- Feb 6, 2007
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Nov. 21 (Bloomberg) -- Proton Holdings Bhd., Malaysia's unprofitable state-owned carmaker, posted a record one-day decline (22%) in Kuala Lumpur trading after the government ended alliance talks with Volkswagen AG.
Proton slumped 19 percent after Malaysia's state investment unit yesterday said it scrapped a year of talks to give the carmaker more time to reverse five quarters of losses. A strategic alliance can be considered later "if necessary,'' the agency said in a statement.
"They don't have the resources to make it on their own,'' said Raymond Tang, who oversees $5.4 billion at CIMB-Principal Asset Management Bhd. in Kuala Lumpur. "The company needs new technology from a partner.''
A turnaround now hinges on Proton's ability to develop models and increase sales in overseas markets including China, Iran and Thailand. While sales in Malaysia for a new car rolled out in August beat company forecasts, that won't be sufficient for the 24-year-old automaker to go it alone, analysts said.
"Although management has done a commendable job at turning around the company, it probably won't be enough,'' said Vincent Khoo, head of research at Aseambankers Malaysia Bhd. in Kuala Lumpur. Proton still needs a partner, he said.
Proton today fell 92 sen to 4.02 ringgit, the biggest daily decline since it sold shares for the first time in March 1992. The stock has slumped 39 percent this year, giving the company a market value of 2.21 billion ringgit ($653 million).
Poor Brand
Proton lost 589.5 million ringgit last fiscal year. The search for a partner followed the end of an alliance with Mitsubishi Motors Corp. in 2004, and the loss of half of Proton's market share to rivals such as Toyota Motor Corp.
"Proton lacks global competitiveness as it has a poor brand image, has no real global presence to speak of and lacks the necessary technology to compete,'' Sharifah Farah, an analyst at CIMB Investment Bank Bhd. in Kuala Lumpur with an "underperform'' rating on the stock, wrote in a report today.
Malaysian Prime Minister Abdullah Ahmad Badawi said today the government isn't considering a bailout of Proton because the company is showing signs of recovery.
"There is no question of bailing out,'' he told reporters. "Proton is doing well today.''
The new Persona sedan, introduced in August, notched up 22,000 bookings by the end of October, Malaysian Second Finance Minister Nor Mohamed Yakcop told reporters late yesterday. Proton, which planned to sell 4,000 of the vehicles a month, may report a profit in 2009, Nor said.
Manufacturing Emblem
"We must give Proton management the flexibility to move on and carry out its turnaround plan,'' Nor said. ``We are not saying there will be no strategic partnership. It's a very attractive idea, but we also have to look at the interest of the country.''
Protons, driven by taxi drivers across Malaysia, are among the cheapest cars on offer in the Southeast Asian nation. The carmaker was set up in 1983 by then-Prime Minister Mahathir Mohamad as a manufacturing emblem. The Saga saloon is still on sale more than two decades after the first model was produced.
General Motors is still interested in Proton, Rob Leggat, a spokesman for the Detroit-based carmaker, said yesterday in an e-mailed response to questions.
Proton's turnaround plan includes offering all its models in Thailand by the end of November, Nor said yesterday. Proton aims to sell cars in India and to double exports this year and next, it said in September. The company in July agreed with Jinhua Youngman Automobile Manufacturing Co. to sell cars in China.
Old Talks
Proton respects the decision made by the government,'' Zainal Abidin Syed Mohd Tahir, managing director of the Shah Alam, Malaysia-based company, said in a statement. "We will continue to work harder and introduce new models.''
The Persona, which was Proton's first new car in more than a year, may help the automaker return to profit as early as 2009, analysts at Hwang-DBS Vickers Research Sdn. said in August.
The Malaysian government controls Proton though a 43 percent stake held by Khazanah Nasional Bhd., Malaysia's state- owned investment unit.
Proton and Volkswagen jointly ended the talks, the Wolfsburg, Germany-based company said yesterday. Initial negotiations between the two companies collapsed in January last year after the parties failed to agree on terms, including control of the maker of Waja and Wira sedans.
The German automaker will now expand its sales and service network in Southeast Asia, in particular within Malaysia, it said in a statement. A partnership with Proton offered Volkswagen access to a regional manufacturing site.
Source:
Bloomberg.com: Asia
