone but Tony Fernandes. I had no idea who he was 12 months ago and he’s proven him self massively to me! Not that I’m anyone but a fan but I reckon that counts for something!! 🙂

  4. What an ugly situation when politics come into play in motorsport! Tony Fernandes is a good manager with great reputation, a good man (Malaysians seem to adore him for making Lotus F1 Racing and Air Asia a success) his image alsop fits in F1. I hope he wins this war of Lotuses!

  5. Bloody hell. It was all looking so promising.

    With regard to the TEAM LOTUS trademark and name, Tony Fernandes holds most of the cards, but not the most important one — a registered trademark for use with motor racing. However, Team Lotus Ventures Limited (Fernandes’ partner) still owns a number of registered, non-revoked TEAM LOTUS marks in Great Britain, including the ones connected with advertising in connexion with F1 racing.

    Of course the trademarks are just pawns in the game — they will follow the resolution of the commercial issues.

    Joe, do you think Tony Fernandes has enough pull or enough liquidity to prise Lotus away from Proton? Bahar is a Swiss, of course, not a Malaysian — not sure if that counts for anything in the KL halls of power.

    Hopefully someone will realise that the brand goodwill that plucky little Lotus from Hingham has built up will evaporate rather quickly if they turn into the second coming of Toyota F1 with Gino Rosato strutting around as team principal…

  6. Here’s a nightmare scenario:

    ART/Bahar/Toyota make an urgent representation to the FIA seeking the 13th entry for 2011, and are granted it on the basis that they now have the financial and technical wherewithal to get it done. Similarity in surname of ART principal N Todt and FIA president J Todt completely coincidental. Then the writs start flying, and ART/Bahar/Lotus win the rights to the “Team Lotus” name and an injunction to stop Fernandes from using “Lotus” in any form. Leaving a usurper “Team Lotus” on the grid, and the boys from Hingham with three-fifths of ****-all.

    O gawd…

  7. Joe, surely one way Tony Fernandes could make this all go away would be to buy Group Lotus himself? Proton is losing money, and I doubt Group Lotus will exactly be hugely profitable. Bear in mind that he bought AirAsia off the Malaysian government for a token sum the week after 9/11 – the worst time for the aviation sector, ever – and turned it in to a galloping success. I don’t think the FIA are in the mood to start handing out new F1 franchises following the rejection of Epsilon Euskadi et al for 2011.

  8. Clearly a bit of a clusterf*ck going on at Lotus (Cars). Better they focus on their (equally misguided, in my view) road car range and enter some kind of mutually beneficial alliance with Lotus (F1). The team are on the right path, why not just work with them rather than against them on a hare-brained scheme? I was suspicious of Dani Behr to begin with, nice suits and haircut but not sure there’s real motoring substance there.

    If I recall correctly, Trulli shook down the prototype racing Evoras for the factory – surely that shows there was some link back in January or whenever that was?

  9. They should all be banned from using the Lotus name since none of them really have any connection to the historic brand. All it what it is, Team Malaysian Government. This whole enterprise of start-up companies purchasing the rights to classic brand names is naueseating. Volkswagen Group….are you listening? Do they really think that we are all so stupid as to believe there is some historical link to the brand’s glory days? And to be honest, do modern F1 fans really drool over the name Lotus any more?

  10. Would be a sad thing seeing the Fernandes/Gascoyne Lotus Team disappear, so I hope you are right about the chances of the legal claims beeing successful. We have a saying here in Germany which roughly translate “On the open sea and in a court of law you are god’s hands”, meaning anything can happen!

  11. Thanks, Joe. Once again, a great explanation of a situation that goes all the way back to the 50’s.
    Fernandes has done an excellent job this year with his team. I enjoyed seeing his enthusiasm in the garage during qualifying for the last race.

  12. I suppose the major point is whether the “Team Lotus” trademark lapsed between 1998 and TF buying it this year. If it could be argued that it did (and twelve years is plenty of time for a trademark registration to lapse – AIUI, they’re generally considered to lapse after 5-7 years of non-use), then Group-L has a case.

  13. Didn’t David Hunt take the lotus name to Pacific GP in 1995? Or did he pick it up after they went under…the old memory isn’t what it was.

  14. If Chapman didn’t get into F1, he would be fit to run Goldman Sachs given his corporate finance smoke n mirrors skills. Joe you provided a very clear chronological recap and it sounds pretty clear cut given the previous court decisions that Fernandez has did his due diligence correctly and paid the right party. The politics behind it all is certainly intriguing and for the conspiracy theorists, ART is run by Nicolas Todt, who’s daddy Jean’s girlfriend is Malaysian ..

