Mark James is director for Lotus Engineering’s worldwide operations, a position he took up in June 2011 having a wealth of experience from both the automotive industry and engineering services sector.
Interviewed by just-auto’s Simon Warburton.
At Lotus, Mark is leading the expansion of Lotus Engineering’s third party consultancy work and developing its position of technology leadership in lightweight architectures, efficient performance, electrical and electronic integration and driving dynamics. Mark has full responsibility for Lotus Engineering worldwide,
Mark has held a number of positions with Lotus Engineering during his 25 years with the company, including head of European operations, head of strategy and head of the engines business unit.
Mark holds an honours degree in mechanical engineering from the University of Reading in the UK.
What are the key challenges facing Lotus Engineering at the moment and are you affected by the current global uncertainty?
The biggest challenge for us working day to day is demand. The engineering services industry has bounced back with a vengeance after the recession and there is so much change currently because of legislation, the green agenda and to some extent, what the market is demanding in terms of new products.
The market is unsettled in terms of industry direction on ultra low CO2 solutions which is driving a lot of interest in new technologies for powertrains and vehicles. There hasn’t been so much change in the industry probably since its inception.
Lotus values have always been about lightweight, efficient, innovative vehicles, so for us this is a really exciting time for Lotus Engineering. There is demand from the US, China and Europe for these new technologies and everybody wants to understand what ultra low CO2 and light-weighting means in the context of the market.
How has the current global economic uncertainty, particularly in developed, Western economies affected your business?
It has not really affected the ESP’s (Engineering Services Providers) to a great extent . The market is huge, we can safely say the global outsourced market for engineering services is between £5bn-10bn.Not only is the market enormous, but the majority is where Lotus Engineering is strongest in terms of our core competencies.
How do you find recruiting skilled engineers at the moment, can the UK government do more?
Our potential opportunities have quadrupled since April to more than £400m, this is wonderful but unfortunately it has come at a time when the availability of skilled people has declined. Getting new people therefore has become the challenge.
Many companies are competing to recruit from the same pool of engineers and this will constrict the services industry growth to a degree. Companies are looking at off-shoring to China and India. China is not ideal because it has a shortage of experienced labour itself, it also has a high attrition rate and labour costs are increasing at 15% per year.
Thankfully the Lotus brand name attracts people. We make excellent products that entice employees however when you think you need around 150 people to man a typically sized vehicle programme, trying to find them locally is impossible. Therefore attracting new staff is currently a big challenge for our business. Two years ago, it was easier, but with increased demand in the Midlands, from companies such as Jaguar Land Rover, this is now more difficult.
Are there any particular types of graduates you would like to encourage to join the business and could the UK government do more to help?
Lotus has a lot to offer new graduates – not too small to be dull and not too large to have only a small area of responsibility. Lotus is recognised as having a world class graduate scheme, accredited by the IMechE, taking on about ten graduates a year. Any support the government could give to encourage engineering, especially more female, graduates would be good.
There is a higher cost in getting graduates from abroad, visa restrictions have also become much tighter under the current government. However, Lotus is a global player, so we want people who can speak different languages and who understand the different cultures of the markets we are engaged in. Customer empathy is an important factor in good client relationships.
What will the key innovations be in the industry in the foreseeable future?
Legislation is being influenced by public opinion, the problem for manufacturers is that there are no cheap, ultra low CO2 powertrain solutions currently. A full-electric car, like the Nissan Leaf for example, retails for around £31,00 – almost double the price of conventional gasoline vehicles in the same segment. I suspect therefore that none of the OEMs are making money out of small full-electric vehicles given the high cost of batteries. This is not sustainable.
This and infrastructure issues are also constraining the volume growth of hybrid and electric vehicles. This means the industry will not be able to scale up to higher volumes with ultra low CO2 cars. It will be interesting to see what happens within the electric vehicle market.
The European legislation is driving the industry towards these very high-cost solutions and local governments are having to offer grants to the buying public to subsidise their purchase. It is not a sustainable solution in my view.
Until someone develops a radical solution that reduces battery prices, which are currently prohibitive, then the industry will continue to struggle to provide competitively priced electric and hybrid vehicles and consequently not achieve sustainable volumes. The industry, under these conditions, is reverting to improving the internal combustion engine through aggressively downsized engines and other established engine technologies such as cylinder deactivation and through the use of alternative fuels. Aggressive downsizing can achieve CO2 reductions of 35% so there is life in the old dog yet. This doesn’t mean electric vehicles will decline but their growth will be constrained for several years.
