Editor's letter: Why McLaren boss has most exciting job in automotive
Artura production is yet to be at full capacity, said Leiters
McLaren's culture and strategy have drastically shifted during CEO Michael Leiters's first year
“There’s a lot to do,” admits McLaren CEO Michael Leiters, who has been in one of the industry’s toughest yet potentially most rewarding jobs since July 1 last year. “It’s definitely challenging – but I think it’s the most exciting job in the automotive industry.”
We first spoke to Leiters just a few weeks into the job, when he ran through the lengthy to-do list: improve the quality and reliability of the cars, shore up the supply chain, deliver the troubled Artura hybrid supercar production, return to profitability… With a list like that, where do you start?
We met again this week at the Goodwood Festival of Speed, where Leiters detailed the progress he’d made. He started with the company’s culture, making everything “very, very strictly orientated on output, on efficiency, on affecting the quality, with the customer experience at the centre of it all. We have increased dramatically the engagement of our people, and are communicating a lot more than in the past”.
As well as the culture, the internal structure has also changed, with 11 layers of company management reduced to five. “This allows much more direct communication for everybody, right up to the very top,” says Leiters.
The financial part “has been the most challenging” though, according to Leiters, and McLaren remains in the red. Although revenues increased by £7.2 million in Q1 of 2023 over 2022 to £135.2m, losses increased by £17.2m to £57.9m as it sold more vehicles at a lower price. The rest of the year will remain just as challenging, as Artura production is yet to be at full capacity and the 720S is changing over to the 750S on the Woking production line.
The number one priority at the moment is to recapitalise the business with existing shareholders, who have made a “big commitment” to the company, Leiters says, and although “it’s a very complicated restructuring process” the firm was in “very productive and good discussions with our shareholders and we are very positive to finish in the next months. And then we can go forward”.
Leiters admits the “biggest challenge we have right now is definitely a revenue challenge”, but is resisting any notion of simply pushing out more volume due to a laser focus on quality, particularly on the Artura.
“We don’t want to push too much. We have taken in the past quality enhancements, and we need to ensure the customer experience is positive. We prefer to go slower on production instead of increasing production capacity. This is not a delay [to Artura]; it is a ‘non increase’ of our production volume...we don’t want to damage the image by taking risks.”
Quality improvements include getting more people and areas of the business involved in the design of parts right at the start of development, including those from procurement and the supply chain, and then working with suppliers to follow the same processes. All this is part of stopping potential problems before they ever existed.
McLaren remains independent, and Leiters confirmed that external investment – including from other OEMs – was not part of the recapitalisation process, nor a priority for now. These kinds of conversations will only take place when the path back to profitability is in place, which means for now McLaren will continue to go it alone in the supply chain, a tough task in times of logistical hardship.
“The supply chain is less robust than five years ago, or three years ago even before Covid. There are many suppliers in distressed situations and you have to manage them. Sometimes it’s good to have a big OEM on your back and push back a little bit, but I think it’s all about relationships. You have to build a good relationship with your suppliers so there is real support to help you in difficult situations, as you then have to help them.”
Before speaking to Leiters, I wondered a bit what had been going on at McLaren this past year given how little we’d heard from them apart from downbeat quarterly financial updates and a series of delays to the Artura.
Afterwards, I had respect for a man not looking for a quick headline, quick win, or success built on sand; the structural problems at McLaren clearly run – or ran – deep, and although there’s plenty of pain ongoing, fires are being put out.
Leiters was not kidding when he said there was a lot to do and how challenging the role was – but crack this and he can get on with developing the kinds of cars and technologies that really can make it the most exciting job in the industry.