  15. This is all very depressing. From the start, my defence of Fernandes was that his team had the backing of Group Lotus’s ultimate owner, Proton, therefore, like it or not, it was, however arm’s-length, a real Lotus F1 team.

    So why, now it has the goodwill of the Chapman family, possibly the legal right to the Team Lotus name, a quality engine supply for next season, and, most importantly, an impressive record on track considering the standing start it had a year ago, does it drop him like a stone in favour of some unproven, unlikely, lash-up between ART and that colossus of F1, Toyota?

    Somebody at Proton needs his head examined. This is stark raving insane. “A mess” doesn’t even begin to cover it.

  16. This is a fantastically well researched post. I thank you for spending what I can only presume is a substantial amount of time and effort on producing such interesting Formula One journalism.

    I love keeping up with your fantastic blog Joe. Thanks again.

  17. Joe,

    Talking of messes in involving Asian nations (but slightly off topic), preparations for the Commonwealth Games in Delhi are in the news heavily here.

    Any word on how the GP preparations are going at Jaypee Greens for next year? And do those in the know realistically expect to be heading there in October 2011?

  18. As far as i can see , Group Lotus/Malaysian Govt has greater claim to the Lotus name as they bought the company, and kept it going. Fernandes on the other hand, just bought a name, and is trying to evoke the positive image the name represents to pursue financial gain!

  19. Ultimately the Malaysian Government will call the shots on this one. Danny Bahar is an employee at a company controlled by the Malaysian Government. Any kind of aggressive action on his part will only make his bosses look stupid.

    Malaysians are fiercely nationalistic and it remains to be seen if Danny Bahar has the kind of pull in Malaysia that Tony Fernandes has — especially since the Petronas sponsorship Tony was fighting for was pulled in favour of Mercedes (that one not exactly looking like money well spent either).

  20. Joe,

    How do you see this one panning out?

    If Fernandez/Gasgoyne do lose the Lotus name, do you see them continuing the current operation, perhaps under a ‘Team Malaysia’ banner?

  21. I don’t think the Malaysian govt would want to get their hands dirty in this. Serves no purpose and they have more important things to think about on the domestic front. The messy PR would not help.

    This is purely business between Group Lotus and Tony. Proton might get dragged in some way into the mess its mainly GL and LR. Though ultimately linked through indirect ownership by the M’sian govt, GL is an independent business unit. Likewise Proton and the M’sian govt. Likewise Petronas and M’sian govt. The govt would not interfere unless somehow it affects the country’s future

    It will pan out eventually but I think as far as rights of Team Lotus in F1 is concerned it’s in favour of Tony. He might decide to try and buy out GL to stop all this nonsense 🙂

    I don’t think Tony is personally interested in becoming an automotive manufacturer – GL’s business. Tony just wants the rights to go racing specifically F1.

    Lotuses in racing and who its affiliated with:

    F1 – Tony
    Indycar – GL
    F3 – Tony
    WSbR – Tony
    GP2 – GL through ART, Tony through Team Air Asia
    GP3 – GL

    A year ago none of the above existed. Today Lotus is ‘everywhere’ 🙂

    A blessing in some ways

  22. I’m really disappointed. As I wrote in the comments the other day, I was really excited for Lotus as a whole – the car company and the racing team. Now it looks like it could all be undone.

    I could be cynical and suggest that the same arrogance of Ferrari has, with the recruitment of ex-Ferrari staff, now been transferred to Lotus cars. But unless they take over HRT’s entry, Lotus Group have no F1 team. Or placing my cynical hat on again, was this why no 13th team was awarded an entry? Jean Todt risking accusations of nepotism?

    In Autocar magazine this week, they show the new Elite* and make the comment that Lotus Cars now has far more money available to them than they have done in the past and it’s unclear where the money is coming from. Seems obvious to me that someone in Proton has, through the success of Tony Fernandes, seen the potential of what Lotus could be and decided that they want the glory for themselves….

    *Ironically the new Elite looks like a mash-up of other people’s ideas. Honda S2000 nose; Hyundai Coupe lines down the side; 911 Targa roof rails and rear window; Maserati Coupe rear lights…

    1. I don’t believe he was ever “vaguely useless TV totty”. I believe he worked for Red Bull for a couple of years, Ferrari for a couple of years and then Lotus. He does not seem to stay long…

  23. Looks like just the sort of mess Colin Chapman would have loved – as ever he would have come up smelling of roses and made some money out of it!

    Looking at it logically with a Western mind there can only be one winner – Tony Fernandez, as anything else would be a P.R. disaster for Malaysia. However, it may not be as simple as that and depends upon the attitude of the Government there.
    All of the trademark issues have been sorted out in the relevant Court here in David Hunt’s favour so he is the only person able to decide who has the use of the name “Team Lotus”.

