Calls for management to explain sale's circumstances 

Business Time – January 5th, 2006

PROTON'S sale of loss-making MV Agusta for a mere one euro has irked former Proton strongmen Mahathir Mohamad and Mahaleel Ariff. 

Dr Mahathir, the former prime minister and current Proton adviser, and Mr Mahaleel, its former chief executive, said Proton's current management should explain the circumstances of the sale to its shareholders and the public. They also question whether Proton's recent losses were due to provisioning for Agusta and not a result of heavy discounting of Proton cars to boost sales. (He suggested that the discounts given to buyers of the 54,000 Proton cars in the three months had cost Proton dearly). 

Was there an announcement that Agusta was up for sale? Were there other bidders for Agusta? Did Proton attempt to get a higher price? Who made the decision to sell? These were some of the questions posed in a joint letter to the Securities Commission (SC) - initially leaked to a blog site - which the two men said needed answering. Dr Mahathir and Mr Mahaleel noted since the Italian bikemaker had been acquired for 70 million euro and sold for one euro, Proton would incur losses of RM315 million despite its claims that no losses would be incurred. 

When provisions are made for bad debts, it does not necessarily mean that the debts cannot be recovered,' they observed. Agusta tipped Proton into the red for the first time in a decade when the carmaker posted a net loss of RM166.7 million for the half-year to September 2005, largely because of provisions stemming from losses by the motorcycle maker. All told, Agusta cost Proton RM503 million, including its acquisition cost of RM367 million back in 2004. It was its single largest loss on an investment. 

Proton sold its 57 per cent interest in Agusta to GEVI, an Italian investment holding company that has agreed to take on Agusta's restructured debt of RM560 million and its working capital requirement of a further RM170 million. Proton has already written off the failed investment. 

Taking a pot shot at Proton's management, the men who are at odds with current management said: “MV Agusta's technology in motorcycle and small engines is acknowledged by the industry as second to none. Losing automotive companies like Rolls Royce, Bentley, Skoda, Lamborghini, Aston Martin and many others have been bought by stronger companies and have been turned around. But the prices reflect the assets and the brand. As far as we know, they were not sold for one euro. As the two people most involved in the purchase of MV Agusta, our credibility and honesty are at stake. We want to know the correct answers. The public, too, may want to know as Proton is a national project.” 

It is not clear why the letter was sent to the SC, but the commission confirmed it had received it. 

Source: Business Times | http://business-times.asia1.com.sg/