Malaysia's Proton sale fuels debate/Reasons against the deal

Taxpayers seen footing bill for carmaker - again

Chinese automaker Zhejiang Geely's planned purchase of 49.9 per cent of Malaysia's national carmaker Proton has its supporters and detractors, a key critic being former prime minister Mahathir Mohamad, who founded Proton as part of the nation's industrialisation policy over three decades ago. The Sunday Times looks into the sale - its details are still being worked out - and the arguments for and against the deal.

There are those who have said that the deal is not good for either Proton or Malaysia.

NATIONALIST ARGUMENT

Malaysian former prime minister Mahathir Mohamad has said that selling Proton is bad for the country, likening it to controversial land sales by the government which "forfeit our country; like we forfeit Proton".

"I am sure Proton will do well... but I cannot be proud of the success of something that does not belong to me or my country," he wrote on Thursday. Tun Dr Mahathir has been critical of Prime Minister Najib Razak's efforts to woo investors from China, accusing him of selling the country's assets to reduce massive debts.

But this appeal to nationalism appears set to fall on deaf ears so long as Proton's operations remain strong.

"If the new ownership structure does not translate into loss of jobs, then it will have little impact on Mr Najib politically," Vriens & Partners' political risk and government relations consultant Adib Zalkapli told The Sunday Times.

 
 

POTENTIAL JOB LOSS

Proton has 10,000 workers, with the government expecting them to prosper as the new owner ramps up the use of the carmaker's underutilised 380,000-vehicles-a-year plants in Selangor and Perak.

But there are another 50,000 workers employed by Proton's network of 350 parts suppliers.

There is some expectation of job losses if Zhejiang Geely stopped buying from these local parts manufacturers that in the past have been accused of overpricing their products.

The Chinese company might not need to depend on others much as it has 16 manufacturing plants, seven design studios and five research and development (R&D) centres.

BAD DEAL FOR TAXPAYERS?

Malaysian Second International Trade and Industry Minister Ong Ka Chuan admitted on Thursday that the real target for Zhejiang Geely was sportscar-maker Lotus, the jewel in Proton's battered crown.

The Chinese carmaker is buying a 51 per cent stake in Lotus which has been valued at £100 million (S$177 million), considered a bargain by some observers, to control technology owned by "the ultimate lightweight sports car company".

Zhejiang Geely is still discussing with DRB-Hicom about the final transaction price for Proton.

Investment analysts expect DRB-Hicom to cash out from Lotus and transfer RM540 million (S$175 million) in Proton assets into its own books.

Analysts expect Zhejiang Geely's 49.9 per cent stake to be valued at about RM770 million.

The company will pay RM170 million in cash, with the remainder to be settled by giving Proton a five-year licence to sell Geely Boyue sport utility vehicle under the Malaysian carmaker's name. The so-called rebadging is expected to be valued at RM600 million.

To help the deal along, the Malaysian government is handing RM1.1 billion to Proton, saying the taxpayers' money is "reimbursement" for R&D undertaken by Proton in past years.

"It comes as a complete shock that the government has continued financing Proton's R&D, on top of providing the company with billions in soft loans to keep it afloat. What's the point of 'privatising' Proton if the government continues to fund Proton's bleed?" asked opposition lawmaker Tony Pua.

Shannon Teoh

A version of this article appeared in the print edition of The Sunday Times on May 28, 2017, with the headline 'Taxpayers seen footing bill for carmaker - again'. Print Edition | Subscribe