Lim Guan Eng - MV Agusta Scandal : Proton to Explain

Proton RM 800 Million Question.

CLICK HERE - For MV Agusta and PROTON : The Story (My previous post)

Press Statement by Lim Guan Eng in Penang on Thursday, 7th August 2008:

The failure by Proton to find a foreign partner is a warning signal that it is no longer a competitive and economically viable entity with declining market share and questionable management decisions that causes Proton to lose money when other finds profits

The admission by Prime Minister Datuk Seri Abdullah Ahmad Badawi recently that Proton Holdings Bhd needs to consider a foreign partnership to further improve on its quality and service to the buyers is an admission of failure of Proton despite producing Proton's three-millionth car. Despite a long desperate search, the failure by Proton to find a foreign partner is a warning signal that it is no longer a competitive and economically viable entity with declining market share and questionable management decisions that causes Proton to lose money when other finds profits.

Abdullah may urge the 25-year-old national car maker to produce more fuel efficient and environmentally-friendly cars. But the reality is that sales fell 40% from 183,824 units to 110,358 units last year, a drop in market share to 32 per cent from more than 60 per cent in 2000.

How can Proton expect to survive with such poor sales when its overseas market is a loss-making operation? Such a steep loss in market share is almost irretrievable.

Of greater concern is the refusal for a Royal Commission of Inquiry into the RM 800 million ringgit MV Agusta scandal to fully disclose mismanagement and financial misjudgments by Proton Holdings Bhd, action against those responsible and new measures to be implemented against such weaknesses.

This follows the shocking announcement by Harley Davidson Inc that it will purchase Italian motorcycle manufacturer MV Agusta, once owned by Proton Holdings Bhd, for US$109 million (RM352 million), making the total sale proceeds of RM 800 million. Proton Holdings had bought MV Agusta in 2006 for RM368 million which it had then sold for only one euro (RM5) to an unknown company in Italy - Gevi SpA.

In justifying the sale for one euro Proton had said here were no operational, engineering, and technological synergies between Agusta, the motorcycle maker, and Proton as a carmaker. Proton bought a 57.75 percent stake in MV Agusta in December 2004 for 70 million euro (RM367.6 million), which was treated as goodwill and written off. However Proton lost more than RM 500 million in the sale for one euro because it had to assume the additional provisions relating to MV Agusta in the accounts of the Proton group for the financial year ended March 31, 2006, amounting to RM136.2 million.

After MV Agusta was sold off for one euro(RM5), Gevi SpA sold Husqvarna, a division of MV Agusta which manufactures scrambler sporty off-road motorcycles, to a German company BMW for 90 million euro (RM450 million). Now MV Agusta has been bought by Harley-Davidson Motor Cycles of the United States for RM350 million.

Public interest therefore requires a full accounting from Proton on how it went so terribly until BMW can pay RM450 million for one third of MV Augusta and Harley Davidson pay RM 352 million for the remaining stake which Proton sold only one euro at a loss of more than RM 500 million.Tun Dr Mahathir is correct to state that Proton appears to have lost approximately RM800 million by selling Agusta for only RM5 stating that the buyer of MV Agusta “invested one euro and made 160 million euro,".

Malaysians have a right to know what type of management can makes such a decision that allows other foreign companies to benefit at our expense. Instead of losing RM 500 million, Proton could have earned RM 300 million if it had sold to BMW and Harley-Davidson. Proton has refused to anwer despite Khazanah Malaysia, the Malaysian government's investment arm, holding about 42.74 %t of Proton.

Public interest requires full accountability and transparency.
Unfortunately Proton’s refusal to give full disclosure leaves requires an establishment of a Royal Commission of Inquiry into this RM 800 million MV Agusta scandal in the interests of good corporate governance and social responsibility.
Malaysians wants answers to this RM 800 million question.

* Lim Guan Eng, Penang Chief Minister & DAP Secretary-General