How has Lotus dealt with the legislation in Europe?
From a Lotus Cars perspective we helped form a group called the European Small Car Association (ESCA) in association with Burson Marsteller, an international lobbyist, and we invited all the European small car manufacturers to join. There were around a dozen of us eventually. For Lotus, as the legislation stood, if we couldn’t obtain a derogation under the legislation, we would have payed significant fines based on the product plan we had then.
We lobbied MEPs and government officials and put forward strong arguments for the amendments we needed as a group, mainly from Aston Martin, McLaren and ourselves. We were surprised at how supportive MEPs were of our concerns, and that they supported all of the amendments we tabled.
The way the legislation process works is, in itself, interesting. Politicians look for a broad compromise – not necessarily a utopian solution. The current EU CO2 legislation is therefore flawed in some ways. It penalises light weight and only considers tank-to-wheel, it does not consider well-to-wheel. Overall the legislation has been positive as the industry needed to change but I think there will be changes going forward.
How does Lotus Engineering view the next five years?
Because demand in the industry is so high for our four core competencies (lightweight architectures, efficient performance, electrical and electronic integration and driving dynamics) we expect our market share to continue to increase. We have a five-year plan to double our revenues and increase our profitability, even our conservative growth plan represents a 20% compound annual growth. This does not mean that I want Lotus Engineering to be the biggest ESP globally. I want us to remain specialists in advanced automotive technologies and processes and I don’t want size to compromise this.
What are the key attractions for customers when it comes to Lotus Engineering?
Firstly our brand name and our association with Lotus Cars and Lotus Racing has enormous benefits in the market, people see the products we engineer on the road and on the track on a day-to-day basis. And, importantly, being an OEM ourselves means we understand how to develop vehicles and technologies for production, not just in steel and aluminium and at high volume.
We are unique in the industry in that our cars advertise our engineering expertise. Conversely, our leading edge 3rd party projects and R&D programmes generate know how and technologies that benefit the development of our cars. No other automotive company currently has these synergies.
Our driving dynamics and hybrid vehicle capabilities are particularly well regarded in the industry. Combined with our expertise in lightweight architectures and efficient powertrains, we can provide all of the skills and know-how that manufacturers are currently looking for.
Will Lotus Engineering look to shift work abroad?
We are looking to increase our employee base in the UK, but we are also investigating hiring experienced and knowledgeable engineers from elsewhere. We think that over the next few years, 20% – 40% of our projects could be delivered outside of the UK, including work from our existing teams in America and China which will also continue to expand.
How do you view the competition?
We have a very good relationship with our competitors and talk to them on a fairly regular basis. We are competing but the relationship is not adversarial, there is much more dialogue than you might expect and I am not adverse to working with my competitors if it improves my ability to deliver to my clients.
How would you characterise Lotus Engineering’s industrial relations?
We are not unionised here, we have a Lotus Engineering staff council and management representatives. My previous role was looking after UK operations. I have a good relationship with both groups. There are no topics that are off the table, we have a very open relationship and, whilst the responsibility for this has now passed to my UK operations head, I still have one-to-ones with the council chairman and the management reps as does the CEO.
We negotiate on a yearly basis for pay rises and terms of conditions, they do a good job representing staff concerns, not an altogether easy task. Lotus is quite an open company in terms of management style. It is one of the things I noticed, and subsequently admired, when I left the company several years ago.
Are you away a fair amount in your role in Lotus Engineering?
There is quite a lot of travel involved, I spend a lot of time in Malaysia and China in some months, our business is very much a relationship-based business. We have to go and talk to our customers on a regular basis. It’s the only way to understand what their pain is and to build relationships. It is also a great way to understand, first hand, what is going on in the industry.
How does a typical day look for you at Lotus Engineering?
A day in the office is typically filled with meetings from financial and forecasting to client meetings and one-to-ones with staff. I am probably travelling up to half of my time which is to be expected when directing global operations. I have weekly meetings with the CEO and other directors. The wonders of modern technology mean you are available 24 hours a day. You are therefore never out of the office, the office goes with you. This is sometimes a mixed bag in terms of positive and negative, especially when the CEO calls you at 03:00! But I consider myself lucky, I love my job and I’m proud of what we have achieved, and continue to achieve at Lotus.
Author: Simon Warburton, just-auto.com