RACE FOR PROTON HITS LAST LAP: FRANCE, GERMANY, CHINA FIRMS IN THE CHASE

PETALING JAYA – France’s PSA Group, the maker of Peugeot and Citroen cars, is making a bid for a stake in Proton Holdings Bhd, as the local car manufacturer seeks foreign help to boost its fledgling sales.

Other carmakers, including Volkswagen Group and Geely from China, are said to be participating in the process. “The bid (by PSA) was made following fruitful talks between PSA and Proton’s delegation in France recently. The VW Group and China’s Geely are also in the bidding process,” a source said.

Reuters reported yesterday that PSA had confimed its participation in a call for bids initiated by Proton and its main shareholder, DRB-Hicom Bhd.

The source further said PSA was acting as a bidder on its own accord. Malaysia currently accounts for the bulk of Peugeot’s total sales in Asean.

The Naza Group, the distributor of Peugeot and Citroen vehicles locally, has been linked several times in the past as a serious bidder for Proton.

“However, there is a possibility that the Malaysian counterpart (Naza) could be involved in this transaction with PSA at some point, if all goes well,” he said.

The bid bodes well for PSA’s aspirations in Asia, as the group aims to sell one million vehicles in China and South-East Asia by 2018. During the first half of this year, its sales in the region amounted to 296,507 units, or a 19% drop on a year-on-year basis. The French carmaker also manufactures vehicles under the Citroen and DS brands.

It is believed that Proton had sent partnership proposals to nearly 20 carmakers earlier this year, with Japan’s Suzuki Motor Corp and France’s Renault SA among those who have responded.

The potential strategic investment by a foreign partner is a key component of loss-making Proton’s turnaround plans.

In June, the Government provided a soft loan of RM1.25bil to Proton by subscribing to 1.25 billion new redeemable convertible cumulative preference shares (RCCPS). The investment is made by Govco Holdings Bhd, which is a unit of Minister of Finance Inc.

On Sept 9, DRB-Hicom disclosed in a stock exchange filing that a further RM250mil in cash would be provided by Jan 31, 2017 as part of a second subscription agreement.

Among the conditions precedent in the arrangement is that within a year’s time, the carmaker must seek and identify a “strategic and renowned partner” which will assist in research and development efforts so that it can become a competitive player in the international automotive scene.

Potential investors in Proton would have to take into consideration the ramifications of the RCCPS scheme. Among them is that should Govco eventually opt to convert the shares, the Government would end up with a 82.35% stake in Proton, while DRB-Hicom’s stake would be diluted from 100% to 17.65%.

Proton’s two factories in Tanjong Malim and Shah Alam are seen as being among the carmaker’s prized assets for foreign bidders who are keen to undertake a large-scale regional expansion. The facilities are said to be able to produce 400,000 cars annually.

Japanese carmakers who dominate the market share in the region have already committed substantial investments. For example, in May this year, UMW Toyota Holdings Sdn Bhd announced plans to increase its manufacturing capacity to 100,000 cars per annum with the construction of a new factory in Bukit Raja, Klang.

Proton’s sales have dipped throughout this year due to a slowdown in consumer spending and tighter borrowing requirements for auto loans.

For the first eight months of the year, Proton recorded a sales volume of 44,029 units, a sharp decline of 37% compared to 70,113 units during the same period a year ago.

On the other hand, the carmaker saw improved sales figures for the month of August, owing to the positive response towards the recent launch of its Proton Persona model. – ANN

.