Malaysia's national carmaker Proton is now partly owned by Chinese automaker Zhejiang Geely Holdings Group after the signing of a deal with DRB-Hicom yesterday. Geely took up a 49.9 per cent stake in Proton for RM460.3 million (S$150 million).
Of the sum, RM170.3 million is a cash injection while the remaining RM290 million comes from the valuation of Geely's popular SUV, Boyue, which it will produce in Malaysia using the Proton name.
Geely will also be producing right-hand drive Volvos at Proton's giant, and under-utilised, Tanjung Malim plant in southern Perak.
The remaining 50.1 per cent stake in Proton will still be held by conglomerate DRB-Hicom, which also distributes other cars in Malaysia, owns post office services firm Pos Malaysia and has a real estate arm.
Under the deal, DRB-Hicom is also selling its entire stake in British sports automaker Lotus, with Geely taking a majority interest at 51 per cent for £51 million (S$90 million). The remaining share in Lotus is being bought by Etika Automotive, a firm owned by local tycoon Syed Mokhtar Al-Bukhary, who also controls DRB-Hicom.
Taking a dig at former premier Mahathir Mohamad who started Proton as a national carmaker in 1983, Prime Minister Najib Razak said in a speech at the event: "The reality had dawned on almost everyone; namely, that the (Proton) business model was, and had always been, unsustainable in the long run." He said Proton needed a strategic partner to achieve economies of scale.
He hailed Geely's entry as putting Proton on a "secure future".
"For far too long, the unrealistic dreams and lack of commercial understanding of its former chief tester had been indulged. He would still prefer Proton to be 100 per cent Malaysian-owned and lose hundreds of millions of ringgit a year," Datuk Seri Najib said, without explicitly naming anyone. He said views that foreign investments would lead to loss of sovereignty were "economically illiterate".
DRB-Hicom is hopeful that the production of Volvos, owned by Geely, and Boyue vehicles, would help Proton drive out of its financial losses. "This is the turning point where Proton's fortunes would turn in our favour," said DRB-Hicom's group managing director Syed Faisal Albar.
According to DRB-Hicom, the deal would see the government providing the firm with a RM250 million loan, which is part of the RM1.5 billion soft loan Proton took from the state.
Proton would later pay back its syndicated loans to Malaysian banks amounting to RM533 million. It will also repay shareholder advances of RM567 million.
To provide collateral for the government loan, DRB-Hicom would take over non-automotive related assets of Proton valued at a total of RM1.2 billion, such as its land bank.
Hong Leong Investment Bank, in its daily brief yesterday, wrote that it is "relatively negative on DRB's increased cashflow commitment in Proton's turnaround plan" but sees DRB-Hicom benefiting from the partnership with Geely.