Che Khalib: Proton can bring down DRB if problems not fixed

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KUALA LUMPUR: DRB-Hicom Bhd has sounded warning bells that the group could be adversely impacted if the problems plaguing Proton Holdings Bhd are not resolved.

The diversified group’s chief operating officer Datuk Seri Che Khalib Mohd Noh said that automaker Proton could bring down the whole group if its problems are not addressed.

“If we don’t solve the Proton problem, it’s not just Proton that will go down, but the whole DRB group,” he said at the MICPA-Bursa Malaysia Business Forum yesterday.

Che Khalib, who was one of the speakers at the forum, said DRB-Hicom is currently working on solutions for its “problem child” Proton.

“Yes, we are coming up with solutions for Proton. We plan to announce next month what we have planned for Proton,” he said.

During the DRB-Hicom AGM in September, managing director Datuk Seri Mohd Khamil Jamil revealed that the group is also in initial discussions with potential foreign partners for Proton.

While he did not specify any potential partners, Khamil said there will be “a paradigm shift in Proton” to improve the brand’s overall quality.

He added that the group also targets to sell 200,000 units of Proton cars a year, from the previous target of 167,000 for its financial year ending March 2013.

The Malaysian Automotive Association’s target for 2012 is about 615,000 cars. For the first half of the year passenger car sales stood at 265,855 units, with Perusahaan Otomobil Kedua Sdn Bhd emerging the top seller with 92,923 units.

With banks tightening lending regulations, auto sales have been severely impacted.

Much of Proton’s woes lie with its wholly owned Lotus Group International Ltd, which manufactures Lotus cars. Lotus has been draining Proton’s cash reserves as its niche market vehicles struggle for sales.

Che Khalib says DRB will

announce next month what

it has planned for Proton.

The auto company has also struggled to penetrate foreign markets with quality concerns on many of its models.

As at end-December last year, Proton had cash and bank balances amounting to RM1.18 billion while on the other side of the balance sheet, the company had RM1.14 billion in short-term debt commitments. Proton’s shareholders’ funds as at end-December 2011 stood at RM5.3 billion.

Auto industry players say that to come up with a new model, an auto company would have to fork out in excess of RM1 billion.

For its nine months ended Dec 31, 2011, Proton suffered a net loss of RM68.1 million from RM5.93 billion in sales.

Since then there have been no disclosures of Proton’s financials as it was delisted in mid May this year.

There have also been many changes at Proton with many among its top brass, including managing director Datuk Seri Syed Zainal Abidin Syed Mohamed Tahir who had headed the company since 2006, leaving the company.

“Syed Zainal’s track record is good. In Malaysia the largest selling car is the Myvi, developed when he [Syed Zainal] was the project director at Perodua. The second largest selling car is the new Proton Saga, developed under his watch at Proton ... he’s not an easy man to replace,” an auto industry stalwart said when contacted.

Other than Syed Zainal, there were quite a few other top level departures at Proton, leaving the automaker in limbo.

DRB-Hicom to its credit does have an established presence in the auto sector, and has good ties with companies such as Volkswagen AG. However, how this will turn things around at Proton remains to be seen.

 

This article first appeared in The Edge Financial Daily, on Oct 17, 2012.

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