Proton Debacle

Proton must explain the difference between the one Euro received for selling MV Agusta in 2006 and the 93 million Euros (RM 446 million) BMW paid to secure Husqvarna or one third of MV Agusta
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Press Statementby Lim Guan Eng

(Petaling Jaya, Thursday): Proton can no longer run away from explaining to all Malaysians the difference between the one euro received for selling the Italian luxury motorcycle maker MV Agusta in 2006 and the 93 million euros or RM 446 million BMW paid to secure Huqvarna or one third of MV Agusta. Husqvarna is one of three top Augusta’s superbike brand - the other two are Brutale and F4. I had exposed this scandal 2 weeks ago without stating the price BMW paid to purchase only one third of MV Agusta.

This shocking facts of the difference of RM 446 million for only one third of MV Agusta were exposed by Proton former chief executive Tengku Mahaleel Ariff in justifying that he had made the right choice in paying 70 million euros (RM330 million) for a 57.75 percent stake in MV Augusta in 2004. Following a change in Proton leadership, the entire stake was sold for a token sum of one euro (RM4.70) to a little known company Italian company Gevi SpA.

Mahaleel is justified to demand that the management responsible for selling the entire stake in Augusta for one euro to fully account for this vast difference. BMW as one of the most successful automakers in the world would not have bought one third of MV Agusta at such a high price without good reason.

Public interest therefore requires a full accounting from Proton on how it went so terribly until BMW can pay 93 million euros for one third of MV Augusta whilst Proton sold off the entire MV Agustaa for only one euro at a loss of more than RM 500 million. Proton chairman Datuk Mohd Azlan Hashim admitted that Proton lost about RM500 million at the time of acquisition of MV Agusta comprising of the purchase amount of RM367.6 million and the additional provisions relating to MV Agusta in the accounts of the Proton group for the financial year 2005/06 of RM136.2 million.

Something is very wrong that Proton can lose money where others can find profits. Such unchecked bleeding can be seen in Proton’s failure to meet its key performance indicators (KPIs) for the fiscal year ended March 31 (FY07) as revenue dropped 37% to RM4.9 billion from RM7.8 billion in FY06. Proton incurred a net loss of RM591.4mil against a profit of RM 46.7 million previously. Its cash on hand fell 34 % to RM 461 million.

What is more worrying is that sales fell 40% from 183,824 units to 110,358 units last year, a drop in market share to 32 per cent from more than 60 per cent in 2000. How can Proton expect to survive with such poor sales when its overseas market is a loss-making operation? Such a steep loss in market share is almost irretrievable.

Unless these questions are answered, there is no point in Proton introducing new models such as the 1.6litre sedan Persona costing between RM44,999 and RM55,800, to restore its position as the No. 1 car company in the country. The public have paid much in tens of billions of ringgit for giving protection to Proton in terms of huge investment outlay by the government. Malaysians individually have also paid a high price for more efficient, economical and better engineered foreign cars through high excise and import duties and even had to cough up higher prices for Proton here than those Proton cars sold overseas.

As Khazanah Malaysia, the Malaysian government's investment arm, holds about 42.74 %t of Proton, public interest to uphold accountability and transparency requires an answer from Proton in the interests of good corporate governance and social responsibility.