Media Statement
by Lim Guan Eng

(Petaling Jaya, Wednesday): DAP will send a memorandum to Proton Holdings Bhd Headquarters next week on why Volkswagen refused the strategic alliance with Proton,  Proton’s new co-operation with Mitsubishi Motors Corp(MMC) as well as answer Proton Advisor Tun Dr Mahathir Mohamed and former Proton CEO Tengku Tan Sri Mahaleel Tengku Ariff’s 8 qeustions on the RM 510 million loss incurred from the sale of MV Agusta Motors SpA. Proton refusal to give a satisfactory explanation is unacceptable and not in the public interest as they must be accountable to Malaysians who own Proton.

The drop in Proton’s share price to a low of RM 5 resulted in RM 741.4 million in market capitalization being wiped out is not surprising after Volkswagen (VW) scrapped an alliance or joint-venture plan with Proton to build and sell VW brand cars for the local market. This bad news followed Proton sale of Agusta which recouped only RM 4.50 after spending RM 510 million in less than a year. (Proton has a paid-up share capital of 549.21 million shares.) Even though Proton has recovered to RM 5.45 yesterday, it is clear that the new alliance with MMC has not desired impact on the share price or inspired confidence amongst investors.

Proton has to deal with the real reasons why VW refused to co-operate forcing it to turn to previous partner MMC, the second choice. Malaysians have a right to know the benefits of choosing the MMC when the preferred partner rejected Proton and the real reasons behind it so that Proton will not be a continuous drain on national resources.

Why should MMC come back to work with Proton when it had sold its 7.9 per cent equity in Proton on March 9, 2004? By being forced to co-operate with MMC since no other auto car giants is willing to, would MMC benefit more than Proton.  The two will cooperate in product development of new Proton vehicles, supply of car components, technical support for production, engineering and quality control as well as optimisation of Proton’s manufacturing facility. Something is very wrong with Proton if after 20 years in the industry can still not handle these problems and need its old partner MMC to help it out.

From a market share of 60 percent in 2002, Proton saw a decline to 48 percent in 2003 and then 44 percent in 2004. With almost non-existent export and totally reliant on a shrinking domestic market, Proton requires immediate attention not only from the management but probably from the Minister of International Trade & Industry Datuk Seri Rafidah Aziz or even the Prime Minister himself.

The first step to win back confidence is for Proton to demonstrate transparency, open accounting and full accountability. Proton must explain why VW aborted the deal in such a cavalier and insulting fashion publicly. Proton must also respond to Proton’s advisor Tun Dr Mahathir Mohamed and former Proton CEO’s Tengku Tan Sri Mahaleel Tengku Ariff 8 questions on the sale of MV Agusta Motors SpA.for one euro.

Dr Mahathir and Tengku Mahaleel in a joint statement on Jan 3 had questioned the rationale for the sale of Proton's entire 57.75% stake in MV Agusta to GEVI SpA for 1 euro (RM4.50) which was bought for 70 million euros or RM315 million in December 2004.  In fact financial assistance pumped in by Proton to Agusta pushed up the losses to RM 510.24 million as appeared in Proton’s cash flow statement in its 2005 annual report.

To lose up to RM 510.24 million in less than one year has caused anger amongst Malaysians including Mahathri and Mahaleel, who felt their credibility, honesty and intergrity questioned because they supported the purchase of Agusta. For that reason, they posed 8 questions on the sale of Agusta for only 1 euro that must be answered by Proton:-
 

1. Who offered to sell or who offered to buy at one euro? 
2. Were there other bidders? 
3. Was there an attempt to get the buyer to pay a higher price? 
4. Was there an announcement that M.V. Agusta was up for sale?
5. If not, did Proton approach only one bidder?
6. If other bidders were offered, did they reject?
7. Who in fact made the decision to sell?
8. Can Proton explain how selling an entity bought at 70 million euros for one euro would not cause Proton to lose money as is claimed?

When announcing the Proton’s net loss of RM154.33 million for its second quarter ended Sept. 30, 2005, Proton chairman Datuk Mohammed Azlan Hashim said on November 29, 2005 that MV Agusta’s debts and accumulated losses had significantly affected Proton’s finances since it took over the unit in December 2004.

Dr Mahathir and Tengku Mahaleel queried whether it was Agusta's loans that resulted in Proton posting a net loss of RM154.3 million for its second quarter ended Sept. 30, 2005.

Proton had made a provision of RM160.7 million for that quarter, out of which RM90 million was from the Italian motorcycle unit. Both had suggested that the discounts given to buyers of the 54,000 Proton cars in the three months could have cost Proton an estimated RM108 million, which was never answered by Proton.

As Khazanah Malaysia, the Malaysian government's investment arm, holds about 38 percent of Proton and Malaysian investors are the majority shareholders, public interest requires an answer. Proton has an obligation to answer all the queries posed on the aborted deal by VW and the 8 questions by Mahathir and Mahaleel why a RM 510 million investment in Agusta (RM 315 million purchase price and the remainder financial assistance) became zero in less than a year.

(08/02/2006)