    The name Lotus does still mean a lot to F1 fans – particularly older ones, as long as the team is performing creditably and saying the right things – which the 2010 incarnation does seem to be at the moment.

    However what a mess it is and there must be some very well paid lawyers expecting a good pay day on the back of it.

    Great post though Joe to explain the background.

  24. My head hurts, I’m confused. What the heck is Sato doing in Indycars in a “Lotus” powered by a Honda engine. The same Lotus group is now doing a deal with Toyota. I am guessing Honda are footing the bill for his Indycar escapades (someone must be given his crash damage this year).

  25. I don’t claim to know any of the legal ins and out of who owns what name, but I know that earlier in the year Heikki and Jarno both drove Evoras round the test track (as did Martin Brundall and Jacques Villieneuve incidentally). I suspect Gino Rosato (ex-Ferrari F1, now employee of Group Lotus) had a big part to play in this.

    I also know that Lotus Engineering (the consultancy arm of Group Lotus) has helped with development of components in this year’s Lotus Racing F1 car.

    I believed that there was an attempt at mutual cooperation as it would seem both parties would benefit. I don’t know if things have gone sour since then, but it would make sense to me if both parties both pooled resources.

    In March there was partnership announced between Group Lotus and Cosworth which “includes the supply by Cosworth of high performance engines based upon existing Toyota engines for future Lotus cars and the
    assembly by Cosworth of racing engines for all motorsport activities which are based on Toyota powertrains”

    I thought this would bring further cooperation, but now Lotus Racing has switched to Renault for next year this doesn’t really fit any more.

    Last week it was announced “Group Lotus has decided to take the relationship with Toyota to a new level that will enable it to create tailor-made powertrain solutions for future Lotus cars”

    And this week details were released of the Lotus Elite (new road car from Lotus Cars, the manufacturing arm of Group Lotus) which will have the 5.0l V8 from the Lexus ISF.
    The rumours are there will be a new Esprit announced next week at the Paris Motor Show too.

    I don’t know where Dany is getting all the money to do all this. My suspicions are that when he arrived 10 months ago he arranged bridging loans to produce concepts. Now he’s hoping to attract investors in Paris to stump up the money to actually produce these cars.

    It would be advantageous from a PR point of view if he had a link to an F1 team, but I can’t see any way he will get enough investment to get into F1 other than collaborating with the current Lotus Racing team.
    Although Group Lotus has been involved in IndyCar this year with Sato, that’s not gone very well and had little impact in the wider media.

    It would make very little sense to me for Group Lotus to try and stop Lotus Racing using the Lotus name in F1. Even running around at the back on the field this year I feel that the media coverage has done Group Lotus much more good than harm. If they do well next year then it could help sales of the new car(s).

  26. All this and not one Lotus manufactured engine in sight! Personally, I think you’re right Joe when you say the fact that the Chapman family have given Fernandes their blessing is indeed a rather important aspect.

    The biggest shame is that such a world reknowned marque is being traded like an old nag.

  27. Joe,

    Adam Cooper has suggested that it was direct intervention by Max Mosley that secured the last entry for Lotus Racing last September (first time I’d heard it put that way).

    If this is the case, given J Todt’s desire to distance himself from his predecessor, and (as the conspiracy theorists stand up) the ART-Todt fils-Todt pere-Ferrari-Bahar-Michelle Yeoh-Malaysia connexions, is there any suggestion that the FIA may be inclined to favour ART/Bahar/Toyota if they can (eg if an entry is sought)?

  28. I see Lotus Racing have started using the Team Lotus name and trademark in a pretty big way already http://plixi.com/p/46636021 ! Branson will be serving on that plane by the end of season I should think ;).

    Paul di Resta driving for Force India next year seems to be the story of the day. Hopefully true as he has been good to watch in practice and it’ll be nice seeing him in a race.

  29. Hang on now Joe, you have long advocated that new teams should seek to revive the venerable old brands.

    Admittedly, you probably meant that they should choose one each…

  30. You’d think Group Lotus would be grateful for what is effectively a free F1 program for their brand courtesy of the quite charming Tony Fernandes. It seems staggering that they would perceive it as anything else.

    They haven’t just looked the gift horse in the mouth, they’ve kicked it in the arse and slapped it in the chops too. If I’m running a company and an F1 team sprung up that gave our brand exposure to millions without you lifting a finger or spending a penny I would just sit quietly and let them carry on.

    Does running an F1 team look like it could turn major profits in the future and Proton want a piece or is this bickering just personal?

