The Star: Govt: Proton has turned the corner, does not need foreign partner

Wednesday November 21, 2007
The Star: Govt: Proton has turned the corner, does not need foreign partner
By Wong Sai Wan

PUTRAJAYA: The negotiations for Proton between Khazanah and two major international car manufacturers - Volkswagen and General Motors - have been called off.

Second Finance Minister Tan Sri Nor Mohamed Yakcop said there would be no foreign partner for Proton for the time being as the national car manufacturer was showing signs of a turnaround.

He said the Government called off negotiations with Volkswagen and General Motors after the Cabinet Committee on the National Automotive Policy met last week.

“The committee, comprising several ministers, decided that the circumstances to seek a foreign strategic partner has changed and the objectives for such a partnership have also changed.

“We have to look at the issue of a partnership in the present circumstances (now that Proton is making a turnaround in terms of its business),” he said when commenting on Khazanah Holding’s announcement that it was stopping all talks with VW and GM over Proton.

He said the negotiations had not entered into the discussion of terms but was at a stage of “whether the Government wanted to go or not go” with the decision to get a partner for Proton.

“Terms and conditions would only have been discussed after due diligence had been done. Our negotiations had not reached that stage,” he added.

However, Nor Mohamad said this did not mean the Government was rejecting the possibility of an alliance or partnership with a global car manufacturer.

“As Proton improves, it would be easier to go into a strong alliance. We have a little more time for that,” he added.

Asked if the Government had informed VW about the decision and what the reaction was, he said: “We have informed them and, of course, they were not happy.”

Analysts said the Government had looked at the deal again to avoid any fire-sale situation.

They pointed out that when Khazanah started negotiations in December 2006, Proton was in dire straits and urgently required a foreign partner. The situation has now changed with Proton starting to make money again, they added.

Nor Mohamad revealed that the present Proton management had made inroads in getting more export orders and improving quality.

He also expected Proton to return to profit by 2009.

The national carmaker suffered a loss of more than RM500mil at the end of its financial year on March 31.

He also stressed that the move to call off the negotiations did not mean the Government would increase the prices of other cars.

“We will not deprive the consumers of choice.”

The Second Finance Minister said a major sign of the turnaround was that for Proton’s next financial year, the losses would be “significantly reduced.”

The other indicators of the turnaround are: Proton’s market share has increased from 22% to 31%; Increased export orders from China, Iran, Indonesia and Thailand; Number of dealers reduced from 362 in March to 304; Closer cooperation with Lotus to ensure technology was transferred to Proton vehicles; Sales have increased with 21,580 bookings in the past three months; and Reduction of inventory by 50% from three months to about a month.

Nor Mohamad also said the recent deal with Jinhua Youngman Automobile Manufacturing Co Ltd would see 30,000 Gen 2 cars being assembled and re-badged as Europe Star in China.

He also cited the Iran and Indonesian deals where Wajas will be exported to as taxis.

Nor Mohamad also revealed that a new model – at the moment code named BLM which will replace the Saga – would be launched in February and a seven-seater MPV in January 2009.

Sure or not? I appreciate that it's not easy to start a car manufacturer, but isn't that all the more reason to ask for help? If business hasn't been going well for the past - gee, I don't know - 23 years, isn't that a sign that your business model isn't working?