Malaysian government offloads Proton

THE Malaysian government will offload its 42.7 per cent stake in Proton – the struggling manufacturer of some of Australia’s cheapest cars – for 1.29 billion ringgit ($A398 million) via its state investment vehicle Kazanah Nasional.

Proton’s suitor, DRB-Hicom, is a Malaysian automotive manufacturing, assembly and distribution conglomerate with interests in finance, property and construction.

Some of DRB-Hicom’s activities include the assembly of Honda, Mercedes-Benz and Isuzu vehicles, as well as ZF steering systems and motorcycles for Yamaha and Suzuki.

The company is already the ‘master dealer’ for Proton cars in Malaysia and also holds the distribution rights in that country for Mitsubishi and Audi vehicles.

As the first company to assemble the Mercedes-Benz S-class limousine outside Germany, DRB-Hicom believes its acquisition of Proton will result in a more efficient, effective car brand more able to compete on the world stage.

In addition, Proton’s production facilities are reportedly running at only half capacity, something DRB-Hicom could turn to its advantage by increasing its ability to offer a Malaysian production base to overseas brands such as Volkswagen and General Motors – both of which it and Proton have courted in the past.

From top: Proton S16 and Exora. Below: Lotus City Car Concept.

The company says a “renewal and enhancement” of Proton’s product line is high on the agenda, as is the diversification of its offerings – including the development of hybrid and electric vehicles.

Proton already has a busy launch schedule for this year, including a Persona replacement, the Exora people-mover and a facelifted S16 sedan (expected to continue with its $11,990 driveaway pricing in Australia).

Further models in the pipeline include a compact crossover, Lotus Evora-based sportscar and Mitsubishi Lancer-derived sports sedan.

The brand also unveiled a hybrid concept at the 2010 Geneva motor show, which apparently morphed into the Lotus City Car concept shown alongside the British brand’s smorgasbord of luxury and sportscar concepts at that year’s Paris show.

Nobody from Proton Cars Australia was available to comment today and Lotus distributor Ateco Automotive told GoAuto it was “business as normal”, echoing a statement issued to the British media that said the Proton sale “changes nothing”.

DRB-Hicom claims the synergy between it and Proton “not only transcends but also enhances the entire automotive eco system” and describes its business plan as “in pursuit of Proton’s transformation”.

Despite the move to private ownership, DRB-Hicom says it intends to maintain Proton as Malaysia’s national car company, but ultimately the company’s ambition is for Malaysia, like neighbouring Thailand, to become a major hub for vehicle assembly.

DRB-Hicom reportedly acquired a further 7.27 per cent of Proton shares on the open market yesterday, which would take its holding over the 50 per cent threshold assuming the deal with the Malaysian government goes through smoothly.

The transaction values Proton shares at their highest level in four years – the brand has seen its domestic market share halve since 2006 – and DRB-Hicom is said to have informed the Malaysian stock exchange of its intention to acquire all remaining shares.

Although the price agreed by Khazanah and DRB-Hicom may be 6.2 per cent higher than the last trading value before the deal, they still value the company at less than $A1 billion, a seemingly small amount for an operational car company.

Recent reports have suggested that Proton has been considering the sale of its British sportscar, motorsport and engineering subsidiary Group Lotus.

According to Malaysian newspaper The Sun Daily, a sell-off of Lotus would constitute “low-hanging fruits” as it has “proven to be an expensive turnaround venture”.

Proton’s sell-off is one of several divestments made in recent years by the Malaysian government, which last year sold a 32 per cent stake in the national postal service, again to DRB-Hicom.

The conglomerate reportedly wasted no time in performing a major shake-up of the postal service’s management structure, so a similar move can be expected with Proton.

DRB-Hicom managing director Dato’ Sri Haji Mohd Khamil Jamil said that under his firm’s control, Proton will “eventually emerge as a force to be reckoned within the global automotive map”.

That will presumably include a turnaround in Australian sales, which were down 18.8 per cent last year with 1542 units sold, led by the S16, which achieved 521 units (down from 892 in 2010).