news

8 Quick Answers To Your Questions About The Proton-Geely Partnership

Geely has acquired a 49.9% stake in Proton.

Cover image via Retail News

Malaysia's national carmaker Proton has reached an agreement with Chinese automaker Zhejiang Geely Holding Group on Wednesday, 24 May

DRB-Hicom Group Director Khalid Abdol Rahman (left), Geely Holding Group Chief Financial Officer Daniel Li (right) and Malaysian Second Finance Minister Datuk Seri Johari Abdul Ghani during the signing ceremony in Putrajaya, Malaysia, on Wednesday, 24 May.

Image via The Associated Press via The Japan News

Proton Holdings Bhd. was founded in 1983 by the Malaysian government and it went on to buy Lotus in 1996.

In 2012, Proton was privatised as the company struggled financially over the years.

Following a RM1.5 billion soft loan from the government last year, DRB-Hicom Bhd, a conglomerate controlled by billionaire Syed Mokhtar Al-Bukhary, was tasked to pursue a turnaround plan by seeking a foreign partner. Both Proton and Lotus have been making losses.

After months of speculation, DRB-Hicom has sold a 49.9% stake in wholly-owned Proton Holdings Bhd to Geely. Additionally, Geely also gets 51% percent of stake in Lotus.

Here are the answers to some of the questions asked on this new development with Proton:

1. Why would Geely want to buy a stake in Proton?

Image via Carsifu

A Bloomberg report suggests that Geely has taken this move to buy the "unprofitable" Proton for two primary reasons:
1. Access to 600 million consumers in Southeast Asia
2. The brand cachet of Lotus Cars

The Southeast Asia market is dominated by Japanese automakers, and Geely wants to break into this "very difficult market" through Proton.

It is believed that Geely is intending to use Lotus' expertise in composite materials and lightweight technology to help it comply with increasingly demanding emission regulations in China.

2. How much is Geely paying?

The Sun Daily cited analysts as predicting that China’s Zhejiang Geely Holdings will eventually pay RM770.3 million for its stake in Proton.

It is said that Proton will issue new shares to Geely for an estimated value of RM770 million - (RM170 million in cash and an estimated RM600 million value in terms of injection of 'Boyue' SUV (one of Geely's best-selling models launched in March 2016) platform into Proton.

According to media reports, DRB-Hicom has gained GBP100 million (RM560 million) from the Lotus disposal.

3. What will happen to Proton's manufacturing plants in Shah Alam, Selangor and Tanjung Malim, Perak?

Geely will be using Proton's underutilised manufacturing plant in Tanjung Malim to make its low-cost cars.

Following the completion of the new partnership, Proton will move its operations fully from the Shah Alam manufacturing plant to Tanjung Malim which is capable of producing 150,000 vehicles a year, Carlist.my reported.

It was reported that the process will "only happen after five years" and DRB-Hicom will acquire the 250-acre land at a "fair price".

4. Is it still a national car?

Malaysia's Second Finance Minister Datuk Seri Johari Abdul Ghani stressed that this strategic partnership between Proton and Geely is a "significant milestone for Proton and the country" as Proton has a real chance to make a "comeback" as a strong player in the Malaysian, ASEAN and global markets.

"Proton will always remain a national car and a source of pride, as Proton will still have a majority hold of 50.1%," he said at a press conference on Wednesday, 24 May.

5. How will this deal help revive Proton?

Proton is expected to be on the receiving end as Geely is expected to bring in new technologies and capital injections, as well as "globally renowned talent" into Proton's management team.

While DRB-Hicom exercises greater control of Proton’s distribution arm, Proton Edar Sdn Bhd., it will allow Geely to take over managerial control in the production and manufacturing of Proton cars.

"The fact is that we seriously want to turnaround and give ourselves a big comeback. We have agreed that Geely takes the leadership position in management of production, manufacturing, and operation including sales and marketing," group managing director of DRB-Hicom Datuk Seri Syed Faisal Albar, was quoted as saying by Malaysian automotive site Carlist.my.

6. Are Proton staff getting retrenched?

Proton's current workforce is at 10,000 and there have been talks that the new management may resort to a retrenchment exercise to lay off workers that produce about 100,000 cars a year.

However, Syed Faisal has dismissed speculations by saying that with the emergence of Geely as Proton's strategic partner, there should be a growth in employees instead of staff retrenchment.

"We need to emphasise that the national car status remains, and because of that, the industrial linkage programme remains," he told The Edge.

7. Who is the founder of Geely?

Image via Alchetron

Li Shufu, chairman of Geely, is known to be the automotive businessman that saved Volvo.

Li established a strong reputation in the automotive scene after Geely's success in reviving Volvo, by pumping hundreds of millions of dollars into the Swedish car company and returned it to profitability.

The self-made entrepreneur has powered Geely across the globe over the past decade and position it as one of China’s biggest privately owned carmaker.

8. What has the founder of Proton, Tun Dr Mahathir Mohamad, got to say about the Proton acquisition by a Chinese carmaker?

Tun Dr Mahathir Mohamad, dubbed as the 'father of Proton', has likened the deal to "losing a child".

"Proton has been sold. It has been sold to foreigners. They say Proton is my brainchild. Now the child of my brain has been sold," he wrote on his blog.

"Yes. I am sad. I can cry. But the deed is done. Proton can no longer be national. No national car now."

He said that he is sure that Proton will be sold all over the world and that it will be successful but he cannot be proud of the success of "something that does not belong to him or his country."

"I am a sissy. I cry even if Malaysians are dry-eyed. My child is lost. And soon my country."

Do you think this new partnership with Geely will help revive Proton? Let us know your thoughts in the comment section below.

Did you know Proton is extremely popular in Turkey?

Read more trending news on SAYS: