KUALA LUMPUR: DRB-Hicom announced the sale of 49.9 per cent equity in carmaker Proton Holdings on Wednesday. Most view it as a necessary move to ensure survivability of the brand, but there has been criticism of the sale as a sell-out of national sovereignty. DRB-Hicom’s group managing director Datuk Seri Syed Faisal Albar tells the ‘New Sunday Times’ how he views the critics, and why Geely Holding won the bid
Question: There has been a mixed reaction to your announcement of Proton’s new strategic partner last Wednesday. Why was there a need to sell and lose Proton?
Answer: We need to be clear that Proton is a private entity and has been such since DRB-Hicom acquired the nation’s first carmaker in 2012. The acquisition from Khazanah Nasional was an outright purchase and the “golden share” of the government was removed then.
Yes, Proton is the first national car brand by virtue of it being the first car marque that Malaysia produced back in 1985. By the same token, DRB-Hicom retaining a 50.1 per cent equity means that we still own the majority stake and the brand remains a national brand, a national car. But, inviting Geely Holding to take up a 49.9 per cent stake in Proton does not equate to us selling out.
Q: You went through several bids for Proton. Why was Geely chosen?
A: I must emphasise that the process we went through was an international bidding process.
The process took more than 12 months with thorough analysis, site visits and detailed evaluation criteria to identify a foreign strategic partner (FSP) that had the best fit for Proton.
In short, we needed to find a partner that understood what we wanted and what we needed, and was willing to take the journey with us towards our goals and aspirations.
Pound for pound, Geely was the best suitor. And why is this so, is as follows:
GEELY agreed to retain the nameplate and reclaim No.1 spot.
This was an important part of our consideration because we are a national car and proud of it, and we wish to reclaim the No.1 spot in the country again.
Geely embraces this requirement; just as how they respected the Swedish when they bought over Volvo.
And, the statement by Daniel Li, Geely’s executive vice-president and chief financial officer at the signing was clear: “Geely is full of confidence in the future of Proton and we will fully respect the brand’s history and culture, to restore Proton to its former glory with the support of Geely’s innovative technology and management resources.”
To move fast into the market, part of the agreement is to inject a sports utility vehicle (SUV) platform into Proton and Geely offered their best-selling SUV to us without even batting an eyelid.
This will enable Proton to enter a new segment and a segment that has grown tremendously over the last few years.
GEELY is committed to grow Proton beyond Malaysia.
This is an important element to us as we wish to be the top three in Asean markets under the brand of Proton.
Geely’s strategic vision on this is very aligned with us. They wish for us to grow as one of the biggest auto players in the region; not just exporting cars to other countries.
In fact, they have an ambitious target of 500,000 units in annual sales by 2027.
With this kind of target, surely the number of Malaysian employees in Proton will double.
GEELY will provide access to its array of “green” technology.
We aspire to produce energy-efficient vehicles as this is the way forward globally. To have this technology immediately available for Proton is hugely positive.
PROTON Research and Development (R&D) Centre will be recognised as one of Geely Group’s Centre of Excellence.
This is definitely a good deal not only for Proton, but for the country.
This means that our engineers will work alongside the best talents in the world and can be exported to any of Geely’s facilities worldwide.
As for design studios, Geely has four centres — Shanghai, Gothenburg, Barcelona and California. Again, Proton auto designers may be able to tap the wide array of advanced architecture, thereby increasing individuals’ expertise as well.
Geely also has 16 manufacturing plants all over the world, and five R&D plants in addition to the four design studios. Their love for R&D and technology means that Geely has thousands of local and international engineers under their payroll.
PROTON will become the Right-Hand Drive (RHD) Manufacturing hub for Geely-branded cars.
In China, Geely cars are left-hand drive. For Geely cars to enter markets that are RHD (outside Malaysia), Proton manufacturing plants will be used for the conversion and for production.
PROTON Tanjung Malim plant will assemble Volvo cars.
This is a boon to Proton, for sure. Consumers will then have higher confidence that if a Volvo car can come out from our plants, this means that Proton cars are also of a high quality. On top of this, we earn assembly fees together with Geely.
GEELY has proven success in the turnaround of auto companies.
The ability to be successful in a turnaround is a key element of our evaluation of FSPs. Certainly, we are impressed with Geely’s credentials. Their boldness in acquiring businesses across the globe is a study of business acumen in itself; it is easy to forget that Geely is a young carmaker, having entered the automotive industry only in 1987. Yet today, they own 100 per cent of Volvo Cars, the entire stake of The London Taxi Company and make more than onemillion cars globally.
When Geely acquired Volvo Cars in 2010, not many gave them a chance with turning the fortunes of the Swedish carmaker. Yet, they ploughed in RM45 billion into Volvo Cars, and last year, the company recorded its best financial performance since its inception in 1927. They have also managed to turn around the financial fortunes of The London Taxi Company, which Geely fully acquired as a company under receivership in 2013. It turned in an operating income of RM8.4 million in 2015, reversing an operating loss of RM10 million two years earlier.
In March this year, they announced an investment of RM1.65 billion to develop electric versions of the iconic London Black Cabs to meet the city’s green reform initiatives.
Certainly, Geely isn’t just another investor in Proton. They have proven to be a committed partner in all its ventures, helping each of the companies turn around with appropriate levels of financial investment, and a heavy dose of injection of technology and innovation.
LOCAL vendors will have the opportunity to spread their wings globally.
Part of the deal we agreed with Geely is to allow our local vendors opportunities to offer their services to Geely Group globally. If our local vendors meet Geely’s standards, they will be put in the list of Global Sourcing Purchasing System.
This means that if Volvo in Sweden wishes to source components producers, our local vendors will have a chance to be selected to manufacture automotive components for Volvo.
When Proton flourishes, we want our local vendors to benefit too.
GEELY is bold and capable.
Earlier this month, Geely acquired 25.7 per cent of Denmark’s Saxo Bank, a leading FinTech bank, which was set up in 1992. Geely believes in digital technology and we like the progressiveness in their thinking.
Q: With this deal, how do you see Proton in the future?
A: We believe DRB-Hicom cannot get a better partner than Geely. Proton will benefit from being part of the Geely group, a global business group that has shown boldness and capability that has allowed them to reach global revenue of some US$30 billion and become a Fortune 500 company in 30 short years.
As a state-owned business previously, Proton had limitations. As a result, its competitors overtook Proton.
In today’s global economy, an automotive alliance is a normal practice. Tata Group from India owns Jaguar and Land Rover whilst Renault, Nissan and Mitsubishi are in one big alliance.
Proton is now a private company with a global alliance. This means it has a fair chance of making a comeback in Malaysia, and enlarging its footprint globally beginning with Asean. It will benefit from the economies of scale that is generated by being part of an automotive group, which will hopefully see it start to turn its financial fortunes around.
One day in the not too distant future, Proton will be a brand that Malaysians will once again be proud to call one of their own.