    Where does this wannabe Grand Prix machine fit into all this? It seemed utterly bizarre to me to go from £30,000 track day Elises to a billionaire’s million dollar toy with nothing in between… http://www.autoblog.com/2010/08/09/lotus-exos-type-125-revealed-as-quasi-f1-car/

  31. We the people on the outside might see this like a breaking of the Lotus War. But I was thinking on my own and in my mind came a thought and I want to share it with you. I think that we are not understanding fully the evidence. My idea is that Group Lotus does not want to challenge Team Lotus, and I’m saying why. I think that to make a partnership of that size, Group Lotus and ART Grand Prix did not begin the negotiations the day before the contract was signed, so a question comes out of this mess. As everyone knows, ART Grand Prix applied to get the 13th F1 slot, but then later they abandoned the process, because they were short of sponsor money. I think that if Group Lotus wanted to fight with Fernandes’ Team Lotus, then I think that they would sponsor ART Grand Prix for F1 and not make a partnership with ART after the abandoning of the F1 project. These were my thoughts, thanks for giving me space.

  32. Nice article and discussion – good to see some people know what they’re talking about?

    Does anyone know exactly what David Hunt bought and has now sold to Fernandes? Was it just the name and trademark of Team Lotus or did he acquire historic cars, a factory or anything else? Who are Classic Team Lotus and how do they fit into the picture?

    My dream would be for Norfolk-built Team Lotus cars to be back in F1 and having close ties with Lotus Cars. It’s best they remain seperate companies in case the F1 team goes bust again, but if they could all be under the Group Lotus umbrella it would be wonderful. Is there any chance of that ever happening? Personally I doubt it now that Fernandes owns Team Lotus, unless he also buys Group Lotus and I don’t think that’s his line of business. I’m sure he has enough on his plate with F1 and planes!

  33. PROTON’S CLARIFICATION ON THE PURCHASE OF “LOTUS” BRAND BY TONY FERNANDES

    Kuala Lumpur, 27 September 2010 – There is and always has been only one Lotus, the Lotus started by Colin Chapman. From the beginning Lotus made road cars and raced racing cars. Until 1994, Group Lotus, the road car manufacturer and Team Lotus, which operated the Formula 1 team, were in common ownership with common directors. In 1994, Team Lotus failed and Lotus has not raced since. Since 1994, David Hunt has claimed to have acquired assets of Team Lotus, including its name, from the liquidator. He has never raced as Lotus. Mr. Hunt’s attempt to acquire the name Team Lotus was ineffective. Group Lotus is the owner of all rights in the “Lotus” automotive brand including those relating to Formula 1.

    Last year, Tony Fernandes and 1 Malaysia Racing Team recognised this by taking a licence from Group Lotus to use the “Lotus” brand for the “Lotus Racing” team in the current Formula 1 season. With PROTON’s agreement, Group Lotus has now terminated its licence to 1 Malaysia Racing Team to use the “Lotus Racing” brand in the 2011 and future Formula 1 seasons as a result of the flagrant and persistent breaches of the licence by 1 Malaysia Racing Team, which were damaging to the “Lotus” brand.

    Following that termination, neither 1 Malaysia Racing Team, nor any other company associated with Mr. Fernandes such as Tune Group Sdn Bhd or Team Lotus Ventures Limited, has the authority of Group Lotus to use any “Lotus” brand in the 2011 Formula 1 season. This includes the use of the brand “Team Lotus”.

    Group Lotus understands that Mr. Fernandes intends to rebrand the current “Lotus Racing” Formula 1 team to “Team Lotus” for the 2011 Formula 1 season. Mr. Fernandes indicates that Tune Group has acquired the rights to the name “Team Lotus” from a business formerly owned by David Hunt called Team Lotus Ventures Limited. Group Lotus believes these rights to have no proper legal foundation, a fact of which Mr. Fernandes was well aware when his company purchased them.

    PROTON will support Group Lotus in taking all necessary steps to protect its rights in the “Lotus” name, including resisting any attempts by Mr. Fernandes or his companies, or any other unauthorised person, to use the “Lotus” name in the 2011 Formula 1 season.

    Dato’ Sri Mohd. Nadzmi Mohd. Salleh, Chairman of PROTON Holdings Berhad and Group Lotus commented, “We believe the Lotus brand to be one of the most valuable brands in Formula 1 today. We are the owners of this brand, and will take all necessary steps to protect it. Tony Fernandes has no rights to use the Lotus brand in the 2011 Formula 1 season, and we will strongly resist any attempts by him to use our brand without our permission and will withdraw our sponsorship of the Lotus Racing team.”

    “To put it simply, Group Lotus is everything Lotus. The fact that 1 Malaysia Racing Team entered into an agreement with Group Lotus to use the brand means that both Mr. Fernandes and 1 Malaysia Racing Team recognises and acknowledges Group Lotus’ rights,” he added.

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