Proton's new boss arrives, now needs know-how<\/p>\n
KUALA LUMPUR (Reuters): Malaysia's oil company Petronas steps
\ninto the driving seat at Proton next week, taking a controlling
\n27 percent stake in the national car maker as it prepares for the
\nonslaught of foreign competition.<\/p>\n
DRB-Hicom Bhd, which is selling its stake to Petroliam
\nNasional Bhd (Petronas), said in a statement the long-talked
\nabout deal would be completed on Dec. 4.<\/p>\n
Proton, formally known as Perusahaan Otomobil Nasional Bhd,
\nneeds the muscle of cash-rich Petronas.<\/p>\n
But, it now seeks a foreign equity partner who knows the
\nbusiness to help it shape up before protective tariffs tumble
\ndown in 2005 against imports from Southeast Asian neighbours.<\/p>\n
Petronas is paying DRB-Hicom one billion ringgit ($263
\nmillion), or seven ringgit a share, for 25.8 percent of Proton.
\nPetronas is taking an additional 1.4 percent of the car maker via
\na share issue.<\/p>\n
\"Obviously, Petronas will be good for Proton. It may not be
\nable to provide the technical expertise or management know-how
\nbut it has deep pockets. You need a lot of money to develop new
\nmodels,\" said Andrew Seah, senior analyst at Vickers Ballas.<\/p>\n
Malaysian Prime Minister Mahathir Mohamad said last month the
\ngovernment was considering the sale of up to 30 percent of Proton
\nto foreign companies and some U.S. automakers had shown interest.<\/p>\n
Proton has already had talks this year on technology exchange
\nwith several companies, including DaimlerChrysler AG, Ford Motor
\nCo and General Motors Corp<\/p>\n
\"What Proton now needs to do is make themselves more
\ncompetitive by making their own engines and transmission. Getting
\na foreign equity partner would also be a step in the right
\ndirection,\" said an analyst with a foreign brokerage.<\/p>\n
Proton relies on engines from Japanese carmaker Mitsubishi --
\nwhich is a minority shareholder in Proton -- but is hoping in
\nearly 2002 to launch its own engines, which are being jointly
\ndeveloped with its UK subsidiary Lotus.<\/p>\n
While the deal with Petronas is in the last lap, Proton is
\ntaking its time inking the deal to buy 32.2 percent of car-
\ndistributor Edaran Otomobil Nasional (EON) from DRB-Hicom --
\nwhich was part of the package proposed in 1998.<\/p>\n
\"They're haggling over price. Proton wants to buy at 11.0
\nringgit but DRB-Hicom is said to want 14.0 ringgit,\" Reza
\nMutaalib, analyst at Merrill Lynch Research, said.<\/p>\n
Proton currently holds 65 percent of a highly protected
\ndomestic market, but with production capacity at just 230,000
\ncars it just too small to compete with the big multi-nationals,
\nseveral of which are located in neighboring Thailand.<\/p>\n
Proton only sees economies of scale kicking in if it can raise
\noutput to 350,000 units.<\/p>",
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