An icon of the Mahathir era is bringing in a foreign partner, at last, to reverse its ailing fortunes.
Malaysian conglomerate DRB- Hicom will sell a 49.9 per cent stake in national carmaker Proton to China's Zhejiang Geely Holding Group, the companies said yesterday. Zhejiang Geely, owner of Swedish automaker Volvo and London Taxi Company, will also buy 51 per cent of Lotus Cars from Proton.
"While there have been a few serious attempts to find a strategic partner for Proton, we were never successful... Our very own and much- loved brand now has a real chance of making a comeback - a huge one, I hope," Malaysia's Second Finance Minister Johari Abdul Ghani said at a press conference.
Founded by former prime minister Mahathir Mohamad in 1983 as part of Malaysia's industrialisation policy, Proton today struggles to sell its cars compared with local rival Perodua, partly owned by Toyota.
Proton had failed several times to bring in a foreign partner due partly to stiff opposition from Tun Dr Mahathir. He quit as Proton chairman in March last year just before the government injected a RM1.5 billion (S$486 million) grant and asked the firm to look for a strategic partner.
Proton now hopes to bank on Zhejiang Geely's success to drive its revival. For the year ending March 31, 2016, Proton recorded net losses of RM1.4 billion.
Its two plants in Selangor and Perak have a total capacity to make 350,000 vehicles a year, but are underutilised. These are the assets eyed by prospective buyers seeking to expand in South-east Asia. DRB-Hicom announced yesterday that its plant in Perak state will assemble Volvo cars.
Media reports said Zhejiang Geely's contenders were French manufacturer Group PSA, makers of Peugeot and Citroen cars; and fellow French company Groupe Renault, which produces Renault and Nissan vehicles.
An automotive analyst with a local bank said: "Proton's owners are giving up a substantial stake in exchange for an opportunity to change things.
"This means a chance for reform, but it is a long-term plan and we need a better idea of what milestones it needs to get back to black."
DRB-Hicom said in a statement: "The deal will enable Proton to tap Geely Holding's vast range of platforms and powertrains, and will also enable Proton to have access to existing markets of the Chinese carmaker, as well as right-hand drive markets in South-east Asia."
The final agreement is expected to be signed in July, with both sides still negotiating the transaction price, after earlier agreeing on a ballpark figure, said DRB-Hicom group managing director Syed Faisal Albar.
Geely had a turnover of US$30.4 billion (S$42.2 billion) last year.
While there have been a few serious attempts to find a strategic partner for Proton, we were never successful... Our very own and much-loved brand now has a real chance of making a comeback - a huge one, I hope.
MALAYSIA'S SECOND FINANCE MINISTER JOHARI ABDUL GHANI
"For Geely, Malaysia and Asean countries are big potential markets," said Mr Daniel Li, the firm's chief financial officer and group executive vice-president.