Dr Mahathir and Mahaleel question MV Agusta sale
January 3, 2006
The Star

KUALA LUMPUR (Bernama): Proton adviser Tun Dr Mahathir Mohamad and the former chief executive officer (CEO) of the national car maker, Tengku Tan Sri Mahaleel Tengku Ariff today questioned the rationale behind Proton's sale of MV Agusta Motors S.p.A. for one Euro (RM4.50). 

In a joint statement released here, they also raised several questions regarding the disposal that was announced by Proton Holdings Bhd in a filing to Bursa Malaysia last week. 

Among them were on who had offered to sell or buy the stake for one Euro, whether there were other bidders and if there had been an attempt to get the buyer to pay a higher price. 

Questions were also raised on if there had been an announcement on the sale of MV Agusta, whether Proton approached only one bidder, and if other bidders were approached, had the bidders rejected the offer. 

They also sought to know who made the decision to sell, and an explanation from Proton on how selling an entity bought at Euro 70 million (RM315 million) for one Euro would not cause Proton to lose money as claimed. 

Proton Holdings had announced that its whollyowned subsidiary Proton Capital Sdn Bhd has signed an agreement with GEVI S.p.A., to sell MV Agusta. 

Proton Capital has a 57.75% joint controlled entiDr Mahathir had recently said that he was not involved in the decision to sell Proton's stake in the Italian motorcycle maker. 

MV Agusta, a famed but struggling designer and manufacturer of the Agusta, Cagiva and Husqvarna motorcycles was bought by Proton in 2004. 

Dr Mahathir, the former Prime Minister and Tengku Mahaleel, whose tenure with Proton ended at the end of September last year said Proton owed its shareholders and the public an explanation. 

As the two people most involved in the purchase, Dr Mahathir and Tengku Mahaleel said their credibility and honesty were at stake. 

"We want to know the correct answers. The public too may want to know as Proton is a national project." 

Dr Mahathir and Tengku Mahaleel said that the loss incurred by Proton following the sale should amount to RM315 million less RM4.50. 

"Assuming that this relieves Proton from paying the loss incurred by MV Agusta over the 15 months at Euro 26.87 million (RM131 million), it would still lose the purchase price of euro 70 million by selling off at one Euro." 

Due to the sale, they said there was no possibility now for Proton to turn around the company and regain its purchase price, if not make a profit. 

"Of course, Proton will now not get access to MV Agusta engineering technology." 

They added that Proton bought MV Agusta fully knowing that it had a debt of Euro 230 million, which it does not have to pay for three years. 

In addition, MV Agusta has assets in the form of two plants (in Cassinetta and Morazzone) and stocks of motorcycles. 

"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 price reflect the assets and the brand. As far as we know they were not sold for one Euro," Dr Mahathir and Tengku Mahaleel said, stating that MV Agusta's four brands were of high value. 

On Proton's ability to turn around MV Agusta, they said the building of a RM1.8 billion facility in Tanjung Malim without borrowing or capital injection from the government; and with over RM2 billion cash still left over showed that Proton was a profitable company and it knew something about management to make profit. 

Referring to the recent loss incurred by Proton which was said to be due to provisions made for MV Agusta loans, Dr Mahathir and Tengku Mahaleel claimed that Proton Edar CEO Datuk Maruan Mohd Said had during a press conference admitted that the discounts given by Proton had affected Proton's profits. 

"Unfortunately no figures were given. But apparently a total of 54,000 cars were sold in three months with rebates and large discounts which included free registration, free insurance, free first instalment payment for three months and free service. 

"Roughly the discount per car would be around RM2,000 or more. At RM2,000 on 54,000 cars, Proton would forego RM108 million. 

"The increase in the number sold cannot make up for the amount foregone." 

Describing these figures as a reflection of a failed strategy, Dr Mahathir and Tengku Mahaleel said instead the loss was attributed to provisions for debts of MV Agusta. 

"When provisions are made for bad debts, it does not necessarily mean that the debts cannot be recovered.  

"The debts of MV Agusta are frozen in any case and it need not be paid immediately. Has the amount provided been paid so as to reduce MV Agusta's debt or is it still with Proton when MV Agusta was sold at one Euro?" they asked. 

Meanwhile, they also questioned the sale of MV Agusta to Gevi S.p.A as the latter is not a household name in the automotive industry. 

"Is it a motorcycle company, confident that it can turn around MV Agusta, something that the sale by Proton implies that Proton has no capacity or ability to turn it around?"

Source: http://thestar.com.my/news/story.asp?file=/2006/1/3/nation/20060103212012&sec=nation